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How to Protect your Wealth by Investing in AI Tech Stocks

US Antitrust Against the Big Tech

Companies / Tech Stocks Sep 28, 2021 - 08:34 PM GMT

By: Dan_Steinbock


In the United States, the executive branch, courts and Congress are moving to restrict the dominance of the U.S. tech giants.

In the 1960s, the US economy was driven by the automobile sector’s Big Three: GM, Chrysler and Ford. Today, it is fueled by the Big Tech. Over the past decade, US Big Tech has revolutionized internet economy, but allegedly abused its dominance.

In June 2019, the antitrust enforcers agreed to focus on Google, Apple, Facebook and Amazon, while dividing responsibility over investigations. In October 2020, the House Committee finished a report recommending a range of measures to address the firms’ allegedly anticompetitive conduct. And in June, the Committee ordered to be reported a series of antitrust bills directed at Big Tech.

Last December, the US Federal Trade Commission (FTC), in cooperation with 46 US states, launched an antitrust lawsuit against Facebook regarding its acquisition of two rivals, Instagram and WhatsApp, and the consequent monopoly power.

The antitrust division of the US Department of Justice (DOJ) is preparing a second monopoly lawsuit against Alphabet’s Google over its digital advertising business.

Congress, too, may pursue legislation to address the Big Tech’s anticompetitive conduct.

These are just some of the recent signals that US antitrust may be about to toughen.

Big Tech's $9 trillion market cap         

The combined market capitalization of the largest five technology giants reflects their dominance. It exceeds $9 trillion: Apple, ($2.4 trillion), Microsoft ($2.2 tr), Google ($1.8 tr), Amazon ($1.7 tr) and Facebook ($1.0 tr). It is their controversial conduct that has made them antitrust targets.

In the United States, antitrust law emerged with industrialization, income polarization, and the Big Business in the late 19th century. That’s when the Sherman Act (1890), Clayton Act (1914) and the Federal Trade Commission Act (1914) were enacted to promote competition and to suppress monopolies. These laws have been interpreted and enforced differently in different times.

If the more permissive “rule of reason” reflected the early antitrust policies, the post-Depression trustbusting lawyers to relied on “structuralist” rules aiming against excessive market concentration. As neoliberal economic policies triumphed in the 1970s, they were paralleled by the rise of the “Chicago School” and its more permissive antitrust views, presumably resting on law and economics.

Since then, these interpretations have reflected the leverage of Big Business, but also competitiveness concerns about global competition. In the past decade, criticism against the Big Tech has intensified, as evidenced by expanded antitrust investigations in the US and the European Union (EU).

Revolving doors between antitrust agencies and their targets   

The first Big Tech case emerged when 19 states and the Justice Department sued Microsoft in 1999. Despite the ruling to split the software giant, subsequent years of wheeling and dealing resulted in a settlement without a breakup.

Only days ago, the FTC recently found that the Big Five engaged in 616 acquisitions in 2010-19 that were each above $1 million, yet too small to be reported to antitrust agencies. It was a shrewd Pan-man strategy to boost monopolistic practices.

When President Biden appointed Lina Khan to chair the FTC early in the year and Jonathan Kanter to head the DOJ’s antitrust, the moves were cheered by antitrust reformers. But the Big Tech counter-attacks ensued quickly. Big Tech is blaming Khan and Kanter for “unfair bias” and “conflict of interest” – but without legal merits. 

The real challenge to US antitrust is the “revolving door” politics. For years, the Big Tech has been recruiting antitrust regulators from the FTC and the DOJ. Coming from the executive suites of the companies they should oversee; antitrust enforcers are disinclined to turn against their former and potential future employers.

The problem is systemic and translates to conflicts of interest and moral hazards, at the expense of competition and consumers.

Antitrust considerations in emerging economies            

To a degree, US antitrust practices are paralleled by similar trends in high-income West. But since US tech giants reign over the global technology sector, their dominance does warrant greater scrutiny.

In the past decade, a generation of new multinational companies have also emerged from developing economies, including Chinese internet giants Tencent, Alibaba, JD, Xiaomi and Baidu. Hence, too, the rise of China’s anti-monopoly law since 2008.

Yet, antitrust in emerging economies is complicated by additional considerations. In their home markets, per capita incomes are significantly lower than in the West. So, big firms must rely on cost-efficient operations, which are hard to replicate by rich-country multinationals. That’s why US car makers – GM, Ford – have recently exited from India.

Second, domestic markets nurtured the domestic monopoly conduct of US tech giants until the rise of European and Japanese challengers in the 1960s and ‘70s. By contrast, challengers in emerging economies have had to struggle with richer and globalized tech giants from the start.

Third, Trump and Biden administrations have exploited controversial instruments particularly against Chinese tech challengers, including tariff wars and protectionism, unilateral sanctions not supported by international law; even illicit detention of corporate executives. Such conduct does not appear to be motivated by competitive concerns, but by geopolitics to recapture 5G leadership for military purposes.

Distinctive challenges, distinctive policies            

Competitive considerations and the distinctive challenges – lower purchasing power, global competition and controversial protectionist attacks - highlight the importance for equally distinctive antitrust policies in China and other emerging economies.
Antitrust authorities must seek to ensure fair and competitive markets at home. Yet, they cannot ignore the impacts of global competition, including adverse trends and controversial practices against challengers from developing economies.

It’s a difficult balancing act.

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see  

© 2021 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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