As investigations reveal, big techs were engaging in practices that hurt startups and users’ privacy. Governments are retaliating by slapping them with fines and new tough regulations.
Big techs around the world have had their best moments yet in the last few years. In a very short time, they recorded exponential growth in business and are worth billions of dollars. Some of the big techs recorded an increase in profits during the coronavirus pandemic.
Big Techs Becoming A Major Threat To Governments Around The World
Due to their technological innovations and advancements, they have wielded enormous power and grown in a manner that has become a major threat to governments around the world. Regulating their growing power, data privacy issues, and curbing their stifling impact on startups have become one of the major agendas in regulatory technologies. And it doesn’t seem unfair that governments around the world want “a slice of the cake”.
Investigation Revealing Shady Results
Investigations into the big tech business practices revealed some shady results. The EU, where data privacy is a major concern, discovered that Facebook Inc. was harvesting users’ data without ensuring sufficient privacy security.
New Regulation Under The Digital Servies Act Of The European Union
But the EU wants something more than the privacy of the data collected. In a newly drafted regulation under the Digital Services Act of the European Union, big techs are now to share their harvested data within the continent with EU companies. Companies in the EU depend on Facebook for their businesses. Google, Facebook, Apple, and Amazon, known as the “Big Four,” would not be allowed to collect data in the EU should they fail to share the data with companies in the Union.
Other Rules That Big Techs Will Have To Adhere To
Should the big techs satisfy these requirements, there are yet other rules. Big techs have some competitive edges over startups that are also being reviewed. This additional rule is expected to place the companies in the EU at a level-playing ground with startups.
According to the new rule, big techs must ensure that mobile phone users have the freedom to uninstall apps they do not want anymore. Some apps cannot be uninstalled in smartphones, a practice that gives the companies an edge over others.
“Gatekeepers shall not pre-install exclusively their own applications nor require from any third-party operating system developers or hardware manufacturers to pre-install exclusively gatekeepers’ own application,” said the paper as reported by WSJ.
Antitrust Investigation Launched By The EU Against Amazon
An outcome of a long antitrust investigation launched by the EU against Amazon, if it is successful, may become one of the most expensive fines to be bagged by a tech company in the fight to curb big tech supremacy.
Amazon Engaging In Anti-Competition Practices
The investigation suggested that Amazon was engaging in anti-competition practices, making it difficult for startups to challenge them. The EU has argued that such actions amount to anti-creativities and innovation which set them as behemoths over startups.
Owing to this discovery, Amazon was slapped with a fine of 10 percent of the giant’s annual revenue amounting to $28 billion. The company’s annual revenue is about $281 billion.
Big Techs Struggle To Meet Regulations In Other Places
Elsewhere around the world, big techs are also having a hard time with tough government regulations. Xi Jinping’s China also initiated regulations that will crackdown on the growing influence of big techs. In a recent development, Xi ordered a halt of Ant Group’s Initial Public Offer (IPO) worth a record-breaking $37 billion, an amount that would have been the highest offer to be received in an IPO in history.
According to Wall Street Journal reports, Xi appears to be uncomfortable with the growing influence of fintech and private businesses in the country as he perceived them as threats to his government.
The Chinese business magnate, Jack Ma, Ant Group’s boss, at a Bund Summit in Shanghai on October 24th, spoke against international banking regulatory policy saying they were not suited for healthy innovations. He said that with such regulations in the application, there is a risk not only to “lose the present but also the future.”
Ma said that the current international financial regulations are pitted to manage risks and not for innovations. He referred to the Basel Accord as a club for the elderly that can only solve problems of the aging financial system that has been in operation for decades and the problem of system complexity.
WSJ suggests that Xi’s action against the fintech giant was intended to punish what the government considered as a provocative comment from Jack Ma.
China Introduced Regulations Aimed At Diminishing Influence Of Tech Giants
China has also made regulations that are expected to diminish the supremacist influence of tech titans. Among the six interim regulations put out by China Banking and Insurance Regulatory Commission and the People’s Bank of China for online micro-lending, the second one states: “…online microfinance business should be mainly carried out in the provincial administrative region of the registration place and cannot be carried out across provincial administrative regions without the approval of the China Banking Regulatory Commission Online microfinance business.”
Following this new regulation and the suspension of Ant Group’s IPO, stocks of tech companies plummeted. Alibaba’s Hong Kong shares fell by 9.8 percent while Tencent dipped by 7.39 percent. Xiamoi’s shares also downed by 8.18 percent.
Big Techs thrived by engaging in risks driven by innovations. The new regulations may have high consequences on the new industry which is likely to place pegs to the capacity and rate of their growth. This could have an impact on the fintech market by scaring investors and creating a vicious cycle of impaired growth.
Investors may decide to invest in other viable industries like biotech, quantum computing, or the aviation industries. But this may also be good news for startups that will leverage such regulations to grow.
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