Boston Uncommon: Warren misses target in attempt to restore competition to tech industry

The Elizabeth Warren 2020 campaign recently outlined a proposal to break up large tech companies as a continuation of her fight to restore competition in American markets.

Warren’s plan would prevent companies with over $25 billion in annual revenue from participating on their own platforms. Additionally, Facebook would be separated from Instagram and WhatsApp, Amazon separated from Whole Foods and Google separated from Nest.

But bundling these large businesses under one anti-competitive umbrella runs the risk of not addressing the specific offenses of each company.

Each business poses specific threats to competition that should be handled differently. Google and Facebook lead digital advertising, reaching a massive number of people each day with targeted and effective ads. Amazon focuses on its dominance in e-commerce, and Apple imposes demanding terms on web developers.

All of these companies have enormous revenues and great influence in their respective industries, but applying the same antitrust regulations to each of them would inevitably lead to loopholes.

For example, Amazon has recently taken up space in the world of advertising and could potentially gain control over the industry if Google and Facebook are forced to reign themselves in. But Amazon reasserts that its main business venture is e-commerce. Similarly, Google could make larger use of Google Shopping if Amazon is forced to give up its influence.

Warren’s plan to apply the same regulation to each of these companies would not destroy their power, but let them to take advantage of each others’. Warren is correct in asserting that mergers harm competition and, thus, undermine democracy.

Aside from applying vague terms to complex and distinct businesses, the policy suggestion also ignores one of the most corrupt sides of the technology industry: cloud computing, which uses the internet to deliver computing services such as servers, storage, databases, networking, software, analytics, intelligence and others.

Amazon Web Services brings in a significant portion of Amazon’s revenue by renting cloud space to individuals and companies, such as Netflix. There are many different cloud companies, such as Amazon, Microsoft, IBM and Salesforce. From the outside, this seems like competition, but the problem comes when considering their customers.

Companies such as streaming services could be hurt by these tech giants owning multiple ventures since Amazon has control over both its own streaming service and the computing abilities of others.

One aspect of Warren’s proposal, however, is much needed. She outlined a system by which regulators would disentangle large companies from their anti-competitive mergers, such as with Facebook’s acquisition of Instagram.

Warren’s plan would require companies that exceed the $25 billion-revenue benchmark to scale back usage of their own sites and become “platform utilities.” Platforms, as defined by Bill Gates, are “when the economic value of everybody that uses it, exceeds the value of the company that creates it.”

Amazon, Google, Facebook and Apple are far from that designation. Aside from using their interfaces to advertise and sell to their own advantage, these companies are eliminating competition by buying out their competitors. The most notable expansions are Facebook’s $1 billion purchase of Instagram and Amazon’s $13.4 billion acquisition of Whole Foods.

Basically, Warren’s proposal is a mixed bag. Tech giants are in desperate need of regulation, but applying a blanket policy risks worsening the lack of competition in the American economy and ignores other issues.

An approach to restoring competition that considers each case specifically and recognizes the importance of separating ownership of computing services from ownership of their customers is better suited for the industry.