Big Talk on Big Tech—but Little Action
In both the U.S. and EU, antitrust and regulatory efforts against Facebook, Google, and Amazon are gaining traction. But no one’s about to break them up.
This article is part of Foreign Policy’s ongoing coverage of U.S. President Joe Biden’s first 100 days in office, detailing key administration policies as they get drafted—and the people who will put them into practice.
U.S. Sen. Amy Klobuchar didn’t mince words about Mark Zuckerberg.
The Facebook founder was effectively a hypocrite, Klobuchar said in March, as she opened her first hearing as chair of the Senate subcommittee on antitrust. Zuckerberg and his fellow tech titans talk a good game about the need for “disruptive” new technologies and companies to keep capitalism fresh and vital. But during his time as Facebook CEO, Zuckerberg has crushed or simply purchased any start-up that might disrupt Facebook’s dominance, said Klobuchar, a Minnesota Democrat. And she trotted out Zuckerberg’s own emails to prove it—in one he lamented that if new brands “grow to a large scale, they could be very disruptive to us.” In another, Zuckerberg wrote that when one is building market dominance, “it is better to buy than compete.”
That is what he’s done, carefully buying out potentially competitive platforms such as Instagram and WhatsApp. Nor have Zuckerberg and his fellow multibillionaires had to worry much about solidifying their dominance as Washington mostly looked the other way for the past few decades. Instead, Klobuchar said, legislators have typically responded by “holding hearings and throwing popcorn at a screen.”
That era of indulgence is now over, Klobuchar said in an interview, and many antitrust experts as well as lawmakers on both sides of the aisle agree. In both the United States and Europe, there are fresh efforts to rein in Big Tech, especially the companies that have come to dominate social media, e-commerce, and even politics in America: Facebook, Amazon, Google, Apple, and Microsoft. Though Republicans and Democrats disagree on the how, there is an emerging consensus that at the very least they need to beef up antitrust enforcement at the Department of Justice and the Federal Trade Commission (FTC), which are “a mere shadow of what they were even in [former President Ronald] Reagan’s time,” with something like half the lawyers they had then, Klobuchar said.
Problem is, that’s just about where the consensus ends. And even if you add more lawyers, antitrust cases move glacially, and federal judges are extremely cautious about punishing behavior deemed anti-competitive, especially in an era when antitrust experts disagree vehemently about remedies. Plus, now every case faces the prospect of being squelched by a very conservative Supreme Court.
Despite the documented actions of Facebook and other companies in crushing would-be competitors, there is also good reason for judicial caution. Consider the irony that Microsoft—itself the target of a major antitrust action a quarter century ago—now considers itself the aggrieved party in the recent Department of Justice case against Google, since it is trying to raise the profile of its Bing search engine, which has a meager 2.5 percent of the market. Or that Facebook’s own dominance may someday fall victim—without any help from government at all—to new blockchain technology that could allow users to run their own web services and applications. (Ironically, among the key innovators pushing for that are Zuckerberg’s old antagonists from Harvard University, Tyler and Cameron Winklevoss, who famously claimed that he stole the social network idea from them.) Even today, many antitrust experts say it’s probably a judicial and legislative bridge too far for the government to try to proactively promote competition in the tech world; let the markets take care of that instead.
But so changed is the political environment that U.S. President Joe Biden and some of his top regulators, such as Lina Khan, a Yale Law School wunderkind who was recently nominated to the FTC, might seek to break up the big tech firms. Biden, on the campaign trail, said that breaking up tech quasi-monopolies such as Facebook is “something we should take a really hard look at.”
That is almost certainly not going to happen: The political will simply isn’t there, even among many Democratic legislators influenced by Khan and other progressive thinkers.
“I don’t think Biden has the stomach for that,” said Herbert Hovenkamp, an antitrust expert at the University of Pennsylvania. The reason is simple: Today’s monopolistic abuses are quite unlike the monopoly power of old, when big cartels like John D. Rockefeller’s Standard Oil inflicted predatory high prices on consumers and political will was high to “bust trusts.” On the contrary: Most consumers love the fact that they can buy all kinds of inexpensive stuff on Amazon and have it delivered the next day, and that Facebook doesn’t charge them a cent, even as it makes a mint selling their private information to advertisers and market manipulators.
“The Democrats need to be cautious here,” Hovenkamp said. “Consumers are their constituency. And these companies are among the biggest producers of growth in the U.S. Biden certainly doesn’t want to ruin that.” Instead, the administration may well decide to focus more on smaller fish in other industries, as the FTC did last week by challenging Illumina’s $7 billion purchase of cancer test developer Grail. In a sign of how aggressive the FTC might be under Biden, it was the first time in decades that the commission sought to block a so-called vertical merger, alleging that ownership of Grail would incentivize Illumina, a gene-sequencing company, to raise costs on Grail’s competitors.
Indeed, though the United States and the European Union agree that new solutions are needed to curtail the dominance of Big Tech, the approaches remain very different. For years, the EU has led the way in filing antitrust cases, but late last year it did an about-face—deciding on a regulatory rather than lawsuit-based approach. After Brussels released a draft of its Digital Markets Act, EU competition minister Margrethe Vestager tweeted that the new rules would establish “do’s & don’t to gatekeepers” of our digital world. If passed, the act could levy stiffer penalties than ever before, including a demand for a percentage of earnings.
