How do you design regulation that holds the giants accountable, doesn't impair smaller companies' ability to enter/innovate in the space, and isn't quickly corruptible by the (well-resourced) companies you are trying to control?
We're better served by breaking them up and enforcing and strengthening the pro-competition laws on the books. The government has a pretty mixed record with regulating industry, and a far more impressive record of investigation, enforcement, and prosecution - corporate break-ups are far more in the wheelhouse. Regulation requires constant vigilance, whereas a breakup is self-executing once the case is won.
It's not anti-success rhetoric, so much as an acknowledgement that tech has become increasingly concentrated and anti-democratic. The Sherman Act was passed in 1890 - these aren't "knee jerk" solutions - they've worked effectively in the past to curb corporate abuses.
My biggest problem is: How do you break up a software system? I understand how you break up a company that mines ore, produces steel, builds railways, runs transportation - those are all separable ventures that can negotiate contracts almost as easily as when they had a single owner.
But the tech giants run a single system: Amazon in the delivery, FB in the social graph (DB), Google in the knowledge graph. Those would be incredibly hard technically to break up. The less technically complicated split would mean that one new company has all the revenue and the other has all the costs.
I haven’t heard any credible proposal on how this “breakup” would actually physically work. If anyone has links to good sources I’d be interested.
Fair point - there are certain cases where software platforms are too valuable and complex to break up, and should be regulated like utilities with rules for fair play. Amazon shouldn't be able to use it's marketplace data to monopolize entire categories, Google Search needs to be a public platform, with regulated rates for API access (which Google itself will have to abide by).
You don't have to break up many software systems to prevent the worst abuses. Facebook can keep the knowledge graph, but they can't keep WhatsApp or Instagram. Amazon can keep their store, but they can't own a FedEx competitor or AWS - those need to be broken off. Google can keep Search, but Ads, Doubleclick, Analytics, Waze, GCP, Google Home - all of that needs to be broken up.
Some of the resulting businesses may have to update their model or may not remain profitable, but historically break-ups have resulted in an increase in value for the new businesses.
>Google can keep Search, but Ads, Doubleclick, Analytics, Waze, GCP, Google Home - all of that needs to be broken up.
>Some of the resulting businesses may have to update their model or may not remain profitable, but historically break-ups have resulted in an increase in value for the new businesses.
All of this teaches one lesson: be more like Apple. Treat your customers poorly and massively overcharge them. Make sure you are never the biggest in your field. Essentially, don't offer products that are too good for the price.
I'd also like to point out that if those companies have to be spun off on their own, then the only way for some of them to make money is to sell your data to third parties. Right now Google doesn't seem to do that, but how else would Analytics monetize itself, if it cannot offer ads?
Charge money for the product. Plenty of other companies in the space do so successfully. There's ample business value provided by good analytics.
Google Analytics was originally the product of Google's acquisition of Urchin Software. At the time, Urchin's self-hosted version cost $895 with additional optional "modules" that cost up to $3,995 extra. Their "on demand" version cost $199 per month.
> All of this teaches one lesson: be more like Apple. Treat your customers poorly and massively overcharge them. Make sure you are never the biggest in your field. Essentially, don't offer products that are too good for the price.
You’re wrong on both counts: Apple has its own share of potentially monopolistic behavior, and there are billions of people worldwide who disagree with you on how the company treats them.
>Apple has its own share of potentially monopolistic behavior
But I rarely see Apple being included in these calls for breaking up the tech companies. Also, I'd be surprised if Apple even has a billion customers, let alone a billion who are happy with Apple.
The entire ecosystem running on iOS/OS X. This is exclusive on Apple produced hardware, which effectively forms a single relevant market as you cannot easily substitute this with others even if there's a small but significant and non-transitory increase in price.
So is that how you define monopoly now? Does that make all of the console makers monopolies over their platforms? Does that mean that Apple also has a “monopoly on voice assistants that can be used with AirPods”?
Does it also have a monopoly on apps that can be run on the “HomePods”? Does every smart TV manufacturer with their own OS also have a “monopoly” on their ecosystem?
Let’s go further down the rabbit hole. Does Tesla have a “monopoly” on software that can run on its cars?
If non insignificant switching costs defines a “monopoly” every software as a service app would have a “monopoly”.
Unfortunately, neither the EU or the US has ever defined “monopoly” like HN posters...
