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Sen. Elizabeth Warren (D-Massachusetts), who is running for the 2020 Democratic presidential nomination, on Friday said that she is in favor of new regulations that would require the breakup of Amazon, as well as other giant technology companies such as Apple, Facebook, and Google.

Warren’s proposal, if implemented, would mean that Amazon could no longer operate an online marketplace on which other companies could sell their products and also be a retailer on that same platform. Ironically, Warren made the initial announcement of her proposal in a speech in Long Island City, New York - the very neighborhood where Amazon had planned to put half of its vaunted HQ2 project until changing its mind because of community pushback about the impact of such an enormous development and the tax incentives offered tio persuade it to choose that location.

The New York Times described the proposal this way:

It “calls for the appointment of regulators who would “unwind tech mergers that illegally undermine competition,” as well as legislation that would prohibit platforms from both offering a marketplace for commerce and participating in that marketplace.

“Ms. Warren’s plan would also force the rollback of some acquisitions by technological giants, the campaign said, including Facebook’s deals for WhatsApp and Instagram, Amazon’s addition of Whole Foods, and Google’s purchase of Waze. Companies would be barred from transferring or sharing users’ data with third parties. Dual entities, such as Amazon Marketplace and AmazonBasics, would be split apart … Ms. Warren’s plan creates two tiers of companies that would fall under the new regulations: those that have an annual global revenue of $25 billion or more, and those with annual revenue of $90 million to $25 billion. The upper tier would be required to ‘structurally separate’ their products from their marketplace. Smaller companies would be subject to regulations but would not be forced to separate themselves from the online marketplace.”

The Times notes that “the announcement reverberated on Friday from New York to Silicon Valley. Pressure for elected officials to place additional oversight on mega-tech companies has been building for months, particularly after revelations that companies such as Facebook may have violated customer privacy agreements. Ms. Warren is also sending a political warning shot across the Democratic primary field, where decisions on how much to embrace or reject Silicon Valley and its wealthy donors could become an important dividing line among candidates.”

And the Washington Post writes: “Warren’s proposal illustrates the tech industry’s political fall from grace as policymakers grapple with the ills posed by Silicon Valley — from job losses threatened by the rise of automation to the spread of malicious falsehoods online. In recent years, members of Congress have grown frustrated with the privacy mishaps at Facebook, which is now facing the prospect of a multibillion-dollar fine for mishandling its users’ data. And the concern is bipartisan: A key federal watchdog agency in the Trump administration just this month commissioned a new task force to study if big tech had become too big.”
KC's View:
I am sympathetic to the notion that giant companies can be seen as stifling competition from smaller entities; they have have so many resources, so much brainpower, and so much access to capital that they make it difficult for a smaller company to compete. I get it.

But I am not persuaded that Warren’s approach is the right one, and I’m certainly not convinced that it has much chance of becoming law, even if she were elected President, simply because there would be too much opposition to such a heavy-handed regulatory approach.

Let’s take the case of Amazon. There was a time, actually not so long ago, when Amazon was a small company, facing off in one category - books - against giant retailers such as Barnes & Noble and Borders. It succeeded because it had a better, more progressive idea that resonated with consumers.

Those same consumers, as it happens, tend to give Amazon very high marks for prices, customer service, etc … and the last time I checked (and to be sure, I am not a lawyer), I thought antitrust law primarily existed to protect consumers. Break up Amazon, and the result could be higher prices and less product availability, not to mention lower customer service standards.

Is Whole Foods really better off not being owned by Amazon? As I recall, Whole Foods had a bunch of problems leading to rampant speculation about it being acquired by a range of other companies. Amazon just beat everybody to the punch.

I’m not sure where this all would stop. Before Amazon, many retailers saw Walmart as having an unfair size advantage because of its size. Before Amazon, a lot of small bookstores saw Barnes & Noble as a category killer with unfair advantages.

I do think - and have said here for a long time - and new definitions for what “unfair competition” means need to be drawn up for a 21st century business environment. I’m good with that. And when big companies - I’m looking at you, Facebook - can be shown to have ignored the best interests of their customers and even lied to them about how they use their data, for example, then I think the regulatory response needs to be tough, swift and customer-centric.

As I said above, I don’t think this has much of a chance of becoming law. It may be that Warren is just making a point and trying to draw a philosophical distinction between her opponents and her.

If that’s the case, I’m okay with the discussion. It needs to be open and nuanced, and it is what the public deserves.

I do wonder if Warren’s proposal will create a quandary for some people who under most circumstances would never even consider supporting her, but will - because of their own competitive issues - find something to like in this particular suggestion.