“Google, Amazon and Facebook’s monopoly is a threat to democracy”

maintenance – at New WestAnd Olivier Bomsel and Rémi Devaux show how giants beat the web by shutting down the market, like Rockefeller in the nineteenth century. Even if it means endangering the social order?

Olivier Pomsel is Professor of Economics and Director of the Chair in Media and Brand Economics at Mines ParisTech. Co-written with Remy Defoe The New West – Who Can Stop the Web Giants?, so. Le Cherche-Midi, March 2022.

LE FIGARO. Integration of related activities is at the heart of the digital giants model, she writes. When Rockefeller reinvested railroad revenue into purchasing pipelines, storage and distribution, Google and Facebook dominated the market for online advertising that regulates consumer address. Finally, the success of tech giants depends on the fact that they provide not just a product, but an ecosystem?

Oliver Pomsel. – We can see it like that already, although it’s just an aspect. As far as Rockefeller is concerned, it is about vertical integration around the refining that makes up its platform: it buys transportation for crude oil producers and for buyers of refined oil and then partially integrates it into transportation and distribution. Rockefeller and its oil allies are building a refining monopoly and integrating them upstream and downstream into related activities.

An ecosystem is a set of activities that retain a consumer through the mutual benefit of their products. Amazon sells logistics and infrastructure to its suppliers, market customers, and more. It is vertical integration. The impact of the ecosystem is associated with Prime, which offers group customers all its services at a reduced price, which is a paid subscription. Every new Amazon service, including Internet access when its satellites are in place, increases Prime’s benefit. For Apple and Microsoft, it is the technical compatibility of software and services that creates the impact of this ecosystem. For Facebook, it is Instagram, WhatsApp and free access to news. Google has many ancillary activities, but the impact of the ecosystem is not visible to the consumer. There is no link between Google, Gmail or Waze for example. On the other hand, all activities adjacent to the Internet search increase its profitability and allow the engine to remain the best in the market.

By treating the consumer like a sacred cow, the web giants have benefited from overly lax regulations.

Oliver Pomsel

Draw an analogy between Rockefeller and GAFAM. How are they comparable? Is this giant comparable? GAFAMs emerged in a more interconnected world…

Rockefeller, but also JP Morgan and many others are the origin of the large US trusts targeted by the Sherman Act, the first federal antitrust law. At that time, the industry benefited from the effects of scale driven by economies of scale. Rockefeller, through its large refineries, obtained significant transportation discounts that enabled it to purchase its close competitors. But at the end of this focus, it had to form an alliance with other major corporations within a holding company that acts as a cartel. Focusing through economies of scale ends up in collusion because large corporations would rather ally rather than fight each other.

In the digital age, the effects of size first affect the network effects, that is, the usefulness of services increases with the number of users. Then you add economies of scale, so that whoever provides the most beneficial service benefits from the lowest costs. This double effect is devastating. No competitor can resist it. This is how Google killed Yahoo!, how Facebook killed MySpace, and how Amazon, thanks to Marketplace, has taken control of e-commerce. The winner-takes-all rule is what makes these platforms so powerful monopolies. Apple and Microsoft are not monopolies, but rather ecosystems as described above. They do not control any particular market. So our writers deal with GAFs – Google, Amazon and Facebook – not GAFAMs.

The flip side of digital is that once these monopolies are created, their owners will merge upstream and downstream as they compete with their customers. This is where their predatory power comes into play. With DoubleClick, Google’s monopoly on online search and sponsored link has extended to managing contextual banner ads. Dominant in e-commerce, Amazon is expanding into the cloud by commercializing its digital storage capabilities. etc. This is the logic of the predation of neighboring markets which was initially aimed at antitrust law. In the 1980s, this goal was taken down in the name of consumer interest. By treating the consumer like a sacred cow, the web giants have benefited from overly lax regulations.

Monopoly rents are also used, through pressure, to corrupt the institutions of democracy and the rule of law.

Oliver Pomsel

In liberal industrial societies, political power must guarantee free access to property, commerce, and markets and encourage division of labor, innovation, and growth. However, the GAF is doing everything to close the market… Are they endangering the social order?

What is certain is that even if it concerns the economy and the functioning of markets, antitrust is a political institution. The Sherman Act was implemented in the United States only 20 years after its enactment in response to the political context of rebellion of economic sectors victims of the market power of monopolies. Digital monopolies have winners and losers. The winners are often the consumers, the politicians spoil them, and the losers are the industrialists in the dominant sectors. But monopoly rents also, through pressure, corrupt the institutions of democracy and the rule of law. This is the biggest threat.

In addition, among the incentives given to digital, derogatory status has been extended to include liability law granted to telecommunications, platforms, merchants, and media. Host status makes these platforms irresponsible for the use of their services: they can infringe intellectual property and spread hate and obscurantism, and platforms are not held accountable. Social media, thus, detracting from the publisher status imposed on historical media, deliberately stirs up trouble in order to increase its audience. The societal irresponsibility of social media poses a threat to the institutions of representative democracy. The challenge of electing Biden and storming the Capitol was their catharsis.

The war is a reminder of the massive soft power given to America by monopolizing online search, reaching 85% of mobile phones via Android, or social media like Facebook and YouTube.

Oliver Pomsel

Amazon, in particular, has had such significant influence that it has become a global monopoly. Can we still go back?

The United States could decide to break up Amazon as it systematically did between 1905 and 1984 for many of the monopolies. They can separate the retail business from the market and the cloud. They can also do this for Google and Meta. Prior to the Ukraine War, such removals were on the agenda of the Biden administration and the antitrust regime led by Lina Khan. She was a pioneer in revising antitrust philosophy in favor of infected competitors. But the war reminds us of the enormity soft power It gives America a monopoly on online search, access to 85% of mobile phones via Android, or social media like Facebook and YouTube. At a time when intelligence is a global weapon, the United States has no reason to clip its wings. It is unlikely, in this new context, that the dismantling of the new trust will be back on the agenda.

With their power, are we heading toward a clash of sovereignty between nation-states and global groups?

no. States remain sovereign. But some are more than others. The Chinese are cleaning up the tech sector in their own way. They are blocking Alibaba’s expansion and restricting Tencent’s marketplace and other online services. Americans likely have win-win data-sharing agreements between the NSA and trusts. The Europeans pretend they want to organize the GAFs, but they don’t have the means to dismantle them. Furthermore, by easing Europe’s dependence on Russian gas, the US is pushing Europe to reverse the General Data Protection Regulation (GDPR) that requires European data to be stored in Europe. Complaints about the abuse of new dominance are emerging even in the European cloud market, where EU players complain about unfair competition from US giants. The war in Ukraine puts Europe in a state of greater dependence on the United States which, at the present point, can only strengthen the GAF.

Olivier Bomsel and Rémi Devaux, Le Nouveau Western, Ed. Le Cherche-Midi, March 24, 2022, 210 pages, €19 Church Medi

see also – Javam: “It is necessary to emphasize the primacy of French law on the national territory,” insists Nicolas Bay

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