America’s tech industry has been the target of antitrust cases from the government and the wider public for some time now. From the famous Microsoft antitrust case in 1998 to several similar cases filed against the biggest tech firms in recent years, the government has been trying hard to curb the growing power of these tech giants albeit unsuccessfully.
Now antitrust is not a new concept and most of the time, it is warranted. A good example is the Standard Oil Antitrust case in 1911 that led to the break up of an oil monolith into several competing companies. Most importantly, however, it brought an end to “a series of abusive and anticompetitive actions” that was the norm of commerce in the early 20th century.
Today’s cases however are a little different and I would argue, misguided. The government argues that the tech industry is dominated by a few big companies, specifically five; Amazon, Alphabet (Google’s holding company), Facebook, Apple and Microsoft. These are also the five of the largest companies in the US, as measured by market cap.
In a nutshell, it is the size and the dominance of these companies that are bad. They stifle competition and therefore innovation while also harming consumers and the wider society. This is the opinion of Washington DC.
These conceptions or ‘misconceptions’ have led to six separate antitrust bills pushed by a US congressional last week. The goal is to widen the definition of antitrust so that it can finally apply to these companies.
However last week’s events, may shed some more light on the situation and hopefully change the course of the fight.
Last Monday antitrust complaints against Facebook brought by FTC and the attorney general was thrown out by U.S District Judge James Boasberg. In his opinion, the judge dismissed the whole argument by ruling that the FTC did not prove that Facebook is a monopoly.
“The FTC’s Complaint say almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market. It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist.”
Herein is the cornerstone of the whole argument. Are these companies really monopolies or are they just big companies in much larger markets? My sense is the latter. I would argue that the US tech industry is still vibrant, very competitive and subject to disruption. Here are some of my reasons.
A Swahili Proverb translates something to ‘When the bulls fight it is the grass that suffers.’ In this case, however, I argue that the grass does not suffer, it in fact thrives. By grass here I mean consumers and the bulls the tech behemoths.
One big misconception about these tech giants is that they operate within their own turfs. With some sort of agreement not to venture into the other’s territory. The truth however is that these companies are in constant brutal competition with each other to grab a piece of market from the other.
In the cloud computing market, for instance, Google, Microsoft and Amazon are locked in constant battle for supremacy. Alongside them are newcomers like Zoom and Snowflake both of whom debuted last year, they are slowly carving out space in the cloud computing market.
While Google and Facebook seem to occupy different markets i.e. the search and social media, both their revenue streams come from online advertising.
The result is a wide array of options for consumers while a price war between these providers ensures that it constantly drops. This is how capitalism works and it’s the main reason many in the world are much better off than their predecessors. One would think it is as obvious a fact to US legislators as it is to us.
Another popular attack thrown at the “Big Five” is that they intentionally or indirectly crush any disruption into their domains. This again is largely untrue. In his op-ed Matt Rosof explains how it is in fact through disruption that some of the big Five rose.
“Google became a threat to Microsoft because it solved an entirely different problem that Microsoft hadn’t even been focused on – organizing the burgeoning mass of information on the Internet in a way that made it easy for people to find what they were looking for. By the time Microsoft woke up and tried to beat Google with its own search engine, MSN Search (later Bing) in 2005 it was already too late.”
The truth is Silicon Valley’s dominance in the tech world is not the real problem here. What seems to irk, liberals especially is their size. Matt Rosoff captures this sentiment well saying “Being big in itself is not illegal.”