Tech honeymoon is over
AMERICA’S mid-term elections have been seen as a score draw. There is a new majority for Democrats in the House of Representatives and a strengthening of the Republican hold on the Senate.
Much of the focus has been on the capacity of the House leadership to stir up trouble for President Trump by convening hearings on his tax affairs and other sins.
But amid the bitterly divided politics, one of the few areas where there is agreement is the need to tackle the omnipotence of the FAANGs: Facebook, Amazon, Apple, Netflix and Google.
Trump is no 20th Century trustbuster Teddy Roosevelt. No one is expecting a full throated anti-trust pursuit as when the White House took on the power of John D Rockefeller and Standard Oil of New Jersey.
Yet in their own way the FAANGs, although much loved by younger technophiles, have much the same market power as Standard Oil when it controlled about 90pc of global energy production.
Amazon, for instance, has to be held largely responsible for the devastation on the High Street.
Taming the Silicon Valley giants is a tricky business as we have learnt in Europe. Danish trust-buster Margrethe Vestager has made a fist of it with her £3.8bn fine on Google and the contested £11.5bn fine imposed on Apple for allegedly using Ireland as a tax shelter. The EU also has drawn a line in the sand with the irritating, but necessary, General Data Protection Regulation (GDPR) designed to protect privacy.
But Europe is struggling with the idea of a digital sales tax. Initial opposition from Ireland and Luxembourg, where prosperity partly rests on tax avoidance, has won support in recent days from Germany.
Since such a tax would require assent from all 28 EU members, this European wide levy doesn’t look as if it will be happening any time soon.
So far only the Chancellor, Philip Hammond, is showing the backbone to take on the FAANGs, ignoring the fact they have become some of the biggest inward investors in the UK.
Hammond supports a temporary tax on turnover, to be introduced in the Spring, pending a more sophisticated user charge based around clicks.
Donald Trump may be a Twitter addict but in the mid-terms he was sharply critical of the power of Google, Amazon and Facebook. The new group of Democrats, taking control of the House and its powerful committees, also are committed to taking on big tech.
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first line of fire is likely to be political rather than economic. The use of private data during the 2016 presidential election campaign has made an American equivalent of the GDPR attractive.
It is increasingly likely that the US antitrust authorities will get in on the act. But the bigger bazooka is held by the US Department of Justice (DoJ). Down the decades it has been responsible for the biggest anti-trust cases – forcing the break-up of AT&T creating a much more competitive dynamic in American telecoms and media.
The political tides are turning against bigtech both in Europe and the US. The direction of travel, from both a populist White House and frustrated Democrats, is clear.
The long honeymoon for the FAANGs is over.