Big Tech Will Not Be Broken Up – Here's Why

Big technology companies have never had a
greater influence over our lives than they do now and this trend is only increasing. Unsurprisingly, alongside their growing power
comes the ever-louder public that cries out for antitrust litigation. But, unfortunately for the people, big tech
is not going to be broken up and in this video we’ll see exactly why they’ll get away
with it. This video is brought to you by Dashlane. Keep all your passwords safe by registering
with the link in the description. Before we dive into the specifics we first
have to understand how the law defines a monopoly and to do that we have to go back 150 years
ago to the end of the American Civil War. When you compare the late 1800s to today,
you’ll actually find a lot of similarities. After the war had ended, a slew of new technologies
appeared all at once and catapulted businesses into an era of rapid growth. Telegraphs were invented which allowed for
instant communication across the country, while the expanding rail gave industries nationwide
reach. In the span of mere decades, the companies
that emerged during this time of innovation would grow to tremendous sizes. Now, at the time the most convenient way of
legally structuring a large business was by using Trusts. In fact, they were so popular that America
had trusts for everything: there were meat trusts, rope trusts, whiskey trusts and you
name it. One of the largest trusts, which we’ve already
explored on Business Casual, was Standard Oil, owned by none other than the richest
businessman in history, John Rockefeller. Out of the 26 rival refineries in his hometown
of Cleveland, he bought 22 outright, including 6 in a 48-hour period. It was known as the Cleveland Massacre and
Standard Oil ended up controlling 90% of America’s oil through these types of deals. It took America three decades to muster the
political will to oppose Rockefeller’s dominance and it was President Roosevelt who finally
took up the challenge. In 1906, the Department of Justice began an
antitrust lawsuit against Standard Oil that was the first of such a grand scale and whose
ruling would determine the future of Antitrust in America. It took 5 years for a verdict to be reached
and it was: guilty. Standard Oil was in violation of the Sherman
Antitrust Act because, and this is key, it restricted trade and inhibited competitors. Thus, Standard Oil was broken up; interestingly,
however, this was just the beginning of an antitrust killing spree. During his presidency, Roosevelt would pursue
45 different cases, while his successor, William Howard Taft, would almost double the number
to 80. At the heart of most of these cases was the
desire to encourage competition, sometimes even if the company in question wasn’t even
close to being an actual monopoly. This trend continued well into the 1970s,
with some cases bordering on the absurd, like when in 1966, it was made illegal for two
grocery stores to merge even though they would have just 7.5% of the market. Another funny case came in just a year later
when the government stepped in to regulate the pricing of pies in Salt Lake City. It wasn’t until the arrival of Ronald Reagan
that this absurdity would finally come to an end; as part of his sweeping economic reforms,
Reagan also requested a full review of antitrust policy to see what made sense and what didn’t. The man who shaped Reagan’s antitrust reforms
was Robert Bork, perhaps the single most important scholar in antitrust history. In 1978 he wrote a book in which he challenged
pretty much all the assumptions of antitrust law that had dominated America for a century. In his eyes, some industries just have a natural
tendency to concentrate, thus forcing competition onto them could actually just be nothing more
than government protection of inefficient businesses, or in the political context of
the time, something eerily similar to socialism. The changes he proposed were fundamentally
simple: what really matters when asking whether a company should be broken up is not whether
it is too big, but whether the consumers would benefit. This principle came to be known as Consumer
Welfare and it became a viral idea that spread among lawmakers, politicians, and eventually
became one of the defining policies that helped elect Ronald Reagan in the first place. Under the new policies, big companies were
no longer inherently evil as long as customers were OK. It is under this new and revised antitrust
framework that our familiar tech giants would come into play, but this time we’re asking
