The companies dominate markets in e-books and smartphones, search advertising and social-media traffic. The European Union had been the most aggressive jurisdiction so far in trying to regulate Big Tech. Now the U.S. has jumped in with a major splash.
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 had been the most aggressive jurisdiction so far in trying to regulate Big Tech. Now the U.S. has jumped in with a major splash.
1. Are the tech giants monopolies?
They’re powerful, for sure. Google and Facebook Inc. together controlled 60 percent of mobile ad revenue and 51 percent of digital ad revenue globally in 2018, according to eMarketer. In the U.S., Apple Inc. has about 45 percent of the smartphone market; about 47 percent of all U.S. e-commerce sales go through Amazon.com Inc. But under modern antitrust enforcement, those percentages alone aren’t enough to alarm regulators in the U.S., which long ago stopped equating big with bad. (Standard Oil’s market share got as high as 88 percent late in the 19th century.) What’s illegal is for a monopoly to abuse its market power to prevent rivals from threatening its position. U.S. courts ruled Microsoft Corp. did so in the 1990s.
2. Why did Europe get so involved?
EU law sets a lower bar for finding abuse of dominance by a company, so it’s easier to run afoul of antitrust restrictions, as evidenced by three antitrust actions against Google in as many years carrying penalties that total $9.3 billion. The U.S. 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 50 million euros ($56.8 million) for privacy violations — the highest such penalty ever in the EU. Google has appealed.
3. What is the U.S. doing?
The Justice Department and the Federal Trade Commission, which both have a mandate to enforce antitrust laws, have carved up oversight of technology giants, with the DOJ preparing to look at Google and Apple and the FTC talking the lead on Facebook and Amazon. That sets the stage for formal inquiries that could last for years, increasing pressure on the companies amid rising criticism that their practices are harming competition in digital markets.
4. How rarely does the U.S. go after monopolies?
The Microsoft lawsuit was the last major monopolization case brought by the U.S. 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 U.S. 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 U.S. tech companies to compete with the likes of Alibaba, Baidu and Tencent.
6. Is antitrust thinking outdated?
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 U.S. 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 like Amazon 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 $155.7 billion 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.