The CEOs of Apple, Amazon, Alphabet, Facebook and Microsoft faced some tough questions from members of the U.S. Congress on issues that were wide-ranging.
The bulls driving tech companies on Wall Street could not have asked for more. As the Federal Government stepped up the antitrust scrutiny, the biggest tech companies are buying companies and adding to the already formidable muscle than they had.
Between them, these companies bought 27 companies in the first half of 2020. That adds to the ammunition that antitrust lawyers and lawmakers have to claim that tech companies are muzzling competition. With just half the year through, the number of tech buyouts are as many as the deals sealed during 2015.
The flurry of deals has had the lawmakers seeking answers. The CEOs of Apple, Amazon, Alphabet, Facebook and Microsoft faced some tough questions from members of the U.S. Congress on issues that were wide-ranging. The worry for the lawmakers? Tech companies may have used the cash on their balance sheet to buy companies and muzzle competition.
With nearly $500 billion cash on their books, the worry is that the market power for these companies could swell further at a time when the world economy has been badly hit by the pandemic. With another business cycle of growth, after the dust has settled, their market power could be even stronger.
Big acquisitions by Big Tech
Regulators waking up?
Regulators in several countries have taken little or no action when tech companies have bought out small companies because these companies may have had little or no revenue.
The regulators in the EU have almost never reviewed any deal by Amazon, which has spent $20 billion for its top 10 acquisitions. Facebook’s buyout of Instagram in 2012 was not reviewed by the regulator. However, the acquisition of WhatsApp in 2014 was finally approved.
Tech companies are facing more regulatory scrutiny than before both in the E.U. and the U.S. markets. That has not slowed down the pace of their acquisitions. Google, for example has acquired around 200 companies in all – biggest of which was worth $12.5 bn.
The acquisitions made by the large companies also drives leverage that these companies have in the marketplace vis-à-vis other companies. If that can be proved by competition or companies that are impacted, these companies could face the music from the regulators. While Amazon competes with its partners, Apple uses differential pricing to limit competition. Google is both a buyer and seller in the online advertising market. The pace at which tech scales up across the globe makes it a regulators’ nightmare.
Across countries, they are now waking up to the challenges faced by the dominance of tech companies in all spheres of business. Several European countries are looking at these companies closely. Whether some countries succeed in taming tech companies or not, it is an issue that is getting global attention.
Industry open to regulation
While tech companies faced the barrage of questions from the Congressmen, the approach of tech companies – if you can’t build it, buy it – is facing the ire from within too.
Microsoft Founder Bill Gates had earlier lent his voice to the government regulating tech companies. Two decades ago, Microsoft had to face the ire of regulators and changed some of its business practices.
Roger McNamee, an early investor in Facebook & Google, believes it is time to end the practice of tech companies collecting personal data of people around the world. It may have been used to influence the choices of people. As the world rapidly advances into a digital economy, at stake is a rapidly evolving global digital market. The battle for regulation promises to be a long-drawn one
The world is watching with eager ears. Often, online.