Why Breaking Up Big Tech Could Do More Harm Than Good

By Herbert Hovenkamp

Earlier this month, Democratic Senator Elizabeth Warren solidified her party’s growing disenchantment with Big Tech by proposing to break up companies like Amazon, Google and Facebook. “Today’s big tech companies have too much power — too much power over our economy, our society and our democracy,” the 2020 presidential candidate wrote in a March 8th blog post. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

Clouding the issue of breaking up Big Tech is that these firms arguably make consumers’ lives better by offering such things as free Google searches, social media connections on Facebook and low prices with fast, free shipping through Amazon. But Warren argues that they are impeding competition by buying up or squashing smaller rivals — and ultimately harming consumers. She cited the antitrust lawsuit against Microsoft in the 1990s that tamed its ways and made room for an upstart — Google — to rise. “Aren’t we glad that now we have the option of using Google instead of being stuck with Bing?”

But experts from Wharton and elsewhere challenge some of the basic premises of her proposal and warn that breaking up these three companies could result in unintended consequences that ultimately would harm consumers. The presence of Amazon, Google and Facebook in the market, they said, have lowered prices of products and services to consumers and provided a marketing platform for small companies at little or no cost. Weakening them would not necessarily level the playing field, but could instead route profits back to other big businesses — the old incumbents.

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