What a tech breakup could mean for you

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Will my iPhone really become less secure, as Apple has claimed? Would the selection we’ve grown accustomed to on Amazon shrink, as the company has intimated? Would Facebook being forced to sell off Instagram and WhatsApp break those services, as Facebook would have us believe? And would the quality of Google search be degraded by its inability to feature its own services, such as Google Maps and YouTube videos, in results? Or, as the companies’ critics would have it, will life be better for users, competitors and society if all those things come to pass?

Those questions gained new significance last month when the House Judiciary Committee, with bipartisan support, approved a half dozen bills that signaled fresh willingness to break up the Faaam, as I like to call the tech-titan quintet. (Microsoft, so far, has largely avoided the crosshairs.)

Given the torturous process of federal lawmaking, the chances of these bills becoming law in their present form aren’t high, and any movement could be slow. Congress is preoccupied with other battles at the moment. The companies, their lobbyists, and allies are already pushing back forcefully against this legislation, and against the new head of the Federal Trade Commission, Lina Khan, who has criticized tech giants. A federal judge’s decision this past week dismissing antitrust lawsuits against Facebook for being “legally insufficient” suggests that implementing stricter rules won’t be easy.

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But the chances are clearly rising that something like the provisions in these bills could become the rules by which Big Tech must abide—through an act of Congress, laws at the state level, court battles, a new crop of regulators like Ms. Khan or bipartisan political will to move against tech.

If regulators do gain the upper hand, the effects on you and me could take time, and vary by company. The bills and lawsuits tend to focus on competition, not directly on the consumer—their language and mechanics suggest that more of the former will benefit the latter. And there is little precedent to offer a clear view of what it would be like for users if there is a significant breakup of Amazon, or Apple is forced to divest its own App Store.

Caveats aside, it’s interesting to imagine how things might play out. After talking to experts in the history of antitrust battles, the impacts of market concentration on competition, and the effects of regulation on dominant firms, as well as the companies themselves, here are some possibilities:

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Amazon

Every one of the House’s proposed bills seems applicable to Amazon in one way or another, but foremost among them is the Ending Platform Monopolies Act, which would allow the FTC to break up tech giants if it decides the giants’ products and services could compete with those sold by other companies on the giants’ platforms.

If that seems to encompass many things these platforms do that we take for granted—from offering pre-installed apps on the iPhone to offering house brands like Kindle and Amazon Basics on Amazon.com—that’s because the language of the bill really is broad.

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Past ideas from antitrust specialists for breaking up Amazon have included splitting it into at least four different companies by separating the pillars of its dominance: the core retail operation, its marketplace where third parties can sell, its hugely profitable cloud services division, and its fulfillment and logistics operations.

Even if a split were limited to spinning off its marketplace, the change could be noticeable for consumers. Amazon said last month that the bills might lead to it removing outside sellers—which account for a majority of the items sold on its platform. It would be as if Amazon were broken into a retail division that functions like Walmart—with its house brands and the items from other companies that it sells directly—and a separate marketplace like eBay.

Amazon’s statement said all this would “have significant negative effects on the hundreds of thousands of American small- and medium-sized businesses that sell in our store, and tens of millions of consumers who buy products from Amazon.”

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It’s difficult to assess the potential impact of such a breakup and foolhardy to profess certainty about it—America has seen little like it since the breakup of Ma Bell. Amazon says it would mean the end of things like free shipping, but the company’s own programs to allow outside vendors to accomplish the exact same Prime free delivery service, without the aid of Amazon’s logistics operations, suggest the company could find a way to maintain its operations regardless.

Apple

Another proposed bill, the American Choice and Innovation Online Act, has a similar goal. It is intended to keep companies that own big, market-dominating platforms from giving their own services and wares sold on such platforms an artificial boost against competitors. That could put a target on Apple’s App Store, through which Apple controls 100% of the market for apps for the iPhone. It’s a lucrative market. One expert witness for Epic Games, Apple’s opponent in a recent court case, estimated the App Store’s operating margins have been as high as 80%.

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Apple disputes that its margins on its own app store are that high, but has declined to offer its own figure. Apple said during trial that its overall profit margin in 2020 was 20.9%, and that its App store shouldn’t be considered separately from its total profits and losses.

Apple’s mobile operating system is used on six of every 10 mobile devices in the U.S.

In a letter to Congress and a paper on security, Apple has framed attacks on its monopoly on distribution of apps on these devices as attacks on its ability to keep them secure.

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The potential impact could be broader—both for Apple and its customers, by prying apart the hugely profitable “walled garden” of hardware, software and services that make its products relatively seamless for users but also constrains their choices.

New rules and regulators could compel Apple to break up that system, by divesting its own App Store or letting users load apps from anyplace they like. That could mean easier access for iPhone users to other companies’ products—as well as the freedom to expose themselves to threats of ransomware or digital identity theft.

Facebook

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The Platform Competition and Opportunity Act, a third bill, is designed to more or less ban what has been a signature move for Facebook: Acquiring a competitor before it can become a threat.

The FTC lawsuit against Facebook that was among those dismissed this week accused the company of anticompetitive practices in its acquisition of WhatsApp and Instagram. If the new legislation were to pass, it could make it much easier for the FTC to win such a case.

Facebook has said this would make it harder for people to, for example, cross-post between Instagram and Facebook. On the other hand, Facebook’s comprehensive dossier on all of us, which it sells to advertisers—albeit in increasingly anonymized form—would be much harder for the company to build.

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A Facebook spokesman called these bills “a poison pill for America’s tech industry at a time our economy can least afford it.”

Yet another bill, the Augmenting Compatibility and Competition by Enabling Service Switching Act, would seem to make it much easier for users to cross post anywhere, or at least to move their social presence to any other platform, by forcing companies like Facebook not merely to give us our data when we ask for it, but to facilitate transmitting it, intact, to other companies.

Privacy benefits may not matter to many consumers, but they could be among the most immediate impacts of this bill for the more than 2.8 billion people who use one of Facebook’s products every month.

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Alphabet (Google)

Google’s search empire—it controls 92% of the global search market— would also be affected by the American Choice and Innovation Online Act. The company says that not being able to preference its own services would mean they would no longer appear atop its search results.

In the short term, not seeing Google Maps results on your search results could be disruptive for users, but there are plenty of competitors that would be eager to occupy the same slot—notably Yelp, which has been battling Google for prominence on its search engine for years. The same could be said of most every other service Google and its lobbyists have cited as being the sort of convenience that consumers currently take for granted, from song lyrics on search results pages to YouTube videos atop search results.

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“We are not opposed to antitrust scrutiny or updated regulations on specific issues,” says Mark Isakowitz, vice president of government affairs at Google. “But American consumers and small businesses would be shocked at how these bills would break many of their favorite services.”

It’s clear that any actions against Big Tech will take a long time yet to impact consumers. The federal government’s case against Microsoft, for example, spanned three presidential administrations, from 1991 to 2001. By the end, the government settled rather than continuing to pursue a breakup of the company.

Even if such changes are far off, users might need to prepare themselves for changes to these services. Those changes could lead to more competition, and ultimately innovation. But while we’re waiting for Amazon’s disrupter to get us toilet paper from, say, a network of drones that deliver in 30 minutes instead of a day, we might also have to accept the way that top-down efforts to encourage competition can impact conveniences we’ve come to take for granted.

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Write to Christopher Mims at [email protected]

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