In this episode of the Futurum Tech Webcast, my colleague Olivier Blanchard and I engage in a drill-down conversation around the five new antitrust bills congress brought forward last week aimed at Big Tech, and what the likely ramifications are for reach. Our discussion examined:
- The Ending Platform Monopolies Act which proposes that Congress can have the ability to break up a company “when the covered platform’s ownership or control of that line of business gives rise to an irreconcilable conflict of interest.” This would apply to Facebook, Google, Apple, and Amazon just to name a few.
- The Platform Anti-Monopoly Act which is aimed at companies with over $600bn in annual revenue and 500,000 Monthly Active Users (MAU) and would prevent these companies from prioritizing their own products in the market.
- The Augmenting Compatibility and Competition by Enabling Service Switching Act of 2021 (also known as The ACCESS Act of 2021) which would target data sharing practices.
- The Merger Filing Fee modernization Act of 2021 which would add more support and resources to the FTC and the antitrust division of the DOJ.
- The Platform Competition and Opportunity Act which would increase the difficulty for Big Tech companies to acquire other companies.
For a deeper understanding of each proposed bill check out Olivier Blanchard’s breakdown here: The Problem With Congress’s 5 New Antitrust Bills Aimed At Reining In U.S. Big Tech
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Daniel Newman: Welcome everybody to the Futurum Tech Podcast and Futurum Tech TV. I’m Daniel Newman, your host today of the Futurum Tech Podcast, joined by my esteemed colleague, senior analyst, research director, Mr. Olivier Blanchard. Not to be confused with the economist from France, Olivier Blanchard, but pretty much just as smart. So, what’s going on, Mr. Blanchard? How are you today?
Olivier Blanchard: Oh, hey, so much going on. And yes, if you ever hear me on NPR and I have a French accent, it’s not me. It’s the other Olivier Blanchard.
Daniel Newman: It’s the other one, but you’re both French. It’s just you’ve done a very good… I call it the Dr. House of accents, where it can come back if you need it, but people would never know you have it.
Olivier Blanchard: Exactly.
Daniel Newman: Big news going on this week as lawmakers in Congress, both Republicans and Democrats have come together in sort of a bipartisan effort, despite the fact that most of these new antitrust bills were brought forward by Democrats, but are working together to basically try to stifle or slow the meteoric rise of Big Tech.
You and I are both writing on this. We’re both opining on this. You did a great piece on the Futurum Research blog. And I will go ahead and put a link to that in our show notes, but I want to talk about that with you today.
So, there’s a lot to unpack here and while I would love to just jibber-jabber a little bit, I’m going to let you play the role of answerer to all my questions, and then I might opine a little bit in between, but you ready to rock and roll?
Olivier Blanchard: I am. Yeah, let’s go ahead and do this.
Daniel Newman: So, you wrote a great piece. It was like 47,000 words. But in all serious, that’s pretty average for you anyway, but you dug into kind of overall the bills.
Let’s start from the beginning, because everyone’s level of understanding of what’s going on is different. Give a quick recap. Why are we even here? Why are we regulating Big Tech? And just give a little bit of the five bills that are being introduced.
Olivier Blanchard: Okay. So, two things there. So, on the one hand we are here because it’s become popular I think among certain political circles to try to regulate quote unquote, Big Tech on a number of fronts, right?
And the meteoric rises, as you said, of large technology platform companies, which have sort of replaced the established order of energy companies being kind of like the most profitable companies. Now it’s tech. It’s Apple. It’s Amazon. It’s Microsoft, Google, Facebook.
That has definitely kind of like thrown regulators, politicians, the business world, even the investment world, in turmoil over the last 30 years. And some have adapted very well to this change. Others are resisting that change.
And so, there’s been fear, I think, that the established order of things has been disrupted on the one hand.
And two, a number of issues have kind of crept up in the back of people’s minds when it comes to these Big Technology platform companies.
One of the big themes is the loss and security of data, right? And privacy. There are legitimate, I think, discussions to be had about data privacy, about data security, that these platforms have kind of made new and made worth talking about.
And I think that there’s an aspect of legislation and regulation that needs to focus on data privacy and data security. On the other hand, there have been moves to try to scrutinize the antitrust potential or anti-competitive potential of these platforms becoming so big that they might become negative actors when it comes to fostering healthy competition in the business world and in the tech world, specifically.
