Liberating Big Tech’s hostages on day one
“The rule is, jam to-morrow and jam yesterday — but never jam to-day.”
-The Red Queen, Through the Looking Glass and What Alice Found There (Lewis Carroll)
The new, surging antitrust movement has given hope to many who yearn to throw off the yoke of Big Tech. After all, the tech giants’ dominance was attained through solidly illegal conduct, such as anti-competitive mergers and acquisitions, predatory pricing, and price-fixing. This produced conditions in which the companies were able to engage in more flagrant illegal conduct, including unambiguous, multi-billion-dollar acts of fraud.
But antitrust is s-l-o-w. The last big antitrust case with major consequences was the breakup of AT&T in 1982. Notionally, that was the result of eight years of litigation, but in truth, AT&T was first sanctioned for abusing its monopoly in 1913, 69 years before it was finally broken up.
Why did it take most of a century to break up this notorious, abusive, nationally loathed monopolist? Simple: companies seek monopoly power because monopolies are able to juice their profits by raising prices, suppressing wages, capturing regulators, and externalizing their costs.
Monopolies can mobilize these profits (“monopoly rents”) to tie up the judicial system, so any attempt to regulate them is beaten back in court (they can also buy off regulators, pay for corrupt “research” that casts doubt on their power, and establish themselves as part of the state, as AT&T did, making an ally out of the Pentagon by becoming central to the US invasion of Korea).
Take IBM: the company spent 12 years in court, fighting a breakup order. In each of those 12 years, Big Blue’s legal bills were more than the salaries entire DoJ antitrust division, combined. IBM won, because all those lawyers managed to delay the process until the arrival of Ronald Reagan, who brought most antitrust enforcement to a 40-year halt (thankfully, we are finally emerging from that Dark Age).
Breaking up a monopoly is much harder than preventing one from forming, because the power of a monopoly can be used to fight breakups. The best time to fight the tech monopolies was 20 years ago.
(The second best time, of course, is now.)
Which is not to say that there aren’t benefits to antitrust action during their progress — there are even benefits to failed antitrust enforcement. There’s plenty of evidence that companies’ internal deliberations are influenced by antitrust, as execs seek to avoid giving enforcers more ammunition or respond to the trauma of litigation by flinching away from tactics similar to the ones that brought down antitrust enforcers’ wrath before.
Thus, even though IBM was spared from breakup, it experienced a major cultural and tactical change, to the benefit of the industry and the world. IBM knew that the DoJ disfavored tying software to its hardware, so it tapped a little startup called “Micro-Soft” (they dropped the dash later) to provide DOS for its PC. It knew that blocking compatible hardware made the DoJ furious, so it sat back while PC clones proliferated.
Likewise, Microsoft’s seven-year turn in the antitrust barrel did not lead to a breakup — but it did cause the company to abandon the illegal tactics it used to kill Netscape, sparing Google from the same fate.
Now that Google and Facebook and Apple are all in the antitrust crosshairs, it’s possible that in the coming years they, too, will experience cultural shifts brought on by the trauma of endless regulatory colonoscopies and learn to flinch away from the illegal tactics that hurt tech users today.
In Through the Looking-Glass and What Alice Found There, the Red Queen tells Alice there’s “jam to-morrow and jam yesterday — but never jam to-day.” The threat of antitrust enforcement once kept tech monopolies in check, it might do so again.
But what about now? How can we have “jam to-day?”
That’s where interoperability comes in. The harms that Big Tech inflicts on its users aren’t just the result of a lack of competition, they’re the result of lock-in. Investors don’t fund challengers to Big Tech because they know that switching from Big Tech to a rival comes with too high a price: you might hate Facebook, but you love the communities, friends, and customers you hang out with there, and there’s no practical way to get them all to quit at once and follow you to a spunky new startup.
Big Tech companies grew through “network effects.” People join Facebook because their friends are there, and once they do, other people sign up to talk to them. App makers create reasons to buy an iPhone because of all the iPhone customers, and each new app is a potential lure for more customers to buy iPhones.
But while network effects are how tech companies got big, it’s not how they stay big. The thing that keeps unhappy customers from quitting for a rival is switching costs, the economists’ name for all the stuff you have to give up to go somewhere else: losing your Facebook friends, walking away from your investment in apps and media, etc.
The tech companies know this and they devote enormous engineering, legal and commercial effort to raising switching costs. They build devices that use technology to block interoperators, they sue interoperators that go around those blocks, they fight any legal action that would to make it harder to sue interoperators, and engage in predatory commercial behavior that keeps interoperators’ products out of customers’ hands.
Interoperability is how we get jam to-day.
The point isn’t that when you go to the shop, you see a million kinds of printer ink and have no way to tell which one is best for your needs. It’s that when the manufacturer tries to capture you in a switching-cost trap that forces you to buy ink at inflated prices, you can go elsewhere. It’s that when the manufacturer decides not to support your computer (because it’s old, or new, or runs Linux, or whatever), a third party can supply you with a driver without fearing IP liability from the manufacturer. It’s that when the manufacturer goes bust, third parties can service your printer and supply you with replacement parts, ink, and whatever else it takes to keep it running until you decide that it’s time to get rid of it.
The US government could give us interop on much shorter timescales than other pro-competitive remedies. They can use the purchasing power of the state to make interop affordances a standard feature of good products, by refusing to procure any product or service that lacks these. A government wouldn’t buy a hospital whose power, water, and networking details were held secret by the contractor that built it, or where the contractor required a restrictive covenant requiring the government to source all repairs, upgrades, and modifications from the original builder. It wouldn’t let the firm prohibit it from auditing the engineering math used to calculate load-stresses on the hospital’s structure. The fact that our public money is routinely directed to digital products and services that come with equivalent strictures is an aberration.
The US government has a very long history of requiring interop in procurement, stretching back at least as far as the Union Army, which required firearms manufacturers to adopt standard tooling, replacement parts, and ammo for rifles. This style of procurement should be the presumption, and any variation should be subjected to strict scrutiny and auditing.
Interop affordances in procurement will ripple out to the private sector. If a city’s school board can’t use Google Classroom unless it has APIs for third-party components, then private schools will also get those APIs. If a federal, state, or local motor pool’s procurement rules require that manufacturers make diagnostic and repair info available to third party mechanics and abjure the use of software locks to prevent third-party parts, then every motorist will be able to buy a car whose diagnostics and parts are available to their local, independent mechanic.
Multiply this by all the things the US public sector buys — phones, laptops, network switches, cloud services, sensors, etc — and you create a commercial and normative expectation that the products we all use, in our private lives, will all be designed so that we can adapt them to our individual circumstances and requirements.
This is jam to-day, an overnight revolution that can run in parallel to litigation and other enforcement action. By liberating the hostages of Big Tech’s walled gardens, interoperability will make it harder to extract monopoly rents, depriving the tech giants of the capital they’d otherwise use to draw out litigation and exhaust the DoJ and FTC.
We can’t wait 7 years (Microsoft) or 12 years (IBM) or 69 years (AT&T) to humble Big Tech so that it no longer harms the public interest. What’s more, we don’t have to. We can have jam to-day.