Red Flags For Big Tech
Updated: Oct 16, 2020
House Antitrust Subcommittee is expected to release its report on a probe into Big Tech in the coming days after a 15 month investigation into Google, Apple, Amazon, and Facebook. The subcommittee led by Democrat Rep. David Cicilline is expected to recommend forced separation of company operations, especially regarding online platforms such as Amazon and Google.
The largest concerns of the committee during the hearings last month were regarding Amazon's ability to control the platform as well as sell their own products in competition with others on the platform. It provides them with the ability to undercut their competitors or provide better listing placement for its own products, often offering them first before others. Google is in similar trouble for the services they offer.
Amazon and friends argue that in order for their market domination to be considered a monopoly, it would have to have significant pricing control. Ultimately they suggest that if they truly had a monopoly they'd be able to charge astronomical prices for their products, however, their products are often the most affordable compared to their competitors.
The desire to break up these companies should be viewed as a red flag for investors, especially as Joe Biden gains popularity after Trump's performance during the debate. A Democratic President would be more inclined for market regulation than a Republican.
The 5 big tech companies in question are the 5 largest holdings in both the S&P 500 and the NASDAQ. The stock market's rally since late March has largely been bolstered by these massive companies, and an attempt to break them up now could be detrimental to the markets as a whole. Yet just because it may be temporarily painful to break up these companies, as our stock market will likely fall, we will be far better off in the long run with more competition leading to more innovation.