The exit of Internet-monopoly researchers from a Google-funded Washington think tank signals a larger battle. Tech giants including Google parent Alphabet, Facebook and Amazon have reaped fortunes controlling online search, advertising and data. The companies and regulators are slowly taking the concentration of influence more seriously. These giants have seen off rivals claims of abusive behaviour because competing options are readily available, people choose to use them, and they provide useful free or cheap services for consumers. U.S. regulators have generally avoided wading in, so far at least. In Europe, officials have taken a more skeptical view for years.
Emboldened critics
The European Commission’s $2.7 billion fine of Google earlier this year for favouring its own services has emboldened critics stateside, too. One is Barry Lynn, who worked at the New America Foundation, a think tank part-funded by Google and Alphabet Chairman Eric Schmidt. Mr. Lynn, who directed the foundation’s Open Markets program, publicly supported the EC’s levy. Recently, he was fired, though New America denied it was because of pressure from Google and Mr. Schmidt, as the New York Times had reported. Huge tech companies aren’t traditional monopolists. Barriers to entry are low in theory.
But network effects tend to award most of the market to a few winners. Alphabet, Facebook and Amazon have a combined market capitalization of $1.6 trillion. Add Apple and Microsoft, and that rises to a staggering $3 trillion. This concentrates power as well as money. Hence European complaints against Microsoft’s practices in the past, for example, as well as Google’s more recently. Governments fret about the cross-border reach these companies have, enabling them to minimise tax payments. Entire stock-market sectors can suffer if Amazon goes into a new business like the effect on retail stocks when the company agreed to buy organic supermarket chain Whole Foods. And there’s the critical question of data privacy, too. The Open Markets group at New America has been only one questioning voice. It may be naive to think companies will fund think tanks advocating ideas contrary to their interests. But this incident may make the public more skeptical of Silicon Valley’s purported benevolence.
That could spur tech giants to boost their political activities. Big tech firms spend a lot less on lobbying relative to their market values than telecoms groups, which have faced regulatory scrutiny for decades. Meanwhile, consumers and lawmakers will see more and more reasons to rein them in. U.S. railroads, oil and telecoms giants were all broken up. The next big fight could be over access and traffic on the Internet.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
