This post was most recently updated on July 2nd, 2019
At least one of the four players that i will be discussing in this post has an impact in our life. It now depends on whether this is positive or negative. As for me, all for influences my daily life. I mean, i can’t do without a Google product a day, I do visit my facebook page at least once a day, Amazon is my favourite online store and i enjoy my MacBook computer more than any other. You will agree with me that the powers of the four giants are growing bigger. The question now is that, can the US anti-monopoly campaign break their monopoly?
On June 3, the US Department of Justice and the Federal Trade Commission (FTC) officially launched anti-monopoly investigations on Facebook, Google, Amazon and Apple. A few days later, the US House Judiciary Committee also announced that it would conduct an investigation hearing on whether large technology companies would hinder market competition.
Elizabeth Warren and Her Splitting Campaign
At the same time, Democratic candidate and Senate Elizabeth Warren promises to split the four technology giant as part of her campaign for the 2020 US presidential election. As soon as the news came out, the share prices of related technology companies suffered a sharp dip. On June 3 alone, Facebook, Google’s parent company Alphabet, Amazon and Apple shares fell 7.5%, 6.1%, 4.6%, 1%, and the market value evaporated by $137 billion.
US anti-monopoly Campaign Vs the Four Technology Giants
The four major technology giants in the United States have been at the forefront of the world economy. Their success is largely due to a relaxed antitrust regulatory environment. Since the antitrust case of Microsoft in the early 21st century, the US government’s antitrust investigations against technology companies have gradually declined.
Why did the US government suddenly strengthen the anti-monopoly supervision of technology giants this year? What inspired the previous Microsoft antitrust case? Are the four major technology giants (amazon, google, facebook, apple)really facing the risk of being split?
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US Anti-Monopoly Campaign has been Relaxed in Recent Years
Although several major technology giants have been subject to EU antitrust investigations and penalties in recent years, the US government’s antitrust regulation of technology giants has been relatively loose for more than a decade.
According to Colombian professor Tim Wu, in the past 20 years, Google has acquired more than 270 companies; among them, 34 companies were acquired in 2011 and 2014. Google tends to buy more companies every 10 days. Facebook has acquired 90 companies over the past nine years, including the famous Instagram acquisition.
Although tech giants often gain greater market share or dominance by acquiring competitors, both Facebook and Google’s acquisitions have been approved by US antitrust regulators.
Benefiting from the relaxed anti-monopoly law enforcement environment, major technology companies have experienced explosive growth in recent years. For example, after Facebook’s acquisition of Instagram was approved, the active users of the two social platforms continued to set a new record. Currently, Facebook’s monthly active users now exceed 2.3 billion, while Instagram’s monthly active users also exceed 1 billion. In addition, 95% of mobile app consumption in the US market is dominated by Apple and Google. According to statistics, Google and Facebook account for up to 65% of total digital media advertising worldwide.
Although the status of the technology giant is becoming more and more unpredictable, the American public seems to have no opinion on this for a long time. They enjoy the low-cost and even free innovations that the technology giants offer, while technology giants continue to expand by attracting new users and collecting huge user data.
What has now Caused the Sudden Revival of the US anti-Monopoly Campaign?
In the past year, American society’s trust in technology giants has turned sharply. The main cause is the tech giant’s neglect of data privacy protection. In 2018, Facebook’s “Cambridge Data Gate” broke out. A company called “Cambridge Analytica” collected 50 million Facebook users’ data and used it for political analysis without the user’s permission. Some campaign teams used these data to analyze accurate public advertisements during the 2016 US elections in an attempt to influence public opinion.
After this incident, the US political circles, academic circles and public opinion have gradually formed a consensus. They all require that the supervision of the technology giants be strengthened, so as to better protect consumer rights. Many scholars and politicians have proposed a split of the major technology giants. The inspiration behind this is the law enforcement ideas of the Microsoft antitrust case at the turn of the century to prevent the technology giants from forming a monopoly on the technology industry.
A Quick Glance at Microsoft Antitrust Case
Towards the end of the 20th century, Microsoft was not only one of the leaders in the technology industry, but also a spokesperson for the new economic form with technology and has the network as its core. However, Microsoft lost everything at the turn of the century.
In 2000, the Federal Court of Washington, DC, ruled that Microsoft violated antitrust laws and regulations and asked Microsoft to split the Windows system business with the non-Windows system business. The court found that Microsoft not only acquired the monopoly of the personal computer operating system, but also used its monopoly position to force software developers to develop only software suitable for the Windows operating system, thereby indirectly hitting other operating systems competing with Windows. The court also found that Microsoft tried to gain a monopoly in the browser market by bundling Windows and Internet Explorer.
Although Microsoft finally avoided the fate of being split through an appeal, its antitrust facts were determined by the Court of Appeal. In the end, they had to choose to reconcile with the government and other victim companies. In the long-run, this resulted in a series of follow-up rectification measures and financial compensation.
This case set off an uproar in the US scientific, economic, academic, and political circles. Although, most commentators at the time had reservations or criticisms about Microsoft’s punishment. They believed that government intervention was bad for the innovation and consumer welfare of technology companies. It was considered to be a dent on the market’s self-regulation ability.
In the eyes of critics, the lag of law cannot keep pace with technological innovation. Some even felt that cracking down on Microsoft is fighting the international competitiveness of US technology companies.
