Google’s Pernicious Monopoly

Posted by DanielS on Monday, 04 September 2017 01:00.

Background Briefing recently interviewed Johathan Taplin about his book, Move Fast and Break Things: How Google, Facebook and Amazon Cornered Culture and Undermine Democracy, and his op-ed at The New York Times, Google’s Disturbing Influence Over Think Tanks.

Some highlights: The New America Foundation funded a group called The Open Markets Group, which was headed by a guy named Barry Lynn; and they were the most important group of scholars looking at monopoly in America. When the EU sanctioned Google with a 2.7 billion dollar fine, The Open Markets Group put out a statement applauding the EU and saying American anti-trust regulators should follow their example. Eric Schmidt, the Executive Chairman of Google, who provides most of the financing for the New American Foundation, was incredibly angry about this and essentially told the leader of New America, Ann Marie Slaughter, that she had to get rid of the Open Markets Group. She then wrote Barry Lynn an email saying that they had to leave by September 1, and essentially fired them. This is exactly the kind of political pressure that Google plies all over the world in terms of not just academic institutions, but think tanks and others in order to keep the political narrative in their favor and not have people who oppose them.

They pay off academics and think tanks, getting them to write favorable articles (totaling a hundred from each) about Google and denying their monopoly. This is how Google curries influence by dominating the communications channels of Washington D.C.

Eric Schmidt, who is the biggest funder of the New American Foundation and who is one of the top executives at Google, was the number one visitor during the Obama administration. He was logged in more times visiting the White House than any other single person in the entire eight years of the administration.

Google’s regulatory capture: not only was Schmidt the most frequent White House visitor, more than any other CEO, by a long shot. But then Schmidt was able to put people from Google into the various agencies in the Obama administration. So, the person who ran the Patent Office was formerly the person who ran Google’s patent practice; the person who was the Assistant Attorney General for anti-trust in the Obama administration was the person who had been Google’s anti-trust attorney. Google had people high-up in The Federal Communications Agency. It was pernicious, it was everywhere…

One could say “Eric Schmidt is a liberal” and “he’s helping Hillary Clinton”, but literally the day after Clinton lost he was out there communicating with Ivanka Trump and Jared Kushner in the hopes of getting in bed with Trump. Not only did he extend invitations to them to come to his conference in Italy; but he also went to the White House and railed on about how Trump was going to be a great help to the economy with his new initiatives; so, its very clear that he has very little political conscience what-so-ever; he’s just going to go where the money is.

People from all sides are recognizing the Google has too much money and power to frame narratives, to shape and influence culture; its platforms such as Facebook and Youtube are not only the way 3/4 of Americans get real news, but also conduits of propaganda: e.g., Steve Bannon and the Mercers used market targeting in their campaign to defeat Hillary Clinton, used social media very skillfully with fake news, used Russian bots to amplify their effect. An interesting note along with that, the intelligence community observes that Eric Schmidt’s daughter worked for SCL, the company that controlled Cambridge Analytica - the company that Mercer owns and that Steve Bannon’s on the board of.

They couldn’t have done what they did if there hadn’t been these two open platforms, Facebook and Youtube, which you could totally manipulate; there was nobody at the control of these platforms to block fake news in favor of Trump. However, there is no pornography on Youtube, which means that Youtube has very sophisticated technology which could filter out fake news, propaganda, etc., if desired.

Google’s market capture is profound, its users provide content and profiles (which marketers value, of course) which competitors cannot match. Google is not just a virtual monopoly, not just one of the most wealthy companies, it is the richest company and perhaps the most powerful monopoly ever. More:

New York Times, “Is It Time to Break Up Google?”, 22 Aug 2017:

By Johathan Taplin

In just 10 years, the world’s five largest companies by market capitalization have all changed, save for one: Microsoft. Exxon Mobil, General Electric, Citigroup and Shell Oil are out and Apple, Alphabet (the parent company of Google), Amazon and Facebook have taken their place.

They’re all tech companies, and each dominates its corner of the industry: Google has an 88 percent market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77 percent of mobile social traffic and Amazon has a 74 percent share in the e-book market. In classic economic terms, all three are monopolies.

We have been transported back to the early 20th century, when arguments about “the curse of bigness” were advanced by President Woodrow Wilson’s counselor, Louis Brandeis, before Wilson appointed him to the Supreme Court. Brandeis wanted to eliminate monopolies, because (in the words of his biographer Melvin Urofsky) “in a democratic society the existence of large centers of private power is dangerous to the continuing vitality of a free people.” We need look no further than the conduct of the largest banks in the 2008 financial crisis or the role that Facebook and Google play in the “fake news” business to know that Brandeis was right.

