The EU, Tech Trustbusting, and Trade Wars

There’s a difference between protectionism and political will

The EU flag superimposed over a Matrix “code waterfall” effect; in the center of the ring of stars is a vintage newspaper caricature of Roosevelt as a trustbuster, swinging his “big stick.”

Competition regulators in the EU, the UK and the US are all looking hard at concentration in the tech sector, and well they should: an industry that was once hailed for its dynamism — for being a sector where yesterday’s world-spanning titans are sold for parts to companies that were mere napkin doodles a year or two before — has calcified into “a group of five websites, each consisting of screenshots of text from the other four.

The reasons for tech concentration are pretty straightforward. Despite a lot of fatalistic tech exceptionalism about “network effects” leading to inevitable monopolization, the actual means by which tech companies consolidated is actually easy to see in the historical record.

As competition law enforcement faded, tech companies were able to engage in predatory acquisitions (like Facebook buying Instagram to recapture users who had quit Facebook), anticompetitive mergers (like Yahoo’s endless, mindless, destructive company purchases), fraud (like Facebook’s “pivot to video” accounting fictions), conspiracies (like Google and Facebook’s ad-market rigging), predatory pricing (like Amazon’s war on its own sellers) and monopolization of ancillary services (like Apple’s control over apps and repair).

Of course, it wasn’t just tech where these tactics were used to crush competition and concentrate whole sectors of the economy into a few hands: there’s a long list of heavily concentrated industries, from beer to eyeglasses, banks to professional wrestling, athletic shoes to health care, publishing to pharma, mattresses to candy, and beyond. Look closely at the recent history of these industries and you’ll find that the only thing the tech industry doesn’t monopolize is monopolistic tactics — every one of these industries grew concentrated through a version of the Big Tech playbook.

Tech is neither exceptionally evil nor exceptionally great, and its leaders are not exceptionally brilliant or exceptionally foolish. But tech trustbusting is having a moment, prompting some commentators to ask why we’re set on breaking up tech but not cable, finance, or our other systemically harmful monopolies.

Tech is in the crosshairs for three reasons:

  1. Other monopolistic industries are jealous of tech. The entertainment and telecoms industries have been gunning for tech for years, and they’re both masters of astroturf and lobbying. Some of the editorial and political energy to address tech monopolization is being driven by their behind-the-scenes maneuvering.
  2. US-based Big Tech has few defenders in the EU —the companies use the EU for money-laundering, tax-evasion and extraction, create few jobs in the region, and are correctly viewed as having sucked up the market oxygen for Made-in-Europe alternatives.
  3. The longstanding problems of tech — like content moderation policies that silence marginalized voices —finally became problems for conservatives, creating a rare, bipartisan consensus that a couple of unaccountable tech executives shouldn’t be in charge of our political discourse.

But none of this disqualifies Big Tech from competition regulation. Tech, after all, is “exceptional” in two ways:

  • First, it is foundational to everything else we do, the nervous system of the 21st Century. Communications tools are how we organize and coordinate mass movements, including the ones we’ll use to address most important issues, like structural racism, inequality and the climate emergency.
  • Second, it is easier to fix, thanks to “interoperability” — the ability to make new services and products that attach to existing ones, siphoning off customers and neutralizing those dread, overhyped “network effects.” Network effects are a distraction: the real action is in switching costs (all the things that lock-in makes you part with if you quit a tech platform).

Yes, Europeans took on Big Tech before America did because they didn’t have to overcome a jingoistic army who’d defend tech’s abuses in the name of patriotism. That doesn’t make the EU enforcement unfair —the unfair part was America’s long forbearance.

And yes, finance, energy, telecoms, and health concentration (to name just a few industries) must be fixed. It’s possible that Big Telco and Big Content are pulling strings to get tech broken up, but if so, they’re making a foolish bet: that they can wake the slumbering antitrust giant for the sole purpose of taking on their enemies, and then see it off to sleep again for another generation or two.

That’s not how this works: an antitrust victor against Big Tech won’t exhaust the anti-monopoly movement — it will embolden and invigorate it. First we take GAFAM, then we take Disney-Fox, UMG, and Comcast.