A note from the editor
Welcome to the first edition of the Global Affairs section’s new column It’s the Economy, Stupid! In this biweekly column, we’ll take a look at some of the big economics, technology, and business stories from around the world! In today’s article, we’ll take a deep dive into some of the most ambitious antitust suits ever taken against Big Tech companies, ranging from Amazon to Google to Microsoft, and break down the discoveries behind the winners of 2023’s Nobel Prizes.
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The US takes on Big Tech
In the coming months, some of the world’s biggest tech corporations are being taken to court by the US government. Two high profile suits against tech giants Amazon and Alphabet (Google’s parent company) are trying to shake up the regulatory environment towards Big Tech companies, which have enjoyed a long period of relatively light regulation in the US. Since coming to power, the Biden administration has taken a harsher stance towards large tech corporations and has proved more willing to pursue legal action to protect consumers and competition than previous administrations.
This new stance is best displayed by his appointment of Lina Khan as Chair of the Federal Trade Commission (FTC), the US’ anti-monopoly and consumer protection body. Known for her aggressive stance against corporate power, Khan gained attention for an article she wrote as a student for the Yale Law Journal entitled “Amazon’s Antitrust Paradox”, which challenged the US’ antitrust framework. While orthodox regulation against monopoly power was viewed through the lens of “consumer welfare”, purely considering whether corporations were unfairly increasing prices for consumers, Khan argued that firms like Amazon developed dominant platforms by first undercutting rivals and pushing them out of the market, before using their position to control critical digital infrastructure. This, according to Khan, then allowed these firms to favour their own products over rivals’ on their platforms.
Pitting government lawyers against some of the most deep-pocketed firms in the world and accusing them of serious monopolistic practices has led many observers to comment that the FTC chair faces an uphill battle. With the last successful major suit against Big Tech being a 1998 case against Microsoft, success in these suits may herald a new age of tech firm regulation, while failure may only entrench their position.
The Federal Trade Commission vs. Amazon
Launched just last month, the FTC’s case against Amazon alleges several charges. The FTC accused Amazon of keeping prices high by hiding sellers of discounted goods from search results and promoting more expensive Amazon products, of forcing third party sellers dependent on Amazon for business to use its own logistics platform at an unfair high cost, and of charging unfair fees of up to 50% of sellers’ revenue.
While not directly pursuing an outright breakup of the company, these bold claims against the $1.36 trillion-valued firm present a serious challenge to Amazon’s status as the US’ largest ecommerce retailer. Amazon has rejected the FTC’s allegations, claiming that they are acting within the law and greatly benefit consumers.
The Department of Justice vs. Alphabet
Filed back in 2020 but beginning trial in September, the US Department of Justice (DOJ) suit against Alphabet accuses the $1.76 trillion-valued company of making exclusionary agreements with mobile phone producers to make Google their default search engine, allegedly paying Apple between $4-7 billion in 2020 for the privilege, and now pays $10 billion to maintain it. By securing Google as the default engine for users of widely popular pieces of hardware like the iPhone, Google is unfairly entrenching its already dominant market share of almost 95%, the DOJ claims.
Alphabet has argued back that default search engines are not binding for consumers, and that securing Google as Apple’s default search engine was determined by Apple in a competitive bidding process involving other firms. Ironically the DOJ has used Edge, the search engine of Microsoft, the world’s second largest company by market capitalisation, as an example of a search engine that lost out from Alphabet’s alleged anti-competitive practices. Alphabet responded by arguing that it was Microsoft’s own fault for not effectively expanding into the mobile sphere.
The US government’s attempts to take on Big Tech companies will be no easy task, not just because of the resources Amazon and Alphabet will deploy to win the cases, but also due to the difficulty in proving explicit wrongdoing according to US regulations. Khan’s unorthodox aggressive view of antitrust enforcement may prove unconvincing to courts that have not sided against Big Tech for over two decades. Khan has already faced legal defeats, such as when a court blocked the FTC’s move to stop Meta from acquiring Within, a small virtual reality fitness startup, and when the FTC’s attempted intervention in Microsoft’s $69 billion acquisition of game developer Activision Blizzard was rejected by an appeals court (more on that from our Economics Editor Ollie down below).
Further complicating efforts to punish these firms may be politics. Although a bipartisan consensus critical of the power of Big Tech has emerged among Republican and Democratic lawmakers, differences on how and why Big Tech should be reined in means Congress has failed to produce any meaningful legislation. While Democrats are wary of the negative impact excessive corporate power can have on consumers and small businesses, Republicans remain critical of “corporate wokeness”. Particularly with Amazon, its status as a major employer across the country may also induce hesitancy in pursuing the company too aggressively. As these new cases heat up, the stakes for both companies and the government couldn’t be higher.
UK’s competition watchdog gets a blizzard of criticism for Microsoft and Activision merger.
The Competition and Markets Authority (CMA), the UK’s competition regulator, has been heavily criticised for effectively U-turning on its original decision to block the merger deal between Microsoft and Activision Blizzard, throwing into question the reputation of a regulator that has been trying to find its post-Brexit feet.
In general, competition watchdogs around the world have enormous power when it comes to mergers and acquisitions. When two companies want to merge (or one company wants to acquire another company) they must obtain permission from every competition regulator in every single country where the two firms operate. In the UK the job of deciding whether these deals can go ahead falls to the London-based CMA.
