Are Internet Companies Growing too Big?

Antitrust concerns targeting large internet companies are growing. Earlier this year, the European Union fined Google a record $2.7 billion for favoring its own services in search results. Popular YouTuber Dave Rubin and others have been speculating whether Google is manipulating which content gets “monetized” in YouTube based on Google’s own political leanings. Amazon’s $13.7 billion acquisition of Whole Foods raised concerns that Amazon might be growing too big. Additionally, monopoly concerns regarding internet service providers has been a long-standing issue.

To the cynic, these concerns paint a picture of a dystopian future. A future where a handful of technology companies decide what roads your GPS has you drive on, which news outlets you can read, which websites will load faster, and what content is profitable for studios to develop. According to Republican congressman Bob Goodlatte, internet companies were given a lot of freedom to grow and experiment without the burden of regulation, but now is the time to reign them in. In contrast, the chairperson of the Federal Trade Commission said we need to leave success or failure of technology companies to the free market, not let the government pick winners and losers.

Much of the debate is about whether antitrust law or regulations are the best approach to reducing issues with anti-competitive behavior and covert manipulation of the net. These practices are presumed to be caused by the transition of internet companies from nerds in garages to big business. Antitrust law, it is argued, can target individual companies that engage in anti-competitive behaviors, whereas regulations punish an entire industry for the sins of the few. In contrast, others say antitrust law merely punishes big companies for their success and puts a ceiling on capitalism.

My analysis begins by asking the question: have big tech companies successfully eliminated the ability to compete with them? Google only controls 65 percent of the search market, which is a far cry from being so market dominant that nobody can compete. Despite Google favoring its own services in search, Google Circles has not overtaken Facebook, nor has Google Knol overtaken Wikipedia. Amazon has not eliminated eBay, nor does its Whole Foods acquisition mean Food Lion will be unable to compete. In fact, combining Whole Foods and Amazon may just bring the type of innovation competition is intended to foster. Additionally, internet service providers are now competing with Google’s fiber networks.

Using the government’s coercive force to require a big, successful company break into smaller pieces is a dramatic action. One only merited in extraordinary circumstances. Extraordinary circumstances that are quite clearly lacking here. The government swooping in to effectively prohibit companies from growing to a certain size cannot be the solution every time big companies act poorly.

On the other hand, there has been a series of events whereby large internet companies engaged in anti-competitive behavior or covertly manipulated the internet. Google was fined billions by the European Union, but in contrast U.S. courts ruled free speech protects Google’s right to discreetly tweak its search results in its favor. The implication is that the legislature needs to pass laws that would make the courts swing the other way, punishing internet companies that engage in this kind of behavior.

The best path forward is for the government to merely require disclosure and transparency when a user’s internet experience is manipulated to favor a commercial or political interest. Such a regulation is already embodied in the spirit of 16 CFR 255.5 regarding disclosure of a financial connection. Traditionally this regulation has been used to forbid paid advertisements that pass themselves off as coming from a disinterested, impartial source like a newspaper. It also applies to situations where a commercial interest writes reviews or participates in forums, without disclosing that they are not a disinterested member of the public. The regulation does not merely prevent deceit, but requires proactive disclosure of a financial connection wherever readers may otherwise presume the participant is an impartial guardian of information.

Google’s very service, the source of most of its revenue, is tampering with its search results to give top placement to paid advertisers. There’s nothing unethical about it, so long as it’s clearly marked as an advertisements. So long as the user is not lulled into thinking they are getting information from an impartial source, whereas there are actually covert financial interests at play. When Google manipulates search results for customers, it’s disclosed as an advertisement, but results that benefit its own services are not. They are passed off as organic search results from an impartial moderator of information, save they have a secret sponsor.

In practice, once there is transparency, many of the problems which have raised antitrust concerns will work themselves out in the free market. An internet service provider that censors certain websites and makes others run faster than usual will find many of its customers clamoring for competitors; a few may accept cheaper internet in exchange for what is essentially a transparent ad-sponsored service. Google may prefer to give its own service regular search ranks rather than transparently mark them as advertisements.

Rather than put a cap on a company’s success; rather than use the government’s coercive force frivolously; the government can let the free market operate by merely prohibiting deceit and requiring transparency.