In our day, we can’t quite see anything wrong with monopoly. We’re certain that our tech giants achieved their dominance fairly and squarely through the free market, by dint of technical genius.
To conjure this image of meritocratic triumph requires overlooking several pungent truths about the nature of these new monopolies. Their dominance is less than pure.
They owe their dominance to innovation, but also to tax avoidance.
Of course, every big American corporation tries to limit the tax bill. Armies of accountants are a staple of capitalism; the manufacture of new deductions is one of our country’s greatest showcases of innovation. But the tech companies are especially slippery with the tax man. They have hatched schemes that their competitors – brick-and mortar firms, media companies – couldn’t dare attempt.
When Jeff Bezos first conceived of Amazon, he originally wanted to locate the company on a California Indian reservation, where it would pay hardly any tax. Authorities rejected that gambit. But Bezos understood that internet commerce challenged traditional ideas about taxation. Thanks to a court ruling, rendered just as he launched his company, Amazon could get away without paying sales tax to the states to which it shipped its goods.
Google has the same sort of unpatriotic accounting schemes. Google has also shifted assets to Bermuda, that famous mecca of high tech. By the end of 2015, it had “permanently reinvested” $58.3bn of its profits in foreign tax havens, earnings on which it pays no US tax.
The tech companies maintain every shred of data, yet seem to want to purge every bit of taxable earnings. The year Facebook went public, it recorded $1.1bn in American profits, but didn’t pay a cent of federal or state income tax. Indeed, it earned a $429m refund. According to Citizens for Tax Justice, Facebook bilked the treasury by taking a single deduction: it wrote off the stock options it gave to its executives.
These companies can afford to push the limits of acceptable behavior, because they have paid such care and attention to Washington. While the tech companies are hardly the image of corpulent K Street, they have built massive lobbying operations that pace the halls of the regulatory agencies and Congress, stacked with skillful hacks.
Google executives set foot in the Obama White House more often than those of any other corporation – its head lobbyist visited 128 times. Google spread its money across Washington with joyous ecumenicism. Google spent about $17m on influence peddlers of both partisan varietals. By one count, Google poured more into its DC apparatus than any other public company. An investigation by The Intercept concluded: “Google has achieved a kind of vertical integration with the government.” Somehow Google managed to overcome the recommendation of staffers on the Federal Trade Commission who found Google’s monopolistic machinations worthy of a lawsuit.
Lobbyists for the companies have preserved a blissful state of barely regulated, barely taxed monopoly. They have played the politics brilliantly. Obama spent his presidency cheering on the tech companies, even pleading with the Europeans not to collect the taxes owed to them. In return, the tech companies have sent their best brains to work for the Democratic administration and its political campaigns.
The tech companies have so mastered Washington, they have acquired such cultural prestige, that it’s hard to imagine the system ever restraining them. But we know that politics doesn’t repose in a steady state, and the companies have one gaping vulnerability – they aggressively surveil users. Thus far, the public has tolerated these invasions, but that won’t last forever.
Hackers are constantly testing security cordons, and constantly bursting through them. Everybody has tolerated this as a fact of digital life, a minor price to pay for its wonders. With the exception of Russian interference in our election, these have been relatively minor breaches. They will prove throat clearing compared with the Big One, the inevitable mega-hack that will rumble society to its core.
The Big One might be an exposed cache of intimate information that disrupts marital relations en masse, as the Ashley Madison hack did on a small scale. It might disrupt our financial system, so that fortunes disappear in an unrecoverable flash. Or it might trigger an actual explosion of infrastructure that kills. If we could predict, we could prevent, but we can’t.
The tech companies can see the Big One coming, and they are bracing for the fallout, which is a perfectly reasonable posture. Their companies have created devices and code that enable omnipresent surveillance; their pack-rat servers hoard personal data. These companies could logically carry the blame for a massive attack.