This is not how I defined a monopoly, but a well established practice done by DoJ of the US. Defining a relevant market is not that clear and simple as you described, but it's more of an economical, data-driven process. Look up for hypothetical monopolist test.
I just explained one possible scenario how this could be defined as a relevant market and you're now throwing a bunch of random assumptions on my comment. I would read the link thoroughly (it explicitly mentions DoJ?) and study more on the history of the antitrust law and its applications before doing such.
So if it “well defined” by the DOJ, you should be able to find a specific example where a minority vertically integrated platform vendor was declared a “monopoly” and specific remediation steps were enforced. Not a Wikipedia article.
If that were the case, every single console maker since the mid 80s would be declared a monopoly. Why hasn’t that happened?
> you should be able to find a specific example where a minority vertically integrated platform vendor was declared a “monopoly” and specific remediation steps were enforced.
I already told you that the market defining process is a very case-specific one and big techs now are unprecedented. Why are you trying to find applicable prior arts on such cases? You asked how Apple can be monopoly on a market and I gave you one possibility which may or may not materialize due to its uncertain and complex nature. It's pretty hard to understand why you're being so defensive on this issue?
> If that were the case, every single console maker since the mid 80s would be declared a monopoly. Why hasn’t that happened?
There has been multiple antitrust lawsuits and investigations on Sony, Nintendo and Microsoft for their gaming consoles while their exercise of monopolistic power was nowhere comparable to Apple's nowadays. Why don't you google just 2~3 words before making such a false claim?
I already told you that the market defining process is a very case-specific one and big techs now are unprecedented. Why are you trying to find applicable prior arts on such cases?
Maybe because I don’t believe that people can randomly make up definitions instead of citing precedent?
There has been multiple antitrust lawsuits and investigations on Sony, Nintendo and Microsoft for their gaming consoles while their exercise of monopolistic power was nowhere comparable to Apple's nowadays. Why don't you google just 2~3 words before making such a false claim?
Well seeing that Nintendo specifically has been very strict about what was allowed on its platform, forced third parties to use its manufacturing facilities since the 80s, forced all software whether distributed physically or virtually to be licensed and to pay a fee and had a much larger marketshare, where was the government intervention? Where were the consent decrees? Lawsuits?
Please provide one citation where any of the console manufacturers were ever forced to change their business practices?
If my claim is “false”, you should easily be able to find a citation.
> Maybe because I don’t believe that people can randomly make up definitions instead of citing precedent?
While you're trying to frame my argument as "make up definitions", the reality is not; this is a standard practice since 1982. Spend your time on searching and studying the topic, not mine. This is an area of vast complexities and I don't think it's effective to spend my time to enlighten you.
> where was the government intervention? Where were the consent decrees? Lawsuits?
Your ignorant in the topic doesn't necessarily mean an actual lack of a prior. In Nintendo v. Atari case, there was not much arguments on the market definition, but its practice was illegal or not. Yes, I've been talking only about the market definition and you're intentionally conflating the concept of the relevant market definition and antitrust violation. Don't do that. And please don't even try to say "come up with evidence". You can spend your time on studying this.
The person who makes the argument has a responsibility to show citations.
And your citation were about hypothetical arguments, and went to show more of my point. All throughout the article it speaks about the government’s arguments being “defective” and still doesn’t show a single example where a vertically integrated minority player was called a “monopolist” nor where government imposed remedies or sanctions were implied.
In fact, Atari vs. Nintendo affirmed that Atari did in fact violate Nintendo’s copyright when it tried to circumvent Nintendo’s control over its platform.
So in fact, you still haven’t come up with a single precedent where Apple could be considered a “monopolist” on its own platform or where they are violating “antitrust”.
> All of this teaches one lesson: be more like Apple. Treat your customers poorly and massively overcharge them. Make sure you are never the biggest in your field. Essentially, don't offer products that are too good for the price.
Or just don't abuse your customers by hiding the ball on what you do with their data. Don't buy up all your competitors, so you can squeeze more and more money out of small businesses who have to buy impressions because the organic ways (which the same companies own) don't work any more. The products aren't too good for the price - we don't even fully know what the price is.
> I'd also like to point out that if those companies have to be spun off on their own, then the only way for some of them to make money is to sell your data to third parties. Right now Google doesn't seem to do that, but how else would Analytics monetize itself, if it cannot offer ads?
