Big tech companies are surprisingly flexible in how they exercise power over the development and control of technology. An empirical study by Aline Blankertz, Brianna Rock and Nicholas Shaxson shows that Google has an investment strategy that is shaping the global digital landscape ahead of all other established tech companies. While public attention and some competition law investigations have focused on mergers, Google has also built an empire of more than 6,000 companies that it has acquired, supported or invested in, both in the digital sector and beyond.
The study traces how methods of neoclassical economics hinder competition authorities from recognizing the concentration of market power, especially in vertical and conglomerate form, i.e. along value chains and in ecosystems. This mistake is clearly evident in the analysis of past mistakes such as the mergers between Google and DoubleClick (an advertising data platform) in 2008 and between Google and Fitbit (a fitness tracking device manufacturer) in 2020, which were found to be unproblematic under competition law. No lessons have been learned from these mistakes; instead, the blindness towards vertical concentration of power persists: competition authorities are not even examining Google’s extensive investments. It is also becoming apparent that Google will significantly expand its power by acquiring the cloud cybersecurity provider Wiz for USD 32 billion, at a time when the US government is also using this power for geopolitical purposes.
The past mistakes indicate a need for different analytical tools. Specifically, there are approaches that can overcome the capture of economic analysis by IO. The tools from accounting and financial analysis (AFA) are better suited to ground the analysis of vertical integration and conglomerate market power in business realities. Using AFA would make it easier to shift enforcement away from currently ineffective approaches such as behavioural remedies and towards structural interventions such as merger prohibitions.
Tech expert and author Cory Doctorow has commented on the investigation in an article on “The 40-year economic mistake that let Google conquer (and *enshittify*) the world“. In it, he explains in detail, even for people with no prior knowledge of competition policy, what vertical integration is and why competition authorities urgently need to recognize it as a problem both in Google’s investment strategy and in the announced takeover of Wiz.
Picture by Cory Doctorow
