But what would that implosion mean for the mountain of personal data Facebook has already collected on its hundreds of millions of users? According to experts, not much.
Two of the five bills introduced last month would force Facebook to share that data with competing apps and platforms, a feature known as interoperability.
Experts told Insider this can be a good thing. It’s how tech companies work together to make services useful for you – like how you’re able to sign in to apps using your Facebook or Google credentials or send an email from Gmail to a Yahoo address. The practice encourages people to use multiple platforms, instead of getting siloed into one specific ecosystem.
The idea is to foster healthy online competition since tech giants would relinquish their dominant grip on hordes of data and would instead share them with rivals. That proposal also stipulates that Facebook share data with Instagram and WhatsApp if it did spin off the subsidiaries.
Herbert Hovenkamp, an antitrust law expert and professor at the University of Pennsylvania’s Wharton School of Business, told Insider it could be similar to when the Bell System telephone giant was broken up in 1984: all seven of the Bell branches still had access to certain information to maintain optimal operability.
But experts said simply forcing Facebook to divest its acquisitions wouldn’t mean better safeguarding user data.
Hovenkamp said that “a spinoff wouldn’t automatically take any data way” since who has what information has nothing to do with a potential breakup.
And it wouldn’t change how Facebook conducts its data-sharing business. Facebook can enter into a B2B “data-sharing agreement providing them with the exact same data they held prior to the spinout,” Tim Derdenger, an associate professor of marketing and strategy at Carnegie Mellon, told Insider.
Instead, the experts said there would need to be some sort of provision included in the divestiture order to make sure that user data had adequate safety guards.
Otherwise, a plain and simple break-up could mean Facebook sharing your personal information with more entities to comply with interoperability requirements that are laid out in the proposed legislation.
“You’d need to have a mechanism so people could opt-out of sharing or specify what they do or don’t want shared,” Hovenkamp said.
Without that mechanism, user data would be shared more broadly – not exactly protected – in the name of healthy market competition.
“If there is no provision, it could be a disaster,” Hovenkamp said.
Governments from Australia to the US are cracking down on big tech companies. Employees are working to form unions at firms like Google and Amazon. And consumers appear to be more distrustful of the world’s biggest platforms than ever before.
The increased level of scrutiny on Big Tech marks a reckoning of sorts for the industry, one borne out of an increasing understanding of the power these companies wield and a shifting cultural mood toward activism and holding the powers that be accountable.
Experts say it will result in a seismic shift in the industry and one that is already affecting governments, tech companies, and consumers alike.
“There was a golden era when people focused on the enormous good technology could do to connect users to one another and democratize access to information,” Alexandra Givens, president and CEO at the Center for Democracy and Technology, told Insider. “Now, there’s increasing recognition that with this great power comes great responsibility.”
Governments are ratcheting up the pressure on Big Tech
Last summer, something unprecedented happened: the CEOs of Amazon, Apple, Facebook, and Google testified before Congress at the same time over concerns they engaged in anticompetitive practices – and they got grilled.
It marks a turning point, not only in how lawmakers on both sides of the aisle view the tech giants, but also in how prepared they are to scrutinize them. As Givens noted, lawmakers staffed up ahead of the hearings in order to be better prepared to question tech CEOs, an effort she expects will continue to “bear fruit” in 2021. (The most recent tech-focused government appointee is Tim Wu, a Columbia University law professor and outspoken critic of Big Tech, who will serve on the National Economic Council.)
State governments are also now beginning to probe tech giants’ business practices on numerous fronts: A group of dozens of states have filed their own antitrust complaint against Google; the Arizona House recently passed a bill that would allow app developers to use their own payments systems, circumventing the tariffs imposed by Google’s and Apple’s app stores; and Maryland is imposing a new tax on revenue from digital ads sold by tech giants.
