What Big Tech, the Taliban, and 13th Century Robber Barons Have In Common

Amazon, Google, and Apple collect some 30% for being middlemen. Companies and attorneys general are ready to revolt.

Credit: Chesnot/Getty Images

When 13th century merchants needed to move valuable cargo around western Europe, they had a single realistic option — water, averting a pothole-ridden hellscape of roads. Many favored the Rhine, the long, north-south superhighway that cut through German territories on the way to Rotterdam. But even there, the experience could be unhappy, beset by armed local feudal lords who lurked outside their castle strongholds. These Raubritters raised up chains across the waterway and exacted outsized tolls for passage through what they saw as their rightful turf.

In one of history’s best-known displays of citizen justice, an exasperated group of German merchants finally assembled what we would today recognize as a posse. One by one, their hired muscle razed the castles of the main culprits and dispersed them. Thus ended the reign of the robber barons, as the plunderers would forever be known.

I have encountered this sort of behavior myself. In the early 1990s, when I was covering Afghanistan, local mujahedeen commanders would pop up along the desolate main roads, an AK slung across a shoulder, and demand cash for crossing their bit of highway. The practice got way out of hand: On the road from the Pakistan border to Kandahar, there were brigands every few hundred feet, and it could take hours to reach town. Then the Taliban arose, hung one of the robber chieftains from a tank turret, and the problem vanished.

Today, a fast-growing number of U.S. and European lawsuits and investigations accuse Big Tech — Amazon, Apple, Facebook, and Google — of standing athwart the internet era’s primary channels of commerce and raking off an exorbitant cut. Unlike the do-no-harm good citizens the companies long ago said they are, the allegations suggest they are traditional, rapacious Big Business actors, at best oblivious or at worst indifferent to the harm they may cause to the societies in which they operate. “In all cases, they are so dominant in these environments, they can just suck money out of the ecosystem,” says David Chavern, president of the News Media Alliance, an advocacy group representing print and digital publishers.

Some of the Democratic presidential candidates are seeking a breakup of the companies. That appears to be unlikely, but one or more of them could be subject to regulation or forced to change their terms of service.

In the latest case, the attorneys general of 48 states said yesterday they are conducting a joint investigation of Google and its advertising practices (Alabama and California did not sign on). Standing on the steps of the U.S. Supreme Court, a dozen of the state officials depicted the investigation as an attempt to ensure that Google is not wrongly capitalizing on domination of the digital advertising market. Advertising accounted for about 85% of the $136.8 billion in revenue earned last year by Alphabet, Google’s parent. The company dominates the sale of digital ad space and the brokering of digital ads that appear elsewhere, such as the online versions of newspapers. Google’s position may “allow it to pick winners and losers, to kill publishers and decide who stays and who goes,” Jeff Landry, the attorney general of Louisiana, told reporters.

In response, a Google spokesman sent a link to this blog post published on the company’s website by an executive last Friday. In part, the post says, “it’s of course right that governments should have oversight to ensure that all successful companies, including ours, are complying with the law.”

The probe mirrors a separate case announced Friday by Letitia James, attorney general of New York, who said eight states and Washington, D.C., are investigating Facebook’s advertising pricing, data, and privacy practices. Digital ads accounted for 98.5% of Facebook’s $55.8 billion in 2018 revenue. On top of these probes are investigations of one or more of the Big Tech platforms by the Justice Department, the Federal Trade Commission, and the House antitrust subcommittee.

What makes the 15–30% relevant is that Big Tech is a primary enabler of the new architecture of widening U.S. wealth inequality, in which more and more of the gravy goes to the top.

The general charge sheet against Big Tech is that one or more of the companies evade taxes by sheltering income in overseas havens, contribute to inequality, abet Russia, and invade our privacy. But what attracts less attention is how the platforms earn a lot of their gargantuan profits — charging what critics say are exceptionally high rates of its clients, having captured a near-monopoly hold in their respective realms. In other words, they may be modern-day robber barons.