On the other side of the Atlantic, the FTC is also mulling ways to amp up its regulatory power. Khan and other progressives advocate rules that prevent a tech platform from favoring its own products in search results or pressing its own technologies on users, as Google allegedly does with Android, a mobile operating system. Violation of such rules could subject companies to substantial fines. According to a report last fall by Democratic members of the House Subcommittee on Antitrust—and partially written by Khan—Google has used “a series of anti-competitive contracts” that pushed Google search for users of Android phones.
Yet in many areas huge disagreement remains about how to contain Big Tech. Republicans and Democrats both want to do so, for different reasons; the former believe that Silicon Valley is biased against the right politically, while the latter tend to worry about anti-competitive behavior. Klobuchar has sponsored a monster bill, the Competition and Antitrust Law Enforcement Reform Act, which is intended not only to give federal enforcers more resources but also to strengthen prohibitions on anti-competitive conduct and mergers, among other reforms. As yet, however, she has no Republican co-sponsors, and Democrats in the House are leery of going the same route with a sprawling omnibus bill, according to a legislative aide with knowledge of the process. “If you have a big bill it creates a honey pot” for opponents, he said, noting that Big Tech’s pockets are much deeper than those of their antitrust counterparts. House leaders will instead try to introduce a slew of specifically targeted separate bills.
The White House did not respond to several requests for comment on which approach Biden might want to take.
What is still hotly debated by the lawyers themselves is whether Big Tech is really a threat—and if so, what kind? Even if Amazon isn’t yet price-gouging and Facebook and Google cost nothing to use, Khan and other progressives argue that ordinary people—especially American workers—are harmed in ways they don’t fully realize. As a result, progressives say, antitrust needs to go beyond its narrow standard of protecting consumer welfare.
That standard was established by Reagan appointee Robert Bork, a conservative scholar and judge who wrote that Congress had enacted the 1890 Sherman Antitrust Act—the basis of most antitrust actions today—mainly as a “consumer welfare prescription.” In other words, antitrust should mainly be about protecting consumers from price-fixing by monopolies. The Supreme Court adopted that stance in 1979, and it remains the stated goal in antitrust today.
Khan and Tim Wu—Biden’s new advisor on antitrust—say that the Bork approach lets big business run amok by making small companies hostages of the big ones, much in the way the monopolistic railroads did a century ago, as Khan argued in her now-famous paper “Amazon’s Antitrust Paradox.” Today, she wrote, the “thousands of retailers and independent businesses that must ride Amazon’s rails to reach market are increasingly dependent on their biggest competitor.” It’s only a matter of time, Khan argued, before Amazon uses its platform dominance to drive out or suppress competing businesses.
And then there’s the jobs question. Amazon and Walmart provide American consumers with cheap goods—but from where? Usually, China. Big quasi-monopolies are only going to discourage the rise of new American producers of the kind Biden wants to stimulate under his “Buy American” plan. “The trade-off is we lose jobs and we get cheaper goods,” the economist Joseph Stiglitz said.
Much of the outcome will depend on whether the concept of antitrust is expanded, bringing it back around to its origins: a fear of too much political power in the hands of a few big corporate players. In a famous 1890 speech, Sen. John Sherman—for whom the Sherman Antitrust Act was named—declared that monopolies are “inconsistent with our form of government. … If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life.”
In his 2018 book, The Curse of Bigness: Antitrust in the New Gilded Age, Wu described the current challenge in very similar terms. “The broad tenor of antitrust enforcement should be animated by a concern that too much concentrated economic power will translate into too much political power,” he wrote. He deliberately echoed Louis Brandeis’s 1914 essay “A Curse of Bigness,” which laid out the groundwork for the progressive view that held sway until the Reagan (and Bork) revolution.
Yet today, many Republicans still hew to Bork’s narrow standards—including the ranking member of Klobuchar’s committee, Sen. Mike Lee of Utah, who is willing to work with her to a degree. Yes, Lee said in a recent speech, he too is worried that “the actions of Big Tech continue to divide the nation, undermine fundamental liberties, and distort the market.” But Lee said he’s unlikely to support Klobuchar’s tough new anti-merger approach unless there is a proven threat to the consumer. The Supreme Court is more likely than not to follow suit and adhere to the Bork standard.
In the end, the issue may come down to where the voters end up. “What gives me hope is the digital giants’ bad behavior” in facilitating disinformation, even from foreign powers like Russia through Facebook, said Stiglitz. “Americans have become very aware of the political power they have, and both parties are concerned about that. I hope we can leverage that deep distrust of political and market power.”
The Democrats also realize they missed some earlier opportunities. “All these guys have gotten religion lately,” said William Kovacic, an antitrust expert at George Washington University. “They had a chance to sue Google in 2012 and 2013, and they didn’t do it. The FTC reviewed the Instagram and WhatsApp purchases, but didn’t do anything about it.”
That may change under the new activist approach. Forty-six states have now joined a lawsuit against Facebook, and many antitrust experts believe Zuckerberg could be forced to divest one or both of those companies. But ultimately the question will be: Is there really a long-term remedy to bigness?
Even Joel Klein, who as head of the Justice Department’s Antitrust Division under President Bill Clinton mounted the original Big Tech antitrust lawsuit against Microsoft, said today’s issues are somewhat different. “What Microsoft was protecting was its monopoly in operating systems,” he said. “It’s not as clear to me that if you want to do an internet search, there aren’t other ways to get a [new] platform out there.” Google, in other words, isn’t preventing people from using Bing if they want to; most simply don’t.
“It’s like a dog chasing a car. What does the dog do when it catches the car?” said Daniel Crane, an antitrust expert at the University of Michigan. “There aren’t natural seam-lines for breaking up Google; you’re not going to split it into an operating system and browser when the two were always integrated. So what’s your endgame?”