Effects of Antitrust Action on the Tech Industry

Effects of Antitrust Action on the Tech Industry
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Abstract
The primary objective of antitrust regulations is to promote intense competition and protect consumers. Thus, valuable rivalries among firms trigger innovation and the introduction of new products. This is because businesses will always aim at outdoing their competitors to protect their market share from challenges in the future. Consequently, real rivalry among firms enhances innovation. On the other hand, business acquisitions and mergers tend to reduce the need to be the best in an area where two businesses make similar products. Thus, the resultant effect is reduced innovation incentives. After attempting to answer the main result questions to meet the study's objective, this study came up with a conclusion. The final remark of this study is that antitrust actions need more constitutional support to help reduce competition, increase innovation, and promote consumer welfare.
Introduction
The tech industry plays a significant role in human life by providing new and efficient capabilities. Companies like Google, Facebook, and Amazon have impacted people's lives for decades (Khan, 2016). On the contrary, the continued and accelerated rate of innovation has allowed companies to devise their own rules. For instance, firms in the tech industry, experiencing fast technological change, can exploit consumers, use it for their advantage, and even minimize possible competition. Therefore, the impact of antitrust action on the tech industry can be significant (Posner, 2017). While it may not be the only factor influencing the industry, it can significantly impact competition and the sector's overall health. Thus, antitrust measures can lead to more competitors in the tech industry, benefiting consumers (Balto & Pitofsky, 1998). It can also lead to higher prices for some products and services, which can disadvantage consumers. However, antitrust action can be a positive force for the tech industry. The tech industry will need to be more transparent and responsive to customer needs, which will be a challenge for the industry.
On the other hand, the antitrust action against the tech industry is a significant event and will profoundly impact the sector. In addition, firms are likely to change how they operate, influencing how they develop new products and services. Therefore, this work explores antitrust action's effects on the tech industry.
The tech industry has been subject to antitrust action in recent years. On one occasion, the European Union fined Google a fine of almost 2.4 billion pounds in 2017 (Posner, 2017). The main reason for the penalty was due to abuse of market dominance. This work explores the impact of antitrust action on the tech industry. Thus, it will look at how antitrust and regulations affect the competitive landscape and the activities of the companies involved. Therefore, this investigation is crucial because it will provide insights into how antitrust action can impact the tech industry.
Similarly, the research seeks to discover whether these actions are effective in curbing the monopolistic practices of these companies. In addition, this work will be necessary for policymakers considering engaging in antitrust activities against tech companies in the future. Furthermore, the industry will be forced to change how it develops new products and services. Besides, the industry could significantly impact how it interacts with its customers. This work will therefore seek to answer the various questions concerning the topic. First, how will antitrust action in the tech industry affect the ability of firms to innovate? Secondly, what are the effects of antitrust actions on the power of firms to compete? Finally, to what extent do antitrust action in the tech industry impact consumers?
Analysis
Theoretical Analysis
Innovation
Competition plays a significant role in enhancing innovation and distributing its benefits to consumers (Glader, 2006). In most cases, there is more belief that antitrust regulation curtails technological improvements. On the other hand, some sectors, like the tech industry, play an essential role in facilitating integration. Thus, many firms rely on continued innovation in these areas for growth. That being said, a competitive environment is vital in fostering innovation (Gilbert, 2006). However, monopolies are likely to suppress competition and predatory behavior, reducing possible future innovation. Therefore, that's where the antitrust organizations become imperative by implementing legislation in the tech industry.
According to Schumpeter's theory of creative Destruction, technological competition drives an increase in profit margins which encourages firms to continue innovating until they achieve monopoly profits (Tülüce & Yurtkur, 2015). The framework further asserts that these companies will have to maintain their monopoly power through factors other than improving the technology. The means through which these firms inhibit potential threats include predatory pricing, and product bundling, among others. Therefore according to the theory, depending on the market forces to end the monopolies could result in less desirable effects.
Antitrust laws influence innovation by encouraging firms to compete with each other to develop new products. The case of Glaxo and Burroughs Wellcome companies competing with oral drugs for treating migraine demonstrates how the antitrust laws can promote innovation (FTC, 2021). Thus, the regulations may foster a firm to divest its research and development assets to another firm. This ensures continued competition in the market for new products and encourages firms to continue to innovate. The antitrust laws also enable firms to innovate by incentivizing them to develop new products that are not substitutable for existing products. In the Glaxo case, the antitrust laws encouraged Glaxo to create an oral drug to treat migraine attacks (FTC, 2021). This new drug was not substitutable for existing drugs, and the antitrust laws encouraged Glaxo to continue to innovate to develop this new product. In addition, the acquisition of patents can have exclusionary effects that stifle innovation. When a company acquires copyright, it may be the only company with access to that technology. Thus the company may gain a monopoly over an invention, which can then be used to stifle competition. Therefore, antitrust can influence novelty by preventing companies from acquiring patents that would give them a monopoly over certain technologies. This would ensure that other companies would still have access to that technical know-how and would be able to compete.
Furthermore, the market for the development of gene therapy products is an example of how antitrust can influence innovation. The potential for a tremendous demand for such products encourages research and development by firms competing for market share. The existence of competition between the two merging firms also makes it possible for other firms researching this area to negotiate reasonable terms for joint ventures or contracts. In general, antitrust law promotes competition and prevents anti-competitive practices that may harm consumers. This is important because firms that can maintain a monopoly or oligopoly position are incentivized not to innovate. They can charge high prices and earn enormous profits without worrying about competition.
Furthermore, antitrust law can promote innovation by ensuring that firms cannot engage in anti-competitive practices such as collusion or price-fixing. This is important because these exercises can discourage firms from innovating because they know they will not be able to charge fare prices to achieve the necessary profit margin. Therefore, by encouraging competition, antitrust law fosters an environment conducive to innovation.
Competition
The markets in the information technology industry are likely the most concentrated industries today (Taschdjian & Alleman, 2018). Majorities of the monopolies in this sector are constantly growing because they merge horizontally and vertically the moment other new firms in the industry are created. Consequently, their dominance in both small and large markets shows their availability in all consumer facets and industrial technology. It shows how these few majority firms have global influence and are increasingly blurring ethics associated with their consumer conduct (Granville, 2018). The significant aim of antitrust regulations is to ensure the promotion of competition and not to protect individual firms. For instance, the Clayton Act was introduced to prevent unlawful tying, acquisitions, and mergers, which was lacking in the previous amendment known as the Sherman Act (DOJ, 2022). The antitrust therefore ensures that it prohibits anti-competitive conduct that tends to facilitate or maintain monopoly power (DOJ, 2022).
For instance, in the case of the federal trade Commission's actions against Intel, the latter is accused of using commercial retaliation and the threat of revenge to force other firms to give up their patent rights. In addition, it is also charged with depriving those third parties of the platform to adjudicate their rights. Therefore, if FTC wins the case, the company will likely lose the opportunity to engage in the conduct. Consequently, other firms can compete on the fairground, benefiting consumers. Antitrust laws promote competition by preventing firms with monopoly power from using that power to exclude rivals or engage in other anti-competitive conduct.
For instance, Thomas Penfield ...