Us Department Of Justice Has Allowed Internet Platforms To A Mass Economic Power In A Manner That Could Threaten The Very Future Of Democracy

And, yet, between them, the large internet platforms have suffered few, if any, consequences for their many misdemeanours. They have not been punished by the market (consumers and clients), they have not been swamped by competition, and they have certainly not been checked by governmental authorities. How did they get so powerful? Can they ever be held accountable for their actions? These are the pressing questions on the minds of academia and policymakers around the world. And, while Elizabeth Warren is today the most high-profile political proponent of a drastic solution, she may only be the first.

The Curse of Bigness

In calling for the likes of Facebook and Google to be broken up, Warren is echoing similar calls being made in academic circles and elsewhere. Prominent among these voices has been Tim Wu, a professor at Columbia Law School.

Wu, famous for coining the term “net neutrality,” has, in his recent book The Curse of Bigness (2018), called for the adoption of a “neo-Brandesian” approach to the use of antitrust laws in the US, specifically in the context of internet platforms.1 Wu argues that the approach of the US Department of Justice has allowed internet platforms to amass economic power in a manner that could threaten the very future of democracy.
He points out how in the past such concentrations of economic power, even by information technology companies (notably AT&T, IBM, and Microsoft), were effectively attacked using antitrust laws, resulting in the birth of the internet as we know it today (Kumar 2019).
That is not the only argument that Wu makes in his book. He traces the political origins of the principal antitrust law in the US, the Sherman Act, 1896, and the underlying concerns which it was trying to address.

US Department Of Justice Tech Regulation

He finds that the concerns were primarily political, that the amassing of such economic power as the world had never seen before in the hands of the robber barons of the so-called “gilded age” in the US were considered a threat to democracy.
Election campaigns were fought and won on the pledge to break up the vast business empires of the likes of J D Rockefeller and J P Morgan. The speeches of the political leaders of the time, especially President Theodore Roosevelt, show that the concern was not just to address market failures, but also to stave off potential threats to democratic systems of governance posed by the so-called “trusts” which controlled businesses.
This political aspect of antitrust, however, was lost since the 1980s as the so-called Chicago school of economists (led by Robert Bork) gained prominence. Wu argues that the Chicago school’s approach disingenuously tried to simplify antitrust law for lawyers and judges by reducing the whole field to the question of whether consumer welfare was being affected by a cartel or a monopoly.
This approach also fit within the larger political move to shrink the state and give free rein to businesses, or the so-called “Reagonomics,” and this found favour with the governments and judges of the day. In Wu’s telling, this approach has allowed regulators in the US to ignore the harmful effects of internet platforms swallowing their competitors whole.

He points specifically to Facebook being allowed to acquire Instagram and WhatsApp without a murmur of disapproval from the authorities.

Wu calls for a “neo-Brandesian” approach to the problem of tackling internet platforms’ dominance. While still short on specifics, The Curse of Bigness explains the broad outlines of the approach, harking back to Justice Louis Brandeis, a pioneering trust-busting judge.

Big Tech Monopoly And Democracy

The approach calls for greater enforcement of existing laws to hinder the outright acquisition of competitors. Wu does not rule out the need to break up the existing tech companies to separate the various things to prevent them from getting access to more and more of our data.

For instance, he suggests a “de-merger” of Instagram and WhatsApp from Facebook, allowing these platforms to compete rather than collude over users’ data.

Why Data Is Not the New Oil

Wu’s comparison of the near monopoly of present-day internet platforms with the Rockefeller-owned Standard Oil Trust might tempt one to conclude that “data is the new oil.” Inasmuch as data is a valuable resource and will continue to be so in the coming decades, it is true, but the comparison stops there. Data, unlike oil, is more valuable the more there is of it.

While increased production of petroleum might lead to prices dropping, it is just the opposite with data. While petroleum can be mapped to jurisdictions and boundaries, data cannot. While petroleum, like all other natural resources, is finite, data is potentially infinite.
As Wu points out, internet platforms owe their power to the network effect. With Google and Facebook offering their products free, there is little chance of a competitor being able to undercut them by price. Even when a competitor comes along with a better product, their accumulated capital allows competitors to be acquired swiftly, with little regulatory disapproval.
Even if a competitor were to arise, they would be unable to compete on one key feature: data. Internet platforms probably know their customers better than they themselves do. The vast ecosystem of apps and devices which go along with the internet platforms means that incumbents will be virtually unassailable by entrants in the kind of service that they can provide their consumers.

Social Media Regulation And Democracy

Seen in this light, Wu’s and Warren’s calls for antitrust action against internet platform companies cannot come too soon. They are of relevance for India too. While internet penetration in India is still low enough that it is possible for new entrants to compete with the incumbents (for example, the successful entry of Chinese apps into the Indian market) (Shaikh 2019), the concerns cannot be entirely brushed aside.
The Competition Commission of India’s order in the context of Google Flights (John 2018), and the foreign direct investment in e-commerce policy limiting e-commerce companies from selling their own products (Badri Narayanan and Juneja 2019)2 are two instances of pushback on such concerns from regulators and concerned agencies.

The measures to prevent monopolisation of data in India could be both ex ante and post facto, depending on the situation and the powers of the regulator.

Whether regulators in the US are alive to the fact or not, those around the world (especially in the European Union) are growing wary of the increasing economic clout of the internet platforms. The pushback has taken many forms, whether in the form of the European Commission levying one of its largest fines on Google for violations of EU competition law (Warren 2018), or India’s net neutrality regulations.

Internet Censorship And Corporate Power

If the US DoJ were to drop its laissez-faire attitude towards applying antitrust law and regulations on internet platforms, a new front may be opened in this long-running battle.

Notes

For the purposes of this column, the terms “competition law” and “antitrust” will be used interchangeably, though the latter is mostly used in the American context, while other jurisdictions discussed here use the former term.
However, the fact that this principle has not yet been extended to Indian e-commerce companies suggests protectionism rather than genuine concern over competition.