Break Up Google

August was a busy news month. 

The most impactful story for all of our lives is that the federal government won its landmark case against Google, with a district court declaring the company a monopoly. We don’t know yet what the court will order Google to do, nor how Google plans to fight the ruling in coming years. Still, this case may change everything about our tech landscape in the coming decades.

GOOGLE! Too Big!

The federal government also has ongoing anti-competitive lawsuits pending against mega-tech companies Apple, Amazon, and Meta (the parent of Facebook, Instagram and WhatsApp). These cases potentially build on one another. The Google ruling depended for precedent on a Microsoft ruling from 2000. The government’s win against Google strengthens its cases against Apple, Amazon, and Meta. 

Implications

I believe this will be very good for markets in the long run, in the sense that successful capitalism requires innovation, which may itself require forcibly busting up giant companies every once in a while. It could be bad for US stock market investors in the short run, with its extraordinary top-heavy reliance on a few monopolistic tech giants.

My beliefs are based on past reading on the regulation of monopolies and technology innovation, which provides historical context.

The Microsoft precedent

The previous tech bubble of 1999/2000 was kicked off by the IPO for Netscape and the subsequent “browser wars.” That era concluded with Microsoft being sued by the federal government, found to be a monopolist in April 2000, and ordered to break up in June 2000.

MICROSOFT! Avoided break-up for being too big in 2020

In the end, Microsoft appealed the ruling and was not ultimately broken into two companies as it had been originally ordered to do. There are many steps still to come before Google is broken up. Still, observers believe that, because of its loss in court, Microsoft moderated its behavior and did not come to dominate the nascent internet in 2000. Remember Internet Explorer? Yeah, me neither. The rise of Amazon, Apple, Facebook and Google themselves may be owed to the fact that Microsoft did not successfully win the browser wars and manage to shut down internet innovation with its own dominance. 

Regardless of the future for Google, an optimistic view on the recent monopoly ruling is that this loss in court will open up pathways for competitors to grow and compete in search, advertising, and possibly AI services. 

Monopoly theory evolved

The big thing to know about the Google ruling is that the Department of Justice and Federal Trade Commission are working on a relatively novel theory of monopolies. This is the biggest win for their novel approach in 25 years.

Interestingly, in a society increasingly inclined to view everything under a partisan lens, all of the federal investigations of Big Tech for monopolistic practices began under the Trump administration’s Department of Justice and Federal Trade Commission. The Biden administration continued the investigations and launched each of the lawsuits, except for the one against Meta, which began in December 2020 under Trump.

A simple version of the novel theory of monopolies – laid out in a book I have previously recommended called “The Curse of Bigness” by Timothy Wu – is that sheer size is its own problem when it comes to tech companies.

[LINK to October 2021 column on Tim Wu’s book: https://www.expressnews.com/business/business_columnists/michael_taylor/article/Taylor-Antitrust-action-is-not-anti-business-16528601.php]

For decades prior to this argument, the FTC generally didn’t pursue this type of monopoly case. Instead, the bar for proving monopolistic behavior was that consumers were being harmed, usually through higher prices. Companies like Amazon and Google seem to bring lower prices, so have long fought off the idea that they are monopolies.

AMAZON! Too Big!

Lina Khan, the Chairman of the Federal Trade Commission, was brought aboard in 2021 specifically to pursue these anti-trust cases against big tech companies. 

Khan made her reputation as a law student in 2017 initially by arguing that Amazon was a monopolistic threat to businesses, despite the fact that 

1. Amazon probably reduces consumer prices overall and 

2. Amazon faces extraordinary competition in each of its market segments. 

So why is sheer size its own problem? A monopolist we assume will act in its own interest. Its interest is sometimes to destroy competitors and squash any threats from innovation, which big companies can typically do successfully against small and medium-size companies. And that’s pretty much it.

We can’t reliably know what innovations come next. But certainly telecommunications, software, retail, and artificial intelligence should continue to evolve and improve in the coming decades. Breaking up overly large companies that have formed tech monopolies is a way to shape the commercial landscape so that innovation can happen. 

Lina Khan heads up the FTC

No business likes to be attacked by the federal government, and no monopolistic company will take this lying down. They will all fight vigorously against accusations of monopoly power. 

Even while I cheer the break-up of Google, and possibly the other giants, I have no ill-will toward them.

I’m typing this column into my Google Docs account, saving it to my Google Drive while checking my Google Calendar and using Google Search continuously throughout the day, before I Gmail the column over to my editor or go on YouTube to watch some important video.

Google is convenient, excellent, universal, and mostly free. But if Google’s current dominance prevents the emergence of the next world-beating technology – as monopolies typically have the power to do – then this ruling is good news.

