The times they may be changing. At 13:30 ET, President Joe Biden is set to sign a very broad executive order designed to expand competition across a multitude of U.S. industries, while specifically "encouraging" regulators to increase scrutiny of big tech, drug prices, shipping (We spoke on the rails this morning in Market Recon), and much more. In fact, the order is expected to include as many as 72 actions and/or suggestions involving a dozen federal agencies. The end goal seems to be a remodeling of the way business thinks about corporate consolidation and ultimately antitrust laws.
From CNBC, I learned that among those 72 points, the administration is urging the Federal Trade Commission (FTC) to challenge prior "bad mergers" that the previous administration let slide. The administration is pushing the FTC to ban "occupational licensing restrictions", to ban or limit "non-compete agreements'', to restore "net neutrality" rules, and to block deals between landlords and broadband providers.
From Bloomberg, I learned that the order will direct federal agencies to scrutinize big tech's use of consumer data, and to more closely examine proposed future mergers. The federal government is obviously concerned that such companies as Amazon (AMZN) , Apple (AAPL) , Facebook (FB) , and Alphabet (GOOGL) collect massive amounts of data, and then use that data to their advantage, either maximizing market share or diminishing the ability of smaller players to compete and innovate.
To think, this morning, I thought this was more about the rails and maritime transport. This executive order is in fact much broader and attempts to change the landscape for the future of American business if it sticks. How interesting that 37 states sued Alphabet's (GOOGL) Google for anti-competitive behavior within it's Android app store just yesterday.
... This comes after the House Judiciary Committee voted earlier this spring to advance six antitrust bills aimed at revitalizing competition in the tech sector.
... That Lina Khan is now not just at the FTC, she chairs the Commission. Khan is a known critic of big tech in general and of Amazon in particular. So much so that Amazon has asked that she recuse herself from any cases involving the firm. Safe to say that this executive order will be met with a friendly reception at the FTC, and the goals of this executive order could very well be pursued with great enthusiasm.
What Do I Think?
I am already long term long Amazon and Apple. I have not held Alphabet stock in a long time, though I do trade options priced off of the equity. I have never held Facebook, because let's face it, management there gives me the creeps. I mean, gee whiz. What's to like? (Yes, this is an opinion piece.)
For investors, it comes down to whether or not you think these firms are good investments. All of them have been. One could make a strong argument that all of them still are? If forced in order to stay competitive to break these firms up into pieces, what would they be worth? What if Amazon Web Services traded independently from the e-commerce giant? Then, so would all or parts of Amazon services. The same split could be made at Apple. How much would Waymo, YouTube, or the Google Cloud go for by themselves?
The fact is that I think any selling of these stocks based on short to medium term potential for antitrust litigation could probably be a trade if one is savvy enough. That said, longer-term, I love these firms in pieces. I love them enough to stay long Amazon and Apple. I will probably buy the Alphabet on any significant dip. I do like the new CEO. I may even consider Facebook. The nameplate social media site has the potential to eventually wither, but a piece of that plus a piece of Instagram and WhatsApp, and now even I would have to consider ownership. Think of all of that advertising revenue.