Friday, August 28, 2020

"The Big Tech Extortion Racket" (GOOG; AMZN; FB)

The author of this piece caused a bit of a contretemps a few years ago that the reader may recall. From his Wikipedia mini-bio:
Barry C. Lynn is a liberal American journalist and writer. He was a senior fellow at the New America Foundation think tank in Washington, D.C., directing the Open Markets Program. The program was shut down, allegedly for criticizing Google, one of New America's chief funders.[1] He has written extensively on globalization, economics, and politics for such publications ranging from The Financial Times and Forbes to Mother Jones and the Harvard Business Review.[2]
And from Harper's Magazine, September 2020 a superb piece:

How Google, Amazon, and Facebook control our lives 
Popular histories present the Boston Tea Party as a rebellion against taxes. Yet what the colonists objected to more than anything was the idea of an all-powerful corporate middleman regulating commerce. They viewed the 1773 protest in Boston Harbor as a victory for liberty and a blow against the British East India Company’s trade monopoly.

That corporation owed its dominance not to any proprietary advantage but to an exclusive British government charter. The artificial nature of this power was made clear soon after the Congress of the new United States signed a peace treaty with Britain. Six weeks later, the American ship Empress of China sailed from New York, bound for Canton. When the ship returned, its traders sold tea and porcelain on the open market. Without the active backing of the British state, the East India Company could not stop the sale—let alone determine who sold what, or where and how they sold it, in America.

But around the middle of the nineteenth century, Americans began to develop technologies that could not be broken into component pieces. This was especially true of the railroad and the telegraph. These expensive and complex networks were built across vast areas of land and required large teams of people to operate. This made the earlier solution to monopolies—dissolution—impossible. If Americans planned to take full advantage of these technological advances, they would have to regulate the actions of the corporations that controlled them.

Such corporations posed one overarching challenge: they charged some people more than others to get to market. They exploited their control over an essential service in order to extort money, and sometimes political favors. The system of “discriminations made between individuals . . . is the most serious evil connected with our present methods of railroad management,” the Yale professor Arthur T. Hadley explained in 1885. “Differences are made which are sufficient to cripple all smaller competitors. . .  and concentrate industry in a few hands.”

Americans found the answer to this problem in common law. For centuries, the owners of ferries, stagecoaches, and inns had been required to serve all customers for the same price and in the order in which they arrived. In the late nineteenth century, versions of such “common carrier” rules were applied to the new middleman corporations.

Today we rightly celebrate the Sherman Antitrust Act of 1890, which gave Americans the power to break apart private corporations. But in many respects, the Interstate Commerce Act of 1887 was the more important document. This act was based on the understanding that monopoly networks like the railroad and the telegraph could be used to influence the actions of people who depend on them, and hence their power must be carefully restricted, in much the same way that we restrict the power of government. As Senator Sherman himself put it,
It is the right of every man to work, labor, and produce in any lawful vocation and to transport his production on equal terms and conditions and under like circumstances. This is industrial liberty, and lies at the foundation of the equality of all rights and privileges.
For a century and a half, Americans used common carrier policies to ensure the rule of law in activities that depended on privately held monopolies. These rules served as a pillar of American prosperity through much of the twentieth century. By neutralizing the power of all essential transport and communications systems, the regulations freed Americans to take full advantage of every important network technology introduced during these years, including telephones, water and electrical services, energy pipelines, and even large, logistics-powered retailers. Citizens did not have to worry that the men who controlled the technologies involved would exploit their middleman position to steal other people’s business or disrupt balances of power.

In the 1970s and 1980s, Robert Bork, Richard Posner, and other neoliberal Chicago School legal scholars set out to overturn America’s antimonopoly regime, targeting the traditional prohibitions on discrimination that common carrier laws had established. Their scholarship later played a major role in the writing of Section 230 of the Communications Decency Act of 1996. In that bill, Congress simultaneously exempted internet platforms from any responsibility to police the content on their sites, and failed entirely to impose on them any requirement to provide equal and just service to all who depend on their networks.

As a result, Amazon, Google, Facebook, and other platforms were free to develop business models that treated every seller and buyer—every citizen—differently. These corporations exploited this license to the fullest, and have used their power to reorganize entire realms of human activity. Amazon, Google, and Facebook match individuals to specific shoes and clothes, specific restaurants and hotels, specific movies and music, specific jobs and schools, specific drugs and hospitals, specific sexual partners, and even specific books, articles, speakers, and sources of news.
These companies are the most powerful middlemen in history. Each guards the gate to innumerable sources of essential information, services, and products. Yet thus far no governmental entity in the United States has signaled any intention of limiting the license these corporations enjoy to serve only the customers they choose to, at whatever price they decide.

This means that Jeff Bezos, Sergey Brin, Larry Page, and Mark Zuckerberg enjoy much the same power as God did in Babel. We live in the world they manufacture for us. Their vision for what we should do, where we should go, how we should think, and who we should be is now our vision, too. As their manipulation machines increasingly deliver different information to each member of the public, it becomes harder for people to engage in debate and have any chance at bringing these companies under control.
the manipulation of the seller
Traditionally, retailers operate by purchasing someone else’s product and reselling it to consumers. Amazon calls this its first-party business, and it remains a large driver of revenue. But as Bezos detailed in his 2018 letter to investors, Amazon in recent years has focused more on connecting companies that want to sell a particular product with people who want to buy that product, then charging a fee for this service. After noting that annual first-party sales had grown from $1.6 billion in 1999 to $117 billion in 2018, Bezos added that during that same period, third-party sales grew from $0.1 billion to $160 billion.

This new model was so successful, Bezos claimed, because Amazon had done such “a great job” of helping independent sellers “compete against” the company’s own business. Amazon, he wrote, adding his own italics, had provided other sellers with “the very best selling tools we could imagine and build.” “To put it bluntly,” he went on, adding more italics, “Third-party sellers are kicking our first party butt. Badly.”

But to the third-party sellers, the arrangement looks somewhat different. These companies sell on Amazon because there are few other places to find customers online. According to data collected last year, 66 percent of all online shoppers start their search on Amazon. Of those looking for a specific product, the figure is 74 percent. In short, when it comes to commerce in consumer goods, if you are not on Amazon, you are not really in the market....