BREAKING UP BIG TECH: LESSONS FROM AT&T.

• Date: 01 January 2022
• Author: Usman, Maham

INTRCDUCTION 524 I. THE HISTORY OF BREAKUPS: PRESENT AND PAST 525 A. The Call to Break Up Big Tech 526 1. Facebook 527 2. Google 528 3. Apple 529 4. Amazon 530 B. A History of Structural Remedies in Antitrust Law 531 II. BREAKING DOWN A BUSINESS 533 A. Corporate Breakups in Practice 535 1. Dividing Up Physical Assets 535 2. Dividing Up Intangible Assets 536 a. Proprietary Information and Trade Secrets 537 b. Intellectual Property and Licensing 538 3. Post-Divestiture Interactions 540 a. Contracts 541 b. Dispute Resolution 543 B. Are Breakups the Answer? 545 C. Alternate Remedies 547 CONCLUSION 548 INTRODUCTION

It's no secret that antitrust law is having its moment in the sun--and technology is the target. In recent years, Senator Elizabeth Warren proposed breaking up the "Big Tech" (1) companies as part of her presidential campaign platform, (2) and former Assistant Attorney General Makan Delrahim spoke passionately about addressing competition issues in the technology industry in his parting speech. (3) Constituents and politicians on both sides of the aisle are in favor of breaking up Big Tech companies, making this an issue with bipartisan support. (4)

However, opinions by experts on whether the breakup of Big Tech is a valuable and viable solution are far-ranging. Despite strong advocacy by some that breaking up Big Tech companies is the best solution to the competition issues present in the technology sector, these proposals are often stated in basic terms with little specificity. (5) Likewise, opposition to breaking up Big Tech often cites administrability by the courts as a key obstacle but does not provide specificity as to why this undertaking is out of the court's abilities. (6)

In this Comment, I will explore in detail whether a breakup of the "Big Tech" companies is feasible given the unique nature of the technology business. Characteristics that are central to today's technology companies, such as zero-price business models and advantageous network effects, were not present during the last breakup in United States antitrust history with the divestment of Bell from AT&T. These novel factors should thus be taken into account when evaluating any proposal to break up Big Tech.

This Comment also uses specific examples from the business models of each of the four Big Tech companies to determine how a division of resources in a breakup could hypothetically affect those operations. Based on those scenarios, I will draw inferences on whether a structural remedy like a breakup or spinoff is advisable and whether the resulting companies would be able to function properly in the market after the divestiture. Since there has been so much recent endorsement for utilizing structural remedies in the current Big Tech federal antitrust lawsuits, advocates should appropriately analyze the mechanics of breakups and spinoffs and the potential effects they could have on companies and consumers alike.

Part I discusses the application of structural remedies in United States antitrust history as well as the abundance of support for these remedies when discussing market competition issues in the technology sector. Following that background, Part II delves into the specific factors involved in a breakup. It discusses the different challenges in dividing up physical and intangible assets as well as the post-divestiture monitoring and oversight that will be required. It also evaluates whether breakups are the most effective solution to the antitrust violations alleged in the technology industry and discusses alternative remedies that could be used instead.

1. THE HISTORY OF BREAKUPS: PRESENT AND PAST

   In the United States, the purpose of antitrust law is to preserve competitive markets and produce a high output of goods in a sustainable market. (7) Promoting economic welfare is the main focus rather than solving social or political issues. (8) Two types of remedies can be applied by courts in response to antitrust violations: behavioral, which try to limit firms from engaging in specific anticompetitive behaviors, and structural, which essentially dismantle companies so that the anticompetitive behavior is no longer possible or beneficial. (9) Structural remedies have been sparingly used in the United States, but recently have become a popular solution to suggest in response to Big Tech's dominance of the technology sector. (10)

