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Forbes
Forbes
National
Nizan Geslevich Packin, Contributor

Breaking Up Is Hard To Do, But That May Be Where Big Tech Is Heading

It is hard to imagine that Senator Elizabeth Warren and President Donald Trump agree on much. Historically, Senator Warren has focused her agenda on increasing consumer protection and enhancing business regulation. On the other hand, President Trump has emphasized his desire to deregulate as much as possible. (In reality, the Trump administration has not been particularly effective in doing so.) But when it comes to the largest U.S. tech companies, the Trump administration and Senator Warren appear to share the same intuition: these entities might just be too big. President Trump recently took aim at these tech behemoths, and said that he was “looking at” antitrust proceedings against Amazon.com, Google, and Facebook, explaining that prior administrations had discussed breaking up these companies, but failed to act.

Breaking up is always hard to do. photo credit: Getty

President Trump and Senator Warren are not alone in seeing the risk posed by these companies. Many commentators and scholars, myself included, have expressed concerns about the fact that the biggest U.S. tech giants have grown to be too big and influential, and now dominate too many aspects of our economy, government and daily lives. The growth in information systems, financial technology and e-commerce has made our society dependent on networked digital technologies. As a result, the biggest digital service providers play a critical role in our society; they operate essential digital services (effectively the entire Internet) and control how and where data is collected, stored and handled. They also play a critical role in business and government infrastructure—even the Department of Defense relies on their cloud services to store and manage data. Not to mention their role in the economy—since 2008, Google, Facebook, Amazon and Apple added more market capitalization than the GDP of India.

Unfortunately, the tech giants know that we need them. They know that they are too-big-to-fail. And that knowledge along with their sheer size has allowed them to become increasingly political as they reach unparalleled levels of influence and impact and redefine the notions of politics and governance. Indeed, the fact that foreign-governments were able to leverage the U.S. tech giants to manipulate the 2016 U.S. presidential elections demonstrates just how powerful they are. Their ability to unilaterally control our information (Google drives 89% of Internet search; 95% of young adults on the Internet use Facebook products; and Amazon is the undisputed heavyweight in cloud computing) should be cause for concern, particularly given the New York Times’ recent report of Facebook’s retention of a Republican opposition research company to discredit its critics and disseminate negative stories about its competitors.

As the tech giants continue to expand and vertically and horizontally integrate their businesses, Senator Warren and President Trump are justified in suggesting that we should be concerned about their size. Their businesses encompass scientific innovations, media, computing, telecommunication, retail and even financial services. The powerhouses continue to grow, and so too our reliance on them. The fact that so many key government agencies and private-sector institutions depend on the tech giants’ cloud services creates a world in which a single successful cybersecurity attack could bring our country to a screeching halt. Just because they are too-big-to-fail, does not mean that they cannot fail, or at least falter, and cause disruption and negative externalities to our economy and society. For example, Google and Facebook’s involvement in the elections, Facebook’s massive security breaches, and its behind-the-scenes efforts to downplay and deny these scandals, have had significant repercussions causing concerns about these institutions’ stability and standing.

That is not to say that the tech companies do not have answers to many of these concerns. When critics express concerns about their increasing power and anti-competitive behavior, the tech giants reassure us that in the tech industry, competitors can always disrupt the industry by targeting existing services and adapting them to new digital realities using new technologies. They dismiss concerns about barriers to entry by arguing that history teaches us that in high tech industries driven by fast-changing technologies, companies are always vulnerable to the “next big thing.” Just like Uber, Netflix, and Tesla rose to power by creating markets inconceivable to their predecessors, so too will the next generation of technology be born. The tech giants further reassure us that even when a company’s monopoly appears to be unparalleled—as was once the case with Microsoft—eventually, creativity and innovative ideas prevail and drive desired market changes. And they shrug off the reality of successful cyberattacks, asserting that they are leaders in the field of cybersecurity and have extremely secure networks.

But what the tech giants do not tell us is that potential breakups would have several beneficial effects. First, breakups would serve to reduce our multifaceted dependency on just a handful of companies, and moderate their ability to create a national crisis. Second, breakups would help increase competition by preventing the tech giants from continuing to simply acquire and absorb any potential future competitors. Third, breakups could stimulate innovation by reducing the chilling effect on funding of small startups caused by the tech giants’ potential ability to out-man, out-fund and immediately compete with new innovative players.

Recognizing some of the too-big-to-fail problems, and the potential benefits of breakups, an EU directive attempted to regulate key digital service providers to account for some of these issues. Additionally, some EU leaders talked about possibly needing to dismantle the U.S. tech giants. Similarly, EU regulators have asserted that these companies abuse their power, and the European Commission found some of their anti-competitive behaviors to be illegal.

In light of the recent midterm election results, and the now Democrat-controlled House of Representatives, many are saying that the Trump Administration will be stalled in pursuing its agenda. But adopting a more EU-like approach to big tech might be an issue where President Trump is able to reach across the aisle and design a new systematic approach that would address the many concerns caused by our too-big-to-fail tech companies. Ideally, such an approach would result in the prohibition of monopolistic and harmful business activities, as well as better risk management procedures for these tech behemoths. If President Trump does this, he just might be able to demonstrate that he can be a bipartisan leader, and leave a legacy of avoiding a potential too-big-to-fail scenario.

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