Trump Administration puts the magnifying glass on Big Tech
Last Monday the alarms went off on Wall Street. Google, Amazon and Facebook fell sharply on the stock market after it was divulged that US authorities are closing in on possible monopolistic practices by those companies and Apple.
The US House of Representatives announced that it was opening an investigation into this matter.
According to The Washington Post and The Wall Street Journal, the US Department of Justice is already preparing an investigation into Alphabet, the parent of Google, and has the authority to examine Apple’s business, while the FTC will be able to supervise Facebook and Amazon.
Government powers are now intensifying their attention of these companies as many people remember previous antitrust cases such as those of AT & T and Standard Oil.
The voices that demand that these technological titans be closely controlled so that they do not accumulate more power and limit free speech, are growing.
It was inevitable as 90% of searches on the internet are filtered by Google, which also absorbs 60% of online advertising along with Facebook.
Both companies also dominate the world of mobile phones, that is dominated by their operating systems. The same situation repeats with online commerce where Amazon reigns supreme.
In the consumer dictatorship, the oligopoly that these companies have implanted in our lives makes them a clear target for regulation as they limit user activities such as search results, opinion making
In addition, the seriousness of this situation is that the evolution of these companies is to compete in all areas like advertising, ecommerce, business services, telecommunications, entertainment, home automation, banking, insurance, a situation favored not only by the fact that the companies have the largest number of users, but they also have the largest number of business customers.
You just have to think, for example, of the tens of millions of companies that use advertising services from Google or Facebook or the more than six million companies that sell on Amazon to realize that the situation has gone out of hand.
From the economic point of view and from the mind of the consumer and by default of other adversaries, the only barrier left is the legislation branch of government.
There is the example of Huawei and the veto issued by Google or the notice that Uber received from Apple before the suspicion of this on the excess of data collected by the first by it.
For Enrique Dans, professor of Technology at IE Business School, large technology companies have shown that many of the rules that were considered practically written in the stone of neoliberal capitalism must necessarily be revised.
“These technological giants have managed to demonstrate that an excessive power over the market generates the exploitation of large asymmetries of information, the possibility of acquiring or copying any competitor or the creation of artificial barriers of entry, which allow an almost unlimited generation of income to large scale that benefits these companies disproportionately while significantly harming the rest of society. “
The examples, Dans continues, are multiple. Acquisitions and subsequent “flagrant copying” of Facebook models, with WhatsApp, Instagram and Snapchat, to Amazon’s founder and main shareholder, Jeff Bezos, purchasing the Washington Post.
In many cases these companies have entered into new sectors in an absolutely natural way to make their processes more efficient or improve the value proposition of their main business in the absence of solutions from third parties, but the acquisition of power and influence both on customers and politicians turns them into monopolies later on.
This has happened with cloud computing, apps or voice interfaces. In other cases, they have reached these services detecting unmet needs thanks to their greater proximity to the consumer.
Subsequently, these activities have become business lines in themselves. The fact of having triumphed with them should not be a reason to prohibit them from generating value in other sectors, but they cannot be allowed to do anything they want, either.
The questions is what are the effects of such a polarized technological industry? That a company possesses all the elements to control a market is always harmful for the competition and, therefore, for innovation.
If Google, Facebook, Amazon or Apple have not only products with a high market share, “something perfectly lawful”, but also control the platforms in which it is necessary to operate to reach that market, they mark the rules and may even consider blocking, acquiring or copying any possible competitor, it is evident that these markets have become dysfunctional at all levels and that operating in them can only provide enormous benefits to the incumbent and damages the whole society.
Practices such as those have led, for example, to Brussels to impose three million dollar fines to Google between 2017 and 2019 after accusing it of anti-competitive practices in the advertising market through its Adsense system to favor its price comparison service Google Shopping and to apply restrictions to mobile and tablet manufacturers with Android to favor their own services.
Financing in these types of companies has decreased by 22% since 2012, because venture capital funds are hesitant to finance ventures that can easily stifle these great technologies.
Would the solution pass by dividing these companies as Democratic Presidential candidate, Elizabeth Warren proposes? The damage that Amazon is doing in the American retail sector, for example, is something that no politician will see with good eyes, let alone the Trump administration.
Therefore, limiting or restricting its action to certain areas or prevent its entry into some sectors could be a legislative solution. They would basically limit the power of 4-5 companies that now operate as monopolies.
Warren proposes, for example, to undo the purchases of Waze, Nest or DoubleClick by Google; WhatsApp and Instagram, in the case of Facebook, and Zappos and Whole Foods in the case of Amazon.
The positions that these companies have obtained in aspects such as the management of privacy, the control of innovation in the markets in which they operate or the payment of taxes are not only due to their great and undoubted investment in development, but also in that is a great measure to exploit vulnerabilities in the system.
Laws must evolve at the pace of the markets and there is no doubt that these technologies reflect a new type of market domination that regulators had not imagined.
The concept of monopoly that dismembered AT & T is now applicable to the integration of Facebook with Instagram and WhatsApp, to Google with its search engine, email and Android, to Amazon with Kindle and Amazon Web Services, or Apple’s with iPhone, iPad and its application environment.
In any market, the fact that there are great players who concentrate the top of mind and the user’s demand, and that thanks to their volume of commerce they generate economies of scale, makes it difficult for third parties to enter.
If in addition, a monopoly provides an equation of value that locks the user we find an entry barrier difficult to overcome.
Eventually, it becomes a monopoly.