Breakup of Big Tech stifles innovation

October 30, 2019 — by Preston Fu

Over the past decade, Google, Amazon, Facebook and Apple, known collectively as Big Tech, have emerged and quickly taken over their respective markets. Current Silicon Valley startups often have difficulty going public or getting larger companies to purchase them. It seems that no matter what they do, Big Tech, possesses greater resources and often swallows these innovators. 

For this reason, the government has begun antitrust investigations. In fact, president Donald Trump even said that the U.S. government “should be suing Google and Facebook and all that.” Senator and Democratic presidential candidate Elizabeth Warren introduced the breaking up of large tech companies as a major part of her campaign as well.

These political leaders are concerned by the rapid growth of already massive tech companies. Facebook, which now owns Instagram and Whatsapp, swallowed up its primary competitors in order to push ahead as the leader of social media. Several features of Google are approaching monopoly status, most notably its search engine, along with Chrome, YouTube, Gmail, Drive and Maps. Since Amazon purchased Whole Foods, it has grown greatly by establishing a widespread grocery delivery system. 

And yet, due to the convenience of this huge variety of successful products made by tech giants, political leaders’ efforts to break up these companies have only proven unnecessary.

Previously, huge monopolies like Standard Oil and AT&T were split apart by the government in 1911 and 1982, respectively. Standard Oil had control of over 90 percent of the U.S.’s refineries and pipelines and the Bell System, initiated by AT&T, controlled much of local telephone service in the U.S. and Canada until 1982.

By analogy, then, a company as far reaching as Google, which owns 75 percent of the search engine market share, should be broken up, right?

Wrong. The primary difference between these previous-era monopolies and today’s Big Tech is that those monopolies had complete control over the market, with no other competitors to keep prices in check; this does not hold true for today’s Big Tech. Even if Google were to be considered a monopoly, consumers would receive no benefit from its breakup. After all, no other company would make so many successful free apps, like Google Maps and Google Docs, available to the public, and with so much general benefit. 

Additionally, these large companies have not overused their power in the market. For instance, since Amazon took over Whole Foods, prices from just two years ago have been cut by around 20 percent.

In July, the Department of Justice (DOJ) announced that it will be conducting an investigation into Facebook, Google, Amazon and Apple, among other corporations, to determine whether they have violated antitrust regulations. In essence, they wish to deduce if Big Tech have prevented other smaller startups from joining in or have hurt consumers in any way. They have yet to scrape up any evidence of the sort.

Suppose that, for some reason, the DOJ managed to dig up some evidence proving that these companies are monopolies and thus had to be broken up. 

On one hand, the breakup of Google (whose parent company is Alphabet) would be fairly clean and make little difference to the public: It would split into several smaller companies that each worked on one specific product. Google’s spectacular search engine, though severed from other aspects of the company, would still top its old competitors.

On the other hand, breaking Facebook apart from its acquired Instagram and Whatsapp would be disastrous. While under Facebook, Instagram developed anti-bullying and like count-hiding features, and Whatsapp developed dark mode and the ability to share status updates with other social media apps. After splitting, though, these attributes may be undone.

Additionally, the government has been concerned about Facebook using users’ private data. However, they haven’t yet found a way to properly accuse Facebook of violating current privacy laws or to show that splitting it up will change its privacy policies.

Breaking Whole Foods from Amazon would have a similar consequence. After separating, Whole Foods would simply sell the same products as before but revert to its previous higher prices.

Despite the fact that Big Tech companies have taken over thousands of Silicon Valley startups and that this region is chock full of aspiring entrepreneurs, it is also true that these tech giants have been beneficial to consumers. Their extensive resources have allowed for a wider range of products and a decrease in prices, contrary to the usual notion of monopoly. 

While it may be true that these companies have accrued what some perceive as “too much power” over the past few years, breaking them down into individual firms does nothing to resolve the issue at hand. It is only reasonable to take action against the companies when they increase profits at the expense of consumers, which, by current trends, is not projected to happen anytime in the near future.

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