And then the third kind of approach to this, is a notion that some of these technology companies, especially the ones that are communications platforms and social media like Facebook, Twitter, YouTube, et cetera, may have so much power that they can stifle speech.
And that’s something that politically along the spectrum we’ve seen complaints about or fears about on the right and on the left, depending on which channels you choose to get your information from.
So, those are kind of like the three vectors that we’re dealing with. And specifically, with these five new proposals up in Congress in the last couple of weeks, what we’re seeing is an approach that focuses on antitrust. On anti-competition and fears of anti-competition.
And so, the five bills that we’re discussing on this cast and that we’re writing about currently, were introduced by Democrats in Congress to try to address this antitrust fear. This fear that very large technology platforms might be stifling competition and absorbing too many other potential competitors. And growing to a point where they might swallow their competition before that potential competition might have a chance to become competition.
And they are by default, creating these monopolies or oligopolies that might not be healthy for the technology system and for the future of business investments in the United States.
Daniel Newman: So, without boring everybody… Because we’ll link you to the bills themselves… But essentially, there are five bills. It’s really like four and a half. One of them is a funding bill. It gives more dollars to the FTC and the DOJ to regulate.
The other four effectively… And please, feel free to add here, Olivier… But it’s basically, focused on giving more rights to lawmakers and agencies to break up Big Tech companies. Giving more rights for them and more power for them to enforce action, where preference to your own platform is being given.
It’s asking these Big Tech companies to sort of uniformly agree to a series of the way data is captured, managed, transported, so that people have flexibility to move between platforms, at will.
I mean, those are kind of what the bills largely focus on. And again, there’s five different ones. Four are focused on those items that I just mentioned. One focuses on funding.
Let’s just start here. From an overall perspective, what do you think of these bills? Do they have a shot at passing? Because like I said, even if you don’t like them, it doesn’t mean they won’t pass.
Olivier Blanchard: I think that the Merger Filing Fee Modernization Act of 2021… Excuse me, that’s quite the mouthful… Is the one that focuses on increasing funding for the FTC and the antitrust division of the DOJ. This is something that was very much overdue and that one is a perfectly legitimate bill and I don’t think anybody’s going to oppose that.
Daniel Newman: So, you get more dollars to regulate, but the problem is if these other bills pass, these dollars are going to go towards regulating bad policy. And by the way, good add there.
The other focal point is slowing the ability of these companies to continue to rapidly acquire either competition or startups that make the platforms too powerful.
Olivier Blanchard: Yeah. So, that particular one, the one that I was just mentioning, which is really mostly a funding bill, and it also raises the fees for applying for mergers and acquisitions, we don’t need to discuss that. That’s something that was kind of overdue. It’s fine. Objectively, there’s nothing majorly wrong with it.
The other four bills, however, may be well-intentioned. And I’m sure that the people putting them forward are not evil people trying to break things, but they’re complete garbage. Complete garbage.
And I think that they illustrate the degree to which sometimes regulators and politicians, even though they may be well-meaning and have noble intentions, by virtue of the fact that they don’t necessarily understand how an ecosystem works, how a business model works, how these platform companies operate and how they actually foster innovation and fuel innovation and drive it as opposed to a stifling it, can go down these rabbit holes of really bad legislation that means to do well, but ends up threatening a system that actually works super well. That has worked super well for us for the last 20, 30 years.
So, on the one hand, you can look around and see that no companies are having trouble with competition. There is more competition in the tech sector today, more money going into innovation and growth and startups in the technology ecosystem today than ever before.
So, obviously something’s not broken there. And second… There’s another aspect in case we don’t have time to circle back to that today… Which is that we’re caught in whether we like it or not in a geo-strategic struggle with China.
It’s U.S. versus China, two economic super powers. Two technology super powers. And right at a time when China has overtaken us in terms of the number of patents they’re applying for. The IP that they’re investing in. The massive technological challenges that we have to meet in the next century, in order to remain competitive and remain a superpower.
We have these bills that threaten to actually undermine the leadership that the U.S. has versus China. And so, should these four bills out of the five, manage to pass somehow and be enacted, the damage they could cause could not only undermine the technology ecosystem and the business world in the U.S. but could also put at a severe strategic disadvantage against China, in the long run.
Daniel Newman: Yeah. I actually like all those points. I agree with most of them. Here’s my take as I do think some form of regulation is going to pass. I think this is probably one of the only things on the planet right now that we have bi-partisan support on.
