Aswath Damodaran: Will The DOJ break Up the Big US Tech Companies?

Currently, US Department of Justice is considering breaking up Alphabet and requiring it to share data with competitors. This is part of an ongoing debate about the power accumulated by big tech companies like Microsoft, Amazon, Apple, Alphabet and Meta.

In this video and accompanying article, NYU professor Aswath Damodaran discuss the possibility of the US Department of Justice breaking up the big US tech companies. Other antitrust remedies include operating restraints and regulated monopolies.

Aswath argues that ultimately, strong antitrust actions against big tech will be a hard sell compared to actions against other dominant businesses in the past. Consumers directly benefit from big tech’s products and business models today and antitrust laws in the US have evolved over time, with enforcement ebbing and flowing.

Here are the key takeaways as it relates to:

• There is tension between whether the objective is to enhance competition or protect consumers. The appointment of Lina Khan to head the FTC signaled a potential change in focus, arguing that platform-based companies like Amazon prioritize growth over profits and hurt both competitors and consumers in the long run. However, her arguments have not yet won over the courts.

• The big US tech companies have become massive, with the top 5 accounting for over 20% of the total US market cap in 2024. They dominate day-to-day life. They have core businesses where they dominate, fund shaky side businesses with that cash flow, and subsidize many products/services for consumers. Critics argue this is unfair.

• Breaking them up likely won’t benefit consumers, could worsen business efficiency, and only help competitors short-term. Regulated monopolies would destroy innovation incentives. Targeted changes around platform access, content payments, and user recourse may help. But forcing data sharing and banning cross-subsidies is less justified.

• Doing nothing may be best, as tech lifecycles are short, innovation requires big payoffs, and disruption is always a threat.