The US isn’t the only one taking action over how tech companies behave. Just in the last month, the UK Supreme Court ruled that Uber should count its drivers as workers, an issue Uber, as well as Lyft, Instacart, and DoorDash, have fought against in the US as well. And in Australia, the government passed a new law that requires Google and Facebook to pay publishers in order to display their news content in search results and on news feeds.
“It reflects a growing recognition of the fundamental role that technology plays in people’s lives: from how we discover new information to how we connect with friends and family, to how we access job opportunities, find housing, access government benefits,” Givens said.
And, of course, there’s the issue of Section 230. The law, officially known as the Communications Decency Act of 1996, is a point of contention for both Republicans and Democrats – it states that internet platforms like Facebook or Twitter can’t be regulated as publishers, meaning they can’t be held accountable for speech on their platforms.
Givens said this issue, and the issue of misinformation on social media platforms more broadly, is more top of mind than ever before following the 2020 election, which she described as a turning point for many people in realizing the effects online public discourse can have on democracy. As a result, Facebook and Twitter actually changed their policies and instituted bans they had previously been reluctant to impose.
“We suddenly saw this flourishing of far more creative ways to try and improve the health of information on these online services, and you could tell that was the companies really trying to rise to the moment and importantly, rise to public pressure about the moment,” she said. “This didn’t all happen in a vacuum. This was from civil society, organizations, community, activists, employees, all calling on them to do more.”
Consumers and employees are holding tech companies accountable
But government crackdowns are just one piece of the puzzle: there’s also been a noticeable shift from in thinking among both tech employees and the customers they serve.
Two Pew Research Center surveys from the last two years show that Americans have a much less rosy outlook on Big Tech than they did in the past. A 2019 survey showed that the percentage of Americans who believe that tech companies have a positive impact on society plummeted more than 20 percentage points from 2015, from 71% to 50%. On the flip side, those who felt tech companies have a negative impact rose from 17% to 33% during this same period.
And last year, a second Pew survey found that 72% of adults in the US believe social media companies have too much power and influence in politics, with about half of respondents on both ends of the political spectrum saying the government should regulate tech companies more than they currently do.
Givens chalked up the increased consumer distrust partly to increased awareness among consumers about how their information is being used and shared, which is inspiring tech companies to make changes to their products – Apple, for example, has long touted its commitment to privacy, but it will soon roll out a new software feature that goes one step further: It will allow users to opt out of tracking for advertising purposes, a tool that caused an uproar from app developers, and from Facebook.
“There’s an appetite for businesses to compete on privacy as an asset that they can market to users,” Givens said.
Facebook has been hit with that consumer pressure as well in the form of outrage over its messaging app, WhatsApp. In January, WhatsApp issued new terms and conditions that revealed to many users that the app shares user data with its parent company, Facebook. It sent users into a frenzy and caused many of them to switch to a different messaging app, Signal, which resulted in WhatsApp delaying the date by which users would need to accept the new terms and conditions. Still, WhatsApp and Facebook haven’t adjusted their ways as a result of users’ frustration, at least not yet.
But beyond consumer skepticism, there’s another powerful force brewing inside tech companies: employee activism.
In January, more than 200 employees at Google formed a union known as the Alphabet Workers Union. The union, a rarity among Silicon Valley tech giants, has a stated goal to promote more inclusive working conditions at the company and ensure executives act in the best interests of both society and the environment.
Sonny Tambe, an associate professor of operations, information, and decisions at the Wharton School at the University of Pennsylvania, told Insider he believes the newfound energy around this initiative is a spillover from the activism around social justice in the US last summer. And tech companies can’t afford to ignore that momentum, he said, because of how competitive the industry is.
“I think part of the halo effect for tech has been, they’ve been some of the best places to work, and this is important to them,” Tambe said. “These firms are competing, not just for customers, but also for workers, and workers are not going to stop having strong opinions about the way the world works and the way that their employer impacts the world around them.”
Tambe said he believes there’s a growing understanding among tech workers that because they are highly skilled and have a lot of agency, it is incumbent on them to be part of the larger conversation about how their companies are held accountable.