I spent the last week speaking with experts about the margin the platforms charge. For instance, Apple and Google take a 30% cut of what apps sell through their respective stores and 15% after the first year. Google rakes 30% off the top of ads sold through its services, as does Amazon for ads sold on its Fire TV. Merchants using the “Fulfilled by Amazon” service, in which the platform sells and ships their product, say they pay roughly 30% of their proceeds to Amazon. And Apple has just launched an app called Apple News+ that offers a wide range of magazines plus the Wall Street Journal and Los Angeles Times for $9.99 a month. Apple reportedly takes half the money.

What makes the 15–30% relevant is that Big Tech is a primary enabler of the new architecture of widening U.S. wealth inequality, in which more and more of the gravy goes to the top. As with the 13th century robber barons and the mujahedeen, that Big Tech collects about 30% for being the middleman — just sitting there, cha-ching — is angering a number of developers, companies, and officials.

In interviews, a number of experts noted that most major credit card companies charge 3% for transactions. David Cicilline, chairman of the House subcommittee on antitrust, pointed out that media reported both Apple and Google deciding on their 30%/15% fee structure the same day in 2016. “There’s no question that in a healthy economy, if you saw a 30% fee on a transaction, you’d be alarmed. The fact that Apple and Google both announced their 30% fee structure going to 15% on the same day is suspect to say the least. It looks an awful lot like tacit collusion.”

In response to Cicilline, a Google spokesman pointed out that the two companies did not actually change their prices the same day and included this link from the Verge. An Apple spokesperson sent the same link.

After yesterday’s news conference, I approached Eric Schmitt, Missouri’s attorney general, who said that the rake-offs will be a part of the investigation. “The concern is that they are on both sides of the ledger, getting a commission on both sides,” he said, meaning that Google is the main seller of ads wherever they appear — there is no getting away from Google.

Big Tech is under fire for its pricing practices in civil complaints in both the U.S. and Europe as well. In March, Spotify filed a complaint with the European Commission for “the Apple tax,” Apple’s 30% fee for app developers. The EC has not publicly said whether it will formally investigate, although Financial Times reported in May that the commission has agreed to do it. Spotify declined to speak on the record, but a spokesperson said the company has created a website to explain its position.

In the U.S., two developers sued Apple in June over its app store pricing. And in May, the Supreme Court ruled that an antitrust suit against Apple could proceed, again regarding how it runs its app store. Plaintiff lawyers in neither case responded to emails. But Matt Stoller, a fellow at the Open Markets Institute, an advocacy research group, said the fee amounts to restraint of trade, a primary measure of monopoly power under antitrust law. “Apple takes 30% of the app store. That’s a monopoly price,” said Stoller, author of the forthcoming Goliath: The 100-Year War Between Monopoly Power and Populism.

One can create a defense for the companies. For instance, unlike some of the past rogues to whom they are sometimes compared, they, in fact, did not steal anything or gain government favor to attain their stature. As we all know, Mark Zuckerberg created Facebook in his Harvard dorm room; Sergei Brin and Larry Page did more or less the same at Stanford; Steve Jobs led the creation of a phone that, so far at least, is the must-have device of the 21st century; and Jeff Bezos conceived of what may become the biggest business of all by the time he is through. Moreover, there is a sense of a credential-building, popular piling-on in the probes. In a weekend report, Bloomberg’s Eric Newcomer suggested that if you are a self-respecting state or federal prosecutor in the U.S. or Europe, you are more or less obliged to go after Big Tech since that is what “all the cool kids” are doing.

An Amazon spokesperson did say, “Sellers have many choices regarding how and where to sell their products, including physical stores, online marketplaces, and selling direct through their own storefronts. Our fees and commissions are very competitive when compared to options available to sellers from other providers.”

All that’s missing is a castle, some chains, and a German river.