Report on Big Tech Companies | 10 Oct 2020

Why in News

Recently, a US House of Representatives panel submitted the report of a bipartisan investigation into the working of big technology companies like Amazon, Apple, Google and Facebook.

  • It called for the big technology companies to be broken up and also for a “presumptive prohibition against future mergers and acquisitions by the dominant platform”.

Key Points

  • Background:
    • These companies have been on the government radar in many countries for being big spenders and trying to steamroll competition by either buying out their rivals or pushing vendors to avoid working with their competitors.
    • As part of reviewing the state of competition online, the US House panel probed these companies and looked into how they controlled the flow of data for themselves as well as their competition.
  • Findings:
    • Company heads were questioned over the evidence which suggested that the companies have exploited, entrenched and expanded their power over digital markets in anti-competitive and abusive ways and the answers by the heads were often “evasive and non-responsive”.
      • This aspect raises questions on the powers assumed by the big tech companies and whether they consider themselves beyond the reach of democratic oversight.
    • Each of these companies acts as a “gatekeeper” over a key channel of distribution, which means that they have full control over what goes on in their respective domains.
      • By controlling access to markets, they can pick winners and losers throughout the economies.
    • These companies not only wield tremendous power, but also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.
    • Companies ran the marketplace for their respective domains, while also competing in it and to ensure they retain the number one position, the companies have restored to “self-preferencing, predatory pricing, or exclusionary conduct”.
      • Self-preferencing involves actions by an undertaking which are designed to favour its own products or services over those of its competitors.
      • Predatory pricing is an act of setting prices low in an attempt to eliminate the competition.
      • Exclusionary conduct is a conduct that creates or maintains monopoly power by disadvantaging and harming competitors.
  • Recommendations:
    • To push for “structural separations” of the big tech companies. These companies should be broken into smaller companies to ensure that they would not be able to have as much influence as they have currently over the digital marketplace.
    • These companies should be prohibited from operating in an “adjacent line of business”.
      • Adjacent business is to leverage a business's existing capabilities and apply them to a distinctly new market which is close in proximity to the existing business.
    • There should be a “presumptive prohibition” against big tech companies going for mergers and acquisitions.
      • For example, Facebook bought Instagram and WhatsApp and has been accused of using money power to outright buy competition and then pushing them aggressively against other competitors.
  • Impact of the Recommendations:
    • Although the recommendations are not legally binding on either the USA government or any other agency, they have the potential to start a debate and deeper research in the direction of more controls by big tech giants.
    • Laws on vertical mergers and overriding problematic legal decisions can be rethought and changed after the recommendations.
      • A vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service.
      • Vertical mergers are a way for companies to significantly cut costs, increase profits, expand their market, and turn their focus on bigger goals of improving their company.
    • Big tech companies might not be directly impacted by these as of now, but there will be increased scrutiny of regulators and probe agencies worldwide.
    • Companies are likely to face more questions and probes from states in the USA, which have been dragging them for not doing more to control their influence on day-to-day aspects of life.

Big Tech Influence in India

  • The report also mentions the role of the big tech companies in stifling competition in India.
  • In the last two years, the CCI has raised issues with Google’s commercial flight search option, its dominant position in the search marketplace, the abuse of its dominant position in the Android phone and smart television market, and others.
    • In 2019, Google was held guilty of misuse of its dominant position in the mobile Android market for imposing unfair conditions on device manufacturers to prevent them from using other operating systems.
    • Google has also been accused of following a high and unfair commission mechanism for apps listed on its Play Store.
  • Amazon and Facebook, which are trying to enter the retail space in India, are also likely to be under the lens for the way they price their products and the space they give/deny to their competition.

Source: IE