It’s not only the right time, it’s absolutely necessary to fight the big tech monopolies in order to rebuild our economy.

Alex Blumenstein
6 min readApr 29, 2020

--

In order to rebuild after Covid, there needs to be a shift in how our digital economy is structured. Good actors in tech need to provide alternatives to predatory and monopolistic practices of the bad actors, and the government needs to take this opening to legislatively reduce the power of these bad actors. These firms have a stranglehold on the market preventing smaller competitors from squeezing in, either directly by dominating e-commerce channels,creating razor thin margins for vendors, or indirectly by leveraging their market dominance to scare away potential competitors and the capital that would feed them.

All E-Commerce Spending

As it stands in the middle of the Covid crisis, small businesses are losing the battle. One of every three e-commerce dollars passes through Amazon and they are expected to take a bigger share through and post crisis. Brick and mortar retail, where mom and pop shops have certain advantages, had already been in decline, with 2019 marking the all time high of physical store closures. As streets reopen to business, we will see shuttered stores separated by chains which will dominate the landscape.

Independent brick and mortar will take longer to recover but it’s imperative to revive the digital main street as soon as possible, not only for the good feeling of shopping local but because independent small retailers are key contributors to local economies and have supported recoveries in the past.

A study, led by researchers from the Universities of Arizona and Iowa, supported by GoDaddy.com, found that small online businesses have a meaningful economic impact on their local communities, contributing to the growth in median household income in their counties. The study also found that “that counties with more of these ventures experienced stronger recoveries from the last recession than elsewhere,” suggesting, as Marcela Escobari of the Brookings Institution told the New York Times, “these small web businesses can be an important buffer for individuals and local communities facing economic challenges.”

Ultimately, the government must take the lead in breaking up big tech by strengthening the agencies who are responsible for enforcing antitrust laws.

In order for the government to take action, consumers who will be relying more and more on the big tech firms for service delivery can’t have their experience interrupted.

Those who wish to be considered good tech actors have a role to play in creating a positive environment for independent business, clearing the way for regulators. The complications and ethics of relying on certain big tech companies to provide a counter balance to the problematic behavior of others is a separate debate, but one that should be had. For now, it’s worth looking at who is stepping up to create a more level playing field.

Shopify is probably the best example of a big tech company facilitating the shift away from total monopolization and supporting small businesses. Shopify is providing the infrastructure-the sidewalks, storefront, plumbing and power- to re-open main street online. Their core product provides the necessary tools for someone to quickly and easily start selling online, while they’ve rolled out other tools that further support these entrepreneurs’ growth.

Shopify Capital, their debt lending service, fills a necessary gap in funding, allowing people to focus on creating a great product for their customers. This type of modest lending allows vendors to sustainably grow their business, without having to overextend into a growth at all costs model in order to attract venture capital. Shopify Capital is well suited to provide funding to businesses who wouldn’t qualify for government relief packages. Shopify has access to and understands the metrics which show the real value of the enterprise as opposed to the traditional qualifying metrics and collateral the government relies on such as employees and equipment. Where a government official may see a small side business not worthy of a bailout, a Shopify analyst may see the perfect conditions to invest and scale.

Shop, the newly launched discovery app, is creating the actual main street. Allowing customers to stroll, look in windows and connect with the brands and products which speak to them. In theory, charging ‘rent’ in the form of paid listings would be justifiable, but that not being Shopify’s business model, they’re electing to bet on their clients’ success by connecting them with customers free of charge.

As good actors like Shopify do their part to even the playing field, lawmakers and regulators must then step in to support this shift and create lasting change.

Little has been done on this front through the past few administrations, but some movement appears to be taking place.

Last year, Senator Elizabeth Warren introduced a plan to break up big tech while running for president. The plan calls for “large tech platforms to be designated as Platform Utilities and broken apart from any participant on that platform,” meaning Amazon’s marketplace would have to be a separate entity from Amazon Basics. The plan also calls for the reversal of anti-competitive mergers, including that of Amazon and Whole Foods.

Meanwhile on the other side of the aisle, Republican Senator Josh Hawley is calling for a Department of Justice investigation into Amazon following the latest report of the company using data from third party sellers to create rival in house products. Sen. Hawley is asking the DOJ to prosecute Amazon under the Sherman Antitrust Act, the same law that was used against Microsoft in 2001.

While we’re at it, governments could easily take the proactive step of not propping up big tech by competing for their attention with tax breaks and other incentives for jobs, rather they should encourage and invest in the technical infrastructure and skills that small digital businesses rely upon.

Breaking up big tech sounds like a radical notion until we look at the not so distant path to see that politicians and regulators haven’t always allowed big business to grow without limits, exploiting their monopolies of scale to dominate sectors of the economy, shutting out competition big and small.

As Matt Stoller, expertly explains in his book Goliath, there has always been a struggle between corporate industrialists who have aimed to concentrate power and wealth for themselves and populist trustbusters who have written and at times enforced America’s antitrust.

Just because my generation (late 20s early 30s) has come of age and lived through one dominant economic framework does not mean it has to continue to be this way, we have never lived through a pandemic either, which should act as the perfect impetus for this change. The New Deal needed the great depression and didn’t come about until two years of failed recovery by FDRs predecessor Herbet Hoover. That is to say change happens even when it seems impossible. But be warned,the conditions aren’t only right for people like myself who believe in the power of small business, but they’re also right for those who want to further consolidate. Without proactive measures the big four, especially Amazon, will come out of this crisis stronger, at least that’s where investors are placing their bets.

As investors, entrepreneurs, consumers and voters we need to decide what type of economy we want to participate in. The prevailing conditions favou big firms in and out of tech, but that need not be the case. Shopify is leading the way for a shift in the power centre of e-commerce towards a more sustainable model, allowing regulators to bust up the big four without inconveniencing consumers.

--

--