Is the Big Tech Break Up Here?
Dear Rich Lifer,
Big Tech is bracing for big changes as a Congressional committee approved new bills — with rare bipartisan support — to limit the power of giants like Google, Amazon, Facebook, and Twitter.
The six-bill package known as the American Choice and Innovation Online Act is aimed at barring big tech companies from favoring their own products on their platforms.
One measure would require the biggest internet platforms to make it easier for users to move their data to other platforms and allow them to communicate with users on other platforms. It would also give the Federal Trade Commission considerable authority to set individualized standards for the tech giants.
That’s just a taste of the sweeping package.
It still faces a vote in the full House and then in the Senate, but it’s passed a major hurdle.
Today you’ll discover what these bills mean for Big Tech… and what they mean for you.
The Lead Up to the Bills
The crafting of this legislation comes after a 16-month investigation that resulted in the House Judiciary Committee publishing an extremely critical 449-page report that determined Amazon, Apple, Facebook and Google have become monopolies.
Lawmakers have accused these tech giants of abusing monopoly power, and the report stated, “Companies that were once scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”
The report called for extensive changes and restructuring, including recommendations to make it harder for big tech to buy smaller companies, institute nondiscrimination requirements, and stop platforms from prioritizing their own products.
All of these recommendations from the report have now turned into the five bills that will eventually be voted on in the House and Senate.
Impact on Big Tech
Let’s take a look at how each of the big tech companies will be affected by this legislation.
Amazon: Although it would apply to other companies, The American Innovation and Choice Online Act appears to be targeted directly at Amazon. It would essentially restrict Amazon from promoting AmazonBasics products over competing products in search results. It would also make it harder for Amazon to use vendor data to create competing products.
Finally, it would prohibit Amazon from requiring businesses to buy additional products to get better placement on the website.
Apple: As we have covered before, the biggest gripe with Apple is its monopoly over the App Store and its requirement for developers to use its in-app payment processing service and to pay a commission of up to 30% to Apple. The American Innovation and Choice Online Act and the Ending Platform Monopolies Act would target these main issues.
Facebook: Facebook has long been accused of copying, killing, or acquiring its competition — as it did with Instagram. The Platform Competition and Opportunity Act would prohibit Facebook and other platforms from crushing competition in this manner.
Google: Three bills will hit Google particularly hard. First, the Ending Platform Monopolies Act, which bars ownership of businesses that create a “conflict of interest,” could mean Google would have to sell YouTube because it owns the search engine.
Second, the American Innovation and Choice Online Act’s prohibition on “self-preferencing” would likely affect Google’s search business. This would be a huge blow to Google because its search-and-ads business generates the biggest percentage of its $180 billion a year in revenue.
Finally, the Platform Competition and Opportunity Act could hinder Google’s ability to expand because it would make it much harder for the company to get approval to acquire other companies.
So now that we’ve covered the consequences for big tech, let’s look at what it means for consumers…
Antitrust Enforcement and Consumers
Long story short, the efforts to regulate Big Tech would result in more power for consumers. The current antitrust laws that now face a vote in the House and Senate would have two main results: splitting the biggest firms apart and enabling competition.
In an ideal world, more competition would mean more competitive pricing and more innovation: two things that would benefit consumers.
That being said, antitrust laws are notoriously hard to enforce, complex, and may take years to become successful in implementing. Big Tech may “lose” if the proposed legislation becomes law, but there’s always a chance for them to “win” down the line.
For this reason, some lawyers are worried that lawmakers may not be entirely successful in their efforts.
Barbara T. Sicalides, antitrust lawyer at Troutman Pepper law firm, thinks that agencies like the Federal Trade Commission (FTC) — rather than lawmakers — will become the most important part of regulating big tech and therefore should have more funding and instruction on how to regulate business decisions and mergers.
Regardless of whether lawmakers or agencies should take center stage in this battle, one thing is clear: the time is now to finally address Big Tech’s antitrust issues.
What’s It Mean for Stocks?
When it comes to investing, it’s difficult to make decisions on whether to buy or sell while the date for a vote on these bills doesn’t even exist yet.
Right now, it appears that all the proposed legislation are common-sense reforms to curb unwanted behaviors and put more power in the hands of consumers.
We’ll have to keep vigilant if laws emerge that would break up companies or enforce even stricter mandates. Such efforts would likely affect stock prices and could negatively impact your portfolio.
We aren’t there yet… but we will stay alert.
To a Richer Life,
The Rich Life Roadmap Team