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Here's What Big Tech Regulation Might Look Like

Meta, Microsoft, Apple, Amazon, Netflix and Google (MAANG) impact almost every person on the planet but regulators could change the narrative.

Meta Platforms  (FB) - Get Meta Platforms Inc. Class A Report, Microsoft  (MSFT) - Get Microsoft Corporation Report, Apple  (AAPL) - Get Apple Inc. Report, Amazon  (AMZN) - Get Amazon.com, Inc. Report, Netflix  (NFLX) - Get Netflix, Inc. Report, and Google  (GOOGL) - Get Alphabet Inc. Class A Report, or MMAANG, are undoubtedly some of the most groundbreaking and powerful businesses in the world.

Their influence has impacted nearly every person on the planet over the last decade and essentially changed life as we know it.

We now rely on these massive companies for almost everything including information, work, food, entertainment, social interactions, communications, and more.

It’s easy to recognize why, as mega-cap tech has developed countless products and services that make life easier in almost every way.

Whether it's search engines, smartphones, streaming video, or shopping online, convenience is king in the modern age.

But have these companies become too powerful?

Regulators seem to think so, with Meta Platforms, Amazon, and Alphabet making headlines last year for possible antitrust violations.

Do we truly want to live in a world where big tech companies continue expanding their influence and making acquisitions that provide them with even more commercial leverage?

Small businesses could easily become a thing of the past, which is certainly a frightening thought as monopolies could stifle innovation.

Mega-cap companies have designed and created a new form of conglomerate, with the total market capitalization for MMAANG coming in at over $9 trillion as of this writing.

While it’s true that these businesses have created millions of jobs and provided life-changing gains for investors, they could be forced to overhaul their businesses entirely if the government gets its way.

Here are a few ways that regulators might go about breaking up MMAANG and changing the narrative surrounding big tech dominance:

Splitting Up Existing Companies

The most logical approach for the Federal Trade Commission here is to pursue legislation that allows it to split up large tech companies.

For example, if a company is deemed to be monopolistic, the government could end up forcing the separation of a conglomerate into individual companies.

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The Ending Platform Monopolies Act, a bill that has received bipartisan support, aims to do just that.

The bill is focused on companies with market capitalizations of over $600 billion and that have over 50 million active monthly users or 100,000 or more monthly active business users.

While it remains to be seen if the bill is passed, it’s certainly a statement of intent from the House antitrust subcommittee and a step closer to increasing the regulations for big tech.

Unfortunately, consumers may end up being punished as well if these big-tech companies are split up, as a company like Amazon might charge higher prices or do away with logistics perks like free 1-day shipping if its business were to be broken up.

Blocking Future Acquisitions

One of the reasons why big tech continues to build an even more dominant market position year after year is that these companies have seemingly endless capital to use for acquiring new businesses.

That’s why another potential move that regulators can take to level the playing field for all is to potentially block future acquisitions for these massive tech companies.

Senator Josh Hawley introduced a bill last year called The Trust-Busting for the Twenty-First Century Act which would ban all mergers and acquisitions by companies with a market capitalization exceeding $100 billion and empower the FTC to designate “dominant digital firms” exercising dominant market power.

However, this is a complicated endeavor for regulators, as a bill like this would have massive impacts on both the economy, the investing landscape, and the business world.

No More Buybacks

Share buyback programs are often viewed as a big positive from investors, as it tends to be a signal that the company’s management views its shares as undervalued.

Big tech companies like Apple and Microsoft have used these programs to purchase billions of their shares over the years, which is another action that has put them under the spotlight of regulators.

Buybacks have been criticized for increasing the wealth gap and rewarding shareholders instead of workers, which means that they could have played a role in creating powerhouse companies we see today.

Since buybacks can prop up the share prices for big tech stocks, enacting legislation that prevents share repurchase programs for certain companies could be another way that regulators decide to attack.

What All of This Means for Shareholders

While all of these companies are certainly going to be in the crosshairs of regulators going forward, there’s a chance any true consequences would be years away given how long federal lawmaking can take to move forward.

For the time being, these stocks should still be viewed as the backbone of the market. 

Investors should just be aware of the headline risk here, as large fines and changes to how big tech operates could have massive impacts on the companies’ earnings.

With that said, it’s hard to argue against owning shares of MMAANG in any diversified portfolio at this time, and the recent market volatility could be an intriguing buying opportunity to consider.