I’m also cheering this news knowing that it could cause rocky times for the stock market.

Implications for the Magnificent 7

The other three companies being sued – Amazon, Apple, and Meta, along with Google parent Alphabet, NVIDIA, Microsoft and Tesla – constitute the so-called Magnificent 7 stocks that have absolutely determined and dominated returns of the S&P500 and Nasdaq 100 over the past three years. 

The last time the government found the most important tech company of the time – Microsoft – a monopolist in the Spring of 2000, things got volatile and scary. The Nasdaq dropped more than 36 percent in 2000, 32 percent in 2001, and 37 percent in 2002. Obviously the Microsoft story was not the only thing going on then. But the volatility of early August 2024 is a reminder that markets do not like uncertainty and they generally do not like governmental attacks on highly successful companies. So maybe we are in for some rocky days with respect to these court cases.

A version of this post ran in the San Antonio Express-News and Houston Chronicle.

Please see related post:

Book Review: The Curse of Bigness by Timothy Wu

Post read (12) times.

Book Review: The Curse of Bigness by Timothy Wu

Editors’ Note: I wrote this for my column in the San Antonio Express-News back in October 2021. After the ruling of Google as a monopolist in August 2024, I realized I hadn’t posted it here yet. Whoops.

Prior to a few weeks ago, I was not overburdened with any particular bias or knowledge when it came to antitrust law and how it affected US businesses. If anything, I start with a bias that regulators should butt out of markets whenever possible. 

Then I read a short book. 

And now I recommend you read this small book, weighing in at a slim 139 pages, Tim Wu’s The Curse Of Bigness: Antitrust in the New Gilded Age.

This book not only has changed my mind about what is likely to happen during the Biden Administration. It also has changed my mind about what ought to happen. 

Antitrust, I see from Wu’s history, is something that enhances markets. It improves competition. It’s usually fought tooth and nail by the target company but it can be something necessary for an industry as well as for consumers. I had not expected to come to this conclusion.

We sort of, kind of, remember that the first wave of trust busting involved the dismemberment of John D. Rockefeller’s Standard Oil into 34 regional oil companies. Far from wrecking the oil industry, the break-up in 1911 of Standard Oil kicked off a robust national oil industry of competitive and innovative firms in the US. 

Exxon, Amoco, Marathon Oil, and Chevron among others thrived in the over one hundred years since. Compare those to the lumbering national giants like Mexico’s Pemex, Venezuela’s PDVSA, or Saudi Arabia’s Aramco and you would always choose our market structure over theirs. You can see in them what a problem leaving Standard Oil’s monopoly would have been. 

Or take the case of AT&T, the last great antitrust break-up, in 1982. This is the most convincing part of Wu’s book, in which he connects the dots between monopoly power, innovation, and the need for antitrust regulation to improve markets. AT&T never would have chosen the path of breakup if President Nixon hadn’t initially brought antitrust action against the company in 1974.

Before its breakup, AT&T had a monopoly on long distance telephony, local distance, and all equipment that could be plugged into a phone jack. It jealously killed off innovators that threatened any of its control, like tiny MCI trying to innovate with microwave towers. As Wu tells it, cutting-edge technologies of the early 1980s – like answering machines and fax machines! – would have been quashed or controlled by AT&T. The ability to innovate with modems, to eventually allow home computers to connect to “online service providers” like Compuserve and AOL, was only made possible by breaking up AT&T’s monopoly power. 

Timothy Wu. Law Professor and author

Having read Wu’s book, however, I’m jumping on the antitrust train.

Wu argues that Europe and Japan in the 1980s largely left their national telephone monopolies in place. Japan – a tech innovator in the 70s and 80s – suddenly found itself leapfrogged by independent US telephone, and then computer, companies. Nippon Telephone and Telegraph retained its size and monopoly power for too long. As Wu writes “There is, after all, only so much you can do when your innovations need to be engineered not to disturb the mother ship.” 

It’s hard to imagine counterfactuals, but the sheer size and control that AT&T had over telecommunications until 1982 meant that all the innovation that followed in the United States might never have happened, were it not for antitrust actions begun by Nixon.

Fast forward to the late-1990s. Microsoft nearly established monopoly control over the internet and search engines by crushing the startup Netscape, and bullying its way to 90 percent share of browser usage with Internet Explorer. Google and Amazon and Apple too at that point were merely scrappy medium-sized companies. After years of antitrust litigation, and an ultimately rescinded order to break up, Microsoft ceded space in the browser and search wars. (Just imagine if Microsoft hadn’t backed down. We’d all be using Bing today for search. Ugh. Bing is awful.)

