Facebook, Amazon, Apple, Google, anti-monopoly investigations, Five technology giants account for one-fifth of the S&P market value

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Recently, Apple, Google, Amazon, and Facebook have all participated in antitrust hearings in the United States. These companies have been questioned and criticized because of their market power in the digital market.

At congressional hearings, Democrats and Republicans took turns to question their business practices in more than five hours. Because of the epidemic, congressional hearings were held online. It’s worth intriguing that the American people who are now at home rely on these most successful technology giants more than ever.

The chairman of the Antitrust Subcommittee, David Sicillini, called them “key business and communication hubs”, which also represents “any action taken by any one of these companies may be profound and lasting. Affect hundreds of millions of people.” “They have too much power and are using this power to eliminate competition, creativity and innovation.”

This is undoubtedly a scene that can be recorded in the annals of history. Although people are not surprised by what happened, all of this has signs.

As early as a few years ago, the antitrust trend started in the United States. When an ant grows into an elephant, when a company goes from no one knows to its peak, it seems inevitable to meet controversy.

In 1998, Bill Gates appeared at an important meeting. He was ready to speak, but a protester threw a large piece of butter cake on Bill Gates’s face.

The Microsoft he founded was once a company that was given a lot of imagination, but at its peak, it also ushered in an antitrust investigation, which lasted six years before it ended. Microsoft was once judged that it should be split into two companies and was subsequently overthrown, but the long investigation undoubtedly affected the speed of Microsoft’s progress.

Time has passed, and anti-monopoly investigations have come to other giants, and they are more violent than ever.

According to the “New York Times” statistics, Zuckerberg was asked 62 questions, Bezos was asked 59 questions, Cook was asked 35 questions, and Pichai was asked 61 questions.

Several CEOs seem to be fully prepared for this war. In the face of persistent and sharp questions from members of Congress, it is difficult to find loopholes in their speeches.

This hearing is just the beginning. It took Microsoft 6 years to get out of the antitrust investigation. How will these four companies prove themselves?

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Five technology giants account for one-fifth of the S&P market value

Among the CEOs of the four technology companies, apart from the world’s richest man and Amazon’s founder and CEO Jeff Bezos, who has not participated in a congressional hearing, the other CEOs are all very experienced.

Apple CEO Tim Cook gave his testimony as early as 2013. At that time, opposition to technology giants had just risen. The focus of lawmakers was on global tax policy, and Cook performed unscathed at the hearing.

Google CEO Sundar Pichai was also very “cool” at the hearing of the House Judiciary Committee held in late 2018, when Pichai answered questions including Google’s data protection rules.

Facebook founder CEO Mark Zuckerberg (Mark Zuckerberg) has experienced 10 hours of torture between the House of Representatives and the Senate. He calmly faced the grandparents of the lawmakers, and was full of wisdom on how the company handles users’ privacy records.

This hearing brought together four technology giants, reflecting the escalation of the two parties’ concerns about the monopoly of the technology giants. According to a Goldman Sachs report, the combined market capitalization of the five largest companies in the United States, Facebook, Amazon, Apple, Microsoft, and Google, has accounted for more than one-fifth of the value of the S&P 500 index, up from 16% a year ago. % Of.

The market power of the Big Four

Apple controls the mobile operating system iOS and the applications it runs, and the “Apple Tax” has been criticized by developers;

In addition to Android, Google has also controlled Internet advertising through its dominance in search, which is also used to combat competitors;

Amazon provides third-party merchants with an e-commerce platform and logistics foundation, but it is questioned that it is trying to suppress third-party sellers and promote its own brands.

Facebook’s acquisition of Instagram and Whatspp is considered a monopoly on social media.

Apple’s manipulation of its platform application ecology, Google’s control of Internet search portals, Amazon’s regulations and control of third-party stores, and Facebook’s suppression and acquisition of competitors, all of which vaguely point to the market of these large platforms Is it time for the power to be so great that it severely damages consumer welfare and affects the benign market competition ecology?

Platformization can be said to be a trend in the digital society. For a long time, one of the main obstacles facing businesses is market friction. Buyers want to find sellers, and sellers want to find buyers — just like a search engine, when I’m on the Internet, I want to search for some information. How do I start?

By providing search services, Google has made itself the de facto portal of the Internet, through which users can find the websites they want to go to. Users get the content they want, and the website gets the customers they want.

If we take a closer look at these companies, we will find that they all have one common feature- they are all platform-based enterprises that connect two parties, and even multiple parties.

