8 February 2021

Tobias Ellwood is wrong: we’d be far worse off in a world without Big Tech

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Critiques of big tech are ten a penny, but it’s not often that you hear a politician, let alone a Conservative one, saying we should shut down tech companies altogether. So it was a surprise to see Tory MP Tobias Ellwood arguing in the Mail on Sunday that we would be better off if the likes of Google, Facebook, Amazon and Twitter did not exist at all.

I’m not exaggerating. In the piece he writes:

It may seem unthinkable to live in a world without Facebook, Twitter, Google or Amazon. But along with protecting the environment, it is one of the priorities of our age.

But, given that he favours the death penalty for these companies, their supposed crimes are remarkably mild.

Twitter’s, for example, is to have removed Donald Trump from its platform after the storming of the US Capitol. Ellwood has obviously noticed the debate over Section 230 in the US, which makes users responsible for the content they post on the internet, not the platforms that carry it. That means that if I libel someone on Twitter, I am legally liable, not Twitter. 

One reason this makes sense is purely practical. If platforms were liable for what users posted, they would be at risk every time someone posted a tweet or video online, which would make it virtually impossible for services like Twitter or Youtube to exist in their current form. Every single piece of user-created content would have to be checked before it could be posted. It would be expensive, slow, and error-prone.

Adopting a common misconception among American conservatives, Ellwood seems to think that Section 230 immunity means that these platforms should not moderate any content that users post. But a lot of content moderation is done to make the platform a better place for users, not for legal reasons. No law stops Instagram or YouTube from carrying pornography, but they still try to stop people posting this kind of content because users prefer it that way.

Twitter does not have to stop people from promoting anti-vaccine or anti-Semitic conspiracy theories on its platform, but I (and lots of other users) prefer not to use a site filled with that kind of crap, so it tries to remove it to improve our experience. Ellwood thinks that this kind of content moderation is evidence that these platforms are monopolists, but if they are responding to user demand, it is the opposite.

As well as the supposed offence of moderating content on their platforms, Ellwood objects that Facebook and Google link to news articles without paying the articles’ publishers for doing so. To be clear, this is not about them republishing content without paying, but a search engine or social media site linking to other webpages.

Australia’s attempts to force these companies to pay for links have led Google to threaten to pull out of the country, which, again, he considers to be evidence that the company is a monopolist. But it would not make sense for any search engine to operate if it had to pay every site it linked to. Imagine if Australia forced DuckDuckGo to pay for links as well – if it pulled out of the country, as it would probably have to, would that tell us it was a monopolist too?

Amazon is blamed for paying too little tax. But taking a supposedly low corporation tax bill to be evidence of monopolisation, as he does, would lead us to thinking that the most competitive companies were the biggest monopolists. This is because corporation tax is levied on profits, not revenues. That means the smaller a business’s profit margins are, the smaller its corporation tax bill will be as a share of its revenues. So the most competitive businesses, taking the smallest profit shares, will look like the most egregious underpayers of tax, if we insist on comparing corporation tax paid to total revenues. It’s totally backwards.

A value proposition

But the real problem with Ellwood’s case that he completely ignores the value these companies provide to consumers – in the form of useful services, low prices, and competition with other businesses that forces them to up their game as well.

All of the companies he mentions have products that are, in many respects, best in class. Google’s search engine, for example, is astonishingly good and vastly better than the competition. Even people who know how to switch still tend to use it because it is so much better than Bing or DuckDuckGo, and it can hardly be said that Microsoft lacks the funds to invest in Bing (Microsoft is worth $400 billion more than Google), though it may lack certain data. Google Maps, too, is excellent and used by many people on a daily basis and is, at least to my mind, significantly better than Apple’s pre-installed alternative.

Amazon can ship a staggering range of products within 24 hours to most parts of the UK, and usually does so more cheaply than brick-and-mortar and other online competitors. Amazon’s returns are best in class, too – no other retailer I am aware of handles returns so straightforwardly, quickly and cheaply (usually for free, in fact). 

As Alec Stapp notes here, this is an area in which the political class is totally out of step with the public, who overwhelmingly value the products and services offered by the tech giants.

This is not the end of the story, of course, but it’s extreme negligence to ignore the value created by these companies when arguing for killing them. Ellwood takes it entirely for granted that if these companies did not exist, some equivalent one would step in to fill its place with a superior product: “If we are brave enough to do what is right, new businesses will appear that abide by democratic regulation and work for the good of us all.”

Well, maybe. Before Amazon entered Australia in 2018, Australia just didn’t have a service that was like it. A world without Amazon or Google might not mean identical but nicer companies taking their place. It could just be a world where we have to use inferior services like eBay and Bing instead. That would be especially true if companies expected politicians to come along and shut down their services if they became too successful.

The competition angle

Those who want to kill or break up Big Tech often cite competition as a cause for concern. After all, the UK’s own competition regulator, the CMA, concluded last year that Google and Facebook had market power in the digital advertising market, and the capacity and incentive to exploit it. But, for all the faults that its study had, the CMA did stress the benefit to users of these companies.

The remedies it proposed were less straightforward than just shutting them down: data sharing so that some of Google’s advantage in seeing what users search for would have to be shared with competitors, for example, and a code of conduct to govern how these companies use user data.

These would not be minor changes: defenders believe they could increase competition in advertising-funded digital markets. Those opposed, like me, think they would weaken competition in these markets by increasing regulatory compliance costs and weakening the tech firms’ incentive and ability to innovate. My view is that many competition enforcers ignore the competition that takes place between big tech firms in overlapping markets – between Google Shopping and Amazon’s marketplace, for instance, or between Instagram, Youtube, and Twitch.

But even the most extreme remedies considered by the CMA – breaking these companies up by forcing them to sell off some of their services – are done with the intent of adding more players to digital markets, in the hope that a more fragmented ownership will drive further competition.

That is a million miles away from Ellwood’s preferred solutions, which bear no resemblance to any serious attempt to increase competition in digital markets, however misguided those attempts may be. It is not credible to suggest that he has just got the wrong end of the stick when he proposes to shut down Twitter because he does not like that it closed Donald Trump’s account.

No: Ellwood does not want to add more competition to digital markets, he wants to take it away. His model of antitrust is one of destruction and revenge, with no thought whatsoever of what it would do to consumers. The kind of antitrust populism that says Big Is Bad has so far remained on the other side of the Atlantic. A Conservative MP trying to import it to Britain is a worrying development. 

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Sam Bowman is Director of Competition Policy at the International Center for Law and Economics.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.