Would breaking up Amazon, Apple, Facebook, and Google be bad for customers?
Legislators and regulators have the “Big Four” in their cross hairs, but is it fair to compare these companies to the Trust Busting of the 19th and 20th centuries?
By Jeffrey Cole
By any objective measure, the “Big Four” (Amazon, Apple, Facebook, and Google) are so big and powerful they control their industries, causing many critics and governments to question whether they are monopolies. In any normal environment, they would be broken up. The Big Four have become some of the biggest and most successful companies in history, and that size and success is making them targets.
Indeed, at least three of the four are genuine monopolies. Google accounts for over 90% of search in every country in the world except China. Placing advertising in and around search has built Google in 20 years into one of the most profitable companies ever. In those 20 years, Google and Facebook have been responsible for 40% of advertising disappearing from television, radio, newspapers, and magazines. (Facebook is just 15 years old.)
Facebook has 2.4 billion users around the world out of 7 billion people on the planet, or more than one-third of every man, woman, and child. But Facebook’s reach is more impressive than that since 1.3 billion people, the Chinese, can’t get Facebook. So, Facebook reaches 2.4 billion out of 5.7 billion, or 42%. And it’s still more impressive than that because the 5.7 billion figure includes non-users of the internet. Today there are about 3.4 billion people who are online and not living in China. 2.4 billion of them are on Facebook, or 70%. No other platform comes close to this, and this percentage doesn’t include Facebook’s wholly-owned Instagram or WhatsApp.
Amazon’s goal has been to take over the world and put everyone else out of business. In the 25 years they have been around, they have done a good job in this mission. Bookstores, drugstores, department stores, and many others have succumbed to Amazon’s blitz. In the next year, Amazon will account for 50% of all online commerce in the United States. Apartment and office buildings throughout the country cannot find space for all the packages that are being delivered, and the number keeps increasing. Amazon is also moving into new industries. This year they are making significant forays into healthcare and banking.
Apple, which is usually the biggest of the Big Four and the first to become a trillion-dollar company, ironically, is the only one that is not a monopoly: it’s just huge. More people around the world are on Android phones (software that comes from Google) than Apple phones. The iPhone faces serious competition from Samsung, LG, Huawei, Xiaomi, and others. We believe that as Apple’s innovation has slowed—each new year’s crop of iPhones are only incrementally better when Apple fans want game changers—it will lose market share. Look for Apple to move into other industries such as automobiles, payments, and entertainment. Ultimately, we see Apple acquiring Disney.
These companies are so big they are a natural target for the antitrust division of the Justice Department. This is the same Justice Department that, in the 1980s and 1990s, went after the original AT&T, IBM, and Microsoft.
AT&T and IBM were forever altered by anti-trust suits. Microsoft survived (and is bigger than ever) by detaching Internet Explorer from Windows.
Compared to Apple, Amazon, Facebook, and Google today, the AT&T, IBM, and Microsoft of the 1980s were small companies.
There is no doubt that the governments of the U.S., European Union, and elsewhere are preparing to move against the Big Four.
Today’s tech companies are some of the biggest companies we have ever seen. The Big Four are enormous and frequently stifle competition from new entrants. Their lack of regard and protection for our privacy is unacceptable. But there is a difference between the Big Four and the Trust Busting of the 19th and 20th centuries. The dilemma regulators face today is that, in the name of protecting the consumer, they may very well do great damage.
Rep. David Cicilline (D-R.I.), chairman of the Subcommittee on Antitrust, Commercial and Administrative Law, argued that the internet has become “increasingly concentrated, less open, and growingly hostile to innovation and entrepreneurship.”
It seems obvious what is about to happen, and based on over two centuries of antitrust law and precedent there is a strong case to be made for it.
There is just one problem: the immense size, success, and reach of the Big Four may be in the best interests of consumers. Breaking up these companies, or severely restricting them, may well hurt the user more than anyone else.
Wikipedia defines antitrust law in this way: “In the United States, antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers.”
What is likely to come from the Justice Department might not be to the benefit of consumers.
Internet users have paid a serious price in the area of privacy. However, where the Big Four differ from most other antitrust actions is that the strength of Apple, Amazon, Facebook and Google has been an economic windfall for most consumers. Breaking them up could have a direct impact on the consumer’s wallet.
These are some of the ways that consumers have benefited enormously from the size and power of the tech companies.
1. We get extraordinarily valuable and useful services without spending money. In its early days, Google could have decided that filling its pages with advertising was crass and unsightly. Instead, they could have offered Google Search and Maps for $6 each per month. Looking at how critical Google is to finding information (whether for work, school, fun, or settling a bet) and that the average user consults Google 20-50 times a day, if the only way to get it was to pay $6 per month, they would have had almost every internet user outside of China subscribe. (It would be priced differently in other countries).
The same is true for Maps: how many people would not pay for Google Maps or other similar services? Facebook could have priced itself at $7 per month and not sell ads (and in doing so save itself a world of problems). It would have potentially well over a billion paying members. Add Gmail, Android, Google Docs (and many Google services), as well as Instagram and WhatsApp to the services we currently get for free.
2. We are able to stay in constant voice communication with friends and family anywhere in the world for free. When I was a little boy, my parents used to place a three-minute egg timer on the table when they called our relatives across the country. Calls were so expensive (because AT&T was a monopoly and set prices) that they could only talk a few minutes each month. Overseas calls were not even in the realm of possibility.
Today through Skype (Microsoft), Google Voice, WhatsApp (Facebook) and other services, we can call as much as we like, keeping families closer together at absolutely no cost. Facetime (Apple) and WhatsApp have upped the game beyond audio to video. Facetime could easily cost $5 a month, yet it’s free and with no ads. We have moved from $3 a minute to unlimited at no cost.
3. Music, movies, and photos. In my lifetime, I have spent about $7,000 on records and CDs, about $5,000 on DVDs, and $50,000 on photography (camera, film, processing, photo albums, and reprints). With all that spending, there was little flexibility: my CDs have to be where I am for me to listen to them, as do my DVDs and pictures to see them.
Today, through the tech companies (this now includes streaming services like Spotify and Netflix, and cloud services), I can have all the music ever recorded (with a few exceptions) and enjoy it anywhere I am—for free with ads or a few dollars per month without ads. I can watch almost all the movies I want for $12 per month (although this is about to change). Today, teenagers can take a hundred—if not a thousand—times more pictures, and the total cost of photography in their lifetime will be less than $50.
There are other examples of getting valuable services, worthy of monthly fees, for free. Through Apple’s tools, users can lower the barrier to entry in creating music and getting it in front of audiences; the same is true for making and editing movies once you have the phone. Aspiring actors and journalists can create demo reels and distribute them, and actors can create portfolios, at little or no cost. YouTube (part of Google) provides a television platform for everyone at no cost to the user.
Today’s tech companies are some of the biggest companies we have ever seen. The Big Four are enormous and frequently stifle competition from new entrants. Their lack of regard and protection for our privacy is unacceptable.
But there is a difference between the Big Four and the Trust Busting of the 19th and 20th centuries. Then, the companies became enormous, eliminated competition, and raised prices. Consumers had to pay whatever those companies asked because there were few or no other choices. Look at the price of phone services in the 1980s.
The dilemma regulators face today is that, in the name of protecting the consumer, they may very well do great damage. These cases are different. Solving the problems posed by the Big Four will require regulators to act with care and nuance, rather than a meat cleaver.
Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.
See all columns from the center.
July 24, 2019