On Monday, the Nasdaq dropped more than 1% on news that the Department of Justice (DOJ) was opening antitrust investigations into Google and Apple.
It has also been reported that the Federal Trade Commission (FTC) is analyzing how Amazon and Facebook may be harming competition.
In response, investors ran scared from the companies. Shares of both Google and Facebook dropped more than 6%. Amazon dropped more than 4.5% and Apple fell 1%.
In total, they lost nearly $130 billion in market value. The tech index has fallen more than 10% since its record high set in April.
What the Antitrust Regulations Could Mean for Big Tech
The results of the DOJ and FTC investigations will have long-run ramifications for the future of Big Tech firms.
The Big Tech firms have transported living standards on the planet to heights never seen before. If you are reading this article, you are likely reading it on your smartphone or computer; you may be commenting on this article on Facebook. (If you are, please leave a nice comment.)
These products, and others, wouldn’t be available without Google, Facebook, Apple and Amazon.
That is why these developments are so important. The question is: Have these companies amassed too much market power?
There are antitrust laws on the books that are meant to prevent corporations from obtaining too much market power. A major concern that regulators have is whether or not the tech firms are preventing other competitors from competing against them.
In economic parlance, this is referred to as “barriers to entry.”
This question has been debated since the time of the Rockefellers and Andrew Carnegie.
One of the companies exempt from these new antitrust investigations is Microsoft.
However, Microsoft faced similar investigations and was found to be violating antitrust regulations in the 1990s.
Competition is good. The more of it, the better. However, should a company be punished for developing a product that consumers value?
Even if the company does have a monopoly, they must continue to produce high-quality goods and services to maintain their market power.
The only way the monopoly could afford to be complacent is if it were protected by a government.
That is the reason Mark Zuckerberg and Facebook are practically on their knees, begging to be regulated so that the regulations will deter competitors from entering the marketplace.
Time will tell if the regulators find enough evidence to punish the tech firms by fining them or breaking up parts of their companies.
One thing is for sure: The market is a little nervous. The hit to tech stocks proved this. It is an important business story to follow because it has ramifications for the health of the entire economy, and consumers everywhere.