Public Equities

The False Dawn of Big Tech Regulation?

January, 2021 – 6 min read
Calls for increased regulation of tech giants have indeed grown—but will they have the desired impact? In our opinion, the focus on "big is bad" is simply ineffective in a digital world.

The clarion calls for increased regulation of Big Tech have reached deafening levels in recent months. As we have written previously, this has gone hand in hand with growing concerns that the valuations of tech giants are too expensive—with some even fearing that we could be in bubble territory—even as a closer inspection of tech valuations reveals them to have contracted on the back of strong earnings revisions. 

The sources of these calls for drastic action are uniform across the globe—from companies that have lost market share to Big Tech, to politicians that have seen opposing viewpoints spread virally on social media, to regulators that inherently believe that “big is bad”. But missing from this list is the consumer. And it is the consumer who may prove to be the most important stakeholder of all.

Big is Not Necessarily Bad

It’s worth remembering that the world’s largest tech platforms are indeed meeting the needs of millions (perhaps even billions) of consumers every day, offering solutions to the inevitable hassles and frictions in communicating and transacting online—enabling consumers to benefit from economies of scale and cut through the noise in a digital world with endless choice. 

Ultimately, we believe there is a major roadblock to effective regulation going forward—which is that any real leveling of the playing field requires millions of consumers to stop shopping on Alibaba and Amazon, stop searching on Google, stop sharing on Facebook and stop ordering food on Meituan.  

In our view, changing engrained consumer behavior is incredibly difficult. Indeed, consumers continue to engage with these platforms on a daily basis, despite the negative headlines surrounding these businesses. As such, we find it unsurprising that Google’s shares, for example, have performed strongly since the U.S. Department of Justice (DoJ) lawsuit was announced in October last year, suggesting that markets continue to believe that the regulatory bark is worse than the bite.

And while negative headlines continue to flood our smartphones and Bloomberg terminals, it still is not a given that the largest and most successful tech companies broke laws or actively behaved anti-competitively to get to where they are now. However, the efforts continue, with varying degrees of concern for investors. The most significant are explored below.

Want to read the full article?

View PDF

Matthew Ward

Head of Global Technology Equities

Colin Moar

Investment Manager, Global Equities—Technology

Any forecasts in this material are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed by Barings or any other person. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Any investment results, portfolio compositions and or examples set forth in this material are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this material No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments. Prospective investors should read the offering documents, if applicable, for the details and specific risk factors of any Fund/Strategy discussed in this material.

Barings is the brand name for the worldwide asset management and associated businesses of Barings LLC and its global affiliates. Barings Securities LLC, Barings (U.K.) Limited, Barings Global Advisers Limited, Barings Australia Pty Ltd, Barings Japan Limited, Baring Asset Management Limited, Baring International Investment Limited, Baring Fund Managers Limited, Baring International Fund Managers (Ireland) Limited, Baring Asset Management (Asia) Limited, Baring SICE (Taiwan) Limited, Baring Asset Management Switzerland Sarl, and Baring Asset Management Korea Limited each are affiliated financial service companies owned by Barings LLC (each, individually, an “Affiliate”).

NO OFFER: The material is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This material is not, and must not be treated as, investment advice, an investment recommendation, investment research, or a recommendation about the suitability or appropriateness of any security, commodity, investment, or particular investment strategy, and must not be construed as a projection or prediction.

Unless otherwise mentioned, the views contained in this material are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Individual portfolio management teams may hold different views than the views expressed herein and may make different investment decisions for different clients. Parts of this material may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this material is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any service, security, investment or product outlined in this material may not be suitable for a prospective investor or available in their jurisdiction. Copyright in this material is owned by Barings. Information in this material may be used for your own personal use, but may not be altered, reproduced or distributed without Barings’ consent.

Related Viewpoints