Tech giants are not just in control of much of the information we receive, they are also showing they don’t like dissent
small kerfuffle in Washington this week said a lot about power in the modern world. Barry Lynn, head of the open markets initiative at the New America Foundation, a Washington think tank partly funded by Google, was fired. According to him it was because he posted a statement on the foundation’s website supporting the European Commission’s imposition of a €2.4 billion fine on Google for breaching competition laws. Eric Schmidt, chairman of Google’s parent company, complained about him to Anne-Marie Slaughter, head of the foundation.
Slaughter denies this and says Lynn failed to “adhere to New America’s standards of openness and institutional collegiality”. Lynn and his open markets team have now set up on their own, as “Citizens Against Monopoly”.
Never in the history of the world has a group of companies become so dominant, so fast, as the tech giants Google, Facebook, Amazon and Apple. Their rise is partly the result of growing concentration within the entire world economy. In most markets, a smaller and smaller number of increasingly powerful companies rules the roost. But it is also because of the nature of the tech business, which is peculiarly susceptible to “network effects”; the more customers a company has, the more it gets, and the less vulnerable it becomes to competition. Facebook, thus, wouldn’t be worth joining if it had 2,000 users. With two billion, it is unbeatable.
Google spent $9.5m in the first half of 2017 on lobbying Washington
Their market power is extraordinary. Google has 87 per cent of the search market in America, and 83 per cent in Britain. Facebook has 79 per cent of the social media market in America and 77 per cent in Britain. Amazon has 43 per cent of the online retail market in America and 16 per cent in Britain, but with Amazon Fresh it has just moved to challenge the next-biggest players in Britain, the supermarkets. Last year Apple earned nearly 80 per cent of the worldwide profits from the smartphone business.
Their market capitalisation tells you all you need to know about their power. At $750 billion, Apple is worth more than the entire car industry. At $650 billion, Google is worth four times more than the entire airline business. Five of the world’s ten most valuable companies are tech companies.
So what? Given that these companies have done so well because they provide services that we use and enjoy, should we not celebrate their success? Up to a point: we also need to be wary, for a number of reasons. One is that they can use their power to make it hard for others to get into their business: the commission fined Google for privileging its shopping comparison service over competitors’. If we care about nurturing new companies, we need to worry about firms that use their dominance to crush them.
A second cause for concern is the reason for their success. There’s a saying in Silicon Valley that “if you’re not paying for it, you’re the product”. Aside from Apple, the tech giants make their money largely from charging other companies for access to the information they hold about us and which they collect largely without our knowledge. That they know so much about what we do and where we go is troubling enough in itself; combined with the growing power of face-recognition technology, it is downright scary.
A third reason for discomfort is their growing influence over the way we think. The tech giants don’t just know everything about us; they also shape what we know. People increasingly get their news through their Facebook feeds and the selections of news stories that these companies choose for us on our phones. Once upon a time, concerns were commonly voiced about the power of the press barons. Their clout was as nothing to the tech titans’.
This unprecedented market dominance has attracted less attention from competition authorities than you might have thought. That’s partly because in recent years American competition law has been shaped by the belief that the only reason to object to companies’ market power is if prices are going up, which, given that advances in tech have consistently pushed prices down, hasn’t been an issue in that business.
It’s also — and this is another reason for concern — because of these firms’ growing political clout, as illustrated by the New America Foundation story. Google spent 9.5 million in the first half of this year on lobbying in Washington. That doesn’t include the money it gives to around 170 think tanks and similar groups who shape the political debate in America.
The tech firms’ customers themselves can be a powerful weapon. In 2012, when Congress was considering a law that would have protected musicians and film-makers against pirates and made Google vulnerable to action against copyright infringement, the company orchestrated an online protest so large that the Senate’s website crashed. The law died. There’s growing hostility to the tech titans now, but mostly from Democrats. A Republican Congress and a president opposed to all forms of regulation are the best protection the tech companies could hope for.
Power has shifted now from governments to tech companies
The European Commission has taken more interest in the tech giants than the American administration has, which is why Google has recently revved up its lobbying effort in Brussels, spending €4.25 million there last year. It’s not just the fine over the shopping-comparison service: the commission is already working on another couple of cases against Google, concerning its Android mobile operating system, and AdSense service for advertisers.
As Britain moves towards the European Union’s exit door, we need to bear in mind the way the tech revolution has shifted power from governments to companies. When we last ran competition policy as a nation-state, firms were nothing like as powerful or as footloose as they are now. Since we have been an EU member, we have challenged dominant companies as part of a much larger block, with resources and a clout that we will no longer have. If our government, by itself, tried to constrain a tech titan, the firm would very likely threaten to walk away from the British market, and the government would crumble.
To hold our own in the future, we will need to share resources and intelligence with the EU. That means remaining part of the European Competition Network, which will allow our own Competition and Markets Authority to work in concert with the commission when the big beasts of the new economy threaten to abuse their power.
Remember Google’s watchword when it first came to prominence, “Don’t be evil”? That seems like a very long time ago. More relevant these days is a line from The Fountainhead, a novel by Ayn Rand, high priestess of the American right, that libertarian techies love to quote. When the protagonist, Howard Roark, an architect, is challenged about a radical scheme he’s planning, he shoots back, “Who will stop me?”. Who, indeed?