different questions than the ones people were asking John Rockefeller: it’s no longer
whether Apple, Facebook, Google, or Amazon are too big. So, what are the questions that are being
asked? Legally speaking, the most important aspect
is whether a company has durable market power, with the keyword being durable: just having
a high market share alone isn’t enough to fit this definition: Google, for example,
owns 92% of the search engine market, and yet their competition is just one click away. Google can’t arbitrarily start charging
people a dollar every time they search for something because everyone would just leave. Google has market power now, not because they’ve
killed the competition, but because they’re simply better or more convenient. The exact same logic can be applied to Amazon
as well: yes, they might be the biggest player in e-commerce, but their market share is dependent
on them continuing to serve consumers well. The case with Amazon gets interesting when
you consider its suppliers, who have for years complained at the very aggressive practices
Amazon employs when negotiating with them. Since antitrust law focuses more on consumers
Amazon pretty much gets a free pass here, although even if it wasn’t so, Jeff Bezos
can easily argue that all the suppliers have plenty of different distribution methods if
they disagree with his policies. Where it gets tricky though is when we get
to Apple: of the companies we’ve mentioned so far, Apple has by far the smallest market
share; it’s phones account for only 20% of the global smartphone market. However, unlike Amazon or Google, competition
is not just one click away. The Apple ecosystem is intentionally designed
to lock users in, which in and of itself is perfectly fine; it’s normal for Apple to
have a monopoly on iOS. The problem arises from the way they leverage
this monopoly into a different market: that of digital content. You see, by forcing every single app developer
to use Apple’s store, which charges a 30% commission, Apple is effectively extracting
economic rent: it’s not increasing the value of the Spotify music or the Audible audiobooks
you listen to on your iPhone; no, it’s just artificially inflating the price of content
to the detriment of the consumer. There’s actually an ongoing lawsuit against
Apple for exactly this issue and it may very well force Apple’s hand, but at the end
of the day you can’t really break up the iOS ecosystem, so the best outcome here is
that Apple just get to charge a more reasonable commission on their app store. Of all the tech giants the one deserving the
most antitrust attention is Facebook and you can probably guess why: because the social
media market is so difficult to properly define and value, Facebook was allowed to acquire
what was effectively its biggest competitor: Instagram. Today, while the Facebook network itself is
starting to stagnate in the West, Instagram continues expanding everywhere; and yet, even
here the question of durable market power is difficult to answer because social media
really does just come and go, and the only way Facebook can exploit its power is by abusing
privacy. Thus, there really isn’t any case to be
made for breaking up any of the big tech companies, even Facebook, just because at the end of
the day consumers are no worse off under the status quo. The ultimate question we should be asking
ourselves is whether the antitrust framework Ronald Reagan gave us is adequate to evaluate
the trillion-dollar tech giants that dominate our daily lives. It’s difficult to imagine the current administration
reworking such an important part of the legal system, but you never know. What you do know, though, is that you should
be focusing on your online privacy now more than ever and luckily for you, services like
Dashlane exist to make this a little bit easier. With Dashlane, you won’t have to remember
complicated passwords for every single account you have online; instead, you can let Dashlane
generate and save all your passwords for you across all your devices, also protecting them
with a VPN service on top. It’s a great way to stay safe online, and
just so you can see what I’m talking about, you can get a free trial of Dashlane if you
register using the link in the description. Then, if you like it, and I’m sure you will,
the first 200 of you will get 10% off their premium service if you use the code ‘businesscasual’. In any case, thank you for watching. Make sure to subscribe and to follow me on
Instagram, where you can find teasers for my future videos. We’ll see each other again in two weeks,
and until then: stay smart.

