eResearch |On July 23, 2019, the Department of Justice (“DOJ”) announced that it will instigate an antitrust review on market leading online platforms, to investigate if these companies have repressed competitive landscape, suppressed innovation, or affected consumers in a negative way. On Wednesday, Facebook, Inc. (NASDAQ: FB; LSE: 0QZI; DB: FB2A) confirmed in their Q2/2019 earnings that it will be included in the review, and it is expected that the review will also include Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA), Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ), and Apple Inc. (NASDAQ: AAPL; LSE: 0R2V; DB: APC).
The DOJ and the Federal Trade Commission (“FTC”) decided to work together, with the DOJ taking jurisdiction over Alphabet and Apple, and the FTC taking jurisdiction over Amazon and Facebook. Last week, Alphabet, Amazon, and Facebook had to undergo a similar review before the House Judiciary subcommittee on antitrust regarding the collective companies’ control of the e-commerce, cloud computing, and digital advertisement areas.
Regulators are concerned that these dominant conglomerates have grown into monopolies. Amazon can control fees levied on a platform that is becoming a necessity for third-party vendors; Facebook is limiting competition in the tech industry as it copies product features of when start-ups refuse to be acquired; Alphabet’s Google has a dominant control on the online advertisement market as its platform manages a massive volume of search results.
In July 2019, Facebook was the first of these companies to receive a large fine, US$5 billion, from the FTC due to an investigation regarding the misuse of users’ data with Cambridge Analytica, which now forces Facebook to include regular privacy audits and FB had to create an independent privacy committee. Mark Zuckerberg, Facebook’s CEO said that the company will now have to invest a significant amount into engineering resources to build new tools that adhere to the terms of the settlement.
Nevertheless, the tech companies are fighting back, citing the jobs and economic stimulation that they are creating, and that they are constantly competing to maintain the top position that they have rightfully won. Amazon also spoke to its small market share in retail sales, as it only accounts for less than 1 percent of global retail sales and only 4 percent in the United States (U.S.), stating that 90 percent of retail sales still occur in brick-and-mortar stores, according to the U.S. Census Bureau.
The review paints a very forward looking picture in which these companies are not just becoming independent to current regulations but also to the natural order of consumer focused business. Assistant Attorney General Makan Delrahim of the Antitrust Division said “Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands”. Academia and business leaders continue to consult the DOJ and FTC as they are all concerned about the what the future will look like as the economy is becoming dependent on these few companies.
All companies’ stocks are taking a hit on Thursday in light of the investigation news, with day lows from market open including Alphabet down 1.3% to US$1124.60, Amazon down 1.0% percent to US$1981.42, Apple down 1.0% to US$206.92 and Facebook down 4.0%, the largest decrease in the group, to US$198.35.
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Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA)
Headquartered in California, United States, Alphabet is a multinational conglomerate of technology companies that was created through a corporate restructuring of Google in 2015. It is now the world’s fifth largest technology company with continued leadership in its search engine. GOOGL currently trades at US$1,140.47 per share with a market capitalization of US$790.7 billion.
Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ)
Headquartered in Washington, United States, Amazon is a multinational technology company with diversified operations in e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon currently trades for US$1,986.61 per share with a market capitalization of US$977.8 billion.
Apple Inc. (NASDAQ: AAPL; LSE: 0R2V; DB: APC)
Headquartered in California, United States, Apple is a designer, developer, and seller of consumer electronic products, best known for their iPhone, MacBook, iPad, AirPod, and Apple watch products. AAPL currently trades at US$207.23 per share with a market capitalization of US$953.3 billion.
Facebook, Inc. (NASDAQ: FB; LSE: 0QZI; DB: FB2A)
Headquartered in California, United States, Facebook is a social media and social networking company that utilizes its online platform for advertisements and data aggregation. FB currently trades at US$198.97 per share with a market capitalization of US$568.3 billion.
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