Breaking Up Big Tech

Senator (and Democratic presidential candidate) Elizabeth Warren has announced a plan to break up big tech companies (those with revenues of more than $25 billion), to stimulate competition. It would also roll back anti-competitive mergers, such as Facebook buying WhatsApp and Amazon buying Whole Foods.

It's an ambitious plan that I like but doubt has much chance of happening unless there's a complete regime change in the United States.

Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector. Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business. The number of tech startups has slumped, there are fewer high-growth young firms typical of the tech industry, and first financing rounds for tech startups have declined 22% since 2012.

With fewer competitors entering the market, the big tech companies do not have to compete as aggressively in key areas like protecting our privacy. And some of these companies have grown so powerful that they can bully cities and states into showering them with massive taxpayer handouts in exchange for doing business, and can act — in the words of Mark Zuckerberg — “more like a government than a traditional company.”

We must ensure that today’s tech giants do not crowd out potential competitors, smother the next generation of great tech companies, and wield so much power that they can undermine our democracy.

TechDirt has a rather jaundiced view of the plan:

First of all, I should note that just recently lots of people were totally up in arms over Donald Trump supposedly trying to interfere with the DOJ's analysis of the AT&T / Time Warner merger. And I'm curious if those people feel the same way about a potential President Warren announcing ahead of time -- without any actual investigation by a supposedly independent DOJ -- that it's okay to declare that they should be broken up? It certainly seems like the same form of bogus interference, even if for different reasons. The DOJ is supposed to be an independent agency for a reason. We shouldn't cheer when Donald Trump ignores that and we shouldn't cheer when any other President or Presidential candidate does it either.

Second, while I might find myself much more supportive of a more aggressive DOJ that blocks future acquisitions by these companies, I'm not sure I see how the specifically listed divestiture plans would... do much of anything (with the one possible exception of Google/Doubleclick, which I'll get to). While I'm sure that Amazon, Facebook and Google would grumble about breaking off all of the others, for the most part, all of the listed divestitures involve companies that were mostly left alone and run as separate subsidiaries, which don't necessarily have much to do with any of those companies' core business. Sure, there might be some revenue or growth hits in spinning those off, but it doesn't really change their fundamental ways of doing business. Amazon loses Zappos? Meh. It'll still sell lots of shoes and maybe ramp up its efforts there in a way that ends up making Zappos tough to sustain by itself. Google loses Waze? Well, it already has Google Maps which probably has more users anyway.