Big Tech Is Getting Bigger, and That’s a Problem Politically

(bloomberg) – Hey y’all, it’s Austin. Big tech earnings season is upon us, and it’s coming at an awkward moment for Silicon Valley-Washington relations. President Joe Biden has promised to get tough on tech giants, whose immense power and profits have come under fire from the Democrat-controlled Congress, particularly as their seemingly pandemic-immune growth continues to outpace the rest of the coronavirus-battered economy.   

Nothing like a blockbuster quarter to draw unwanted attention from lawmakers and regulators. Over the next week or so, Inc. and Apple Inc. are each expected to report record-breaking quarterly revenue of $100 billion or more. Holiday advertising and lockdown-enhanced online engagement are also likely to drive big earnings for Facebook Inc. and Alphabet Inc., whose stock prices have soared since the pandemic’s March nadir.

Normally, the holiday quarter is a moment for celebration, but this is no time to spike the football. Success for the tech industry now serves as a stark reminder of its dominance. While brick-and-mortar retailers and restaurants go under, Amazon, Apple, Facebook and Google have collectively delivered a stunning $67 billion in net profit over the past two quarters.     

“These tech stalwarts are gaining more market share by the day,” Wedbush Securities analyst Dan Ives said this fall. “It’s A Tale of Two Cities for this group of tech companies and everyone else.”

Companies should be wary of antagonizing Biden, partly because no one quite knows what he’ll do. On the campaign trail, he was vague about his plans for big tech. He has generally derided the industry’s “overwhelming arrogance,” criticized the recklessness and abuses of social-media platforms and said he supports a repeal of Section 230, the legal shield that protects internet companies from liability for user-generated content published on their services. At the same time, many members of his administration have close ties to the biggest players in tech, and questions remain about how far he’ll go on antitrust enforcement.

An ominous sign for the Valley came last week when Reuters reported that Biden’s administration is considering creating a White House antitrust czar. And at the Federal Trade Commission, a frontrunner for a commissioner role is Lina Khan, who served as legal counsel for the House’s antitrust subcommittee investigation into U.S. tech giants, Vox reported.

Netflix Inc., which reported quarterly financial results last week, offered a clue of what to expect from other tech companies. Its letter to shareholders begins not with the usual chest-beating but with a note of sadness and compassion. “2020 was an incredibly difficult year with extraordinary loss for so many families, new restrictions that none of us have ever had to live with before and great uncertainty,” the letter reads. Expect the heads of Amazon, Apple, Facebook and Google to be even more conciliatory and fret loudly about competition. 

A new presidency usually marks a honeymoon period of well-wishes between the White House and business world. Indeed, the chiefs of Apple and Google have already lauded Biden’s action on immigration and climate change, while Amazon extended an offer to help with vaccine distribution. That could come to an abrupt end if the rich keep getting vastly richer, and the tech companies become politically toxic. —Austin Carr

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