Tech companies have become too big to fail even as their tentacles have reached all walks of human life and work, exerting immense influence. Experts say vesting so much power with the likes of Amazon, Facebook and Google can harm people and society. Looks like they have a point.
If you were alive in 1900 and someone had told you Standard Oil would be broken up into 34 small companies by 19011 you’d swiftly term the person a lunatic utopian. At that point in history, the Standard Oil Company and Trust, an American company and corporate trust built (1870-1911) by the legendary John D Rockefeller, unilaterally controlled almost all facets of the oil market in the country.
This included production, processing, marketing and transportation of oil. In the business and policy parlance, it was too big to fail. The group had a near-monopoly in everything it did. For one, it controlled 91 per cent of the oil market in the US. But in 1911, Standard Oil broke up courtesy a lawsuit that the US government brought against it in 1906. The Sherman Antitrust Act of 1890, on which the government move was based, saw the oil giant divested into 34 companies.
Similarly, in 1982, AT&T was split off its local access telephone network into seven regional companies (the Regional Bell Operating Companies or ‘Baby Bells’), keeping long-distance and the telecoms equipment business (which was also later split off and is now part of Nokia).
Cut to 2019. Many in the United States and beyond swiftly termed American politician and senior senator Elizabeth Warren a utopian when the former law professor (who interestingly specialised in bankruptcy law) said it was time to break up Google, Facebook and Amazon. “Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy,” wrote Warren. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”
The ‘break-up’ story
Warren’s plan had these key components:
- Pass a law that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform. This means prohibiting suh companies from owning both the platform utility and any participants on that platform. They would be required to conduct fair and nondiscriminatory dealing with users, and would not be allowed to transfer or share data with third parties.
- Appoint regulators committed to reversing illegal and anti-competitive tech mergers.
- Protect the future of the internet by allowing small businesses to have a “fair shot to sell” their products on Amazon without getting cannibalised or on Google without having the search giant “demoting their products”.
Warren’s was not a new suggestion. Several activists and observers of the tech industry have been raising similar demands for some time now (Club ‘Break Up’ includes the likes of Facebook co-founder Chris Hughes, and antitrust scholars Tim Wu and Lina Khan), pointing towards the dangers inherent in the way Big Tech has been amassing data and money. Some critics called this an act of primitive accumulation of capital and data. The recently coined term platform capitalism explains how platform companies, such as Google and Facebook, use technology to collecte, curate and commercialise private and public data.
A look at the size and spread of Big Tech would give some pointers: The four big tech companies (Apple, Amazon, Google and Facebook) hold a combined market capitalisation of $5 trillion. That’s nearly twice the total GDP of India, in case you want to put it in perspective. They have about $780 billion in combined annual revenues. They sit on a cash pile of $420 billion. And, finally, nearly 4.6 billion people are connected to the internet (Thanks Axios for this nugget of info).
Even during Covid-19, Big Tech companies earned pretty well.
The companies continue exerting immense and at times toxic influence over societies they function in. And during the pandemic the four largest technology companies posted robust quarterly results. Apple, Amazon, Google and Facebook marked record increases in revenues. The four companies reported a combined profit of $28 billion during the second quarter of the year.
Here’s an interesting visualisation on How Big Tech Companies Make their Billions, by VisualCapitalist.
How will a break-up help check their influence?
It’s pretty simple. Smaller entities cannot exert pressure on rivals and won’t be able to choke competition. Smaller entities can ensure better competition, innovation and can mean less monopoly. Investors love small companies and broken up entities (most offshoots of Standard Oil went on to do well in the markets).
But obviously, Big Tech won’t like this. And given their powers, it’s not going to be easy for legislators to do so. Still, there is a heated debate, backed by studies and data, on why we cannot delay breaking up Big Tech, given the way the fall of ‘Too Big To Fail’ finance companies such as Lehman Brothers triggered the mighty financial meltdown of 2008-09.
For the world, the collapse of, say, Facebook is dangerous as things stand now. Mostly because we have no idea what to do in a no-platform world. In August 2020, a research paper from Oxford University called for governments to understand the dangers inherent in the way platform companies operate and called for companies to formulate new rules to protect users and society in the event of a possible collapse, Guardian reported. The paper, published in the Internet Policy Review journal, by Carl Öhman and Nikita Aggarwal said the world’s biggest technology companies are unlikely to fall abruptly, but we have no clue what we should do if they do.
To know more…
In another interesting paper (What if Facebook Goes Down? Ethical and Legal Considerations for the Demise of Big Tech Platforms), in 2019, Öhman and Aggarwal had argued that recent events relating to the misuse of users’ data by Facebook and the “growing regulatory push-back it is receiving in response” expose the relative fragility of its preeminent status, making “the future demise of Facebook’s main platform if not plausible, then at least less implausible.” The researchers said that the demise of a major online social network, such as Facebook’s main platform, would give rise to several legal and ethical concerns, in particular relating to the treatment of user data, that are not adequately addressed by existing governance frameworks.
That said, some experts suggest the notion that breaking up Big Tech would strengthen democracy is false and there is no evidence per se to prove that large monopolies imperil democracy. They point out during the 1960s and 1970s AT&T and IBM held monopolies over telephony and computer, the US democracy was becoming more inclusive. It might be the size, instead their nature – tech – that is at the heart of problems, they believe.
But the dangers are real and present. What Big Tech is going to do about the concerns around their powers and how lawmakers are going to address them will change the way work and live in today’s world.