Antitrust and the Tech Giants: A Reader

Below are some excerpts from recent articles addressing the question of whether antitrust action is needed to reign in the big tech giants – Amazon, Apple, Facebook and Google.

Matt Stoler, Why We Need to Break Up Amazon… And How to Do It, Medium (Oct 16, 2014).

It’s quite clear that Amazon is a deflationary force, pushing down wages, prices, tax revenues, and new non-Amazon business activity. It has deflated prices in book publishing, and retailers across the board are terrified that Amazon is in the process of ripping their guts out. The company is having a ripple effect across the economy. To the extent that deflation is a serious problem, which it is, Amazon is a villain. And this isn’t just ‘technological process’, it’s straight up market power over workers, suppliers, and even governments.

Lina M. Khan, Amazon’s Antitrust Paradox, Yale Law Journal (Jan. 2017)

We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

. . . .Amazon controls key critical infrastructure for the Internet economy—in ways that are difficult for new entrants to replicate or compete against. This gives the company a key advantage over its rivals: Amazon’s competitors have come to depend on it. Like its willingness to sustain losses, this feature of Amazon’s power largely confounds contemporary antitrust analysis, which assumes that rational firms seek to drive their rivals out of business. Amazon’s game is more sophisticated. By making itself indispensable to e-commerce, Amazon enjoys receiving business from its rivals, even as it competes with them. Moreover, Amazon gleans information from these competitors as a service provider that it may use to gain a further advantage over them as rivals—enabling it to further entrench its dominant position.

Jonathan Taplin, Is It Time to Break Up Google? New York Times (April 22, 2017).

In just 10 years, the world’s five largest companies by market capitalization have all changed, save for one: Microsoft. Exxon Mobil, General Electric, Citigroup and Shell Oil are out and Apple, Alphabet (the parent company of Google), Amazon and Facebook have taken their place.

They’re all tech companies, and each dominates its corner of the industry: Google has an 88 percent market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77 percent of mobile social traffic and Amazon has a 74 percent share in the e-book market. In classic economic terms, all three are monopolies.

Tim Worstal, Google Isn’t A Monopoly – So Don’t Break It Up Or Regulate It Like One, Forbes (April 23, 2017)

They’re not natural monopolies, no, they’re all eminently contestable dominant players, that’s all. And precisely because the dominance is contestable they’re unlikely to try to gouge consumers. For if they do then the competition will arise. It’s, again, only if the competition cannot arise that we must do something.

It is impossible to deny that Facebook, Google and Amazon have stymied innovation on a broad scale.

And that’s just ridiculous. Three of the most innovative organisations on the planet are stymiying innovation?

Ashlee Vance, Google and Facebook’s Idealistic Futures Are Built on Ads, Bloomberg’s Business Week (May 4, 2017)

Google and Facebook are unlike any other two companies in history. They’re technology-and-advertising hybrids—strange amalgams with incredible power. They’re building the tools we use to communicate, to do business, to form and maintain relationships, to learn, to travel to and fro, and to relax. And they’re doing all of this while being wholly dependent on ad dollars for their survival. Never have advertising companies had such an all-encompassing influence on our life. And next year it will be even greater.

James Heskett, Is It Time To Break Up Amazon, Apple, Facebook, or Google? Harvard Business School’s Working Knowledge (June 6, 2017)

Now comes the “New Tech Big Four,” often characterized as Apple, Amazon, Facebook, and Google. Like their older cousin Microsoft, all are dominant in one or more industries. Their major source of power is a “platform” that can be used to control markets and discourage competition.

Apple’s design capability may be remarkable, but its platform—iOS, Mac OS, iPhone, iPad, Macbooks, even Apple TV—is the force behind its control of certain markets for hardware and software. When Amazon announces that it has acquired Whole Foods, the market value of US big name retailers selling foods immediately drops 10 to 20 percent. The exchange of information and news, fake or fact, among large segments of the world’s population is controlled by Facebook. We naturally “Google” our information, subjecting ourselves not only to revenue-producing advertising but also a stream of advertising reminders based on information that follows us for a lifetime. Can you name Google’s closest competitor in search and search-related advertising? That’s market power.

Scott Galloway, a successful tech entrepreneur and author of one of the blogs that regularly reach my email inbox, maintains that one or more of the Big Four tech firms should and will be broken up. In his opinion, Europe will lead the way in prosecuting them, levying “the mother of all fines against one or more of them.” His argument is not based on a belief voiced by some that they are evil, destroy jobs, avoid taxes, lie to regulators, or provide a weapon for Russia. Rather, he is concerned about the way they have benefitted from (and perhaps caused) market failure.

Douglas Rushkoff, It’s Time To Break Up Amazon, Fast Company (June 19, 2017)

The reason why monopolies were broken up in an industrial economy was that they tended to gain control over the platforms through which their products were distributed. The biggest oil company ends up controlling shipping and refineries, the biggest airline controls too many gates, and the biggest phone company controls the wires.

