Is now the time to break up big tech?

As the chief executives of the tech giants faced off against the United States Congress this week, one defining question loomed large on the agenda: are they – Facebook, Google, Amazon and Apple – simply too big?

Critics can marshal ample statistics to argue that, yes, they are. Facebook has 2.4 billion active monthly users – almost a third of the planet. Amazon accounts for nearly 40 percent of all e-commerce spending in the US and generated $296bn in revenues last year – more than the entire annual economic output of Chile, Greece or Portugal.

Outside China, Google handles 92 per cent of online searches and has used its platform to expand its dominance into the markets for online advertising, shopping and travel, among others.

These are staggering figures but scale in itself is not necessarily a negative thing; far more important is the power that comes with it, and whether it is being wielded in a detrimental way.

Among the many charges against the big tech firms is that they have used their power over the architecture of modern commerce to crush competition and hoover up unassailable mountains of personal data with which to build new products that others cannot match.

Online shopping is indicative of the problem. When Google launched its own price comparison service, it started putting its own results at the top, above rivals like Kelkoo.

Referrals to those other sites from Google’s organic search results plunged, suffocating businesses and cementing Google’s own near-monopoly position.

Apple has faced its own charges of monopolistic behaviour from companies like Spotify (itself no angel) who must pay exorbitant 30 per cent fees to sell via the App Store.

Amazon exerts a similar control over its own e-commerce marketplace, which is fast becoming the de facto shopping centre of the online world. All of the companies have staunchly defended their own actions and consistently denied wrongdoing.

But the conflict of interest in each case is clear. By owning the platform on which much of online commerce and interaction happens, they write the rules of a game in which they are both a player and the referee. This must be stopped.

Where rivals do emerge with something new or innovative, they are usually bought up before they pose too much of a problem. Such takeovers should be assessed much more stringently in future, and blocked where necessary.

Regulators belatedly understand these issues but they are fighting a battle using obsolete tools built to stop the anticompetitive practices of a previous era.

Margrethe Vestager, the EU competition commissioner, has been the most active in taking the tech companies to task. But the experience of Google indicates the limits of the weapons at her disposal.

Google has been fined more than €8bn since the EU antitrust investigations began in 2010. That amounts to just a few months’ profits.

In the meantime, as investigations have dragged on for a decade, Google has grown rapidly while countless potential rivals have been strangled, bought or deterred from entering the fray in the first place.

It therefore makes abundant commercial sense for large tech firms to act as they please, growing rapidly and swatting off fines as mere costs of doing business.

They are too big, too powerful and too wealthy to regulate.

So what is to be done?

Forcibly breaking up companies is a last resort but it is now firmly on the table. It’s easy to see why politicians have seized upon it as a policy. It’s eye-catching, easy to understand and has a feeling of toughness about it.

However, it should not be necessary and is not, on its own, the most effective way of curbing tech companies’ most damaging behaviour.

Amazon and Apple have huge market share in their respective fields, and have legitimate questions to answer about how they leverage that to reduce competition. Their role as owner of a platform as well as a seller competing on that platform must be looked at.

But Google and Facebook in particular pose a different challenge, which demonstrates how the current rules remain decades behind.

Competition laws were designed with physical commodities in mind. They are intended to make sure that unfair practices do not cause people to end up paying more for a product than they otherwise would have.

But we are no longer in the era of John D Rockefeller’s Standard Oil, broken up by the trust-busters a century ago.

The commodity which has become the most valuable in the world is not oil but personal data. Google offers its immensely popular and undeniably useful mapping, email and search services, for free. So how can it said to be causing detriment to people who use them?

This argument only holds if we believe our personal data is worthless. The bank balances of the tech companies demonstrate that acquiring it for free and selling it on to advertisers is, in fact, enormously lucrative.

Of course, we never actually use an online service for free. Instead we make a bargain – almost always without truly thinking it through – that we will hand over information about where we are, what we’ve searched for, where we live, what things we buy, who we speak to, what we are worried about to a company that will sell it for profit.

Given the ubiquity of such “free” products, and the fallibility of human nature, can such a bargain ever be seen to be fair?

If all of our social circle uses Facebook or Instagram to connect, it becomes difficult to opt out, even if we have to hand over troves of personal information in return. The bargain, laid out over dozens of pages of terms and conditions, is a hugely lopsided one.

It is also the central element of the big tech’s power. The more data they have, the more targeted their products can become and the more difficult it becomes for others to compete.

How can a rival search company provide results as good as Google’s when Google has data from the vast majority of previous searches?

A far more effective approach than breaking up the tech companies, and one that is gathering more and more support, would be to properly value our data, to make companies pay for it, and to recognise that inordinate control over it is bad for us all.

Regulators should focus much more on whether or not companies are gathering more data than is strictly necessary, or using it in ways that are intrusive.

When the aim of the game is to target products at people based on thousands of pieces of information about them, curtailing the amount of data they can collect is an effective check on their power.

It would stop the hoarding of a valuable commodity, which allows a handful of companies to build an impenetrable wall around themselves.

The aim should not be to break up big tech but to even the playing field on which it competes.