Regulating Big Tech, the New Social Dilemma
In the last decade, the technological sector has grown beyond the scope of imagination and in the process, propelled society forward. Their contributions to our daily lives are easily ignored. Still, it is undeniable that they have had a significant contribution to bringing in the age of comfort and ease we live today.
The importance of these companies was made apparent to most of us in the midst of the global pandemic when we were forced to stay locked in place. We resorted to social media, streaming platforms, and video conferencing apps to remain connected and feel some sense of normality as the world crumbled around us.
In many ways, the experience of the pandemic would have been so much worse without these tools. When our local shops were ravaged by panic buying, and we struggled to find necessities, Amazon's size and capacity allowed many to find those items conveniently at their doorstep the next day. Just ask anyone who ordered a mask, toilet paper or a yeast bread primer to make that special banana bread that plagued your timeline (the real pandemic, some might say). The heightened role tech companies have had on our daily lives has given them a year to remember when most of us want to put 2020 behind us. This has been reflected in the markets. The stock of Amazon, Apple, and newcomers like zoom, has sky-rocketed since the onset of COVID-19.
However, the unprecedented growth that some tech companies have had has also made them some of the most influential companies in history. In the process, members of the public and politicians alike have become concerned over the detrimental effect these companies may have on consumers by stifling competition and innovation if they remain unregulated. This has led to a turning point in the past year as Google and Facebook are now being sued in the US and the EU for breaching antitrust law. Many speculate is the beginning of a larger attempt by governments to begin to regulate these companies.
The FTC's allegation of Facebook's anti-competition behaviour has called into question the acquisition of WhatsApp in 2019 and Instagram in 2012, for a combined sum of $20bn. The lawsuit has used a 2008 email sent by the CEO, Mark Zuckerberg, where he states: "it is better to buy than to compete", as evidence of the intention to neutralize competition. If the FTC is successful, the social media empire may be forced to break-up, which can have repercussions for the other tech giants and the practices considered acceptable in the future. The fear of this outcome has made some investors panic, making Facebook lose 2% of its stock market value. Still, Zuckerberg has reassured employees and investors that the company is prepared to use every legal recourse available to fight this lawsuit. Zuckerberg also discarded the FTC's allegations as revisionist history, since the regulator could block the acquisitions when they occurred; however, it chose not to do so. Nevertheless, as experts have pointed out, this is not equivalent to approving them.
Although any card-carrying economist would argue that markets work best under competition and that consumers will benefit from innovation and choice if monopolies are broken down, the question remains whether Big Tech can even be regulated at this point. These companies have more revenue than some countries' entire annual GDP. Nevertheless, some governments are now taking the challenge.
Another tech giant that has recently been brought under scrutiny is Alibaba, the Ant group's sister company, poised to be the largest IPO in history estimated at $37bn before the Chinese government shut it down. Alibaba, China's largest e-commerce platform, is being investigated for monopolistic practices such as forcing merchants to sell exclusively on its site. Beijing's new attitude towards tech companies signals a change that is being experienced across large economies around the world.
Two years ago, the EU passed a law that gave itself the power to fine tech companies up to 4% of global annual revenues if they breached their privacy laws, some of the most extensive around the world. Today, the UK and EU regulators are now pursuing more aggressive policies by proposing to fine Big Tech companies with penalties up to 10% of annual global revenues in an attempt to hold these companies responsible for illegal actions within their platforms.
These developments raise many questions for the technological landscape in 2021.
Do governments understand enough about the industry to design sensible and accurate legislation that targets the issues? Or will the age of regulation bring the same problems it has brought for Wall Street and investment banking where big banks seek former policy advisors to exploit loopholes in the policies they helped to create?