Governance affects stock price
My blog article “How should investors view companies being included in the antitrust investigation list” published a few days ago caused a lot of feedback from readers. Take Alphabet (ticker:s: GOOGL and GOOG) as an example. If the company hadn’t been able to cooperate with the Chinese government’s supervision, if Alphabet had not withdrawn from China today, its market value would be at least 20% to 30% higher than it is now.. Because it should be able to steal most of Baidu (ticker: BIDU)’s advertising revenue, and its Google Play store and other products and services can also get more revenue from China.
The factor company can’t control
As I have repeatedly emphasized in section 4-1 of my book “The Rules of Super Growth Stocks Investing”; because government regulations and supervision are the most important of all the main factors affecting business operations, this is the only one is out of listing companies’ control, and this factor may have a fundamental impact on the business model of the enterprise and lead to lethal consequence.
Why they are under governance?
Due to the far-reaching influence of these technology giants in China and the United States, the impact on the lives of modern people has reached a pervasive level, forcing governments (mainly the United States, the European Union, and China) to take action on these technology giants. The progress of these antitrust cases varies. Some have reached final judgments or fines, but most of them are still undergoing lengthy investigation procedures or legal proceedings.
The governance cases big tech companies are facing
This article is mainly to introduce to you the major technology giants in China and the United States. So far, the major antitrust cases they have faced and the major regulatory cases from various countries, the date of filing, and the reasons for filing the case, as of today.
|Apple (ticker: AAPL)||Apple was ordered by a judge and ordered the App Store to open up external charging methods (9/11/2021)|
Apple’s investigation into a potential antitrust case boils down to only two: it has both an AppStore application provider and its own applications pre-installed on its own devices, and these applications directly compete with other applications on its platform. The UK launched an antitrust investigation against AppStore (6/14/2020). Tile accused Apple of violating fair competition with its platform advantage (6/6/2020). In addition to the United States and the European Union, Russia, the United Kingdom and South Korea are investigating Apple’s antitrust incident.
|Alphabet (ticker:s: GOOGL and GOOG)||Attorneys-General in 36 U.S. states sued the Google Play Store for monopoly and unequal clauses on the Android platform (7/6/2021) UK antitrust investigation against Alphabet’s privacy sandbox program (2021) The U.S. Department of Justice and the state attorneys prosecute allegations that Alphabet has pre-installed its search engine on browsers and computers and signed an exclusive agreement (10/20/2020) Colorado and other 38 states sued alleging that Alphabet signed an illegal agreement on a mobile phone to prevent competition from other search engines, and discriminated against those who want to use Alphabet technology to place digital advertisements (12/17/2020) Ten states including Texas are suing alleging that Alphabet has reached an illegal agreement with Facebook, and it can gain an advantage when placing mobile ads through Alphabet (12/16/2020) Alphabet has been investigated by the US and EU governments 18 times in the past 13 years, and China, Australia, India, Japan, and South Korea also want to file investigations (10/21/2020)|
|Facebook (ticker: META)||The United Kingdom and the European Union formally initiate antitrust investigations on Facebook due to data use that harms fair competition in the market (6/4/2021) The US Federal Trade Commission sued Facebook for acquiring promising competitors (Instagram and WhatsApp), preventing them from using Facebook’s tools and distributing content on the Facebook platform to suppress competing competitors who refused to be acquired (12/9/2020) New York State leads 48 state attorneys jointly sued Facebook’s acquisition of potential rivals and stifling emerging startups in violation of regulations on monopolies and regulations on mergers and acquisitions (12/9/2020)。The agreement between Alphabet and Facebook to jointly control the online advertising market, the code is called “Jedi Blue” for manipulating the advertising market, sued by the United States (10/17/2020) The settlement agreement reached between the Facebook Cambridge Analytica case and the U.S. Federal Trade Commission pleads for a $5 billion fine (4/25/2020) The Japanese Fair Trade Commission decided that when IT giants such as Alphabet and Facebook illegally collect and use personal information, the antitrust law shall be applied (3/11/2020) Germany ordered Facebook to self-regulate its data collection behavior because it involved abuse of its dominant market position (2/8/2020) Facebook paid nearly US$ 550 million in settlement for the abuse of face recognition in Illinois, the largest privacy settlement agreement in history（1/30/2020）Facebook is illegally collecting and improperly using personal information. South Korea, Britain, Germany, Russia, Italy, Turkey and other countries have imposed fines of varying amounts in 2020.|
