Exploitation or Capitalism? Big Tech just gets bigger
October 5, 2021
3 min read
What's going on here?
“Big Tech” companies such as Apple, Facebook, Google, Amazon, and Microsoft are facing regulatory scrutiny following an acquisition spree this year at a record pace.
What does this mean?
The Federal Trade Commission (FTC), a US regulatory body with the primary aim of protecting American consumers, has found cause for concern within a recently published report that details tech M&A activity from 2010 to 2019. The report revealed that Big Tech companies completed 819 acquisitions that weren’t brought to the attention of a regulator. This report highlights potentially worrying antitrust infringements in the US, something the Biden administration is keen to tackle in a variety of sectors.
Lina Khan, the FTC chair, suggests that Big Tech systematically used takeovers to eliminate any future competition. Data provided by Refinitiv reveals the extent of recent acquisitions made by Big Tech. Since the start of 2021, Big Tech companies have spent at least $264bn buying up potential rivals worth less than $1bn. To put this into perspective, this is double the previous record which was set in 2000 following the dot-com boom. During times of economic hardship, companies that are financially struggling become easy targets for other companies that have deep pools of capital. Another reason for this growth in acquisition activity is that companies expanded their digital capabilities due to the rise of eCommerce through the pandemic.
What's the big picture effect?
These reports take centre stage amid a battle between US regulatory authorities and Big Tech. They highlight a toxic combination for any market, a lack of regulatory enforcement and abuse of power. There is a concern that Big Tech has been abusing loopholes to enable acquisitions to fly under the radar of the FTC. Currently, transactions valued below $92m do not need to be reported to US regulatory authorities. Data from Refinitiv suggests that $66bn has been invested in acquiring assets in this size category. Kelly Slaughter, an FTC commissioner, explains the significance of this as “the collective impact of hundreds of smaller acquisitions can lead to a monopolistic behemoth”.
Large tech monopolies have evidently been exploiting a weakness surrounding existing legal frameworks concerning fair competition. Competitors have been bought up or buried. According to the FTC report, Big Tech made 616 acquisitions valued at more than $1m. Within this data, at least 40% of the deals showing the assets’ age involved companies that were less than five years old. These acquisitions involved small start-ups with valuable patents and talented employees. This evidence demonstrates a significant element of anticompetitive practice happening in the tech sector.
The regulatory clampdown on monopolies has also expanded to policies concerning vertical mergers. Richard Powers, head of antitrust in the Justice Department, explains that “the department’s review has already identified several aspects of the guidelines that deserve close scrutiny”. Certainly, the Biden administration appears to be trying to establish a precedent by enacting regulatory reform. The White House, regulators, and members of Congress hope to be able to reign in monolithic companies. How radical this reform will be is yet to be seen.
Ultimately, it is within the interest of the consumer that the underenforcement by antitrust regulators is quickly reformed. The Biden administration’s strategy to tackle concentrations of corporate power is certainly picking up pace. Yet, interestingly, since the publication of the FTC report, Big Tech has only increased the pace of its deal-making. This leads us to ask: has Big Tech become so big, that it can no longer be tamed?
Report written by William Sutcliffe
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