Survival of the fittest is hardly the case at Silicon Valley, or so believe the Antitrust authorities who have cast a huge shadow over the country’s prestigious tech behemoths. The suspects – primarily Alphabet and Amazon – are being put under the scanner for using unfair means to restrict competition and setting up an environment for monopoly. The stats are displayed as evidence.
While Google is the most preferred search engine with a staggering 89% market share, Amazon eats up almost 44% for all e-commerce sales worldwide. And Facebook? Facebook and its products are used by more people than the combined population of Europe, Americas and Russia. There is no denying the fact that these giants have abundant cash reserves and enormous amounts of user data to have a competitive edge over smaller firms or start-ups. But is a lawsuit a fair solution?
When is such an action taken? According the US antitrust laws, action is initiated against a corporate firm when consumers are harmed by its market dominance. For example, at the time of the divestiture of Bell System in 1984, the company controlled over 85% of the national telephone network, and charged consumers of rival companies extra fees to connect to their networks.
In order to avoid the fees, customers were forced to stick to Bell network, a clear case of monopoly and competition crushing. But how does this merge with the current scenario? Google and Facebook do not charge their users for their services. Amazon gained popularity primarily due to its lowest prices and free shipping. Where is consumer harmed at any point of time? An argument that constantly pops in favor of antitrust action is that these tech giants are killing more innovative start-ups that can give consumers better products and services – a vague excuse.
Antitrust suits should be consumer centric; and should not be a means to provide succor to wounded start-ups. In fact, a counterargument would be that breaking down such innovative companies would, in turn, hurt consumers who are already benefiting from their free services. Start-ups with breakthrough innovations will crop up, irrespective of the number of goliaths present in the industry. It is insane to imagine that the sole reason that Google gained dominance in the tech space is because IBM faced antitrust action in the 60s.
Restrict cheap tricks Meanwhile, corporates do resort to cheap tricks at times to fend off competition, the most recent example being one involving Facebook and Snap. The highly innovative start-up is currently struggling for breath, as Facebook emulated Snap’s core concepts and unique features for its own products. These are the situations that require monitoring from antitrust authorities. It feels unfair to punish a company and its shareholders, just because the company is performing well.
Antitrust lawsuits can sometimes cause unprecedented and prolonged damage to a stock (even though Alphabet earlier managed to brush off the damage after the EU lawsuit last year). Keeping in view of the evolving market space, antitrust authorities should start behaving like watchdogs, rather than a jury.