The case for enforced restructuring of Big Tech’s big offenders
This feature first appeared in the Fall 2019 issue of Certification Magazine. Click here to get your own print or digital copy.
The uneasy relationship between humans and technology is thousands of years old. In recent decades, however, tensions have hit a boiling point, with a number of Big Tech companies under threat of antitrust actions by governments around the world. The hot button issue is how the largest key players are misusing customers (and their personal data) to drive higher revenues and create unassailable dominance in their respective markets.
The current hostility directed at Big Tech is perhaps rivaled only by the ongoing backlash against pharmaceutical corporations and the global medical establishment for their roles in creating the modern opioid crisis. The Big Tech brouhaha is gaining serious traction with politicians and the public alike, especially as the Democratic presidential primary in the Unites States starts to heat up.
On at least one point, both the Big Tech and Big Pharma crises have grown from the same toxic root: The heated and never-ending push for higher corporate profits has increasingly taken precedence over all other corporate concerns, including any sense of obligation to honor basic human rights. This, in turn, has laid bare a chilling indifference to the rising collateral damage borne by society.
There are four corporations, colloquially known as the “Big Four,” at the top of the hit list for crusaders intent on breaking up Big Tech: Amazon, Apple, Facebook, and Google. These four corporate behemoths are a good starting point for our discussion, as they currently exercise a largely unchallenged majority ownership of our online lives.
They are also wealthier and more powerful today than at any point in history. In 2011, the Big Four had a total valuation somewhere near $500 billion. Today, Apple on its own has a valuation of more than $940 billion, and a year ago it was, if briefly, the first U.S. company to achieve a $1 trillion valuation.
Enormous wealth alone is not a valid justification for breaking up a company. Rather, much like with the Microsoft antitrust action of the late 1990s, it is the questionable tactics the Big Four have employed to create this wealth that has lawmakers arguing over the use of stronger punitive measures than just fines based on out-of-court settlements.
Because as it stands, conventional financial punishments are toothless when applied to corporations like those in the Big Four. These are businesses that have become wealthier than many nations of the world.
Big Tech’s petty cash fines
In July 2018, the Information Commissioner’s Office of the United Kingdom fined Facebook £500,000 for its role in the Cambridge Analytica scandal. That’s the kerfuffle in which data was harvested from 87 million user profiles and used strategically to influence both the Brexit referendum in the United Kingdom and the 2016 presidential campaign in the United States.
A follow-up article in The Guardian pointed out that, in the first quarter of 2018, Facebook took in £500,000 in revenue every 5.5 minutes. Likewise, two months ago, Facebook was fined $5 billion by the Federal Trade Commission of the United States for a number of privacy violations. This was the largest fine ever imposed by the FTC, almost 30 times larger than the previous highest fine …
… and equal to approximately one month’s worth of Facebook’s annual revenue. In fact, in a previous 2019 quarterly earnings report, Facebook told investors it was setting aside $3 billion to help cover the predicted FTC fine, money which would come from the company’s $15 billion in revenue piled up that quarter alone.
(Brief aside: Not a single penny of the $5 billion fine levied will go to the Facebook users who had their privacy violated. All FTC fines are paid straight into the general fund of the United Stated Department of the Treasury. You get the sense that the Department of the Treasury’s annual Christmas party involved a degree of splendor beyond the comprehension of mere mortals.)
The cold truth is that large government fines generate a lot of feel-good headlines — but cause very little relevant change. In fact, all of the Big Four have paid out massive fines over the last few years.
Apple paid a $15.3 billion fine for receiving illegal tax benefits from its use of the Double Irish arrangement, an accounting practice by which Apple and many other wealthy corporations sidestep the necessity of paying huge amount in business taxes in the United States.
The European Union fined Google $5.1 billion as part of an Android antitrust case ruling. Google was also recently fined $170 million for YouTube’s child privacy violations. Amazon has been fined millions of dollars for everything from shipping hazardous products, forcing third-party vendors to sign contracts with brutally unfair clauses, misleading customers about price savings, and receiving illegal tax benefits — from Luxembourg, no less. Perhaps so as to not step on Apple’s toes in Ireland.
It is clear that fines alone are an exceedingly modest deterrent at best to bad corporate behavior. Should such misdeeds be viewed as the literal cost of doing business in the modern age? Or are government-enforced breakups of the Big Four the most appropriate action to take?
