What is causing the asphyxiation of "Big Tech" and eventually innovation in America ??

I am neither a populist nor a democratic socialist. I am a staunch believer in liberal capitalism that is based on the tenets of the “invisible hand” and the “free-market economy”.?I choose to follow liberal capitalism because it fosters competition, innovation, creation of jobs and it ?also democratizes creation of wealth.?Two and half years ago in January, 2019 I wrote an article on LinkedIn expressing my?concerns about the concentration of economic power in the hands of few in the American economy (https://www.dhirubhai.net/pulse/bigger-nemesis-us-china-capitalism-himanshu-shekhar-ojha/?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_post_details%3B7U86fqtzRlSwRlOWHvrJPA%3D%3D).?I agreed with Ms.Elizabeth Warren, who competed with Joe Biden to win the presidential nomination from Democrats,?on the need to check this unnatural concentration of economic power resulting in Oligarchies across America, the proponent and, unfortunately till now, only, the?bastion?of liberal capitalism.?

Context

Starting 2017 there has been a spate of lawsuits filed against four companies, which are household names across the world- Amazon, Facebook, Google and Apple. The lawsuits range from accusations of anti-competitive behavior to creation of monopolies through acquisition of companies stifling competition in the market.

Illustrations of lawsuits against Google and Face Book

A.??????Google

Case # 1- October, 2020

In October 2020 US Antitrust case accused Google of strangling competition. Justice Department called Google a monopoly gatekeeper of the internet.?The US government claimed that Google used its contracts with device makers to block other search engines while also paying to out its search services in front of users on many of the most widely used smart phones and browsers.

The case also mentioned that contract terms of Google with device makers prevent latter from using any rival version of open source operating system on any other devices they make.?To add on?it’s alleged that Google requires its search engine to be given prominent position on all handsets that include its Play App store and other services.?It is important to know that the US government did not specify any remedies rather it subtly mentioned its inclination to break-up Google.

Arguments in defense of Google

The article that I wrote in January 2019 was aimed at exposing the Janus-faced economic system in the US , which bilked capitalism into creating iniquitous inequality, cartelizing companies that colluded on prices and that scuttled the formation of perfect competition, which could result in low-prices and thus increased purchasing power of the consumer.

?I defend the Big Tech because all the four companies have disparate business models yet they are considered monolithic. Google, Amazon, FB and Apple do not charge anything to their consumers.?They charge the entities who, through them, sell their products to consumers and earn profit. Antitrust aims to punish companies that use their market power to raise costs for consumers. The services provided by the Big Tech are gratis.

I am convinced that the volley of aspersions cast against Big Tech is unfounded and illogical and I intend to prove it in this article.?Here goes my defense against the lawmaker’s claims against Google:

Just as a cereal maker might pay/ offer considerable discount to a supermarket for stocking its products at the end of the row or on a shelf at an eye-level the same way Google pays for eye-level shelf space, which is a kind of home screen when one buys any digital product.?On mobile that shelf-space is controlled by Apple as well as AT&T, Verizon, Samsung and LG. On desktop computers that shelf space is overwhelmingly controlled by Microsoft.

Apple has Google Search in its Safari browser and this arrangement is not exclusive – even Bing and Yahoo pay to feature prominently and an important consideration is changing the search engine in Safari is very easy because Apple’s iPhone makes it simple to?change settings and use alternative search engines in?Safari.

Google doesn’t come preloaded on Windows devices because Microsoft preloads its Edge browser on Windows devices, where Bing is the default search engine.

Google has promotional agreement with carriers and device makers of Android devices. These agreements enable Google to distribute Android for free reducing directly the price people pay for phones. Even with this agreement in place device makers often preload competing apps and app stores.

Lawsuit claims that Americans aren’t sophisticated enough to easily download their choice of apps or change their default settings. People, on the contrary, downloaded a record 204 billion apps in 2019. Many of the world’s most popular apps aren’t preloaded – Spotify, Instagram, Snapchat, Amazon and Face Book. Also When Yahoo paid to be the default search engine in Mozilla’s Fire Fox browser, which is funded almost entirely by revenue from search promotional agreements, most Americans switched their search engine to Google and later Mozilla chose Google to be its default search provider.

In addition to the arguments in defense of Google I would like to mention that if Google is restricted or broken down there will be a multitude of low-quality search engines propping up artificially. People will find it difficult to get the search service the want and will also find an increase in prices of phones using Android.

Case # 2- July, 2021

As if the claim of lawmakers regarding Google strangling competition was not enough, few days ago few states in the US have sued Google over its Play Store. The states claim that Android smartphone market is part of the licensed mobile operating systems and Android accounts for 99 % of this market and that Google has discouraged competition in Android apps distribution.

Arguments in defense

Android allows alternative app stores to exist side-by-side along its Google Play. Google also allows Android users to side –load apps , or download them directly through an app store.

Also states still need to prove how Google has a dominant position in how mobile apps are sold. Android accounts for only 42 % of market in the US smart phone market. It should be noted that US defines market dominance in excess of 65 % of any market and EU defines in excess of 50 %.

B.?????Face Book

Case # 1- June,2021

Two lawsuits were filed by FTC ( Federal Trade Commission ) and a coalition of US states claiming that Face Book had become a monopoly after it acquired Instagram in 2012 at a price of 1 billion $ and What’s App in 2014 at a price of 19 billion $. The law suits asked for a forced break-up of Face Book and Instagram and what’s App as a merged entity.?

