By C.J. Atkins
In the middle of the last century, Marxist economist Victor Perlo described the U.S. economy as an “empire of high finance.” If he were writing today, he’d probably update his assessment to say U.S. capitalism has also become an “empire of high technology.”
The U.S. House Judiciary subcommittee on antitrust essentially dances around that conclusion in a new 450-page report released on Oct. 6, which declares that the digital giants Amazon, Facebook, Apple, and Alphabet (Google) have achieved “monopoly power” in a variety of sectors. The report recommends a range of reforms, including breaking up the tech conglomerates.
The indictment of Big Tech is the product of a 16-month-long investigation that surveyed over a million documents, conducted dozens of interviews, and held seven hearings. The report presents extensive evidence concerning the extent to which the companies “have exploited, entrenched, and expanded their power over digital markets in anticompetitive and abusive ways.”
Testimony from CEOs Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Tim Cook (Apple), and Sundar Pichai (Alphabet/Google) was characterized as “evasive and non-responsive,” which the subcommittee said raised fresh questions about whether the tech titans “believe they are beyond the reach of democratic oversight.”
Taken together, the four online platforms had a combined valuation of more than $5 trillion as of September this year. A stunning 30% of the entire world’s gross economic output flows through or is controlled by just these four firms and a small handful of others. They account for more than a third of the S&P 100 stock index.
Each of the four companies was analyzed in detail separately, but there were a number of common monopolistic behaviours highlighted in the report. Having consolidated control over market access by achieving “gatekeeper” status in their individual areas, the platforms were said to now possess the ability to “pick winners and losers throughout our economy.” This gives the companies power that even banks, which control lending, would be jealous to have.
This gatekeeper power is used not only to crush competing businesses, but also to abuse consumers (businesses and individuals) as well as workers through the charging of exorbitant fees for services, “oppressive” contract terms, piece-rate warehouse and delivery work, and the extraction of data from users which is then monetized for further profit.
The digital economy is no longer defined by the Wild West atmosphere that characterized the dot.com boom of the late 1990s and early 2000s when literally thousands of platforms and companies meteorically rose and disastrously fell. Concentration and centralization of capital have been the rule in recent years, with competition between capitalist tech firms rapidly narrowing. The big four masters have bought out or otherwise absorbed hundreds of other firms, then shut down or discontinued their business in so-called “killer acquisitions.”
Facebook was singled out for monopoly control over social networking and online communications. In documents, the company admitted its various divisions—Facebook, Instagram, WhatsApp, and Messenger—compete more with each other internally than with any outside platform.
When it comes to general online search and search advertising, Google was criticized for abusing both advertisers and the public. It often “misappropriates third party content” to boost its own business, fills users’ search results with ads that generate profit for the company while pushing more relevant results further down the queue, and “extorts users for access to its critical distribution channel.” Essentially, if anyone wants to reach people through search results, they have to pay up, but even then they are shuffled further down the search page in favor of higher-paying clients or Google’s own content and services.
Amazon is king of e-commerce in the U.S., controlling an estimated 50% or more of the market. But this very public aspect of the company’s business has actually been a money-loser, generally. The free shipping and discounted pricing that puts its competitors out of business are possible only because of the company’s expansive Amazon Web Services division and cloud computing.
These lucrative businesses provide the cash to prop up the hemorrhaging retail wing of the firm—a source of money that brick-and-mortar retailers like department stores can’t possibly compete with. In essence, the profits of Amazon’s computing business acts as a bottomless bank for the monopolization of retail by its e-commerce portal.
Among the four, Apple is the only one whose primary business is still the production of actual material goods—iPhones, Macbooks, iPads, Apple Watches, and more. Its products overshadow all others in the hardware segment of the market. But the company’s power also comes from the edge it has in the mobile operating system sector.
The Congressional report highlighted the fact that the tech monopolies were collectively killing innovation and entrepreneurship in the U.S. economy, contrary to the image they paint of themselves being constantly on the cutting edge. With nearly total market domination, the four monopolies now control what Congressional staffers called “the infrastructure of the digital age,” which they use to squeeze out competitors and become even more dominant. Antitrust regulators, meanwhile, were criticized for failing to properly vet mergers and acquisitions as required under U.S. anti-monopoly law, according to the report.
The reforms recommended by the committee included structurally separating (i.e. breaking up) the companies and prohibiting them from operating in adjacent lines of business—such as Amazon being both the host of the primary e-commerce portal for third-party sellers as well a seller itself, or Apple being both a hardware and software monopolist. If implemented, these kinds of rearrangements could mean also that Google has to divest from its video platform YouTube, or Facebook could be forced to spin off Instagram and WhatsApp into separate companies.
To protect consumers’ data from being monopolized, the report suggests that companies be required to make their services compatible with one another, allowing users to take their data with them when they leave a platform. It also calls for the budgets of the Federal Trade Commission and the Antitrust Division at the Department of Justice to be beefed up. (IPA Service)