Time to topple the technopoly

In just a few short years the tech giants have gone from upstart agents of digital democracy, connecting the world through their free platforms, to monopolistic fat cat enablers of abuse.

Where once politicians were falling over themselves to hang out with tech’s boy billionaires, they’re now eager to be seen castigating them for their failure to fix up – to protect children from would-be abusers, to stop hosting terrorist propaganda, to prevent fake news and hate speech, halt hacking, safeguard our data, and, of course, to pay more tax.

The likes of Google, Facebook and Amazon are facing the sort of scrutiny that would ordinarily send corporate executives into a tailspin. And yet, despite issuing apologies and pledging to do better, they have shown almost no commitment to real change.

How do the tech titans get away with it? Well, ain’t they got the power?

When your reach is greater than government, you hold a near monopoly market position, and consumers have little alternative than to use your services, what’s the inducement to real reform?

Take Facebook, which has almost 2.2 billion users worldwide. Its business model is to link people – for free – in a spider web of connections that create a dependency on the platform. If everyone else is on Facebook, communicating, organising events, sharing photos, sharing news, are you really going to disconnect?

For many people Facebook is too central to their social and professional lives to quit – one survey of small businesses in America found 80% used Facebook for marketing – which helps explain why the #DeleteFacebook movement doesn’t seem to have had a discernible effect.

What is the alternative for users? When people say consumers have a choice to disconnect, they’re right. But it is the same choice as people had in the Gilded Age: they didn’t have to use one of Vanderbilt’s ships to get from New York to San Francisco, but if they didn’t, they wouldn’t be travelling.

Market concentration removes real choice, and enables companies to become so powerful that their position is all but unassailable. In the US in 2016, 43% of online sales went through Amazon, and their market share is growing. Google account for 80% of the global search engine market (over 90% in the US). And it is estimated that Google and Facebook together account for almost three quarters of digital advertising in the States – unsurprising when they have all the online traffic.

And their overwhelming dominance is getting worse as they gobble up competitors and use their huge cash piles to spread into new markets (think Amazon acquiring Whole Foods for $14 billion).

In response to the monopolists of the Gilded Age, President Teddy ‘Trust Buster’ Roosevelt broke up the overreaching corporations, arguing that: “Where a trust becomes a monopoly the state has an immediate right to interfere”.

Breaking up the tech giants, or at least breaking off parts of them, may in the end be the only solution to tame their power, but applying this type of antitrust to today’s hyper-networked model would be much tougher than breaking up Rockerfeller’s Standard Oil or the Northern Securities Corporation (the holding company for the railways).

A new report by think tank Respublica and the Big Innovation Centre, aptly titled “Technopoly”, has a more realistic idea: stop the tech giants eating their competition.

The report’s starting point is that “liberal free market capitalism has not failed – but has not existed and doesn’t exist where markets have become monopolised”. And it is complacency, on the part of both governments and competition authorities, that has led to this.

I have written about the tech giants’ acquisition binges before. What better way to maintain your dominance than buying up any potential threats to it. The Respublica report points out that in the past decade, Google has bought 167 companies and Facebook almost 70. That’s not just aggressive, it’s predatory.

Critics of tougher action will argue that such acquisitions are innovation-enhancing, and some of them are, but the whole point of competition watchdogs is to separate innovative from anti-competitive behaviour. In fact, if “competition is the mother of invention”, as the report points out, a system that “does not catch or scrutinise mergers between major players and innovative upstarts”, will end up damaging innovation.

The authors even go as far as to say that “innovation is more important than short-term efficiency for our society”. And when you look at Britain’s lagging productivity and stagnating wages it’s difficult to disagree. They therefore recommend a much more aggressive approach to mergers and acquisitions, with competition authorities assessing each case based on a sophisticated understanding of value – for the new robber barons, data and, as the report puts it, “eyeballs”, are the new route to monopoly. Competition policy and enforcement needs to catch up, and quickly.

The tech titans’ transition from hero to villain looks uncannily like the experience of their Gilded Age equivalents, who went from celebrated entrepreneurs to reviled monopolists. Teddy Roosevelt understood just how pernicious extreme market concentration was for free markets, and therefore consumers. Today we are facing the same problems – but where’s our 21^st century trust buster?

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