Regulators on both sides of the pond size up big tech targets
Some of the world’s largest technology companies are facing attack from both sides of the Atlantic as regulators mull arming themselves with new powers aimed at capping the market dominance of Amazon, Apple, Facebook and Google-owner Alphabet among others.
The four tech juggernauts are thought to be on a European Union hit list aimed at curbing the market power of large technology companies.
Reports say that as part of the plan big tech companies will not only have to comply with tougher regulations compared to their smaller rivals but they will also have to share data and be more transparent on how they gather information.
The Financial Times claimed that EU regulators are looking at a host of criteria, such as market share, number of users and the dependency of other companies on their products, platform and services.
While individual companies may not be singled out, Brussels’ regulators are reported to be keen on building a list of up to 20 companies, with the watchdog given new powers to force big technology companies to change their business practices without a full investigation or any finding that they have broken existing laws.
This follows complaints that the current regulatory regime has resulted in weak and belated action, which has done little to foster competition, says the Financial Times. The number of companies and the precise criteria for the list is still being discussed, but it is the latest indication of how serious the EU is about coming up with powers to limit the power of platforms seen as too big to care.
Alphabet, Amazon, Apple and Facebook have become the poster kids for growth investors since the financial crisis of more than a decade ago because of their ability to deliver goods and services that people want, and their access to personal data of billions of customers.
This year the four stocks have put up astonishing growth in operating numbers and share price returns, defying the Covid-19 pandemic and outstripping average returns by huge margins.
Amazon’s shares have jumped 81% in 2020, Apple is up more than 65%, while Facebook returns top 30% year to date. Even Alphabet, the worst performer of the four, is 14% higher in 2020, close on double the 8.5% return of the S&P 500 index.
Now with a combined market value of more than $5.7 trillion, regulators and lawmakers in Brussels and Washington are investigating whether the four technology companies have used their size and wealth to quash competition and expand their dominance.
Earlier this month the US’s Antitrust Committee slammed the technology industry with a 449-page report. However, any restrictions or attempts to break up these four companies, or others, are likely to prove difficult and long-winded. We believe investors should keep a watching brief but see little reason to panic now.