The same way Mixpanel, KissMetrics, Adobe and dozens of other web analytics vendors monetize (including Google's own 360 Suite). Or make it clear, up front, how the data will be used on free accounts, and give the user a way to monitor and revoke that agreement at any time. As an independent business, they will be free to find the best path.
As many people point out, breaking up is a reductive measure. The whole legal and technical process of breaking Google up would be 10 years? Maybe longer? I heard some tech journalists give those numbers; don't quote me on that.
If you really want to change the landscape and make it actually feasible, force companies to expose APIs or impose standards on them. Both of these are very hard things to do in practice but at least they give a hope of a better future - increasing competition.
Breaking up big tech, depending on the specifics, will cause either worse productivity or (in the best case) change nothing.
Say Alphabet and its myriad of ad-supported services, such as Youtube. Instead of serving first-party ads, they would need to serve third-party ads, or charge their users, or a combination of the two (e.g. freemium model).
The facebook conglomerate could similarly be broken into Instagram, Facebook, etc. Each would get a portion of their current ad business unit.
In terms of software, each baby Facebook could get a flexible royalty-free license to all the software currently owned by Facebook, and they would be free to derive from it to differentiate over time.
What does it mean to serve first party ads? The ads are (mostly) for third party products/companies. Newspapers also run ads for third party products. The only difference is that the ads/sales department at the NY Times is substantially less complex (and lucrative) than the same at Google.
Split the search from Adsense. Allow the search company to only sell ads on its own properties so they can’t reestablish ad-hegemony. For good measure, ban them from making their own browser.
Turn the relevant parts of it (the ones which are affected by network effects, or other barriers to entry) into an open platform that can be accessed on an equal basis. That's quite a bit easier than breaking up a mining company. For example, Android is already "broken up" from this POV, since the likes of Amazon can use AOSP to create their own Google-free platform, and applications written to run on AOSP will work on either version.
What's the relevant part of building a search engine that's affected by network effects?
Is it the index itself? There's already a fairly decent open-source equivalent to that in the form of Common Crawl, which has been out since 2011. People (including me) have tried to build search engines off of it, but it never seems to work quite as well as Google.
Is it the computing infrastructure? That's already been commoditized and offered as a service by multiple providers - AWS, Azure, GCP, SoftLayer, etc.
Is it the serving infrastructure? Commoditized by ElasticSearch, which uses many of the same techniques as Mustang and in many ways does it better.
Is it the ranking algorithm? It used to be that Google would agree with you. However, the ranking algorithm changes basically continuously - the one in use now is very different from the one that was used when I left in 2014, which was different from the one where I learned how it worked in 2011. I've heard the new one is heavily machine-learning based: given a suitable training set and some learning-to-rank papers you could construct something similar.
Is it the log & clickthrough data? Imagine the privacy advocate conniptions if that were open-sourced. AOL got in huge trouble when they open-sourced their click-logs circa 2002.
Is it the evaluation system? Mechanical Turk exists, and Google's rater guidelines are public.
I'd argue that the real competitive advantage of Google now is the brand and associated consumer habits, and it's really hard to break up a brand. Same reason Coca-Cola remains dominant 150 years after they started selling cocaine-laced sugar water. This is a recurrent problem in the economy today - brands fuel not just Google, but also other giant monopolies like Coke, Nike, J&J, P&G, DeBeers, McDonalds, Wells Fargo, and so on, and in many cases the companies that own them get to practice some exceptionally bad behavior. But short of reaching into each consumer's head and getting them to consider each purchase on purely rational factors, I don't see how to fix this.
It's a huge advantage and critical ingredient for ranking in all major websearch engines as far as I know. Google gets billions of queries and clicks every day. Your startup? Pretty much none of that. How are you going to train your ranking algorithm with no data?
> Imagine the privacy advocate conniptions if that were open-sourced. AOL got in huge trouble when they open-sourced their click-logs circa 2002.
Right, logs with such level of detail as individual user sessions would never get public for this reason, too much legal risk. But even simple aggregated datasets of the form "how many clicks did this query-url pair get" would be very useful to bootstrap a competitor and can be anonymized much more effectively.
>Turn the relevant parts of it (the ones which are affected by network effects, or other barriers to entry) into an open platform that can be accessed on an equal basis.