“These forces that are converging on Big Tech, they’re substantial,” he said. “A lot of stakeholders are realizing at a similar time that not all tech is moving us forward in positive ways, that these firms are very large and powerful, and that as consumers, as customers, as regulators, we need to be quite cognizant of this.”
When the global financial crisis slowly subsided in the spring of 2010, tech giants Google, Apple, Facebook and Amazon (GAFA) were collectively valued at just under 450 billion euros by market cap. These companies were drivers of innovation that pointed the way forward, enterprises at the center of a flourishing technological ecosystem with a creative and technology-driven vision.
Over the past decade, the transformation of society’s relationship to these companies is unprecedented. We use the products of the GAFA companies to manage almost our entire professional and private lives. And during the coronavirus crisis, the value of the tech giants have increased even more. The GAFA companies, taken together, currently have a market capitalization of 6 trillion euros, which is about five times as much as the entire German DAX index.
The dominance of the GAFA companies has become so great that individual governments have no choice but to submit themselves to them.
It seems that many German and European politicians have given in to the superior power of the GAFA companies. Complicated regulatory issues are not very attractive election campaign topics, after all. This powerlessness is also reflected in the practically nonexistent media debate.
It is my steadfast conviction that how we handle the US tech monopolies will dictate Europe’s future. Never before in the history of our continent have so few companies possessed so much power – never before were they able to exert such a profound influence on our lives.
And even if it seems almost unimaginable – the technological revolution is not yet over. Quite the opposite is true. We are still in the early phases. If we want, we can still make the rules that will shape our future. But the room for the maneuvering needed to do this is shrinking, and time is running out. If we want to know what to do next, then it is vital that we gain an in-depth understanding of the mechanisms by which the tech monopolies operate.
The tech monopolies survive on data, algorithms, and capital
In the 20th century, a company’s wealth came from its factories, machines, and its qualified employees. In Germany and the EU, our entire education and economic systems are designed based on this formula. The problem is that the digital world functions completely differently.
In the digital world customer behavior is evaluated in real time. This allows digital services to be continuously improved and aligned precisely to customer needs and desires. The more data is collected, the better the algorithms work and the more relevant the offers presented to customers become.
Over the past decade, the GAFA companies have built a huge competitive advantage because they control the operating systems, the search engines, the browsers, and the cloud infrastructure. They also own the shopping marketplaces, the communication platforms, the networked household appliances, and the app stores.
To return to our picture of the 20th century, the tech monopolies not only have factories and machines, they also increasingly own the entire infrastructure of the value-creation chain, including all the businesses and all of the communication channels to the customer. With every new customer, this value-creation chain becomes more efficient and more profitable. Competition in the GAFA infrastructure is only allowed for as long as the competitor compensates the monopolist or helps the monopolist towards even more expansive growth.
The capital that the GAFA companies suck out of the system using this mechanism is fed straight back into undermining the competition or accessing new areas of business. The vendors on Amazon’s marketplace are just as dependent on the goodwill of the platform as media companies are on Google or Facebook. This goodwill can only be acquired by consistently providing access to all content and data, thus continuing to feed the monopoly and making it more efficient.
The enormous profitability of these infrastructure services allows the GAFA companies to invest in new fields of business on a very long-term basis. To do this, the monopolists are willing to accept high losses for many years in order to weaken the competition and build up market shares. Due to the enormous market capitalization of the GAFA companies, it is necessary for them to continue to occupy large and lucrative markets to keep the expansive system going and to increase their stock market price.
Consumers are the human shields protecting the monopolies
The favorite argument put forward by the GAFA companies to divert attention away from their position of power is that the products are free for the consumers and that they greatly improve the lives of all of us.
That is a sneaky argument that might seem plausible at first glance. However, it is a deliberate trick. The products sold via the platforms must finance the high profits of the GAFA companies – which means that the users are paying indirectly.
