Big tech break up? That’s unlikely.
Competing with Facebook, Apple, Amazon, Microsoft, and Google (FAAMG) is a very difficult task; and it is becoming tougher every day. Startups have been voicing their pain points, wanting a level playing field. However, their cries have been drowned out by big headlines from big tech companies, with laymen calling their claims to be ill-founded. Many believe if you want to compete with the big guys, you should stop complaining first and start working on outplaying them.
It has been only recently, after the Brexit referendum and Trump being elected, that privacy concerns have caught the attention of the people, and consequently, that of the government to do something to address it.
The EU government has previously fined Google on antitrust issues—on multiple occasions, citing its abuse of power when it came to its Play Store, Android software, and such. Now, it is the US Justice Department that is looking into the possible antitrust workings of Facebook, Apple, Amazon and Google. Microsoft has escaped the scrutiny, although it did face this situation two decades ago.
Their sheer market penetration has made them so big, that any new competitor is dwarfed in comparison. Moreover, competitors are mostly bought by the large corporates or stifled out of revenues. Amazon is a prime example of this. Due to its financial prowess, it has been allegedly undercutting local online retailers on its website, incentivising people to buy Amazon’s own brand; losing money to gain market share.
The antitrust probes into these big tech corporations are aimed to uncover and penalise such cases. However, opposed to what US 2020 presidential candidate, Senator Elizabeth Warren would like, the possibility of breaking up big tech companies is very slim. Following are three reasons why:
1. The United States of America is a capitalist country, and as such it may shy away from a harsh decision of breaking up the tech companies. It is far more likely to impose fines and regulations.
2. US’s antitrust laws are mostly formed to discourage monopoly, as they are based around price harms to consumers. While Facebook is free, Amazon’s model is undercutting indirect competition by which it gives consumers a better deal.
Google, on the other hand, also offers its Android software for free, although it does come with pre-installed Google apps. And Apple has many competitors; although it is currently facing a legal battle with Spotify in EU, whereby it is accused of abusing its power over app downloads.
3. Historically, antitrust probes often result in an agreement to change business practices. Even the EU probes into Google only led to fines and regulations becoming stricter. Moreover, almost 20 years ago, 20 US states joined to file an antitrust suit against Microsoft, seeing to break it up like they did the Rockefeller oil company in 1911.
Having said that, the antitrust probe could do some serious damage to the big tech companies. Here are just some of the negative consequences Facebook, Apple, Amazon and Google could face:
1. Stricter regulations. The US has signed on to a coalition of governments for the regulation of AI, while the World Economic Forum has set up six councils that will oversee the policy guidance and regulation of blockchain, cryptocurrency, Internet of Things, artificial intelligence, drones and driverless cars.
Insights and intelligence from them may very well be used to put new policies and regulation laws into existence, in order to keep big tech’s power in check.
2. Damage to big tech’s reputation as their dirty laundry and unfair practices get publicised. This will affect their core strength: large user base. Apple and Facebook have already been alienating consumers due to exorbitant prices and data concerns respectively.
Amazon too has been under fire for unfair business practices, which could give way to smaller competitors to take advantage of the opportunity. Noon has been giving serious competition to Amazon, who acquired the local Souq.com. This push is just what it might need to gain a larger market share.
3. As seen in the EU, big tech could get away with just fines. This would be the most common and likely outcome of the antitrust probes.
The government cannot break up big tech corporations, but they can lead to reputation damages that would affect the valuation of the companies, investor trust, user base alienation and the overall revenues.
The only way to beat them is to make their biggest strength their vulnerability—affect their user base. Now this is a challenging task, nearly impossible without regulation support. Startups also need to keep in mind that people are selfish and money sensitive. If they can get a better deal, majority will go for it. There is a risk of being undercut by big tech and not having the economy of scale nor fiscal power, but if startups can gain investor trust for the long term, this can become a possibility.
The other way is to find a new market segment to capitalise upon, like WhatsApp competitor Wire has done through their deal with EY.
In either case, the antitrust proceedings will take a few years. Unless something drastic happens through which big tech affect the world economy, it is unlikely that the government will break them up. Remember, many of these big tech corporations have lobbying groups and support political election campaigns through fundraisers and donations. This will deter many governments to avoid breaking them up.
