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For Tech, Antitrust Is a Fatal Distraction

Do you support antitrust scrutiny of the tech industry?

by Axios | 3.12.19

When leaders in Silicon Valley assess the new antitrust fever among candidates and policymakers, the prospect of corporate breakups isn't their biggest worry. Instead, insiders fear missing the next cycle of industry change if they're distracted and hobbled by antitrust conflicts.

Why it matters: If executives are busy answering lawmaker inquiries and defending regulator lawsuits, they're less likely to be protecting their businesses from upstart challengers. And if they're under constant regulatory scrutiny, they'll be less able to either elbow aside or snatch up the competition.

Driving the news: Last week Democratic hopeful Sen. Elizabeth Warren (D-Mass.) unveiled a broad case for breaking up big tech icons like Google, Apple, and Amazon, arguing that operators of platform-style marketplaces should not also be participants in those markets.

Whether or not Warren's campaign takes off, the combination of privacy scandals, misinformation scares and charges of anti-conservative bias mean tech companies face antitrust action no matter who's in charge of Washington.

  • Inside tech's corporate suites, executives foresee a wave of legal challenge, legislative inquiry, and regulatory action.
  • Like the Trump White House, they will be required to cough up emails and internal documents, to send key personnel for further committee testimony, and to face potentially damaging leaks.

Flashback: Microsoft's antitrust fight with the feds two decades ago shows the kind of damage such an assault can wreak.

  • A federal judge initially ordered Microsoft to split in two, with Windows and Office to be part of two separate companies. While that order was overturned on appeal, the combined effects of more limited regulation in the U.S. and prolonged scrutiny in Europe had a profound effect on the company's innovation in the ensuing years.
  • Regulators in Europe and Korea for years forced Microsoft to offer versions that excluded Windows Media Player or allowed consumer to choose a default browser other than Internet Explorer.
  • Lawyers became part of the software development process, and the company cautiously separated its products at a time when Google and Apple were further integrating software, hardware and services on new mobile platforms.

IBM fought a similar epic federal antitrust suit from 1969 to 1982, ultimately prevailing. In both instances, the targeted companies found themselves focused on their legal quandaries and missed the next turn of the industry wheel.

  • Antitrust action pinioned these tech Gullivers while new competitors in new kinds of businesses stole their initiative — Microsoft and the PC industry rose on IBM's turf, and Google and Facebook later emerged on Microsoft's.
  • Intel, by contrast, cemented its dominant share of the personal computer chip market by playing along with regulators instead of fighting them. Intel's aggressive marketing skated right up to the line, but whenever a regulator balked, the firm settled. (It did miss out on mobile, though, creating a whole new set of headaches.)

The bottom line: No tech giant has ever been split up by courts, regulators or legislators.

  • The breakup of AT&T in the '80s was a different story, since the telephone giant was a tightly regulated, quasi-public utility.
  • You have to go all the way back to the vivisection of John D. Rockefeller's Standard Oil a century ago for an example of a large-scale government-ordered antitrust breakup in the U.S.

Be smart: For antitrust advocates, the corporate breakup endgame may not matter if, even without such a dramatic outcome, they can still achieve a key goal — ensuring that dominant incumbents can't squash or swallow the next wave of tech innovation. 

Scott Rosenberg, Ina Fried

Illustration: Lazaro Gamio/Axios

Axios

Written by Axios

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(27)
  • Dave
    Voted Yes
    03/12/2019
    ···

    The prospect of corporate breakups isn't their biggest worry. Instead, insiders fear missing the next cycle of industry change if they're distracted and hobbled by antitrust conflicts. You have about six month to get you product to market to keep ahead of your competition. Monopolies can hurt companies not necessarily help. You get to many irons in the fires, you put the fire out.

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  • Daniel
    03/12/2019
    ···

    As Maxine Walters stated in her statement in the Scent hearings As a Liberal she will socialize big business. We need to stop this socialist take over of this country or we will be 100 times in worst shape then when Obama destroyed the economy.

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  • Jason
    Voted No
    03/12/2019
    ···

    Government’s role is to provide a path to prosperity by removing roadblocks for business, not set up roadblocks to inhibit them.

