The 21st century has seen some drastic innovations in the way that technology plays an important role in everyone’s daily life. The key innovations in this came from several small tech start-ups who brought a revolutionary new business model to disrupt the existing incumbents of the traditional markets. Such disruptions are prime examples of competition in a market being a primary driver for innovations, which can significantly improve consumer value. But what happens when these small start-ups continue growing and expanding their business without the balance of some worthy competitors?
That is the current situation that the tech market finds itself in, with the Amazon, Apple, Facebook and Google forming the Big 4 of the tech industry. These tech giants have grown at a tremendous rate during their relatively short lifetimes and have aggressively dominated their own market. This market domination has led to the American House Judiciary Committee to start an investigation in whether these firms are violating antitrust laws and whether their monopolistic position can be considered to be harmful.
In the report published recently by the Democratic leaders of the House Judiciary Committee several accusations are made about the monopolistic behaviour of the big tech companies. An example of the competitive advantage of the monopoly of amazon can be seen in how they are providing a platform to external sellers but at the same time are competing with these external sellers by selling similar products themselves. This has resulted in Amazon placing their own products higher in search results which gives them an unfair competitive advantage. A similar accusation has also been made against google, who are also tend to favour their own services when supplying search results.
Google has also been accused of unfair competition and abuse of their monopoly through their Android data collection. The committee has reported on Google collecting Android app data from other companies, which was then used by Google to create their own similar app to compete with the other companies. This again gives an unfair competitive advantage and makes it impossible for new companies to enter the market and actually make a profit from their new original product, when Google can just copy it.
Another reason that it has become impossible for new competitors to enter these markets is the extreme size and buying power of the established big tech firms. This can be seen in the case of Instagram. Instagram was gaining a massive user base and popularity which could have competed with Facebook. Instead of Facebook fairly accepting the competitiveness of the market they straight up bought the entirety of Instragram. This makes it impossible for a competitive market to be established since all dangerous potential competitors can easily be bought.
While these companies originated as innovative competitors bringing the fight to the established incumbents they have now outgrown that role. They are no longer the innocent innovation drivers and now endanger the competitive market economy. Their extreme power has become uncontrollable causing them to potentially have more power than some countries governments. The position of these firms and the necessity of potential regulations can be illustrated by the following quote from the report from the the House Judiciary Committee’s Democratic leadership: “This pattern of behavior raises questions about whether these firms view themselves as above the law, or whether they simply treat lawbreaking as a cost of business.”
Sources
– https://www.nrc.nl/nieuws/2020/10/06/amerikaanse-commissie-pleit-voor-forse-inperking-marktmacht-big-tech-a4014988
– https://www.nytimes.com/2020/10/06/technology/congress-big-tech-monopoly-power.html
– https://www.nrc.nl/nieuws/2020/01/29/we-zijn-beter-af-zonder-big-tech-monopolie-a3988611
