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The heads of four of the U. S. s biggest technology companies Alphabet Inc., Apple Inc. , Facebook Inc., and Amazon. com Inc. appeared before Congress last week to respond to criticism that they have too much market power. The hearing showed that lawmakers are beginning to understand what is and isn't important when it comes to regulating these large businesses. And it also showed an increased focus on the most important area of antitrust policy mergers and acquisitions and whether regulators have exercised enough vigilance. In recent years, Big Tech has become ever more important to the U. S. economy and U. S. financial markets. The five biggest tech companies (the four that testified, plus Microsoft Corp. ) now represent more than one-fifth of the market capitalization of the S&P 500. Their value has only risen in the coronavirus pandemic: When a few companies get this big and dominant, it makes sense to think about how they might be using their size to unfairly control markets. One typical defense against such allegations is that tech companies are not monopolies. Whether this is true depends on how markets are defined, for example, Google is overwhelmingly dominant among search engines, but has only about a third of digital ad revenues. Facebook Chief Executive Officer Mark Zuckerberg argued that his company faces intense competition in many markets, especially from the other top tech companies. But focusing on whether a company is a monopoly misses the point. Oligopolies, where a few big companies dominate the market, also tend to wield some degree of market power. In theory, that can allow powerful players to jack up consumer prices, underpay workers, and squeeze suppliers. In the case of Big Tech, consumer prices are generally not the issue. Services provided to consumers by Google and Facebook tend to be free, while Apple's fat margins stem mostly from consumer willingness to pay a lot for the brand value of an iPhone.