Now we have today’s Big Tech monopolists. Like Amazon, Apple, Alphabet (aka Google), and Facebook. 

Don’t get me wrong, I love these companies. They are extremely customer-friendly. I use their products every day. I am grateful for the convenience and services they provide. 

I am convinced by Wu that their size alone justifies their breakup. Notice, I did not say “destruction.” Just separation into smaller, non-monopolistic parts, like what happened to AT&T and Standard Oil. 

Currently, the antitrust train against the sheer size of Big Tech is gathering steam in state capitals and Washington DC.

Their size is why Texas Republican legislators teamed up with Governor Abbott to warn large social media companies that any perceived political biases will be punished and regulated. Their size is what made the recent “60 Minutes” whistleblower story resonate, in which a former employee said Facebook purposefully emphasizes hateful and anger-inducing content, because it’s better for increasing engagement with the platform. Their size is why, when Facebook and Instagram suffered an unexpected outage recently, the schadenfreude was palpable. Many of us use these companies but we also rightly fear – and truth be told – loathe them a little bit.

Their extraordinary control over speech and media is what so angered President Trump and conservative supporters when Trump was de-platformed following the January 6th riots. 

Sen. Josh Hawley goes after Big Tech

Conservative Senator Josh Hawley (R-Missouri) pushes his “Trust-Busting Agenda For the 21st Century.”

The language on his website, calling out Google and Amazon in particular, seems straight from Wu’s book. On September 30th he introduced legislation to allow parents to sue social media companies if their children were harmed. 

In the wake of the temporary Facebook/Instagram outage, progressive Representative Alexandra Ocasio-Cortez (D-New York) took to Instagram to call for breaking up Facebook, Instagram, and WhatsApp, due to their size.

Rep. AOC calls for Meta break-up

You could almost ignore these calls as fringe political voices. But you shouldn’t. The antitrust calls will soon be coming from inside the White House. Tim Wu joined Biden’s National Economic Council as Special Assistant for the President for Technology and Competition Policy. I don’t believe Wu joined just to have a job. Stuff’s going to happen.

Having read Wu’s book, The Curse of Bigness, I want stuff to happen. Bigness is its own threat. Bigness ultimately quashes innovation. A better society, and a better market, requires governments to at times check the ambition, size, and voracious appetites of our biggest, and yes, most successful companies. 

Don’t fear the trustbusters. We don’t know yet what tech marvels would be possible from the broken-up pieces of Google. Those software engineers don’t just go away. They probably just continue to invent, but without the innovation-squashing that incumbency and monopoly create. 

Chop down the tallest tree and let the forest grow.

This post ran as a column in 2021 in the San Antonio Express News and Houston Chronicle.

Please see other Bankers Anonymous book Reviews – They’re all here!

Post read (30) times.

End This Pain

The Federal Trade Commission recently sued the largest anesthesia-provider in Texas and its private equity owners. 

As the dominant provider in Houston and Dallas, ten-times larger by revenue than its nearest competitor in Texas, US Anesthesia Partners Inc is accused by the FTC of reducing competition and unfairly raising prices. 

According to the FTC complaint, private equity firm Welsh Carlson Anderson & Stowe noticed a fragmented market 11 years ago. They began a process of “rolling-up” anesthesia practices in Texas cities Houston, Dallas, Austin, San Antonio, Tyler, and Amarillo, until they’d built a behemoth involving 1,000 doctors, 750 nurses and over a dozen practices. 

US_Anesthesia_partners

As a result of its dominant position in its major markets, the FTC claims, the firm controls 60 percent of hospital-only anesthesia costs statewise, and 43 percent of cases. With that, the firm has been able to raise prices significantly, with reimbursement rates twice the median of other providers in Texas. The FTC quotes an email from a member of the anesthesia firm who wrote “Cha-ching” after completing another anesthesia practice acquisition, on the expectation that they would be able to extract monopolistic profits from their dominant position.

I have three reasons for mentioning this lawsuit against the anesthesiologist private-equity roll-up.

The first, most trivial point, is about the dangers of email in business.

You guys, this is in no way legal or financial advice but seriously, avoid writing “Cha-ching” in a celebratory email if you work for a private equity firm. Sure, you can think it, you might even say it to your buddy over post-acquisition drinks, but just please don’t write it down. That email could cost you and your partners a lot of money. 

The second, more profound point, is that this case gives us a sense of an important federal government and national business trend in 2023.

