Breakup Google and Facebook

This is an extraordinarily difficult column to write. In the first instance it requires me to agree with America’s newest socialist, Sen. Elizabeth Warren (D-MA), albeit agreement as to a problem but not to the rationale or the solution. And second because, at first blush, it would appear to be a departure from a commitment to capitalism, free trade and risk and rewards. But, as I’ll try to explain, my belief is that the major players (Google and Facebook) in the internet and social media arenas need to be broken up and limits need to be established on “market share.”

Ms. Warren appears to object to these industry leaders not because of market domination but more because of their wealth accumulation and a frustration that because of that wealth she cannot bring them to heel in promoting her political agenda and/or preventing her opponents from promoting their political agendas. It is one of the endearing qualities that brand her a socialist – her agenda is unsound in reality and must be enforced by the power of government, including the silencing of dissent. What a gal!

But, be that as it may, there is a problem with the concentration of market power in these two companies as well as their intrusion into their subscribers’ privacy. Capitalism has proven to be a boon to the development and prosperity of America, but capitalism without recourse has proven over time to permit anti-competitive conduct and abuse of customers. The Sherman Antitrust Act was adopted in 1890 in response to the abusive conduct of business enterprises which allowed them to arbitrarily raise prices and impose other limitations without fear of competition. The United States Supreme Court in a case decided nearly 100 years after the Sherman Act – (Spectrum Sports, Inc. v. McQuillan (1993) – captured the essence of antitrust law:

“ The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

It is to that principle that I adhere rather than the concept of Ms. Warren that “big is bad” – particularly “big” that doesn’t listen to her.

Lets make sure that we are all on the same page when discussing Google and Facebook. Google is the gateway to the use of the internet. Over eighty percent of internet searches are channeled through Google. So pervasive is Google’s control of internet searches that Firefox uses Google for searches over its network. And despite your belief that Google services are free, they are not. In order to avail yourself of this dominant search engine you must grant Google the intrusive right to access, capture and store unlimited information about you and your family. It is an omnipresent demand and extends not to just their search engine but also to its email system (gmail), to cloud services, its photo services, its smart phones (Pixel) and virtually every other service it provides. It can read your emails, listen to your private conversations over Google Assistant and chart your movements through Google smart homes and Google Maps, It knows where you are at every minute of the day or night through the GPS capability of your smart phones. It knows more about you than you know about yourself. With Google there is no privacy.
Now you might say you have nothing to hide so you don’t care about that. If you do then you are an idiot. The problem with that kind of attitude is that Google uses all of that information to build a computer model of you that may or may not represent your actual self and there is nothing you can do about it because you are not allowed access to it or the algorithms that create that model. It sells access to that model for advertising and political purposes, which results in your being inundated with tons of internet advertising. Google, is basically an advertising machine and that is the primary source of its revenue.
But Google uses its primacy in data collection and its exclusive access to its algorithms to advantage itself in placement of the results of internet searches as well as references to its allied products. These are “tying” arrangements and should be viewed with suspicion.
The concentration of information in a private entity without controls or opportunity to view and change the data collected allows too much political power in a private entity – including the opportunity for leveraging information for financial and political gain.
And it is here that a solution for Google’s market domination can be resolved. Google’s business should be segregated between data collection and advertising. It would thereafter be able to sell its manipulation of that data collection to others, including the new independent entity created to continue its current advertising on a nondiscriminatory basis. The data collection business would receive revenue selling the data, while the new entity would receive revenue by undertaking its advertising.
And along the way, consumers should be given the opportunity annually to eliminate the data collected that can be identified to them individually as well as review the “model” that algorithms have created from the collected data.
Like Google, Facebook is basically an advertising business using the data collected from its users to build profiles for advertising and God knows what other purposes. Facebook’s recurring lack of transparency, political manipulation and misinformation suggests that it is in dire need of a house cleaning. Ridding itself of that snot-nosed Geek in the gray tee shirt (Mark Zuckerberg) and Malificent (Sheryl Sandberg) along with its culture of “move fast and break things” is probably insufficient to cure all that is wrong with Facebook. Segregation of its data collection through Facebook pages from all the other services that use that data will go a long way towards leveling the playing field. Selling use of its collected data to its new entity on the same terms and conditions offered to third parties would provide revenue for Facebook and remove the incentives for manipulating the data in secret – secret even from those providing the data.
A muscular enforcement of the antitrust laws is the best means for ensuring that aggressive marketing doesn’t destroy a competitive market. However, there is one caveat. In exercising the authority given under the anti-trust laws it is critical that those assigned to enforce the remedy actually know something about the business they are being asked to oversee. The breakup of AT&T was overseen by United States District Judge Harold Greene who knew nothing about telecommunications and less about the United States outside of Washingon, D.C, and administered by a group of junior lawyers at the Justice Department – most of whom who had never been west of the Ohio River and who assumed that what might work in Washington, D.C. would work universally. They were wrong and they made a mess of the dissolution of AT&T by failing to recognize that the introduction of technology, not the shackling of the Bell Operating Companies was the key to introducing competition.
In the end, I do not stand with Ms. Warren, rather I suggest Mr. Warren get out of her ivory towers (Harvard and the United State Senate) and understand that she is clueless in understanding her target – its should be Google and Facebook and the information they mine, not wealth.

Oregon Catalyst