Trust in antitrust

Trust in antitrust

On March 3, 1998, US Senator Orrin Hatch called to order a hearing before the Senate Judiciary Committee.

“Is there a danger that monopoly power is or could be used to stifle innovation in the software industry today or, perhaps, more importantly, looking forward?”

With that, the antitrust case against Microsoft began.

Now, 21 years later, the U.S. Department of Justice and the Federal Trade Commission launched a probe against Amazon, Google, Facebook and Apple for a potential antitrust case.

In today’s edition we’ll explore why this is happening, why (most) tech companies aren’t a monopoly, how regulators can fuck up and how this could affect Europe.

The Pressure Cooker

Machiavelo suggested that one of the most effective political tactics is “creating an enemy” out of thin air only to take it down with vigor and claim victory.

Trump did it with the press. Marine Le Pen, with immigration. Elizabeth Warren and Margre the Vestager are doing it with Big Tech.

“You can be an umpire—a platform—or you can own teams. That’s fine. But you can’t be an umpire and own one of the teams that’s in the game.” —Elizabeth Warren at South by Southwest.

After Warren’s speech at SxSW, taking a swing at Big Tech became a popular move. Everyone and their mother is pushing for big tech to be dismantled.

Now, as a result of that pressure, the DOJ and the FTC are building up an antitrust case against Big Tech.

It’s certainly reasonable to ask ourselves: did Big Tech get too big? But it’s also reasonable to look at the evidence before asking for Mark Zuckerberg’s head.

Let’s start with everyone’s favorite word: monopolies.

Big Tech is nasty, but it’s not a monopoly

Cambridge Analytica. Influencing elections. Zuckerberg playing fast and loose with your privacy. Google prioritizing Youtube and Maps in search results. Amazon copycatting best-performing products and launching them under their own brand.

There’s a fine line between using your entrenched market position to maximize profits in a responsible way and anti-competitive practices, and there’s no doubt that Big Tech is painting green all over it using big piles of cash as a brush.

This said, claiming that Facebook, Google, Amazon, and Apple are monopolies is a stretch. Here’s how the Federal Trade Commission defines a monopoly:

The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power (...) something other than merely having a better product, superior management or historic accident.

Google and Facebook

The first argument is that Google and Facebook are a digital advertising duopoly. But as Ben Thompson points out, there is infinite ad inventory on the Internet, “which suggests that Google and Facebook earn more advertising dollars because they are better at advertising, not because they foreclose competition.”

Source: Stratechery

A few months ago, when analyzing the fall of the newspaper business model I wrote:

“But advertisers weren’t spending less. They were redirecting it [to the internet]. Newspapers went digital with the hope of capturing back those dollars. And while that did happen to some extent, the numbers never came close because advertisers would rather spend their money where they get the best ROI. That'd be Google and Facebook.”

Yes, Google is clearly driving their own products by prioritizing Youtube, Google Maps and AMP sites in search results. But a “good enough” Google alternative is only a click away.

Google and Facebook are capturing most of the advertising dollars because they have a product that’s an order of magnitude better than the competition. The argument that this shift is due to a monopoly position can only be made by someone who hasn’t deployed a single advertising dollar.


In terms of Amazon, there is no valid argument that Jeff Bezos’ baby is a monopoly. According to the US Department of Justice, "as a practical matter, a market share of greater than 50% has been necessary for courts to find the existence of monopoly power."

Yes, the company has around 37% of e-commerce sales, but that if I did my math right, that’s less than 50% and again, the competition is only a click away.

AWS is huge and growing at enviable rates, but is still nascent and definitely not dominant or market-imposing. The retail market share for Amazon is negligent, with only about 4% of the $2.7 trillion U.S. market and about 1% of global retail.

We know they copy their best sellers and launch an Amazon Basics version, which they then prioritize in search results. But is it anti-competitive to launch your own products and own the entire distribution chain? Fuck no. Retailers do it all the time, and I don’t see people complaining about Costco putting Kirkland at eye-level.

Amazon is not restraining trade, which was the Supreme Court's justification for ordering Standard Oil to be broken up in 1911. They are enabling it by allowing thousands of merchants to sell their products on the site.


The Apple case is a strange one. In the US, Apple has less than 45% of the smartphone market share, and in Europe, less than that.

The biggest case against Apple has been brought up by Spotify, who contends that the company of abusing its position as owner of the App Store to stifle competition by forcing a 30% tax on in-app purchases. Spotify, which competes directly with Apple Music, argues that this constitutes an unfair advantage for Apple.

Regardless of Spotify’s motivations, they have a case, particularly in European court who has a record for slapping billion dollars fines to Big Tech, including a $5 billion one to Google for forcing Search and Maps into all Android devices.

