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March 15, 2022updated 16 Mar 2022 9:54am

Can fines break Big Tech monopolies?

Opinion is divided on whether financial penalties can stop tech giants' anti-competitive practices, or if they have become a mere ‘cost of doing business’.

By Afiq Fitri

When Apple incurred five consecutive fines from the Dutch competition regulator earlier this year, it surfaced a debate over whether financial penalties have any impact on Big Tech’s dominance of the digital economy.

Experts and regulators are equally divided. Some argue that despite their low value compared with the tech giants’ profits, fines apply pressure for reform. Others say competition law is entirely incapable of breaking digital monopolies, and radically new approaches are needed.

big tech fines
The expectations that fines will encouraged Big Tech to change their practices may be misplaced. (Photo by Thierry Monasse/Getty Images)

Big Tech fines: Regulators crackdown on digital monopolies

In the past decade, the astonishing growth of the tech giants’ market power has alarmed competition watchdogs around the world. Many have levied fines in order to punish and discourage monopolistic behaviour.

Since 2015, tech companies including Google, Apple, Meta, Apple, Amazon, and Qualcomm have collectively received antitrust fines totalling more than $30bn.

Google has been the target of the most fines, according to Tech Monitor’s analysis, with at least 11 financial penalties levied by competition authorities, including those in the US, the EU, South Korea and India.

Apart from Google, which lost its appeal over its shopping service and Qualcomm, which recently lost its case against the European Union, most of these companies are still appealing their respective cases.

But the utility of these fines came into question earlier this year, after the Dutch Competition Authority issued Apple with five consecutive fines for repeatedly failing to comply with its ruling on third-party payments in the App Store.

Even regulators themselves appear to be divided on the matter. In a speech last month, the EU’s head of digital policy Margrethe Vestager lamented Apple’s response to the Dutch fines. “As we understand it, Apple essentially prefers paying periodic fines, rather than comply with a decision of the Dutch Competition Authority on the terms and conditions for third parties to access its Appstore,” Vestager said.

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Isabelle da Silva, president of the French Competition Authority, is more positive. The watchdog fined Google €720m last year in two separate cases – one relating to the web giant’s ad business, the other to an agreement with publishers.

Fines are not just a ‘cost of doing business’ for tech giants, da Silva told the Financial Times. “Fines are an element of the identification of what is wrong in the conduct.”

In its most recent financial report, Google listed fines from the European Commission under ‘costs and expenses’, adding to the impression that tech giants view these fines as more of an annoyance than a threat.

And their investors may agree:  "[Wall] Street views EU investigations into Big Tech as a contained risk, which likely results in fines rather than business model changes,” investment analyst Dan Ives told Barron's this week.

The true cost of Big Tech's antitrust fines

Certainly, the fines seem like a drop in the ocean compared to Big Tech’s eye-watering profits. The five fines meted out to Apple by the Dutch regulator totalled €25m; the company’s net income for 2021 was, at $93bn (€84bn), nearly 4,000 times that figure.

But the financial value of such fines is not the whole story, says Dr Arianna Andreangeli, senior lecturer in European law at the University of Edinburgh. “These financial sanctions may appear minuscule in relation to the actual profits generated by Big Tech, but in fact, it’s much more onerous for the targeted companies in terms of the surrounding obligations that a decision imposes on them,” she says.

Compensation to claimants and the cost of monitoring regulatory obligation should also be factored in, Andreangeli adds.

Nevertheless, the expectation that fines will force the tech giants to change their business practices is misplaced, says Professor Pablo Ibanez Colomo, who researches competition law at the London School of Economics. “The hope that heavy fines on Big Tech will lead to the market changing and essentially self-regulating in accordance with the vision of authorities is, by and large, wishful thinking.”

Loosening Big Tech's hold on digital markets would require entire ecosystems to be restructured, Colomo argues, something that fines could never – and are not designed to – achieve. "When you want to restructure an ecosystem, you have to essentially regulate the whole ecosystem, and a fine does not fulfil that role."

Fines have some value in signalling a regulators' priorities, Colomo says. But "if someone believes that simply by heavily fining companies that Big Tech would fundamentally change, then there is a fundamental misunderstanding of what fines are supposed to do.”

In Europe, the proposed Digital Markets Act will shift the regulatory regime from one of ex post that punish bad behaviour retrospectively, to an ex ante approach that defines illegal practices upfront.

But even this, Colomo argues, won’t stop the tech giants from building monopolies. “You need a public utility regulator dictating what companies can and cannot do,” he says. “Whether we like it or not, this is something that has to happen if we’re serious about changing digital ecosystems run by Big Tech.”

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