Newspaper article St Louis Post-Dispatch (MO)

Breaking Up Big Tech Would Be Harmful to Consumers

Newspaper article St Louis Post-Dispatch (MO)

Breaking Up Big Tech Would Be Harmful to Consumers

Article excerpt

For all their flaws, Amazon and Facebook and Google are nothing like the old Standard Oil or AT&T monopolies.

Those giants of the past harmed customers by charging artificially high prices. Facebook and Google charge nothing for their most popular services, while Amazon has such low prices that some scholars think it may be lowering the nation's inflation rate.

Nevertheless, Sen. Elizabeth Warren of Massachusetts, echoing rhetoric from other populists of the left and the right, wants to apply the Standard Oil solution to big tech companies: She would break them up.

The Democratic presidential candidate proposes regulating large technology platforms, such as Amazon's marketplace and Google's search engine, as public utilities. She'd split Amazon's own retail business and Google's advertising network into separate companies.

Warren also would reverse past mergers that she says reduce competition. She'd force Amazon to sell Whole Foods, Facebook to spin off Instagram and WhatsApp and Google's parent, Alphabet, to get rid of navigation app Waze.

Unfortunately, her proposed solution looks like a negative for consumers. Without its powerful marketplace platform, Amazon might not be able to cut prices so aggressively. And do we really want to see Facebook and Google ads that are less well targeted?

Competition is a good thing, but network effects in technology tend to favor giant companies. A social network only has value if most of your friends and relatives are on it; an e-commerce platform gains value as it offers more products. Companies that couldn't achieve enough scale, such as Alta Vista in search or MySpace in social networking, fell by the wayside.

The populist presumption is that big is bad, but consumers actually benefit from the scale of these platform companies.

"It's not a problem as I see it," says Michael Strain, director of economic policy studies at the conservative-leaning American Enterprise Institute. …

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