Switching away from Apple iOS isn’t a click away. Changing phones and operating systems (which play nice with your Macbook and Apple TV) is a major inconvenience and can’t be treated as going from Google to Bing.

No doubt that Facebook, Apple, Google, and Amazon play rough. These are all questionable moves, ethics-wise. But assuming they are a consequence of a monopoly is lazy. It’s important to understand why users gravitate towards these companies: at the end of the day, Big Tech is powerful because consumers love them, not because they are the only option.

Regulators definitely disagree though.

Lawmakers usually don’t get it right

A decade before the Microsoft case, the US brought an antitrust case to IBM on account of it’s dominant market position in the computer market and attempted to break it into smaller companies that would compete against one another.

On top of IBM spending tens of millions of dollars annually on attorney fees, the company was forced to be completely cautious of all transactions made so as not to give the prosecution any ammunition.

This effectively slowed down the rate of innovation, crushing any possible technological moat around the business. As a result, companies started gaining ground on IBM, who lost much of its advantage over the computer industry.

Wanna guess what happened with the Microsoft 1998 case? You guessed it. It also backfired.

Yes, Microsoft survived the case as a single company, but it emerged from the proceedings drastically changed.

It became so focused on protecting Windows, their golden cow, that it was slow to adapt to the mobile-computing revolution, probably because all Microsoft new development had to be scrutinized for possible pro-monopoly effects.

The long duration of the case not only stifled innovation but also affected Microsoft’s suppliers and customers may well have suffered economic dislocations.As both the IBM and Microsoft case attest, lawmakers move tend to backfire. We saw it with GDPR and how it did exactly the opposite it was supposed to do: to empowering tech giants by building bigger, nicer, cuter moats around them and I’m sure we’ll see it again this time.

Even Margarethe Vestager, who fined Google and Apple billions in European courts, is treating lightly:

“Right now we are not looking into breaking up these companies. We don’t know the effects, we don’t know whether ‘unbundling’ works and increases competition. When you break up a company, it doesn't follow inevitably that you will have more competition, as you may lose some benefits that lead to more competition, incentives, investments.”


Every lawmaker should assume by default that regulation won’t work as expected, and as a consequence, allocate time and budget (and ego) to understand how the change is affecting society.

Since they don’t, once a regulation passes, it’s rarely revised, regardless of whatever second-order consequences occurred.

We are already seeing some of these effects in motion. In big part thanks to antitrust and unbundling discussions, Facebook is looking into merging Whatsapp, Facebook Messenger and Instagram into one unbreakable platform, certainly a questionable move for our privacy.

This strengthens Europe’s position as data arbiter

Ever since GDPR, Europe has been trying to play “privacy” judge for the Western world. The US launching an antitrust probe into Google, Amazon, Facebook, and Apple will only embolden Europe and cement their position as the data regulation leader in the West.

There is one thing Europe is getting correctly, and that’s the importance of privacy as a human right. I don’t want to live inside a Black Mirror episode and I’m sure you don’t either.

"The protection of privacy is quite close to the protection of democracy and freedoms." - Věra Jourová from the European Commission.

Even though they got the “privacy is king” thing right, they got everything else wrong.

Article 11 and Article 13 of the EU Copyright Reform are just the latest example in a series of shitty moves by Europe with the goal of regulating the internet, that culminated with a GDPR disaster.

Now, Europe is trying to smuggle privacy deals in trade deals. The EU's first line of attack is to push data protection rules in upcoming trade deals, as well in bilateral and multilateral trade agreements across the globe.

Yeah, nope.

Europe’s goal to protect citizens against privacy intrusion is admirable, but I’m starting to believe they are not the right people to do it.

The power of the people's will decide

What brought Microsoft down 20 years ago was a shift in public opinion:

“I think going into the case, most people were on Microsoft’s side. By the end of that case — both watching Bill Gates squirm and being obviously too clever by half in his testimony, and that debacle of the faked demonstration video that tried to represent how the system would be degraded if they tried to do what the government said, and it turned out it was just made up — those were moments that were reported on over and over again. And as they were reported, the public began to develop a very different sense of who the company and Bill Gates were.” - Lawrence Lessig, professor at Harvard Law.

The same way that the antitrust probes were launched as a response to public pressure, it’s the internet who will decide how this thing swings.

The main difference today is that Big Tech has the ability to set the “Internet” mood, which is ironic, and perhaps dangerous.

One thing I’m sure though.

Companies are meant to increase profits, not welfare. The entire incentive structures are aligned towards making money because it’s the potential to make outsized profits that drives innovation.

Ideally, an antitrust action is not simply about punishing bad behavior in the past, but also about ensuring competition (which, in the end, secures innovation) going forward.

To that end, it is worth considering whether the upheaval that would result from any sort of investigation would actually make a long-term difference.

There’s no innovation in communism, only Gulags.