Business

Critics argue that technology companies should be broken up

As technology becomes a more ubiquitous presence in our lives, and technology companies grow to enormous sizes, some have asked whether these giants of industry should be broken up.

According to The Wall Street Journal in particular, Apple, Facebook, Inc., Alphabet Inc. and Amazon.com have become dominant in their respective areas, creating virtual monopolies and duopolies. According to The Wall Street Journal, in the United States, Alphabet’s Google handles 89 percent of all searches conducted on the internet. Ninety-five percent of young adults on the internet use a Facebook product, such as Instagram or WhatsApp.

Amazon handles 75 percent of all electronic book sales. Google and Facebook together received 63 percent of online advertisement spending on their platforms last year. Google and Apple provide 99 percent of mobile phone operating systems. Apple and Microsoft Corporation supply 95 percent of desktop operating systems.

As a result of this Apple, Google, Facebook and Amazon are among the world’s most valuable companies. Despite these successes, they have also been accused of stifling competition, avoiding taxes and invading privacy.

Their hold is so vast that Russian operatives used Facebook and other U.S. social media companies to sow dissension among citizens during the 2016 presidential election. According to Bloomberg L.P., “Executives of Facebook, Google, and Twitter Inc. told Congress on Oct. 31 that they can’t even measure the extent of Russia’s manipulation of the U.S. presidential election and don’t yet have the tools to stop it the next time.”

Their precedents are AT&T Corporation and Standard Oil, that both commanded 80 percent of their specific markets until they were broken up by the U.S. government. Critics are wondering if these tech companies could be split the same way, under an antitrust case.

However, antitrust regulators have to estimate whether the massive size of Apple and these other companies leave consumers worse off. Right now, they do not operate as a conventional monopoly would. In a traditional monopoly or duopoly, a company would seek to set its own exorbitant prices or collude with another to keep prices in their market high, leaving consumers with little to no alternatives.

Companies with this favorable market position might also offer poor quality products or services, with few improvements or updates. In contrast, big tech has only driven down prices, as well as rolled out new and improved goods and services at a rapid pace.

Most of Google’s products are free to consumers, including access to an advanced internet search engine, email, calendar, notes, photo storage service, file storage service and an office suite hosted on the web.

Market dominance could mean fewer competitors and less innovation, however. With fewer choices available to consumers, they will be worse off as a result. Fiona M. Scott Morton in an antitrust case stated, “The impact on innovation can be the most important competitive effect,” according to The Wall Street Journal.

Companies such as Facebook are a prime example of how market dominance hampers competition. With more than 2 billion users, the company is the most popular and prominent social media network around. Consequently, this makes it difficult for users to switch away from it and for other companies to compete. Even if a competitor offers a better service, users will not want to switch to it without their friends. Through the network effect, a platform becomes more useful to an individual user the more users it has. Facebook has leveraged its massive user base into other areas. Instagram, purchased in 2012, and WhatsApp, purchased in 2014, became the world’s largest photo-sharing site and instant-messaging provider, respectively. This was due to the fact that Facebook users signed up for these services in much greater numbers once they were acquired by the company.

Additionally, companies who want to compete with Facebook may struggle to draw users to their platform or to acquire funding from investors. Even if they cater to a niche, there is no law preventing certain forms of copying. Snap Inc.’s Snapchat, a disappearing photo and video-sharing mobile app popular among teenagers and young adults, was once seen as a direct competitor to Facebook.

When Snapchat denied Facebook’s offer to buy it outright in 2013, Facebook retaliated by copying key features of the phone application. In 2016, the company introduced Stories, a Snapchat-like feature, on Instagram, which today has both more users and advertisers than Snapchat, according to The Wall Street Journal. This decision by Facebook not only undercut Snap’s growth and profits, reducing the number of users who would want to try the app out, but also brought new users to Instagram and further locked in Facebook product users into its ecosystem.

Antitrust laws and federal regulations may need to change to keep pace with the rapid innovation and unorthodox practices of these tech giants. However, compared to decades ago, users do have more of a choice than ever. If a superior search engine or online store were created, making the switch would be easier compared to the times of infamous monopolies in the past.

March 12, 2018

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Jahvon Meadows


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