Taming the Beast of Big Tech

Julian Herbst

Graduation Year: 2026

London, UK

“Big Tech”, large and often multinational information technology (IT) companies you will likely have heard of, such as Amazon, Apple, and Microsoft, pervades almost every aspect of our lives. They influence equity markets, with the aforementioned companies valued at a total of over $5 trillion, but also the everyday, whether it’s making friends, shopping, or writing articles like this one.

With such great power comes great responsibility, and also scrutiny in the form of recently heightened global regulation. To provide just a couple of examples, the UK created a new Digital Markets Unit in 2022 to “make sure tech companies don’t abuse their market power”, and China introduced a Personal Information Protection Law in 2021 to standardise the handling of consumer data. Given the differing regulatory approaches, I shall use economics to inform my conclusion on how Big Tech should be regulated.

Economists since the “father of modern economics”, Adam Smith, have believed that competition regulation must be present for a market to function in the interest of consumers. In his seminal book “The Wealth of Nations”, Smith stated, “if any branch of trade, or division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so”. This is because a lack of competition allows a few companies to arbitrarily dictate prices and quality of products, leaving consumers with little choice. Therefore, it is concerning to see the formation of Big Tech monopolies, duopolies, and oligopolies.

Globally, Meta accounts for around 78% of social media market share, one-third of the internet operates on Amazon Web Services, Microsoft is a top three vendor to 84% of businesses, Google dominates over 90% of the search engine market share, and together, Google’s Android and Apple’s iOS hold  99% of smartphone operating system market share. One might assume that most of Big Tech’s services, such as social media, are free and therefore cannot engage in monopolistic behaviour. However, they can alter the quality of their services by altering the amount of advertisements or their privacy standards. Moreover, many small and medium-sized businesses depend on these platforms for advertisements, app stores, or other products to grow. The negative impact of this lack of competition on most users is clear. For example, Facebook notably reduced privacy standards after early rivals like MySpace shut down, and the UK’s Competition and Markets Authority estimated that Google and Facebook generated excess profits of £2.4 billion in the UK in 2018 alone, harming consumers and businesses with higher prices. Furthermore, not only are newcomers likely to be acquired and absorbed, like Instagram and WhatsApp were by Facebook, but they also face significant barriers to entry.

Firstly, every Big Tech company collects and rarely shares data about their consumer base, already providing them an advantage over new companies that lack access to as many data points for generating advertising revenue and optimising consumer experiences. Regulation supporting data portability would grant innovative startups more resources to grow and compel incumbent Big Tech firms to offer services of higher utility, aiding consumers and fostering trust that their data is used to their benefit. Without such regulation, consumers might abstain from using these services, leading to a deadweight welfare loss, or a more inefficient market.

Secondly, Big Tech also more actively suppressing rivals and stifling innovation. The EU and India both determined that Android gave an unfair advantage to Google’s own search engines and apps. Google pays £1.2 billion anually to companies in the UK to ensure its status as the default search engine, a practice which in the US, according to its Department of Justice, covers 60% of search queries. It’s also worth noting the difficulty often associated with switching services, such as moving from Apple’s iOS to Android or vice versa. Furthermore, both the EU and Google allege that Microsoft uses its Azure cloud unit to unfairly promote its other products. The lack of competition to Big Tech is damaging to  consumers and self-reinforcing due to considerable incumbent advantages.

Big Tech regulation’s second central contentious aspect is data collection and sharing. Due to profit-making incentives (mainly providing targeted advertisements), most IT companies collect personal data, a practice critics dub “surveillance capitalism”. This poses an ethical issue regarding the human right to privacy, where however, economics is crucial in determining the extent and implementation of viable regulation. Over-regulation of data, such as the EU’s GDPR, has been shown by the US-based National Bureau of Economic Research to have come at “substantial costs in foregone innovation,” with the entry of new apps in the Google Play Store falling by half following GDPR implementation due to new compliance costs. In a broader context, researchers at Oxford’s Martin School found that GDPR has cost-affected businesses an estimated 8.1% decline in profit, and was in fact anti-competitive, by disproportionately affecting small IT firms whose profits dropped 12%, while Big Tech, whose profits dropped only 4.6%, already had the resources to be GDPR compliant. The adverse economic effects of GDPR show that data protection regulation should be implemented cautiously so as to not dampen innovation and competition.

In conclusion, economics tells us that a path towards stronger antitrust regulation, and selective data regulation should be taken. China, the EU, the UK, and the US have all taken steps to encourage competition necessary for the IT market to function efficiently, but these must be taken carefully. Antitrust regulation can work and has worked in the past, with regulation of Microsoft in 2001 triggering a substantial increase in patent activity. However, proposed steps like breaking up Meta would be interventionist rather than pro-free market and competition and reduce cost advantages due to size, or economies of scale.

Targeted data regulation, such as mandating consumer data portability would build consumer trust and aid competition. Google is free, most of Microsoft’s products are paid, and Amazon mainly acts as an intermediary. Considering these varying business models, regulators should differentiate between Big Tech companies rather than implementing all-encompassing regulation like GDPR.

Article Writer - LexaNews Journalist