Several of the largest tech companies are being looked at in a large antitrust investigation following several new tech regulation rules by different countries. Companies like Apple, Google, Facebook, and Amazon have bought hundreds of companies between them as talent acquisitions or expansions of services, and critics have raised concerns that these conglomerates have become monopolies.
Regulators are splitting oversight duties between the Justice Department and the Federal Trade Commission, but it’s difficult to make an antitrust argument against Google and Facebook, for example, since they do not charge their users for their services. Trusts stifle competition, which in turn raises prices subjectively and hurts consumers, but many large tech companies don’t charge for their services even if they do buy out their competitors.
The Justice Department is handling the antitrust investigation for Apple and Google while the Federal Trade Commission is handling the investigations for Facebook and Amazon.
The European Union’s Charges Against Google
The European Union has started cracking down on Silicon Valley companies. They recently fined Google €1.5 billion euros ($1.7 billion dollars) for unfair advertising rules, which was the 3rd fine by the EU in just three years totalin. So far, the fines total €8.2 billion euros ($9.3 million dollars).
According to the EU Antitrust Commissioner, Google has been using illegal advertising practices by making AdSense customers sign exclusive advertising contracts. These contracts legally restrict them from advertising on rival search engines. The other two fines were for “abusing its market dominance in mobile” by having Google’s browser and search engine pre-installed on Android devices, and for using its market dominance to push consumers towards Google’s shopping service.
Google is currently appealing the fines, and has not yet paid anything.
What is a trust?
A trust, or a monopoly, is what occurs when a company has grown to a level of dominating their industry that they’ve either bought all of their competitors out or forced them out of business, leaving customers no other option. Not only can a trust set whatever price they choose, they can even supply inferior products and charge more since there are no alternative options. Sometimes, trusts can also fall into a lack of innovation since they’re not trying to compete or out-innovate another company, so potential innovations are lost.
It is important to understand that antitrust laws were not put into place to protect businesses from aggressive competition. Antitrust laws were created to ensure that there is competition after one company acquires all of their rivals. Sometimes businesses fail, but trusts prevent other business from competing in the first place, which is why this antitrust investigation is underway.
History of Antitrust Laws
Tech companies offer an interesting predicament to existing antitrust laws because the internet didn’t exist when these antitrust laws were written. The original antitrust laws were written into law to combat the steel, sugar, oil, and railroad companies that had monopolized their industries in the late 1800s and early 1900s. They were designed to comprehensively take apart companies that supplied physical products, like U.S. Steel and Standard Oil, so the antitrust investigation may have a hard time proving how a free (or nearly free) product can be a monopoly.
1890 – The Sherman Act
The Sherman Act is our nation’s oldest antitrust law. Passed in 1890, it prohibits competitors from making agreements to limit competition. This law made it illegal for companies to agree to set a price, as well as making illegal the formation of a monopoly because the company would not be competing fairly. The consequences usually involved fines, but possibly jail depending on circumstances.
1914 – The Federal Trade Commission (FTC) Act
Over 100 years ago now, Congress created a new federal agency to investigate and prevent unfair business practices that kill competition. The Federal Trade Commission is the organization handling the investigation of Facebook and Amazon today.
Because these companies had total control over their industries, they were able to change prices however they pleased since no other company was around to make a better deal. And because steel, sugar, oil, and railroads were so necessary for Americans back then, it wasn’t possible to simply not use the product.
While it is technically still possible to opt out of the Digital Age, it’s not realistic or conducive to a normal life. Many jobs require use or knowledge with Google or Apple products. Offices have supplies shipped in with Amazon, or ship their products through Amazon because it’s often seen as more trustworthy than small, independently run sites. Marketing campaigns now are run on Facebook and Google since younger customers congregate more on social media than in front of the television.
So, what have these tech giants acquired that’s now bringing them under antitrust scrutiny?
Who does Google own?
Google’s parent company is Alphabet, Inc., created in 2015 during a corporate restructuring. Alphabet, Inc. owns over 200 other companies, including Google and all its variations (Google Maps, Google AdSense, GoogleHome, Google Ads, Google Cloud etc), Android, YouTube, and DoubleClick.
Who does Facebook own?
Facebook has acquired over 80 other companies. Facebook owns Instagram, WhatsApp, Oculus VR, LiveRail, and others, but mostly companies you’ve probably never heard of:
While some of the companies that Facebook has acquired stand alone as their own businesses (ie Instagram and WhatsApp), Facebook is known for buying companies for talent acquisitions, not necessarily business acquisitions. This means that Facebook buys the company in order to access the skills of their employees.
Who does Apple own?
While the most obvious products for Apple are their iPhones, MacBooks, Siri, and iPods, they have also acquired several other companies along the way. For example, Siri isn’t an original Apple product: the Siri app was bought by Apple back in 2010. Later in 2014, they acquired the company Beats Electronics, which is known for high-end headphones and speakers. They also own Shazam, a popular song identifying app, which they acquired in 2017.
Who does Amazon own?
Amazon has acquired a series of product-based and service-based companies over the years. For example, they own the shoe and accessory website Zappos and the audio book company Audible, but they also bought the organic and natural foods store Whole Foods Market back in 2017. They also own a variety of other companies, including the popular streaming website Twitch and the home security company Ring.
Only time will tell whether or not these tech giants will or can be broken up, but it seems with this antitrust investigation, we are witnessing the beginning of a new era of regulation of the tech industry in a way we haven’t seen before. Maybe it’s even a good idea to get that small business idea up and running!
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