Democrats and Republicans can’t agree on much, but a consensus is emerging to challenge the power of Big Tech.
Congress is investigating whether antitrust violations were committed by Amazon, Apple, Facebook and Google. The probe took on new gravity in September when the House Judiciary Committee asked the companies to turn over sensitive documents including financial data and executive discussions on potential merger targets.
The Justice Department had already begun a major antitrust investigation, along with the House’s “top-to-bottom review of the market power held by giant tech platforms.” Amazon is facing closer inspection by the Federal Trade Commission, the Progressive-era agency assigned to police anti-competitive practices and monopolies.
From the standpoint of the companies, the worst outcome would be a government-ordered breakup.
That’s unlikely but not impossible. Democratic presidential candidate Elizabeth Warren promises to break up Big Tech, saying the giants hurt innovation and small business. The Washington Post, owned by Amazon CEO Jeff Bezos, is a particularly effective thorn in President Donald Trump’s side. That could put the bullseye on Amazon.
From the standpoint of Seattle, attention should be paid. Serious damage to Amazon would affect the metropolitan area in unpredictable and mostly unfavorable ways.
Microsoft survived a historic antitrust case mostly intact. Now it’s an admired corporation. But between the lawsuit itself and a consent decree, the company spent 21 years fighting the federal government.
It was a near-run thing: The federal court initially ordered Microsoft broken into two separate units. And the battle contributed to the infamous “lost decade” and, some say, Bill Gates’ decision to step down as chief executive.
Amazon might not get off so easy. It’s made enemies beyond Trump, such as the mom-and-pop retailers it vaporized and the big rivals it terrifies. Microsoft mostly had enemies in D.C. and Silicon Valley — average Americans were happy with the software. Will enough average Americans stand by Amazon, even if they shop there? These are highly uncertain times.
The nightmare scenario isn’t what happened to Microsoft but the fate of Ma Bell.
The old American Telephone and Telegraph (later AT&T, aka the Bell System) controlled phone service through most of the United States before the feds went after it in 1974 as a monopoly. The government had actually filed two previous suits, in 1913 and 1949, but AT&T came through with relatively minor concessions. Ma Bell seemed unassailable. And most of us alive back then had no complaints. We had the best phone service in the world.
But Ma Bell’s luck ran out. The Bell System was broken up in 1982, losing local phone service to independent regional operating companies (US West here, absorbing Pacific Northwest Bell which was headquartered in Seattle). It also lost the Yellow Pages (essential and lucrative before the internet), and half of Bell Labs, once a world-class generator of innovation. AT&T’s Western Electric was no longer monopoly equipment supplier to America’s telephone system, either.
Today’s AT&T is a bulked-up Baby Bell, SBC Communications, finally acquiring its Ma, so to speak, in 2005 and taking the name.
Amazon could face a similar fate. The parts are as evident as a Thanksgiving turkey: Amazon Web Services, Whole Foods, Alexa and other hardware and software, entertainment, and Amazon Air. All could be spun off as independent companies. The e-commerce marketplace could be broken into smaller, competing companies, too. It would be almost too easy, at least on paper.
The Ama-geddon scenario would only benefit the economy, however, if it were applied to other giants with anti-competitive market power: the rest of Big Tech, big banks, the airline cartel, Walmart, media, defense contractors and more.
And would the pieces remain headquartered in Seattle? Amazon Web Services would likely use HQ2 in Virginia. Other spinoffs might move elsewhere. For all the local carping about Amazon, its headquarters here — achieved without any incentives — has been a unique asset and mostly for the good, not least in filling city coffers.
Even without a breakup, years of fighting an antitrust action would distract Amazon management from the biggest things driving its stock price: growth and innovation. Even an eventual triumph would be a lost decade on steroids. Hiring would slow and could even reverse.
Again, the worst is unlikely. Brave faces are being worn. According to Politico, at a summer tech conference Amazon Web Services chief Andy Jassy said, “We don’t spend a lot of time talking about it.”
The story continued: “Bezos and others in Amazon’s inner circle aren’t preoccupied by a potential forced restructuring at government hands. Far more front of mind, (Jassy) said, are Google and Microsoft gaining ground into the cloud computing business AWS has long dominated.”
Writing in Bloomberg, Harvard Law’s Noah Feldman argued that the interpretation of antitrust for the past 40 years, seeded by Robert Bork and Richard Posner, would work in Big Tech’s favor.
“The essence of the … theory is that we should measure the presence of anticompetitive behavior by determining whether consumers are being harmed,” he wrote. “Instead of protecting a company’s competitors, the law should protect consumers. If consumers are not being harmed, or are even being helped, the conduct should be deemed lawful.
“You can see why this theory has enjoyed such success. It’s simple and elegant, and resonates with the philosophy of utilitarianism. The consumer-oriented theory is supposed to embody the goal of providing the greatest welfare for the greatest number of people. The implicit idea is that competing companies don’t have legal interests — people do.”
And don’t forget the Supreme Court’s Citizens United decision, which holds that political spending is a form of protected free speech by corporations and unions. This allows them to essentially spend unlimited sums on political causes.
Still, uneasy rests the crown. Old theories and political axioms are more fluid than anytime in decades. Big Tech might be in for a rough ride, and that would give Amazon and Seattle less to smile about.