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The reckoning

parliament-whereszuck.jpgIt seems clear that we're approaching a reckoning for Big Tech as the societal costs of their success keep becoming bigger and clearer. Like so many other things, the pandemic has made these issues more urgent, as the money these companies suck away from local businesses and communities is now badly needed to help rebuild suffering economies. Twenty-five years ago, some were celebrating the dawn of cyberspace as the approaching end of the nation-state. Today's crises remind that some problems only governments can solve.

In the US, two types of legal actions are heading GAFA's way, as suggested by the recent two-pronged antitrust hearing. The first, which led to the Democrat-led antitrust report of a few weeks ago, has spawned a lawsuit case against Google alleging anticompetitive behavior surrounding its search engine. The second, reflecting the Republican-led grievance that conservative voices are being suppressed, has led to this week's Commerce Committee hearing on platform censorship. Thoughts on that one, which will likely result in a push to reform S230, will have to wait for concrete proposals.

Pending elsewhere: both users and Epic Games are suing Apple over the 30% commissions charged by its App Store. Meanwhile, in France, a coalition of trade groups has filed an antitrust complaint ($) asking the French competition authority to stop Apple from following through on its plans to restrict mobile trackers for advertising. This is, as the FT puts it, "one of the first legal actions alleging that big tech groups are using privacy arguments to abuse their market power". On Twitter, Lukasz Olejnik rightly says that this case about "privacy-competition trade-off" will be fascinating. It will, not least because privacy has not in general been a market mover.

Tech-related antitrust suits are typically ten years late, largely because the industry's speed makes it hard to see where to push until the damage has become deeply entrenched. In 2014, I thought Google's purchase of Nest would be the antitrust case of 2024. Instead, Google is being accused of abusing its position by illegally tying its search engine, its main revenue source, to its Chrome browser and Android licensing agreements, and, paying other browser makers such as Apple for pole position as their default search engine. (Query: if Google search is so great, why do they need to do this? The steady degradation of the Google experience has been clearer to those of us who stopped using it.)

Both Sarah Miller and Matt Stoller see the Google case as a near-copy of the late 1990s case against Microsoft, which also focused on tying. In that case, Microsoft used its Windows dominance to make its Internet Explorer the default for browsing the web. The current complaint specifically references that case, calling Google's tactics "the same playbook". Privacy is not among its concerns, though it does at least note that the key to Google's success and scale is the data it collects as the price consumers pay for its "free" services.

It's rare that an antitrust case scores a hit on an entirely different company. Google pays Apple $8 to $12 billion a year - compared to Apple's Q4 2019 $13.7 billion in profits. Apple will survive if Google is enjoined from making such payments. Firefox, however, might not, since its Google contract represents most of its income. Diversifying the search market is good for competition; shrinking the browser market is not.

My suspicion is that an additional factor in the answer to "why now?" is the arrogance and indifference to complaints that these companies have often displayed. Facebook founder Mark Zuckerberg has been particularly resistant, refusing in 2018 to show up to testify in front of representatives of nine countries.

It's tempting to divide these companies into those still run by their founders - Amazon and Facebook - and those that are on their second (Google) or later (Apple) generation of leaders. But the better division is between normal share structures (Apple and Amazon) and kingmaker share structures. Google has ensured that founders Sergey Brin and Larry Page, along with original company chair Eric Schmidt, could never lose control of the company. Facebook's share structure is even more tightly controlled, giving Zuckerberg 60% of the voting rights; he is the company's king.

Neither hearings nor complaint mention this, but I think it's crucial. The benefit of these structures was supposed to be to keep the companies nimble and innovative. It's not clear it's worked. The downside is the showrunners can be unresponsive to complaints; Facebook will never change as long as Zuckerberg is in charge - and no one can push him out. For this reason, ownership structures should be a consideration in modernizing antitrust law/

In the end, the Microsoft case was largely abandoned - but it reportedly nonetheless left a mark by changing the company's culture into one vastly more cautious and risk-averse, like IBM before it. Today's biggest technology companies have been less easily intimidated by big and bigger fines or adverse decisions. But governments won't give up; these cases, like others before them are all part of the long arc of the power struggle between global technology and national governments. We are just at the beginning.

Illustrations: Mark Zuckerberg's empty chair in front of the Grand Committee.

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.


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