The best analogy is the financial crisis of 2008. There was nothing that the banks could do to gain political traction in the face of the catastrophe that they unleashed. When the Big One arrives, the tech companies will be vulnerable to the regulation that they have skillfully avoided. (Shamefully, there’s no modern law governing the
use of data.) Just as the financial crisis triggered the creation of Elizabeth Warren’s Consumer Financial Protection Bureau – the rare launch of a new agency – the Big One has the potential for creating a sizable regulatory infrastructure.
What we need is a Data Protection Authority to protect privacy as the government protects the environment. Both the environment and privacy are goods that the market would destroy if left to its own devices. We let business degrade the environment within limits – and we should tolerate the same with privacy. The point isn’t to prevent the collection or exploitation of data. What are needed, however, are constraints, about what can be collected and what can be exploited. Citizens should have the right to purge data that sits on servers. Rules should require companies to set default options so that citizens have to opt for surveillance, rather than passively accept the loss of privacy, a far more robust option than the incomprehensible take-it-or-leave-it terms of service agreements.
This is a matter of autonomy: the intimate details embedded in our data can be used to undermine us; data provides the basis for invisible discrimination; it is used to influence our choices, both our habits of consumption and our intellectual habits. Data provides an X-ray of the soul. Companies turn that photograph of the inner self into a commodity to be traded on a market, bought and sold without our knowledge.
t’s a basic, intuitive right, worthy of enshrinement: citizens, not the corporations that stealthily track them, should own their own data. The law should demand that these companies treat this data with the greatest care, because it doesn’t belong to them.
Possessing our data is a heavy responsibility that must come with ethical obligations. The American government has a special category for corporations that profit from goods that they don’t truly own: we call them trustees. This is how the government treats radio and television broadcasters. Those companies make money from their use of the public airwaves, so the government requires that these broadcasters adhere to a raft of standards. At times, they were asked to broadcast civil defense warnings and public service announcements; they were asked to adhere to decency standards and were required to provide equal airtime to candidates of both political parties. The government, in the form of the Federal Communications Commission, supervises the broadcasters to guarantee that they don’t shirk these obligations.
One of the most sacrosanct obligations of the data-driven firms is that they don’t abuse their power to undermine democracy. The government shouldn’t dictate the editorial policy of the platforms, but we should prevent our informational gatekeepers from suppressing criticism of themselves; we should insist that they provide equal access to a multiplicity of sources and viewpoints. I don’t deny that
this is a thicket of complex questions, which would require a legislative doorstop and many judicial rulings to untangle.
This is not, however, a novel interpretation of the government’s responsibilities. It’s exactly what the supreme court has demanded of the state, even its most conservative justices. In 1994 Anthony Kennedy intoned: “Assuring the public has access to a multiplicity of information sources is a governmental purpose of the highest order.”
Over the decades, the American state has done a first-rate job of limiting communications behemoths, allowing the oxygen for new technologies and new competitors.
In the earliest days of the republic, the postal service monopolized the flow of information. But with the advent of the telegraph, the government withstood the temptation to control the new medium, even though the postal service had ample opportunity to swallow it. The government allowed a period of rigorous private competition – which ended, as all such cycles do, with the rise of a monopoly: Western Union. Politicians, however, kept threatening to dismember Western Union, a threat that deterred Western Union from extending itself into telephony. AT&T emerged as the dominant firm in that new technology, but the government wouldn’t let it extend into radio. When NBC achieved a grip over radio, the government insisted that it divide into two – NBC and ABC. The Nixon administration encouraged a challenge to the Big Three networks that controlled broadcasting, by promoting the emergence of cable.
A Data Protection Authority would be the heir to this tradition. Unlike the Federal Trade Commission, which evaluates mergers to preserve low prices and economic efficiency, the authority would review them to protect privacy and the free flow of information. It would constrain monopolies as they attempt to carry their power into the next era, creating the opening through which challengers can ultimately emerge.
The health of our democracy demands that we consider treating Facebook, Google, and Amazon with the same firm hand that led government to wage war on AT&T, IBM, and Microsoft – even dismembering them into smaller companies if circumstances (and the law) demand a forceful response. While it has been several generations since we wielded antitrust laws with such vigor, we should remember
that these cases created the conditions that nurtured the invention of an open, gloriously innovative internet in the first place.