In economics, there is a vocabulary to describe these platforms, that is, “bilateral markets.” Bilateral markets often have two very important characteristics, which make them naturally easy to monopolize.

1. Network effects

For example, on social networking platforms such as Facebook, whether a person uses these software and how long they use it every day does not entirely depend on how many functions the software provides, but also how many other users are using it at the same time.

The more people use it, the more interesting and important the software becomes — just like mobile chat software, before Snapchat, there have also been times when they competed for hegemony.

Under this business logic, companies are pursuing a “critical point”, that is, when users reach this point, they will continue to attract new users to join and enter a period of exponential growth-this is called “network “Effect”, also known as “direct externality” in economics, is the mutual influence between users and users.

The network effect means that almost all of the Internet platform models cannot bypass the early-stage non-stop investment source to pour money to accumulate users, and the medium-term start to roll out the route of spontaneous growth.

This invisibly increases the barriers to entry for Internet companies-because it means that they will not be able to make a profit for a long time in the early stage. Once a company enters a virtuous circle of mid-term development, other platforms can grasp if they do not have different characteristics. It’s harder to enter your own core users.

2. Indirect externalities

Companies with only direct externalities are unilateral markets, that is, apart from the network effects mentioned above, then it can only be said that monopoly is for a reason.

But the disadvantages of monopoly to consumers are still obvious-strong market power can make the platform treat users with a “useless” attitude, and because it sets a high threshold, the motivation for research and development will also be Weaken. This is also one of the basic logics of anti-monopoly- monopoly damages market competition and reduces consumer welfare, so government intervention is required.

But these platforms mentioned above also have the function of connecting different interest groups:

Google connects the website and the end user, Apple connects software developers and users of Apple products, Facebook connects advertisers and users of Facebook, Amazon connects consumers and third-party sellers.

This list can include many more. For example, Airbnb connects landlords and tenants of short-term rental houses, Uber connects drivers and passengers… This is why it is called a “double market.” There are also mutual influences between the two sides of the bilateral market:

For example, Uber and Apple are positively promoting each other more driver supply will attract more passengers, more passengers will attract more drivers; more high-quality app developers will attract more people App users with paying habit, and more App users with paying habit will also attract higher-level developers.

Of course, there are also negative effects on each other, such as duckduckgo and Google. More users will attract more advertisers, and more advertisers will generally have a negative effect on users.

Regardless of whether the two sides of the platform are connected to each other positively or negatively, as long as the two sides have different price sensitivity, the platform has room for operation and optimization. The method is cross-subsidy.

For example, for the Uber Taxi platform, it is obvious that consumers, that is, passengers, are more price-sensitive, so the platform will use a portion of the money collected from drivers to subsidize passengers and attract more passengers to join the platform, and because drivers have enough passengers, their income will increase. In the end, the passengers got relatively low taxi prices, the drivers had enough tickets, and the platform also charged enough intermediary fees.

This ideal model requires the platform to consider the impact of the left and the right, and then choose the appropriate subsidy method. Because this influence does not occur within the same group, it is called “indirect externality”.

To make the platform more “responsible” and provide cross-subsidy between consumers and service providers, the platform needs to have a certain degree of monopoly power-if the market is too competitive, then the platform has no power to provide such subsidies. For example, in a highly competitive market, if you take money from producers to subsidize consumers, it is likely that producers will go directly to other platforms.

Therefore, precisely because of the existence of this indirect externality, even for consumers, the competition between the platforms of the bilateral market is not the stronger the better, but the loss caused by the monopoly power and the platform cross-subsidy A trade-off is carefully achieved between capabilities. This is also the confidence of Facebook, Google, Amazon and Apple in responding to the hearing.

A typical example is Amazon e-books. In the era of Amazon monopoly, the price of e-books was very low. Because Amazon had a strong bargaining power, publishers had no choice but to keep book prices down. Amazon was able to gain the Kindle market by selling a large number of low-priced e-books. To gain growth, it also excludes other potential entrants. And when Apple entered with iBook, it promised a high share to booksellers, attracted a large number of booksellers, and allowed them to gain greater bargaining power. So just after the market became fully competitive, electronic Instead, the price of books has increased by 20%-30%.

3. Repel

Of course, bilateral markets have their particularities, and the government may not split them, but the negative impact caused by monopoly power exists, so a certain degree of regulation and punishment is difficult to avoid.This is called “exclusion” in industrial economics.

