A View from Silicon Valley: Elizabeth Warren, Breaking Up Big Tech, and Complications
On March 8, Elizabeth Warren wrote a persuasive piece on Medium making the case that large tech companies like Google, Facebook and Amazon are too big and should be broken up. A day later, Sen. Warren confirmed that Apple would also be on the chopping block.
Elizabeth Warren is a fierce advocate for consumers, and no one can deny the underlying theme for her proposal: tech companies, like other conglomerates, are too big, exploit their market power for anti-competitive purposes too often, and ignore privacy concerns too often. Nevertheless, Warren’s policy is well-thought out, and it deserves some well-thought out scrutiny.
Here is Warren would do, legislatively: companies that provide an online platform for sale of other items, whether physical or digital, would be known as platform companies. In addition to providing fair and nondiscriminatory terms to sellers, platform companies that have more than $25 billion in global revenue would not be allowed to sell their own products on the platforms they own. Smaller companies would still be subject to the fairness and nondiscrimination doctrine, but would not be barred from selling their own products on their own platforms. Then, administratively, a Warren administration would unwind acquisitions of products that compete with their own products.
The idea here is that it shouldn’t be possible for Amazon, which has all the sales data, to run a profitable seller out of the market by providing their own alternative to that product, and by maybe even promoting it over the other popular product. It shouldn’t be possible for Facebook to buy up WhatsApp or Instagram, products that would otherwise give it a run for its money. Google shouldn’t be able to promote its own rating system over Yelp on its search platform. Platforms have all the data of what’s selling and what’s not, how people are reacting to products and services, and therefore have an unfair advantage knowing just what to make on their own.
Seems like a proper remedy.
Perhaps, but let’s consider certain analogies. Are online businesses and tech companies the only ones that can count as a “platform”? Certainly all retailers - online and brick and mortar - are platforms. The storefront - whether Amazon’s landing page or Costco’s shelves - carry products. The platform company, Amazon or Costco, knows what’s selling and for how much. So it begs the question, what is the justification for allowing more traditional retailers to carry store brand products to compete with other sellers on their shelves?
Consider this. Costco has an annual revenue of nearly $150 billion, carries products from hundreds of manufacturers, including its own popular Kirkland brand. Target’s revenue is $75 billion per year, and products with Target’s store brand, Up & Up, sells alongside products from competing brands. And who can forget the elephant in the room, Walmart, with $500 billion in annual revenue and it sells products from a whole bunch of private label, Walmart-owned brands, including Great Value grocery items and Special Kitty catfood.
What’s funny about this is that store brand products almost always outcompete their brand name brethren when it comes to price. Yet, these cheaper products do not seem to have driven all the competing namebrands out.
Amazon’s annual revenue, at $230 billion, falls somewhere between Walmart and Costco. Walmart has bought up both traditional and online retailers, like Shoebuy and Jet.com. It is difficult to imagine why there should be one set of rules for Amazon and Google in so far as they provide a platform, and another set for Walmart and Costco.
And it’s not as though traditional retailers have not been caught lax in their data security. Any one remember the Target data breach?
The point is, is the tech industry being singled out, and if so, why? On the flip side, should the same standard be enforced against the likes of Walmart, Target and Costco even if it comes at the cost of consumers losing less expensive, good quality merchandise?
I don’t know the answers to those questions. But these are valid questions. I hope, and knowing the policy-wonkishness of Warren, expect the Warren campaign to answer these questions.
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