I think fundamentally, it’s driven by ego. It’s driven by a little bit of posturing to the market. People feel threatened. We hear these ProPublica reports about these big billionaire owners of these companies, not paying taxes.
And it’s almost a little bit of like, we want to get them back and by some extent, we almost feel like, “Hey, we can get them back by harming these companies.”
But the problem I have Olivier… And you and I’ve talked about this ad nauseum at this point… Is first of all, there’s legitimately not a single bit of consumer harm that I can identify right now. Which by the way, is only half of the main reasons you handle antitrust.
It’s breaking down in its most simple terms. And trust me, there’s a lot of nuance in antitrust, but you’re either A, protecting consumers or B, trying to make sure there’s enough competition in markets so ultimately, so consumers can’t be harmed by not having enough competition. There is a very specific interdependence on these two things.
And here’s the thing. These platforms have brought endless satisfaction to markets. You look at our behavior, look right here. We’re streaming a video. We’re going to publish it out onto multiple platforms. We’re going to be able to distribute it to our market. And we’re going to go on Facebook and share our opinions. We’re going to find out what’s going on in the world. We’re going to connect with our old classmates. We’re going to listen to our favorite music. We’re going to wire into our phone.
We’re going to get our work done from the road, whether it’s our connectivity, whether it’s our music and streaming, whether it’s our social media, all these things were fostered by an innovation ecosystem where A, big, big companies buy little companies that create and innovate and design these technologies for big dollars.
And it creates a ton of incentive for the U.S. to have what is arguably the most ripe ecosystem for developing and innovating new technology and distributing it to the world.
You start to dis-incentivize this. You start to punish companies for this type of innovation. To your point, you start to create a level playing field. We actually will intentionally be cutting ourselves off at the knees and saying, “Let’s stop incenting these startups for being so creative.”
Because we’re going to make these big companies weaker. We’re going to make it less likely for people to invest in them, because there’s less growth incentive. We’re going to make founders less likely to want to sell. And we’re going to slow that whole process, Olivier. We’re going to slow that whole process of actually innovating and getting things to market.
And like you said, geopolitically speaking, technology… I don’t want to compare this to war. I don’t want to say it’s war… But technology, this is how we fight in the world now.
We don’t go and send sailors to the beach anymore and we’re not storming in Normandy. This isn’t Pearl Harbor. I mean, will those days ever happen again? I don’t know. It’s dystopian to even think about it, but what we do fight for power in the world is through biotechnology innovation. Through technological innovation. Through that currency value in de-valuing.
You look at China’s power move on Bitcoin right now. So anyways, I digress, but I’m saying like the way we power migrate across the world ecosystem is not based upon how big our guns are.
I know that’s the popular narrative on CNN and Fox right now. They like to talk about that. But obviously, when you really look at where the power lies in money and technology, and the two things are very closely interdependent.
So, you had some really great commentary in your article about breakup, makeup, finding regulation. And so, I think it’d be good, let’s pivot to that for a minute because you’ve kind of talked about the harm.
We both talked about the harm of if this goes forward without better, but is it even possible? Should the legislation push for this? I mean, what the heck would be the point?
Olivier Blanchard: No, it’s absurd. So, here’s one of the problems with some of these bills. So, on the one hand, we already have a pretty strong antitrust regime in the United States, right? It’s not quite as aggressive as the one that the European union operates under. They’re definitely a lot more aggressive than the U.S.
But the thing about the U.S. is if there are legitimate anti-trust concern, anti-competitive concerns. So, companies essentially kind of grouping together to form a cartel and price fixing.
Or if a company is legitimately operating in anti-competitive ways to try to crush a competitor or stop a competitor from entering the market. We have laws already that have been around for decades, actually over a century for most of them, that have worked extremely well. And they’re the types of laws that have kept our business ecosystem healthy.
And obviously, you’re seeing investments and that what you were talking about, the startup ecosystem with a lot of VC funding, going to small companies that specialize in solving very specific problems that then sell to bigger companies that then create solutions that they can then sell to bigger companies and bigger companies.
And so, what you have is this ecosystem in which any inventor, anybody with the skills and the ability to solve a specific problem, can compete against other companies to solve it faster and better, and then sell to bigger and bigger companies.
And what that does is it keeps the innovation spread out across this entire very layered ecosystem of people with ideas, as opposed to only limiting companies with huge budgets. Companies like Apple or Google, for instance, or Amazon, from keeping that innovation in house and then not selling it to anybody else.
