Policy Controversy: Proposal Seeks to Rein In Big Tech Amid Murmurs of a Big Tech Break-Up

This article examines one of the most bold, controversial, and progressive policy proposals currently cycling through the political corridors of Washington: the proposal to “break up” big technology companies, chief among them Facebook, Google, and Amazon. This proposal has stoked controversy in legal and economic policy circles since its introduction in March. In leaked audio from an employee meeting, Mark Zuckerberg, CEO of Facebook, said the company will fight any such measure.

One of the current proposals is twofold. The first pillar of the proposal is to pass new legislation requiring large tech platforms to be designated as “Platform Utilities” and broken apart from participants on that platform. “Platform Utilities” are defined as companies with annual global revenue of $25 billion or more, and which offer to the public an online marketplace, an exchange, or a platform for connecting third parties. Specifically, Amazon Marketplace, Google’s ad exchange, and Google Search are mentioned as platforms that would fall under its scope. In other words, Amazon Marketplace would be split apart from Amazon Basics, which offers products for sale on the marketplace. Similarly, Google’s ad exchange and businesses on the exchange would be split apart. The idea behind this proposal is that it is fundamentally unfair for a company that operates such a platform to also compete on its own platform with other (smaller) companies.

The second pillar of this policy proposal involves blocking mergers, which would lead to more consolidation of an already concentrated tech sector. Some variations of this policy even call for unwinding previously consummated transactions, which has the potential to impact the acquisitions of Whole Foods and Zappos by Amazon, WhatsApp and Instagram by Facebook, and Waze, Nest and DoubleClick by Google. Rather than legislation, effectuating this prong of the proposal centers on the appointment of government officials in the relevant agencies who are committed to this agenda.

Along the same vein, the Antitrust Division of the Department of Justice in the Trump Administration, under the leadership of Assistant Attorney General Makan Delrahim, an Iranian-American lawyer, announced in July that it will launch a wide-ranging antitrust review of “Market-Leading Online Platforms.” The announcement refers to “search, social media, and some retail services online.” This is generally understood to apply to the same big tech companies and also Apple, even though the Department’s announcement does not call out any particular company by name. “Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands,” said Mr. Delrahim. Thus, the Division is reviewing “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”

In sum, there seems to be a growing consensus that there is a need for scrutiny into the competitive conditions of the online and technology marketplace. The main concern among many policy experts is that traditional antitrust frameworks and practices may not be adequate to address the new issues arising in this area, especially since many of these services are offered to customers free of charge. But this lack of price-competition does not exclude the possibility that more competition would lead to better outcomes for consumers on other fronts such as privacy, and also further stimulate innovation. We will know soon what, if any, impact this debate will have on major technology companies and their billions of customers.

by Amin Bahrami, Legal Fellow

About the author: USIRCC