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Ethan Wu 2-9-2018

Mark Zuckerberg’s floppy cotton t-shirt and blue jeans might make him seem more like a scrappy college student than an imperial capitalist. But that would be to misjudge him. Mr. Zuckerberg presides over a vast social media empire, stretching across borders and age cohorts.

His crown jewel, Facebook, is flanked on one side by Instagram, a photo-sharing app, and on the other by WhatsApp, an app for the chatty. The young Emperor Zuck reigns over a billion Facebook users — a seventh of the world’s population.

Not to be outdone, Google is constructing its own empire. It develops Android software for smartphones, owns video-sharing site YouTube and sells laptops. Its mapping software, Google Maps, gives the company extensive location data on millions of people. And don’t forget its search engine, effectively an irreplaceable piece of internet infrastructure.

Apple, too, holds remarkable clout. Worldwide, 99.8% of new phones ran either Google’s Android or Apple’s iOS. Although Apple’s share of new phone sales is smaller than Google’s, Apple ate up 79% of global smartphone profits in 2016. iTunes, its media-distribution platform, is integrated into the one billion Apple devices currently in use. And now that Apple is pouring billions into original content, the prospect of a monopolistic content-to-distribution pipeline is real.

Lastly, Amazon. The Seattle-based firm has successfully pushed a strategy of prioritizing business growth over profitability. The company profited a measly $250 million in the previous quarter, despite soaring revenues. Yet Amazon is worth over $550 billion — a bit larger than the GDP of Sweden.

Having bought into the growth-over-profitability vision, investors eagerly provide the firm with free working capital — essentially, free money. This creates a happy cycle for Amazon: growth invites capital, which allows for further growth, which invites further capital, and so on. As a result, Amazon can throw money at new ideas to see what sticks — something its competitors can’t do. Some ventures, like Amazon Prime, were stupendous successes. Others, like the Amazon Fire Phone, went down in flames.

It’s worth mentioning that the tech behemoths have benefited many consumers by lowering prices and increasing choice. But the question is whether their market dominance is having broader negative impacts. The evidence is damning: these companies are impeding competition, sidestepping regulations and harming democracy.

Start with the threat to competitive markets. Apple’s iOS and Google’s Android control the mobile software business. Apple is top dog in mobile hardware, and boasts the most valuable brand in the world. No surprise that it’s nearly impossible to survive — let alone compete — in the smartphone industry without the help of Android. Whatever happened to Nokia or Blackberry?

Amazon looms large across nearly every industry. After Amazon purchased Whole Foods, stocks of all other grocers plunged. Even just rumors of Amazon entering the pharmaceutical industry dampened the stock prices of Walgreens and CVS. Companies like Nike have conceded defeat by embracing Amazon-first product distribution. Amazon, more a commerce utility than a retailer, is past the point of creative destruction. It is swallowing everything.

Google and Facebook receive 103% of the growth in digital advertising — meaning the market, minus Google and Facebook, is shrinking by 3%. Google recently paid a $2.8 billion fine to European Union (EU) antitrust regulators, the largest ever, for favoring its own products over competitors’. But even this record fine amounted to a mere 3% of Google’s 2016 revenue — hardly a reason for it to stop.

In capitalist democracies, citizens elect governments who choose regulators to enforce rules. So when a handful of tech firms act with impunity, something has gone wrong. Apple has long evaded taxes. Google shrugs off antitrust law. Facebook lied to EU regulators, getting off with a slap-on-the-wrist fine of $132 million.

But for Facebook, a hundred million is chump change, a puny fraction of its eleven-figure revenue stream. Unsurprisingly, Facebook continues to violate data privacy regulations. Apple, meanwhile, insists it complies with the “spirit of the law,” despite all evidence to the contrary. Far from cheeky business practice, Big Tech is flouting the government.

More frightening still is the damage done to democracy. As part of its election-meddling efforts, Russian government agents leveraged Facebook and Google ads to incite division. This is only possible because two in three Americans get news from social media sites, primarily Facebook and YouTube. If they are to operate a digital-advertising duopoly, Facebook and Google must prevent foreign nations from undermining American democracy.

Yet Mr. Zuckerberg contends that Facebook is a “platform” and not a “media company,” thereby shirking the editorial obligations of the latter. His claim rings hollow. Facebook enjoys the profits and influence of a media company; it must bear the responsibilities of one, too.

The tech titans have proven themselves unable to responsibly wield power. And since markets have failed to rein them in, it’s time to break them up.

There is precedent for such a move. In 1983, U.S. regulators separated AT&T into seven independent companies. In a 2000 antitrust lawsuit, a federal judge ordered Microsoft be broken up. In both cases, companies abused their monopoly power. In both cases, the government intervened.

Breaking up America’s gang of tech monopolists is no silver bullet. But in democratic capitalist America, the tech titans threaten both democracy and capitalism. Fans of either must demand bold action.

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