An Embarrassment of Riches: Big Tech Proves Bigger is Better
One day after the CEOs of Apple, Amazon, Facebook, and Google’s parent Alphabet faced a hostile House Judiciary Antitrust Subcommittee hearing, where they were each questioned about how they got so big, so profitable, and at whose expense, the four mega-cap tech darlings reported blowout second-quarter revenues and profits.
Tim Cook, Apple’s CEO, feigned embarrassment in his address of the company’s earnings, almost apologizing for Apple’s flood of riches as the rest of America and the world suffer the ravages of the coronavirus crisis.
The question is now: Will these giants be allowed to keep on squashing all competition, keep on minting money, see their stock prices keep on rising? Or will political winds blowback their relentless growth and market dominance?
The Defendants: Big Tech Stands Tall
The House hearing was supposed to be all about antitrust issues and competition; however, political pandering was equally evident. Nonetheless, lawmakers expressed concern about market dominance, unfair competition, and the companies’ predatory practices.
Amazon.com Inc. (NasdaqGS:AMZN) was attacked over the firm’s sometimes crushing relationship with third-party vendors.
Apple Inc. (NasdaqGS:AAPL)’s issue was the influence its App Store has over mobile applications and app developers.
Facebook Inc. (NasdaqGS:FB) faced blowback over its acquisitions of Instagram, WhatsApp, and Oculus.
Alphabet Inc. (NasdaqGS:GOOG)’s CEO was hammered over its search dominance and whether it hoists its products over those of competing firms.
Of course, the CEOs defended their products and practices, championed consumer benefits, and pointed to competition they faced.
Amazon’s Jeff Bezos noted that “eighty percent of Americans have a favorable impression of Amazon” and argued his firm “accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S.”
Apple’s Tim Cook went so far as to say, “Apple does not have a dominant market share in any market where we do business.” As for the App Store, the CEO noted its guidelines “are transparent and applied equally to developers of all sizes and in all categories” and its “commissions are comparable to or lower than commissions charged by the majority of our competitors.”
Alphabet’s Sundar Pichai claimed Google’s search does not in any way disadvantage the products of other companies and that the firm faces a competitive ad market and “operates in highly competitive and dynamic global markets, in which prices are free or falling and product are constantly improving.”
Facebook’s Mark Zuckerberg defended Facebook’s acquisitions, claiming they benefitted consumers. Instagram, he claimed, helped with “stabilizing infrastructure and controlling runaway spam.” WhatsApp aided company development by “introducing end-to-end encryption and making it free to use.”
The Defense: Political Parties Were Dragged in
Subcommittee Chair David Cicilline railed at all the CEOs for undermining and hindering competition and egregiously engaging in unfair practices. He said CEOs were “emperors of the online economy” and called for additional oversight and regulation of the giants.
Cicilline was even more disturbed by how each company’s “concentrated economic power also leads to concentrated political power.”
Congressman James Sensenbrenner complained about political censorship.
Jim Jordan said, “Big Tech’s out to get conservatives.” Jordan made Google’s Pichai promise not to design Google products or practices that would advantage Joe Biden over Donald Trump in the 2020 presidential campaign.
Based on the aggressive tone House members adopted in this latest round of hearings, the first to include Jeff Bezos, it’s entirely possible, especially on the heels of the tech giants’ blowout earnings, greater public oversight, stronger enforcement actions, and wider regulatory reach are all in the works.
With the presidency and control of the Senate up for grabs this November, 2021 could be a year when legislation on privacy, competition, cybersecurity, tax policy, and online hate speech, take shape in the larger context of controlling these issues by dividing and conquering the giants responsible for not fixing them.
Right or Left, Lobbying Won’t Give You Profits
The mega-cap tech titans aren’t going to roll over, not now, not ever. They’re already fighting mightily behind the scenes.
Google just spent a record amount in a quarter on lobbying. Facebook outspent even Google. All the monsters of moneymaking spend freely on lobbying.
The fight for their dominance and existence will take place in the corridors of Congress, while publicly the companies defend their products and practices, and champion all the consumer benefits everyone enjoys thanks to their existence.
Their revenues and profits will continue to soar, and so will their stock prices.
It’s not time to sell any of the mega-cap tech darlings, in fact, it could be easily argued every time they pullback it’s time to buy more shares in all of them.
That doesn’t mean there won’t come a time to sell these winners. That possibility is out there, in time.
But not yet.