Elizabeth Warren's Bold Plan to Bust Up Big Tech: Why and How She'd Do It

Presidential candidate Elizabeth Warren made tech policy a central focus of her campaign on Friday: Ahead of a rally scheduled to take place in Long Island City — the same New York City community where, until recently, Amazon was set to establish one of its two “HQ2s” — the candidate proposed a pretty audacious plan to “break up” three big tech companies: Amazon, Google, and Facebook.

“Today’s big tech companies have too much power,” reads the statement on Warren’s Medium page. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

The timing is… ripe! Starting this weekend, many, many members of the tech community will be descending upon Austin, Texas, for a week or two of shmoozing and partying at SXSW. How worried all these entrepreneurial coastal elites should be about Elizabeth Warren’s candidacy will now very likely loom larger over the conference.

Warren is a top-four candidate, according to the latest polling data at Real Clear Politics.

As a New England populist, Warren also has a lot of overlap with the arguable frontrunner for the nomination, Vermont Senator Bernie Sanders. He’s not exactly chummy with big tech, either, but has at times struck a pretty conciliatory tone for a socialist; at one point he praised Amazon CEO Jeff Bezos on Twitter for raising Amazon employees’ wages. That might explain why Warren is making tech policy such a focal point of her agenda, as it helps her differentiate from her most geographically and ideologically aligned opponent.

Break Up Big Tech: Which Companies Are Targets?

Warren’s argument for breaking up tech companies identifies two key problems. One is the excessive use of mergers and acquisitions, which she says companies have successfully leveraged to make the industry less competitive.

She identifies in particular Facebook and Google, who by acquiring potential competitors in social networking (like Instagram and WhatsApp) and digital mapping (Waze on the part of Google) have allowed the two to develop what is often referred to as the digital ad duopoly.

To address this problem, Warren even proposes ramping up the oversight process that reviews whether mergers are potentially anti-competitive, and even suggests reversing a handful of the biggest mergers in the sector over the last few years:

So is Warren right about all these monopolies? Facebook and Google do control about 60 percent of the ad market, according to the latest figures from EMarketer. But this share also appears to be falling, albeit ever so slightly.

Facebook in particular is likely an attractive punching bag for candidates, as the company’s reputation has tanked according to the latest polling from Axios. It is now the 94th most-respected of the 100 most-visible tech companies, Axios’s poll found, down from the high 40s last year. Google and Amazon’s reputation, however, remains strong.

The other main complaint in Warren’s essay seems more directed at Amazon, who she accuses of using its proprietary marketplace to squelch competition from other, smaller e-commerce businesses. There is a lot of anecdotal evidence this may be the case. Amazon has often been accused of lifting design ideas for its own Amazon-branded products from smaller companies, as well as using its market power to squeeze competitors like Diapers.com.

Whether Amazon can really be anti-competitive though depends a little on what you count as the competition. In terms of e-commerce, it’s a giant, with roughly half of e-commerce sales last year, reported Vox. But if you think about Amazon as just another store, its share of overall retail sales is still relatively small at around 5 percent. People still like stores, one likely reason why Amazon acquired Whole Foods.

That’s not all, either. Warren’s team later told CNBC that she would also look into trying to break up Apple, specifically, by preventing it from operating the App Store while also producing its own apps.

Break Up Big Tech: Is Warren Right?

Tech anti-trust is a complicated issue, as the laws on the books were passed between 1890 and 1914, and were mostly intended to pertain to railroad and oil conglomerates, not e-commerce, search engines, or social media networks.

Simply being a large company is not a crime, particularly post-globalization, what is a crime is to engage in or attempt to engage in monopolistic practices like price-fixing or bid-rigging.

How you demonstrate that the mostly “free” products of Facebook and Google, or the very cheap products of Amazon, are engaging in price fixing is an open question. This appears to be one of the main criticism of the policy from within the tech community — that Warren’s policy singles out companies simply because they are big and well-known.

Warren argues, however, that there is evidence of anti-competitiveness. Facebook has often cloned competitor features, particularly from Snap, as Kara Swisher recently pointed out in a column accusing Facebook of “shoplifting” Snap’s best ideas.

Warren also cites some data suggesting that fewer startups are getting off the ground, including one stat that the number of first-financing rounds to startups has declined by about a fifth since 2012. Finally, there is little debating that economy is increasingly dominated by a handful of large “super-firms,” and that this problem may be driving up income inequality.

The rise of super large companies, several studies have shown, disincentivizes labor spending (it’s easier to retain talent when there are fewer competitors to work for, and massive firms benefit from their more expansive scale).

As much as one third of income inequality growth since 1980, another study has found, can be blamed directly on the gap between wages at super firms and their smaller competitors. 

In other words, even though the argument that “bigger is badder” will likely draw criticism from the tech industry, and could prove legally challenging, that might not be enough to prevent it from being very popular.