The U.S. Federal Trade Commision (FTC) and the European Commision (EC) and have recently announced new investigations into big technology companies.
The FTC will primarily look into big tech companies’ acquisitions of small companies (opens in new tab) to strengthen their own services. Meanwhile, the EC will open a broad inquiry (opens in new tab) into the tech sector to see how it can prevent big tech companies from hurting smaller rivals before the damage is already done.
The FTC announced that it will look at hundreds of smaller acquisitions under $100 million made by five of the biggest technology companies, including Alphabet (Google’s parent company), Amazon, Apple, Facebook, and Microsoft, between 2010 until 2019.
The agency believes that even though no particular acquisition may look worrisome on its own, all of them combined may have added-up to large consequences a few years down the road for the big companies’ rivals.
During its antitrust investigations against some of the big technology companies, the FTC has received complaints from smaller rivals that the big tech companies try to do “killer acquisitions,” which are used to choke off the competition.
Under this strategy, large companies can buy up emergent competitors before they grow into larger threats. This strategy would therefore cement the large companies’ dominance in the industry for perhaps longer than it would otherwise be if those smaller competitors wouldn’t have been acquired.
Rohit Chopra, an F.T.C. commissioner said on Twitter (opens in new tab) that:
“Google didn’t invent YouTube. Facebook didn’t invent Instagram. And the list goes on and on. That’s why I voted to order @Google, @Facebook, @Amazon, @Apple, & @Microsoft to hand over a decade of records about their buying binge.”
The European Commission also opened an investigation to evaluate how it could prevent large tech companies from harming smaller competition before it’s too late to help those smaller companies. The EC has recently issued multiple multi-billion dollar fines (opens in new tab) against Alphabet over the company’s anti-competitive tactics in the smartphone market, the shopping comparison market, as well as the digital advertising market.
However, despite these significant fines, big tech companies may still see them as a cost of doing business, and the harm would have already been done against the smaller players. Those smaller players may no longer exist, so even if the large tech companies lose a significant portion of their profits, they’ll still carry on without that competition. In the meantime, the consumer would be hurt by a significant lack of competition in the market.
The EC plans to propose new legislation to deal with these anti-competitive abuses from large companies, and the new inquiry is meant to inform how those new rules should be written.
The document seen by Reuters (opens in new tab) said that a tougher line was needed to deal with big tech companies that act as private gatekeepers and rule-setters to markets and information, because existing competition rules were not sufficient to deal with this new phenomena.