Just because a company has had exponential growth, does not mean it is a monopoly, Microsoft President Brad Smith told CNBC on Tuesday.
“I don’t think that one should ever equate size in and of itself with a potential threat or harm,” said Smith, who also serves as the company’s chief legal officer. However, he added, “I do think that with power comes responsibility.”
Smith was referring to several investigations that have popped up in recent months into Big Tech’s market power.
Just days after attorneys general from eight states and the District of Columbia announced an antitrust investigation into Facebook, Texas Attorney General Ken Paxton on Monday revealed that he’s leading a multi-jurisdictional antitrust probe of Google. AGs from 48 states, the District of Columbia and Puerto Rico are also participating in the investigation of the Alphabet unit. California and Alabama are not involved. All the attorneys general in the separate Facebook probe are also supporting the Google inquiry.
Smith certainly knows a thing or two about dealing with government investigations. After becoming Microsoft’s general counsel in 2002, he spent the next decade resolving government antitrust inquires into the company.
In 1992, the Justice Department launched an antitrust investigation into Microsoft that led to a government settlement about nine years later. Microsoft escaped a breakup, but it had to pay billions of dollars in fines in lawsuits from rivals and state governments. The ordeal arguably made Microsoft more cautious in the 2000s, allowing competitors such as Google and Apple to cut into its dominance.
In the fast-paced tech industry, companies want to move quickly and innovate — but at the same time, they cannot forget their missions and values, Smith said in a “Squawk Box” interview. He’s the author of the new book out Tuesday, “Tools and Weapons: The Promise and the Peril of the Digital Age.”
“You need some guardrails,” he stressed, saying smaller firms are able to get away with some anti-competitive behavior. But once start-ups grow into giants, they can no longer employ certain tactics, he added.
Smith talked about the idea of a company limiting exposure of certain apps on its app store. Though he did not name it specifically, Apple recently tweaked its app store to reduce the frequency of its own apps in search results after competitors raised antitrust concerns with regulators around the world, two executives told The New York Times in an interview published Monday.
Regulatory action at the federal government level to date has had a minimal impact on big tech companies.
The Federal Trade Commission recently imposed fines on both Google and Facebook over their handling of user data. Last week, Google’s YouTube agreed to pay $170 million. Facebook, in July, agreed to pay $5 billion. Those penalties, which would be considered large by most standards, represented just small fractions of their quarterly revenues.
But antitrust, compared with privacy and consumer protection concerns, poses a more direct threat to these companies’ business models. If the federal or state probes find evidence of anti-competitive behavior at Google, for example, the company could be compelled to make its algorithms friendlier to rivals even if that eats at its own profits. It could also be forced to spin off entire business units, such as YouTube.
What Smith does know, is that it’s not too late for companies to begin changing practices or focusing on their mission. “When you put it in that broad perspective, it’s not a day too late but we better not wait until tomorrow.”
Officials for Apple, Facebook and Google were not immediately available for comment.
— CNBC’s Lauren Feiner and Jennifer Elias contributed to this report.