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

Amazon is under attack. Joe Raedle/Getty Images

Amazon is under attack. Joe Raedle/Getty Images


January 31, 2024   7 mins

In a viral speech earlier this month, the newly elected Argentine president Javier Milei accused Western leaders of embracing a vision of economic “collectivism” that will lead “to socialism, and therefore to poverty”. And in many ways, he’s right.

Signs of collectivism can be seen all over Europe in top-heavy bureaucratic efforts to regulate innovation, particularly when it comes to tech. This “demotic reallocation of power” — as an eminence grise of tech policy told me privately — has long characterised Europe’s approach to innovation.

The problem is that the phenomenon seems to have spread around the world, including to some of the most important loci of digital innovation, including the UK and the US. Just last month, Adobe called off its $20 billion acquisition of design tool start-up Figma after the UK Competition and Markets Authority blocked its path. In America, Amazon and Alphabet are both facing competition lawsuits brought by branches of the US government. And only two weeks ago, the Federal Trade Commission (FTC) and Department of Justice (DOJ) announced they’re “in deep discussions” concerning Microsoft’s deal with OpenAI.

We are, in other words, witnessing one of the most expansive and significant regulatory efforts in decades. In total, the FTC and DOJ, which together are responsible for upholding US antitrust law, have brought more than 50 enforcement actions over the past two years — the highest, Bloomberg notes, since the US first required pre-merger antitrust reviews in 1976. In the UK, meanwhile, the CMA blocked three deals in the 2021-2022 fiscal year, amounting to 5.5% of all deals proposed, more than tripling its historic average.

The CMA-halted Adobe deal is particularly revealing, due to both its scope and the strange rationale the regulator employed to quash it. Adobe and Figma do not provide the same services and therefore serve different kinds of customers. This was implicitly acknowledged in the decision by CMA, which blocked the deal on grounds that it could negatively affect competition in the future. This is a departure from much regulatory law on competition which sensibly looks at the effect on actual competition — i.e. what’s already taking place in the market. This novel approach to determining the likely, or even possible, outcome of a deal created an impossible hurdle for Adobe and Figma to clear. And maybe that was the point.

“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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J Bryant
J Bryant
5 months ago

Ok, dumb question, but surely one weapon big tech has against Democrat-led lawfare is to subject Democratic politicians, notably Biden, Harris and Newsom, to the same biased curated coverage tech dished out to Trump in 2016 and 2020? Big Tech is one of the few entities that can convincingly point out these Democrat emperors truly have no clothes.
Also, why is California leading this effort? If Big Tech, and the constellation of VCs surrounding them, ever decamped from California to pastures Red, the Californian economy would collapse.

Andrew Vanbarner
Andrew Vanbarner
5 months ago
Reply to  J Bryant

Progressives tend to dominate HR, law, middle management, and marketing, and tend to be feminized midwits.
Larger tech companies are generally saddled with huge hordes of these non-tech personnel, while technical/ infrastructure tasks are performed, mostly, by men.
Musk noticed this, as did the rest of us, when he sacked over half of his staff with little consequence to Twitter 2.0/X’s day to day operations.
Because of high labor costs, tech firms rely on access to our capital markets, which necessarily means dealing with the SEC, the FTC, and countless lawyers. Startups, mid sized firms, and even household name behemoths like Microsoft and Oracle rely on banking and are at the mercy of our government, which means dealing with regulators underfoot everywhere.
And of course, useful and popular products, particularly those that disseminate information, create money and power, which will always attract those who wish to seize it for themselves.
Eventually, classical liberals, libertarians, and of course conservatives (who do exist in tech) will overcome progressive leftism. It’s corrupt, economically stupid, and unfair. There will come a point when the Morlocks all move to Texas or Florida, and the Eloi will be on their own.
In the meantime, we – tech firms, businesspeople, and the public – will all have to deal with regulators whose politics almost resemble those of Carlos the Jackal.

UnHerd Reader
UnHerd Reader
5 months ago

As a conservative, I enjoy the schadenfreude of outmigration from Blue to Red states as a sign of progressivism’s bankruptcy of common sense. But I also remember when Oregon, Washington state, and Colorado were conservative places until they were, in the parlance of the times, “Californicated” with migrants from the Golden State. Progressives are often arch hypocrites and many Californians who are now taking their business to Texas are doing so for the friendly business environment will bring their political progressivism with them. Austin is already a progressive bastion.

