Regulation

Warren Pitches Plan To Break Up Big Tech

Elizabeth Warren

In an effort that could limit Silicon Valley’s growth, U.S. Senator Elizabeth Warren (D-Mass.) has put out a plan to break up large tech firms like Facebook and Amazon. The idea is said to be the clearest proposal of its kind in the presidential race for 2020, CNBC reported.

“Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy,” Warren wrote in a blog post. Warren continued, “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

She went on to explain that nearly half of all eCommerce goes through Amazon, while more than 70 percent of all Internet traffic is via sites owned or operated by Google or Facebook.

To create an even playing field, Warren wants to make certain firms into “platform utilities,” which would be defined as firms that have worldwide revenues of at least $25 billion. Those would be firms that connect third parties or offer an exchange or marketplace. Warren is proposing that these firms would not be able to own platform participants and the utility itself.

In addition, Warren wants to have regulators undo mergers she says are “anti-competitive” like the acquisition of Whole Foods by Amazon or the purchase of Instagram or WhatsApp by Facebook.

The Senator defended her proposal at this past weekend’s South by Southwest Festival (SXSW) in Austin, where the audience included employees from some of the tech companies Warren has set her sights on.

She said that companies like Amazon have data on buyers and sellers that it can use to compete in ways that average sellers and small businesses simply cannot.

“My view on this is: it’s a little like baseball,” Warren said, according to CBS News. “You can be an umpire, a platform, or you can own teams, that’s fine. But you can’t be an umpire and own teams.”

“The way markets work is that they have to have rules, and they have to have cops to enforce them,” she explained, adding that she supports instating antitrust rules in the tech market.

And while her original proposal didn’t specifically address Apple, Warren made it clear in a recent interview with The Verge that the tech giant would be included in her plans.

“Apple, you’ve got to break it apart from their App Store. It’s got to be one or the other,” she said. “Either they run the platform or they play in the store. They don’t get to do both at the same time. So it’s the same notion.”

Warren, however, did not explain how Apple could distribute apps, as well as keep the iPhone ecosystem working, without the App store.

“If you run a platform where others come to sell, then you don’t get to sell your own items on the platform because you have two comparative advantages,” she added. “One, you’ve sucked up information about every buyer and every seller before you’ve made a decision about what you’re going to to sell. And second, you have the capacity — because you run the platform — to prefer your product over anyone else’s product. It gives an enormous comparative advantage to the platform.”

She went on to say that companies like Apple and Amazon are able to use “market dominance,” to sell their products, which might not necessarily be better or more user-friendly that their smaller competitors.

“So my principle is exactly the same: what was applied to railroad companies more than a hundred years ago, we need to now look at those tech platforms the same way,” she said.

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