The CMA stands out from the pack by having even more power than usual (often referred to as having bigger teeth). This is because it is much harder to challenge or appeal its decisions, giving the organisation more clout globally and an ability to halt multibillion dollar companies in their tracks. Crucially, its decisions are much more final than any other similar organisation.
While Britain was a member of the EU, the CMA was required to defer to Brussels for mergers over a certain size. Since the UK left in January 2020, the CMA has diverged from the European Commision (EC) and began to earn the respect of international investors for its approach. It has been less willing to allow deals based on promises from companies about their future practices (known as behavioural undertakings) than the EC, and has instead favoured concessions that include companies selling off contentious aspects of their business to third parties in order to get approval for the merger (known as divestments). This earned the CMA a reputation for making easily enforceable demands that made a material difference to the deals it was presented with.
The Microsoft/Activision deal was a great example. The EU waived the deal through, while the US regulator tried to stop the deal, but lost in court (small teeth). Nonetheless, when the CMA originally decided in April to block the deal, many thought that was the end of it (despite Microsoft’s ongoing efforts to appeal to a tribunal).
However, when the CMA announced in July that they were looking into a revised version, it came as a shock to many. Their U-turn undermined the entire process and brings the regulator’s international reputationinto question. Sudden reversals such as this mean that the regulator’s final decision (something which gave the CMA power and credibility before) is no longer final. In future companies could repackage remarkably similar deals, brand them as new ones and demand the regulator opens a new probe. This is no way to conduct the important work of deciding which deals will bring a net benefit to the consumer and which deals bring a net loss to the consumer.
While the new Microsoft deal has won some support for benefiting consumers, the huge mess that the CMA has created from this debacle increases the uncertainty of future investigations, undermines the CMA’s ability to stand by its decisions, and gives firms a precedent for forcing through unworthy deals, which could harm consumers.
2023’s Nobel Prize winners
The Nobel prizes for 2023 were announced at the beginning of October, highlighting some of the most prominent contributions in the fields of Physics, Chemistry, Physiology or Medicine, Literature, Peace and Economics. The process of deciding who is awarded these prizes begins with nominations of candidates from academics, previous Nobel laureates, and members of parliamentary assemblies. After receiving all the nominations, the Nobel Committees of four prize awarding institutions – set forth in the last will and testament of Alfred Nobel – vote to decide on the laureate for the specific prizes for the year.
The Nobel Prize in Physics was awarded to Pierre Agostini, Ferenc Krausz and Anne L’Huillier “for experimental methods that generate attosecond pulses of light for the study of electron dynamics in matter.” Their work has shone light on the inner workings and movements of electrons in atoms and molecules, having possible applications in making disease detection easier and understanding the behaviour of particles such as electrons in more detail.
The Nobel Prize in Chemistry was awarded to Moungi G. Bawendi, Louis E. Brus, and Alexei I. Ekimov “for the discovery and synthesis of quantum dots.” Another prize awarded for pioneering work at a small scale, it celebrated the laureates’ work in developing luminescent nanoparticles whose properties obey quantum phenomena and have become commonplace in screens of computers and televisions, LED lamps and even in bioimaging.
The Nobel Prize in Physiology or Medicine was awarded to Katalin Kariko and Drew Weissman “for their discoveries concerning nucleoside base modifications that enabled the development of effective mRNA vaccines against COVID-19.” Their work set the basis for the development of life-saving vaccines during the pandemic, and has revolutionised vaccine development timeframes following the detection of diseases in the future.
The Nobel Prize for Literature was awarded to Norwegian author and playwright Jon Fosse “for his innovative plays and prose which give voice to the unsayable.” One of the world’s most performed playwrights, his versatile work often has a pared down style which has come to be known as ‘Fosse minimalism,’ relating to everyday scenarios but with profound themes and touching on the deepest feelings.
The Nobel Peace Prize was awarded to Narges Mohammadi “for her fight against the oppression of women in Iran and her fight to promote human rights and freedom for all.” She is the deputy head of the Defenders of Human Rights Center, an NGO led by another former Nobel Peace prize laureate, Shirin Ebadi. Mohammadi is currently imprisoned in Tehran for crimes including propaganda against the state. The announcement also comes a year after Mahsa Amini’s death in police custody which has triggered widespread protests in Iran for the rights of women.
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded to Harvard Professor Claudia Goldin “for having advanced our understanding of women’s labour market outcomes”. “Understanding women’s role in the labour is important for society. Thanks to Claudia Goldin’s groundbreaking research we now know much more about the underlying factors and which barriers may need to be addressed in the future,” says Jakob Svensson, Chair of the Committee for the Prize in Economic Sciences.
All the laureates will now officially receive their prizes at the awards ceremony to be held on 10 December, on the anniversary of Alfred Nobel’s death. All the prizes are awarded in Stockholm, Sweden, except the Nobel Peace Prize, which is presented in Oslo, Norway. The prize money for each prize is set at 11 million Swedish Krona, which is roughly over a million dollars (just over 800,000 pounds), shared between all the laureates for a specific prize, although the worth of the Nobel prizes continues to be beyond just monetary as they remain some of the most prestigious international awards bringing fame and recognition to laureates for years.