Back in March when Elizabeth Warren, the Massachusetts senator and presidential hopeful, promised to break up Big Tech if elected to the White House the idea seemed fringe and fanciful. In July things got real – the US Department of Justice opened a wide-ranging antitrust review of Amazon, Apple, Facebook and Google, following similar moves by the Federal Trade Commission (FTC) and Congress.
Since then, Mark Zuckerberg and Facebook’s defence has been the threat of Chinese technology domination, warning in numerous talks and interviews that the country “do[es] not have the values we have.”
Zuckerberg’s statements have been received as: "well, he would say that, wouldn’t he?" But he does have a point. As of 2018, China has nine of the world’s top 20 tech giants, according to VC firm Kleiner Perkins Caufield & Byers. These include Tencent, the Shenzhen based social networking site that had one billion monthly users in 2018 while its instant messaging service had 820 million monthly users – roughly the same as the combined populations of the US and the European Union; Alibaba, the world’s largest online retailer, which handles more than twice as many sales as Amazon and eBay combined; as well as China’s top search engine Baidu; smartphone giant Xiaomi and China Mobile, which has 800m customers making it the largest phone company in the world.
So how much could power would breaking up US big tech firms hand to China? In his recent book Curse of Bigness: Antitrust in the New Gilded Age, Columbia Law School professor Tim Wu argues that an enormous gap between giant monopolists and their workers might lead to fascism.
US president Franklin D Roosevelt, he argues, broke up US monopolies thanks to strong democratic instincts. Ahead of World War II, German corporations had felt disadvantaged against British and American competitors, and German monopolists started to think Hitler might be good for them. “The rise of a figure like that doesn’t happen unless you’ve allowed corporations to centralise,” Wu writes. “It doesn’t happen in a nation of small businesses that’s even moderately decentralised.”
As a result, a complex debate has been unfolding around US big tech vs China. “There’s no doubt that big technology companies are starting to become a real threat to innovation,” according to one partner in a Silicon Valley venture capital firm. “Tech giants try to squash start-ups by copying them, or scoop them up early to eliminate a threat. We’re tending towards an oligopoly – but on the other hand, if you break these companies up who do we have that can defend us against Chinese giants like Tencent? Do you take your strongest players off the board?”
Nicol Turner Lee, fellow of technology and innovation at the Brookings Institution, explains this as a race to be the first in the data driven world of AI and autonomous vehicles. “There is some credibility to the argument that the US could fall behind,” she says. “Whoever gets there first will have unrivalled access to the patents and the tech running these systems." China has been ploughing huge sums of R&D money into quantum computing and AI.
"Where the US and China differ is in their permission to use to data to contribute to innovation – US regulations are tighter," Lee says. "But none of this is an excuse for tech companies breaches of privacy, data security and use by foreign operatives to interfere in domestic politics.”
Anti-surveillance activists are aghast at the China debate. “Mark Zuckerberg says that if we break up or weaken Facebook, some Chinese company will just step in take over – so, now we have to support our monopolies?” says Clare Birchall, a University College London academic and author of Surveillance: The Dangers of Openly Sharing and Covertly Collecting Data. “Once you’ve engaged in this sort of conversation, you’re heading in a very dangerous direction. You shouldn’t hold up surveillance monopoly as a reason to undermine anti-monopoly and democratic rules.”
The US government has a mixed history of breaking up monopolies. In the late 19th and early 20th century, railroad, oil and banking giants were broken up into separate companies although the vast United States Steel Corporation survived. In the mid-20th century the government largely relied on limiting price discounts to level the market. In the 1970s, the Justice Department began a lengthy legal action against IBM that was terminated by Ronald Reagan in 1982 – although Regan did act against telecoms giant AT&T. In 1999, 19 states and the Department of Justice initially won a battle to divide Microsoft into two companies – a decision that was overturned on appeal.
“As certain kinds of technology seem to become inevitable the power of users to contest or protest or functionally disagree with how companies are treating them diminishes,” says Seeta Gangadharan, assistant professor in the department of media and communications at the London School of Economics. “If you look at the breakup of AT&T in the US the history of that story as the legal scholars would have you think is that breaking up AT&T allowed us to move forward with commercial internet. But that didn’t really help consumers."
If action is taken, the question is – what form should any forced break-ups be? Should Facebook exist as separate companies running WhatsApp, Messenger, Instagram and its other products? Historically, break-up options include declaring some markets off limits to the biggest tech companies, carving out their most powerful platforms to become separate regulated utilities and unwinding past acquisitions – like Facebook’s purchase of Instagram – that raised few concerns at the time they were completed. “If you bust up Google into ten parts, you just distribute the problem – you now have ten people assembling detailed data profiles of internet users rather than one,” says Roger McNamee, a veteran Silicon Valley investor.
Some doubt politicians can act effectively, as they fail to understand the issues. “We are competing for data driven networks – the more data the more nodes, the more people the greater precision,” argues Ray Wang, founder of Constellation Research, Inc. “We’re using this data to build recommendation engines and next best actions. The battle is for scale. With Amazon vs Alibaba in online retail, Alibaba has many thousands more transactions than Amazon every day. The problem is we are building monopolies and digital duopolies from day one because governments don’t understand this market.”
Wang’s suggestion is that all previous anti-trust laws are invalid and a regulatory framework that forces big tech to open up its infrastructure to competition is needed – alongside the idea that private data has financial value. “We have to make data – whether privacy, genomic or any other kind – an actual property right for the individual,” he argues. “That breaks up data monopolies for everyone and forces companies to pay for data access – and some of that money could be used to fund a data watchdog. We need a fair playing field where we’re trading data and information like financial markets are trading capital flows. We need the same kinds of regulation for data as finance.”
For some, the issues go further. “As these companies grow bigger, they employ more workers and the evidence is these are short term, sometimes zero hours contracts,” Gangadharan says. “That’s equally true in China where Chinese academics are writing about the labour unhappiness at Chinese tech companies. The conditions for workers at Tencent or Alibaba are much the same as Amazon and Facebook. It’s an important discussion that is finally opening up – how do we want private industry to develop technology that’s not punishing or extracting value from consumers? Whatever we do, we need to make all tech companies accountable for their actions.”
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This article was originally published by WIRED UK
