Trust-busting in the Silicon Valley

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The ghost of Teddy Roosevelt and his trust-busting big stick hovers over Silicon Valley as calls for countering the concentrated power of dominate Internet companies grow louder.

The most recent example is contained in a 70-page pamphlet issued by Bill Galston, a former Bill Clinton aide and senior fellow at the Brookings Institution, and Bill Kristol, founder and editor-at-large of The Weekly Standard. With their newly incorporated non-profit The New Center, they hope to refocus political dialogue. The pamphlet includes seven “Ideas to Re-center America.”

Idea number 1 offered by the authors challenges the Titans of Technology. Galston and Kristol point out that “America’s five largest technology companies—Apple, Alphabet (parent company of Google), Amazon, Facebook and Microsoft—dominate the economy and their respective markets like few businesses in the modern era.”

Examples: Facebook controls the social feed of 2 billion active monthly users, nearly one-quarter of the world’s population; Alphabet (Google) owns 81% of the search engine market; one out of every two dollars spent online goes through Amazon.

While the authors recognize the companies for their success, they raise a warning flag of concentrated power that leads to monopolistic behavior. Similar monopoly situations have met legislative and regulatory actions in the past. Unlike companies like Standard Oil, which controlled a commodity, the tech companies control “unprecedented amount of data, the most valuable asset in the world today,” Galston and Kristol write.

The threat of a dominating and a domineering Silicon Valley has been long understood by Joel Kotkin, Presidential Fellow in Urban Futures at Chapman University and a recognized authority on economic, political and social trends. He has written extensively about what he terms the “oligarchs” of Silicon Valley.

“The tech moguls have morphed from exemplary entrepreneurs to something closer to the rent-seeking oligarchs in Russia. They pose a huge threat to competition and perhaps the middle class in a way not seen since the gilded age,” Kotkin wrote.

Kotkin notes that the tech titans became wealthy the same way John D. Rockefeller became rich: control of markets. He warns the big tech companies can “morph into conglomerates… buy their way into what were once seen as unrelated markets.”

Galston and Kristol argue that unlike during the age of the so-called robber barons, there is little widespread anger against big tech because the public views the companies favorably.

But that attitude may be changing across the political spectrum as this report in Politico suggests.

Kotkin bluntly says of the Silicon Valley tech leaders, “They have bought off the progressives with contributions and by endorsing their social liberal and environmental agenda.” But Kotkin also thinks the “oligarchs are losing their popularity pretty rapidly.”

For Galston and Kristol, the solution to deal with the tech titans is to stiffen the Sherman Anti-trust Act of 1890, used by Teddy Roosevelt to break up monopolies. Galston and Kristol propose new laws to: Address the ways that digital companies are using network effects to crowd out potential competitors; Redefine and crack down on predatory pricing practices; Toughen scrutiny of mergers that threaten competition within sectors; Take seriously the anti-competitive effects of vertical integration; Enact new rules and procedures to speed antitrust litigation, which sometimes drags on for a decade or more; Explore the use of free services to disguise monopolistic advertising practices

Silicon Valley and other tech titans will resist a move to crack down on their ever-growing power. Yet, history could repeat. Teddy Roosevelt believed it was not the government but the people speaking through the government that demanded regulation of all-powerful companies. The voices are getting louder.

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