South by Southwest can be a kingmaker for the buzziest new apps — Twitter and Foursquare first took off in previous festivals here. But this year, the talk of the town is whether it’s time to break up the technology giants.
Sen. Elizabeth Warren’s (D-Mass.) bold proposal to take on Google, Amazon and Facebook barreled through the conference, which continues through March 17 in Austin, Texas, like an electric scooter on a crowded sidewalk. Onstage at one event, journalist Kara Swisher said Warren’s plan has the tech industry “vomiting on their Allbirds.” But at one tech podcast’s live recording session on Sunday, chants of “Break them up” broke out.
Warren’s plan to break up Big Tech may be a long shot, but it appears it will make regulating the technology industry a key point of the 2020 debate. Other presidential hopefuls who attended South by Southwest, such as Sen. Amy Klobuchar (D-Minn.), said it’s time to look carefully at any future tech mergers — and “supercharge” the agencies to crack down on monopolies.
Here is an interview with Warren backstage at the Moody Theater:
Google and Amazon are very popular businesses. Why do you think this proposal to break up Big Tech will be a winning strategy with voters?
This is about keeping markets competitive. My proposal will still let any consumer go to Amazon and order a coffee maker for delivery within 48 hours, go to Google and look up the capital of North Dakota and go to Facebook and check out what their old college friends are up to. I propose to separate that platform that consumers use from the ancillary business products that Amazon and Google are able to unfairly promote and that has the consequence of stamping out little businesses, medium-size businesses, start-up businesses. I want to protect competition. The giants can’t use the advantage of the platform to wipe out all the competition for what gets sold on the platform.
It’s like in baseball. You can be the umpire; that’s like the platform. Or you can own the team; that’s one of the businesses. But you don’t get to be the umpire and own the team in the league.
Let’s take Amazon first. How would you propose to break Amazon up?
It’s not even hard. Right now 49% of all retail sales come to Amazon. For comparison, about 9% of physical retail sales go to Walmart. Any small business that wants to do online retail pretty much has to be on Amazon. They go to Amazon right now, and they’re on the platform and Amazon sucks up information about every buyer and every seller. When it spots a profitable business, it has the option of moving in on that profitable business’ space, undercutting them — maybe only temporarily — on price, moving where they appear on the platform back to page 9, and killing off the competitor business and sucking up the business for themselves.
My proposal simply says, you can operate the platform. But [the] platform does not own the auxiliary businesses. They have to be spun into their own businesses. It’s actually not that hard to break them apart.
But for consumers, if Amazon is offering a lower price . . .
Are you sure it’s a lower price, did you check page 6?
You just said that they can undercut on price.
Temporarily. That’s what they did with Diapers.com. This is another feature of the problem.
[Though Warren’s focus has been on small businesses that sell via Amazon’s website, she used an example of Diapers.com, a would-be e-commerce competitor, to show how Amazon cuts prices to compete.]
It’s not on the Amazon website, so this is a little bit of a different example of what goes on. It lowers its price to below cost. There’s no way Diapers.com can survive it. The business strategy [from Amazon] is to lower our price enough that Diapers.com just can’t make it. After they make this announcement, they offer to buy Diapers.com. Diapers.com agrees because they have two choices, get sold or die. They let themselves get sold, they make some money on the sale, and Amazon no longer has a competitor. The price of diapers goes back up.
Do you expect to introduce legislation in the Senate on this?
Yes. I’ve been working on antitrust issues for years. This is part of an extension of other legislation that I’ve introduced, other speeches that I’ve given, other policy papers I’ve put out. It’s part of a much larger piece about protecting competition and not permitting industry giants to snuff out competition.
When can we expect you to introduce legislation?
I don’t know.
You called out Facebook, Google and Amazon. Why not Apple?
They should be on the list. There’s no special reason. These were the three where it was easiest to make the example. Apple, it’s true as well. Apple can run the platform or they can sell the apps. But they can’t compete with other individuals on selling the apps at the same time that they’re running the platform and sucking all the information off the platform and making decisions about whose apps are going to be at the top of the platform and who’s going to be way in the back where you never find them.
What about the telecom providers?
Yup, I’m already on record on that. These are all related to each other.
How does this affect your position in Silicon Valley? Do you still plan to raise money and have campaign events there?
I’m not in Washington to work for the billionaires. I’m in Washington to try to make government work for everyone else.
But they’ve played a crucial part in funding Democratic candidates so how does that affect your path forward?
You know I’m not doing closed-door fundraisers with millionaires, but I already announced that policy.
In your post, you raised a lot of the privacy concerns that come up with Facebook. As you think about that, how does that affect how your campaign uses social media and tools like Facebook?
We use the same tools as everyone else, and we worry about those tools the same way as everyone else.
Facebook is an example of the problem we’ve got. Facebook looked over and saw that people were migrating off Facebook over to WhatsApp. They had two choices, they could get better, which is what happens in a competitive market. Or they could use their enormous size to buy WhatsApp and then suck all of the data out of WhatsApp. They chose the second path. I propose that merger be unwound. That would give consumers an option.
Venture capital right now refers to the area around Facebook, Amazon and Google as the “kill zone” because small businesses and start-ups that get too close and look like they might compete with those giants for business get killed. Investment is going down.
There is some concern that these ecosystems are very intertwined. The companies invest in start-ups. They’re also acquiring start-ups, which puts more money back into the venture capital system. How do you avoid unintended consequences on innovation if you break the companies up?
I think what we have right now is the unintended consequence. The giants are destroying competition in one area after another. It’s the job of law to enforce the rules to stop them. That’s how competition will flourish in this marketplace. The country had to do this 120 years ago. We need to do it again.