Big Tech 5 Expected to Reach $1.572 Trillion in Revenue This Year... "Antitrust Regulatory Framework Needs Reform"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] As the non-face-to-face economy due to COVID-19 accelerates the growth of big tech, the sales of the Big Tech 5 (Apple, Microsoft, Google, Amazon, Facebook) are expected to expand to about three times the size compared to 2016 this year. However, opinions have been raised that it is necessary to reform the antitrust regulatory system because it is difficult to judge the monopoly power and competition restrictions of big tech.

Jeong Seon-young, Associate Research Fellow at the Macroeconomic Research Office of the Bank of Korea Economic Research Institute, stated in the report "The Relationship Between the Digital Economy and Market Monopoly" (BOK Issue Note) on the 27th, "Antitrust regulations should be reformed according to changes in the market environment based on an understanding of the characteristics of new types of companies such as big tech, minimizing negative effects and maximizing positive functions."

According to Data Track, a financial market information provider, the total sales of the Big 5 this year are expected to reach $1.572 trillion, about three times the $560.6 billion in 2016. The average annual growth rate of these five companies from 2016 to 2019 was 17.1%, significantly exceeding the 10% average annual growth rate of the top 200 U.S. companies. Additionally, as of the end of August last year, these companies accounted for about 22.9% of the S&P 500 market capitalization.

Associate Research Fellow Jang explained, "Recently, there have been increasing calls to regulate the monopoly of big tech from the perspective of creating a fair competitive environment among companies and checking the concentration of power," adding, "This is because the perception has grown that the potential social costs caused by excessive market dominance and abuse of monopoly power by big tech have reached a considerable level."

He pointed out, "Under the current legal framework focused on consumer welfare and prices, it is difficult to prove whether the management strategies of big tech constitute anti-competitive behavior, making it likely ineffective in curbing the abuse of dominance by monopolistic companies."

At the end of 2020, in the first trial of the antitrust lawsuit filed by the U.S. Federal Trade Commission (FTC) against Facebook, the FTC lost because there was insufficient legal evidence to prove that Facebook held a dominant market position.

Associate Research Fellow Jang said, "Big tech can exercise monopoly power while keeping consumer prices low by passing costs onto producers," adding, "Big tech hides price increases through constant price fluctuations and personalized pricing, making it difficult to apply laws regulating predatory pricing behavior."

Accordingly, various discussions are underway regarding the specific methods of new antitrust regulations.

Associate Research Fellow Jang explained, "Regulatory methods such as limiting the business areas of big tech or controlling behaviors that expand monopoly power through aggressive mergers and acquisitions (M&A) have been proposed," and added, "There is also an alternative that accepts the natural monopoly of big tech as an inevitable phenomenon due to digital transformation and treats them as public enterprises with public characteristics, implementing regulations accordingly."

He continued, "The government, as a market creator, needs to design regulations with the goal of establishing a fair competitive environment from a neutral standpoint," and added, "It should support companies' innovation activities in the mid-to-long term through the diffusion of technology and market activation to create a virtuous cycle of innovation, and strengthen tailored policy support such as expanding technology finance supply to create an environment for improving the productivity of latecomer companies."