Companies like Amazon, Google, Airbnb and Uber have so far successfully neutralized the antitrust arsenal of the United States and the European Union. Even with the recent increase in antitrust cases, new regulations like the EU’s 2022 digital market regulation, and high-profile declarations, such as those by U.S. President Joe Biden in 2022 and 2023, efforts to curb their monopolistic power have been largely ineffective. Despite some minor setbacks to their dominance, public policies seem unable to seriously hinder their triumphant progress.
In a paradox that deserves to be clarified, these digital giants escape the wrath of public opinion, which is otherwise so quick to ignite. Yet, there is no shortage of issues: abuse of dominant position, exploitation of unskilled workers, tax evasion, disastrous environmental impact, manipulation of public opinion, displacement of local populations from desirable urban areas…Unlike Standard Oil Company (later ESSO) or the short-lived Northern Securities Company, which were vilified and then dismantled by the Supreme Court for their monopolistic practices, these huge platforms are celebrated by consumers who are delighted by the level of prices and services offered. This public adoration, with only a hint of ambivalence, reflects the impotence of public authorities to translate their protests into decisive actions.
It is indeed challenging to accuse these multinational giants of harming consumers when the marketplaces they organize create the ideal competitive conditions envisioned by the neo-liberal theory : a vast number of buyers and sellers, free entry and exit for market players (without friction or barriers), information transparency (complete access to pricing, value attributes, and past experiences of other buyers).
Tepid Public Measures
Unable to blame them for creating monopolies, as they merely lucratively oversee competitive markets, public authorities criticize these platforms for relatively minor practices. President Biden criticizes “online platforms giving unfair advantage to their own products.” The European regulation prohibits platforms from favoring their services over third-party offerings. In concrete terms, Amazon is for instance being accused of abusing its power to copy successful products on its website and promote its own sales at the expense of third-party sellers. By demanding that Amazon remains impartial, regulators are settling for cosmetic improvements. Even if, in their determination, regulators overcame their reluctance to interfere in the free market and banned the sale of own-brand products, they would not have significantly diminished the foundation of Amazon’s power as a gatekeeper or put a major dent in its profit margins. With a 38% market share in the United States and highly effective customer lock-in mechanisms Amazon has every ability to extort sellers who use its platform under various pretexts.
In this “second machine age,” filters from the past, such as enshrining free competition, prove ineffective. The challenge is not to prevent the formation of old-style monopolies but the emergence of new masters. Each enjoys undisputed dominance in its domain, without any significant rivals, notably thanks to the famous network effects, be they direct or indirect. The value of a network or platform increases with its user numbers (direct network externality). For example, the more drivers there are in Uber, the less customers wait, and the more passengers have an incentive to choose Uber; and the more customers there are, the more drivers have an incentive to work for Uber. The loop is closed, in a snowball effect that allows a private player like Uber to claim near-monopoly control over the management of a public interest market.
Another type of loop, this time indirect, also emerges. The value of a platform grows in proportion to the number of complementary products or service. For instance, Amazon Marketplace’s opening to third-party sellers enhanced the site’s attractiveness by vastly increasing the number of products offered at the best prices. Conversely, the large number of customers and their loyalty through the Amazon Prime program increased the necessity for manufacturers to be present on Amazon Marketplace. This way, Amazon’s dominance in e-commerce self-reinforced, akin to a “flywheel” as described by Jeff Bezos, storing and effortlessly releasing energy.
New Forms Of Despotism
These unstoppable effects have shifted us into a new dynamic: mass clientelism. Nearly the entire adult population in the Western bloc uses services from Google, Amazon, Facebook, Uber, Netflix, Spotify, and other digital platforms. Even critics like former Greek Finance Minister Yanis Varoufakis, who recently published a pamphlet against “TechnoFeudalism acknowledges that he cannot do without the services of these digital giants. Thus, every citizen has become a follower, renewing his or her allegiance to these new masters regularly to be able to enjoy these indispensable services. Loyalty in exchange for favors: we are indeed in a situation of clientelism.
On the customer side, we are dealing with a form of mass clientelism that encourages everyone to prioritize his or her consumer interest over the common good (which would, for example, involve ensuring consistent working conditions and social protection for all workers). On the platform side, a form of unprecedented servile despotism has emerged. It can be characterized as servile rather than tyrannical because digital giants buy the consent of their users, customers, and shareholders by serving them well, causing them to turn a blind eye to the incredible concentration of their economic and technological power. As for the nature of the power exercised, it is indeed a form of despotism that has, on the one hand, eliminated any form of counterpower or alternative and, on the other hand, established a system of predation, all fueled by an excessive will to power, in the service of its own expansion.
This predatory behavior is evident in the exorbitant revenue captures. Like feudal lords, the new despots impose hefty, non-negotiable commissions on their vassals, who have no choice but to pay if they wish to survive. Apple’s successful 2021 defence against Epic Games of its online marketplace policies is a prime example. And, despite a jury voting in favor of Epic Games in a similar dispute between Epic Games and Google, the latter has announced its intention to appeal.
In a similar vein, the case of Nuance Communications exemplifies how Google undermines potential rivals. Voice recognition is widely recognized as the future primary human-machine interaction channel, and Nuance was a pioneer in this field. Its flagship product, Dragon Dictation, was popular on iOS and Android smartphones. However, in 2014, Google introduced its own solution (“Google Keyboard”, later renamed “Gboard”) and effectively pushed Dragon Dictation out of the consumer market, depriving it of essential user data for ongoing improvement, by requiring phone manufacturers to either integrate all Google apps or none.
Exploiting Democratic Loopholes
These revelations about Google could have sparked scandal and damaged its reputation, but they did not. The tactics used to preemptively quash potential threats occur behind the scenes and, when exposed, are met with public indifference. As in traditional clientelism, users remain loyal to keep benefitting from favors. That’s why, the public is willing to turn a blind eye to many abuses in order to continue using these digital servants, so zealous.
So far, the new digital despots have largely evaded regulatory nets and won most battles against civil society. Despite ongoing discussions and legal battles, it seems unlikely that they will face stringent regulation. They have thrived in a democratic loophole: the tyranny of the majority. As Alexis de Tocqueville observed back in 1835, in a democratic system the rights and interests of minorities can be trampled by the will of the majority. Mass clientelism has a bright future ahead. Ruthless with the minority, complicit with the majority, the new despots are here to stay!