Antitrust no one
Antitrust laws in the United States were created to protect consumers from predatory business practices, and to safeguard companies by ensuring open competition in the marketplace. For example, one of the chief knocks against Microsoft during its antitrust investigation was that, by bundling a web browser with its operating system, the company was using its dominant Windows market share to suppress competition from other web browsers.
(A decade later, Google would find some poetic justice by turning its Chrome web browser into an operating system, and using it to compete with Microsoft in the consumer and education markets. That’s Big Tech payback at its finest.)
There are three primary U.S. antitrust laws. They are:
• The Sherman Antitrust Act
• The Federal Trade Commission (FTC) Act
• The Clayton Antitrust Act
There are shades of difference between these three laws, perhaps most notably with the Federal Trade Commission Act. The FTC Act specifically empowers the FTC to “prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce.”
The word “commerce” becomes a virtual can of worms when discussing antitrust laws and their applicability to Big Tech corporations, of course. Many of the services provided by tech companies are offered to consumers “free of charge.” In many instances, a Big Tech company’s value and related revenue doesn’t come from selling products at all.
Instead, users’ personal data and online activities are converted into a product, which is then sold to other companies. This is a nitpick to be sure, but it’s the type of nitpick that corporate attorneys have used to flip-flop verdicts through the justice system for a decade or more, forcing authorities to go down the road of fines and settlements rather than affecting real change in the marketplace.
In order to win an antitrust legal battle against Big Tech companies, the arguments must go beyond traditional price fixing and monopoly accusations. Instead, it must be shown that the current oligopoly of tech corporations are behaving in such a way that government intervention is necessary to protect individuals not just as consumers of products and services, but as consumers of information.
The use of information control goes back as far as the aforementioned uneasy relationship between humanity and technology. Crude forms of propaganda have been traced to the earliest beginnings of human history. If previous centuries of human societies were about monetary power and military power, then the first two decades of the current century have been about the ascendance of the power of information.
Just as monetary systems and military forces have been subject to nefarious schemes of control, so have modern information systems. And Big Tech corporations are increasingly being found negligent (if not outright complicit) in the manipulation of the information under their control.
Facebook was the platform behind the previously mentioned Cambridge Analytica scandal, whereby an app originally designed for academic study was used to harvest personal information from more than 80 million Facebook user accounts. This information was later used to design personalized political advertisements purchased by Ted Cruz’s and Donald Trump’s 2016 U.S. presidential campaigns.
In 2017, after a seven-year investigation, European Union regulators found that Google was guilty of manipulating its search results to give its own comparison-shopping service an unfair advantage over similar services offered by competitors. A 2015 Federal Trade Commission report found evidence that Google was demoting search results for its competitors and promoting its own services to the top of search result pages.
Apple’s manipulation of information has historically been kept exclusive to its own product marketing. While the company has repeatedly emphasized its strong commitment to user privacy, however, it was recently revealed that Apple’s virtual assistant Siri captures recordings of some user voice interactions, and this information is regularly screened by third-party contractors.
The Apple whistleblower who broke the news reported that: “There have been countless instances of recordings featuring private discussions between doctors and patients, business deals, seemingly criminal dealings, sexual encounters, and so on.” It wasn’t long after Apple’s admission that Google and Amazon were both found to be performing similar information gathering activities with their virtual assistant products.
Breaking up is hard to do
Big Tech has gone beyond the simple storage and transportation of information. There are some very powerful, very wealthy corporations that are guilty of not doing enough to prevent information manipulation on their platforms, or are unlawfully complicit in using information control in the pursuit of higher quarterly profits and more power over the online activities of everyone.
If the purpose of antitrust laws is to protect individual consumers, then they should also provide protection for individuals. They should provide protection for those of us — which to some extent is all of us — who are being converted into products and consumed by the businesses and politicians who fill the pockets of Big Tech corporations.
There isn’t just a wand we can wave to make it all stop. It is past time, however, for the FTC and the U.S. justice system to make a start. As with the opioid crisis, the longer that we wait to tackle the problem, the worse the damage inflicted on society will become.
We’re beyond the point where government can effectively police the behavior of Big Tech companies with fines. It’s time to restore some balance through enforced restructuring.