A judge dismissed these lawsuits stating that the failure of the states and the FTC in establishing the size of the Social Network Market in the US.???In legal parlance, Monopoly is defined as the?power to profitably raise prices or exclude competition in a properly defined market.?The so called “Social Networking Market “ ???is not a properly defined market at this point of time. ?Delineating digital markets is very-very tricky because consumer-derived sales does?not match the criteria here because Face Book does not charge its users any money.

What’s actually going on here?? Reasons behind the ?indictment

1. It all stated in 2017 after the Presidential elections in the US when the tech giants ( FB, Google and Twitter) were grilled by the Congress over Russian trolls abusing their platforms/services to meddle in the 2016 elections. It is no secret that Russia manipulated the results of the US elections. ?The lawmakers , the world over, are feeling threatened by these social media giants because of a fundamental yet very strong reason- today’s elections are fought out on Social Media and undoubtedly Face Book, Google and Twitter have all the hegemony on the Social Media today.

2. ?Another reason behind this murky onslaught on Big Tech is the fact that today the war is not between capitalism and socialism rather it’s a war between different versions of capitalism primarily between State Capitalism and Liberal Capitalism. OPEC states mainly Saudi Arabia , UAE, ?China , Brazil and Russia( to a limited extent though ) have demonstrated the ?success of state capitalism and probably the West – US and EU is confounded by the consistent decline in productivity?accompanied by low per capita income and staggering inequality in income.

Even Britain, the crucible of free-trade thinking created a giant national champion in the form of East India Company. ?Japan’s rise in 1950’s was the result of state capitalism. If one includes the existence of Sovereign Wealth Funds in the countries mentioned in the preceding paragraph then the impact and influence of state capitalism is huge.?The West now wants to adopt a different version of state capitalism by indirectly controlling the Big Tech whose combined market capitalization exceeds the GDP ( Gross Domestic Product ) of many countries in different parts of the world. To gain control its now trying to meld the powers of the state with the power of capitalism and ?incapacitate these companies through legal?harassment enforced continually through , at times baseless, lawsuits.

3. The third reason is the pervasiveness of the “New Brandeis “school of thought in the US administration. ?Louis Brandeis – advocate, reformer and Supreme Court Justice took, in 20th century, actions against oligarchs such as John D Rockefeller and JP Morgan. In a case against Morgan’s New Haven Railway he exposed the underside of Monopoly power in the form of cartel pricing, bribes to officials and accounting frauds etc. The result was the breakup of the railways.

?The most significant evidence of this pervasiveness is the appointment of Lina Khan as the Head of the FTC in the US . Lina Khan claim to fame is her treatise, while she was in Law school, over the monopolistic tendencies and resulting actions of Amazon. She has been entrusted with the “gargantuan” ( I call it Machiavellian) task of chairing an enquiry over the alleged?monopolistic tendencies of Amazon. This is a blatant and brazen attempt of the US administration to make the Big Tech kowtow to its whims and fancies otherwise how can a person, who has already made up her mind in the culpability of Amazon when she wrote that thesis years ago, be entrusted to chair the inquiry. Here, however preposterous it may seem, the plaintiff has been made the judge and ?her presumption that success can only be the result of anticompetitive behavior?is?a matter of serious concern.

Conclusion

In my opinion politicians should stop mucking about highly innovative and evolving business models they don’t actually understand. Looking at the past decade the only thing that seems to have gone in the right direction in the US economy has been Silicon Valley . The success of these big companies has bought amazing products and services to customers and we do want further innovations from them in the coming future.?I cannot imagine how I would have survived the pandemic last year ?without Amazon’s e-commerce and its Amazon Web Services, without Microsoft Teams and Google’s Chrome and many other critical services offered by the Big Tech.

?I do concede that the Big Tech is responsible for few big goof-ups such as fake news transmitted through Google when it promoted misinformation about shooters during Las Vegas and Texas shootings. I also hold You Tube responsible for letting past its filters disturbing videos aimed at kids. FB Live- Face Book’s live video streaming service has broadcasted, in the past, killings and rape unchecked over the internet .These pitfalls faced by the Big Tech can be termed as transgressions but not crimes so severe enough to decide in favor of a ?divestiture.

Break-up always backfire and it’s not a panacea for the transgressions mentioned above. The break-up of AT&T is a pertinent example of a divestiture going wrong. The constant threat of the same [divestiture] can be disastrous for consumers and enterprises alike. IBM , for example, went through so much of unwarranted pressure in the form of looming threat of a break-up that it lost its momentum and zeal to innovate further and missed to capitalize on internet based computing architecture and client-server that led to its lagging behind in the new software industry. At present, in the US, break-ups are seemingly the only means available to cripple a successful enterprise.

I am still grappling with the following questions:

?I don’t understand why Big Tech is considered a public utility and subject to total welfare rather than pure economic efficiency?

How Google, Face Book and Amazon are the Standard Oil or US steel of today ?? How do these three companies individually or collectively are a threat to liberal democracy ??

What harm is the Big Tech inflicting when in the new digital economy currency is not bartered but information about consumers is bartered?

Finally....

Yes regulatory framework is needed because these companies can’t track the complexity of their own algorithms but the framework needs to be respectful of our needs , our digital interests , our social interest and the freedom for these companies to innovate without undergoing a threat to their existence .

?