Explained: Why do the Governments want to de-fang FAANG companies?

FAANG is an acronym for five big tech giants namely: Facebook, Amazon, Apple, Netflix and Alphabet (which owns Google). The article will guide you about the FAANG companies and issues related to them. 

Why in news?

The governments on either side of the Atlantic appear to be determined in handling what they see as ruthless business practices, tax evasion and misuse of data flowing from excessive corporate power in “winner-take-all” or “platform” businesses like search, online shopping, and digital ads, The Print reported. 

Amid the ongoing pandemic, FAANG companies have prospered while other businesses have suffered. For instance, more online shopping was done, people scrolled social media to curb their boredom and so on. 

Highlights:

1- The share prices of FAANG Companies have escalated in the year 2020 by close to 50% despite the ongoing COVID-19 pandemic. 

2- Amazon, Apple, and Alphabet (which owns Google) are already trillion-dollar enterprises while Facebook and Netflix are on their way in achieving the said numbers. 

3- As of January 2020, these companies are the largest companies in the world, with a combined market capitalization of over $4.1 trillion. Also, these companies are widely famous among consumers. 

4- The FAANG companies comprises of over a fifth of S&P 500 (stock performance of 500 large companies in the US Stock market), having a substantial effect on the overall stock market. 

Why do the Governments want to de-fang FAANG companies?

1- Facebook-owner Mark Zuckerberg has declared on several occasions to protect the integrity of national elections. However, the world's largest social media network is under scrutiny by US legislators investigating secretive political ads. 

2- US justice department launched an investigation against Google's deals with firms such as Apple. The Government fears that this may block the distribution of rival search engines.

Additionally, in June 2020, the European Union (EU) imposed a $2.7 billion fine on Google over skewing search results which benefitted its shopping search service. 

4- Amazon has also been investigated by the EU for its unfair tactics, using third party merchant data. 

Thus, for the above-mentioned reasons the governments around the world want to de-fang FAANG companies. However, the FAANG companies on their part have denied wrongdoings. 

FAANG Companies: Origin of the term 

In 2013, the 'FANG' acronym was coined by CNBC's Mad Money host Jim Cramer who praised these companies for being 'totally dominant in their markets'. In the year 2017, a second 'A' was added the acronym for Apple. 

About FAANG Companies 

FAANG companies need no introduction are they are not only household names but are financial behemoths. 

1- Facebook: It is an American technology conglomerate and is headquartered in Menlo Park, California. It is a social media website and owns Instagram, WhatsApp and so forth.

2- Apple: It is an American multinational technology company and is headquartered in Cupertino, California. It designs, develops and sells consumer electronics, computer software, and online services.

3- Amazon: It is an American multinational technology company and is headquartered in Seattle, Washington. It focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.

4- Netflix: It is an American over-the-top (OTT) content platform and is headquartered in Los Gatos, California. 

5- Google: It is an American multinational technology and is headquartered in Mountain View, California, United States. It specializes in Internet-related services and products, including online advertising technologies, a search engine, cloud computing, software, and hardware.

The European Union (EU) is planning to impose more tax on these companies as they have so far routed profits through low-tax havens. In case of future misdemeanours, the FAANG companies may be penalized with a  percentage of global annual revenue. It is, however, unclear as to what extent the regulatory moves by the Governments around the world will succeed. 

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