|Alibaba (ticker: BABA)||Sesame Credit Agency asked to spin off from Ant and lower stake to 35% (11/26/2021) |
BNPL and consumer credit group asked to spin off from Ant, as a new company Chongqing Ant Consumer Finance (1/11/2011)
Domestic online retail platform service market abuses market dominate status, forcing manufacturers to “select one.” fine RMB 182 million（4/10/2021）。
|Tencent (ticker: TCEHY)||China’s State Administration of supervision bans Tencent from merging Huya and Douyu (7/9/2021)|
Tencent Music involves exclusive copyrights, bound applications, and the exclusiveness of the WeChat platform prevents competitors. Reuters revealed that China’s antitrust agency is preparing to issue a fine of less than RMB 10 billion to giant Tencent (5/24/2021)
|Meituan (ticker: MPNGF)||“Election One” is suspected of monopoly, and Meituan’s anti-monopoly penalty has been implemented: a fine of RMB 3.442 billion accounted for about 3% of annual revenue (10/8/2021)|
conduct in the implementation of “Selection One” (4/26/2021)
|DiDi (ticker: DIDI)||China requires Didi to be privatized and delisted from the U.S., or to be listed in Hong Kong (11/25/2021)|
“There is a serious violation of laws and regulations to collect and use personal information” as the reason, was notified
the App Store removed the “Didi Out” app (7/6/2021)
Congress increases supervision of the big four
The U.S. House of Representatives Judiciary Committee will complete a more than one-year antitrust investigation of the above-mentioned four companies in 2020. The four major technology companies have all been invited to the Congressional hearing to testify and investigate, and broadcast live worldwide. In 2021, the House of Representatives proposed five more important draft legislation to strengthen anti-monopoly enforcement. Apple, Amazon, Facebook, and Alphabet may be forced to completely change business practices:
- The American Choice and Innovation Online Act : Prevents the now common player and referee behavior; avoids technology platforms that allow their products and services to enjoy competitive advantages that their opponents do not have, or other types of discrimination.
- Ending Platform Monopolies Act: Customers must not be required to purchase services to enter the platform. In addition, platforms are prohibited from owning businesses with obvious conflicts of interest. For example, Amazon cannot sell Amazon Basics products under its own brand, Apple cannot provide Apple Music, or Google cannot provide special search services such as travel and shopping.
- Platform Competition and Opportunity Act: Avoid platforms with exclusive advantages from acquiring other rival companies that pose a “competitive threat.” Members of Congress have previously questioned Facebook’s aggressive acquisition of competitors.
- Augmenting Compatibility and Competition by Enabling Service Switching Act of 2021 (ACCESS): Establish data portability and compatibility, such as making it easier for users to bring their data to other platforms, or allowing merchants to import customer reviews into other platforms.
Facebook and Alphabet are more dangerous
In the monopoly case of the four major technology companies in the United States, Facebook and Alphabet are under the greatest pressure, because many of their products account for more than half of the market, and the necessary conditions for market monopoly are obvious. In addition, most of their revenue comes from digital advertising, and digital advertising is extremely dependent on the tracking of user data, which involves the privacy of customers. In recent years, it has caused many negative comments and seriously hurt the corporate image of both. The basic allegations of these lawsuits against the two companies are very much the same, that the tech giants used their far-reaching influence to curb competition and maintain market dominance.
The surveys of Apple and Amazon are very similar. Both have less than half of the market and are under less pressure. But the point is that they both have their own market trading platform (AppStore and online e-commerce market), and have their own pre-installed applications (Apple) or products on the shelves (Amazon), directly competing with third-party customers, so It was the player and the referee who was questioned, obviously trying to benefit himself. It is really not easy for the two companies to dispel this accusation.
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