Facebook and Google May Become Regulated Utilities

Google effectively has a monopoly in search and Facebook has one in social networking and together they have a virtual monopoly in online advertising. Worldwide, Google has 92% market share! Facebook has 2 billion users with no competitor in site. The two companies alone account for virtually all digital advertising growth.

It is for these and other reasons that Steve Bannon wants the companies regulated like utilities. Another close Trump advisor Peter Thiel has detailed that Google is a monopoly in his excellent book, Zero to One.

The idea espoused in the book is there are companies which are monopolies that constantly tell the world that they aren’t and companies in commoditized businesses that try to act like they are. In other words, you can spot the monopoly by seeing who says they aren’t one.

Bottom line: there are a few people in the Trump camp which are focusing in on Silicon Valley monopolies. As a result, these companies have spent a record amount on lobbying in an effort to fight back.

Questions worth investigating are exactly what would you regulate? In the case of Google for example, the move to parent company Alphabet was thought in-part to be related to an eventual break-up of the search business from the rest of the organization. If this was to happen by government decree, would they also be forced to separate their search business from advertising?

Would Facebook have to spin off Instagram? What behavior would need to change to get regulators to be happy.

Amazon isn’t mentioned but Jeff Bezos and President Trump aren’t exactly pen pals so what would happen to Amazon? Currently the company allows third-party sellers to use Amazon distribution but if a business looks like it is worth getting into, Amazon takes the third-party out by competing directly. Would this practice be stopped by the Feds? Would they be forced to show other sellers in their search pages? Would something have to be done with Prime as it is at least similar to tying – a potentially anti-competitive type of behavior.

Would Apple be off the hook? Netflix?

Government policy can make or break companies. Just today the FDA tanked the tobacco stocks by suggesting it would limit cigarette nicotine levels to reduce addiction. Will we similar market activity if there is more talk of tech regulation? It is possible.

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