TORONTO – 2021 has proven itself to be a watershed moment for the tech industry as it increasingly comes under aggressive antitrust and regulatory scrutiny from European and U.S. lawmakers. When it comes to America’s biggest tech companies, it seems like regulatory risk has never been higher.
Informed by her experiences as a bank analyst during the Dodd-Frank Wall Street Reform era in the wake of the global financial crisis, Capital Group Investment Analyst Tracy Li recently published her insights on the three largest risks facing big tech today.
Highlights from the report include:
- Privacy: Privacy and data transparency restrictions enacted by companies while regulation plays catch up have the potential to be more disruptive to the industry. Competitive advantages will likely accrue to those that have access to first-party data or data collected on proprietary platforms.
- Content: As bipartisan consensus builds around requiring internet platforms to increase transparency and reporting on content governance, compliance costs may rise and fines could be more frequent. However, these rising costs will also widen the competitive moats for the biggest companies.
- Antitrust: Similar to the “too big to fail” framework for banks, we may see a framework implemented for internet platforms where differentiated anti-competition rules are applied based on size.
Capital Group Investment Analyst, Tracy Li, closed her report with remarks “The major technology and internet platforms face a number of challenges ranging from privacy issues and content moderation to antitrust and regulatory pressures. However, I believe that concerns related to privacy or content may actually strengthen, rather than weaken, the moats of the largest platforms since these companies often boast well-established protocols and deep resources pertaining to privacy and legal matters. Furthermore, regulatory outcomes are difficult to accurately predict and often less important to determining company success than factors related to the business itself, particularly adaptability of the management, ability to develop new innovative products and services, and current valuations. By focusing on these metrics and closely monitoring legal and regulatory developments, it is possible to find attractive investment opportunities in the companies facing these pressures.”
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