Here we go again. The antitrust regulating risk of Big Tech dominated the headlines last week. But does the government's new threat have any teeth or are there concerns for investors being inflated?
The Ministry of Justice announced late Tuesday that it has opened a review of "market leading online platform practices." The agency did not name specific companies, but the wording suggests that it will look more closely at Google superiors.
(ticker: GOOGL) for search,
(FB) for social media, and
(AMZN) for e-commerce.
The Ministry of Justice will also consider online marketplace to ensure that companies compete for the benefits of their services, which may suggest
(AAPL) and Google's app store practices will be reviewed.
The market shrugged. All four shares barely moved the following day. Investors may have learned a lesson when the same four companies lost more than $ 130 billion in total market value on June 3 after several reports of antitrust investigations. One-day sales turned out to be a buying opportunity, as the shares have gathered between 15% and 20% since.
At that time, Barron's suggested antitrust fear may be excessive ("Weighing the Antitrust" case against Google, Apple, Amazon and Facebook, "June 7). After the latest news, our vision has not changed.
History has shown that the government tends to either lose in court – such as its bid to block
S (T) acquisition of Time Warner and the order to break up
(MSFT) —or decide. In most cases, companies accept fines and peripheral changes, but nothing that will affect core business models.
Now there has been more evidence that the outcome may not be too criminal. On Wednesday, the Federal Trade Commission and Facebook announced a $ 5 billion penalty of privacy practices from last year's Cambridge Analytica scandal – "the biggest ever imposed on a company to violate consumer privacy."
It is relatively small for a company with $ 49 billion in cash and is estimated to earn $ 18 billion in net income this year. When the settlement was first reported, Facebook shares fell.
Proving consumer harm is also a tough task when Facebook and Google's services are largely free, and Amazon's e-commerce platform has undoubtedly reduced prices and increased comfort through faster delivery.
In fact, none of the companies have traditional monopoly positions in different markets. EMarketer estimates that Amazon represented 37% of US online shopping in 2018 and 3.5% of total retail sales. The company also said that Google accounted for 50% of US digital ad spending that year, while Facebook had 22%. Apple's iPhone had 45% of the US smartphone market, according to eMarketer's latest data.
"Facebook and Google are great in digital advertising, but rather small in global advertising," says Marcelo Lima, a hedge fund manager at Heller House. “The same is Amazon. Great e-commerce, small retail. There is no reason to limit these markets only as digital. "
David Nelson, chief strategist at Belpointe Asset Management, says antitrust laws are obsolete and requires new legislation to follow companies in digital age.
Daniel Ives, a Wedbush Securities analyst, agreed and wrote that he found all important legislation "very unlikely."
Investors should ignore the legislative noise and focus on Big Tech basics instead.