(Bloomberg Opinion) -- When U.S. antitrust laws were first written more than a hundred years ago, the word “data” had a slightly different meaning, referring mainly to facts and manually-compiled information. You didn’t hear it much in everyday language, and it certainly wasn’t associated with trust-busting. In the digital world of today, it’s come to mean the measurable tidbits and inputs that add up to make every program and app — and thus much of the world’s economy — function. And the fact that it isn’t anywhere to be found in antitrust rules is a big problem.To have data is to have power, and collecting it is the lifeblood of four of the most valuable companies in America: Facebook Inc., Google, Amazon.com Inc. and Apple Inc. Together, they are worth more than $5 trillion by market cap. That’s like adding up the market values of Walmart Inc., Johnson & Johnson, JPMorgan Chase & Co., Procter & Gamble Co., Pfizer Inc., Coca-Cola Co., Exxon Mobil Corp., Nike Inc., McDonald’s Corp. and Walt Disney Co. — and then multiplying that sum by two. Calling it “Big Tech” doesn’t even do it justice.These leaders of social-media, online-search, e-commerce and smartphones are so embedded in consumers’ lives that it’s nearly impossible to avoid interacting with them on a given day and handing over reams of data, all for free, in the process: Checking emails, “liking” a post about Taylor Swift, clicking on an enchiladas recipe, joining a group for novice knitters, searching for bug spray and new eyeglass frames, looking up the UPS store’s hours and directions to it, downloading a fitness app and geo-tagging a selfie at the beach — innocuous activities that are meticulously tracked to build a profile of who you are and predict how you’ll spend your money.That power hasn’t gone unnoticed by regulators, Congress and other critics, many of whom wonder whether the companies’ dominance is a sign that current antitrust laws have come up short in regulating this relatively new industry. The answer is, they have — and that’s not all that surprising considering current laws were written with largely traditional businesses in mind, in which a tangible product or a service is built using suppliers and then sold to an end user. How Big Tech makes money can feel a bit more nebulous to an outsider, as well as who exactly is hurt by some of the industry’s practices. Their customers are advertisers and other large and small businesses. The product is, well, you.Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Apple’s Tim Cook and Sundar Pichai of Alphabet Inc., Google’s parent company, appeared last Wednesday over video chat before a Congressional committee that’s investigating whether the industry has a monopoly problem. The Federal Trade Commission is also examining whether past acquisitions by these companies were anticompetitive. The industry doesn’t see it that way; when the members of Congress pointed to known instances of data misuse or overreach, the CEOs often chalked it up to one-offs or minor mishaps, rather than patterns of harmful business practice aimed at squelching competition. Where critics see an anticompetitive move, Big Tech sees a noble effort to improve service for consumers.It’s time that antitrust laws were updated so that regulators can better chaperone the industry — and its treasure trove of data — for it is both an immense intellectual and economic national asset and an opaque force with the power to capitalize on unknowing consumers and suppress rival businesses. Even with the best of intentions to create beneficial services that keep the world connected and informed, the result of Big Tech having such unchecked power over reams of valuable information has been to leave consumers and third-party partners comparatively powerless.Amassing so much data isn’t inherently anticompetitive — nor does it directly hit people’s wallets — but regulators need to look at how it’s collected and used and take action when competition is harmed in the process. Amazon makes for the simplest example of how it can become problematic: The company has been accused of using the highly detailed information it gathers from sellers on its marketplace to inform what products to make for its own private label, AmazonBasics, and to undercut the competition. That’s a major conflict of interest and an unfair advantage over third-party sellers, but there’s nothing those sellers can really do about it — Amazon is practically the only game in town. (Would any reasonable person consider Etsy Inc. or even EBay Inc. to be substitutes?) Bezos said using seller data to aid Amazon’s own brand would be a company violation, but he didn’t deny that it happens and said he’s looking into the issue.This type of accusation against Amazon is the clearest example of monopoly power. Others aren't so clear-cut. My colleague Tae Kim summarizes more of the complaints about the companies here and explains why issues around Google are particularly thorny. This is precisely where the U.S. antitrust framework gets tripped up by the digital-data industry. Take the U.S. guidelines on mergers, which state:A merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.Rising prices are the most obvious way mergers can be harmful. But small acquisitions by Big Tech tend to fall into that all-encompassing “otherwise harm” category described above. Facebook’s 2012 takeover of Instagram was harmful because it left social-media users with few alternatives, forcing them in effect to accept the company’s terms and further widening its lead over newcomer apps. Even if regulators couldn’t have predicted this at the time, it’s indisputable now that Facebook dominates social media and that spinning off Instagram would restore competition. (It would probably be good for shareholders, too, as Tae Kim has argued.)The FTC says that antitrust laws were intentionally written in general terms, allowing them to be broadly applied and interpreted in changing times on a case-by-case basis. But it may be that they are overly broad to the point of being antiquated, or at least not specific enough to effectively govern Big Tech. For example, the idea of “prices” should also include the price social-media users pay — the level of data they must fork over and the loss of control they have over that data. Another steep price that can be paid in the digital era is a privacy breach. Facebook’s controversies involving its data aren’t merely public-relations matters — they stem from competitive dominance and insufficient regulatory oversight.Antitrust enforcement also comes down to how regulators define markets. “In the absence of price competition, market definition can be difficult,” Makan Delrahim, the head of the Justice Department’s antitrust division, said in a November speech regarding the data industry. “Antitrust enforcers may need to play an even greater role in zero-price markets,” he said. Rather than a zero-price market, Google and Facebook would argue that they compete healthily in the $333 billion global digital-advertising space, with