Scrutiny over Facebook continues to gain steam. The EU is implementing a new data protection regulation in May that may become a global standard, but the bigger risk to Facebook and other members of the FAANGs are of the antitrust variety.
As the Roger McNamee writes in the FT today, Facebook, Google, and Amazon have built near monopolies by limiting choice.
Facebook, Google and Amazon have built monopolies that are limiting consumer choice, while also creating a chilling effect on innovation and entrepreneurship.
They have snapped up potential competitors, including YouTube, Instagram and WhatsApp, and continue to acquire companies in promising new areas of technology — artificial intelligence, self-driving cars and virtual reality, among others. While their interest has validated these new markets to other investors, their presence makes it harder for even the most innovative start-ups to raise capital and compete.
As a long-time technology investor, I believe that effective regulation of large internet groups must address the problem of market domination. The giants tell us they are platforms, not traditional media companies, so we should look at past experience with communication platforms.
In 1956, the biggest platform of that era, AT&T settled an antitrust case by signing a consent decree in which it made two important concessions: it agreed not to expand its business into new markets (such as computers) and it made all of its patents available to others at no charge. The consent decree did not eliminate antitrust issues relative to AT&T — those were addressed with its 1984 break-up — but it was an essential first step.
It is no exaggeration to say that the AT&T consent decree planted the seed for Silicon Valley. One of the many fundamental patents in AT&T’s huge portfolio was the transistor. The combination of freely licensable patents and restrictions on AT&T’s ability to enter new markets enabled entrepreneurs to create today’s semiconductor, computer, data communications, mobile technology and software industries, among others.
There is no guarantee that history would repeat itself with the internet platforms, but there are interesting parallels with AT&T. Google, Amazon and Facebook control hubs of the US economy. They have used their market power to control adjacent spaces and, increasingly, emerging non-adjacent markets with huge potential.
Read more here.