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Tech companies face growing pressure as antitrust concerns mount

Sally Hubbard - Open Markets Institute Director of Enforcement Strategy and ‘Monopolies Suck’ Author joins Yahoo Finance's On The Move to discuss her testimony before congress about tech monopolies.

Video Transcript

JULIE HYMAN: Want to move on, though, to some developments regarding the antitrust potential actions against big technology. Remember, the CEOs of Google, Facebook, Twitter, they're all set to testify before the Senate Commerce Committee on October 28. Ahead of that, "The Wall Street Journal" obtained a document that lays out Facebook defense against potential antitrust legal threats. Among other things, the document argues that, quote, "a breakup of Facebook is a complete non-starter."

Sally Hubbard is joining us now. She is Open Markets Institute Director of Enforcement Strategy. She's also the author of the book, "Monopolies Suck." Sally, thanks so much for joining us. Appreciate it. You know, when you look at the potential antitrust actions against Facebook and the other big technology companies, one of the sort of most clear cut ones that has been mentioned is a potential breakup of Facebook, separating WhatsApp and Instagram from Facebook. First of all, is Facebook a monopoly? And second of all, would separating it into those parts accomplish, perhaps, what its critics want to accomplish?

SALLY HUBBARD: Right, yes, Facebook is a monopoly, and we have to remember that the definition of monopoly power is the power to control prices or exclude competitors, and we have seen Facebook excluding competitors in a number of ways by denying access to data by, you know, shutting out others from its Facebook API when they're competing against it. But, you know, the market that Facebook wants us to look at to decide whether they're a monopoly is a huge overbroad market definition that includes things like Snapchat. But when you're looking at what belongs in the relevant product market, you have to look at what are the substitutes? What are the alternatives for people to go to?

And the reality is that for most Facebook users, Instagram was the top substitute, and Facebook bought that. There have been internal documents that have been revealed in the House Judiciary Antitrust Investigation that have showed that the motivations for acquiring both Instagram and WhatsApp included that they were competitive threats. So unwinding those mergers, which were illegal under the Clayton Act, would be a first step towards addressing some of the issues we have with Facebook, but it wouldn't solve all of the problems.

ADAM SHAPIRO: Sally, you also point out that monopolies spy on and manipulate their users. Well, I just saw "The Social Dilemma," the documentary on Netflix. So I want to ask you, I get the business argument against these and breaking them up as monopolies, but if you were to break them up, wouldn't those AI artificial intelligence programs still be at play even with more companies than if we were to break them up?

SALLY HUBBARD: Right. I mean, I think we need not just breaking them up, but we also need regulation. I personally have advocated for banning hyper-targeted advertising, because it is so dangerous to our democracy. Allowing anyone that pays Facebook to be able to, you know, manipulate voters, even voter suppression. There was a real big expose recently showing how many African-American voters were targeted for voter suppression in the 2016 election. So it's an incredibly dangerous business model. The surveillance that powers it is being done in ways that we have no idea are even happening, so it's a massive deception and a fraud on the American people.

In terms of breaking up, I do think more competition will help. We obviously need strong privacy laws, ones that are not crafted by the tech giants themselves as they're currently trying to do, and we need to look at this really dangerous business model. But competition also gives consumers alternatives. If you're not happy with the way a company is targeting you or boosting disinformation with its algorithms that prioritize engagement, you need an alternative. Right now for most people, the top alternative to Facebook is Instagram, so that doesn't provide any competitive constraint to inspire Facebook to fix its ways out of fear of losing profits.

MELODY HAHM: And Sally, I know you gave a testimony before the House Judiciary Antitrust Subcommittee that happened last week. One of the phrases that really caught my attention was America suffering from a crisis of imagination. When you think about the systemic structural sort of acquiescence to monopolies, if you will, that our culture has sort of allowed to many degrees, whether it's because of Congress or consumer behavior, how would you say that crisis of imagination can actually be changed?

SALLY HUBBARD: Right, so I mean, that's why I wrote my book, "Monopolies Suck." I wanted to make people understand how monopolies affect their daily lives every day in a really accessible way. Because basically, whether it's big tech or any major industry in America right now unfortunately, including, you know, Big Pharma, Big Ag, Big Oil, we are basically living in a monopolized economy. And we're so accustomed to it that we have a hard time envisioning what life could be like without it, and we tend to think that these practices that are actually allele are just the way business is done because section 2 of the Sherman Act has been so weakly enforced for the last 30 years.

So I think we know the crisis of imagination is that if we don't know what's possible for our economy and our democracy, then we don't know how to fight for that, and so we need to start envisioning what our world could look like if we had open, competitive markets where entrepreneurs are rewarded for their efforts, for their ingenuity and not afraid of just being copied or crushed or unable to even get funded in the first place because they're in a kill zone of a tech giant. All of the dynamism of our economy, all the harms involving speech, the way that speech is being so concentrated under the control of Facebook and Google, these are all things that we've just become accustomed to that we take it as this is just the way it is, but it's not the way it has to be. And so I really, you know, tried in my testimony to put forward a positive vision, and I do this in my book as well, of what our lives could look like if we began enforcing our antitrust laws again as well as using all of the other parts of the anti-monopoly toolkit to disperse the concentrated economic and political power of monopolies.

BRIAN CHEUNG: Hey Sally, it's Brian Cheung here. In more than just the policymakers I think is also the public opinion. What's been interesting is that it seems like there's been a lot of public interest in the scale of these large tech companies through things like Netflix's "Social Dilemma." It does seem like all my friends and family have been blowing up after watching that on Netflix. How does that affect, not just where the public goes, but then also where policy makers go in terms of approaching these antitrust laws that you just discussed in the past few questions?

SALLY HUBBARD: Right. I mean, it's critically important for the consumer and the citizen, you know, the average American to understand these issues, and to basically give the representatives in Congress or even at the local and state level their support, because these companies have tremendous political power, right? Their economic power translates to tremendous lobbying resources. They spend tens of millions of dollars lobbying a year, and the only real way to counter that is through the people, which like I said, is why I wrote my book. I want the people to understand that this is an issue they need to care about, and I have seen the public opinion shifting drastically during the time that I've been covering this issue.

There was a poll that came out a couple weeks ago by Consumer Reports showing that the vast majority of Americans are really concerned about the concentrated power of these companies and think something needs to be done. So, you know, it's critically important. This is a democracy, right? This is governance by the people, and it's critically important for people to understand why it matters to them and why they need to, you know, support the politicians who are standing up to the tremendous power of these companies.

JULIE HYMAN: Sally, thanks for your time today. Sally Hubbard is Open Markets Institute Director of Enforcement Strategy and the author of "Monopolies Suck."