Doesn't this run counter to private property though? Or what would you have happen when Google says "no"?
Amazon is a deliverer, FB is a social graph, Google is a knowledge graph. Don't think of the companies nor their roles (such as they are) as immutable. Look at GM in the 50-60s, or Paramount Studios in the 40s.
>My biggest problem is: How do you break up a software system?
There are people who have created entire careers about exactly that: antitrust remedies. I defer to experts where I can.
We entrepreneurial wannabes on HN are only going to provide unrealistic answers that become battles of will for the rest of this Sunday before all is forgotten overnight.
Easy, stop letting them dump other services for free on the backs of their other businesses. Search can stay ad-supported. Youtube, Gmail, Drive, Cloud, Stadia, Android, News? Should all be broken out into their own businesses and forced to be profitable on their own. As it is, nobody can enter those spaces without being willing to lose hundreds of millions (billions?) of dollars.
Prevent a global company from giving away products? So other big company can gain space?
All of the virtuals you mentioned have different stories. Cloud is profitable, and is not the top company anyhow. News is not a product it's a grouping of news stories. Youtube makes money through ads and better access and could be considered a loss-leader but shutting it down will not make the field more competitive. Android is open source.. and perhaps could be seen as dumping to prevent others. Gmail is a mail service, others exist.. and starting a new company will not cost you billions unless you plan on serving billions of people. Drive is one of many companies that didn't cost a billion to start but might be worth it now.. try dropbox or box.com or rapidgator.
Yes, global companies should not be able to give away products or operate services at absurdly unprofitable rates (see: Ridesharing, a myriad of other Google services) just because they have billions to burn. It's horrifically anti-competitive and raises the barrier of entry unnecessarily. It's not like vertical integration is some new invention, its historically been fought against by anti-trust regulators. We just live in a world where they effectively don't operate any more.
Google/Facebook/Amazon have been acting anti-competitively for quite a while. Vertical integration, concentrating industry through M&A, shady data practices.
A democratic country has an interest in ensuring that our labor and goods markets also remain open, competitive, and democratic in nature. We've made this choice as a country repeatedly throughout our history, and it's time to do it again.
Many companies across many industries vertically integrate. Should they all be broken up?
“Shady data practices” is hand-wavey and non-specific. What do you mean? Many companies today (again, across All industries) have had issues with keeping user data secure, selling it to untrustworthy third parties, not giving users transparency or controls in what information is shared, etc. Google’s track record in these areas is far better than most. How does this necessitate a breakup?
Concentrating industry through M&A is a legitimate issue, in my opinion, but it’s also probably the easiest to regulate.
Our tech companies are the most competitive in the world, bar none. I’m not sure that cutting them off at the knees will help with that. ”We did it before,” isn’t a convincing argument that we should do it now, under much different circumstances.
To a substantial degree, yes. Vertical integration reduces the dynamism of the market.
I used a cover-all term, because there are too many to really name. Facebook is a co-conspirator in defrauding American elections, Amazon uses their data to kill small businesses, Google has been repeatedly fined in the EU for using search anti-competitively. Those are just 3 tech companies, and doesn't get into how data is used abusively by credit agencies, banks, and other financial institutions.
Regulating industry is a fools errand, and part of how we wound up here. Breakups are the only self-executing, corruption-resistant solution.
Are our tech companies the most competitive at in the world? The largest companies have been cutting off our startups at the knees for a decade, so we have no idea how competitive we could actually be. It doesn't really seem like our big tech companies have to compete much at all these days, actually.
> breaking them up and enforcing and strengthening the pro-competition laws on the books.
So, suppose Google Search is broken away from alphabet. What changed?
I can understand that argument about Youtube (which is losing money and would probably fail), but google search will keep being dominant and their ad revenue won't change significantly.
We're better served by breaking them up and enforcing and strengthening the pro-competition laws on the books. The government has a pretty mixed record with regulating industry, and a far more impressive record of investigation, enforcement, and prosecution - corporate break-ups are far more in the wheelhouse. Regulation requires constant vigilance, whereas a breakup is self-executing once the case is won.
It's not anti-success rhetoric, so much as an acknowledgement that tech has become increasingly concentrated and anti-democratic. The Sherman Act was passed in 1890 - these aren't "knee jerk" solutions - they've worked effectively in the past to curb corporate abuses.