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IMF warns on the power of technology giants

Is the power of US tech giants such as Google, Amazon, Apple and Facebook threatening to stifle innovation, due to their market power?

According to a report from the International Monetary Fund it is.

The IMF has voiced the opinion that we should be very concerned about any further increase in the ‘clout’ of these already dominant firms.

The Fund makes the point that there is a need for stronger competition policy to ensure that established firms are unable to block the entry of potential rivals and has called for excess profits to be targeted by a tougher international tax regime.

The study was conducted for the IMF’s forthcoming World Economic Outlook (WEO) and found that over the past twenty years there had been a growing concentration of market power, among a smaller and smaller number of productive and innovative firms.

The IMF concedes that the impact of rising market power on innovation has so far been positive, but warned that the impact would become: “increasingly negative if the market power of high mark-up firms, in particular, were to continue to rise in the future.”

It’s certainly true that the leading technology companies have been buying up competitors as well as smaller, innovative businesses but, so far, any impact on consumers has been limited and in fact has been positive – with falling prices due to economies of scale.

However, the IMF does warn that this may not continue and that there is a possibility that successful firms seeking to block potential rivals, means that there is a very strong case for structural reforms to keep competition strong.

At a time when some politicians are calling for the big Silicon Valley platform firms to be broken up and a growing number of national governments questioning them over their approach to issues like privacy, fake news and tax isn’t greater competition, rather than stifling regulation or break-ups, more likely to benefit all those concerned – both companies and consumers alike?

Author
Neil Tyler

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