Have we become too reliant on Big Tech firms?

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Keith Ingram, owner of vinyl records shop Assai RecordsImage copyright
Keith Ingram

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During lockdown Keith Ingram shifted sales to Amazon

“We wouldn’t have survived without Amazon,” says Keith Ingram, owner of vinyl records shop Assai Records.

When lockdown hit on 23 March in the UK, Mr Ingram had to shut his shops in Edinburgh and Dundee, and sell his stock through Amazon Marketplace. Now, his sales are 40% higher than last year.

“Without Amazon, we would have had to furlough all employees for all of lockdown. Instead, we furloughed them for four weeks until we adjusted ourselves to the new normal, and then we could retrain staff to help us fulfil our online orders,” he says.

It’s not just Amazon that has been used more during the pandemic. Apple and Android smartphones and tablets, Facebook’s apps and Microsoft tools have provided crucial links with friends, family and colleagues.

And that’s certainly been great for investors and the billionaires behind these firms. Shares in Facebook, Apple, Amazon and Microsoft all hit all-time highs on the stock market in June.

Between 18 March and 19 May, Amazon’s Jeff Bezos saw his wealth swell by $34.6bn (£27.6bn) and Facebook’s Mark Zuckerberg’s wealth rose by $25bn (£19.9bn), according to a recent report.

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Reuters

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Amazon founder Jeff Bezos has seen his wealth swell during the pandemic

But is this reliance on Big Tech getting out of control?

“Amazon have gone from being the dominant gatekeepers for online commerce to being the dominant gatekeeper for much of retail because of the lockdowns,” says Stacy Mitchell, co-director of the Institute for Local Self-Reliance, the US organisation that challenges concentrated economic and political power.

Meanwhile, this week the UK government announced that it would be using a coronavirus-tracing app based on technology from Apple and Google.

Germany, Italy and Denmark are among other countries also using that system.

Big Tech firms have been getting even bigger during the pandemic and their success means they have plenty of funds to snap up other businesses.

For example, in May Facebook announced its second biggest deal – a plan to buy a 10% stake in India’s Jio, a telecoms and digital services business.

“All of them will be in the M&A [mergers and acquisitions] game if they’re not already. Start-ups are more likely to sell out during the pandemic when they might struggle to meet their obligations and the buyout looks especially attractive – the pandemic is speeding up the buyout date in some cases,” says Sandeep Vaheesan, legal director at the Open Markets Institute, a think-tank that studies corporate concentration.

Before the pandemic, there had been scrutiny on Big Tech. The US House Judiciary antitrust subcommittee sent requests for information to Amazon, Apple, Google owner Alphabet and Facebook in September 2019, with the government concerned that only a small number of companies hold such a big share of the digital market.

Coronavirus may have delayed these investigations, but they will still be carried out.

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Geeta Bhat

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Tech buyouts have accelerated during the pandemic, says Sandeep Vaheesan

“Those focused on antitrust will renew their attention on big tech companies because we’re in an election year [in the US] and both parties are going to want the attention on their efforts to regulate business,” says Jonathan Osborne, a lawyer from Globalaw’s law firm Gunster.

Mr Vaheesan warns that in the US, the Department of Justice (DoJ) and the Federal Trade Commission (FTC) have not taken company acquisitions seriously enough – clearing the acquisitions of Instagram and WhatsApp by Facebook, and YouTube and Android by Google.

He is not optimistic that the DoJ and the FTC will change their approach in the future.

In the UK, Amazon’s multi-million pound investment in Deliveroo was provisionally cleared by competition chiefs because the takeaway courier said it would collapse if it was blocked. A final ruling is due on 6 August.

“That was a one-off, the Competition and Markets Authority (CMA) looked at the market circumstances and saw them changing because of the pandemic, but the pandemic is not a reason for Big Tech companies to get away with scrutiny – absolutely not,” says Jonathan Branton, head of competition at law firm DWF.

The CMA has since announced it is investigating Facebook’s acquisition of Giphy, the popular owner of a library of short animations and stickers used in social media.

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But is the current level of scrutiny enough, and will it change because of the pandemic?

“It’s hard to look into a crystal ball. I think Microsoft has taken a strong stance on trust, security and ethical use of AI, and while we’ve been focusing more on the crisis response in the short term, we still maintain and apply these principles and they will apply in the future. It’s then about how public, industry and government look at that across the usage of Big Tech in the market,” says Microsoft’s Azure business lead Michael Wignall.

Mr Vaheesan suggests that these major investigations into tech companies may not be what they seem.

“It’s too soon to say whether these are serious inquiries or whether they’re merely a window dressing responding to the public and political concerns about the power of the big five tech companies.”

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EPA

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President Trump has threatened to introduce greater regulation of social media

In the US the picture is further complicated by President Trump’s fraught relationship with Twitter.

In May, for the first time, the company attached fact-check links to the President’s tweets.

That prompted a furious response from the White House with the President threatening to “strongly regulate” or even “close down” social media firms.

Facebook has also been under pressure to remove comments made by the President, but has so far kept his posts up.

To help protect their interests, the Big Tech firms have hundreds of lobbyists working in Washington.

“When I meet with elected representatives in Washington DC, they’re almost a bit bereft that there are more lobbyists than they have staffers to write this legislation,” says Scott Galloway, professor of marketing at NYU Stern.

“The budgets at DoJ and the FTC have been cut every year, so although there’s more likely to be anti-trust action with a change in the White House, the question is whether the US government even has the resources anymore,” says Mr Galloway.

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Section4

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Washington is awash with Big Tech lobbyists, says Scott Galloway

Mr Galloway believes that Europe is more likely to take the lead on tougher sanctions against Big Tech than the US.

“Europe gets all of the downside of big tech… but they get very little of the upside. In the US, these are tremendous economic engines, providing a lot of jobs and a source of pride – they create that ecosystem of other successful companies around them,” he says.

The European Commission announced two new antitrust investigations into Apple this week, while a recent Wall Street Journal report suggested that Amazon could be next on the EU’s agenda, over its treatment of third party sellers.

“It raises the question: why are we so dependent on a handful of large companies? Would we actually lose anything as a society if we had multiple online marketplaces? There’s really nothing that compels us to accept the present structure of these markets,” says Mr Vaheesan.

Big tech may be getting stronger during the pandemic, but it may actually make things harder for them in the long term.

Amazon, Facebook, Apple and Alphabet were asked for a response but declined to comment.





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