Anti-Trust Lawsuits Against Big-Tech with Sam Tomlinson

By Site Strategics
January 20, 2021

Our special guest for episode 385 and episode 387 of the award-winning EDGE of the Web podcast was Sam Tomlinson, Executive Vice President at Warschawski. Host Erin Sparks spoke with Sam about anti-trust actions against big tech, including specific cases involving Facebook and Google. Here’s what we learned: 

Antitrust Law 101: From the 1800s to Big-Tech Today

There has been a distinct lack of regulation at the federal level over big-tech companies like Google, Facebook, Apple, and Amazon, but there is a rising wave of anti-trust actions beginning to wind their way through US courts, and in other countries around the world.

The word “trust” is what was used back in the 1800s to refer to large businesses, and anti-trust laws were developed in those days to hold those companies accountable and keep markets competitive. Sam noted that the rapid rise of big tech companies in a very short period of time (a couple of decades) is unprecedented, and regulations have lagged because of this. And it’s complicated because those big-tech companies have become the backbone of the economy.

One thing that’s clear is that the anti-trust laws developed more than 100 years ago, such as the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, simply are inadequate for the complexities of big-tech today. The EU model, instead of trying to apply old laws to new situations, just make new laws to deal with new situations. Many think this European model has gotten better results regarding anti-trust actions.

It’s Time to Really Define the Problems

Sam is also quick to point out that most people simply don’t understand how complex these issues are around big-tech—lack of competition, user privacy, dealing with misinformation, and so on. He references an important quote from H. L. Mencken: “For every complex problem there is an answer that is clear, simple, and wrong.” Breaking the companies up would be simple, and wrong. Doing nothing would be simple, and wrong. There are complex trade-offs that have to be figured out to address problems, such as between security and privacy, between scale and user affordability, and so on.

A good place to start, however, is clearly defining what problems should be addressed, which is what’s lacking from current lawsuits. Is the lack of competition? Is it harmful to consumers because of privacy issues? Is it misinformation on the part of bad actors? Not all of these problems can or should be addressed through anti-trust actions, which is focused on competitive markets.

Should Big-Tech Companies Be Broken Up?

Simply breaking up big-tech companies would be the wrong approach, in Sam’s opinion. Splitting YouTube away from Google isn’t going to help competitors enter the market because YouTube’s dominance is already established. The “network effect” has already happened to such a large degree. Just like it’s questionable whether any new search engine could really make a dent in Google’s market share. Breaking them up doesn’t seem like it would have any discernable favorable impact. And when companies like Google, Apple, Amazon, and Facebook between them gobble up literally thousands of companies (acquisitions plus the acquisitions those companies being acquired had previously made), it’s important to remember that the big four do that because they then have the capital to pour into further innovating what those acquired companies bring to the table.

The Anti-Trust Case Against Facebook

Sam notes that the biggest hurdle in the FTC (Federal Trade Commission) lawsuit against Facebook for illegal monopolization by acquiring companies like Instagram and WhatsApp is that it not only stood by but approved Facebook buying those companies! It makes no sense to go after Facebook for doing something the FTC itself signed off on. As any kid in elementary school will tell you after trading something with someone, there are no “take-backs.” But that’s what it feels like the FTC is trying to do. And there is the possibility for competition. Just look at the way TikTok has exploded onto the scene very recently, or how well Snapchat is doing. 

Sam notes, however, that both of these deals were reviewed and signed off on by the Federal Trade Commission when they were happening. Why is it now suddenly a problem when they approved it to begin with? And every elementary school kid who trades a baseball card knows it’s final, there are no “take-backs,” so for the FTC to now be doing this feels like a kind of “take-back.”

Sam also pushes back against the idea that no other company can compete. Just look at TikTok, which amassed over a billion users in an unbelievably short amount of time. Look at Snapchat and how well it’s doing. It’s wrong to say no other company can compete. And that’s about user demographics, right? Facebook skews older. Today’s teens don’t use Facebook, and many don’t use Instagram—they use TikTok and Snapchat! And when it comes to Facebook’s predatory conduct around app developers not being allowed to develop competing functionalities, it would be rather easy to solve that problem with regulations, not anti-trust laws that don’t apply. Again, it’s about clearly defining the problem and then choosing the best way to address it.

The Anti-Trust Case Against Google

Google controls the entire digital advertising pipeline, which paves the way for Google prioritizing its own services. The complaint here, as the New York Times put it, is how unfair it feels when Google acts as the “pitcher, batter and umpire, all at the same time.” 

The US Department of Justice filed a lawsuit accusing Google of unlawfully boxing out competitors by reaching deals with phone makers, including Apple and Samsung, to be the default search engine on their devices. There is also a complaint led by Texas accusing Google of engaging in “false, deceptive, or misleading acts” while operating its buy-and-sell auction system for digital ads. Google has been accused of hurting competitors by giving priority in its search results to its own products, like shopping ads or local business listings.

Sam notes the Texas lawsuit is a strong one because they’ve produced solid documentation of how Google dominates the whole ad tech stack and operates in ways that exclude competitors and results in self-preference. What’s good is to see regulators getting to really unpack the digital ad stack and understand it. The problem is that some are saying they need to borrow from financial regulations and apply them to digital advertising, but that won’t work because they’re not directly applicable. But the self-preference issue is real and should be addressed, but it’s better addressed through some simple regulations.

People love getting mad at Google for constantly changing its core search algorithm and the negative impacts it often has on many companies, but Google has every right to change their platform however they wish. Google has also been very good at “taking over” various vertical search opportunities. Here again, Google is merely seeing how existing platforms are lacking (TripAdvisor, Booking.com, Yelp, and so on) and ends up doing it better. It’s just the nature of Google having the resources to make improvements on behalf of users. Google reviews are better than Yelp. Google Flights is better than any other airline search option. This is just the way business work. It was the same approach Sears used to take, and the same approach Walmart takes as well. 

In the end, Sam notes when trying to deal with the complexities of big-tech companies, there are always going to be trade-offs to manage. And big-tech isn’t really doing anything businesses haven’t been doing for decades. It’s just that the scale is mind-boggling, which makes people understandably nervous. There are real problems to address, but they require being clearly defined and choosing the most effective way to address them.

 

Connect with Sam Tomlinson and Warschawski

Twitter: @DigitalSamIAm (https://twitter.com/DigitalSamIAm

Sam’s Website: https://samtomlinson.me 

Warschawski Twitter: @thewagency (https://twitter.com/thewagency)

Warschawski Facebook: @thewagency (https://www.facebook.com/thewagency)

Warschawski LinkedIn: https://www.linkedin.com/company/warschawski

Warschawski Website: https://www.warschawski.com 

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