Why we can never put the Big Tech monster back in its box: Don Pittis
Facebook, Google and the rest have changed the world — and Congress can't reverse it
It's as if Godzilla hatched from its giant radioactive egg, while we all watched complacently, and then grew into a civilization-eating monstrosity.
And now that the Big Four tech giants — Facebook, Google, Amazon and Apple — have suddenly gobbled up whole industries, stomping through the smoking ruins of the advertising, retail, music and news industries, the world's politicians are trying to turn the clock back.
Empty seats behind nameplates for Facebook executives Mark Zuckerberg and Sheryl Sandberg during recent hearings in Ottawa were a glaring demonstration that Canadian Parliament — even when backed by the support of international lawmakers — does not have the firepower to blast this digital economy Godzilla into submission.
But even as politicians from both sides of Congress gang up this week, it is almost impossible to imagine even the full might of the U.S. government can do much to subdue industries built in an interconnected age — ones that are still growing and transforming in unpredictable ways.
"The current landscape suggests there are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems, and electronic book sales," the head of the U.S. Department of Justice's antitrust division, Makan Delrahim, said in a speech this week, titled Antitrust Enforcement and Digital Gatekeepers.
Cheap or free — but still a monopoly
In economics, the main concern about monopolies is that they are able to charge higher prices than in a competitive marketplace, as consumers have no alternative to that single supplier.
But in his comprehensive address, the Justice Department's antitrust chief pointed out that monopoly power is not all about price. Amazon, for example, may offer the cheapest prices and still be a monopoly. Google or Facebook may offer services for free, thereby prevent others from competing.
"As we think about antitrust enforcement in the digital economy, the key issues that antitrust enforcers must untangle are whether a company is growing due to superior price, quality and innovation, or whether some transaction or business practice is, on balance, anti-competitive in purpose and effect," said Delrahim.
In theory, charging the lowest prices can lead to the bankruptcy of the competition, allowing the market leader to raise prices later. But domination of an entire technological platform can be even more insidious, preventing small-fry competitors from presenting their own innovations to the world — especially when the giants quickly gobble up innovative challengers through acquisition.
And while the U.S. government celebrates its successes in breaking up the Standard Oil monopoly in 1911, the AT&T telephone monopoly in the '70s and, more recently, Microsoft's dominance of the PC market through Internet Explorer, it has failed to prevent the systemic domination by the "digital gatekeepers" of long-established industries at the heart of business and society.
The once-profitable recording industry, decimated first by illegal file-sharing and then by Apple's iTunes, is now subject to the power of Big Tech's streaming services.
It is also too late for much of the newspaper industry, with many formerly strong outlets forced to close down or to cut editorial staff to the bone, as the advertising dollars used to invest in quality journalism moved to these dominant online platforms.
In wiping out the news industry, digital gatekeepers "have operated with virtual immunity from the antitrust laws," said Rep. David Cicilline, of Rhode Island, as the congressional antitrust hearings began this week.
But even if Congress moves quickly, it is hard to imagine the news industry returning to its former health and power — even if Facebook and Google were forced to more fairly share their advertising revenue with content creators, as many have proposed.
Hard to solve
In its quest to eliminate the digital gatekeeper monopolies, Congress may face a number of insurmountable problems.
One is the speed with which technology transforms. Any new rules by the plodding legislative and judicial process could fail to catch up with an industry that has already moved on.
A related problem is the complexity created by digital connectedness. Problems like security and privacy, high on the congressional agenda, are not something that can be solved once and for good.
In a world where the Phoenix pay system cannot print an accurate cheque after years of trying, governments may be fearful of breaking up powerful companies that are able to do things right.
And unlike in previous antitrust actions, another snag is that global tech giants are no longer under the purview of any single government. Global competitors, especially from China and especially in the current hostile trade climate, are outside congressional control.
But far more important than those may be the fact that a globalized digital technology has already transformed not just industry, but our entire society in ways that simply cannot be undone.
Beyond economics, social and civil discourse have been changed forever: Instant information in your pocket. The ability to share your views with a wide audience. The ability to try to manipulate the political dialogue — for good or for ill.
In economics, there is the concept of the "natural monopoly" — a business that, without any attempt at collusion, dominates an entire sector.
When we have access to the whole world, instead of choosing variety, we may all prefer to narrow our choices.
With our urge to watch the same team play, to shop in the most convenient way, to stream the most popular videos, read the hottest news and talk in the forums where all of our friends are talking too, it may be that we've all contributed to creating a monster that will be hard even for Congress to kill.
Follow Don on Twitter @don_pittis