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Large tech companies are facing increasing scrutiny as their market power continues to grow

In the US, there has been a focus on potentially creating legislation to disassemble the empires that each company has built, and in Australia there are similar competition concerns.

The power, influence and market dominance of US tech giants have become a hot button political issue in the United States.

After years of showing little interest, it has been reported that US Congress and regulators at the US Federal Trade Commission and the US Justice Department plan to scrutinise whether the tech giants have misused their enormous market power to hamper competition.

There’s growing support from both major parties (Democrats and Republicans) for regulating the world’s most dominant technology platforms. For example, politicians who tend to disagree about most things, like Democrat Nancy Pelosi (current Speaker of the House of Representatives) and Republican Senator Ted Cruz have both recently agreed that tech giants have amassed too much market power. They have expressed growing concern that companies like Google, Facebook, Amazon and Apple have too much influence over what consumers buy, what information consumers see, how they communicate with one another and how vast amounts of consumers’ confidential information is handled.

Democratic presidential candidate for the 2020 election, Senator Elizabeth Warren, recently jump-started the debate among Democrats with a proposal to break up Facebook, Google and Amazon. She asserted that “today’s big tech companies have too much power over our economy, our society, and our democracy.” In particular Google, Facebook, and Amazon have “bulldozed competition, used our private information for profit, and tilted the playing field against everyone else,” hurting small businesses and innovation in the process.

Some Democrats agreed with her and others urged different kinds of regulation. To further compound matters, the US House of Representatives Judiciary Committee also announced a ‘bipartisan investigation’ into competition in digital markets and noting “a small number of dominant, unregulated platforms have extraordinary power over commerce, communication, and information online.”

Political commentators are also weighing in with strong views supporting an antitrust case for breaking up the tech behemoths. The debate has become loud enough to impact financial markets with major tech stocks losing hundreds of billions of dollars of value because of worries of government intervention. For example, on Monday June 7, Apple, Alphabet (Google’s parent), Amazon and Facebook lost more than $130 billion in aggregate market value after the federal government launched what seemed to be a coordinated campaign to examine the companies’ competitive practices. The tech-heavy Nasdaq Composite index fell 1.6% on the news. It seems the immediate concern has passed as the share prices for each have since recovered.

While some are suggesting the companies may need to be broken into smaller parts, others believe a break up may not actually end up being the best remedy to restore competition to markets and protect innovators, consumers and workers. They also noted all the benefits tech companies have brought to society such as the myriad of useful apps, convenience and lower prices for both goods and services. Passing new laws aimed at regulating the big tech companies as ‘digital platform utilities’ would also involve overcoming significant political challenges.

Supporters of a breakup argue splitting off business units would look something like this: Amazon split into (i) retail, (ii) media – TV, Kindle, music, and (iii) web services / cloud computing. Alphabet split into (i) search, (ii) mobile systems / Android system, and (iii) web services / Play Store. Apple split into (i) hardware – computers and phones, (ii) web services – TV, games, and (iii) music. Lastly Facebook could be split into (i) WhatsApp, (ii) Instagram and (iii) Facebook.

European countries have been more aggressive than the United States in curbing the dominance of big tech. They've handed out billions of dollars in fines and pressed companies to clamp down on misinformation on their platforms. In the United States, the inquiries are just getting started. Any process to break up big tech companies would likely take years and lead to drawn-out legal battles. Nonetheless the rhetoric surrounding big tech will continue to increase as the US presidential election race gathers pace.

President Donald Trump has also weighed in, commenting in a recent interview that the U.S. could benefit from some of the cash windfall European regulators are getting from lawsuits with major American technology companies.

He pointed to the European Union’s probes into tech giants and said “they’re great companies” but “something’s going on” when it comes to their concentrated power. Trump said that as a by-product of the fines, the EU gets “all this money — we should be doing that.”

Closer to home, Rod Sims, the head of Australian Competition & Consumer Commission has also conveyed his views into the debate. At meetings in March 2019 in Washington, he told US government regulators and competition experts that global competition and consumer laws must be employed to rein in the unfair advantage of digital giants. He was in Washington to meet with US government, regulat­ors and experts about the ACCC’s pioneering draft report into ­digital platforms. The prelimin­ary report, released in December 2018, is highly critical of the negative impact of Facebook and Google on competition and consumers. Regardless of what actions are taken in the USA, if any, the activities of big tech companies in Australia will be heavily scrutinised.

Illustration by Sébastien Thibault

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