We are in year 3 of a significant shift to a much more activist antitrust phase of the federal government in its enforcement of market competition. Lina Khan, the FTC commissioner, embodies this shift. She established herself as a leading scholar rethinking antitrust rules with respect to technology giants such as Amazon, with a highly influential article entitled “Amazon’s Antitrust Paradox” written while she was still a law student at Yale University.

Lina_khan
Lina Khan, FTC Char

Most of the attention toward the FTC’s actions in recent years – with Khan as chairwoman – has focused on how the commission might target tech industry giants, such as Amazon, Alphabet (Google), Microsoft, and Apple for anti-competitive practices. 

This anesthesia roll-up case in Texas is an example outside of the technology industry of the FTC’s more activist stance. Traditionally the FTC focused on correcting situations where a monopolistic business might unfairly raise prices because of an absence of competition. But watch the tech space over the next year as the FTC is expected to bring more aggressive enforcement there on anti-trust theories beyond “monopolies lead to higher prices for consumers.” 

For its part, US Anesthesia rejects the FTC’s case and says it is based on “flawed legal theories and a lack of medical understanding about anesthesia.”

My third reason for bringing this up is personal. This is a follow-up to an earlier post I wrote in which I mentioned an anesthesia-billing problem that I found absolutely egregious.

I got an in-network preventive colonoscopy in June 2022 (to celebrate turning 50), covered by my insurance company Blue Cross Blue Shield of Texas. This procedure included anesthesia (because duh), but I learned 11 months later, in May 2023, that the anesthesiologist Alamo Sedation Associates was not considered in-network for my insurance at the time. I had first met the anesthesiologist who did the procedure approximately 90 seconds before going under, while gowned and sideways on a gurney. It had never occurred to me to look over my shoulder and ask at that special moment, “Hey, are you in-network with Blue Cross Blue Shield?” 

In May 2023, Alamo Sedation Associates sent me an invoice of $1,920 for their service. A month later this bill was reduced to $1,785.82 when BCBS paid $134.18 as an in-network payment. Over the course of the next 4 months I refused to pay the $1,785.82 balance.

Alamo_sedation_associates
A Very Bad Experience

Astute readers wrote to me in August that a federal law passed January 2022 made this kind of ‘surprise bill’ illegal. Blue Cross Blue Shield representatives, when presented with this situation by me over at least a half-dozen phone calls, claimed this law only applied to emergency-room bills. Most times I called them they claimed “oh, it should be resolved at some point, but we can’t promise it will be.” Four months later it wasn’t resolved.

Meanwhile, collection agency Quantified Management Services, hired by Alamo Sedation Associates, began to threaten my credit for non-payment of $1,785.82, via letters and phone texts in late August.

From the Alamo Sedation Associates PLLC website: “We accept any insurance that the facility where you are having the service accepts. Because we are an ancillary provider, we typically do not need to contract separately with your insurance to be processed in-network (several BCBS plans are the exception).” The first two sentences simply aren’t true, and the parenthetical phrase at the end is what drove me crazy, for months. Alamo Sedation Associates did not have a live person who would answer any of my phone calls, only an automated voicemail system and recorded messages about where to pay their invoice. Although I don’t think they are part of US Anesthesia Partners, the vibe the Alamo Sedation Associates PLLC website gives is that they are owned by a for-profit company based 3,000 miles away and unreachable on any day ending in the letter Y.

Blue Cross Blue Shield failed to resolve the bill after 6 months and countless phone calls. I imagine this same scenario being played out among tens of thousands of patients, most of whom would either pay the bill or have their credit wrecked. The experience was awful, predatory, and I think, illegal.  

Charles Riley of Riley and Riley, Attorneys at Law in San Antonio, who represents patients in disputes with health care providers and insurance companies, disagreed with BCBS.

Once I signed on with Riley, he wrote a letter letting them know he represented me and disputed the charge. The bill was zeroed out by BCBS, the anesthesia provider, and the collection agency. I found out about Riley’s success with my situation last week.

Charles_Riley_attorney_san_antonio
Charles Riley and firm

In terms of consumer and patient harm, ignoring the federal surprise billing law, threatening my credit, and refusing to honor the in-network claim, I believe and my attorney believe that both Alamo Sedation Associates and Blue Cross Blue Shield were in dangerous potential class-action lawsuit territory for them. By zeroing out my bill, they avoided us finding out for sure. But if you are stuck in a similar situation, I’d recommend you find an attorney like the one who represented me. 

There’s nothing wrong with the practice of anesthesiology. This is essential medicine! But the part of the business that involves surprise billing, jacking up prices in Texas, being jerked around by your insurance company for six months, and ignoring consumer protection laws isn’t great. 

Post read (33) times.