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Tim Wu: This is how you break up Facebook

CNN's Jon Sarlin talks with Tim Wu, the Columbia Law School professor who coined "net neutrality," about how he believes our economy is increasingly dominated by monopolies, and what breaking up a tech giant like Facebook would look like.

Posted: Dec 20, 2018 1:41 AM
Updated: Dec 20, 2018 2:00 AM

Amazon, Google and Facebook tower over their tech competitors. But have they grown too big?

Antitrust expert Tim Wu thinks so. The Columbia University law professor doesn't see much of a difference between Big Tech and Standard Oil, one of the industrial giants of the early 20th century. Powerhouses like that one were eventually broken up by landmark antitrust law.

"There's been a profound change in the tech economy, and I think one that's very dangerous for the United States' economy," Wu told CNN Business. "Right now, what we're seeing is a lack of innovation. A lack of starts. That's why I think it's important to have a shake-up of the industry every so often."

According to Wu, the technology industry didn't always look this way.

"It was a sector that everyone always thought was going be so competitive forever," he said, adding that many believed that new startups would continue to pop up, preventing any one company from becoming too dominant.

For example, he said AOL used to be big — until it wasn't. Netscape followed a similar path.

But in Wu's new book, "The Curse of Bigness: Antitrust in the New Gilded Age," he argues that all of that has changed. Antitrust regulators who should have stopped Big Tech from rising up were "asleep at the wheel," he added.

Wu criticized the dozens of acquisitions Facebook and Amazon have made without receiving significant pushback from regulators.

A spokesperson for Facebook noted Wu "was a regulator in the Obama Administration at the time of least one of the acquisitions." Wu served as a Senior Adviser to the Federal Trade Commission from 2011 to 2012.

Wu wrote that Google has snapped up more than 200 companies, a few of which had conditions attached.

Some of those deals were small — perhaps a sign of Big Tech's interest in talent more than anything else. But Wu argued that others were deliberate attempts to avoid competition. He cited Google's (GOOGL) acquisition of YouTube, Facebook's (FB) deal for Instagram and Amazon's (AMZN) purchase of the online shoe and clothing retailer Zappos.

Asked to respond to Wu's claims, Google declined to comment. Amazon provided a statement to CNN defending their history of acquisitions, saying they "operate in a diverse range of businesses, from retail and entertainment to consumer electronics and technology services, and we have intense and well-established competition in each of these areas.

Those mergers did not necessarily raise prices for consumers, which is a typical concern about monopolistic power. But Wu argued that concentrating all of the power can still stifle innovation and hurt consumers in the long term.

He added that trust busting doesn't always have to be about whether consumers are paying more money, either.

Wu said that some antitrust cases in technology haven't been about raising prices. He cited the US government's case against Microsoft (MSFT) two decades ago, when the company was accused of unfairly bundling its Internet Explorer browser with its operating system.

That case wasn't about raising prices, since IE and competing browsers were available for free, Wu added. But he said the case and the conditions placed on Microsoft helped open the way for the growth of companies like Google.

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