41 thoughts on “Big Tech Will Not Be Broken Up – Here's Why


  • For corporations over a certain size (say one billion turnover), a minimum 20% tax rate on turnover, not profit. At least that way, there'd be money in the state coffers to fund all the people out of work due to these quasi-monopolies

  • as a libertarian i do not believe that any legal action should be possible against Apple because, whatever they do, it should be their decision to make money how they want. I have never purchased any Apple product, this does not mean in any way that I believe other peoples' right to purchase Apple products should be restricted (which legal action against the company would cause)

  • For social media companies the users are not the "consumers" of the product they are a resource which can be comercially exploited to sell personal adds to the " real consumers" the companies that want to sell products to the social media users. So if a social media company forces add buyers to buy adds at their company just because there is no competition, isn't that against regulation? Just because a consumer is not "the people" doesn't mean that they are creating unfair competition. Same holds for Uber and Airbnb they don't offer taxi or hotel services they are facilitating the transaction between "end users" and "suppliers". If a taxi company/service is unable to compete with uber that (can) hurt the taxi drivers which are the consumers of the Uber platform.

  • I guess the most damage will be done to Apple, because if the lose the Anti-Trust case, they will have to allow App Store competitors on iOS and they will also have to refund all developers because of the high fee they charge when publishing an app on the App Store

  • omg, you left out the most valuable point: politics! because of their big market shares, they are in control of the influence of politics!
    they are in control of what you hear and what you see and they are censoring people who have a "wrong" opinion. That's why they need to be "broken up".
    This PC bullshit needs to stop!

  • Wait so the people who choose who is elected and have trillions of dollars won't be broken up?

    Color me fucking surprised.

  • On the case of Apple this video i partially true. Neither Spotify nor Amazon has subscription via App Store anymore and therefor does not pay the 30% fee on new subscibers anymore, they are salty because they want all the benifits from the ecosystem but they do not want to pay for it. Also on the case of spotify they pay half the amount to artists per stream as opposed to Apple Music.

  • Amazon put bookstores out of business, used predatory pricing techniques to put other fledgling e-commerce sites out of business (even bled money and relied on venture capital because it was unprofitable for years)… now, they are going after groceries and soon logistics companies, the poor fulfillment center employees they and their partners are running to the ground they plan to replace by robots, truck drivers and delivery guys might be phased out by self driving trucks and drones… All the while, Amazon is able to offer great prices and fund award-winning television thanks to Amazon Web Services. Yeeeah. Nothing to see here.

  • Man your usually so thorough. I was surprised you didnt go into the fact that large tech companies use entirely different business models to undercut and dominate markets that arent even in. Like how say Amazon can use their AWS profits to go undercut all competition in say grocery stores. Or how Apple can turn out so much profit to undercut spotify since they purpisfully sell it as a loss leader. The same strategy could be applied literally to any other business model killing all local competition. I think this is the main cause of the problem here. Theyre getting so large they can subsidize basically all competition who physically cannot afford to compete on their level.

  • Great video but I hate those damn transitions at the end at (8:52). Like I get it you need ad revenue to continue making great videos but Dashlane sounds like some really late software. There’s a number of software I already have to store my passwords not to mention Google Chrome does it for free. I hate just being sold to in a transition like that… I wish he made the transition less subtle, more obvious.

  • well they will have a hard time staying around, when people take up arms and seize back their freedom by violence.

  • Brilliant theatrical business historical case, thank you for reminding me of the business model using trusts. Great work!

  • i say big tech should be broken up but unless if its videogames im fine with some of the ways they handle things but tech thats ritcher than videogames and treats emploeeys worse like apple and facebook and google should be broken up

  • Everything you just said in a normal world would be correct but they have to much power and it would not be beyond them the crush or buy their competitors, google shut down gab for awhile because they didn’t like the fact that they were allowing free speech, yes they re-instated it but they did it to teach them a lesson, breaking them up will work because of to much power

  • i'm no expert. i think these cases differ strongly from past cases because they control the sources of information, and they (eg, google, facebook) don't make their biggest money (i'm not sure) from the people who use them. neither the users nor the content creators pay them directly, and the ones that pay them are not the majority of users and creators. quite a different kind of business.

  • Google has not outright directly killed competitors but they have used shady tactics to ensure people use their products.

    One example is that people in tech often report mysterious bugs that break web applications on other browsers (like Mozilla/ Safari)– but mysteriously work only on Google chrome browser.

  • Big tech won't be broken up because you think that dated anti-trust laws will somehow still apply? Even accepting that faulty logic, concentration of power never ends up being good for the consumer.

  • People don’t understand how important those big tech companies are, if Microsoft were to be split entire developer teams all over the world would be incapable to keep working, lots of new comers wouldn’t be able to even try cause lots of new developers take advantage of the azure free stuff, it’s strange to think about it but if they split google, Microsoft and amazon, the world as we know it would change in really strange ways

  • Why do we assume that only the US government will decide? What about the EU breaking up the same tech companies that currently use EU countries as tax havens? The world is bigger than what America decides

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