Malcolm Owen
Federal Trade Commission Chairman Joe Simons is open to the idea of breaking apart giant tech firms like Apple by undoing mergers, if it is determined large entities like Facebook are harming competition across the tech industry as a whole by being too dominant.
The possibility of a breakup of considerably large tech companies like Apple, Facebook, Alphabet, and others, has been a major political talking point in recent months, under accusations the firms may be making anticompetitive moves in merging with others and acquiring startups in various fields.
The issue has led to US government agencies including the FTC and the Department of Justice to open up investigations, to determine how much competition there is, whether the companies are effectively monopolizing the market, and if there are any antitrust problems on the horizon. In the case of the FTC, its chief seems to be fine with breaking up the tech firms.
"If you have to, you do it," Simons told Bloomberg. "It's not ideal because it's very messy. But if you have to, you have to."
One way of breaking up the firms is to undo acquisitions that received approval to go through by the FTC, Simons suggested. While there would be a requirement of court approval, Simons believes it is entirely plausible for the FTC to admit that "we made a mistake," and force through that process.
On the subject of the parallel investigations by both the FTC and the DOJ, Simons claims there's an agreement between the two agencies to divide the tech industry scrutiny based on each firm's conduct, rather than by company. "It's possible for sure that we could be investigating the same company at the same time, but just for different conduct," told Simons, giving the hypothetical of the FTC looking at Amazon for buying a grocer while the Justice Department could look at the purchase of a music-streaming service by the retailer.
While not explaining specifically why Facebook is being investigated, Simons advised inquiries into acquisitions would be based on what would have happened to the targets if they were not bought.
"There's a question about what caused Instagram to be as successful as it is," reasoned Simons. "Was it the fact that the seed was already there and it was going to be germinated no matter what, or was the seed germinated because Facebook acquired it?"
The notion of breaking up tech companies came to the foreground in March by presidential candidate and Senator Elizabeth Warren, who demanded the introduction of legislation to make large tech platforms be designated as "platform utilities" and to be broken apart from any participant on the platform.
Warren later confirmed Apple would be a target, as it both operates the App Store as well as produces apps that exist within it. "Either they run the platform or they play in the store. They don't get to do both at the same time," insisted the senator.
Apple is already the subject of a number of antitrust investigations around the world, including one in Japan over contracts the company has with parts makers, which may be considered a violation of antimonopoly laws. In Russia, Apple is accused of violating antitrust after removing Kapersky Lab's Safe Kids application from the App Store,
Spotify filed a complaint with the European Commission claiming Apple is taking more money from consumers than it is entitled to via the App Store's in-app purchases and subscriptions, as well as limiting third-party access to technologies such as Siri and the HomePod, while giving its own Apple Music free reign.
The FTC and DOJ investigations are not the only ones Apple may be concerned about. In July, it was revealed a number of US states are also looking into antitrust motions against tech firms.
While breaking up isn't necessarily going to happen for many instances of antitrust, a recently proposed bill by Democratic Senators Amy Klobuchar and Richard Blumenthal titled the "Monopolization Deterrence Act" aims to ward off tech companies and others from anticompetitive practices, by mandating stiffer penalties of up to 15% of a company's U.S. revenue.
William Gallagher
Christine McKee
AppleInsider Staff
Chip Loder
30 Comments
It is one thing to break up Amazon. They've used their mass and profit from one line to undercut and destroy competition in others so the are building up a monopoly in multiple fields.
It is one thing to break up Alphabet. They have a number of huge companies that cooperate to leverage their strength and squeeze out competitors.
It is one thing to look at Microsoft. This was done and the decision was made to break them up before the W Bush administration snatched defeat from the jaws of victory.
It's one thing to look at breaking up Facebook. They are a corrosive, utterly unethical machine that takes user data and sells it to anyone for any price regardless of how much harm the buyer may do. They are now looking at spreading their pathological model into monetary policies and elsewhere. Perhaps breaking them up would just metastasize the problem. Killing it with fire might be a better solution.
But those are very different from Apple. Apple does not dominate any market. They do not sell user data. They hold no monopoly on anything anywhere, at any time. The argument that they hold a monopoly on the AppStore is vacuous. Target and Walmart control what goes into their stores and set standards for quality just like Apple does in their store. You don't like it, don't buy an Apple product. MOST of the world uses android. I honestly do not know why they keep tossing Apple in with the others, other than they are a big target for politicians.
But leave it to an incompetent government to do stupid stuff. The breakup of AT&T from one monopoly into 7 regional monopolies did nothing for consumers. Any breakup needs to be multiple identical companies that would then need to compete with each other.
The FTC lumps Apple in with companies that are very different. I could see them reviewing large acquisitions like Instagram and Whole Foods...
Apple biggest “problem” is the App Store, which could be considered a monopoly. The problem is Apple Music, Books, Games, TV etc. don’t have to pay the 30% which gives Apple an unfair advantage.
The problem with changing the rules now is a complete reversal on how companies function. Microsoft will need to be broken up into a bunch of parts... Windows, Office, Search, Gaming, Azure etc.
If I was going to ignore all the time bombs, and just look at Apple. Spinning off the App Store into a separate non-profit entity with the same mission would probably be a good thing. Apple would need to pay App Store like everyone else. But, everyone else isn’t everyone else anymore. Companies are increasing decoupling subscriptions (like Netflix) and Apps to avoid fees, Apple could do the same...
Basically, doing what they’re talking about would completely change the US economy/business environment... 90% of the S&P 500 might need to be broken up (Boeing, GE, banking, etc)
I don’t see a revisionist approach going anywhere, but I could see new mergers and acquisitions getting more scrutiny. That’s probably a good thing.
Bottom line, we can write this off as political rhetoric for now. US companies have a “competitive” advantage now. Is it really in the US governments best interest to level the playing field? The US government is more worried about Chinese state sponsored businesses encroaching on US companies...
Also, the USA is pretty much ruled by special interest groups (tech companies, farming, banking, NRA, unions, etc. etc.). Politicians know who REALLY gets them elected... So, politicians will say things to manipulate the public, but when push comes to shove, don’t expect much change.