‘Two complex break ups’ is new ‘Too big to fail’



A few days ago, Facebook Inc. produced its own documentation that breaking it would be a “non-starter” for several reasons, including that the company’s component parts are already too complex and for any of them Also interlinked – Instagram, WhatsApp, its advertising business – splitting up as separate companies or shutting down as separate divisions.

“After years of hard work and expensive work, Instagram and WhatsApp are now integrated into the same Bezock infrastructure that Facebook has built from the ground up,” the company said in its report. ”

The report of the House Antitrust Subcommittee released on Tuesday accepted Facebook’s argument that no big tech company is likely to breakup until Congress passes the new law. For concerned lawmakers, it is only necessary to know how to deal with the dominance of Silicon Valley.

Facebook CEO Mark Zuckerberg testified by remote video at a House Antitrust Subcommittee hearing in July.


Photo:

Grammy Jennings / Pool / EPA-EFE / Shutterstock

For those who curb these companies, one question looms. These four companies already have unprecedented market value and hold positions in industries ranging from digital advertising and app distribution to online retail and mobile computing. If they are already so complex that they are hard to uncontroll, what if they continue to go undocumented for another decade? Collectively, these companies plan to expand into healthcare, cryptocurrency, brain computing, space-based telecommunications and countless other fields.

In the financial crisis of 2008–09, some argued that any bank should be allowed, by extension, to grow too large. As tech giants in the businesses they enter ever widen, and their vertical integration deepens, many economists and activists are coming to a similar conclusion: to break “too complex”, Such as “huge failures”, an argument in favor of doing fine to avoid these companies.

There are definitely complications. When Facebook tried to increase user engagement on Instagram, the company’s first step was to port the same algorithms that power the Facebook news feed. In fact, Facebook says it spent the last year integrating WhatsApp and Instagram, even “them from Facebook”. These certainly feel like defensive measures against antitrust efforts to break up the company.

Mattel Gavett, former chief executive of Railway’s largest e-commerce site – former vice president of operations for Train Group and author of a book about Big Tech’s current problems and how to fix them – says that from a technical standpoint , Splitting Instagram would be WhatsApp labor-intensive but prevalent. As new independent companies, they will have to rebuild their messaging and advertising systems, and also move to a different cloud-service provider, which will reduce the user experience in the short term. But such a “demerger” could be completed in a year or two, she speculates.

While alphabet Of inc

GOOG 1.97%

Google has not lent voice to its “too-complex” defense, it has deeply integrated its previous acquisitions, from advertising giant DoubleClick and streaming colossus YouTube to the world’s most popular mobile operating system, Android.

Partitioning any of these, Ms. Gavett says, will be as complex, and can result in problems of shorter duration. She says, “That doesn’t mean we shouldn’t do it.” “It just means that we should be prepared for the pain that will happen to both users and advertisers.”

The company responded to the House report saying, “Americans don’t just want Congress to break Google’s products or damage the free services they use every day.” “Anti-law aims to protect consumers, not to help commercial rivals.”

With Apple Inc., “fault lines” – as House reports call the seam between various potentially separable businesses – are blurred. Much of the company’s expansion has been from fuel development through early stage technology acquisitions. Nevertheless, the House report was critical of Apple’s habit of operating a major retail platform as well as competing with its vendors.

In the App Store, Apple has prioritized the company’s own app in search. (Apple says its own tests do not support this claim.) Transactions made within a third-party app that Apple distributes are also charged 30%, leading many companies to comply with Apple’s regulations Attempts to work around, while the company has become a monopoly. Gatekeeper to 125 crore consumers.

Apple said in a written statement: “Our company does not have a major market share in any category where we do business … Last year in the United States, the App Store facilitated $ 138 billion in commerce, including Amounted to more than 85%. For third-party developers. Apple’s commission rates are mainstream to those charged by other app stores and gaming marketplaces. ”


‘I want regulators to be better informed about the potential competitive threats.’


– Dennis Hearn, American Economic Liberties Project

Thomas Philippon, an economist and professor of finance at New York University’s Stern School of Business who specializes in monopolies and regulation, warns against considering Big Tech as a monolith. Even though some of these principles can be applied to all these companies – the House report proposes, for example, that it creates a universal rule that companies cannot promote their own goods on their major platforms Are, which means for each. Necessarily different. It would be absurd to split the App Store from Apple, Ms. Gavett says, but it is unclear what other regulation could curb its power.

