trending Market Intelligence /marketintelligence/en/news-insights/trending/6aidZZyXp3eX6rwBIK9H3g2 content esgSubNav
In This List

Analysis: Push to break up big tech faces long odds


HDFC Securities Investment Research Now Available through S&P Capital IQ Pro


MediaTalk | Season 2
Ep.2 Back to the Box Office


The Marriage of Two Best-in-Class Solutions Delivers a Significant Advancement in Data Visualization and Technical Analysis

Case Study

A Green Lender Adopts a Robust Approach for Assessing Project Finance Credit Risks

Analysis: Push to break up big tech faces long odds

There is a growing bipartisan sentiment that big tech companies have too much power, but antitrust experts say ambitious proposals to crack down on their market power, such as a recent one from U.S. Sen. Elizabeth Warren, D-Mass., face long odds.

The senator, who is running in the 2020 U.S. presidential election, recently unveiled a proposal outlining her vision for antitrust enforcement against big tech. The first part of the proposal would appoint regulators who would unwind previously approved "illegal and anti-competitive tech mergers." The plan specifically targets Facebook Inc.'s purchase of apps Instagram Inc. and WhatsApp Inc.; Inc.'s acquisition of retailers Whole Foods Market Inc. and Inc.; and Google LLC's purchases of DoubleClick Inc., an internet advertising services company, Waze Inc., a navigation software app, and Nest Labs Inc., a manufacturer of smart home products.

Warren also proposed that large tech platforms offering an online marketplace, exchange or platform connecting third parties with an annual global revenue of $25 billion or more be designated as "platform utilities." Companies that receive this designation would be prohibited from owning both the "platform utility" and any participants on the platform. Warren listed Amazon Marketplace, Google's ad exchange and Google Search as examples of platform utilities under this law.

"Therefore, Amazon Marketplace and Basics, and Google's ad exchange and businesses on the exchange would be split apart," said Warren in her proposal.

Breakups are tough

Douglas Melamed, a law professor at Stanford University who specializes in antitrust law, said that even if Warren were able to appoint regulators to evaluate previous mergers, undoing those combinations would be a tall task.

"Ultimately, [regulators] have to persuade a court, and a court is going to look at [the mergers] and say ... either you were asleep at the switch, or this merger wasn't illegal and now you're just looking at the way that Instagram flourished under Facebook's ownership and saying, Well, that's reason enough to separate it," said Melamed.

But Melamed, who also previously oversaw Intel Corp.'s legal and government affairs departments, added that if a regulatory agency such as the U.S. Federal Trade Commission did end up re-examining high-profile tech mergers that have already closed, it would be valuable to resolve existing concerns with them, even if the agency finds that the mergers did not stifle competition.

"Now, there's this drumbeat from people saying these companies are behaving badly, and the companies deny it, but of course no one believes them," he said. "What you don't really have is a thoughtful investigation by people who have the capacity to get the facts and then apply the law in a sensible way."

Bipartisan support

Some Republicans also believe big tech has become too powerful.

Sen. Ted Cruz, R-Texas, spoke out when Facebook took down ads posted by Warren that called for the breakup of the social media giant and its peers.

"Big Tech has way too much power to silence Free Speech," Cruz said in a March 12 tweet. "They shouldn't be censoring Warren, or anybody else. A serious threat to our democracy."

Similarly, during Attorney General William Barr's confirmation hearing in January, Sen. Josh Hawley, R-Mo., noted the "extraordinary concentration of power" in Silicon Valley and asked Barr what role the U.S. Department of Justice would play in addressing anti-competitive conduct. Hawley also said it is possible the FTC has allowed big tech companies to violate antitrust laws.

Proving harm

Although many on both sides of the aisle agree that large tech firms have become too powerful, Donald Polden, a law professor at Santa Clara University who has expertise in antitrust law and securities regulation, argued that regulators will still have a tough time implementing broad proposals to rein in big tech.

"It would be extremely difficult for an antitrust court to come in and say, 'OK, we're going to split Amazon into multiple pieces,'" Polden said in an interview, "[Warren] definitely needs to have more specific proposals in this area."

In order for antitrust regulators to unwind the previous acquisitions of Facebook, Google and Amazon, they must successfully prove that these companies have engaged in "harmful" business practices that had "devastating effects" on consumers, which would be challenging given the various benefits the firms also offer to consumers, Polden said.

SNL Image SNL Image SNL Image