Big Tech's Q2 Results Are Poking The Regulatory Bear

Last week, three tech giants, Apple AAPL, Microsoft MSFT, and Google's parent Alphabet GOOG reported they earned combined profits that exceed $50 billion during the second quarter. The April-June results reflect Big Tech's unparalleled influence and success but more importantly, these figures show just how much these companies reshaped the way we live. Therefore, the concern of them becoming powerful beyond measure is more than valid and they have been poking the eyes of regulators for quite some time.

Being Held Accountable For Misinformation

Back in July, the White House's communications director clearly stated that social media giants should be held accountable for publishing misinformation. This area is defined by the Communications Decency Act, or more precisely, in its Section 230. More recently, President Joe Biden accused companies such as Facebook FB to be "killing people" by allowing disinformation regarding Covid vaccines to be diffused.

Facebook merely replied it is not distracted by fact-free accusations. Biden did clarify that he meant that users who were posting the falsehoods were doing the ‘killing', expressing that he was hoping Facebook will do more to stop the misinformation being spread around its platform. Speaking out and reacting has been Facebook's rare weak spot since the Trump era.

Anti-Competitive Practices

On July 9^th, President Joe Biden signed a new executive order made from 72 actions and recommendations that aim to put a halt to anti-competitive practices in many sectors, including Big Tech. The thinking around corporate consolidation and antitrust laws needs to be changed and this order is merely addressing the elephant in the room – the fact that Big Tech companies are using their power to kick smaller competitors out of sight while exploiting consumers' personal information for their own financial benefit.

The order could provide somewhat of a relief to the small fish represented by small and medium-sized businesses that have been crushed by the e-commerce titan Amazon AMZN, Apple, Facebook, and Google who snitched the whole digital market pie leaving them unable to even fight for their own place under the Sun. It is all part of a broader strategy to tackle concentrations of corporate power in several sectors such as technology.

Fines

Despite their deep pockets, multimillion-euro fines can force Big Tech companies to behave differently, or at least this is what the president of the French Competition Authority, Isabelle De Silva believes in. Yet, the slow pace of antitrust probes and the inefficiency of the imposed fines have been frustrating regulators as in Big Tech's case, it's been decades that no fine was ever enough to move the needle.

However, De Silva argues that the work done by competition regulators in France is finally changing this status quo her office has hit Google with €720 million in fines in two separate cases since June.

The first case revolved around Google's advertising technology business, more precisely how Google leveraged its different roles in selling online banner ads to disadvantage competitors. This lawsuit ended up being the first time that the California-based search engine giant decided to settle and pay €220 million in penalties in full without appeal.

In the second case, Google was fined €500 million in July after failing to reach a fair deal with the country's publishers' overpayment for their content. However, in this case, Google will probably appeal, just like it did in the other three fines European Commission imposed, including 2018's Brussels's largest-ever imposed an antitrust penalty of €4.34 billion.

However, the point of the story is that French authorities have been the only watchdog that succeeded in extracting a fine from Google without an appeal. The EU's second-highest court will rule on a 2017 fine in November, where Google has been accused for allegedly favoring its own price-comparison service over rivals. Considering it is more than a decade since the EU started its investigation and that the losing side in any scenario is almost certainly likely to appeal, this story portrays the main downside of these fights- they take a long time to be fought. But it does not mean that regulators will give up, especially now when the French broke the ice.

The Question Of Power

Although these companies make their money in different ways, their results are merely one reminder of the power they have over our lives. Therefore, addressing the question if they have become too powerful is of vital importance as it is directly related to answering the question of where is the world headed. The massive profits clearly illustrate where is the combined market value of $6.4 trillion coming from as this is more than double their pre-pandemic combined value which was only 16 months ago. These results clearly confirm that the digital revolution is here to stay beyond the pandemic as these companies embodied their offerings deeply within our everyday lives.

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