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The anti-monopoly case against Google

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Since 2001, writer and researcher Barry Lynn has warned of the dangers of corporate influence of monopoly power at the New America think tank — most recently as part of the Open Markets program. Initially focusing on conventional conglomerates like Walmart and Newscorp, Lynn’s more recent work has focused on tech giants like Google, Facebook, and Amazon, which he sees as a new breed of internet-fueled monopoly.

Last week, Lynn’s supporters got an unpleasant surprise. On Wednesday, The New York Times reported that New America had cut ties with Open Markets and Lynn — reportedly at the request of Alphabet’s executive chairman Eric Schmidt. Google contributes significant funding to New America, and the company was unhappy to see Open Markets cheering on a recent European Union fine. The result was a permanent split between Lynn’s project and the larger think tank — one that has inspired a new round of concerns surrounding the web giant’s power. If Google can shut down critics, is it time to rethink the monopoly case against Google? We spoke with Lynn on Friday about the new push for anti-monopoly action, and what the last week has meant for him.

This interview has been edited and condensed for clarity.

I’m sure it’s been a busy week. I wanted to start by asking about Open Markets. How is the program going to change now that it’s not connected to New America?

So, I wasn’t funded by New America. I raised my own money from different foundations for Open Markets. In New America, each program director raises his or her own money and then [gives] the center a certain percentage of the money to cover rent, to cover accounting, to cover communications. In this case, most of my funders are transferring over with me, and we are already up and running.

We’re an independent institution today…. And we’ve got more funding coming. We intend to grow. We’ve got a lot of work to do, so we’re going to be fundraising aggressively. But we’re in good shape today.

Taking a step back, why is it so important to talk about monopoly power, particularly regarding tech companies?

It’s important to talk about monopoly power in general because monopolies are a threat to our democracy and to our basic liberties and to our communities. Monopolization, this concentration of wealth and power, is a threat to everything that is America — everything we established America to ensure. So Open Markets is built to fight the environment of law and regulation that currently promotes unrestrained monopoly.

America today has a monopoly problem. We’re seeing basically a second wave of consolidation and monopolization because of the digital revolution. These companies are just as bad as Newscorp or Walmart or Citibank was in 2005. Google, Facebook, and Amazon: the danger they pose is on a vastly different level.

There are big differences between classical monopolies and web companies like Google and Facebook, though. Walmart has lots of stores and physical infrastructure that make it hard for competitors to open up a store next door. But if you wanted to make Not-Facebook.com, it’s easy to set up a URL and easy for people to go there. But people don’t go because they want to use the service everyone’s on. And it’s free, so where’s the harm to consumers?

The first issue is consumer protection and potential consumer harm. We created antitrust laws originally to protect our liberties, often as producers of stuff. Say I’ve grown a bushel of wheat and I want to bring my wheat to market. I want there to be no corporation standing between me and the person who’s buying my wheat so I can engage in an open negotiation in a competitive environment against other farmers for the favor of these buyers. My liberty to bring my wheat, my ideas, the product of my labor to market. That’s liberty.

The second purpose was to protect our democracy against huge concentrations of wealth and power. To protect our democratic institutions.

And the third purpose [was] to protect your community. If I’m living out in Peoria, do I want the city of Peoria to be run by a couple corporations based on Wall Street, or do I want it to be run by the citizens of Peoria? So you use anti-monopoly law to ensure that.

Those were the goals. They’re political goals. [But] in the late 1970s and 1980s, the Chicago School came along and said all those political considerations are very wasteful, and what we should really do is remake monopoly law so it focuses on serving the welfare of the consumer. And the welfare of the consumer is really only measured by price. So what they did is create a system in which any company that could make a rudimentary argument that their actions were going to result in a dropping of price, they would be given license to get bigger and bigger.

An excellent example of that is Amazon. They’ve busted in market after market. And whenever they bust into a market, the first thing they do is sell things below the cost at which they’ve been sold up to that point.

Sure, if you’re talking about Amazon or Walmart, you can make that argument. But the nature of an email service or a social network is that it’s free Facebook isn’t any cheaper than Ello. It’s just that people go to Facebook because they want to be where all the people are.

Given the nature of the internet, it can make sense that all of a certain kind of activity ends up on one platform. That makes sense, perhaps, from the public’s point of view. But the problem is when the marketplace is not neutral. It is a marketplace that is regulated by a private actor — by Amazon, say — not for the interests of the public, but for the interests of Amazon.