Carl Valentine
Carl Valentine
5 months ago

Good comment and appreciated the HG Wells analogy. 🙂

Ethniciodo Rodenydo
Ethniciodo Rodenydo
5 months ago

What is the difference between the US and the good old USSR?

Christopher Barclay
Christopher Barclay
5 months ago

How long do you have?

Stuart Sutherland
Stuart Sutherland
5 months ago

Russia and the USA are very similar. Both countries have a ultra wealthy oligarchy that support the government in exchange for light touch regulation.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
5 months ago

Also the ultra wealthy oligarchy use the state apparatus to syphon wealth from the country’s citizens (and the wider world) and are able to effectively stifle dissent

Lennon Ó Náraigh
Lennon Ó Náraigh
5 months ago

What is the difference between the US and the good old USSR?
A half-serious response would be: two letters and forty years.

Alex Lekas
Alex Lekas
5 months ago

In the US, we indulge ourselves in the pretense that freedom exists.

Seb Dakin
Seb Dakin
5 months ago

In USSR we pretend to work, they pretend to pay us.
In US, we pretend our votes properly count, they pretend they’re properly counted.

Andrew F
Andrew F
5 months ago

That you actually can ask this question in USA?

Christopher Barclay
Christopher Barclay
5 months ago

Amazon and Microsoft have unprecedented dominant positions in their respective industries. It is a bit late to start to have concerns about competition now.
The internet has also allowed people to find information and question official narratives in a way not seen before. Much of the recent Davos meeting seemed to involve people desperate to resume their role as gatekeepers of information, aka keeping the plebs ignorant.

AC Harper
AC Harper
5 months ago

The information genie is out of the bottle and there’s no putting the genie back. So, like any good bureaucracy, new ‘rules’ are established to control the shape and size of the genie and to ensure that the bottle is environmentally acceptable.
If there’s a rule the bureaucrats feel vindicated. And will probably spend millions creating compliance teams and reporting structures.

Saul D
Saul D
5 months ago

In this context, it’s worth taking a look at “Corporate Compliance Programs” issued by the DOJ against larger businesses. I first ran into them when reading a background biography of James Comey who amplified their use.
What happens is that a company becomes subject to investigation for corporate wrong-doing or wrong-doing of its employees.
The company, under threat of legal action, is then encouraged by prosecutors to agree to enter into a ‘corporate compliance program’. These programs are used to mitigate the risk of DOJ legal action against the business and so expensive and lengthy court cases.
However, these then give prosecutors board-room level influence over the processes and procedures of the company, including allocating monitors to ensure compliance and determining what policies to pursue (eg over employment). No actual legal case or trial will have taken place, and the control is entirely based on the DOJ and prosecutor ‘agreement’ giving a large amount of hidden influence to public prosecutors over corporations with minimal oversight, and with obvious scope for financial skullduggery and political activism.

Daniel Lee
Daniel Lee
5 months ago

“…SpaceX is being sued by the DOJ for not hiring enough asylum-seeking migrants …”
Folks, you don’t hate and fear the federal bureaucracy nearly enough, not nearly enough.

Terry Raby
Terry Raby
5 months ago

“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.” The All In podcast, including David Sacks is always enlightening. https://www.youtube.com/@allin

Alex Lekas
Alex Lekas
5 months ago

In America, Amazon and Alphabet are both facing competition lawsuits brought by branches of the US government. — So who gets to file a competition lawsuit against the monopoly that is govt? Oh, that’s right; no one. Because freedom means asking permission and following orders.
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. — This sentence exposes the idiocy of govt officials and how the right hand is ignorant of the left’s activities. There are so many rules and regs that no one can possibly keep up, especially when one measure contradicts another.
ï»żThen again, it’s not about competition or the consumer; it’s about control, and some tech companies have no one to blame but themselves for their willingness to play ball in the partisan arena where censorship is concerned.

Lennon Ó Náraigh
Lennon Ó Náraigh
5 months ago
Reply to  Alex Lekas

Before the West’s descent into oligarchy, every five years or so, ordinary people got to file something better than a competition lawsuit against the monopoly that is government – a vote.

David Kingsworthy
David Kingsworthy
5 months ago

So, thanks for an interesting piece, maybe the title is inaccurate?

Mike Doyle
Mike Doyle
5 months ago

Mergers and Acquisitions: a way of enriching Lawyers, Bankers and Company Directors and of no benefit to anyone else.

Lennon Ó Náraigh
Lennon Ó Náraigh
5 months ago

The article reaches a familiar libertarian dead-end: big business is bad, but big government regulating big business is bad too.