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Home / Business / Elizabeth Warren calls to break up Amazon, Google is a real threat

Elizabeth Warren calls to break up Amazon, Google is a real threat



It has been a long time since antitrust policy has been a major theme for a presidential election.

Elizabeth Warren is trying to change it – and that's bad news for Amazon, Facebook and Google Parent Alphabet.

On Friday, Warren declared that if she was elected president, one of her key governments would be breaking up the three major technology companies. She wants to relax her past mergers and divide up other parts of her business to clear up and increase competition.

Currently, Warren is still a long shot to secure the nomination of the Democratic Party, much less winning the 2020 election, so technology companies are not in immediate danger. But Jeff Bezos, Mark Zuckerberg and Larry Page would be foolish to reject the threat she just released.

Warren taps into public anxiety about the technique's influence on our lives and channels it into a legal mechanism that, though rusted over the years, has the capacity to submit to even the most powerful businesses.

With a two-year electoral course just underway, the technology industry is now officially America's first corporate church ̵

1; more dangerous than Wall Street bankers or Martin Shkreli – and the debate is now focused on real reforms centered on legitimate antitrust policies rather than just populist rage.

That's bad news for Big Tech. Although she is not elected president, Warrens movement has increased the chances of the rulers of the tech universe drawing fire, no matter who.

Warren wants to shine a spotlight on the big tech companies

The technology industry has never really met this type of survey. Yes, some companies in the industry have met antitrust acts, including Microsoft in the famous turn of the century. And some of these actions, including the Microsoft trial and the AT & T breakup in the 1980s, sparked public attention.

But the discussion of what to do with these companies' behaviors was usually left to the courts or federal agencies. It was not a major topic of debate in a presidential election. For example, in 2000, George W. Bush said little about the time the Microsoft trial was and it was an open question when he took in the office how his administration would approach the case. When his legal department agreed on a settlement that stopped short of breaking up the company, the decision came as something of a surprise.

Warren will not have antitrust policies ignored this time. Instead, she wants antitrust policies to be in focus, and she wants a public debate on how these big tech companies should be regulated. If she succeeds, it would be one of the early times that the company's concentration of power has been a major electoral issue since the Progressive Era of the early 1900s.

Part of the danger of the technical companies is what the bright light Warren wants to shine on will reveal about them – and how the audience will respond to what they see.

Neither Facebook nor Microsoft looked good in light

For Facebook we already have a good sense of this. The social networking company has spent much of the last two years with a Klieg light that shines on it. The company's reputation knew under the intense lights, which revealed its informal treatment of customers' private data, its dubious business practices, and the way the core business, newsfeed, had been hijacked to spread dangerous propaganda.

In these revelations, Facebook's user growth has stopped in the US and Europe, revenue growth has slowed, and people are using it less. It also faces a major fine from the Federal Trade Commission, and the exposures have boosted conversations from critics to impose new restrictions on the business.

A similar thing happened to the Microsoft antitrust process two decades ago. When the government first started scrutinizing the software giant, it was among the most respected and beloved companies with the public as a whole. But the revelations from the trial of its ruthless business practices and especially the sheer arrogance and contempt that when CEO Bill Gates demonstrated in his testimony, contributed to sour public perceptions of the company.

Bill Gates
Reuters / Jeff Christensen

Perhaps the rumor that Microsoft took from the experiment created so much of an opening for its competitors that made the restrictions the government placed on its business as part of the settlement that closed the case. In the wake of the experiment, consumers and businesses were much more willing to try rival services such as Google's search engine and later their productivity tool package.

Meanwhile, other companies were far more guarded about doing business with Microsoft, and did not want to be in the same inventory as PC makers in the 90s, where the software giant dictated all the conditions of the relationship.

Amazon and Google may face similar issues if Warren is able to focus the spotlight on them as well.

Warren is trying to fundamentally change antitrust policies

But Warren's call means a greater danger to Amazon, Facebook and Google, because she is trying to fundamentally change the terms of the debate. Under the influence of conservative economists from the University of Chicago, in the early 1980s, the federal government ruled entirely on how it scrutinized corporate power.

Instead of seeing concentrations of corporate power in low light, federal regulators generally came to see them favorably. Instead of worrying about the effect of such power on competition in specific markets or other potential problems with corporate concentration, they began to focus on just one aspect: price. Generally, they only worried about enforcing the antitrust law if a company used its market power to increase consumer prices or it was likely to do so.

Read this: Facebook, Google, Apple and Amazon have too much power – so it's time for regulators to take on tech's titans

But in recent years, a growing collection of academic Experts on the left have pushed back towards this focus on price. Such a limited objective ignores the wider damage caused by concentrated corporate power, they argue. Supported in many cases by extensive research, they argue that competing competition over a wide range of industries has kept wages low, counteracting the formation of new companies and new job growth, hindering innovation and undermining democratic government.

So far, the debate on getting a broader view of antitrust policy has largely been limited to academic circles and politics. Warren, whose proposal is based on research and arguments by left-wing guardians for renewed robust anti-trust enforcement, makes a bid to take his perception of the competition policy ordinarily by putting it in front and in the middle of the presidential election.

Amazon, Facebook and Google prefer to stick to prices

It's something Amazon, Facebook and Google – not to mention other business giants that dominate their own markets – really don't want to.

If the antitrust policy continues to focus only on price, Amazon, Facebook and Google can easily argue that they are not a problem. Facebook and Google offer their services free of charge to consumers, and Amazon is known for its low prices on its products.

However, if regulators begin to investigate the wider effects of their power and how it distorts their respective markets, they are much more likely to see the need to knock down the big technology companies.

Google cofounder Larry Page
Justin Sullivan / Getty Images

The European Union, which is not fixed at consumer prices, has already found that Google was illegally trying to counter rival competition and have fined it billions of dollars. Publishers have complained for years that Facebook and Google's dominance over the digital advertising business has left little room for them to build sustainable businesses.

Read this: Europe's competition tsar is wrong – it is a long time to break up Google

And dealers and trademarks have accused Amazon of undermining their businesses. Partly because of Amazon's power over e-commerce, they feel compelled to offer their goods on their side. But they charge that Amazon uses information that gathers about its sales to identify its most popular products and offer competitors who oppress them on price.

Google, Facebook and Amazon would almost certainly not justify such actions to regulators or before a court. But thanks to Warren, they soon have to.

Warren can never be president, and she can never get the opportunity to put in the guidelines she proposed Friday. But she has increased the chances that Amazon, Google and Facebook will see a comeuppance taking the White House.


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