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Big tech monopoly in the US faces heat

Big Tech is under fire. Two important reports, on divergent issues but underlying the monopoly power of the technology giants, hit us last week.

Published: 11th October 2020 09:25 AM  |   Last Updated: 11th October 2020 09:28 AM   |  A+A-

Big Tech is under fire. Two important reports, on divergent issues but underlying the monopoly power of the technology giants, hit us last week. Both have been underreported in our media. The big one is from the US House of Representatives’ Judiciary Sub-Committee on Anti-Trust which has lambasted the monopoly power of the Big Four - Amazon, Apple, Facebook and Google. The 16-month investigation says these companies have become anti-competition monoliths and the US needs new laws to break up these companies.

“To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons,” the report’s introduction states.The report, penned by the majority Democrats on the panel, poses no immediate threat to the tech giants. It is guidance to the US Congress on shaping future legislation. The Republicans differ on the law process, but are one with the Democrats that these Big Tech monopolies are a real threat to competition. That’s significant. This kind of Congressional attention heralds action will follow, especially if Joe Biden wins in November.

KILLING COMPETITION
The report accuses Amazon of having cornered close to 50% of the US e-commerce market (not 40% as estimated by research firm eMarketer) by unfairly gleaning data from third-party sellers. Amazon then uses the information to develop its own brands, giving them exclusive merchandising space on its virtual shelves, and thereby kills competition.

On FB, the Subcommittee says it had used the path of acquisition, as in the case of Instagram which it acquired in 2012 and WhatsApp in 2014, to “neutralize a nascent competitive threat”. Google, on the other hand, has snuffed out competition with a strategy of undermining what the report called “vertical search providers” in specific areas such as Yelp for restaurants and Expedia for travel.

Big Tech is not taking 
it lying down. “Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people,” a FB spokesperson said.The fact is the big technology guys are getting richer faster than the others, and at a time when the Covid pandemic is threatening to make poverty once again a global crisis. A report from the Swiss bank UBS and PwC last week shows the wealth of the world’s billionaires reached a new record high in the middle of the pandemic on the rebound in tech stocks.

During 2018, 2019 and the first seven months of 2020, technology billionaires’ total wealth increased 43% to $1.8 trillion, and healthcare billionaires by 50% to $659 billion. This is way above the 19% median increase for Billionaires as a whole over the same period. The pandemic also made no difference to the 643 wealthiest Americans, including Amazon’s Jeff Bezos and Tesla’s Elon Musk. They raked in $845 billion in combined assets between March and September, multiplying their wealth by  nearly a third, the report said.

‘BREAK THEM UP’
Elizabeth Warren, Senator and former aspirant for US presidentship, has been a big antitrust campaigner. Demanding breaking up the Big Four, she has pointed out how they have become a drag on innovation and competition. “Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business. The number of tech startups has slumped, there are fewer high-growth young firms typical of the tech industry, and first financing rounds for tech startups have declined 22% since 2012.”

She has been demanding legislation that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform. These companies would be prohibited from owning both the platform utility and any participants on that platform. Second, she advocates appointing proactive regulators committed to reversing illegal and anti-competitive tech mergers.

The US has a long history of anti-monopoly action. Standard Oil, built by John Rockefeller into a huge production, processing and distribution monolith that forced out competition, was forcibly split up in 1911 into 30 different companies. More recently, and what Big Tech forgets, is that Microsoft, the dominant force of the 1990s, was stopped by anti-monopoly action and helped Internet companies like Google and FB to grow.

In India, super monopolies riding technology are just beginning to emerge. In telecom, from a dozen players a decade ago, we are down to just 3 - Reliance Jio, Airtel and Vodafone Idea (Vi). No prizes for guessing who is likely to win the final lap. FB is already a shadowy force that is influencing elections and monopolizing the channels of news and information. The Competition Commission (CCI) established in 2003, to regulate monopolies, has so far proved to be a fairly toothless body. But then that is another discussion.



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