To understand the ramifications of Sen. Elizabeth Warren’s (D-Mass.) new plan to break up big tech, consider AmazonBasics. It’s an in-house brand under which Amazon sells many things, from bath towels to sheets to batteries. The label is probably best known for its electronics cables, which typically cost quite a bit less than their brand name counterparts and are more reliable than most cheap generic brands.
The New York Times has praised AmazonBasics cables for their general reliability. And Wirecutter, a consumer reviews site owned by the Times, chose AmazonBasics HDMI cables, an essential cord for connecting supporting devices to home theaters and flat-screen televisions, as their best all-around pick. Two years ago, a Times Smarter Living columnist recommended AmazonBasics’ affordably priced 6 foot long iPhone charging cable as a cheap way to change your life for the better, calling the longer-than-average cable “magic” and writing, “the happiness of lying on my couch while charging far outweighed the cable’s $7.99 price tag.” It’s a surprisingly affordable form of bliss.
The point is: These cables are good. They’re inexpensive, reliable, and, thanks to Amazon’s ubiquity, easy to come by.
Elizabeth Warren wants Amazon to stop selling them.
That’s because Warren’s proposal would prohibit large companies from selling products in marketplaces they own and operate, meaning that Apple, for example, could not sell software through the App Store it runs. “Apple, you’ve got to break it apart from their App Store. It’s got to be one or the other. Either they run the platform or they play in the store,” she told The Verge over the weekend. “They don’t get to do both at the same time.”
As an Amazon house brand selling products within Amazon’s platform, AmazonBasics would go away. It would have to be shut down or spun off, and would thus no longer benefit from being backed by Amazon’s considerable resources. The same would be true of numerous other AmazonBrands, from GoodThreads, which offers quality, inexpensive clothing basics, to Stone & Beam, the company’s label for modestly priced furniture and home goods.
Warren has billed her plan as a way to promote competition and provide consumers more choices, but the most immediate and obvious effect is that consumers would lose inexpensive, reliable options.
Amazon’s house brands are the only products and services that would be affected. Warren also wants to appoint regulators to unwind some high-profile mergers. Whole Foods would be unwound from Amazon. Mapping service Waze and thermostat maker Nest would be forced apart from Google, whose search and ad business would be affected too. These are useful services, and part of their usefulness comes from their integration with a larger corporate infrastructure, from Google’s expertise in artificial intelligence to Amazon’s comparative advantage with logistics. Warren wants to make these useful services less useful.
Also, she wants to break up Facebook and Instagram.
And she wouldn’t stop with today’s tech giants. All companies with more than $25 billion in global revenue that offer an “online marketplace, an exchange, or a platform for connecting third parties would be designated as ‘platform utilities.'” Large, public-facing companies of the future would be subject to the same treatment. Essentially, they would become quasi-governmental operations, their plans and practices overseen by the likes of, well, Elizabeth Warren. Warren may be running for president, but her plans for large corporations often make it sound like she’s running for something more like national CEO.
There is something hubristic about Warren’s proposal, which would use the force of law to remake one of the most productive economic sectors of the last four decades. She claims to be doing this in the name of boosting competition and consumer choice, but consumers have already made their choices. All of the companies in her crosshairs grew as large as they did in large part because they provided products and services that consumers wanted. Yes, some have benefited from unwarranted government handouts, but if those are the problem, then Warren should attack them directly. Instead, Warren is focused on a blunt effort to cut them down to size.
Yet for all its scale and scope, there is also something tellingly small and petty about the way her plan would position regulators and lawmakers in between so many minor transactions. Warren, going back to her ideas for the Consumer Financial Protection Bureau, which was premised largely on the notion that most people are too dim to understand the contracts they sign, seems to believe that it’s government’s job to negotiate these transactions for you. She wants to be capitalism’s ever-present middleman, the busybody between you and the stuff you want to sell and buy, from houses to HDMI cables.
Warren doesn’t frame it that way, of course. She says she wants to regulate big tech because selling on an in-house platform gives a company too much power and leverage, which doesn’t serve the interests of consumers.
Instead, she wants to give more power to herself and others in government.
Granted, as a campaign rallying cry, “let’s reign in powerful technology companies” sounds a lot more appealing than, “let’s get rid of the good, cheap charging cables.” But the latter is closer to the truth.
*Disclosure: My wife, Megan McArdle, works for The Washington Post, which is owned by Amazon founder Jeff Bezos.
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