So, the regime that we have now actually fosters competition. It’s good for competition. It’s not bad for competition. These small startups are not trying to become the next Google. They’re not trying to become the next Facebook.
They’re trying to sell to Facebook and Google and Amazon and Apple and Microsoft and everybody else. And so, when lawmakers try to stop that and operate under the assumption that every startup is trying to become a giant technology platform, like the established Big Technology platforms, that’s already a wrong assumption.
And if they’re trying to create laws, right laws, to try to stop that, they’re addressing a problem that isn’t a problem. They’re actually creating a problem that isn’t there currently.
So, I’ll give you a quick example. One of the bills that’s being proposed by a New York rep Hakeem Jeffries, who’s a really cool guy and I like him, but this is the Platform Competition and Opportunity Act.
This particular law or this bill, in its current form, would stop essentially companies like Big Tech companies from acquiring any other company that might at some point become a competition to them.
So, the specific language is that under the bill, mergers and acquisitions involving large technology companies would be unlawful unless it could be shown that the company being acquired, one, doesn’t compete with a covered platform or with a platform operator and two, doesn’t pose a potential competitive threat.
So, here’s the problem. Say you have a company like Google that invests a lot in artificial intelligence, right? They have an AI lab. They pour millions of dollars, if not more, into AI every year. They’re getting better, but there are some things that they’re not able to do themselves.
Or there’s something that they find in a cluster of small companies working on AI that will really help solve engineering problems for them and their users. It’ll make maps better. It’ll make Google assistant better. It will make search better. It’ll make devices work better with language recognition, whatever it is.
Under this bill, they would no longer be able to acquire a startup that has solved one of these AI problems anymore, because it could potentially compete against some of its products and services that it’s building in house.
And that’s absurd. This is not a problem that needs fixing. What this bill would do if it were signed into law would actually create a problem, essentially de-incentivize small startups that specialize in solving these types of problems from getting funding, from actually working.
And it would stop companies like Google and Amazon and Apple and Microsoft and everybody else from acquiring these solutions and making them public and adding them to their suite of integrated products.
So, I understand why these bills are being proposed, because it sounds like they’re solving a problem, but they’re actually going to create a huge problem for us, for everybody, and actually, just kill competition, as opposed to protect it.
Daniel Newman: Yeah, absolutely. I think you made a ton of great points as we sort of head to the end of this segment, here in a few minutes. Part of the stifling, the Big Tech has to do with acquiring companies for just the sake of eliminating competition. And I’m sure that happens from time to time. I think more times than not, it’s not why it happens.
Sometimes I think companies get acquired. Diligence wasn’t done well. And they end up finding out that the acquisition wasn’t what they thought it was. And a lot of times, you remember you have these Big Tech companies, they might buy a company for a few hundred million dollars. And that is not a big… They’re taking what would be considered a small bet. That would be like you or I picking a stock that we like and putting a hundred dollars and just saying, “Yeah, I think it might be a really great investment.”
The other thing though, that I really think is worth pointing out, as we sort of wrap this up too, is that the idea of these companies not having competition needs to be further pointed out.
Like, you look at the space of Amazon. First of all, they’re looking at splitting up Amazon and AWS, which effectively accomplishes nothing.
The two companies run as almost completely discrete companies.
The former CEO of the AWS business is going to become the CEO of the Amazon business. And so, there was a wall created between the two organizations, merely for the sake of being able to win certain customer archetypes that didn’t feel that they would want to work with AWS because they’re competing with Amazon.
So, they’ve been very explicit in creating some distance between the two businesses. Now, AWS has been a profit center and that’d be very detrimental to the bigger Amazon for its innovation, as a whole.
But I just want to point out AWS as a cloud company competes with Azure. Competes with Google. Competes with IBM. Competes with Oracle. Those are its biggest competitors. And of course in China, you got Alibaba and Tencent. And so, there are major global competitors that every single enterprise customer has a choice to work with a different cloud.
So, there’s no force. They’re putting continuous pressure on innovation on one another and pricing models on one another to offer more value. And then of course, you have the on-prem cloud providers that… Your Dell, Cisco’s. You have your HPEs and all these other technologies for on-prem data center.
So, there’s plenty of competition there. You go into social media, Olivier, you got Facebook, but you’ve got Pinterest. You’ve got TikTok. You’ve got Snapchat. There are several. And then of course, there’s geographically dispersed social media.
