Last week the US Senate confirmed the appointment of Lina Kahn as chair of the Federal Trade Commission (FTC). A lawyer and academic known for her antitrust research, Kahn is the youngest ever chair of the department responsible for policing the US’s biggest corporations.
With Kahn at the helm of the FTC, companies hailing from silicon valley could finally be held account for their antitrust and anticompetition practices. The organisations likely to be first to garner Kahn’s attentions are those Big Tech household names that hog much of the media headlines.
It is not just headlines that Big Tech hog. They also hog much of the weight of US indices, in particular the Nasdaq100. Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB), Alphabet (NASDAQ: GOOGL, GOOG), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) make up approximately half of the weight of the Nasdaq100. As such, some argue they are a little too big. All the above examples have operations spanning multiple disparate industries and find it a little too easy to stifle innovation and competition by buying up rivals as they emerge.
Khan has already indicated that she plans to apply special scrutiny to the Big Tech players in her role as FTC chair. Support for her security could find cross-party support as her stance on Big Tech was widely known by democrats and republicans alike before her confirmation as FTC chair. If United States Democrats and Republicans can agree on anything, it might be in regard to the need to rein in Big Tech.
Kahn’s scrutiny could extend as far as proposing and bringing forward action to break up some of the Big Tech companies into several smaller, more manageable companies (from a regulatory perspective). If this is a road that Kahn and her team push down, whether eventually successful or not, we can expect a high level of uncertainty and instability in the Nasdaq100. As of writing (Thursday 24/06), the Nasdaq100 hit a record level above 14,200, largely on the back of the growth experienced in Big Tech. This could be a case of 'the bigger they are, the harder they fall'.
One of the first events the FTC will be scrutinising during Kahn tenure is the acquisition of MGM Studios by Amazon. Typically, the FTC would share responsibility with the Department of Justice to review the proposed Amazon-MGM merger. However, it is said that the FTC lobbied for the right to examine this merger as it already has an open investigation into Amazon’s antitrust practices.
It appears that Kahn has already begun to apply her special level of scrutiny to the Big Tech behemoths. However, as it stands, the market is yet to react to Kahn's appointment. In fact, Big Tech have never been more popular with investors (MSFT recently joined Apple in the $2 Trillion club), while the Nasdaq is hitting fresh intraday records every other day.