Monopolies of Big Technology Companies

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Companies that amass dominance and control over an industry are considered monopolies or trusts. These companies often initially grow by offering popular and widely used products or services. Some expand into conglomerates by acquiring other firms that further expand their reach and influence. Supporters of monopolies note the advantage of increasing the value of markets and providing innovative solutions to meet consumer demands.

In the twenty-first century, a few multibillion and trillion-dollar high technology industry companies cornered the market on personal data, search engine results, e-commerce, and social media. Collectively referred to as “Big Tech,” these companies wield significant power over the US economy, society, and politics.

Economists note that one of the major disadvantages of monopolies is the use of anticompetitive practices intended to undermine and eliminate competition. The economic consequences of these unfair business practices result in restricting overall growth by lowering the ability for other businesses to successfully develop and thrive.

Monopolies also raise concerns over the exploitation of consumers through lack of protections or by compelling them to pay unfair prices while reducing options. Governmental regulatory agencies seek to protect competition in the market and limit the oversized power of monopolies by enforcing antitrust laws. Ruling bodies can also deny mergers and acquisitions or force large businesses to break up into smaller, separate entities.

Pros and Cons of Breaking Up Big Tech Companies

Pros

 

  • Smaller technology entities would no longer share exclusive privileges with one another or access to the same valuable consumer data as they had under the monopoly.
  • Smaller technology companies are less likely to engage in preferential treatment and anticompetitive practices.
  • Ending monopolistic control over the industry could increase competition and spur innovation by reducing the barriers to entry and leveling the playing field for start-ups.
  • Consumers would benefit from having more options and fair pricing.
  • Breaking up tech conglomerates would remove market distortions and dissipate the centralized power they wield. This would serve to reduce the outsized influence of any single firm on the economy, society, and politics at large.

 

Cons

 

  • Technology companies continue to grow if they offer excellent products in high demand.
  • Continued innovation could suffer if technology giants were ordered to break up in a way that separated integrated products and services or reduced efficiencies.
  • Breaking up technology conglomerates into smaller entities does not automatically resolve separate issues of user privacy and data collection or address arguments over free speech and content moderation.
  • Antitrust laws were created during an era of industrialization. Technology business models operate in a very different and more complex economic environment.
  • Breaking up technology conglomerates solely on the basis of the size of their market share would not withstand legal challenges.

 

The US government created the first antitrust laws in the late nineteenth and early twentieth centuries in an era when monopolies on oil, sugar, and tobacco became extremely powerful. Congress passed the Sherman Antitrust Act in 1890 based on the Commerce Clause under Article 1 of the Constitution, which granted the legislative branch the power to regulate interstate commerce. Congress intended the law to serve as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” The Sherman Act allowed Congress to break up or dissolve companies with monopolistic control over an industry.

The Clayton Antitrust Act of 1914 reinforced the Sherman Act by defining and prohibiting practices such as price-fixing and anticompetitive mergers. Price-fixing is when companies agree to set a price for their product or service instead of competing on price. The practice may allow all of them to charge a higher price than if they had to compete and may involve controlling supply or demand for the product or service.

The act also allowed individuals and companies to sue the offending entity for damages in federal court. Labor protections were also expanded under the Clayton Act, including the legalization of labor unions under federal law, along with permission to boycott and strike. Oversight and enforcement of antitrust laws were placed under the Federal Trade Commission (FTC), which was established that same year.

Starting in the late twentieth century, the US government levied antitrust charges against tech companies with mixed outcomes. In the 1980s the government dropped an antitrust case against International Business Machines Corporation (IBM) for monopolizing digital computer systems, but federal regulators forced the telecommunications giant AT&T to break into seven regional entities.

Starting in 1992, the FTC launched an investigation into Microsoft Corp. for the company’s near-exclusive control over the market for personal computer software. The Justice Department filed charges against Microsoft for predatory pricing and anticompetitive practices. The charges stemmed from complaints that Microsoft required users to purchase the Windows operating system in order to use the company’s other products and made it extremely difficult for consumers to download software created by competitors, including internet browsers.

A federal judge ruled in June 2000 that Microsoft was operating as a monopoly and should be broken up into separate entities. Microsoft appealed the case, which resulted in a 2002 settlement that allowed the company to remain intact. The settlement required Microsoft to remove barriers to competition from its operating systems, including web browsers. The settlement prohibited the company from retaliation against entities that filed lawsuits or complaints against it. Though critics contend that the outcome allowed the company to maintain monopolistic control over the industry, supporters note that emerging technology companies like Google benefited from the prohibition against anticompetitive practices.

The rapid expansion and domination of several major technology companies in the twenty-first century often outpaced government oversight and regulation. The consumer electronics and software services firm Apple Inc. was founded in 1976 as personal computers grew in popularity.

During the early years of the World Wide Web and e-commerce, Amazon.com, Inc. started out selling books online in 1994, ultimately branching out into e-commerce, cloud computing, and digital streaming services. Google Inc. launched the search engine designed to locate and rank websites that would become synonymous with its name in 1998. Google created its most lucrative venture, an internet-based advertising platform called Google AdWords, in 2003. Founded as a social media service in 2004, Facebook, Inc. expanded into a technology conglomerate by acquiring numerous other companies worth billions of dollars, including Instagram and WhatsApp.