Amazon.com Inc. For, one issue is the company’s market, to which some employees of the company have stated that Amazon has used data on sales from vendors to launch competing products. (Amazon sent a letter to the House subcommittee on October 4 stating that an internal investigation found no examples of its employees doing so.) Amazon has also prioritized its products in its search engine.

Ms. Gavett says that Amazon may need an entirely new thinking about consumer harm. Although Amazon does not have a major market share in any area other than e-commerce, its offerings are so wide ranging from Alexa, Ring and Ero to Whole Foods, Amazon Logistics, Amazon Web Services and its very popular Prime Membership Services. Its ability to collect data on Americans has become widespread. “We instinctively feel that this is a problem,” she adds, “but how do you manage that type of company from an opposing viewpoint?”

In a lengthy rebuttal to the House report, Amazon called its suggestions a “fringe assumption” born of “regulatory spitballing”. The company went on to highlight familiar conversations, such as Amazon accounting for less than 1% of global retail and 4% retail in the US, ordering numbers that could only be derived from very liberal definitions of those markets In which Amazon competes. The company concluded that the suggestions in the report would harm both sellers and consumers, leading to lower prices.

Dr. Filippon says that the argument of Facebook or any other tech giant is too complicated to break. AT&T Inc.

He said that the same argument was made several times when the government sought to break it in the 1970s.

Regardless, Big Tech’s opponents would have to wait for an act of Congress for either of these scenarios. A senior partner of the American Economic Liberties Project, Dennis Hier, says the next best test on his power will be to look at future acquisitions of companies in a warlike manner.


‘We prefer a targeted approach, rather than the chains of regulation, a scalpel of mistrust.’


– Representative Ken Buck (R., Colo.)

“I wish the regulator would be better informed about the potential competitive threats,” she says. Evaluating Facebook’s willingness to pay $ 19 billion for WhatsApp in 2014 — the largest acquisition of an enterprise-backed company at the time — he argues that regulators should have asked, in fact, Facebook 10 times WhatsApp was so eager to pay it was valued a year ago.

An answer has been clear since Facebook bought WhatsApp and used it for pilot mobile banking products in India, where the service has 400 million users. Facebook apparently saw WhatsApp as a blank slate with which the company might later be completely unrelated to its core business in the markets, and then, according to its usual playbook, found ways to dominate that industry. is. It is the same company that still plans to launch its own currency, expand its lead in virtual reality, and create a brain-computer interface.

The House report says that in the future, any acquisition by Big Tech should be viewed as a default, as an attempt to crush competition or gain an unfair advantage. The burden of proving otherwise would fall on the companies themselves.

It flies in the face of 50 years of retaliatory enforcement. The agencies have also not blocked one of the more than 500 acquisitions made by Apple, Amazon, Facebook and Google since 1998, the House report noted. Since the 1970s, there has been a continued erosion of anti-crust laws and enforcement in the US in the name of increased economic mobility, Ms. Hearn says.

From a startup’s point of view, becoming more difficult to acquire could have a chilling effect on their formation, says Ian Murray, a senior fellow at the Competitive Enterprise Institute, a liberal think tank. “Saying caching as the only way to take your company to an IPO will destroy dreams and lead to a less innovative culture,” he said.

Ken Buck (R.Col.) Of the Rep. Wrote in a separate supplemental report as a supplement to a member of the House, “We are concerned that widespread changes can lead to extreme consequences for the entire economy.” Written primarily by the committee’s Democratic majority. “We prefer a targeted approach, the scalpel of Antitrust, rather than the chained up of regulation,” he says.

Despite these misconceptions, overall, committee members have concluded that Big Tech has too much power. We may be at a tipping point: if these four companies, collectively valued at more than $ 5 trillion, are too complex to actually break or regulate without new or revived legislation, perhaps members of Congress would call it May be ready to give.

For more WSJ technology analysis, reviews, advice and headlines, sign up for our weekly newsletter.

Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

.

Leave a Reply

Your email address will not be published.