How Big Tech is buying its way out of trouble

Then in the 1970s a new idea emerged from America’s law schools that turned this thinking on its head. The size of the company no longer mattered: the only criterion by which it should be judged, or a takeover blocked, was consumer welfare. To put it crudely, a firm like Amazon could be as big as it wanted as long as it kept prices low. Today to be concerned about the ‘bigness’ of companies is to go back to the popularist goals of the past, argues Professor Daniel Crane of the University of Michigan.

By the second decade of the 21st century, that reinterpretation of the law has had – if you are cynical – its intended effect. We are living in a new age of concentration, where a few corporate giants like Amazon dominate the economy. The ratio between the cost of a good or service and its selling price in the wider economy – often seen as evidence of market dominance – has risen in advanced economies by 43% since the 1980s.  The combined revenue of the tech giants – Alphabet, Amazon, Apple, Facebook and Microsoft – is larger than the GDP of more than 90% of the world’s nations. Start-ups are even founded with the sole purpose of being acquired by one of these Big Five.

Then, in 2016, an unknown law student decided to dust down some forgotten textbooks hidden away on the top floor of her university library. Early in 2017, Lina Khan published ‘Amazon’s Antitrust Paradox’ in the Yale Law Journal. The one word that Big Tech didn’t want to see in the public conversation – monopoly – was back, and at the worst moment. For the first time, Big Tech was caught in a bipartisan squeeze in Congress as real political pressure built up over the abuse of customer data and fake news.

Khan’s argument was simple. Once laws that were designed to prevent one company controlling a market had been pushed to one side, companies like Amazon were able to gain market dominance through anticompetitive practices. This gave them control of the infrastructure that many businesses and other parts of the economy depend on. Khan suggests that either Amazon should be regulated more forcefully to ensure competition – or that it should be recognised as a natural monopoly like the water or gas supply, and run as a publicity utility.

Now, Amazon, Google and the other modern monopolies have a battle on their hands. Worryingly, it looks like they have a formidable range of weapons to fight it with – and Khan and her allies have already been labelled as “hipster radicals.”

Big Tech’s lobbying dates back 20 years, but the scale of it has grown significantly. In America, five years ago Amazon spent $3.5 million on lobbying, last year they spent $13 million. In just a few years, Amazon’s lobbying operations have gone from almost nothing to rival Google. To defend its sprawling empire from the politicians that are circling the tech giant has assembled the biggest lobbying team of any tech company in Washington: 28 in-house lobbyists, compared to Apple’s and Facebook’s eight. 

Perhaps more disturbing is the influence that companies like Amazon and Google have that you can’t see. Both regulatory capture, where the regulators identify too closely with the companies they are trying to control, and policy capture, when commercial interests so infiltrate governments that they can affect the design of measures relevant to their activities, should concern us.

Since 2005, concern has grown over Google’s political influence after research showed that it had poached at least 65 government officials from all over the European Union. During the same period, 15 ‘Googlers’ have been appointed to government positions in Europe, thus penetrating to the heart of the decision-making process. In the UK, Google has targeted for recruitment civil servants from key parts of the government machine like the Treasury and No. 10. This revolving door between politics, tech and regulators is a key characteristic of crony capitalism.

Then, of course, there is the ‘dark money’ – the think tanks, research institutions and publications who enjoy their journey on Big Tech’s gravy train and can be used to shape the debate. Last year a critic of Google was fired from the New America Foundation, when he posted an article in support of the European Commission’s antitrust regulators. The think tank has received over $20 million from Eric Schmidt, co-founder of Google, his family trust and the company itself.

Then in July 2018, US activists really woke up to the power of Amazon, and the damage it could do to democracy, when the company used its influence to repeal a law passed by its home city of Seattle that imposed a small employee ‘head tax’ on large corporations. The purpose of the tax was to fund affordable housing in a city whose horrendously high costs are partly down to the very same tech companies. Many were left with the feeling that Amazon was too powerful to tax and regulate.

If politicians can be persuaded to act, the big question is how to tackle the problem. The traditional anti-monopoly medicine would be to break up these large conglomerates into their smaller component pieces. Amazon could easily be split into retail, cloud, logistics and video production. Alphabet (Google’s parent company) could be broken up into divisions such as Google Search and YouTube.

Others are thinking about an updating of the vision behind the BBC. In Britain, the think tank IPPR argues that the digital economy should be reorganised as a “digital commonwealth”, to be an open, collective resource for the common good. The major digital platform companies would be regulated like broadcasters and mobile providers. Where large digital companies have the advantage of existing data when moving into a new market, such as banking or mobility, they would be compelled to open it up for others to use. And a new public service corporation would ensure that public data is widely available for innovation and public good.

This is already being done in other industries. In the energy industry, consumers who share their data with new firms such as Switchd can already get better access to cheaper prices, and the process will only get better, faster and more automated as energy suppliers share more of their data digitally. Banks and other financial institutions are also opening up their data for others to access, use and share. Customers are doing something similar by sharing data from their accounts with third parties they trust.

In the end, the convenience of Amazon’s platform has turned us into lazy consumers who would give up almost anything in return for same day delivery. But if we are not careful it won’t just be the High Street that we have abandoned. Big Tech has the will and the wallet to bypass traditional regulators, and that leaves few options other than to turn them into social enterprises that serve the common good.

In 1911, the breakup of John D Rockefeller’s monopolistic Standard Oil Company prevented one man from having a stranglehold on the fuel that America depended on. If data is the new oil, then perhaps it’s time we stopped a handful of men from controlling the lifeblood of every advanced nation.

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Mark Piesing writes about technology, culture and the intersection between the two.

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