Fighting the FANGs

Gains in technology business such as Facebook, Amazon, Netflix and Google – the so-called FANG stocks, as well as iPhone maker Apple – have led market gains. But more regulation is coming.

| 6 min read

For several years world share markets have been led by the stellar performance of the leading US technology companies. Facebook, Amazon, Netflix, and Google, along with Apple, have powered ahead, adding huge numbers of users. Twitter and Zoom have joined the party.

Several of these companies have become very cash positive, whilst they have shown a capacity to generate profit as well as ploughing large sums back into business growth. Some started with attractive free service offers to individuals, with Google providing free searches, Facebook, Twitter and Zoom offering free communications. Several have now shown an ability to grow a subscriber model, with people signing up for Amazon Prime, paying for better and longer Zoom calls and for Netflix movie downloads.

Most of these companies have preserved their hunger for growth and have been willing to delay higher profits in order to spend more on staff, property and technology to grow their customer base. As they have grown bigger, so they have come into the public and political space and have become objects of controversy themselves as their conduct is scrutinised and as governments cast envious glances over their cash flow and their consumer power.

The internet we know owes much to US pioneers and to the legislation which the US rushed out to tackle entirely new communication and business phenomenon. The 1996 US Communications Decency Act was a crucial piece of legislation, which influenced how the rest of the democratic world decided to regulate the web in its early years.

Section 230 of that Act laid down the important proviso that the internet service provider was not responsible for the content that a user wished to post. Each individual user could be subject to the laws of decency, libel and state security for what they wrote – but the internet service provider was just a platform supplier, not a responsible publisher. This meant a traditional newspaper or tv news show needed to check their news items carefully for accuracy whilst there was no need for the internet provider to check the content of a tweet or video loaded onto their platform.

Taming the powerful internet

As the power and scale of support for the large social media companies have grown, so more people have come to question this embrace of so much freedom. The authoritarian world has long since taken a tough line on internet control and censorship. In China and Russia, the state supervises individual use of the internet, blocks access to harmful sites, limits links to overseas and snoops on searches and use of the web by individuals. Claiming they do so to ban terrorist or criminal postings and to ensure state security, their critics think it transforms into censorship of alternative views and of opposition campaigns to the government. It is part of a system to guide people to conforming views.

The US has had long debates about whether it too needs limited censorship to prevent abuse of the web by criminals. The Democrats have tended to prefer more controls and regulations as they think the web has allowed too much free speech to their right-wing opponents. The right of the Republican movement trends to think the opposite and believes the big internet companies have exercised their own censorship of postings too firmly against their viewpoint.

Twitter has adopted self-censorship, removing some on the more extreme wing of the Trump movement and then even removing President Trump himself. The Europeans have legislated against hate speech and have encouraged the main social media sites to enforce that through bans and removals of people and posts. Germany has long required the removal of any holocaust denial material given her constitutional commitment to root that out. Some now want President Biden to strengthen US law against unregulated speech on the web.

Australian news battle

The Australians have recently tackled the related issue of how the social-media platforms repeat articles and news items from the mainstream media without paying for the privilege. They are demanding that the large tech companies make payments to local newspapers and tv programmes whose material they use, on the grounds that they have had to pay to guarantee quality and accuracy whilst the social media companies get that content free.

The social-media groups reply that their free repeat of the conventional media is offering that media free advertising that benefits traditional media who want the exposure. Google has done a deal and is now making some media payments to repeat material to comply with the prospective law, whilst Facebook has decided to remove Australian news material covered by the law, refusing to pay.

Joe Biden and the Democrats got into office with plenty of support from California and the tech giants. They never hid their concerns about these large successful corporations. Mr Biden named Amazon and Netflix for paying too little tax and said he had never been a fan of Facebook. His early relations as President with Twitter were marred when Twitter refused to automatically transfer all the Trump White House Twitter followers to him.

We should expect more regulation and higher taxes for the FANGs and their friends. A hike in corporation tax to 28% may include a provision to seek a minimum tax payment from a large company. The Democrats may expect the social media companies to employ more people and more algorithms to censor more material.

Many governments in the democratic world want more control. They object to materials querying vaccines and their response to the virus, and to some materials discussing green matters. In their understandable wish to root out sexual and child abuse, hate crimes and terrorism, they need to draw lines between such crimes and things that are inconvenient to them.

The worst abuses are obvious, but in other cases, an abuse to one person is just a view they do not like to someone else. The big technology companies can look forward to more tax and regulation as these weighty matters are discussed intensively in many capitals. The pendulum is swinging against freedom for the FANGs. They will need to spend more on compliance and pay more tax.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Fighting the FANGs

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