And you could extend this same argument to the Facebook News Feed or Google search.

Exactly. People are starting to use the word “utility” when you talk about Amazon or when you talk about Google search. And we can use the word utility. Another way to think about it is that these are railroads. These are the railroads people use to get to market. But whether you use the word utility or you think of them as railroads, either path will lead you back to a bunch of regulatory models from the past that help to shine a light of today’s regulatory model.

If all the people online want to go to one place to exchange books or to exchange mortgage quotes, you want to ensure that the platform provides a neutral place for the individuals to interact with one another according to rules that ensure the neutrality of the entire system, so that it is individual talking to individual within an open market system. That’s how you make markets. And that can be done, that has been done in the past. [Today] all this stuff taking place on a platform, but the people running that platform manipulate the interactions between the people that produce something and the people that consume it. They manipulate those interactions to maximize their own power.

So, go back to Amazon and books. In the old system what you had was authors writing books — hundreds of thousands of authors, maybe thousands publishers, new publishers coming in, old publishers dying out every day. You had thousands of retailers and then you had millions of buyers of books. The book may have taken a while to move from the author to the reader, but it had a huge number of pathways to get from the author to the reader. Today, most books are sold along the Amazon platform, and Amazon will interconnect readers and authors in ways that entirely warp how books flow. And this affects the well-being of the author, it affects the well-being of the reader, and it affects the well-being of the public as a whole, because the flow of information within society is being warped by this large platform.

So your argument is that there’s this third party that’s serving a market function, but isn’t being neutral and even-handed about it. But that’s not an argument about how big the third party is. Maybe market share makes bad behavior more of a problem, but it sounds like if we suddenly decided we were going to treat Google like a telecom and hold Android to some set percentage of market share, that wouldn’t necessarily solve the problem you’re talking about. The problem is the non-neutrality of the platform, not the size.

You got it! What we’re dealing with in platforms is just like utilities and railroads. These are monopoly networks, or networks that have many monopoly characteristics. So we looked to the past, trying to figure out what principles people used to regulate the railroads, the utilities, and other monopoly networks. And there were two primary principles people brought to bear on the transport monopolies.

One was non-discrimination, which is most important from the side of the producer. Every single customer has been trying to use these platforms, these transport systems, to get to market, has to be treated the exact same. You get the same service, you get the same pricing, and you all get in the same line. No discrimination, no playing favorites, no giving someone a better rate.

The second principle was no vertical integration. If you own a necessary monopoly that other people depend on, you cannot deal in products that compete with other companies that depend on you to get to market. If I am growing grain on my farm and I need to get on your railroad to get to the city where my grain’s going to be consumed, I do not want the railroad to buy the farm next to me. That’s because when I go to the depot, I know that every day when I try to take my grain into town, the railroad grain will be loaded before mine is.

And an example of that today is Amazon Books. Amazon is now the largest publisher of books in the United States. I’m not just talking about self-published books, but books prepared by professional authors. And while Amazon is publishing books, they are the essential pathway for Hachette, for Penguin Random House, for those publishers to get to the marketplace. How is that fair? Amazon has an interest in putting books that it has published itself ahead of the books that other people have published. It’s clearly unfair, and that’s why, traditionally, the United States has not allowed vertical integration.

In some ways, it sounds like the problem you’re describing is more a problem of regulation than conventional anti-trust action. You want to make sure companies follow specific rules rather than break them up into smaller platforms.

Sure. The answer is not to break Google or Amazon up. If, because of the nature of a particular technology, there’s a tendency for there just to be one, then you want to ensure that one treats every single producer and every single consumer the same — no discrimination. And you want to ensure that it does not have any conflicts of interest created by ownership of products that put it into competition with people who depend on it.

Now, is that utility-style regulation or is that anti-trust? There are answers to that problem in both the utility regulation toolkit and the anti-trust toolkit.

So it’s just a question of who picks up the tool?

Yeah. One of the criticisms is that these companies are extremely new, and we have to create an entirely new toolkit and proceed very carefully so we don’t mess things up. But in fact, we actually have a good recent example of the use of government to pursue each of those principles. That’s what the Microsoft case was about in the 1990s, no vertical integration, and the case was won. The government won the case in the first instance.

Well, Microsoft won the appeal in 2001, and ended up with a smaller settlement.