In the past two decades, a series of new technology giants such as Google and Facebook seem to have forgotten the once-in-a-lifetime Microsoft. Surprisingly, the far-reaching impact of Microsoft’s antitrust case is gradually fermenting.
Will the US anti-monopoly Campaign Force the Four Tech Giants to Split?
Taking the Microsoft incident into account, technology giants are extra cautious in dealing with current antitrust investigations. Most industry observers and scholars believe that the four major technology giants are unlikely to face the risk of being split up as much as Microsoft did, but they may still face a series of penalties and corrective actions.
Among the top four technology giants, Facebook faces the most severe anti-monopoly law enforcement test. In addition, its two major social media platforms, Facebook and Instagram, also face certain split risks.
In the view of anti-monopoly law enforcement, Facebook’s actions to shut down the acquired technology company after completing the acquisition may damage the market competition. According to scholars’ statistics, Facebook has made 92 acquisitions since its establishment in 2007, of which 37 companies have been shut down, and some of the shutdown technology companies are likely to become Facebook’s strong competitors in some market segments.
The case of Spotify vs Apple
Although Apple’s antitrust risk is not as bad as Facebook, the fact that it monopolizes the App Store has attracted the attention of law enforcement agencies. Antitrust enforcement agencies may conduct a rigorous review of whether Apple is abusing its dominance in the App market and forcing developers to charge a 30% commission. Music streaming company Spotify has complained to regulators earlier this year about Apple’s unfair competition.
In Spotify’s view, Apple is indirectly paying for Apple’s own app by charging a high commission to Spotify to combat Spotify’s profitability and competitiveness. The Music app is vying for more users.
European Union Antitrust Investigations and Penalties Against Google
Google has been severely punished by the EU anti-monopoly law enforcement agencies this year. That notwithstanding, its anti-monopoly risk in the United States is relatively moderate. More analysts pointed out that if US regulators try to spin off Google (such as the split of Youtube and Google), Google’s market valuation may even go higher. Professor Hovenkamp of the University of Pennsylvania believes that if regulators want to split Youtube and Google, they must explain in detail how such a spin-off will promote market competition.
Compared to Facebook’s continuous shutdown of competitors, the legal challenge of splitting Google’s different businesses is relatively greater. Besides, the economic significance of the split is also open to question.
Why Anti-Monopoly Case Against Amazon is Weak
The antitrust risk against Amazon is relatively low. The reason is that Amazon is involved in a wide range of industries and products. it’s market share is not very high in every market segment, and it is less likely to be subject to anti-monopoly penalties. But given that the EU has begun an investigation into Amazon’s alleged unfair competition using third-party seller data, it is still unclear whether the US antitrust agency may issue a ticket to Amazon.
Are we About to Witness the Return of The new “Golden Age” in the US?
Let’s flashback to the end of the 19th century, the “golden age” of the United States.
Origin of US Anti-Trust Act
Along with the rapid growth of the US economy is a high concentration of mergers and acquisitions in all walks of life. The monopoly position of large companies have become more unmovable, and the accumulation of wealth has not benefited the broad masses of the people.
In fact, the gap between the rich and the poor in the society is constantly expanding. It is in this era that American society had a rethink of the monopolistic behavior of large companies. Consequently, they passed the first anti-monopoly bill “Sherman Act” in 1890.
The US Anti-Monopoly Bill: “The Sherman Act”
Twenty-one years after the adoption of the Sherman Act, the power of the anti-trust law was truly demonstrated. In 1911, the US Supreme Court ruled that there were a series of anti-competitive practices by Standard Oil Company. They opined that these practices violated antitrust laws and they decided to split it into 34 separate, competing companies.
But in the 1980s, the economic crisis in the United States and the rise of the legal economics movement led the American legal community to rethink the purpose of antitrust law. The Chicago School, represented by Supreme Court Justice Robert Bork, believes that anti-monopoly law should use economic efficiency as a starting point, aiming at improving consumer welfare, allowing the market to adjust spontaneously, and for government antitrust investigations.
US antitrust review and Enforcement logic as it Stands Today
Since then, US antitrust review and enforcement logic have been based on the measurement of consumer welfare. Moreover, consumer welfare has been reduced to the price of goods or services purchased by consumers.
According to this logic, as long as a merger or acquisition does not increase the price consumers pay for services or goods, the likelihood of such a merger being blocked by an antitrust regulator becomes very small. It is under such a law enforcement framework that US antitrust regulators have not blocked the continued mergers and acquisitions of technology giants in recent years. Thanks to the loose antitrust regulatory logic, the size of technology giants has also become larger.
But should consumer welfare be simply defined as the price paid by consumers? Such logic is clearly open to question. Facebook’s “Cambridge Data scandal” made the public realize that the power of the technology giant is not limited to the economic field, but to all aspects of politics and society.
Our lives are also invisibly controlled by large technology companies. Consumer welfare should not be simply defined by the price of the product that the consumer pays. Instead, the consumer’s information privacy, the ability to obtain accurate information, and the freedom to choose different competing products should be included in consumer welfare.
In the past 20 years, 75% of the US industry has become more concentrated; in the past 40 years, the total number of listed companies in the United States has decreased by 50%. At the same time, the gap between the rich and the poor in the United States is growing, with 1% of people accounting for nearly 40% of the wealth. When the technology giants go into every detail of their personal lives, when wealth, technology, and industry are gathering at a high speed.
Can the anti-monopoly law rewrite the US economic and social order as it did 100 years ago? This may be the expectation of many people in the United States.