Mark Ritson: For the first time big tech faces a credible threat of breakup

If Elizabeth Warren or another Democrat wins the White House, Facebook, Google and Amazon may finally realise they can’t hang on to their dominant positions forever.

Elizabeth Warren big tech breakup
US Democratic Presidential candidate Elizabeth Warren has pledged to break up the tech platforms (Photo: Marc Nozell)

When it comes to digital marketing, the name Elizabeth Warren might not be the first one that springs to mind. The US senator is one of the dozen or so Democrats running for President in 2020. Last weekend Warren announced via a post on Medium that, once elected, she would break up the three big tech companies: Amazon, Facebook and Alphabet, the parent company of Google.

Specifically, Warren would designate any company generating more than $25bn in global revenue and offering an online marketplace, exchange or platform as a “platform utility”. These companies would then be prohibited from owning both the platform and any business operating on that platform. Google, for example, could continue to run its search engine but would be required to spin off its ad exchange. Facebook could no longer sell Facebook ads.

“Today’s big tech companies have too much power – too much power over our economy, our society, and our democracy,” the Senator announced on Saturday. “They’ve bulldozed competition, used our private information for profit and tilted the playing field against everyone else.”

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A big breakup is not without precedent. Back in 1982, AT&T was forced by the US Government to divest the Bell Operating Companies that had provided the local telephone services across America and Canada up until that point. The move saw 70% of AT&T’s book value lost in the spin-off. The seven ‘Baby Bells’ went their separate geographic ways, successfully ushering in a new era of competition and innovation that even resulted in one of the babies, SBC, ultimately acquiring its original parent company AT&T.

Warren is using the ‘break up big tech’ idea as a key platform in her run for the Presidency. Over the weekend she was promoting it heavily across social media and with paid political advertising, including a series of Facebook ads. In a move of uncalculated stupidity Facebook pulled the ads claiming they violated its policies against the use of their corporate logo.

This was doubly idiotic. Firstly, because the ads in question did not actually feature the Facebook logo. Secondly, the act of political censorship made Warren’s point for her and generated a shit ton of publicity.

Facebook needs to hang onto its marbles a bit better than this. Warren is a very long shot for the White House. Current betting gives her just over 2% chance of becoming the 46th President on 3 November next year. But she is influential and popular. For the first time there is a legitimate, if unlikely, threat being posed to the long-term prospects of three of the biggest tech firms on the planet. They are simply not used to that kind of thing.

Big tech’s accountability issues

Over the last few years it has become readily apparent that these big firms are, to all intents and purposes, above the law and out of the legislative reach of any nation state. It’s all very well for the British Government’s select committee to conclude that Facebook deliberately broke both privacy and competition laws and to call the firm “digital gangsters”. But the response from Facebook, which continually demonstrated “contempt for parliamentary democracy” throughout the process, was in essence: “Meh.”

Similarly, Australian competition chiefs have been skewering all three big tech firms down under. The Australian Competition and Consumer Commission’s inquiry into digital platforms recently recommended an independent body be set up to monitor the algorithms of the big tech giants because they had accumulated too much market power.

Until now the threat of breakup has appeared unlikely because of the parlous state of American lawmaking. But all that could change with a Democrat in the White House.

Both Facebook and Google pushed back. Google’s Aussie boss somehow kept a straight face while refuting the idea that Google had too much market power in search. It was a “mistaken premise” she claimed. That’s a tough argument to make given Google enjoyed a whopping 94% share of the Australian search market last year.

In Singapore, Facebook’s Simon Milner infamously told the select committee on online falsehoods that his time was not being well spent by appearing in front of them given the “inappropriate” nature of their questions. He quickly found himself in ‘kena sai’ – Singaporean for ‘deep shit’ – and got the politest ass kicking I have ever seen. But he, and Facebook, walked out of the room that day with heads held high and business as usual.

In all three cases, and others around the world, its apparent that none of the big tech firms are even remotely concerned with national laws or government sanction. For all their global trade and international services these are businesses run squarely from their American HQs.

Spend any time with any relatively senior platform executive in any market other than the US, inject four pints and it becomes apparent just how little say, knowledge or influence any of them actually have. They are little more than regional agents and everything – and I mean everything – is done out of California.

Up until now the threat of sanction or breakup has appeared unlikely because of the parlous state of American government lawmaking (they literally cannot get anything done) and because a free-market, Trumpian Government is hugely unlikely to countenance any form of market interference for fear of being labelled ‘socialist’.

But all that could change with a Democrat in the White House. It might not end up being Warren, but any one of her rivals might pick up the breakup baton and make it a central plank of an ultimately successful tilt at the White House.

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That assumes, of course, that the tech giants allow such things to occur. It’s no coincidence that Google, Facebook, Alphabet, Microsoft and Apple spent a combined total of $48m on lobbying last year in America. With the exception of Apple, all the tech firms increased their lobbying spending significantly.

And the bonanza will only continue into this year and next. As we speak, corporate money will be flowing to the more ‘tech-friendly’ candidates on the Democratic side of the 2020 election. Joe Biden, ever the pragmatist, is likely to be the biggest beneficiary.

Put more simply, the giant tech firms probably are so big and so dominant that they should be broken up. But we have not seen size like this before. Their dominance is global. Their power almost complete. Their influence unending. And they have become so enormous that anyone proposing their reduction is almost guaranteed defeat.

If Elizabeth Warren was a long shot last week before she started promoting her big tech breakup platform, her odds are really shitty now.



There are 2 comments at the moment, we would love to hear your opinion too.

  1. Dominic Stanway-Williams 14 Mar 2019

    An interesting twist in the tale indeed.

    With Facebook already on unsteady ground, perhaps all that’s needed are a few more blunders such as the pulling of Elizabeth ads to raise a mob – with torches to boot. Maybe the likes of Warren know exactly what they’re doing and it’s only a matter of time till Bezos, Page and Brin fall into the trap.

    There’s no doubting this duopoly is like nothing before, they make the East India Trading Company like a NPO.

    Love to see a ‘general comment’ article from you Mark, keep em coming, along with the others of course 😉

  2. Martin Thomas 15 Mar 2019

    One factor that may dissuade US regulators from breaking-up ‘big tech’ is the fear that this will risk strengthening the market position of the Chinese-based tech businesses.

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