Last week Sen. Warren (and Presidential hopeful) called for the breakup of three Tech Giants, Facebook, Amazon and Google. Warren noted that each has an outsized amount of power, and are dominating market areas, and are stifling competition. In an interview over the weekend Warren added Apple to the list of targets.
This sort of move is sure to be enraging to Capitalists and Libertarians. It would look like the big hand of government punishing successful capitalistic enterprises for their successes.
In what I termed The Warren Manifesto, Team Warren noted that Facebook is dominating the social networks, Amazon is dominating product sales, and Google is dominating advertising and online video and search. Further that each company is using their position to unfairly tilt the playing field, squishing competitors with unfair practices. For more on this read Sen. Warren seeking to break up Facebook/Amazon/et/al just like previous generation broke up Ma Bell (AT&T)
In an interview with The Verge over the weekend, Sen. Warren also added Apple to the list, saying:
You were very specific about how you’d break up Google and the rest. How would you break up Apple?
Apple, you’ve got to break it apart from their App Store. It’s got to be one or the other. Either they run the platform or they play in the store. They don’t get to do both at the same time. So it’s the same notion.
Pulling that apart, the App Store is the method by which Apple keeps the iPhone secure. It’s integrated into the platform. How would you propose that Apple and Google distribute apps if they don’t run the store?
Well, are they in competition with others who are developing the products? That’s the problem all the way through this, and it’s what you have to keep looking for.
If you run a platform where others come to sell, then you don’t get to sell your own items on the platform because you have two comparative advantages. One, you’ve sucked up information about every buyer and every seller before you’ve made a decision about what you’re going to sell. And second, you have the capacity — because you run the platform — to prefer your product over anyone else’s product. It gives an enormous comparative advantage to the platform.
What does Sen. Warren mean here?
Is Sen. Warren just an out of control LIBERAL who hates big corporations? I have no idea.
But there are some valid points here to consider.
The Apple iOS App Store is an unfairly run tilted marketplace. Here are a few attributes:
- Apple sells products in the same marketplace as 3rd parties
- Apple sets the standards for the allowable products
- Apple sometimes develops features or products that squish the rationale for a given product
- Apple requires all sales through iOS apps must pass through a mechanism that forces a royalty payment to Apple
That hasn't stopped application makers from rushing to the iOS marketplace with dollar signs gleaming in their eyes. But this sort of market is ripe with potential conflict of interest on Apple's part.
With Amazon, Sen. Warren made a similar analysis.
- Amazon sells products in the same marketplace as 3rd parties
- Amazon looks for best-sellers in the marketplace and sometimes develops Amazon-branded competition
- Amazon sets certain standards etc
This is ripe for potential conflict of interest on Amazon's part.
- Google's information services are often given preference over 3rd party information services
- Google sets policies and standards
- Google search ranking algorithms determine whether a site lives or dies, and is based on undisclosed decisions by Google's search quality team
This is ripe for potential conflict of interest on Google's part.
The case with Facebook isn't as clear but Facebook is clearly a major dominating force in social media.
Trust Busting in the modern era
Sen. Warren's interview talks about old school dominating capitalists.
This would not be the first time in US history that this kind of arrangement had to be broken up. Back when the railroads were dominant, and you had to get steel or wheat onto the railroad, there was a period of time when the railroads figured out that they could make money not only by selling tickets on the railroad, but also by buying the steel company and then cutting the price of transporting steel for their own company and raising the price of transporting steel for any competitors. And that’s how the giant grows.
The problem is that’s not competition. That’s just using market dominance, not because they had a better product or because they were somehow more customer-friendly or in a better place. It’s just using market dominance. So my principle is exactly the same: what was applied to railroad companies more than a hundred years ago, we need to now look at those tech platforms the same way.
In the olden days when the Trusts were broken up, it was handled by peeling off parts of the business operation into separate companies. The shareholders get shares of the new company, and all of a sudden you have 2 companies or maybe 10 companies where there had been one. And good luck to all involved.
Read the Team Warren manifesto here: https://medium.com/@teamwarren/heres-how-we-can-break-up-big-tech-9ad9e0da324c