John Oliver’s masterful explanation of tech monopolies—and how Senate Majority Leader Chuck Schumer (D-NY) is blocking legislation to reign them in—is must-watch television for anyone who cares about innovation and competition in America. He explained in detail how Apple, Google, and Amazon use their core products and their market share to crush competitors and enter new businesses while taking advantage of everyday Americans.
It is easy for anyone to see that it is unfair when Amazon copies a bag that becomes popular on its website and offers its own, identical version through Amazon Basics. That’s one example of “self-preferencing,” the term used to describe the behavior of monopolists who leverage their control of a marketplace to hurt players in that market, that Mr. Oliver expertly described.
But Oliver didn’t talk about Meta, which is arguably the biggest winner if Senator Chuck Schumer chooses not to lift his de facto hold on the American Innovation and Choice Online Act (AICO), a bipartisan reform legislation currently in the Senate that would limit the ability of marketplace owners to exploit their power over market participants. For example. Amazon has been accused of copying best sellers in its marketplace and then using it control of the platform to steer traffic to its copy.
Meta’s platforms—Facebook, Instagram, and WhatsApp—operate marketplaces that appear at first glance to be different from those of Google, Amazon, and Apple. So why is Meta putting unprecedented resources into killing the AICO, which appears to be targeted at the other Big Tech monopolies? Because just like the other Big Tech monopolists, Meta employs self-preferencing to undermine the viability of smaller companies that are dependent on it.
AICO threatens to unravel some of Meta’s less recognized anti-competitive practices. For example, Facebook blocks users on its chat platforms from communicating with users on other chat platforms. One chat start-up CEO says there’s “very little innovation in chat” because companies like Facebook “lock people into using their product.” You don’t need to take that CEO’s word for it. Facebook actually cut off another messaging service’s access to its infrastructure, fearing it might become a competitor.
The deeper reason Meta is fighting AICO tooth and nail is this: AICO would be a barrier to Meta implementing its long term goal to control what Mark Zuckerberg describes as the next internet revolution: the metaverse.
From 2006 to 2009, I was an advisor to Zuckerberg. I also led my firm’s early investment in Facebook. Since then, I’ve written and spoken (again and again) about how the company has lost its way, how its culture, business practices, and algorithms undermine public health, democracy, privacy, and competition in our economy.
Over forty years in tech, I have witnessed the industry morph from a culture of empowering customers with technology to exploiting human weakness. An industry that was once dynamic and revolutionary is now controlled by a half dozen monopolies whose idea of innovation is to add just enough functionality to keep customers locked in. In many ways, Facebook is a poster child for that shift. Its journey, from dorm-room startup to a trillion dollar company, took just sixteen years.
Along the way, Facebook pioneered an entirely new industry, giving people genuinely new and useful products. Now, it behaves the way aging monopolists always do—protecting its turf, copying the best ideas from emerging players, and exploiting consumers instead of serving them. I had a front row seat to the transformation, and I’m here to tell you that Zuckerberg must be stopped.
The transformation of America’s tech industry from an engine of growth to a collection of parasitic monopolies occurred over the past fifteen years, slowly at first, then decisively. It took place at a time when there is almost no oversight of tech companies. Facebook reached the apex of our economy by gobbling up would-be competitors WhatsApp and Instagram before they posed a real threat, allowing it to corner the global market on both messaging and photo-sharing, creating giant moats to extend and protect its monopoly in social media.
Later, Facebook added a “Stories” feature copied from a smaller competitor, Snapchat, and was able to corner the market on a new way to share photos and videos that was made possible by its ownership of Instagram. Facebook admits to repeating that strategy, try to look and feel more like TikTok in the hope of preventing that emerging competitor from undercutting its social media monopoly.
Last Fall, Facebook suddenly changed its name to Meta and Zuckerberg gave a demo of the metaverse, which he described as “the next chapter for the internet.” The timing was unexpected and appeared to be rushed. Coming as it did on the heels of whistleblower Frances Haugen’s earth shaking revelations, analysts like me hypothesized that the name change was a desperate effort to change the subject. It largely worked.
When Zuckerberg says he wants to build “immersive, all-day experiences” and says the metaverse will “become the primary way that we live our lives and spend our time,” what he is really saying is that he will build a platform where every participant, from users to corporate partners to merchants, will be at his mercy. If the AICO is not passed, Meta will be able to undermine the business of any company or manipulate the choices of any user in the metaverse. The philosophy of AICO is that a company should be able to own a marketplace or participate in the marketplace, but not both.
Meta has an incentive to be open in the early days of the metaverse to attract partners and users, but the history of Facebook suggests that once it achieves critical mass, the company will engage in anticompetitive behavior. The most likely endgame is a metaverse where you can only participate with Oculus VR technology, which Meta already owns; only log-in via a Facebook account, which Meta already owns; only chat with Messenger, which Meta already owns; and pay for coffee through WhatsApp’s new payment feature, which Meta also owns. Meta would likely repeat its past behavior by buying the most promising innovators around the metaverse and then use its market power to bury the rest, just as Google and Amazon have done on their own platforms.
It is not in the world’s interest for any Big Tech company or companies to control “the next chapter” of the internet. But that is exactly what is likely if we continue to sit on our hands.
The good news is that Schumer can partially restrain Zuckerberg and the other tech monopolists with the snap of a finger. AICO would spur tech innovation and give consumers better products by cracking down on self-preferencing. The Senate Judiciary Committee has already approved it in an overwhelmingly bipartisan vote. The bill polls well in red and blue states.
Senator Schumer can and must call a vote on AICO. In doing so, he has a chance to make the internet better and sharpen America’s technological edge.
Will he seize the opportunity or will he do Big Tech’s bidding?