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Can Congress Break Up Big Tech?

The House Judiciary subcommittee concluded an investigation into Facebook, Amazon, Alphabet, and Apple on Tuesday, claiming they enjoy ‘monopoly power’.

Not content with simply sitting back and allowing the world’s biggest tech companies to rule the world, the House Judiciary subcommittee concluded that Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB), and Google (NASDAQ: GOOG) enjoy monopoly power. 

One of the more divisive conclusions to this 16-month long investigation was that parts of Big Tech will need to be broken up. Ahead of the madness of earnings season, this is an unwanted headache for these powerful companies, but what exactly have they done wrong?

Let’s begin with Amazon:

Amazon’s retail dominance is hurting competitors

That tagline above might seem a bit oversimplified, but it’s true. Lawmakers estimate that Amazon controls roughly 50% or more of the U.S. online retail marketplace, which is much higher than previous analyst expectations of 38%.

What this also gives Amazon is monopolistic power over the third-party sellers on its platform, which happen to make up 53% of all paid units sold via its marketplace as of Q2 2020. The 400-page report on Amazon alone found that the Jeff Bezos empire has stifled third-party sellers in favor of its own products, as well as introduced barriers to entry for other voice-enabled device manufacturers by pricing its Alexa-enabled products below cost.

Even its most profitable division, Amazon Web Services (AWS) is concluded to be too dominant in the cloud market, forcing competitors to use it and creating a conflict of interest that “Amazon has the incentive and ability to exploit.” 

Among other suggestions, the House suggested that Amazon could be required to split apart its core e-commerce site from the third-party marketplace where independent vendors sell their products, and from the Amazon Web Services cloud-computing service. 

Apple’s App Store provides it with outsized profits

The committee found that its App Store has become monopolistic, generating the power to allow Apple generate large profits from the App Store and extract rents from developers. This accusation of monopolistic practice revolves solely around Apple’s grip on software distribution on its own iPhones.

This practice of closely regulating what developers put on its App Store, as well as the 30% cut it takes of all in-app purchases, has gotten Apple in trouble with many big names. In August, Fortnite-makers Epic Games, Spotify, and Match Group formed a coalition of companies to go against Apple in a bid to challenge its 30% cut. This revolt against Apple is still unfolding. 

The report recommends that dominant technology platforms, including Apple, be barred from entering “adjacent lines of business” and should not be allowed to give preference to their own services or products.

Facebook is bad

That’s kind’ve the jist of it; Facebook is nobody’s friend right now. The Republicans feel it is disproportionately censoring them, the Democrats feel it is not censoring enough. It’s lose-lose for Zuckerberg and Co. 

Unofficially, Facebook seems like the devil, but officially and according to the House Antitrust Subcommittee, it “wields monopoly powers in social network and has maintained its position by acquiring, copying or killing its competitors.”

Ouch!

Specific to Facebook, the report concluded “Facebook’s monopoly power is firmly entrenched and unlikely to be eroded by competitive pressure from new entrants or existing firms” and recommends the following:

“Congress should consider any acquisition by the big tech companies to be anticompetitive unless the companies can prove that the merger would be in the public’s benefit and could not be otherwise achieved.” 

Google dominates the search market 

We’ve known it for years but apparently it needs to be spelled out by a House Subcommittee to explain why it’s bad:

Google is the dominant name in search and advertising!

According to the report, Google has a wide-ranging monopoly that favors its own services over third party users and demotes others. This includes the likes of Maps, search, and advertising. 

“The overwhelmingly dominant provider of general online search is Google, which captures around 81% of all general search queries in the U.S. on desktop and 94% on mobile. Google abused its gatekeeper power over online search to coerce vertical websites to surrender valuable data and to leverage its search dominance into adjacent markets. Google used its search engine dominance and control over the Android operating system to grow its share of the web browser market and favor its other lines of business.”

Pretty damning stuff, and the report recommends that Congress force Google, along with the rest, to split up and have acquisitions become harder to make.

This is only the beginning of the story as there is some opposition to the more extreme measures, but it looks like lawmakers are really out for blood now. 

If you can get through the document, you will find the official report from the House Committee here.


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Jamie Adams
Jamie Adams
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.