The Justice Department is investigating them, as is the Federal Trade Commission. Congress and state attorneys general have their sights on the companies, too.
There is no shortage of people arguing that America’s large technology companies — namely Apple, Amazon, Facebook and Google — have gotten too big and too powerful. That has helped spur the scrutiny by the government officials.
But what to do about the issue? On that, the industry’s critics are split.
Some would like to see the businesses broken up. Others want more robust regulation. And there are shades of gray on both sides. Here are four of the most prominent prescriptions being debated.
BRIGHT-LINE BREAKUPS
This is the most drastic surgery, splitting off large portions of the big tech companies.
The guiding principle is simple. If you own a dominant online marketplace or platform, you cannot also offer the goods, services and software applications sold on that marketplace.
So Amazon could not own the leading e-commerce marketplace and sell Amazon-label goods there. Or Google could not have both the dominant search engine and its Google Shopping service, which shows up in search results. Apple could own an app store that offers music services, but not also its own music service sold there. And so on.
Bundling businesses on top of a dominant platform invites conflicts of interest and discrimination against rivals, thwarting competition, proponents of this countermeasure say.
“The world is going to be better off after we break up these companies,” said Barry Lynn, executive director of Open Markets Institute, a research and advocacy group.
Sen. Elizabeth Warren, D-Mass., has embraced the idea of bright-line breakups in her presidential campaign.
But such a sweeping overhaul of the tech industry could bring unknown risks for the companies and shareholders. Many economists are leery of broadly prohibiting companies from entering new businesses, fearing potential losses of efficiency and consumer welfare.
The last big government-mandated breakup targeted AT&T in the early 1980s, and that was the dissolution of a government-granted monopoly.
Still, the idea is not unthinkable. The remedy initially proposed in the government’s antitrust case against Microsoft in the 1990s, endorsed by three leading economists, was to split the Windows operating system business from Microsoft’s Office productivity software business. After George W. Bush was elected president, his administration settled the case without a breakup.
SELECTIVE SPLIT-UPS
This is a case-by-case approach to breakups rather than a broad rule applied to all the tech giants. A current example is a plan that would require Facebook to shed Instagram and WhatsApp. A detailed proposal on this, laying out the alleged anti-competitive conduct, was developed by two leading antitrust scholars, Tim Wu of Columbia Law School and Scott Hemphill of New York University Law School, along with Chris Hughes, a co-founder of Facebook. (Wu is also a contributing opinion writer for The New York Times.)
The three have made their presentation to federal and state antitrust regulators and to congressional investigators. They explain that starting about 2010, when mobile computing and photo-sharing services were taking off and Facebook was lagging in those areas, the social network embarked on a years long campaign to buy nascent competitors.
The biggest purchases were of the photo-sharing service Instagram in 2012 and the messaging service WhatsApp in 2014.
Typically, regulators challenge mergers when they give a company a big share of an established market. That was not the case when Facebook paid $1 billion for Instagram, a startup with 13 employees in an emerging field.
Instead, the three argue, the strategy was to buy out budding threats. “We think that’s the better perspective of what was going on — maintenance of monopoly in the social network market,” Hemphill said.
In Facebook’s case, Wu said, “the remedy is straightforward: Unwind the acquisitions.”
But an issue in spinning off a unit like Instagram is whether doing so enhances competition. Would a stand-alone Instagram be a real rival to Facebook, or would consumers simply stay with the dominant social network, Facebook, and Instagram suffer?
A NEW TECH WATCHDOG
Getting breakups approved by the nation’s courts, which are generally conservative on economic matters, would be a stretch. Besides, some experts argue, a more comprehensive way to police the big tech companies would be with a beefed-up force of regulators.
One idea is the creation of a new regulator, a Digital Authority. It would be an expert group to supplement traditional antitrust regulators in the Justice Department and the Federal Trade Commission. It would be able to move faster and have the expertise to constantly track the tech markets and trends.
“Its mandate would be to protect competition,” said Fiona Scott Morton, an economics professor at the Yale University School of Management.
The new regulator was the central recommendation of a recent report about the digital platforms that was sponsored by the Stigler Center for the Study of the Economy and the State at the University of Chicago. Scott Morton led a group of eight antitrust experts and technologists who worked on the study. Since the report was released in May, members of the group have made a series of presentations to policymakers.
In online markets, the flywheel of network effects — the more people who use a service, the more users, developers and advertisers it attracts — is especially powerful, creating dominant companies. Yet even in digital markets, the door to new entrants must remain open, said Scott Morton, a former senior official in the Justice Department’s antitrust division.
In traditional antitrust, regulators and courts move at a measured pace, slowly and often after the fact. The goal of a new digital regulator, she said, “would be to save the rival before it is killed.”
The authority, Scott Morton said, could receive a complaint from a competitor and schedule a hearing two weeks later, when both sides would present testimony.
A new regulator? It would be a tough sell in today’s political environment. But we do have specialist federal regulators in many other industries, including banking, aviation, transportation, drugs and agriculture.
Reining in the big tech companies, Scott Morton said, is increasingly becoming a bipartisan concern. “At some point, society will say this is too much power without real oversight,” she said.
UNLOCK THE DATA
There are also narrower, targeted regulatory proposals. Some of these involve rules that would loosen a dominant company’s control of user data, by either forcing that company to share the data with a smaller competitor or giving users more ability to take their data from one service and move it to a competitor. The Stigler Center study cited those data moves in a list of potential regulations and enforcement actions.
The idea, broadly, is that data can be a barrier to competition, and that freeing up the personal information collected by the tech giants could lower that barrier.
The big online platforms are data monetization machines, collecting, analyzing and exploiting information from consumers, merchants, advertisers and others. And the network effect of data is formidable. The more data the companies have, the more fuel to feed the machine-learning algorithms that power their businesses.
“Data is the real trump card these platforms have,” said A. Douglas Melamed, a professor at Stanford Law School and a member of the Stigler Center study team.
Melamed, a former senior antitrust official at the Justice Department, favors a rule that would require dominant digital platforms to give other companies access to their user data for a fee. That would help level the playing field for new entrants and other rivals, he said, but wouldn’t be free for them, either.
“You let the competitors have access to their backrooms for a reasonable fee,” Melamed said. Such a solution would require regulatory oversight to set guidelines for fair licensing terms. Data sharing would also entail some privacy risk, since no privacy-protection technique is foolproof.
A related idea is to mandate that tech companies make user data portable. That means consumers could move their information from one service to another, forcing digital businesses to compete with superior offerings rather than data lock-in.
The regulator would need the technical skills to ensure that the consumer data was handed over in a way that would let a competitor use it easily.
“The details are crucial, if you’re really going to give consumers more choice and control,” said Jamie Morgenstern, a computer scientist at the Georgia Institute of Technology who worked on the study.
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