The Rise of Big Tech: From Industry Giants to Market Disruptors

October 4, 2024

Editor(s): Michael Chen

Writer(s): Sammi Lam, Nathan Ang, Yitong (Tina) Ma

From the rise of the internet to the birth of the social network, technology has been a driving force behind economic growth in these last few decades. At the forefront of this looming wave of technological development are the ‘Big Tech’ names, often referred to as FAANG (Facebook, Apple, Amazon, Netflix, Google) or MAMAA (Meta, Apple, Microsoft, Amazon, Alphabet). These names need no introduction as chances are, you’re viewing this article from an Apple Macbook or Microsoft’s Windows OS. You may have even found this article through a Google search or through Instagram, owned by Meta. The reach of these companies is evidently enormous, as the companies included in MAMAA make up more than $10 trillion of the S&P 500’s total market capitalisation of $44 trillion–implying that these 5 stocks alone account for 22% of the index. But how exactly did these companies get so large? What allowed them to be as large as they are now?

From Big to Bigger: The Formula for Lasting Dominance

The ascent of Big Tech from industry giants to dominant market players stems from several key factors, each reinforcing their continued growth and influence. Whether it be through their established network effects, brand power or intellectual capital, competitive advantages are a commonality between these companies. 91.47% of all searches come from Google, 72.17% of the desktop OS market is owned by Microsoft and Meta dominates the social networks with 3 billion monthly active users on Facebook. 

Market capitalization of the largest internet companies worldwide as of August 2023

However, this only explains one small part of the story. The real major driver of growth in these companies has been through their extensive list of mergers and acquisitions that these companies have completed. For example, Apple was initially a hardware business that had only picked up its growth after its acquisition of NeXT –developing the foundation for Mac OS X. Amazon was originally an online book retailer, but has now continued its business as an online marketplace, with additional ventures into Cloud Computing and AI. These accumulations of acquisitions have allowed these companies to inorganically expand their operations, whilst also culling potential competitors. The easing and outdated nature of antitrust laws has also been argued as a key factor in allowing monopolies to form and thus dominate the market.

History of acquisitions for Apple, Amazon, Google and Facebook

Antitrust lawsuits in the past 

Antitrust lawsuits are commonly tied to big tech in headlines and news reports, with the ‘Big Four’ companies being brought to court time and time again. While it’s not illegal for these firms to possess large market power, the antitrust laws come in to keep them in check when they toe the line of unfair competition . 

Antitrust laws are a set of laws designed to keep competition fair and prevent companies from abusing market power or limiting other competitors unfairly. If found in violation, the respective bodies will take action. In Australia, competition laws are enforced by the Australian Competition and Consumer Commission (ACCC). However, in the USA where the majority of big tech companies operate, the Federal Trade Commission (FTC) and the Department of Justice wield the responsibility to enforce antitrust laws. 

Big Tech firms are often under the spotlight of antitrust lawsuits, have committed dubious business practices to forward the company growth and keep market control. The most recent notable case being the Google Landmark Antitrust case and a similar case of the Microsoft 1998 antitrust lawsuit, both possessing remarkable and familiar parallels.

Alphabet’s Google was investigated by the Department of Justice in the US for monopolistic practices with a particular focus on their search engine. The Department of Justice put forth allegations of artificially inflated prices resulting from Google’s monopolistic practices despite an inadequate investment in time and money to improve their product, thereby harming consumer’s interests and competitors. On the other hand, Google defended itself in court against the allegations arguing consumers can and have changed search engines when dissatisfied, citing Yahoo as their example. Google was ruled by the judge as a ‘monopolist’ and had ‘acted as one to maintain its monopoly’, thereby in violation of antitrust laws. The firm was found to have violated antitrust laws and unfavorably competed through making exclusive deals with Apple and Samsung to have Google’s search engine as the default in their devices, paying upwards of $26.3 billion USD to remain the default search engine in 2021. These anti-competitive agreements unfairly oppressed the competition amongst start-ups and smaller search engine businesses. 

Then-Microsoft CEO Bill Gates during a hearing in 1998

A similar and equally impactful case is the 1998 United States vs Microsoft Landmark antitrust case. This case was also brought forth by the Department of Justice in comparable circumstances, where Microsoft was investigated for its browser software on the grounds of monopolistic and anti-competitive behavior. In a competition with its largest competitor, Netscape, Microsoft resorted to bundling its software programs into its computers for free as a means of presenting a default option to consumers. This ultimately led to the fall of Netscape and was alleged as a harmful practice that prevented businesses in the software industry from being able to compete fairly and limited the options of consumers. Microsoft, in defense, argued these allegations stemmed from a place of jealousy from competitors and that consumers preferred Microsoft products anyway as opposed to its competitors’ softwares. A prime argument from Microsoft was that antitrust laws limited the growth and success of businesses, making firms less competitive as opposed to its counterparts in other countries that are held to more lax antitrust laws. Ultimately, the judge ruled Microsoft in violation of antitrust laws and that Microsoft constituted a monopoly. Microsoft was ordered to break up into two separate entities, but this was not enforced after the Department of Justice settled with Microsoft in 2001. In the end, Microsoft was banned from making exclusive deals with computer manufacturers and internet providers, and further forced to disclose its source code with software developers to allow their apps to be accessible in Windows.

Future of Big Tech

After being found in violation of antitrust laws, Google now faces a series of potential restrictions that could significantly alter its business model and competitive position, with remedies ranging from structural changes to ongoing regulatory oversight. While a breakup of the company is considered unlikely, potential measures could include divestitures of Google’s ad-tech business, separating its ad buying and selling operations, or imposing behavioral restrictions and data-sharing requirements. These actions intend to reduce Google’s control over search engines and advertising markets, potentially leading to a reconfiguration of its parent company, Alphabet, with implications for its long-term dominance.

Despite the severity of these potential remedies, industry experts believe that Google’s case is unlikely to set a precedent for similar actions against other tech giants like Apple, Amazon, or Meta. This is due to the antitrust issues at the heart of Google’s case being distinct from those facing its peers, where Google’s monopoly relates specifically to its dominance in search services, whereas other Big Tech firms operate under different business models that present unique regulatory challenges. For instance, the Federal Trade Commission’s (FTC) case against Amazon centers on the company’s use of self-preferencing – promoting its own products over third-party sellers on its marketplace – is viewed more as a traditional retail dispute over a digital monopoly issue, as it involves allegations of unfair competitive practices rather than outright market control. Similarly, the case against Apple focuses on its App Store practices, such as restricting competitor access and imposing high commission fees – policies that the government argues disadvantage developers and reduce consumer choice. However, Apple’s dominance is more challenging to litigate than Google’s search monopoly because it is rooted in product integration and platform exclusivity, rather than control over a single market.

Ultimately, while Google’s ruling marks a significant win for antitrust regulators, it is unlikely to reshape the broader tech landscape. The penalties may include adjustments to Google’s business practices, but regulators appear more focused on promoting competition through transparency and interoperability rather than breaking up Big Tech firms.

References: