It feels like the US tech giants are in for a reckoning. In the US, influential senator and occasional Democratic presidential nomination hopeful Elizabeth Warren was until recently championing an ambitious plan to break up the tech monopolies, starting with Facebook. In Brussels, the EU competition commissioner Margrethe Vestageris back for a new term, with a beefed-up mandate, and is already duking it out with Google and others in the courtroom.
After a decade of untrammelled expansion, during which the tech giants amassed billions of users, two women are leading charges across continents to bring the sector to heel with the power of competition law.
Except, in reality, it’s all something of a phony war. Warren and Vestager’s tool of choice to rectify the situation – antitrust – is both too big and too small to actually tackle the underlying issues of the internet era. Sure, competition law plays a key role in shaping our lives and preventing big business from exploiting us. But when it comes to reining in the internet giants, it has its limits.
In the US, action requires proving that consumers are being charged too much as the result of a company having a monopoly or near-monopoly. When Facebook and Google give their products away for free, and when Amazon has become dominant through aggressive low-pricing, this is virtually impossible to establish. How can anyone argue that free is too expensive?
Whereas the US system doesn’t allow for other, indirect, damages of competition to be taken into account, the EU system does. Trouble is that drastic measures – like forcing the break-up of a company – can only be enforced if it can be demonstrated that they are the only way to tackle the problem identified. If a less radical step might fix the issue, that’s the one that should be taken.
In that sense, using competition as grounds to reform big tech would first require us to fundamentally rewrite competition law and then get the new definitions passed by Congress and the EU, and accepted by the courts as constitutional or compatible with the European Convention on Human Rights.
That’s when the question becomes: what would breaking up Facebook actually accomplish? The simplest way to break up the company would be to require it to reverse its purchases of Instagram and WhatsApp, which would at least mean several huge companies competing in both the social media and messaging spaces.
The core Facebook network, however, would remain as a multi-billion dollar company with more users than the population of any country on the planet, and billions in revenues. Splitting that core product would quickly turn out to be untenable: would you divide users by country, severing international friendships and family ties? Or at random, leaving people with odd subsets of their friendship groups?
In such a position, most of us would likely look for a new social network that would allow us to have all of our connections in one place – rapidly rebuilding the very monopoly control Warren and Vestager seek to challenge. Even breaking up the site on ostensibly more sensible grounds like, for example, requiring it to divest its Event-organising functions could lead users to migrate to the better services.
This is where we hit the issue of thinking too small: Facebook is the result – a symptom – of the fundamental nature of the internet, not its cause. Tackling tech giants one at a time is simply a global game of whack-a-cyber-mole. Take one down, and before too long something all too similar will take its place.
The internet is a network, just like the railway is. Despite the utopian language we use to talk about networks – the language of connection and of immediacy – networks tend to concentrate power by their very nature. To see why, think of a small-town pet shop: pre-internet, it had little to no competition; post-internet, it is competing with every pet shop in the world that will deliver to its town. Networks are bound to deliver fewer winners.
This dynamic has conspired with other forces to accelerate the internet’s centralising effects. Venture capital requires technology startups to go big or go home. Programmatic advertising has come to dominate the internet and the huge volumes of both data and eyeballs needed to make that work. These factors combine to build almost unassailable companies. The tech giants don’t just have economies of scale: they have their network effects, their size, and their huge troves of data. Anything displacing them would just replace one monopoly with another.
The internet has propelled us out of the atomic age and into the information age – into a new technological era. But this is an old challenge: we have dealt with technology’s centralising power before. When the industrial age came, power shifted from independent craftsmen to factory owners and the railway barons that shifted their goods and materials. Those power shifts weren’t solved just by the creation of antitrust laws, though they helped. The industrial revolution sparked the growth of the modern welfare state, of trade unions, of health and safety laws, of restrictions on child labour and then compulsory education once they were out of the factories.
In short, our present era needs an entirely new social contract to make sure its benefits are felt by everyone, and not just those rich enough to take advantage of the new opportunities. This isn’t just about more privacy protections: it’s about rights to our data, audits of algorithmic decision-making, registers of use, and new tax systems for a world shrunk by the web.
We need a new societal compact. Breaking up Facebook is just a distraction.
James Ball is the author of “The System: Who Owns the Internet and How it Owns Us”, published by Bloomsbury and released May 14, 2020.
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