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  • samiam6
    Voted Yes
    03/12/2019
    ···

    Google, Facebook and others are far too powerful.

    Like (3)
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  • JustJeeps
    Voted No
    03/14/2019
    ···

    I’m overjoyed the Democrats are biting the hands that have fed them. Seattle learned that lesson, New York is learning it, looks like the Bay Area will have to learn it the hard way.

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  • Robert
    Voted Yes
    03/12/2019
    ···

    Scrutinize the heck out of it! Especially North Korea, China & Russia😩

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  • Bridget
    Voted Yes
    03/12/2019
    ···

    If antitrust issues distract them, they are wealthy enough to hire more staff. Who can trust a big company that can’t walk & chew gum at the same time? Stop with the excuses and deal with the consequences you reaped.

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  • James
    Voted Yes
    03/12/2019
    ···

    Is there anyone out there who thinks the breakup of AT&T was *not* a good thing for the tech industry?

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  • Catherine
    Voted Yes
    03/12/2019
    ···

    I am not so worried about Google or Apple, but Amazon is out of control. Since they have waded in to so many different markets, however, I am not sure how it fits the antitrust regulations; in fact, I could almost believe that they deliberately went into multiple markets for that very reason. I definitely think looking into Amazon is reasonable.

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  • Choky
    Voted Yes
    03/12/2019
    ···

    I notice the GOP going heavy on anti-thrust issues.To be a party that’s believes in the free market they sure like to intervene a lot. This type of intervention could hamper the technological edge of our nation. I urge you to oppose this issue

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  • S
    Voted No
    03/12/2019
    ···

    The distraction becomes acute when these US companies are competing on a world stage with China, Russia, and the like. This isn't about individual companies' anymore.

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  • Kenneth
    Voted Yes
    03/12/2019
    ···

    Yes! What if a smaller competitor offers a product that works better than the dominant one? (For instance, on one of the PCs I had, I used Mozilla Firefox for a while because Microsoft Internet Explorer kept crashing on me.) If not for government scrutiny of the tech giants, their upstart competitors wouldn’t have a chance. And the “little guy” can sometimes offer a product that is superior to the top selling product on the market.

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  • John
    Voted No
    03/12/2019
    ···

    Learn from the past. It was tried 20+ years ago and failed. There’s no reason to try again. When it comes to operating systems, there’s Windows, OS X, Unix, BSD, Android, Linux, and many others out there. The most prevalent one being Windows. With office suites there’s way more than MS Office and the much less expensive Apple office apps. There’s literally tons of free office suites that are compatible with Microsoft and available to ANY operating system. EMail clients and chat utilities are a dime a dozen, both more and less feature laden than Outlook. A person can order a computer WITHOUT an operating system and install his choice of systems. If he want a free system he can get Linux in one of its many “flavors” or, if he wants to go the expensive route, he can install Windows. Granted, Linus, BSD and Unix take quite a bit of knowledge to effectively set up but so did DOS in the early days of PC’s. There are enough developers that write software under the GNU license and enough freeware out there to satisfy any user once he learns how to do a search. And then there’s the Open Source route for software that is often better than the junk that Microsoft puts out. It, too, is free where Microsoft charges an arm and a leg. The last 4 iterations of OS X for Apple have been free for the taking. With all of these choices, I, personally, don’t see a problem with the companies remaining intact. Besides, if you are going to buy a piece of technology, you should research it before walking into the store and putting your money down.

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  • KevinRosa
    Voted Yes
    03/12/2019
    ···

    Big Tech has gotten far too powerful.

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  • Roy
    Voted Yes
    03/12/2019
    ···

    Absolutely...finally something both parties agree upon!

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  • Terry
    Voted No
    03/12/2019
    ···

    Govt. overreach

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  • A david
    Voted Yes
    03/13/2019
    ···

    Trust busting should never have gone out of fashion.

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  • Martin
    Voted Yes
    03/13/2019
    ···

    Break-up Google.

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  • Curt
    Voted No
    03/13/2019
    ···

    Never trust E. Warren the known liar.

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  • Darby
    Voted No
    03/13/2019
    ···

    Free World, Free Market Economy! Government needs to stay out of private businesses.

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