What is even worse: they are forced to hand over their personal data. The tech giants have no reservations whatsoever when it comes to analyzing their customers down to the smallest detail. They know that we can no longer live without their products, and that is why antitrust fines or occasional political objections are a small price for them to pay on the way to increasing their market dominance.
Our dependency on the GAFA companies’ infrastructure makes things extremely difficult for our government authorities because they want to help the citizens, not cause them problems.
A life without iPhones, Google Maps, WhatsApp, or Amazon is hard to imagine and not exactly something we are striving for. The bundling together of the different services such as the integration of maps into Google’s search engine, or the linkup between the app stores and the smartphone operating systems makes it even more difficult to break up the monopolies.
Not that GAFA doesn’t deserve our respect for having understood this connection years ago and for placing it at the heart of their strategy to defend what they do and exculpate them from any wrongdoing. None of us can imagine a world without their dominance anymore. And therein lies the problem, as well as the political and regulatory challenge.
The large tech corporations spend billions on image campaigns and employ an army of lobbyists in Berlin, Brussels and Washington, DC. There is hardly a single association, NGO, or start-up hub in the political sphere that they do not support in some way or other. Politicians and entrepreneurs who point out alternatives are – with only few exceptions – reeled in again by the lobbyists and opinion-makers, attacked in the media or have their businesses damaged.
The lack of regulation of the tech monopolies is the greatest danger to liberal democracies
There are two possible exit scenarios for the end of the tech monopolies. If we continue without strict regulation of GAFA, the polarization within society will grow. The economic opportunities of smaller businesses will shrink more and more because of the growing profits of the monopolies, and the GAFA companies will be able to take over whole new fields of business.
An ever-growing concentration of economic power will lead in the medium term to an erosion of the market economy. This will soon cause social unrest, distribution struggles, and an increasing destabilization of our liberal democracy, which will be unable to gain control of the economic inequality.
There have been clear signs of this development for many years, but our debate so far remains focused on the symptoms instead of asking about the causes. This is regrettable, because the facts are there for anyone to see. You only have to look at where record turnovers are being made in the midst of a great European recession, where profits are increasing permanently, and market shares are being gained.
And in my opinion, this dark scenario can only end in a state run by autocratic populists. We only have to look at protectionist China to see where this might lead. The GAFA companies have nothing to say there anymore, and the Chinese have constructed their own tech ecosystem. The Chinese population pays a very high price for this in the form of an illiberal dictatorship in which politicians decide who is allowed to have economic success.
The second, optimistic exit scenario is a return to European sovereignty and our social market economy. Ludwig Erhard, who as Minister of Economic Affairs led Germany’s remarkable post-war economic recovery (the Wirtschaftswunder, or ‘economic miracle’), and later became Chancellor, already postulated that a market economy can only work if it works for everyone. What Erhard was referring to here was protection against interference in the state, but also protection against monopolists and cartels.
Ludwig’s legacy is being kept alive today by the likes of EU Commissioner Margrethe Vestager, who campaigns like almost no other politician in Europe for regulation of the GAFA companies. However, in contrast to the eagerness for reform in the early years of the Federal Republic, the EU is slower as well as unclear in its vision and in its willingness to shape the future. And that is precisely the weakness that the US corporations have been exploiting for many years.
Far-reaching regulation of the tech monopolies is urgently necessary and unavoidable
In my mind, there can be no doubt that splitting up the GAFA companies is unavoidable in the long term if we want the liberal democracies of the Western world to survive. This is not only in the hands of the EU, but is ultimately a decision of the US government. Which is why this topic must be given utmost priority in German and European foreign policy.
The US is rightly demanding that we take our security interests increasingly into our own hands. But the ability to act in a self-determined manner also requires a functioning market economy, which is why we must immediately prompt the US to modernize its antitrust legislation and, after sharp debate in the Senate, to also become active in the campaign to split up the GAFA companies.
