March 11, 2019 / 5:07 PM / 8 days ago

Breakingviews - Big Tech's best bet is to friend U.S. regulation

U.S. Senator Elizabeth Warren speaks about her policy ideas with Anand Giridharadas at the South by Southwest (SXSW) conference and festivals in Austin, Texas, U.S., March 9, 2019. REUTERS/Sergio Flores

SAN FRANCISCO/NEW YORK (Reuters Breakingviews) - Silicon Valley’s biggest companies should get in the tent with U.S. regulators. Lawmakers and politicians keen to run for president are considering ways to break up Amazon.com, Facebook, Alphabet’s Google and even Apple. Companies fighting constraints rather than trying to shape them may regret it.

One White House wannabe, Democratic Senator Elizabeth Warren, raised the bar on Friday. She proposed designating online companies with at least $25 billion in global revenue as “platform utilities.” That could mean, for example, that Amazon’s marketplace for third parties would be separated from sales of house-branded items like batteries. Consummated mergers are also a target: Facebook’s acquisitions of WhatsApp and Instagram could in theory be unwound.

Amy Klobuchar, another senator with presidential ambitions, wants to further scrutinize M&A for threats to competition. There’s a bipartisan element, too: the Federal Trade Commission recently announced a tech task force to consider similar issues. California’s privacy law is another reason to get on board with federal legislation rather than risk a patchwork across the country.

Apple, Salesforce and Snap have offered fairly full-throated support for tougher rules. So far, though, Facebook and Google have been less enthusiastic, saying they welcome oversight but expressing caution on what form it should take.

Together Alphabet, Facebook, Apple and Amazon represent nearly $3 trillion of market value, more than 10 percent of the S&P 500 Index’s total capitalization. The firms have minted money by collecting user information, and data breaches have piled up. Warren’s idea of breaking them up might not address those issues. But that’s the point – if the targets of regulation don’t engage, they could face only misguided options. That also applies in Europe, where competition watchdogs have shown themselves to be more aggressive.

AT&T and Microsoft were once in the crosshairs for their size and muscle. Trustbusters broke up the telecom firm nearly 40 years ago, while Bill Gates’ company had to share its software tools with third parties. Warren argues that pressure on Microsoft helped clear the way for Google to emerge. That’s simplistic at best, but the lesson is still clear. Big Tech’s best bet is to friend U.S. regulators.

Breakingviews

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