Big Tech’s ‘enormous influence’ one of many roadblocks to Elizabeth Warren’s break-up plan

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Last week, Sen. Elizabeth Warren made a splash with her proposal to break up Amazon, Google and Facebook if elected president in 2020.

Her blog post on Medium criticized the Department of Justice and Federal Trade Commission for “weak antitrust enforcement” that has allowed tech giants to buy competitors, or worse, devitalize the venture capital markets that should be funding new startups.

“We live in an America where it’s not only economic power that we need to worry about from the Amazons and Facebooks and Googles and Apples of the world. We have to worry about their political power as well,” Warren told The Verge.

In 2018, employees of the tech firms named by Warren gave millions of dollars in contributions to members of Congress and their PACs, disproportionately Democrats. Those tech employees gave substantial contributions to Warren, too. The companies spent even more money on lobbying and have massive influence on Capitol Hill, creating a potential roadblock for Warren’s plans.

“These big companies exert enormous influence in the economy and in Washington, D.C.,” Warren said.

According to the Wall Street Journal, Amazon has 100 lobbyists at a dozen firms lobbying on issues as diverse as drone regulation, music licensing and food stamps.

But the relationship between Washington and tech goes well beyond regulation. The government is also a major customer. The Journal reported that the U.S. government is estimated to spend $90 billion a year on information technology alone.

Amazon will soon be a major employer in the district after choosing the Crystal City neighborhood of Arlington, Virginia — a stone’s throw from the Pentagon and home to Ronald Reagan Washington National Airport — as the site of its second headquarters. The development is projected to bring 50,000 jobs to the capital region with $5 billion in investment over the next two decades.

Warren’s emphasis on breaking up the tech giants will likely be met with resistance from many quarters. Facebook had the temerity to remove several ads placed by her presidential campaign that called for the break up of it and other tech companies. The ads were later restored, but Warren commented that the whole episode proved her point that Facebook has too much power.

The tech companies would almost certainly spend millions in attempt to persuade members of Congress to oppose Warren’s proposal. But not everyone sees tech’s influence coming primarily from political lobbying or contributions. It also comes from consumers themselves.

“The firms have sway in Washington because huge numbers of consumers rely on these companies and like their products and because most politicians do not care about antitrust (probably because the voters don’t care about antitrust),” said political science professor Eitan Hersh of Tufts University.

Hersh dismissed the dollar amount of political contributions spent by these firms as trivial and saw little correlation between it and the government’s lack of appetite for regulation.

“Consumers have shown pretty clearly that they don’t care about supporting mom-and-pop shops or getting their news from local newspapers, etc.,” he said.

Berkeley professor, lawyer and former DOJ antitrust economist Carl Shapiro took a different approach, saying the root of many political problems is money in politics and the corruption that goes along with it. But Shapiro also questioned whether the tech giants’ behavior had risen to a level that required legal action.

“We have a good tradition of not attacking companies just because they become large and powerful; they have to behave badly, too,” he said.

According to the Federal Trade Commission, “Obtaining a monopoly by superior products, innovation, or business acumen is legal.” To run afoul of antitrust laws, a company must engage in exclusionary or predatory tactics. It is a high bar to vault.

Warren, the original architect of the Consumer Financial Protection Bureau, is no Johnny-come-lately to the arcane minutiae of financial regulation. Perhaps that is why she is seeking to create a new legal standard for tech platforms rather than pursue a risky antitrust action against them.

Her proposed legislation would classify some technology business lines as utilities. Companies earning over $25 billion that offer an online marketplace, exchange or platform to connect to third parties would be considered “platform utilities.” As regulated utilities, they would be prevented from selling or giving preferential treatment to their own products on their own platforms.

For example, would not be able to sell Amazon Basics products, Google search could not promote Google products, and Facebook would have to spin off Instagram and WhatsApp.

“We break them apart, that backs up the influence a little bit, and it makes absolutely sure that they’re not engaged in these unfair practices that stomp out …every startup that’s trying to get in there,” she said.

Warren’s blog post pitches an improved internet experience. “Small business would have a fair shot to sell their products on Amazon without the fear of Amazon pushing them out of business. Google couldn’t smother competitors by demoting their products on Google Search. Facebook would face real pressure from Instagram and WhatsApp to improve the user experience and protect our privacy. Tech entrepreneurs would have a fighting chance to compete against the tech giants.”

It is a discordant image for Warren: saleswoman. But, she sold Congress on the Consumer Financial Protection Bureau. She’s hoping platform utilities are her next innovation.

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