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The era of the U.S. government giving free rein to technology companies as they grow and flourish is over. The momentum around regulation has been building for at least five years, roughly corresponding to a speech that Sen. Elizabeth Warren (D., Mass.) delivered in 2016, when she singled out tech companies in arguing that in America, competition is dying.
That technology companies are living in a new era of oversight is no longer up for debate. The view among both Democrats and Republicans is that the status quo must change.
President Joe Biden has made his view clear with the appointment of progressive reformists to his administration. In a sprawling executive order that tackles corporate power, the Biden administration is seeking to rein in Big Tech in numerous areas, including data collection and surveillance, while also asking the Federal Trade Commission to take a closer look at mergers.
The goal is to create a more dynamic economy that works for more Americans, says Timothy Wu, special assistant to the president for technology and competition policy.
We want to emphasize the goal of this is, ultimately, a better tech industry, says Wu. Its not trying to destroy tech. Its trying to make it more competitive.
The White House may act with executive authority, but other government actions require legal argument, political consensus, or both. And unlike efforts from European regulators, its not yet clear whether the U.S. will be able to take significant action.
The open question is whether the government is fast enough and smart enough to regulate these companies effectively, says Cowen analyst Paul Gallant. Its very up in the air.
Here are the main efforts underway:
Some of the most ambitious efforts to curtail Big Techs power are already progressing through the court system. Federal and state regulators have filed suit against Alphabet and Facebook, with further litigation against Amazon.com and Apple likely in the coming months.
Investors should remember that litigation will not resolve quickly. Most of the current litigation is expected to take four to six years, with appeals extending the process by another five years or so, say antitrust lawyers. It may cost hundreds of millions of dollars in legal expenses, but stocks typically remain unscathed during the drawn-out process.
Congress has begun to act. In the House, lawmakers have advanced a package of six bills to a potential floor vote. One effort that has broad support would include more funding for Federal Trade Commission and Department of Justice antitrust reviews and litigation efforts. Other legislation could force tech companies to allow user data to be easily transported between platforms. That has a decent prospect for passage, though it would do little to dent tech profits.
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A bipartisan effort has emerged in Congress that could ultimately curtail the commissions that Google and Apple earn from their app stores. According to Gallant, the bill is likely to become law early next year, though it could face legal challenges. The companies are facing similar action from a coalition of state attorneys general.
Lastly, theres the most severe and controversial bill that threatens to break up Big Tech companies. It made it out of committee by just a single vote and hasnt attracted the widespread support needed to pass. its likely to face legal challenges, and tech companies are already lobbying against it. Its a long shot, at best.
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