Did Big Tech get too big? More of the world is asking


Attendees walk past a Facebook logo during the tech giant’s F8 developers conference in San Jose, California on April 30. Google and Facebook together controlled 60% of mobile ad revenue and 51% of digital ad revenue globally in 2018, according to eMarketer.

The rise of global technology superstars like Amazon, Apple, Facebook and Google created new challenges for the competition watchdogs who enforce antitrust laws around the world. The companies dominate markets in e-books and smartphones, search advertising and social-media traffic. The European Union has been the most aggressive jurisdiction so far in trying to regulate Big Tech. The US has largely been hands off, though that may be changing.

1. Are the tech giants monopolies?
They’re powerful, for sure. Google and Facebook Inc together controlled 60% of mobile ad revenue and 51% of digital ad revenue globally in 2018, according to eMarketer. In the US, Apple Inc has about 45% of the smartphone market; about 47% of all US e-commerce sales go through Amazon.com Inc. But under modern antitrust enforcement, those percentages alone aren’t enough to alarm regulators in the US, which long ago stopped equating big with bad. (Standard Oil’s market share got as high as 88% late in the 19th century.) What’s illegal is for a monopoly to abuse its market power to prevent rivals from threatening its position. US courts ruled Microsoft Corp did so in the 1990s.

2. What would actually worry regulators?
In the US, they’re primarily focused on the harm to consumers from reduced competition. When two companies want to merge, for example, could the deal result in higher prices? That’s usually not an issue in high-tech tie-ups, because big firms are often gobbling up much smaller rivals or buying companies for the purpose of entering new markets. The EU has been more aggressive, as evidenced by three antitrust actions against Google in as many years carrying penalties that total $9.3bn.

3. Why are tech companies having a tougher time in Europe?
EU law sets a lower bar for finding abuse of dominance by a company, so it’s easier to run afoul of antitrust restrictions. (The US chose not to bring charges against Google for the same conduct the EU found illegal.) EU enforcers also have been more wary of big companies collecting consumers’ personal data. Strict new privacy rules that took effect in the EU last May under the General Data Protection Regulation gave regulators unprecedented powers to protect people from having their data misused by companies doing business there. Already, Google has been fined €50mn ($56.8mn) for privacy violations — the highest such penalty ever in the EU.

4. How often does the US go after monopolies?
The Microsoft lawsuit was the last major monopolisation case brought by the US. The ensuing 20-year dry spell is often cited by those who argue enforcement has been too timid. President Barack Obama’s administration vowed to get tough on dominant companies in 2009 but didn’t follow through. The number of monopoly cases brought by the US dropped sharply from an average of 15.7 cases per year from 1970 to 1999 to less than three between 2000 and 2014.

5. What about Asia?
Japan’s Fair Trade Commission says Google, Apple, Facebook and Amazon need to be examined for possible abuse of their market dominance. South Korea’s commission was reported last year to be looking into whether Google Korea was abusing its market position to pressure local game companies to upload their products only onto the Google Play platform. In China, censorship and government control over internet access have made it difficult for US tech companies to compete with the likes of Alibaba, Baidu and Tencent.

6. Is antitrust thinking 
Some lawyers and economists think it’s time to move past conventional antitrust enforcement to consider harmful effects from increased concentration such as lower private investment, weak productivity growth, rising inequality and declining business dynamism, or the rate at which firms enter and exit markets. They’ve gained a high-profile backer in US Senator Elizabeth Warren, a Massachusetts Democrat who is seeking her party’s 2020 presidential nomination and who has proposed dismantling tech giants like Facebook and Google.

7. Have the tech giants abused their power?
As the middlemen for today’s essential products and services, platforms likeAmazon and Facebook have leverage over both producers and consumers. Amazon used its power over the book market in 2014 to block pre-orders for some Hachette Book titles during a dispute with the publisher over pricing. The tech giants are also growing by snapping up potential rivals that might threaten market share. Data compiled by Bloomberg show the big five – Alphabet, Amazon, Apple, Facebook and Microsoft – have made 431 acquisitions worth $155.7bn over the last decade, according to data compiled by Bloomberg. The companies also have control over vast amounts of data about their customers, raising concerns about threats to privacy.

8. What do the companies say?
They argue that their dominance is hardly durable because barriers to entry are low for new competitors. As Google is fond of saying, competition is just “one click away.” Due to the nature of competition in the digital marketplace, tech platforms benefit from network effects: As more people use them, the more useful – and dominant – the platforms become. Network effects can give a company scale quickly and create what investor Warren Buffett calls competitive moats.

Sources and photo-credits: David McLaughlin, Gulf Times