Tech giants' "hide-and-seek" game: The SEC has limited regulation of tech companies

Tech giants Alphabet, Amazon, Meta and even Microsoft are tracking users' information. But what we don't know is how they monetize this information on their own platforms.

Regulators are also fully investigating tech companies, finding that giants will use search, social media and cloud computing to create an unfair playing field between themselves and consumers.

A new report from The Institute for Innovation and Public Purpose at University College London (UCL) has heightened its condemnation of big tech companies for using information asymmetry to escape the SEC's 10-K disclosure rules, making it impossible for them to require them to provide more detailed financial data.

UCL scholars Ilan Strauss, Tim O'Reilly, Mariana Mazzucato and Josh Ryan-Collins released a report examining how well the SEC's existing disclosure rules match the data monetization business models of big tech companies and found that the results were unsatisfactory.

The SEC has limited regulation of technology companies

First, while platforms rely on "free" products to capture more users, creating network effects that enable them to monetize all products and services, financial regulators are largely focused on specific financial disclosures. This allows big tech companies to mask market forces, boost profit margins, and expand the dominance of their platforms in unfair ways.

Second, the existing U.S. Securities and Exchange Commission (SEC) rules focus primarily on segment disclosures within head tech companies, ignoring the huge hidden value contained in the data extracted by the platform, because the SEC rules are limited to products that directly generate revenue, ignoring the true value of data information.

At the same time, the report said that the current 10-K disclosure requirements largely ignore the market user side and do not pay attention to some non-public records, such as conference calls and information. It's the data that tech company operators spend a lot of time getting, such as "monthly active users (MAUs)," "customer acquisition costs (CAC), and lifetime value (LTV)," because these metrics can drive revenue growth.

Moreover, the SEC's regulation does not "expand as the size of the company expands." While all companies with revenues of $100 million or more are subject to the same SEC rules, some tech giants have a single division that can go into the 100 largest companies in the United States. For example, many of the single product lines of some large technology companies may account for only 1% of the parent company's total sales, but still dominate their respective markets, but the SEC cannot adequately regulate them.

Giant tech companies become "gatekeepers"

The U.S. House of Representatives spent a lot of time last year investigating the world's four largest tech companies. The conclusion is that:

While companies like Amazon, Apple, Facebook, and Google have brought clear benefits to society, these companies are competing in the marketplace while operating the market. And enable them to write one set of rules for others while they themselves act according to another, or engage in their own form of private quasi-regulation, without accountability to anyone but themselves.

A 449-page report filed by the House Judiciary Committee said that while the four big tech companies all maintain different kinds of monopolies, each acts as a "gatekeeper" to today's digital marketplace, with the power to pick winners, acquire or dispose of competitors.

For example, Facebook has a monopoly on social media and advertising, Google in search and advertising, Amazon in online retail, and Apple takes too much commission from app developer sales through the App Store.

But all four tech giants disputed the findings, with Alphabet saying the reason it didn't call YouTube a separate division was because its CEO didn't review the results. Is there really anyone who thinks the world's largest video platform will go unnoticed by executives?

Apple said "independent financial information" about the Profitability of the App Store "does not exist." However, the company often mentions that it has created an entirely new application development industry.

However, antitrust law made new progress in November this year, and the General Court of the European Union, europe's second highest court, ruled on Google's challenge to the EU's antitrust fine of 2.42 billion euros (about 17.9 billion yuan), and the final result was that Google lost the case.

The court of justice of the European Union ruled that Google's use of its search engine's dominant position in terms of price comparison services created an undue advantage over competitors. However, Google can still appeal to the European Highest Court of Justice (CJEU), but the probability of winning the case may not be large.