Roger Fingas
The head of the U.S. Justice Department's antitrust efforts, Makan Delrahim, drew comparisons on Tuesday between past monopolies like AT&T and the state of the modern tech industry, including companies like Apple and Google.
At one point before its breakup Standard Oil likewise offered cutting-edge technology and low prices, Delrahim told an Israeli conference via video link, according to Reuters. Another infamous monopoly, AT&T, similarly defended itself by claiming that its market status offered better prices and innovation — in reality it was an early example of the "network effect," Delrahim said, by way of its opposition to independent companies using its long-distance lines. That made it difficult or impossible for smaller rivals to compete.
The problem extended into Microsoft's anti-competitive efforts against Netscape in the 1990s, and antitrust action was a solution, Delrahim argued.
"The government's successful monopolization case against Microsoft may very well have paved the way for companies like Google, Yahoo and Apple to enter with their own desktop and mobile products," he remarked.
When considering antitrust actions the DOJ is said to watch for collusion, higher prices, and falling quality standards. Delrahim used diminished privacy as an example of poor quality, likely referring to scandals at Amazon, Facebook, and Google.
The DOJ isn't inherently opposed to companies buying up each other, Delrahim noted.
"Acquisitions of nascent competitors can be pro-competitive in certain instances and anti-competitive in others," he explained. "I will note the potential for mischief if the purpose and effect of an acquisition is to block potential competitors, protect a monopoly, or otherwise harm competition."
The DOJ recently received jurisdiction to launch an antitrust probe of Apple as part of a much wider examination of the tech industry. While Apple has escaped privacy complaints, critics have still pointed out that the company maintains absolute control of iOS app distribution, blocking developers from selling anywhere but the App Store — where it normally claims 30% from each transaction, and enforces tough rules that for instance block "duplicates" of its own apps and services.
Democratic Senator and U.S. Presidential candidate Elizabeth Warren recently called on Delrahim to recuse himself from probing Apple and Google. He lobbied for both companies between 2006 and 2007, something Warren suggests is a conflict of interest.
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"A popular idea is to splinter the companies of their properties, which could prove a financial windfall for investors. Facebook could create billions of dollars in additional value through the spinoff of WhatsApp and Instagram, and Google could do the same with YouTube, according to Scott Galloway, a marketing professor at New York University and author of “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.”
Needham analyst Laura Martin wrote in a note Tuesday that cleaving parts of Alphabet would likely result in more valuable pure-play properties for investors. Separately, Cowen analyst John Blackledge estimated Amazon Web Services would be worth $500 billion as a separate company, making it one of the world’s 10 most valuable companies.
The problem with that approach is that the individual businesses could actually better compete against pure-play startups that can benefit from being singularly focused when facing off with a large company. Instead of four large companies ruling the tech world, there could be many that still have ties to a former corporate parent but are actually better equipped to harm competition.
“The threat of a Microsoft-like judgment could drive some of these (four) companies to spin off certain business lines in an effort to be seen as promoting competition,” Day said. “Whether such actions will, in fact, promote meaningful competition or just further reinforce the position of existing players or platforms remains to be seen.”
By the way, another good article delving in the possible cures is here:
https://www.marketwatch.com/story/breaking-up-big-tech-is-a-big-task-2019-06-10
In Apple’s case Tim Cook made the decision to twist the dragon’s tail over privacy and legal access to devices by authorities. While many here applauded the decision all it did was turn the dragon’s attention towards Apple. These forums heat up every time we read of an incident where access to an iOS device is demanded and refused on 5th Amendment grounds, whether or not a search warrant was issued. I’m here to tell you that we have already lost the war. From face recognition to video cameras we have already lost our privacy and there’s no going back. Be it Democrat or Republican regimes the surveillance dystopia is here. The government will eventually know everything about our lives both public and private. Even now we are beholding to the government. Many of us are completely dependent on the government for our very existence. The government is not beholding to us because we can’t vote any of them out.
Now Apple’s app store policies are under attack both here and elsewhere. Supporters of Apple’s app store like to claim that third party app stores will open the floodgates to spyware, malware, and all manner of nastiness. They also claim Android is already there but we never see objective reports of just how many Android users have had their bank accounts emptied out, their private photos stolen, or their devices locked down by ransomware. Where are those statistics? If this comes to past will there really be a thriving third party app market? How many developers will actually choose to distribute their apps in third party app stores rather than Apple’s official one? Are there thriving third party app stores for Android because I’ve never heard of one other the Google’s own store. The fake techies are always pounding their chest over SIDE LOADING!!!
Delrahim's past lobbying for Google (which was specifically related to anti-trust issues) and Apple doesn't just "suggest" a conflict of interest. It is a clear conflict of interest.