Complaints over anticompetitive practices by technology companies led to increased scrutiny by federal regulators. The FTC concluded in 2012 that Google used illegal monopolistic practices to stifle competition and exploit internet users. Google was accused of using its search engine to manipulate results that highlighted its own products and services.

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The FTC dropped its antitrust and anticompetitive investigation against Google in 2013 following the company’s voluntary agreement to end certain practices that were alleged to hurt competition and consumers. Google did not incur any financial penalties but agreed to eliminate restrictions it placed on advertisers and end numerous lawsuits over mobile phone patents. To avoid further charges of antitrust violations, Google reorganized in 2015 and became a subsidiary of its new parent company, technology conglomerate Alphabet Inc.

In addition to Google, other companies faced allegations of misconduct, FTC investigations, and federal actions against them. An anticompetitive suit against Apple forced the company into a $450 million settlement in 2016. The settlement came after the Supreme Court refused to hear Apple’s appeal over a federal judge’s guilty verdict against the company for conspiring to fix the price of e-books to eliminate competition while increasing the cost to consumers.

In August 2018 Apple reached a stock market value of $1 trillion. In July 2019 the FTC imposed a $5 billion penalty on Facebook for violating a previous order over the privacy rights of users and control of personal information. Facebook monetized the information for targeted advertising, which generated most of the company’s annual revenue. In February 2020 labor unions petitioned the FTC to look into allegations that Amazon used anticompetitive practices to drive down wages. Bloomberg reported in August 2020 that FTC investigators and attorneys general from New York and California were examining whether Amazon leveraged data from its online marketplace to undermine small business owners who sold products as third-party merchants on the e-commerce site.

Concerns that technology conglomerates had grown to become monopolistic led to further investigations. The FTC announced in February 2020 that it would examine acquisitions undertaken by Alphabet, Amazon, Apple, Facebook, and Microsoft between 2010 and 2019. The FTC reported that it was looking for anticompetitive acquisitions that may have undermined competition and hurt consumers.

In July the House Judiciary Committee summoned the chief executive officers of Apple, Amazon, Facebook, and Google to a hearing. Some representatives criticized the companies for using data collected from their users to the advantage of the company and at the expense of consumers’ privacy. The CEOs defended their business practices as beneficial and highly competitive. They argued that their large reach allowed them to provide better services to the benefit of consumers.

Antitrust cases followed the investigations. In October 2020 the US Department of Justice along with the attorneys general of eleven states filed a federal antitrust complaint against Google for “anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation.”

According to the complaint, Google monetized these strategies to garner 90 percent of general search engine traffic in the United States. The complaint also alleged that Google created multiple barriers to entry for small and innovative companies and used its various services and products to feed income and customers back into its structure, creating a self-reinforcing monopoly.

The FTC and attorneys general from forty-eight states filed suit against Facebook in December 2020 for illegal monopolization. The suit alleged that the technology conglomerate engaged in predatory conduct by acquiring rival corporations and abusing third-party software developers.

The suit claimed that these actions were part of a systematic business strategy to harm competition and reduce consumer choices in order to consolidate dominance over the social networking industry. In December the FTC ordered Twitter, Facebook, Amazon, YouTube (which is owned by Google) and other companies to provide federal regulators with reports on the collection and use of consumer data over privacy concerns.

Critical Thinking Questions

 

  • What laws and regulations has the US government implemented to address monopolies? What entities are these laws intended to protect?
  • In your opinion, are the business practices of technology giants like Google and Apple anticompetitive and monopolistic? Explain your answer.
  • Do you think that the federal government should force big technology companies to break up into smaller, independent entities? Why or why not?

 

The debate over the role of social media platforms in protecting free speech and censoring political content intensified following the 2016 presidential elections and under the administration of Donald Trump. US government officials placed Section 230 of the Communications Decency Act of 1996 at the center of the conflict. Section 230 exempts technology companies from legal responsibility for content posted by site users, except in cases of copyright infringement and criminal law.

Republican lawmakers accused social media platforms of political bias and using algorithms to suppress conservative voices. Democratic lawmakers accused social media platforms of allowing false, misleading, and manipulative information to proliferate. Donald Trump released an executive order in May 2020 that attempted to bypass legislative and judicial authorities by ordering regulators to interpret Section 230 more narrowly. The executive order also requested that regulators look into political bias complaints against technology companies.

Big tech defended Section 230. Supporters argued that eliminating the legal protections would make it too costly for new competing tech firms to enter the industry. Companies including Facebook and Twitter asserted that given the massive scale of content posted on their platforms, it would be impossible to vet everything.

CEOs pushed back against regulations that would make complete oversight their responsibility. Critics argued that tech companies were already required to identify and block unprotected content related to civil and criminal exceptions under Section 230, such as sex trafficking and prostitution.

After facing immense public and political pressure, social media platforms began monitoring, tagging, and in some cases removing false or misleading content related to the November 2020 elections. This included content posted by Trump. In December Trump vetoed the National Defense Authorization Act because it did not meet his demand to include a provision to overturn Section 230.

Following an insurrection at the Capitol by his supporters in early January 2021, numerous social media platforms announced they were temporarily or permanently banning Trump. Critics of the move claimed it was censorship. Legal analysts point out that although the US government is constitutionally prohibited from restricting free speech under the First Amendment, private companies may create and enforce rules related to content on their sites.

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