In the past two weeks, two of the tech industry’s ‘big five’ companies have surpassed the $1,000 per share milestone. Just six days after Amazon reached the mark, Google’s parent company Alphabet followed suit. The second and third firms to break the $1,000 barrier, industry analysts hailed the achievement as reflective of a booming technology sector reaping the rewards of investment. But is there a danger of the big guys becoming too large for the pond?
The increasing dominance of Apple, Alphabet, Microsoft, Amazon and Facebook cannot be ignored. The question is: is the success of the ‘big five’ to be hailed as a capitalist success or should it be put down as unfairly monopolising the market?
Their increasing dominance is fuelling concerns about competition and data privacy and some corners are now calling on greater regulations to curb their growth.
Jonathan Kanter, a Washington-based antitrust attorney at Paul Weiss, believes that attitudes towards the ‘big five’ are slowly changing. "People are asking questions about whether the tools and principles that have been used previously are the right ones to continue using,” he said. "There are certainly lots of people who think that there needs to be some change."
But if change is to happen, it will have to happen soon. Google is expected to attract more than 40% of digital advertising dollars this year, while Amazon is on track to collect half of US online sales by 2021.
One suggestion has been to enforce European-like laws on these US-based companies. Over the last five or so years, the EU, and its member states, has clamped down on the ‘big five’ for everything from tax evasion to anti-competitive tactics. In 2013, the European Commission fined Microsoft for giving preferential treatment to its own browser, Internet Explorer. This year, it fined Facebook for providing "incorrect or misleading" information during its acquisition of messaging service WhatsApp. Just last month, Amazon agreed to the European Commission’s demands to stop enforcing contracts deemed anti-competitive for other e-book publishers. And Google’s parent company Alphabet has been forced to repay taxes in multiple European countries and is currently subject to an EU investigation into how its shopping services in search work.
“The EU actions show that there are things that could be done," Professor John Kwoka of Boston’s Northeasten University said. "Whether they would be a big deal or a little deal, it’s hard to know, but the EU has taken a crack at it and we’ve mostly taken a pass."
Kwoka also believes that stricter guidelines on mergers and acquisitions needs to be implemented to stop the ‘big five’ from snapping up its competitors. Lina Khan, also an academic from Boston published a paper this year which highlighted underhand tactics from Amazon before it acquired diapers.com. Amazon effectively priced diapers.com out of the market by selling its own product at a lower price, forcing the firm to accept its acquisition offer.
And what if nothing is done?
Likening the current share increase to a group of popular stocks called the Nifty Fifty in the 1970s, Mad Money host Jim Cramer said stocks reaching over $1,000 per share should be a ‘red flag’. He warned that accelerated growth cold leave investors bitter with the market. "This ‘Nifty Fifty’ concept went hand-in-hand with a blue-chip, buy-and-hold philosophy that said you didn’t need to touch these stocks as they would just keep going higher," he added.
And while the group, which included Coca-Cola and IBM, did not cause a full-blown crash, its effect left a lot of people unwilling to invest in the market at all.