Simplifying Big Tech, Antitrust and Regulations
Hayne Shin is a LLB student studying at King's College London! In her informative submission below, she provides a succinct insight into the world of Big Tech!
Regulators around the world are circling big technology companies. Why?
Big Tech, also known as the Tech Giants, is a term commonly used to describe the dominant technology companies- namely Facebook, Google, Amazon, Apple and Microsoft. Sometimes referred to as GAFA or FAAMG, these five companies’ combined market capitalisation amounts to $7 trillion (Oct 2020) and are top-performing stocks in the market.
In recent years, there have been countless headlines with the words Big Tech, Antitrust and Regulations. So, what does this all mean?
Simply put, governments are worried that these companies are using their monopoly power to kill off competitors. Regulators all around the world have begun investigating into antitrust practices of big tech companies.
To list a few-
The US’s Federal Trade Commission filed a suit against Facebook in December 2020. The FTC stated that Facebook retained its market power by removing potential rivals (killer acquisitions). It would buy innovative companies that provided similar services to Facebook when they were just starting up and growing. Instagram was acquired by Facebook back in 2012, and WhatsApp was acquired in 2014. Now customers don’t have much choice over which social network they use.
In Europe, the European Commission opened an investigation into Amazon’s antitrust practice in November 2020. Amazon provides a platform for third-party sellers to sell their products. At the same time, Amazon sells its own products as a retailer on that same platform, competing with third-party sellers. Amazon allegedly uses third-party sellers’ data it collects from running the platform (like how many products were ordered) to promote their own products over third-party sellers’ products.
These anti-competitive practices are problematic because they kill off small businesses, discourage competition and give consumers less choice and control. Only big technology companies win in the end. It would also drive down innovation as big tech wouldn’t have the same incentives without any competition.
So, what are regulators doing to solve the problem?
Many believe that current competition laws are not suited for big tech and more attention must be paid to prevent further anti-competitive behaviours. Additionally, increasing data privacy issues with big tech have gathered more attention due the Cambridge Analytica Scandal (The Great Hack on Netflix provides a good summary of this).
Image Source: https://www.wired.com/story/the-great-hack-documentary/
To combat these issues, the UK government created the Digital Markets Unit under the Competition and Markets Authority (CMA). This will oversee competition regimes and enforce a new code to govern the behaviour of platforms that currently dominate the market.
As for the European Union, the European Commission recently proposed the Digital Services Act and Digital Markets Act to regulate big tech companies. It aims to create a safer digital space and prevent large companies from abusing their market power by introducing obligations and significantly high fines.
The United States’ Federal Trade Commission has already brought multiple lawsuits against big tech companies and even the Chinese antitrust authorities have been investigating Alibaba over Christmas.
With numerous investigations going, we will be seeing more changes in the next few years as to how these companies will be regulated. Will Facebook be broken up and separated from WhatsApp and Instagram? It will be interesting to keep an eye on these issues as there are many legal and commercial implications.