China has basically shut our social media down. You’ve got major search competition. You’ve got major retail competition. Many, many multi-billion dollar companies.
So, the idea that there isn’t competition is not even close to accurate. And then the only other thing I want to point out before I’m going to have you wrap up here and give us some things for these lawmakers to focus on here.
But the only other thing that I think is really worth pointing out is all this thought that these private labels are basically sending a lot of business their own way, using their own platform. Yes, by design, you spent all this money, time and energy to build a platform. You build it to be ubiquitous and seamless across the platform.
Spotify, which is also a multi-billion dollar company, being mad that Apple wants you to, if you’re going to use Apple’s platform to identify and find the application, they want to be paid for, it’s fair.
Some of the end around, work around stuff. Well, Apple’s always been a closed ecosystem. If you don’t like that, get off the Apple platform. Use Windows. Use Android. And then you can download it any way you want.
So, the point is that there’s a lot of differences there. So, we’ve got just a couple of minutes left here, Olivier, and I want you to answer one last question for me. And that would be, what should the regulators focus on? If not what they’re putting forward, because there are probably is some regulation required.
Olivier Blanchard: I think they need to tap the brakes a little bit. Take their foot off the gas and think about this a little bit more. First of all, there’s no harm actually being done. The little harm that there is, is usually handled in the courts anyway.
So, for instance, the case that you just referenced with Spotify suing Apple over the app store, I think that’s something that there’s the purview of the courts and that’ll be solved. But that’s a contractual dispute more than an antitrust dispute.
I think for the most part though, the problem with most of these bills is that the attempt to completely rewrite antitrust law in the United States pretty much overnight. And instead of using antitrust law that we know works, it changes the burden of proof.
Obviously now, companies don’t have to defend their mergers and acquisitions before the FTC or regulatory body anymore. Now they have to prove that there will not be potential harm, that there will not be potential competition. That’s not how we operate currently.
Daniel Newman: Guilty until proven innocent.
Olivier Blanchard: Right. Right. And a lot of these, especially with some of the other bills that focus on breaking up Big Tech, not even just preventing mergers and acquisitions, but actually breaking up companies because they own a company or a service or product that competes against some third-party vendors on their platform. Therefore, they’re not allowed to be in that space either.
Those things are ridiculous. And they shift the focus from actual harm to competition and actual harm to consumers, to potential harm sometime in the future, which is absurd. It’s kind of like convicting companies of a crime that they haven’t committed yet before they’ve ever committed it just because they might commit a crime at some point.
So, except that there’s actually no harm, they’ve been doing this and there is no potential harm.
So, the two things that I would tell lawmakers is one, talk to the platform operators, not in terms of playing devil’s advocate, but trying to understand better how these systems work.
Platforms thrive on integration. Integration thrives on mergers and acquisitions. Mergers and acquisitions and competition thrive on this ecosystem of small companies selling to bigger and bigger companies, that then compete against each other.
They all compete on the same level. The small startups compete against other startups. The Big Technology platforms compete against other Big Technology platforms. There’s not a competition problem. It’s not a diagonal issue. It’s a vertical layer issue.
And so, lawmakers need to educate themselves with regards to that. And also, they need to slow down when it comes to completely upending over a century of solid, good, healthy antitrust law, and essentially, breaking the entire U.S. technology infrastructure, because they didn’t understand the problem they thought they were trying to solve, in the first place.
So, those are the two big, I think, takeaways for me. And again, slow down. Don’t try to pass these laws until you understand the problem. Also, the language is way too vague and gives much too much flexibility to FTC, to DOJ, to just go rogue and start breaking up Big Tech for no reason. And I think that the domino effect of that would be more harmful than doing nothing at all.
Daniel Newman: Absolutely. Harm to our innovation ecosystem. Harm to our consumers. Start breaking these up in our experiences, get much worse. All the designed infrastructure gets much worse. So many other problems to solve.
Unfortunately, we don’t have time to solve them all today. Olivier Blanchard, senior analyst, colleague, heck of a good author, writer. Written books, what, four or five together? Appreciate you joining and everyone out there, hit that subscribe button. Share this podcast.
I’m sure we’re going to get together again and talk more about this. But this episode of the Futurum Tech Podcast got to say goodbye. Thanks for tuning in. We’ll see you later.
Olivier Blanchard: Bye, bye now.