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Spotlight on the Check on Big Tech

This month-end will show whether the all-pervasive four giants in the digital space will have their tentacles pruned under U.S. antitrust laws

In the first week of August, a seminal event took place. The U.S. Congress held the biggest antitrust hearing in decades against the “Big Four” — Amazon, Facebook, Google, and Apple —questioning their market power and practices. The focus was on the need to update the antitrust laws for the 21st century.  It also discussed the designation of digital advertising on social media as industries prone to unfair monopolisation and hence subject to antitrust laws. 

A study in 2019 of the online advertising industry showed Amazon competing with Google, and after surveying 155 digital publishers, found that the average website used the same amount of software used to sell advertising in an automated way as Google does. It shows Google to be a big player in the market, and not the only one. The Big Four can work their way into a monopolistic situation by fielding several products under their banner.  Google, through vertical integration, markets some of the best online ad services, which together corner a huge chunk of the market. 

THE ANTITRUST LAWS

The Congress passed the first antitrust law, the Sherman Act, in 1890 as a "comprehensive charter of economic liberty aimed at preserving free and unfettered competition". In 1914, two additional antitrust laws were passed: the Federal Trade Commission Act, and the Clayton Act. The Federal Trade Commission Act bans "unfair methods of competition" and "unfair or deceptive acts or practices". 

The House Judiciary Committee has been investigating Big Tech for over a year now. CEO Mark Zuckerberg’s Cambridge Analytica scandal, along with his hearing last year with Ocasio-Cortez and other lawmakers regarding the launch of Facebook’s cryptocurrency project, Libra, have brought to attention the power that Facebook wields. 

The last Big Tech-based antitrust hearing was in 2001 against Microsoft, which was trying to monopolise its browser in its popular Windows operating system. Even though a federal judge determined that Microsoft was behaving in a monopolistic manner, the settlement agreed upon did not require Microsoft to break up its product, Internet Explorer, from Windows. However, as per Bill Gates the scrutiny took away their focus and Microsoft Mobile lost to Android.

THE HEARINGS

The hearing investigated the Amazon Web Service (AWS), it's cloud storage which stores all the data on products and pricing from its third-party sellers to make its own online products more competitive. AWS had brought in only 12.5 per cent of Amazon’s total revenue, yet makes up a whole 63 per cent of its operating income. CEO Jeff Bezos conceded that there is a company policy against using seller-specific data to aid private business, however, he couldn’t “guarantee that that policy has never been violated”. 

Apple was investigated for charging a flat 30 percent cut from app sales through its app store, which is used by about 1.5 billion people and generates billions of dollars in e-commerce annually. Apple's defence was that this is in line with industry practice.  While larger brands like Spotify, Amazon and Netflix can refuse to pay this fee, giving an option of service through their businesses, smaller start-ups and businesses have little choice.

Google dominates the digital ad market and corners about one-third of all online ad revenue.  Its reply to accusations of monopoly was that there was no compulsion on online ad players to use its products for carrying their ads. However, antitrust law is all about consumer protection while creating a healthy market space. The three elements, DV360, AdX, and DoubleClick for Publishers, which help place, bid, and feature ads, are all merged under Google Ad Manager. There is also the claim that Google prefers and shows its own products first in spite of other search results in the Google Search Engine. CEO Sundar Pichai, did not agree that Google had stolen content and put rivals at a disadvantage. “Today, we support 1.4 million small businesses supporting over $ 385 billion in their core economic activity,” he said. “We see many businesses thrive, particularly even during the pandemic.”

Among many charges, regulators are concerned that Facebook’s method of acquire-or-copy of up-and-comers in the social media space is reducing competition and limiting choice. There was also a chain of emails that were brought up, stating Zuckerberg’s clear worry about Instagram overtaking it, which then led to Facebook buying Instagram. The emails, Zuckerberg said, meant that Facebook always saw it as a competitor in some aspects, but also complemented its core features. There is also the concern that when you sign up for Facebook, you consent to your internet activity being shared between platforms and third-party advertisers. This all-or-nothing “terms of service” could be considered unfair because people do not have other comparable social media platforms to use instead. 

WHAT'S NEXT

The end of the year shall see a stance being taken on the tech companies, Fines and court rulings could be the way forward for the U.S. to control the Big Techs, along with insisting that the different products under the company are separated — such as YouTube from Google; Instagram from WhatsApp, etc. It is pertinent to highlight that even with the pandemic and fall in businesses, nearly all the Big Tech companies have been performing well, with Bezos turning into a billionaire and Zuckerberg hitting $100 million. They tied up with governments to track users with COVID-19, yet, rather than giving the government the data it needs; they have tried to dictate the terms of the partnership, posing as guardians of civil rights.

The trend to rein in the Big Tech  is spreading globally. The European Union has had stricter antitrust and privacy rules and has made many moves, especially slapping Google, with a US$ 1.7 billion fine over its “abusive” ad tech and strategies. That case is currently on appeal. In Germany, lobbies attacked Facebook over its 'all-or-nothing' approach and obtained a ruling that users will be given the option to reduce the data collected from them. However, as the ruling was made this year, Facebook is still arguing that it has months before it must comply.  

These data control measures will affect India, as well. The Big Tech is investing in a big way - a $ 10 billion fund by Google to “help accelerate India’s digital economy” and another $ 4.5 billion in Jio followed by Facebook which also has invested $ 5.7 billion in Jio. Market monopoly is nothing new in the Indian market; an analysis of 2,035 listed companies across 298 industries shows that in up to 100 of them, there is one single company that controls more than half the net sales in the sector.  

CONCLUSION

The internet has allowed for a new style of oligarchy, and the danger concentrated market power poses to democracy and free-market competition. Had the mergers and policies by the tech giants been monitored, it would have checked their growth, and they wouldn't have the hold that they do on the internet today.

Author: Synergia Foundation Research Team

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