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Congress vs. Big Tech: Breaking Up Is Hard (and Stupid) to Do

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Like a lot of you, last week I watched the congressional testimony from the CEOs of Amazon, Apple, Facebook and Google — and there were a lot of apparent things that were problematic.

One is that there are folks in Congress that likely shouldn’t be in Congress (and if you watched the testimony you know who I’m talking about), and another is that each company has some serious issues they haven’t dealt with. Though, I think Apple seemed to get through this pretty cleanly. However, at the same time, Arizona stepped up and took a decent shot at Apple regarding throttling older iPhones — and that tended to drop Apple into the same mess as everyone else.

Given the remedy that seemed to be favored is breaking up the companies, which I think is akin to cutting off your nose to spite your face, I’m going to suggest a different path.

We’ll close with my product of the week — an instrumental Microsoft 365 third-party app that could free up more of your time to binge watch videos.

Power Corrupts

If you were to step back from the grilling, a common theme was an abuse of power. This position was highlighted differently in each of the companies:

  • Amazon — for aggressively abusing their selling partners, highlighting stories consistent with what I have also heard;
  • Apple — for abusing their app store vendors and allegedly using slave labor to build their devices;
  • Google — for taking the majority of ad revenue, putting the U.S. press at severe risk of failure, and for allegedly not complying even with their internal privacy directives; and
  • Facebook — for buying up all of their competition and assuring none could emerge.

It did seem like, with some noted and embarrassing exceptions, that the men and women empaneled were laser focused on these firms abusing U.S. citizens, and the firms did not present themselves well.

Example after example of abuse of power was brought forward from the year-long congressional investigation into the firms’ practices; and the evidence was pretty damning, as a strong case was being built for abuse of monopoly power that could be applied to all four companies.

But, like a lot of things out of government, the suggested remedy to break up the firms is overly tactical and likely will do the nation more harm than good.

Breaking Up Isn’t Just Hard – It’s Dangerous

I’ve studied government responses to antitrust problems over the years, and generally, they do a different kind of damage.

For instance, the breakup of Standard Oil removed the U.S. as a leader in the petrochemical industry and replaced it with the oil cartels (mostly Arabian).

The breakup of RCA took consumer electronics and gave the industry to Japan. The consent decree with IBM critically weakened the company. It did eventually lead to the rise of Apple, Intel, and Microsoft, but it was a very close thing as Japan and England were clearly in the hunt for that industry.

Microsoft was able to recover from their consent decree as well, suggesting that this, if it is enforced, can be a better way to deal with the problem and not pass the industry on to another country. But the decree has to be enforced, and the typical use of internal audit for this has proven problematic because that function, in most companies, has either declined or never been powerful enough in the first place.

Regardless of the approach, the effort has to go beyond the initial remedy and assure the intended outcome. You can’t just kill a U.S. company and assume that other U.S. companies will benefit. We are in a world market, and other countries will step up and fund the emergence of competitors who will then take away the crippled company’s business and power.

So you not only have to restrict the misbehaving company but also make sure whatever remedy is enforced and then fund the competition that you want to emerge to assure that it doesn’t emerge in another competing country.

If you don’t take those extra steps, you won’t address the bad behavior effectively, or you are more likely to cause the nation to lose another industry — and each company needs a different remedy.

The Ombudsman Approach

When the problem is an abuse of excessive power, the one remedy that can work is to mitigate that power with more powerful oversight. Complaints are routed to that entity, who then aggregates them and decides on a response based on the nature of the complaint. The position has to be staffed well enough to be able to deal with the complaints and have enough authority to assure that the resulting punitive remedy, if the complaint holds up, is strong enough to change the underlying behavior.

The goal of the effort, either put in place by ruling or consent decree, is to remove the power imbalance that is at the heart of the bad behavior but not cripple the company so it can’t compete. The ombudsman (but applied to the private sector) should have the apparent power not only to fine the company but also the individuals in charge.

Besides that, the ombudsman should have the authority to set the amount of the fines as well as provide financial remedies for those harmed by the bad behavior. A special effort, in the case of Google, to better balance income between the information aggregators and those producing information, is also necessary if the nation’s free press is to be sustained.

In other words, the approach needs to be surgical because you don’t want to kill the patient; you want it to start behaving in a way that isn’t damaging the country or its citizens.

Wrapping Up

In watching the testimony, I agree that the firms have all been misbehaving and doing harm because they lacked sufficient oversight. You wouldn’t fix a misbehaving child by carving them up, but instead by giving them adequate oversight, punishments, and incentives. That is more the role of an Ombudsman.

If we look at Microsoft’s recovery from their antitrust issues, they came out of the process not only more successful than they went into it, but with what appears to be sustained behavior modifications where they favor things like open source and interoperability rather than fight it.

But given this is a recurring problem, perhaps part of the remedy is to empower the Federal Trade Commission to more aggressively oversee all large companies with enough clout to make it so large firms don’t screw up in the first place. The cost to the country of killing large numbers of small innovative companies is high and more aggressively preventing that should be part of the remedy.

Often in these cases, the small companies that initially complain are long gone by the time the eventual remedy is put in place. That is a loss of capability that almost assures the next tech wave will occur someplace else. Assuring that doesn’t happen should also be a far higher priority than it is.

Rob Enderle's Technology Product of the Week

I just ran into ActiveWords last week, and it is a fascinating and rather simple productivity booster for folks that write a lot.

It allows you to create your macros very quickly for phrases, sentences, paragraphs, or pages you use a lot in writing.

You can also train it to launch apps with a couple of letters, open web pages, act on selected tests, carry out scripted sequences, date and time stamp, and AutoCorrect and Auto Text when needed.

For someone who writes a lot, it could take hours of repetitive typing out of your workday, allow you to get far more done in a given period, and work faster.

Now, the only group that seems not to like this app are people that are paid by the hour; and the groups that love the app are those paid by the word, by the project, or salaried.

ActiveWords 4

ActiveWords 4

The product costs US$30 a year for an individual, but you can try it free for 60 days to see if it helps the way you work.

This offering is for power writers, and for those that can remember the shortcut codes they set up. Think of it as shorthand for all of Microsoft 365.

For the right person, this thing is potentially a godsend — and my product of the week.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.

Rob Enderle

Rob Enderle has been an ECT News Network columnist since 2003. His areas of interest include AI, autonomous driving, drones, personal technology, emerging technology, regulation, litigation, M&E, and technology in politics. He has an MBA in human resources, marketing and computer science. He is also a certified management accountant. Enderle currently is president and principal analyst of the Enderle Group, a consultancy that serves the technology industry. He formerly served as a senior research fellow at Giga Information Group and Forrester. Email Rob.

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