A Blog by Jonathan Low


Mar 1, 2018

Are Google and Facebook Monopolies?

The more pertinent question may be to what extent - and how fast -  traditional definitions of what constitutes a monopoly are finally changing to reflect the realities of our dependence on information in the internet age.

The tentative answer suggests that perceptions of economic concentration will lead to demand for a reconsideration of the playing field and the players. JL

James Warren reports in US News and World Reports:

Facebook's product is free and doesn't have a monopoly on attention, as Rockefeller did on gasoline. (But) the control of data gives the giant platforms an increasing hold over other sectors, especially as artificial intelligence grows. It's not a traditional monopoly but unceasing leverage of influence. "I'm advocating reallocation of data ownership. I want more competition. In a walled garden, there are two factors. One benefits the consumer. The other creates a moat to block competitors and builds a bigger monopoly."
Luigi Zingales provides a window onto news illiteracy, or at least social media's penchant for the provocative over the reasoned.
Zingales is an economist at the Booth School of Business at the University of Chicago, whose main floor walls are lined with a photographic Murderer's Row of Nobel laureates (nine, actually) in economics. You can occasionally find a real, live Nobelist at the salad bar in the upscale cafeteria just off an airy lobby atrium where elite students from around the globe (our future tech moguls, Fortune 500 chiefs and perhaps even well-heeled dictators) can be found chatting with an unmistakable aura of privilege and intellectual superiority.
The Padua, Italy native has inspired a nasty kerfuffle by inviting former Trump admnistration adviser Steve Bannon to campus (date to be determined), prompting both accusations of his promoting a "Nazi" and a sit-in by protesters during one of his classes. The university, where (some joke) fun goes to die, has long been the most honorable bastion of free speech and won't buckle, as President Robert Zimmer reiterated during a conversation with The Wall Street Journal.
But if the citizenry were less ideologically convulsed, it might pay attention to Zingales' actual work, which includes questions about more troubling forces than a humbled former Donald Trump Svengali.
In sum, are Facebook and Google monopolies?
Zingales first broached the matter in a podcast he co-hosts with Kate Waldock of Georgetown University and now goes into greater detail both in a conversation with George Mason University's Tyler Cowen found in Booth's magazine and in a phone chat.
Zingales is troubled by their power, but Cowen really isn't as he noted some obvious realities: Most people love them and the price is right. They companies have ascended because they're doing a better job than media competitors. Their growing market share, especially of ad dollars, is a function of being very good during a period where our choice in media has never been greater.
Zingales demurred and contends, for starters, that we pay a greater price than imagined, most notably in the personal data we give up. Oddly, we may not place as great a value on that data as we might and do seem less and less concerned about privacy. We don't really appreciate all the information we routinely dispense as we google and post on Facebook.
So, to that extent, data is the new oil and Facebook is our new Rockefeller, harkening to the days of Standard Oil's monopoly. Cowen disagrees, noting that, in his mind, Facebook's product is free and it doesn't have a monopoly on his attention, as Rockefeller did on our gasoline.
Zingales countered that the control of data is worse and gives the giant platforms an increasing hold over other sectors, especially as artificial intelligence grows. It's not quite a traditional monopoly but a dangerously unceasing leverage of influence.
In his very civil debate with Cowen, he said, "I'm not advocating regulation; I'm advocating a reallocation of data ownership. I don't want to tax them; I want more competition. You want, as you said, a walled garden. In a walled garden, there are two factors at play. One benefits the consumer. The other creates a moat to block competitors from coming in and to build a bigger and bigger monopoly."
"These companies discriminate on a commercial basis. If you are a competitor, you're at the bottom of the list," he added. "If I own the railways, I can't charge you double the price because you're my competitor, while my friends get it for free. That's the law of the land in the U.S.: If you are a public utility with certain characteristics, you must provide service on equal terms to everybody."
And, while he pointed to the effectiveness of European media and data regulation (and argued that prices have gone down and competition increased for products such as phones), he doesn't call for immediate regulation but, at minimum, a more explicit understanding of the giants' power.
"It's not a straightforward thing," he says in a phone chat. "The solution is not saying there is no problem or jumping the gun. In my first line of attack, it's saying I want to make the market more competitive by introducing rules to make it more competitive."
Take a look at the increasing Facebook-Google stranglehold on digital advertising. Yes, there is greater access these days to information (including, he jests, people wasting time on academics' blogs), but really good information has to be paid for. The decline in that lifeblood of a democracy is vivid, especially on local media markets.
"I am not trying to go back to good old days. They weren't that good and they are not coming back. But saying there is no problem would be excessive. Facebook and Google are extremely good at transmitting information but not at creating information," he says.
Good information is a public good, he contends, as he was reminded of when watching "The Post," the Steven Spielberg-Meryl Streep-Tom Hanks movie on The Washington Post's coverage of the Pentagon Papers.
He recalls how when The Post was concerned about The New York Times' blockbuster initial coverage, "they go out and buy ten copies of The Times. We are not used to that anymore. Modern technology has made ease of reproduction easier," and disrupted business models. These days, just find a free digital version of the story.
If the Justice Department's antitrust division sought his counsel, he'd try to figure ways to increase competition, be stricter with Google in assuring search brings unbiased results from both a commercial and political point of view and try to somehow limit the size of the digital ad market it and Facebook control.
"Maybe put a strict limit that they can't control more than x-percent in that market," he says. Some of the very media concentration limits ditched by Trump's Federal Communications Commission should probably be revived for the internet age, he suspects, with last week's Robert Mueller indictments of Russian trolls only underscoring the influence of Facebook, especially (not to mention the growing inability of Americans to distinguish real from phony).
"I'm not against [Facebook and Google]," Zingales says. "I just worry about their power."
And then, of course, there's that guy, Bannon, and the very harsh public debate that's included depressingly liberal use of the word "Nazi." It's perhaps more concerning than the role of Facebook and Google.
"We don't have a date yet. But what's shocked me is that extremism of some positions. I am actually more worried about the future of the nation as a result," he says.


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