Here comes the “techlash.” Back in February, in an article titled: Digital Gangsters – politicians finally bring the tech giants to heel we warned you of a strange alignment of the political stars that suddenly made the tech titans look vulnerable and friendless. Last Monday, confirmation of US investigations came, wiping billions off share prices in seconds at Google, Apple, Facebook and Amazon. Many are panicking. But this is less likely to be a day of judgement, than a period of purgatory. Slow, long, and, very difficult. Or is it?
The tech titans have a new tamer. The relatively unknown David Cicilline, chairman of the House Judiciary’s subcommittee on antitrust. He announced last week that he’s planning eighteen months of hearings, and testimony from executives from Amazon, Apple, Google and Facebook, as well as subpoenas for internal corporate documents. “This is about how we get competition back in this space” Cicilline promised.
Last Monday was a busy day. Cicilline’s press conference coincided, conveniently, with a leak about negotiations over the last few weeks between the Federal Trade Commission and the Department of Justice over tech regulation. These have ended with the latter picking off Apple and Google, while the FTC will take on Facebook and Amazon. There seem to be a lot of people in Washington who are suddenly on a mission. Indeed, it is hard to think of a time in US history when politicians have been so divided in general, and yet so united on one particular issue. As we warned in February, the consensus against big tech is all encompassing. The right of the Republican Party is fed up with social media platforms for prioritizing liberal views and blocking many of their firebrands. President Trump has developed something of a personal vendetta against Jeff Bezos owner of Amazon (and crucially of the anti-Trump Washington Post). Trump openly mused that Google, Facebook and Amazon, are in a “very antitrust situation.”
Across the aisle, the Democrats have been riled by Facebook’s involvement in the Cambridge Analytica affair. The leader of the Democrats in the House, Nancy Pelosi, now believes that Facebook’s refusal to remove a doctored video of her being incoherent is proof that the company knowingly enabled Russian election interference. At the same time, just about every further left Democrat contender for President, is openly toutingcorporate prosecutions and company break ups. Indeed Senator Warren is proposing sweeping legislation and the potential break up of all tech companies with revenues of more than $25 billion. “Today’s big tech companies have too much power…. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else.”
Some of US politicians’ current fervour in pursuing the techs may come from their failure to do anything over the last two decades as near monopolies were established. Facebook’s acquisitions of WhatsApp and Instagram were waved through; Amazon was allowed to crush competitors by temporarily lowering prices; and Google began promoting its own search results (and affiliate marketing links) over those of competitors like Yelp and Expedia. You might have thought it obvious that the huge share of the digital advertising market controlled by Google and Facebook might not be healthy. As Scott Galloway NYU Stern business professor, observed just one company, Facebook, now has 2.4 billion users (the population of the entire southern hemisphere). What those users see each day is dictated by algorithms, themselves controlled by just one man. A man who cannot be removed from office. Google’s advertising revenue is now worth more than the entire US market for advertising. Complaints from those competitors affected have been getting louder and louder. Consider one example. European app, Aptoide, which has gone as far as launching its own campaigning website demanding Google “Play Fair.” Aptoide alleges Google Android’s malware protection has been manipulated to wipe out competitors: “flagging Aptoide as a harmful app, hiding it on users’ Android devices and requesting them to uninstall it.” Aptoide claim Google targeted them because they offer developers a more attractive revenue split — taking just 19%, rather than the 30% cut Google takes from Play Store wares. Google are crushing them they say: “In 2018, we had 222 million yearly active users. Last month (May’19), we had 56 million.”
So it should be no surprise that various enquiries are now underway. But where will they lead? What comes next is slow and difficult. Years and years of enquiries, testimony, and debate lie ahead.
A lot of the anti-trust legislation was written before the Great War when Government was struggling to control
the robber barons. In addition, America’s rather geriatric political elite is often out of touch with the implications of new technology. Should companies be broken up as some suggest (including Chris Hughes one of Facebook’s founders)? That is no small question. Previous government anti-trust efforts were very long winded and didn’t achieve much. An attempt to tame IBM took thirteen years and was finally dropped. AT& T’s break up into seven smaller companies did succeed, but it took a decade. The Government case against Microsoft was finally settled after twelve years.
Why so slow? Well, if you are big enough to be a target for politicians, you are also big enough to have an army of lobbyists and lawyers. Take Google, the ultimate politically savvy company. Their long established Washington office spent $21.1 million lobbying the federal government last year and sponsors hundreds of different organizations: think tanks trade groups etc., including the Cato Institute, the American ConservativeUnion, the Brookings Institution, the Electronic Frontier Foundation and the Human Rights Campaign. Google is even a “platinum sponsor” of the American Anti-trust institute! It has also spent over $2 million supporting particular congressional candidates in the last two years. As Luther Lowe who leads public policy for rival Yelp observed: “throw a rock in any direction in Washington, D.C., and you’re likely to hit somebody on Google’s payroll. No doubt they’re going to mobilize those individuals now.” The same is true of the other companies now being targeted. These are powerful forces to take on, and most agree with Carl Szabo of Net Choice, a tech industry group, that these investigations will fizzle out as well. “Back in 2013, the FTC looked at Google and realized that there’s no ‘there’ there. So now I guess it’s DOJ’s turn to realize that there’s no ‘there’ there.”
Really Carl? The question now is whether the political alignment is different? Senator Warren and President Trump on the same side. Think about it.
Christopher Walker is a writer on business and politics. He has worked for many years in the area of institutional investment and ESG.