The Democrat extortion racket will backfire Politicians are desperate to control Big Tech

“The only way to solve a future competition issue, that someone might do something, is to not do the deal,” Adobe’s general counsel, Dana Rao, said in a December interview. “That’s essentially what they were telling us.” But why was that the message? Neither company is British, and neither has its largest market in the UK. At a time when the UK is aggressively attempting to court tech, particularly in AI, a highly contentious legal move to torpedo one of the biggest tech deals of the year — and in the process wipe $1 billion in breakup fees off Adobe’s balance sheet — seems like an odd choice, one not likely to endear the country to ambitious tech founders.

Yet the Adobe decision is hardly an outlier. Around the same time that deal fell apart, Microsoft concluded its $69 billion acquisition of leading video game maker Activision. Since it was announced in 2022, the deal, however, was anything but certain. Microsoft similarly attracted attention from anti-trust regulators, notably the CMA. But five months after Microsoft announced the deal, a California regulator called the Civil Rights Department (CRD) announced it was pursuing claims of sexual harassment that Activision had already settled with a federal regulator, and with the express consent of CRD itself.

As the Microsoft deal began to progress in earnest, the CRD began taking an exceptionally aggressive approach to pursuing Activision. At the time, Matt Taibbi detailed the elaborate, almost arcane lengths to which the CRD went in pursuit of Activision, at times appearing to violate its own ethical and legal boundaries as a regulator. In one instance, a CRD official told a reporter over email that the agency’s policy is not to comment on open investigations (as it is legally prohibited from doing). Two days later, the same official wrote to the reporter saying “my director” would be willing to discuss the case by phone — and, presumably, out of the reach of official records. This exchange was only revealed after Activision sued CRD, which had initially provided no documents in the discovery process.

Though CRD did not have regulatory jurisdiction over the acquisition itself, given the timing, it’s hard not to wonder if the agency’s regulators were conscious of the fact that their efforts could have easily become enough of a distraction for Microsoft to walk away. Indeed, within days of the Microsoft deal announcing its final regulatory approvals for the acquisition, the CRD inexplicably dropped its most grievous claim, sexual harassment, and settled with Activision for far lesser claims, saying “no court or any independent investigation has substantiated any allegations,” in what The New York Times called “a stunning reversal”.

While it might seem like a single case in a single jurisdiction, the reality is that, given California’s tech-centricity and deep blue politics, the state is a bellwether for this emerging approach to tech regulation in the US. In this regard, the CRD’s activities should raise flags — and already they have. Recently, the Hindu American Foundation sued the CRD for racial and religious discrimination, after the CRD sued tech giant Cisco, making racially tinged allegations that a “caste” system was operating within the company. And so we find ourselves in a bizarre scenario, whereby California’s civil rights protection agency is being sued for violating the civil rights of an ethnic and religious minority group.

While this moral paradox could be the punchline of a bad DEI joke, it is in fact the product of a newly aggressive regulatory approach to tech emerging from Democrat California. The FTC’s current suit against Amazon, for instance, includes allegations that the company’s algorithm prioritises its own products over other brands. That might be true, but this is also the case with nearly every supermarket or drugstore on earth.

In the finance industry, on the other hand, regulation looks rather different: what we see is not regulators slowing down or scuttling mega-mergers but, in some cases, forcing them. Last year, the Swiss government all but commanded UBS to acquire the embattled Credit Suisse. In the US, the country’s largest bank, JP Morgan Chase, was made even bigger when it swallowed up regional bank First Republic during a banking crisis, without a peep from regulators.

What explains this apparent double standard? Some in the US see the regulatory push as a step toward a European-style approach to the relationship between tech and state power. “Europeans don’t like the disruptive aspects of tech,” said one long-time tech lawyer with an expertise in policy. “They tend to think of tech as a Frankenstein’s monster that needs to be tightly controlled, exploited for what economic and lifestyle benefits it can afford their citizens, but not something to encourage.”

In the US, both parties seem to be following a similar course. In the days of Barack Obama, the love affair between Big Tech and the Democrats knew no bounds, with the President strolling a SpaceX launch site with Elon Musk and holding campaign events with Mark Zuckerberg. Democrats only became tech-sceptics around the time of the 2016 presidential election, when the Cambridge Analytica scandal was perceived to have swung the election towards the Republicans, Wikileaks damaged Hillary Clinton’s campaign, and Peter Thiel came out in support of Trump. “I think for Democrats it’s a case of, ‘We really liked you guys when you were doing cool stuff with data and outreach and helping us win elections. Now you make teens into body-obsessed depressed vapers while you harvest our data,’” the tech-policy lawyer said.

The idea of mass-scale data harvesting and “surveillance capitalism” explains some of the current political animus and regulatory zealousness towards Big Tech. But it’s also a question of power. Since the end of the Second World War, the only serious contender to the fantastically effective, and highly centralised, American political establishment has been Big Tech. While tech was busy disrupting entire industries, the power elite may have realised that it, too, stood to be disrupted.

But the tech world is adaptable. And it knows it needs to stay in the good graces of those who pull the regulatory strings. This partly explains Twitter’s shameful collaboration with the US government in its effort to censor Americans on Covid-related issues; it is also the reason why the corporate culture at Google is so often described as paralytically concerned with compliance. None of this is surprising, of course, when you note the phalanx of senior Obama Administration officials who fell into the arms of Big Tech, including senior advisor, David Plouffe (Uber), press secretary, Jay Carney (Amazon, Airbnb), and economic advisor, Larry Summers (Square, A16Z). It turns out that tech’s regulatory revolving door turns as fast as any other.

For those who refuse to play ball, meanwhile, there is a price to pay. Elon Musk’s companies, for instance, face a remarkably different climate, and have in recent months been subjected to almost Kafkaesque lawsuits and regulatory efforts, including a joint investigation by the DOJ and the US Securities and Exchange Commission (SEC) into claims that Musk built a single glass house. SpaceX is also being sued by the DOJ for not hiring enough asylum-seeking migrants (“asylees” in DOJ-ese) despite being barred by US law from hiring non-US citizens because of its work in national security. Biden later took time at a rare news conference appearance to clarify that Musk’s business relationships with other countries are “worthy of being looked at”.

Here, the political dimension is hard to ignore. “The Left is always pushing for more control over Big Tech,” says noted tech investor and entrepreneur David Sacks. “They leverage that control — or the threat of control — into campaign contributions and censorship. It’s the protection end of the extortion racket.” It’s not surprising that the FTC, now gearing up for its landmark suit against Amazon, is currently led by Lina Khan, a 34-year-old Yale Law student whose paper on Amazon’s labour practices catapulted her to Democratic establishment stardom.

The problem with a politically inspired regulatory effort, however, is that the courts don’t share the same prerogatives. Losses by regulators in courts are piling up: most notably the FTC’s defeat with the Microsoft acquisition of Activision, and the SEC’s loss of a lawsuit by crypto company Ripple. Yet this hasn’t stopped the agencies from powering forward: after all, even without formally losing their cases, regulators can tie up mergers to the point they are no longer tenable.

None of this, however, means it is good for the public, especially given that it’s taking place in a context of a volatile economy and a marked depression in the tech IPO market. As the Big Tech deals dry up, so will the funds that sustain start-ups. The aftermath isn’t too hard to glean, as innovation stalls and the global economy, already on unstable footing, trips right when we need it to run, and run fast.

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Ashley Rindsberg is author of The Gray Lady Winked: How the New York Times’ Misreporting, Distortions and Fabrications Radically Alter History

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