The Bush Department of Justice didn’t want to pursue it. They set it aside. But we can still say the government went to court [and] they won that case — there’s our model. That’s what we want. And that’s what we’re seeing with Google in Europe. That model is being applied. And you know the answer for the other principle, neutralization of network monopolies. That’s the Open Internet Order in 2015.

Now that was a regulatory approach through the FCC, but whether it’s a utility approach or an anti-monopoly approach, both of them are under the umbrella of anti-monopoly. You’re just using different types of approaches to deal with a particular problem. And sometimes it’s just by happenstance whether you’re approaching it through the anti-monopoly or utility model. If you look at the history of American regulation, how one particular ended up under one particular regulatory regime, a lot of that’s just accident. But as long as you keep the principles in mind, what are the goals you’re aiming at? There’s a whole bunch of different ways you can achieve those goals.

Why do you think Google feels threatened by this conversation?

Well, they just lost a big case in Europe, and they have more cases coming down. This is a fight that they’re in right now, and they’re desperate to keep that fight out of the United States. They want to keep that in Europe. Anti-trust is kryptonite for a super-large corporation like Google. You bring anti-monopoly up with them and it takes away all the special powers they have.

You mentioned the European Union ruling in June, which forced Google to pay €2.4 billion for favoring its own shopping services in Google search. It seems like the penalty had a focusing effect for Google, but from afar, the fine wasn’t that big. It didn’t seem like it hinted at any existential threat to the company. What was so scary about that ruling for Google?

It wasn’t just the fine. It was the threat of future fines based on continuation of the behavior. They gave a fine that was to get their attention, to prove that they were serious, but it wasn’t just a one-time fine. The message was, “You can’t do this anymore, and if you continue to do this, we are going to come back and fine you more.”

It’s the permanent prohibition on certain types of activities, the taking away forever of a license that they had, that is getting them upset. And we should applaud it, because the taking away of that license means that this technology is going to become less threatening to us as a public and these technologies will become more useful to us.

Remember, anti-monopoly action doesn’t mean that we get rid of Google or get rid of Amazon. In fact, if we apply these principles to Amazon or Facebook, one of the benefits for citizens is that we still have Amazon and Facebook. But they cease to become dangerous. They become tools that allow us to do our work. They become mediums that allow us to interact with each other more effectively. They actually take us back to what the internet was originally designed to do. We should remember, the internet was open and now suddenly it’s closed. These are the people who closed it. These are the monopolizers of the internet.

You’re talking in very broad terms, but Google, Amazon, and Facebook are very different companies.

For both Google and Amazon, I think regulators would be bringing both of those principles to bear — neutralization of certain aspects of the companies, and then also de-verticalization, or cutting off things at both companies.

Facebook, you’re right, is a more stripped-down operation. Now, Facebook has engaged in horizontal predation, both in buying up companies that we probably should not have allowed them to buy and then also appropriating the capabilities that other people bring to market.

Snapchat comes along and has certain unique features that distinguish it. Then in a few weeks, this giant company comes out with the same features. So preventing Facebook from engaging in vertical integration would have less effect, but if you did apply the non-discrimination rule to them, it would really quite radically change a lot of the flow of information through their systems, and would really change their advertising. That would also make it easier for new entrants to test themselves and grow, and maybe lead us to a better Facebook.

The other question with Facebook: is there a public harm in the way they manipulate information between the author of an idea and the reader of that idea? I was talking about the way Amazon manipulates the flow of books between an author and a reader. We have much the same problem with Facebook. They’re manipulating the flow of information between citizen and citizen, and they’re doing it in ways that maximize their own revenue but warp the public perception of events.

But that sounds like an objection to algorithmic timelines in general. Right now, I get a mostly chronological feed of posts from Twitter and Tumblr and a mostly algorithmic feed from Facebook and Instagram. You’re talking about the government coming in and telling Facebook and Instagram that it has to be chronological.

Sure, or maybe we need to be auditing the algorithms. Maybe it’s not the government, but some other group. Maybe we want restrictions on the use of data. There are lots of different potential solutions, so I don’t want to put out any one solution as the only answer. Once we start to understand what the problems are, there are a lot of different ways to make these products work better for us. But the key thing is that we are increasingly able to identify the problems.

You said we’re bringing the government in. I tend to look at it as the public getting back into the game. These are public utilities. They provide services that are essential in nature. So the people of the United States have an essential interest in ensuring that these giant companies are serving us all equally.

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