In the meantime, Vestager and the EU recently embarked on the pragmatic path towards intelligent regulations by announcing the Digital Markets Act (DMA). The DMA defines what gatekeeper platforms are and submits them to much stricter competitive restraints. For example, giving their own products preferential treatment in the marketplaces, as currently practiced by Amazon and Google, is to be prohibited and carries a heavy fine.
In my eyes, this is still not enough to cope with the problem of GAFA market power. We must define, isolate, and regulate the critical infrastructure of the GAFA companies. This applies, in particular, to the evaluation of personal data, and to the allocation of their enormous profits. Whether Google’s search engine, Facebook’s WhatsApp, or the Amazon Cloud: data and profits from this critical infrastructure must not be used to expand into other markets.
Just as we would not allow an electricity generation company to make unlimited profits to enter into direct competition with Miele, Siemens, and Bosch, we must subject our digital infrastructure to the same regulatory checks and controls. The data and the algorithms of the monopolists must be available to all of us so that those participating in the market can engage in fair competition on the platforms to the benefit of the customers.
For a long time, I was skeptical about whether Europe can succeed in managing this enormous task. But, in the meantime, I see reason for optimism. When Facebook recently wanted to force WhatsApp users to share all their data so that their advertising could more easily reach users via Facebook and Instagram, the update resulted in a huge surge towards alternative messaging services like Signal and Telegram.
Both of these have been at the top of the app stores for weeks now and differ from WhatsApp in that they request much less data. A turning point has been heralded in, and people are ready for a future that is different from the one imagined by the GAFA companies. The political decision-makers in Brussels and Berlin should follow this lead. The social market economy is one of our greatest achievements and is the foundation of our democracy.
And we should fight for it, especially in the digital age, undaunted by the size and power of its opponents.
Google will soon be facing another federal antitrust lawsuit, this time over the design of its search engine, Politico reported Tuesday.
A bipartisan group of state attorneys general – led by Colorado’s Democratic Attorney General Phil Weiser, and Nebraska’s Republican Attorney General Doug Peterson – plan to file a complaint against Google as early as Thursday, according to Politico.
The states’ complaint is expected to accuse Google of anti-competitive behavior by modifying its search engine to boost results for its own products while disadvantaging results for competitors that provide specialized search results, Politico reported.
A Google spokesperson declined to comment on the planned lawsuit.
Consumers often begin their decisions about where to shop online, look for jobs, book travel accommodations, and make dining plans with a Google search. From there, they could end up visiting sites like Amazon and Etsy, LinkedIn and Monster.com, TripAdvisor and Airbnb, or Yelp and OpenTable – or Google’s own products, such as: Google Shopping, Google Careers, Google Flights, and Google Maps.
Many competing search result providers have argued that Google unfairly leverages control over its search engine to give its own specialized search products premium placement, steering users away from its competitors or forcing them to pay Google for ads in order to secure prime real estate.
It also comes on the heels of another major antitrust case filed against Google by the Department of Justice in October and joined by 12 states (California joined earlier this month).
That lawsuit argued that Google uses a network of illegal, exclusionary business deals that disadvantage smaller competitors, building an unfair advantage in search and online advertising, marking the largest legal challenge Google has faced and is likely to result in a court fight that could last years.
In a blog post, Google’s Senior Vice President of Global Affairs, Kent Walker, called the lawsuit “deeply flawed.”
Politico reported that some states from the DOJ’s case may also sign onto the forthcoming lawsuit because it focuses on a different aspect of Google’s search dominance.
Federal and state regulators have grown increasingly aggressive in probing major tech companies over potential monopolistic behavior, and in recent months have filed major lawsuits that could have huge impacts on those businesses as well as their users, customers, and competitors.
Last week, Facebook was hit with two massive antitrust lawsuits – one from the Federal Trade Commission and one from a group of 46 states – both seeking to spin off Instagram and WhatsApp from the social media company.
European regulators, which have long been ahead of their US counterparts in taking on tech companies over antitrust concerns, have also filed lawsuits, opened investigations, and issued fines this year against tech giants including Amazon, Apple, and Facebook.