   1. The Call to Break Up Big Tech

      Over the last few decades, tech companies have become prominent players in the economy. Since 1995, when the companies at the top of the Fortune 500 list like Exxon Mobil, General Electric, and Coca-Cola represented manufacturing and consumer products industries, there has been a huge shift towards the technology sector. (11) In 2020, the top five companies were all tech industry giants and Google, the fourth highest company, almost doubled the market capitalization of the first non-technology company, Berkshire Hathaway, which placed sixth on the list. (12) These companies rose to power through innovative means, but critics argue that the methods they use to retain their dominant market positions often violate antitrust regulations. (13)

      Each of the major tech companies, Alphabet (Google), Amazon, Facebook, Microsoft, and Apple are often accused of using anticompetitive business methods and wielding their dominant market position to stifle competitors. In 1998, Microsoft was involved in a notable antitrust lawsuit which resulted in the court ordering a breakup of the company. (14) However, Microsoft settled with the Department of Justice ("DOJ") and agreed to share its technology with other companies, so the DOJ abandoned the breakup requirement. (15) Currently, two of these four Big Tech giants, Google and Facebook, are currently facing federal antitrust lawsuits in the United States. (16) The remaining two, Amazon and Apple, are facing investigations by the Federal Trade Commission ("FTC") and DOJ along with several state Attorney Generals and are also facing scrutiny abroad from the European Union's antitrust regulators. (17) Below is a description of commonly cited antitrust concerns relating to each of the Big Tech companies as well as examples of proposals to break them up. This is simply an overview; a further exploration on whether these proposals are feasible or favorable given the unique nature of the technology industry will be addressed in Part II of this Comment.

      1. Facebook

         In the case of Facebook, one of the most common concerns is the use of killer acquisitions--an aggressive acquisition strategy where the dominant company buys up small competitors in the market before they have a chance to evolve into larger threats. (18) Suitably, the policy solution to this has often been to undo these mergers, such as Facebook's acquisitions of Instagram and WhatsApp, platforms predicted to be a substantial competitive threat if they were spun-off from the company. (19) Furthermore, this kind of structural remedy would be easy to find legal reasoning for, since the federal government "explicitly reserved the right to take another look at the mergers" when they approved them in the first place. (20)

         In the FTC's current lawsuit against Facebook, the Commission argues for the "divestiture or reconstruction of businesses" and specifically names Instagram and WhatsApp as targets to restore competition in the social media platform industry. (21) The industry itself has a high barrier to entry; social networks can retain their market power in part because of strong network effects--the fact that more users are using a given platform is what makes it appealing to consumers, which also makes it difficult for new entrants to compete. (22) This is why when a competitive threat emerges, acquiring the competitor is often easier than trying to compete. (23) This is the core of Facebook's alleged antitrust violations and the main focus of proposals to break up the company. (24) However, since WhatsApp and Instagram remain viable as independent companies, spinning off these assets will be a much easier task than it would be to break up internally developed assets. (25)

      2. Google

         The focus on Google's violations is around using its search function to limit competition and promote its own services. Senator Warren's proposal to break up Google states that "Google allegedly snuffed out a competing small search engine by demoting its content on its search algorithm, and it has favored its own restaurant ratings over those of Yelp." (26)

         In addition, Google also faces similar criticism to Facebook regarding killer acquisitions, with Waze, Nest, and DoubleClick being commonly cited as mergers that should be spun-off into separate companies. (27) Additionally, many proponents of a Google breakup call for a spinoff of YouTube, Chrome, Android, Google Search, and Google's advertising capabilities, claiming that its dominant position in the search market is "unfairly supported through its advertising business and software offering such as Chrome and the Android mobile operating system." (28) Critics of Google's practices state that bundling its advertising tools makes it difficult for rivals to compete on cost, and that owning both the search function as well as the end-use application websites that users are trying to reach--such as YouTube and Gmail--also stifles competition. (29) Additionally, the power that Google Search has as a "horizontal" (or general) search engine to promote its own "vertical" (or specific category) search functions over third-party vertical search products like Yelp and TripAdvisor makes these third-parties heavily disadvantaged even if they were the preferred search method by consumers in the vertical category. (30)

         An issue unique to digital platforms when considering antitrust remedies is that many of these technology companies operate using a business model wherein they do not charge users anything to use their service and then supplement...