Do the Recent Antitrust Cases Mark the End of Big Tech’s Golden Age?
As High-Profile Lawsuits Pile Up, Chinks in Big Tech’s Armor Appear
If it feels like your portfolio always seems to sag in September, don’t worry, you’re not alone. Historically, September has been the worst month of the year for investors, and this year was no different. The NASDAQ composite fell nearly nearly 6%, dragged down by several of the tech giants. Amazon and Google faced eerily similar anti-competitive lawsuits in the U.S., while Meta appears poised to roll out a Facebook and Instagram subscription plan in order to comply with the European Union’s increasingly restrictive regulations. Taken together, it seems that the mind-boggling scale of technology’s biggest platforms may be reaching its limit, as regulators across the world seek to protect consumers.
FTC Sues Amazon on Anti-Competitive Grounds
The Federal Trade Commission (FTC) and 17 states sued Amazon for invoking ‘monopoly power’ by inflating prices on competing websites. The lawsuit alleges that Amazon engages in highly anti-competitive business practices, punishing sellers who offer their products at lower prices on non-Amazon sites by effectively burying their listings on Amazon, often to the detriment of Amazon customers.
The complaint also says the company biases its own brands over other products of better quality and charges third-party sellers exorbitant fees. According to the anti-monopoly organization Institute for Local Self-Reliance, the fees cost U.S. sellers 45% of their revenue in the first half of this year — up from 35% in 2020 and 19% in 2014.
U.S. Takes Aim at Google’s Indomitable Search Empire
Meanwhile, the trial in the antitrust lawsuit filed by the U.S. Justice Department against Alphabet (owner of Google) began several weeks ago. The DOJ is attempting to prove that Google is abusing the power of its search engine to stifle competition. The government also claims that the quality of search results has deteriorated, as Google uses its search engine to sell ads and promote its own products like Google restaurant reviews, to the exclusion of competitors. Dozens of state attorneys general have joined the lawsuit, claiming that, much like Amazon, Google is an illegal monopoly harming consumer choice in their respective states.
Despite commanding about 90% of the search market, Google argues that it faces a range of competition from other search engines such as Microsoft’s Bing and websites like Amazon and Yelp, and that consumers are free to switch their default settings to another search engine if they so desire.
Meta Struggles to Comply with EU Privacy Regulations
While Amazon and Google’s lawsuits are centered around consumer protection, Meta’s ongoing struggles in Europe revolve around data. According to recent reporting by the New York Times, Meta is considering charging European Union users a monthly fee to bypass targeted ads on Facebook and Instagram. Earlier this year, the European Union’s highest court barred Meta from combining data collected about users across its “family of apps,” as well as from outside sources, unless it received explicit consent from users. Crucially, however, the court ruled that tech companies could use subscription models as a backhanded way of obtaining such consent, by offering users an ad-free version of Facebook and Instagram for a fee.
Meta is considering charging users $14 a month to bypass targeted ads on Instagram, and $17 to bypass targeted ads on both Facebook and Instagram, Meta insiders revealed. Even if few people choose the paid version, making such an option available could satisfy Meta’s regulatory burden. Meta’s pivot towards a ‘freemium’ model demonstrates how those living in the European Union, which comprises roughly 450 million people, may begin to see increasingly divergent versions of consumer technology products due to regulatory concerns.
It is noteworthy that Meta has not released its new Threads app, a rival to X, formerly known as Twitter, in Europe because of regulatory considerations.
Beginning of a Paradigm Shift?
The world’s largest tech firms have expanded exponentially over the last decade, but it appears that regulators in Europe and the U.S. are now keen to assert their control over tech giants in order to protect consumers. Up Until now, the tech giants have largely grown unabated, even if having to pay the occasional fine. Do last month’s lawsuits signal the beginning of a paradigm shift, in which power shifts from the mega-cap corporations to smaller technology companies? The jury is still out.
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