Antitrust is already working. Here’s why.

With the United States Congress taking aim at Google’s Search in anti-trust hearings, anti-trust is in the spotlight again. It is still unclear whether tech platforms privileging their products is enough to build and win an anti-trust case against big tech. We will find the answer to that question in the times to come. Until then, let us remember that 2019 displayed two memorable sides of Facebook founder Mark Zuckerberg. The first where he made the US Congress look stupid while explaining them how Facebook made money. Remember, “Senator, we run ads”. The other side was visible when he talked about Elizabeth Warren being an existential threat to Facebook.

Warren had not been the favorite to win the Democratic ticket for a while, let alone the Presidency, but was big enough to get herself heard. And a big part of her message was opposition to Big Tech and her call to break up Amazon, Google, and Facebook. Even if Warren goes on to win the Presidency (she has dropped out of the race now) and launches her anti-Big Tech campaign, it is unlikely that any of the Big Four (Facebook, Amazon, Apple, Google) would be broken up so easily.

Actually, there are a bunch of reasons why it is unlikely that Big Tech would be broken anytime soon. For starters, all of them have the capital and expertise at hand to handle an anti-trust challenge. Also, you could well argue that anti-trust (or at least the way it operates) wasn’t built for this. And finally, a significant part of America views these companies as symbols of success, and at times engines of economic growth.

So how is anti-trust working? Is it because it seems to have successfully threatened Facebook to merge its messaging services, making it harder to separate them? No. Anti-trust would still apply to a more interoperable messenger. If it could break up AT&T, one of the largest and most complex networks known to mankind, then consider it capable enough to mandate the decoupling of a complex messaging service.

Instead, anti-trust works today as a deterrent, and a fairly effective one at that. Through the threat of breaking up Big Tech, it has ensured that these massive corporations think thrice before acquiring smaller firms. Instead, it has unknowingly been responsible for establishing a new approach to dealing with competition in Silicon Valley: The slow burn.

The idea is that bigger tech companies slowly eat into their competitor’s market share or refrain from entering into new markets for fear of anti-trust. Professor Scott Galloway explains this well through Star Wars. Here is a slightly paraphrased version of his analysis:

The Death Star’s multiple reactors can cause the total and rapid destruction of a planet. But, a firing a single reactor on a planet is enough to be overkill for a city or a base, but nowhere near enough power to destroy an entire planet. That is basically what Big Tech has also adopted as a strategy.

Prime Microsoft (1990s) was absolutely ruthless as a company. During the first browser wars, it killed its closest competitor, Netscape, and ended up inviting anti-trust. Since then, Microsoft has learned. Now for instance, it has decided to compete against Slack with its latest offering, Teams. Turn on the single reactor. Microsoft began by offering Teams at a marginally lower price point than Slack. It has gradually upped the ante since then. Now bundling Teams with the Office 365 bundle, it has passed Slack in terms of users (13 million v 10 million, according to the most recent reports). Had Microsoft wanted to turn on the death star, it could have begun with retailing Teams for free and added in support for the G-Suite and say, Zoom. Making Teams interoperable would have taken away much of Slack’s USP.

Once you begin thinking in terms of this analogy, a lot of Big Tech’s actions (and non-actions) begin to make sense. Think Amazon and FedEx.

Amazon sits upon arguably the world’s best physical distribution networks. With some significant tweaking, they can also perform FedEx’s functions of transporting packages between cities. This would easily eat into the market share of FedEx. Plus, since it is Amazon, it is likely that replacing FedEx would happen at break-even or loss, beating the FedEx’s price point. Amazon somewhat turned on the single death ray recently when it blocked its sellers from using FedEx ground for Prime shipments during the holiday season,  citing a dip in performance levels. Had it chosen to turn on the Death Star, it could have banned their express service from Prime Shipments and both express and ground services on Non-Prime Shipments.

Amazon has also perfected its software over the years. So, when you order something on the platform, it feels frictionless. When was the last time you used the FedEx app? For Amazon, this market is a low hanging fruit – One that it won’t go for (at least with all its push) in the foreseeable future.

And that in itself is how anti-trust is working. Yes, it wasn’t built keeping in mind Big Tech. Who could have predicted that we would have such companies back then? Big Tech likely has the capacity and expertise to navigate an anti-trust challenge. Anti-trust may not have been built for this, but the current version of it seems to have unintentionally been repurposed. It is now akin to a tool of deterrence against Big Tech. To some extent, we may have Warren to thank for it.

Rohan Seth is a Policy Analyst at the Takshashila Institution. Views are personal. 

This article was first published in Deccan Chronicle.