Breaking Up Big Tech

Being too big has never been a reason to pursue antitrust actions. Instead, mistrust usually revolves around conduct or consumer harm. That said, the two main arguments for breaking up big tech companies are that they hurt small businesses and they stifle competition.

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    Breaking Up Big Tech

    Breaking Up Big Tech

    There are few things that our political parties agree on. One area where they have found common ground is breaking up the big tech companies. Both parties share concerns about privacy breaches, data misuse and anti-competitive behavior.

    The Case for Breaking Up “Big Tech”

    Being too big has never been a reason to pursue antitrust actions. Instead, mistrust usually revolves around conduct or consumer harm. That said, the argument for breaking up the mega-cap technology companies is two-fold:

    • They hurt small businesses. Yes, Amazon has opened the world to small businesses through its third-party platform, but big players like Amazon and Google can, through slight changes in its algorithms, make them invisible to the consumer over night. Many also feel that Apple’s take of sales of nonproprietary apps harms businesses.
    • They stifle competition. Competition is frustrated by the inability of a potential competitor from getting funding. Venture capitalists shy away from any start-up looking to take on big tech companies’ propensity to quash competitors by either buying them or copying their ideas.

    Whatever the merits, some investors believe that a breakup may have the benefit of unleashing shareholder value by disconnecting some of the high-growth components of the business from the lower-margin, slower-growth business segments.

    The Case for Maintaining the Status Quo

    The proponents of keeping big tech intact argue that much of the discontent can be addressed through regulation. They believe that any breakup would harm the consumer, businesses and America’s technological leadership, contending:

    • The success and profitability of big tech has enabled exceptional levels of R&D. America’s big tech companies are among the world’s leaders in R&D funding, which helps retain global technological leadership.
    • The nature of the business requires massive scale. The value of a social media platform, search engine or online store depends on scale. No one wants multiple Facebooks or Googles, as that undermines community connectivity and smarter search results.
    • Innovation is the competition. It’s not always obvious from where the next disruptor will appear, which is as true today as it was when Yahoo search and MySpace once seemed like monopolies.
    • A humbled American big tech company may be replaced by a Chinese tech competitor. That would be a Pyrrhic victory, indeed.
    • These companies continue to deliver falling prices and rising service levels. This is the very antithesis of monopolistic behavior.

    The near future will determine how aggressively lawmakers pursue a breakup, but for now all the talk of breakup seems to have had little effect.

    Please reference disclosures: https://blog.americanportfolios.com/disclosures/

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