Back in October 2017, the cover of Baron's Featuring a heavy mallet lying with a mash-up of the Big Tech logo. At the time, the push to regulate and even break up tech companies was gaining momentum. Given the countless regulatory efforts, it was a glorious story.
Press conferences and several high-profile hearings were held under the leadership of both the Democratic and Republican Congresses. There are written reports from congressional committees. There have been investigations and trials. In the end, nothing happened.
Seven years later Baron's Core, Big Tech is as dominant as ever. Microsoft
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apple
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Amazon.com
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Meta platforms
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And Alphabet comprises 25% of the S&P 500. Upstart Nvidia and six of the biggest tech companies now make up 32% of the large-cap index.
To be sure, there are still important cases in the courts, including the Justice Department's case against Google, which is expected to be decided by a US District Court judge in the coming months. If the search company is monopolized, it may force Google to change its behavior. But the market is already taking care of that.
Google's search business is at risk for the first time in 20 years, as artificial intelligence gains traction. The company has a lot of new competition from big tech firms like Microsoft to startups like OpenAI and Perplexity.
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Any decision by the court may be obsolete by the time it is enforced, especially with the inevitable appeals period.
Meanwhile, the government's day-to-day ability to regulate tech suffered a blow late last month when the Supreme Court overturned a long-standing doctrine known as Chevron Deference, which allowed US agencies to use federal law. Provided scope for interpretation and formulation of laws based on . In overturning Chevron, Chief Justice John Roberts wrote that “courts cannot defer to an agency's interpretation of a statute simply because a statute is ambiguous.”
The decision is likely to reduce regulation across the board, according to Blair Levine, chief of staff at Reed Hunt, a policy analyst at New Street Research and one-time chairman of the Federal Communications Commission.
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“The general implications of the decision are that courts have more power and are more likely to overturn regulations,” he wrote to clients shortly after the ruling.
No matter what you think about government regulation, the elimination of Chevron's rule will add to the complexities facing regulators and companies.
For investors, that brings an unwelcome reality: years of uncertainty.
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“I can usually predict with some confidence what the five FCC commissioners will do,” Levine told me recently. “I cannot predict with confidence what any unassigned single district court judge will do in any given situation, unless I know who the judge is.”
“Making sustainable investment decisions will be much more difficult,” Levine says.
Critics of the Chevron precedent claim that it stripped Congress of its constitutional powers. So the judicial decision should transfer the power back to the legislative branch. But Levin, who helped oversee enactment of the 1996 Telecommunications Act, sees the opposite, with a Congress that ends up with little real-world impact.
Levine says Congress has often found a compromise, by moving controversial rulemaking to federal agencies. It will not be able to fly without the chevron.
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The end result could be more gridlock. “Congress's incentives are exactly the same as they've been, with the exception that the real-world impact is less likely now,” Levine says. “So incentives are actually reduced.”
Public support for tech regulation remains strong but steady, with 51% of voters in a recent Pew Research Center poll saying they support more regulation of big tech companies — as of 2018.
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For one example, “Both sides of the aisle believe that social media has a negative impact on the way things are done in the country,” Monica Anderson, Pew's director of internet and technology research, tells me. .
So why hasn't Congress acted? My view has long been that Big Tech companies, while powerful and sometimes competitive, provide services that consumers cannot live without.
Politicians play it up for the cameras, but ultimately no elected official wants to be responsible for constituents' free Gmail accounts, their easy and cheap Amazon shipping, or their access to family and friends through social media accounts. .
Artificial intelligence could prove to be a wild card. It has already changed the investment landscape. It could also soon change the regulatory climate. Public support for data privacy laws is particularly strong—and has limits on both sides of the aisle, Anderson notes.
An October 2023 Pew study found that 72 percent of American adults support more regulation of consumer data usage. Only 7% of those surveyed sought less regulation on the consumer data front.
Meanwhile, AI is upending traditional political dynamics, with 75% of Democrats and 59% of Republicans worried that the government will do too little to regulate chatbots.
The fear of AI may be one thing we can all agree on.
Write to Alex Eule at alex.eule@barrons.com