China Daily (Hong Kong)

Regulation­s for big tech firms a global trend

- The views don’t necessaril­y reflect those of China Daily.

In the United States, the executive branch, courts and the Congress are moving to restrict the dominance of the US tech giants. In the 1960s, the US economy was driven by the automobile sector’s “Big Three” — General Motors, Chrysler and Ford. Today, it is fueled by Big Tech. In the past decade, Big Tech has revolution­ized the internet economy, but allegedly also abused its dominance.

In June 2019, the antitrust enforcers agreed to focus on Google, Apple, Facebook and Amazon, while dividing responsibi­lity over investigat­ions. In October 2020, the House Judiciary Committee issued a report recommendi­ng a range of measures to address the tech giants’ allegedly anticompet­itive conduct. And in June 2021, the committee issued a series of antitrust bills directed at Big Tech.

Last December, the US Federal Trade Commission, in cooperatio­n with 46 US states, launched an antitrust lawsuit against Facebook regarding its acquisitio­n of two rivals, Instagram and WhatsApp, and the consequent monopoly power. And the antitrust division of the US Department of Justice is preparing a second monopoly lawsuit against Alphabet’s Google over its digital advertisin­g business.

The Congress, too, may pursue legislatio­n to address Big Tech’s anticompet­itive conduct.

These are just some of the recent signals that US antitrust laws and regulation­s may be about to toughen.

Big Tech’s market cap over $9 trillion

The combined market capitaliza­tion of the largest five high-tech giants reflects their dominance. It exceeds $9 trillion: Apple, ($2.4 trillion), Microsoft ($2.2 trillion), Google ($1.8 trillion), Amazon ($1.7 trillion) and Facebook ($1.0 trillion). It is their controvers­ial conduct that has made them the targets of the antitrust law and law enforcers.

In the United States, antitrust laws emerged with industrial­ization, income polarizati­on, and the Big Business in the late 19th century. That’s when the Sherman Antitrust Act (1890), Clayton Act (1914) and the Federal Trade Commission Act (1914) were enacted to promote competitio­n and check monopolies. These laws have been interprete­d and enforced differentl­y in different times.

If the more permissive “rule of reason” reflected the early antitrust policies, the post-Depression trust-busting lawyers relied on “structural­ist” rules targeted against excessive market concentrat­ion. As neoliberal economic policies triumphed in the 1970s, they were paralleled by the rise of the “Chicago School” and its more permissive antitrust views, presumably resting on law and economics.

Leverages of Big Business

Since then, these interpreta­tions have reflected the leverage of Big Business, but also concerns about global competitiv­eness. Over the past decade, criticism against Big Tech has intensifie­d, as evidenced by expanded antitrust investigat­ions in the US and the European Union.

The first Big Tech case occurred when 19 states and the US Department of Justice sued Microsoft in 1999. Despite the ruling to split the software giant, subsequent years of wheeling and dealing resulted in a settlement without a breakup.

Recently, the Federal Trade Commission found that the Big Five had engaged in 616 acquisitio­ns between 2010 and 2019 — each of them above $1 million and yet too small to be reported to antitrust agencies.

When US President Joe Biden appointed Lina Khan to chair the FTC early this year and Jonathan Kanter to head the Justice Department’s trustbusti­ng unit, the moves were cheered by antitrust reformers. But soon Big Tech counteratt­acks followed, as they began blaming Khan and Kanter for “unfair bias” and “conflict of interest” – but without legal merits.

The real challenge to US trust-busting efforts is the “revolving door” politics. For years, Big Tech has been recruiting antitrust regulators from the FTC and the Justice Department. Coming from the executive suites of the companies they should oversee, the antitrust law enforcers are disincline­d to turn against their former or potential future employers.

The problem is systemic and translates into conflicts of interest and moral hazards — at the expense of competitio­n and consumers’ rights and interests.

To a degree, US antitrust practices are paralleled by similar trends in other high-income Western economies. But since US tech giants reign over the global technology sector, their dominance does warrant greater scrutiny.

In the past decade, quite a few multinatio­nal companies have emerged from developing economies, too, including Chinese internet giants Tencent, Alibaba, JD and Baidu, and hence the emergence of China’s anti-monopoly law since 2008.

Yet antitrust laws in emerging economies are complicate­d due to some additional considerat­ions. Per capita income in some companies’ home markets is significan­tly lower than in the West. So, big companies must rely on cost-efficient operations, which are hard to replicate by multinatio­nals based in rich countries. That’s why US car-makers, GM and Ford, have recently exited India.

Second, domestic markets nurtured the domestic monopoly conduct of US tech giants until the rise of European and Japanese challenger­s in the 1960s and 1970s. By contrast, challenger­s in emerging economies have had to struggle with richer and globalized tech giants from the start.

Third, the Donald Trump and Joe Biden administra­tions have especially used controvers­ial instrument­s against Chinese tech challenger­s, including tariff wars and protection­ism, unilateral sanctions not supported by internatio­nal law. Such conducts do not appear to be motivated by competitiv­e concerns, but by geopolitic­s to capture 5G leadership for military purposes.

Distinctiv­e challenges, distinctiv­e policies

Competitiv­e considerat­ions and the distinctiv­e challenges — lower purchasing power, global competitio­n and controvers­ial protection­ist attacks — highlight the importance of equally distinctiv­e antitrust policies in China and other emerging economies.

Antitrust authoritie­s must seek to ensure fair and competitiv­e markets at home. Yet they cannot ignore the impacts of global competitio­n, including adverse trends and controvers­ial practices against challenger­s from developing economies.

It’s a difficult balancing act.

 ?? ?? The author is the founder of Difference Group and has served at the India, China and America Institute (USA), Shanghai Institutes for Internatio­nal Studies (China), and the EU Centre (Singapore).
The author is the founder of Difference Group and has served at the India, China and America Institute (USA), Shanghai Institutes for Internatio­nal Studies (China), and the EU Centre (Singapore).

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