Amazon nipping at their heels in the U.S. and Apple’s devices serving as conduits. But the ad market provides an incomplete picture, and that framing implies these companies are merely a powerful foursome. Defining the market more narrowly — and more accurately — shows how each one has instead become a monopoly of sorts, having carved out its own silo with few, if any, true competitors.Advertisers may regularly adjust how much money to allocate to each site, but they generally need to be present on all of them. Facebook provides the ability to target ultra-specific subsets of people. Google isn’t just a search engine, it’s the primary verb people use for search, and it further feeds that dominance by scraping useful information from other pages, making its products priority destinations. For sellers of goods, Amazon’s marketplace offers the best reach. App developers don’t have much choice than to agree to the Apple app store’s onerous terms and fees. Consumers don’t pick and choose between these products and services either — they must use them all or accept life under a rock. Regulators would also be more effective if antitrust laws specified how data can be used and with what limitations, as well as requirements for safeguarding it. That would prevent Amazon from having such porous walls between its marketplace and internal brand. It could put an end to Google’s practice of paying to keep its search engine dominant and being able to direct so much traffic toward its own sites. Data should no longer be thought of as just an input for effective advertising, but rather the focal point of the question of whether Big Tech has too much power. If the answer is yes, and the remedy is creating an environment that would allow more Instagrams and Googles to flourish, wouldn’t everyone benefit? This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Most income investors are likely familiar with the Dividend Aristocrats -- elite members of the S&P 500 index that have raised their payouts annually for at least 25 straight years. But there's an even more rarefied rank (though one not restricted to S&P 500 members).
(Bloomberg Opinion) -- Intellectual property is a convenient fiction. It is a right enforced by state power and international agreements, one that’s even more fragile than other forms of property rights since it’s not tangible. We choose to believe this fiction because we also believe that intellectual property adds to general welfare. It permits innovation and growth, and supports writers, artists, inventors — and pharmaceutical companies.But crises upend beliefs and we are in a crisis at the moment. We should all hope the tradition of treating intellectual property as a real thing survives the pandemic. That hope must be especially keen among the companies most at risk if the myth breaks down: the pharma industry.Nothing is more likely to test this consensus than hints of profiteering off the war against Covid-19. A Financial Times report that the U.S.-based company Moderna Inc. has sought to price its vaccine candidate around $50-$60 per course, for example, has shaken public health establishments across the world. The story also suggested that while Moderna might offer developing countries a lower price, rich countries would get privileged access to the vaccine.Let me tell you the consequences if that happens and Moderna’s vaccine performs better than its cheaper competitors: The patent on the vaccine will be widely ignored. The consensus on intellectual property, painstakingly built up over time and spread worldwide over the past two decades, will be busted.I don’t want to single out Moderna here. It doesn’t have a single successful commercial drug, nor any other Phase 3 candidates; its need to make money off this vaccine is arguably acute. Larger drug companies are different. Yet Pfizer Inc.’s CEO recently said that calls for companies not to consider making a profit on their Covid-19 vaccines were “fanatic and radical.” (AstraZeneca PLC and Johnson & Johnson have promised a not-for-profit effort on their Covid-19 vaccines, so Pfizer clearly has an odd definition of “fanatic and radical.”)If a vaccine proves too expensive or difficult to obtain, those who seek exorbitant profits off of it will be scrutinized far more closely than bankers were after the 2008 crash. Actions like those that have already allowed insiders to pocket $80 million will provoke public revulsion, even if those trades were pre-scheduled. Calls to regulate sectors that take for granted intellectual property protections will grow exponentially. Those demands won’t be fanatical or radical, but mainstream.It will be hard enough to preserve the myth of intellectual property within rich countries. Once international capital flows are involved, it’ll be impossible. Cash-strapped governments around the world are not going to pay tens of billions for vaccines needed to save the lives of their citizens. Any attempts to collect using the traditional trading and legal architecture will be ignored — and will indeed lead to those institutions being seen as discredited or even immoral.There is a lesson here that goes beyond the pandemic. If we are not sufficiently careful over the next decade, one likely economic future consists of tech lords, data czars and algorithm owners sitting in the U.S. or in China soaking up rents and payments from consumers in the rest of the world. That is simply unsustainable. Asian, African and even European governments will step in and prevent those streams of payments from being made. Global intellectual property requires the consent and enforcement of every state, not just one government. That consent will not be given if the capital flows involved appear to be one-way and permanent.A world without global intellectual property would be one of constant electronic warfare. State-backed hacking, such as China apparently tried with Moderna this week, would be a constant threat. Nor would companies enjoy a comfortable relationship with their own governments, who would see them less as engines of growth and more as storehouses of national wealth and security. The days before copyright were tough. When the Murano glassmakers’ industrial processes were considered state secrets in the Republic of Venice, the doges would kill any artisan who left the island.That isn’t a world we want to live in. It’s up to pharma companies and rich-country governments to ensure that we’re not forced to do so. The World Health Organization has asked those with relevant intellectual property to sign up to the Covid-19 Technology Access Pool, which will make vaccines broadly available across the world. Too few have.Perhaps, as some pharma companies have done, IP holders can make it clear they will only seek to profit from their vaccines once the pandemic is over. A little patience would serve them — and the world — well in the long run.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mihir Sharma is a Bloomberg Opinion columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.