Horizons Newsletter – Week 32 // 2020
Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
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U.S. politics is eating Big Tech
On July 29th, the CEOs of Google, Amazon, Facebook and Apple (GAFA) testified before the House Antitrust Committee in what some have called Big Tech’s “big tobacco moment”. Since 2019, regulatory and political interest in the market power of these companies has grown, signaling a shift in sentiment towards Big Tech. The hearing in the House was part of an antitrust investigation into the digital economy that started in 2019, but the House’s investigation does not stand alone. Since the summer of 2019, the Department of Justice, the Federal Trade Commission and various state attorneys general have announced investigations into one or more of the GAFA companies. However, as of yet no formal cases have been brought. Simultaneously, lawmakers are focusing on a number of other issues involving Big Tech companies such as misinformation, content moderation, consumer privacy and their relationships with China. Tech companies have long faced little regulation, but recent signs point to a future where this is no longer the case. The U.S., furthermore, will not be the only actor in shaping that future.
Europe is expanding its big tech rulebook
Europe has long been a trailblazer when it comes to curbing the power of the Big Tech companies. By clamping down on tax dodges, privacy violations and anticompetitive behavior, the E.U. seeks to create a more level playing field. This month, however, Europe suffered a setback in the tax battle with Apple when the E.U. General Court decided that the European Commission failed to prove that the Irish tax regime granted Apple a selective economic advantage. With several similar cases against big multinationals, the decision will have significant repercussions, but it will not deter the Commission’s ambition to ensure that companies pay their fair share of taxes. Moreover, the E.U. is even considering implementing a digital economy tax. Furthermore, the E.U. is working on a new Digital Service Act (DSA) that replaces the e-Commerce Directive and lays down ground rules for data sharing and the operation of digital marketplaces. With several countries around the globe looking for ways to reign in the power of Big Tech, Europe’s DSA could become a global template for tech regulation.
India’s digital collaboration economy
India has historically been notoriously difficult to enter and navigate. During the Cold War, India adopted a democratic but centrally planned economy with strong protection of domestic industries to assure self-reliance. Only after the reforms and liberalization program in 1991 has India’s economy become more open for foreign companies and investors. Since then, growth rates have accelerated and a substantial Indian middle class has emerged, although its byzantine regulatory and legal frameworks still create significant barriers for foreign companies. Recently though, several Big Tech (e.g. Google, Facebook) and other IT companies (Qualcomm, Intel) have found an opportunity to enter the market through investments in Jio Platforms, the digital and telecom division of Reliance Industries. Jio started out as a mobile network but expanded into e-commerce, digital payments and streaming services. Through their investments, the U.S. tech companies can add their services to that stack, even if they will have to share the profits. At the same time, India stands to benefits as it can provide its middle class with more digital services, collect more taxes, and raise a national tech champion.