Citing consumer welfare and competition concerns, a rising chorus of voices is calling for more government regulation of the most dominant players in the US technology sector. As recently as late 2019, the co-founder of one household tech name even opined that government should step in and regulate the tech giants. The sector’s perceived impact on the upcoming national elections has helped fuel what some observers describe as growing “anti-big-tech” fervor.
So, what might come of it? It depends who you ask, but in my view, probably not a lot. I think federal privacy legislation will be on the roadmap if an agreement can be reached, but changes to antitrust law and/or content regulation seem unlikely to find common ground in today’s environment.
On the legislative front
Legislatively speaking, I don’t anticipate big movement out of Washington anytime soon. While Democrats and Republicans are both anti-tech to some degree, their proposals are very different; it’s hard to imagine they could ever agree on a meaningful solution. Besides, I doubt sweeping antitrust reform is high on the agenda of any US politician when the electorate, for the most part, doesn’t seem to care about this issue.
More likely than new legislation would be a shift at some point in how courts, including the US Supreme Court, interpret the laws already on the books. Importantly, existing antitrust law in the US focuses on consumer welfare, as measured primarily by price. That matters because many of the products provided by the big-tech companies are free, making it difficult to show harm to consumers. That said, incorporating privacy and mental health into measures of consumer welfare could open the door to a less favorable view of big tech.
On the regulatory front
Then there’s the issue of antitrust enforcement by federal regulators. In February 2020, for example, the Federal Trade Commission (FTC) “asked” the five largest US tech companies to turn over information about their acquisitions over the prior decade that were not required to be reported to the antitrust agencies. Said the FTC chairman: “This will help us continue to keep tech markets open and competitive, for the benefit of consumers.”
I found this noteworthy to the extent that it signaled the FTC could be a stubborn thorn in big tech’s side. I think it’s reasonable to assume the agency will be more aggressive going forward with regard to merger enforcement, particularly if there is evidence of any adverse impact on price competition. That level of regulatory oversight could hamper the large technology players’ ability to get deals done.
Even so, for now, I don’t think these companies face substantial regulatory risk. Indeed, the specter of regulation poses far more of a headline risk than an existential business threat. Let’s not forget that big-tech firms are driving innovation and disruption and growing rapidly. They are creating the future of consumer technology. Their products will evolve in the coming years in ways that we and regulators can’t predict. I expect these companies’ growth and profitability to persist, regulatory hurdles notwithstanding.
Accordingly, I continue to see them as sound long-term investments. Bouts of headline-driven weakness may present opportunities for investors to initiate or add to big-tech positions.