While Brandeis generally opposed regulation — which, he worried, inevitably led to the corruption of the regulator — and instead advocated breaking up “bigness,” he made an exception for “natural” monopolies, like telephone, water and power companies and railroads, where it made sense to have one or a few companies in control of an industry.

Could it be that these companies — and Google in particular — have become natural monopolies by supplying an entire market’s demand for a service, at a price lower than what would be offered by two competing firms? And if so, is it time to regulate them like public utilities?

Consider a historical analogy: the early days of telecommunications.

In 1895 a photograph of the business district of a large city might have shown 20 phone wires attached to most buildings. Each wire was owned by a different phone company, and none of them worked with the others. Without network effects, the networks themselves were almost useless.

The solution was for a single company, American Telephone and Telegraph, to consolidate the industry by buying up all the small operators and creating a single network — a natural monopoly. The government permitted it, but then regulated this monopoly through the Federal Communications Commission.

AT&T (also known as the Bell System) had its rates regulated, and was required to spend a fixed percentage of its profits on research and development. In 1925 AT&T set up Bell Labs as a separate subsidiary with the mandate to develop the next generation of communications technology, but also to do basic research in physics and other sciences. Over the next 50 years, the basics of the digital age — the transistor, the microchip, the solar cell, the microwave, the laser, cellular telephony — all came out of Bell Labs, along with eight Nobel Prizes.

In a 1956 consent decree in which the Justice Department allowed AT&T to maintain its phone monopoly, the government extracted a huge concession: All past patents were licensed (to any American company) royalty-free, and all future patents were to be licensed for a small fee. These licenses led to the creation of Texas Instruments, Motorola, Fairchild Semiconductor and many other start-ups.

True, the internet never had the same problems of interoperability. And Google’s route to dominance is different from the Bell System’s. Nevertheless it still has all of the characteristics of a public utility.

We are going to have to decide fairly soon whether Google, Facebook and Amazon are the kinds of natural monopolies that need to be regulated, or whether we allow the status quo to continue, pretending that unfettered monoliths don’t inflict damage on our privacy and democracy.

It is impossible to deny that Facebook, Google and Amazon have stymied innovation on a broad scale. To begin with, the platforms of Google and Facebook are the point of access to all media for the majority of Americans. While profits at Google, Facebook and Amazon have soared, revenues in media businesses like newspaper publishing or the music business have, since 2001, fallen by 70 percent.


According to the Bureau of Labor Statistics, newspaper publishers lost over half their employees between 2001 and 2016. Billions of dollars have been reallocated from creators of content to owners of monopoly platforms. All content creators dependent on advertising must negotiate with Google or Facebook as aggregator, the sole lifeline between themselves and the vast internet cloud.

It’s not just newspapers that are hurting. In 2015 two Obama economic advisers, Peter Orszag and Jason Furman, published a paper arguing that the rise in “supernormal returns on capital” at firms with limited competition is leading to a rise in economic inequality. The M.I.T. economists Scott Stern and Jorge Guzman explained that in the presence of these giant firms, “it has become increasingly advantageous to be an incumbent, and less advantageous to be a new entrant.”

There are a few obvious regulations to start with. Monopoly is made by acquisition — Google buying AdMob and DoubleClick, Facebook buying Instagram and WhatsApp, Amazon buying, to name just a few, Audible, Twitch, Zappos and Alexa. At a minimum, these companies should not be allowed to acquire other major firms, like Spotify or Snapchat.

The second alternative is to regulate a company like Google as a public utility, requiring it to license out patents, for a nominal fee, for its search algorithms, advertising exchanges and other key innovations.

The third alternative is to remove the “safe harbor” clause in the 1998 Digital Millennium Copyright Act, which allows companies like Facebook and Google’s YouTube to free ride on the content produced by others. The reason there are 40,000 Islamic State videos on YouTube, many with ads that yield revenue for those who posted them, is that YouTube does not have to take responsibility for the content on its network. Facebook, Google and Twitter claim that policing their networks would be too onerous. But that’s preposterous: They already police their networks for pornography, and quite well.

Removing the safe harbor provision would also force social networks to pay for the content posted on their sites. A simple example: One million downloads of a song on iTunes would yield the performer and his record label about $900,000. One million streams of that same song on YouTube would earn them about $900.

I’m under no delusion that, with libertarian tech moguls like Peter Thiel in President Trump’s inner circle, antitrust regulation of the internet monopolies will be a priority. Ultimately we may have to wait four years, at which time the monopolies will be so dominant that the only remedy will be to break them up. Force Google to sell DoubleClick. Force Facebook to sell WhatsApp and Instagram.

Woodrow Wilson was right when he said in 1913, “If monopoly persists, monopoly will always sit at the helm of the government.” We ignore his words at our peril.



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