Tim Wu thinks it’s time to break up Facebook.
Best known for coining the phrase “net neutrality” and his book The Master Switch: The Rise and Fall of Information Empires, Wu has a new book coming out in November called The Curse of Bigness: Antitrust in the New Gilded Age. In it, he argues compellingly for a return to aggressive antitrust enforcement in the style of Teddy Roosevelt, saying that Google, Facebook, Amazon, and other huge tech companies are a threat to democracy as they get bigger and bigger.
“We live in America, which has a strong and proud tradition of breaking up companies that are too big for inefficient reasons,” Wu told me on this week’s Vergecast. “We need to reverse this idea that it’s not an American tradition. We’ve broken up dozens of companies.”
And breaking up Facebook isn’t a new idea. Ever since Mark Zuckerberg bought Instagram and WhatsApp, the idea of undoing those deals has been present at the periphery of the conversation about regulating tech companies. Both were serious burgeoning competitors to the social network, and both acquisitions sailed through without serious government oversight, which was a mistake. Instead of facing competition, Facebook was able to swallow its rivals and consolidate the market.
“I think if you took a hard look at the acquisition of WhatsApp and Instagram, the argument that the effects of those acquisitions have been anticompetitive would be easy to prove for a number of reasons,” says Wu. And breaking up the company wouldn’t be hard, he says.
“What would be the harm? You’ll have three competitors. It’s not ‘Oh my god, if you get rid of WhatsApp and Instagram, well then the whole world’s going to fall apart.’ It would be like ‘Okay, now you have some companies actually trying to offer you an alternative to Facebook.’”
Breaking up Facebook (and other huge tech companies like Google and Amazon) could be simple under the current law, suggests Wu. But it could also lead to a major rethinking of how antitrust law should work in a world where the giant platform companies give their products away for free, and the ability for the government to restrict corporate power seems to be diminishing by the day. And it demands that we all think seriously about the conditions that create innovation.
“I think everyone’s steering way away from the monopolies, and I think it’s hurting innovation in the tech sector,” says Wu.
Antitrust law in America seems to be at an inflection point: after a proud history of aggressive enforcement that saw the breakups of everything from Standard Oil to the original AT&T, the past few decades have been incredibly lax as something called the “consumer welfare standard” has swept the courts. Basically, the consumer welfare standard says the government has to show that a merger will result in increasing prices for consumers before it can stop it.
“I think anyone will agree that [the consumer welfare standard] creates a very challenging screen where most antitrust cases die,” says Wu. “And sometimes the prices will go up, but you can’t prove it because it’s hard to prove. That’s what I’m trying to overthrow.” Read More>>>>