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Are the Tech Giants Monopolists?

Claims about this tech giant or the other being monopolist are increasingly common. As these companies take up an even greater part of the economy and concerns about privacy become hot button issues, the rise in public scrutiny of their business tactics is unavoidable. Criticism of their market position and dominance has coalesced around a few main concerns.

The Case for Antitrust

Consumer Harm

The modern legal and economic principles that drive competition are based on consumer harm. Critics believe that consumer harm standards are too narrow and ignore the issues faced by relevant stakeholders like workers and other sellers, whose bargaining power often suffers under these conditions. They want to institute a more holistic approach that harkens back to the antitrust ideas of the 50s and 60s, which consider a comprehensive approach towards the overall market structure, even if short-term effects are not red flags.

Prices are a bad measure of a monopoly-based market structure. Many of these companies charge nothing for their core services but their market dominance can impact the market in other ways. More competition might lead to more competition on privacy and security. The effect on business-to-business transactions should also not be neglected. For example, if developers and supply chain vendors were not negotiating with just a couple of companies, they might not be at as much of a disadvantage.

A laser focus on revenue doesn’t make much sense given that investors have rewarded low-profit high-growth bets. The law should recognise the change in underlying market structures. Such unique financing enables companies like Amazon to engage in what is arguably predatory pricing.

Conflict-of-Interest Issues

Owning the platform in which you also compete is anti-competitive. The structure of Apple and Google are such that they both sell products or maintain platforms wherein they compete in those same markets.

APPLE: Apple both sells the iPhone-which is the single most popular smartphone model, therefore controls iOS- and also owns numerous apps that compete on the AppStore. The AppStore grossed upwards of 70 billion USD last year. The app ecosystem is incredibly lucrative and a legitimately important market unto itself. Numerous companies have alleged bad faith behaviour from Apple that resulted from its control of the AppStore.

Apple offers Apple Music which directly competes with Spotify. Apple uses its market control to unfairly push Apple Music on consumers by putting it front and centre on the homepage of the AppStore and nudging consumers through UI decisions. Spotify cannot do this and contends that these are unfair grounds for competition. Moreover, Apple also controls iOS and uses multiple features like better syncing with AirPods, linking with Apple devices, etc. for Apple Music that a developer is not allowed to. As such, in the music streaming space, it enjoys an unfair advantage that it has gained not through a better product, more investment, or lower prices; but through control of the platform.

Apple takes a cut every time you spend on a paid app. You pay for in-game currency in a random video game- Apple takes a cut. You subscribe to service within that app- Apple takes a cut. You pay for the premium version of an app- Apple takes a cut. This, some developers claim, is not warranted by the service that Apple is technically providing in the transaction- filtering which apps make it onto the platform so that they are considered safe by consumers. Moreover, it is somewhat opaque about the way it charges. Technically, if your app leads consumers out of that to pay for a service so it's not under Apple's purview- the developer receives a warning or the app gets taken down. This is what happened to Epic Games, the developer behind Fortnite. However, if you've tried to pay for a new subscription on the Netflix app, you get taken to a browser page so Netflix gets all the money.

GOOGLE: Google has already landed in trouble for abusing control of various platforms. Online advertising services are at the heart of how Google and publishers monetise their online services. Google collects data to be used for targeted advertising purposes, it sells advertising space and also acts as an online advertising intermediary. So Google is present at almost all levels of the supply chain for online display advertising. We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack.

The obligation to use Google's services Display & Video 360 (‘DV360') and/or Google Ads to purchase online display advertisements on YouTube.

The restrictions placed by Google on the ability of third parties, such as advertisers, publishers, or competing online display advertising intermediaries, to access data about user identity or user behaviour which is available to Google's own advertising intermediation.


Aggressive buying of nascent startups and promising competitors is a staple in the industry. The prevalent wisdom in Silicon Valley seems to be that entrepreneurs should not bother competing in the main markets that FAANG companies operate in. Google and Amazon spend enormous amounts on acquisition.

Facebook’s acquisition of Instagram and the lack of oversight regarding the acquisition approval decision by the regulators at the Federal Trade Commision have been subject to a lot of criticism. Instagram is now more lucrative than Facebook’s own social network. Some believe that had it not been approved, an independent Instagram would have provided Facebook with healthy competition.

Again, it is not easy to discern how strong that argument is, in absence of the counterfactual. You can just as well claim that had Facebook bungled the management of Instagram after the acquisition, critics would still claim that it was proof of anti-competitive behavior to protect their core brand. In fact, Facebook itself makes the argument that the success of a new social network is hardly guaranteed; and that integration with Facebook and subsequent efficiency improvements probably contributed to Instagram’s success.

The Case Against Antitrust

Which markets are they even monopolizing? Monopoly tends to imply they’re absolutely dominating their field. Let’s look at digital advertising: Google controls a third, Facebook a quarter. In legalistic terms, those are not high enough market shares. They’ve also faced competition from Amazon as of late. More importantly, which is the relevant market: digital advertising or advertising. If we look at advertising as a whole with digital and non-digital components, we see that the loss of strength of traditional advertising has been compensated by corresponding increases in spending on digital. That seems to imply that they both exist within the same market. (Similar: Amazon+Retail). Critics claim that antitrust advocates highlight arbitrarily narrow markets.

A pretty common standard for judging the need for market intervention is that of consumer harm. Rather than more subjective measures, consumer harm standards look at whether the activities of the firm have led to lower outputs, higher prices, and lesser innovation than would otherwise exist in a competitive market. It is difficult to argue about price when social media is free while offering services that consumers value, Amazon’s goods are often cheaper than competitors, and the going price for digital advertising is lower than in the past. Innovation, as measured through spending on research and development, is useful as well. One would expect complacent monopolies not to spend a lot on RnD since they’re protected by barriers to entry whereas competitive firms need to invest in order to survive. The Tech Giants, however, lead in RnD spending when compared to other companies of that size.

Network effects don’t constitute enough of a barrier. Network effects refer to when the value proposition of a service or product increases if more people use it. A social media site, for instance, is much more useful if more of your social circle is on it. Similarly, the more people use a search engine, the more data the creators have to refine using their algorithms and produce better results. Many anti-trust advocates cite the immense power of the network effect at play in the markets the tech giants dominate. Simply stated: it is difficult to build a competitor to Instagram without the ability to connect with as many users as it currently has. Critics of such arguments counter, saying that Network effects are quite widespread and don’t often constitute an impregnable barrier to entry. Fax machines, newspapers, and a number of legacy products also made use of network effects but were still prone to disruption. Some markets are at equilibrium with fewer competitors. It is much easier to streamline your app development if you’re only making apps for two platforms and it’s much better for consumers if the platforms they have access to use numerous apps. There are high switching costs for users and platform-specific investment is costly for developers, maybe it’s better for there to be only two or three competitors.

After years of public debate around these issues, action by governments is finally forcing the hand of regulators to change policy. Whether it is aggressive court action in European Union institutions or competition investigations by India’s own CCI; the policy response to these firm’s dominance is both heterogeneous and indicative of the overall shift. Interestingly, Biden has appointed the leading progressive critic and the author of a viral paper on Amazon’s anti-competitive behaviour as the head of the Federal Trade Commision, which has the mandate to deal with many of these issues.



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