Legislation & Regulation

Sen. Warren Wants to Separate Tech 'Platforms' from 'Participants'

National Security vs. Investment: Are we striking the right balance?

“Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.” –Sen. Elizabeth Warren, March 8, 2019

In her statement, released via the insight and commentary website Medium.com, Warren said she wants everyone to play by the rules no matter how powerful they are. She wants tech companies of the future to flourish, but said the current generation of gargantuan tech enterprises are using their heft to shape the laws in their favor. They are “throwing around their economic power to snuff out or buy up every potential competitor,” she warns.

Warren points out that Amazon enjoys nearly half of all e-commerce while Google and Facebook monetize the more than 70% of all Internet traffic that goes through their sites. Weak antitrust enforcement is partly to blame. Investors are less likely to fund tech startups, which are down dramatically.

The Massachusetts senator says her administration would make “big, structural changes to the tech sector to promote more competition — including breaking up Amazon, Facebook, and Google.”

Warren's two-point plan:

#1. She would push for a law that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform. That would mean, for example, Amazon Marketplace, as a platform, would need to be separated from AmazonBasics, a participant that competes with non-Amazon sellers. Google Search and Google’s ad exchange would need to be broken up.

#2. She would appoint regulators committed to reversing illegal and anti-competitive tech mergers. Warren already has a shortlist: Amazon would need to spin off Whole Foods and Zappos; Facebook would need to let go of WhatsApp and Instagram; and Google would need to say goodbye to Waze, Nest and DoubleClick.

Consistently one of the harshest critics of big business, Warren has been right up there with Sen. Bernie Sanders (I-VT) in their long-time challenges to the power of big tech, big banks, big pharma and big oil.

Whoever becomes the Democratic nominee we can be certain that antitrust in general, but especially anti-tech-trust, is going to be front and center. Sen. Amy Klobuchar (D-MN) – nine days before announcing her candidacy in January — introduced two bills designed to “modernize antitrust enforcement and promote competition.” House freshman Alexandra Ocasio-Cortez (D-NY), who famously helped tank Amazon’s move to New York (although she appears to be rethinking her position somewhat), said tech companies are too strong for the nation’s own good. "The current monopoly trend is societally and economically unsustainable," she said. (See CNN.com.)

Consumer Welfare 3.0

MoginRubin co-founder Dan Mogin had this to say: "Sen. Warren’s proposal, like those from Senators Klobuchar, Blumenthal and others seeks to respond to increasing concerns about corporate concentration in the economy as a whole and Big Tech in particular using the tools of antitrust. These proposals see a need to reinvigorate antitrust enforcement. The Warren plan is modeled on the structural remedy imposed by Judge Jackson in the last significant government-prosecuted monopoly case, U.S. v. Microsoft. That remedy, however, was reversed by the DC Circuit and the case was assigned to another judge who chose behavioral remedies instead. But the antitrust laws are hard-pressed to combat concentration; in the mid-1980’s the courts adopted Chicago School thinking and turned away for using antitrust to fight concentration. While Chicago School doctrine has somewhat softened and evolved into the current consumer welfare standard, antitrust cases against monopolies and oligopolies have become harder to win, more expensive and longer. The federal antitrust agencies have brought fewer cases against domestic companies and the practical ability of market participants to bring the cases themselves has been restricted as both corporate political and economic power have grown. Thus the current proposals respond to a perceived need even if they are misguided in numerous respects, but so is the wholesale rejection of the challenges to the consumer welfare standard. Ironically, few economists still support Chicago School thinking but the courts continue to do so for on the grounds of economics. In my opinion, antitrust needs to look to both its roots and contemporary economics to re-fashion an objective standard that maximizes competition overall -- consumer welfare 3.0."

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