Exclusion will damage the competitiveness of other upstream and downstream companies in the industry chain, allowing the platform to complete vertical integration. Other areas may not be bilateral markets. There may be very good companies that have been forced to withdraw from the market because of such a brutal invasion. This undoubtedly seriously hurt the ecology of the industrial chain and the interests of consumers, and it needs to be restricted.

In short, the anti-monopoly determination and supervision of bilateral market platforms are quite different from the traditional anti-monopoly determination and supervision. The goal has shifted from “how to encourage competition” to “how to weigh and monitor the market power of the platform not to be abused”, which requires more detailed and prudent consideration.

Major companies are ready to respond to this hearing

Several CEOs seem to be fully prepared for this war. In the face of persistent and sharp questions from members of Congress, it is difficult to find loopholes in their speeches.

The knife has been put on the neck, but they only denied the key issues, and did not explain much. More testimony was spent on publicizing the company’s contribution, and they repeatedly emphasized that the company does not yet have a monopoly.

1. The hateful “apple tax”

In this hearing, Cook gave a series of explanations. He once again emphasized that Apple is not a monopoly. The iPhone is not dominant in smartphones either.

A lawmaker questioned whether Apple treats all app developers equally. For example, Apple agreed to charge Amazon lower fees than other apps in the app store, and allowed Baidu to obtain fast app permissions.

Cook still said that Apple treats every developer fairly. He also said, “If Apple is a gatekeeper, all we do is open the door bigger.”

It seems that Cook is still unwilling to make compromises and concessions. In the past, Apple has paid hundreds of millions of dollars in fines, and its stock price has fallen several times because of this. But letting it adjust the rules of the app store will shake the important foundation of revenue. This is the real disaster.

2. Google’s multiple businesses are questioned as a monopoly

At the hearing, lawmakers accused Google of weaponizing its search engine, putting its competitors at a disadvantage. Sicilini gave an example that Google stole Yelp’s hotel review data, threatened to “remove” it from Google searches when Yelp complained, and said that Google detected website traffic to look for competitive threats.

Pichai’s answer to this seemed wrong. After he expressed his disapproval, he began to describe Google’s contribution. He mentioned that Google currently supports 1.4 million small businesses and supports more than $385 million in core economic activities.

In the past turmoil, Google has retired completely. This time it faces prosecution by the U.S. Department of Justice. Although it has been placed on the table with Apple, Amazon, and Facebook, among the four companies, Google is the most concerned and has been It is believed to be the largest antitrust case in the United States after Microsoft was sued by the Department of Justice in the late 1990s.

However, even without the challenge of antitrust investigations, Google has already faced the embarrassment of increased competition, weakened main business, and weak diversification. It is not an easy task to continue to maintain its dominant position.

3. Amazon’s “all in one catch” third-party sellers

Although it was the first time to attend the hearing, Amazon CEO Bezos appeared to be comfortable. He denied that the Amazon platform has systematically unfair treatment of third-party sellers. After listening to the Amazon seller’s complaint recording broadcast live, Bezos said that this was only a case and he was willing to communicate with the seller.

However, when faced with a key question raised by lawmakers-whether the company uses third-party seller data to manufacture products that directly compete with these sellers, Bezos responded with a slight lack of confidence. He mentioned that Amazon has policies prohibiting this. Practice, “But I can’t assure you that this policy has never been violated.”

Before the hearing, Amazon was exposed again. By adjusting the placement, Amazon’s self-operated products do not need to be labeled with the “sponsored” label like other products in order to get homepage display traffic. If other third-party sellers want to get impressions, they need to invest a lot of advertising fees.

Amazon’s response to this incident is that they only used a variety of internal data to show the brands consumers prefer.

All these controversies can only have a result after the antitrust review is over.

4. Facebook crowds out or acquires competitors to cause controversy

Unfortunately for this hearing, Zuckerberg answered the most questions, but he was too cautious and avoided many inquiries. When referring to the acquisition of Instagram, a congressman mentioned that Facebook violated monopoly laws through potential competition threats through mergers and acquisitions, but Zuckerberg responded that we strive to compete, compete fairly, and strive to be the best.

However, some US media reported that on the eve of the hearing, Zuckerberg stated that he had defined antitrust issues as political issues. He said that if the monopoly of US technology companies is weakened, it will provide other countries with great opportunities, which is not conducive to the development of US companies. Antitrust investigations will only hinder the technological innovation of American companies and even provide convenience to Chinese companies.

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Digital Nomad

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