But in a digital economy, the platform is the business. Netflix content sells its platform. Apple’s devices sell its supposed “ecosystem.” Amazon’s book business, like Uber’s cab business, was just an easy foothold—the low-hanging fruit of an existing but inefficient marketplace—through which to establish a platform monopoly. From that beachhead, the company then pivots to other verticals.

Paula Dwyer, Should America’s Tech Giants Be Broken Up? Bloomberg’s Business Week (July 20, 2017)

Luigi Zingales, director of the university’s Stigler Center, likes to remind people that the reason Google and Facebook were able to succeed is that the U.S. in 1998, under Bill Clinton, sued Microsoft Corp. for tying its web browser to its Windows operating system to undermine rival Netscape. A trial court decision that Microsoft should be broken up was overturned on appeal (though not the court’s finding of monopoly), and ultimately the case was settled by the George W. Bush administration. But it slowed Microsoft’s ability to dominate the internet. Zingales says today’s monopolies are yesterday’s startups, and a healthy system needs to make room for newcomers.

. . . The tech superstars insist they compete fiercely with each other and have lowered prices in many cases. They argue that their dominance is transitory because barriers to entry for would-be rivals are low. Google often says competition is “one click away.” And since consumers prefer their platforms over others’, why punish success? But when a cool innovation pops up, the superstars either acquire it or clone it. According to data compiled by Bloomberg, Alphabet, Amazon, Apple, Facebook, and Microsoft made 436 acquisitions worth $131 billion over the last decade. Antitrust cops made nary a peep.

Charles Sizemore, The Simple Reasons Why Amazon is Not a Monopoly, Economy & Markets Daily (Aug. 14, 2017).

Amazon is big, and it’s getting bigger every day.  But it’s not a monopoly. Not even close.

Let’s play with the numbers a little.  Over the trailing 12 months, Amazon has racked up $150 billion in sales. And not all of those revenue dollars are from its online retail business.  Amazon’s AWS cloud services business accounted for about 10% of its sales, meaning that Amazon’s retail business brought in closer to $135 billion. That’s a big number. But total U.S. retail and food services sales last year were over $5.5 trillion. Amazon’s $135 billion accounted for a measly 2% of that.

The current problem is that, under the mantle of innovation, the companies are avoiding the strenuous regulation that their more traditional rivals have to accept. . . . . Treating the “platforms” as they really are would even the playing field in other ways, too. If it is recognized that Facebook is a media company, it will be legally liable for its content, and it will be forced to keep better track of fraudulent anonymous usage, like U.S. political ads placed by foreign customers. A “legacy” media company always know who has bought ads, sometimes after vetting by the legal department. Using a different ad-placement technology shouldn’t absolve Facebook, or Google, from this kind of responsibility. It shouldn’t worry regulators how the companies are going to enforce content control, just as it doesn’t worry them in the case of a traditional publisher or TV channel. The firms will just have to figure out how to do it — and they will be free to have an overt editorial policy, as media companies do.

It would benefit vigorous competition if Uber had to submit to all the transport regulations followed by its rivals. Subjecting Airbnb to hotel regulations would put it on a more equal footing with hotel chains that use essentially the same “asset-light” approach, owning few of their properties.

Scott Galloway, Full-Throated Capitalist, L2 Gartner (Nov. 17, 2017).

The market is failing. Amazon can take any other consumer company’s stock down 10–30% just with a press release. The Four are dominating the press and markets, creating a concentration of power that fosters premature death for big companies and infanticide for small firms. In VC pitches, an unhealthy amount of energy is allocated to determining if a firm can compete with, or could be acquired by, the Four before VCs can decide whether to invest.

The Amazonian success of these firms wallpapers over the fact that, as a whole, the markets are not healthy. The traditional metrics / indices are buttressed by these firms. The Four represent 40% of the gains in the S&P 500 in October 2017.


Alex Simmons, Facebook’s Monopoly: Misplaced Criticisms, Queen’s Business Review (Dec. 17, 2017).

Facebook’s dominance in users makes some uncomfortable, but ultimately users have benefited from the network Facebook has built. Government interference would ultimately impede its ability to serve its users, which it has done incredibly well. It could cause disincentives to innovate, or worsen the existing dominance at a detriment to advertisers and users. Facebook is just an excellent business offering a superior product to advertisers and an impressive service to users.

The Break Up Of Big Tech (Scott Galloway, L2) | DLD 18 (Jan. 25, 2018)



2 thoughts on “Antitrust and the Tech Giants: A Reader

  1. Interesting collection of views–I really enjoyed reading this. These firms, however, enjoy an unfairly privileged position in society as the direct result of laws, and U.S. government policies, that exempt “the internet” from the bulk of legal responsibility imposed on every other business/industry. As long as this situation remains, the idea that antitrust enforcement can magically set things right is simply illusory. Of the excerpts you collected, the Bershidsky column comes closest to the correct analysis (Taplin’s book explains these points very well, also). Here is something I wrote yesterday that explains my point further.

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