By James Pethokoukis

Imagine a world much like this one where the most valuable companies were in the technology sector. And like this one, these companies were pretty dominant in their respective business areas. The search engine company captured 80–90 percent of all queries. The social media giant ran three of the four largest social platforms. The online retailer accounted for 40 percent of all online sales. The supercool smartphone company had half of the US market.

Now also imagine that these companies had such control over their markets, and their executives felt so confident about the future, that little was spent on new investment or R&D. Surely such a damning data point would be one of the main things mentioned by their critics as a reason for government to break up fat-and-happy Big Tech. Some might also accuse them of “short-termism,” focusing more on quarterly profits, dividends, and buybacks rather than making long-term investments.

Of course, the level of Big Tech spending on new investment and R&D is where my imaginary world and our real one part ways. Here’s Shira Ovide from the New York Times:

I have watched, mouth agape, as America’s five biggest tech superstars — Apple, Microsoft, Google, Amazon and Facebook — have splurged on big-ticket investments in their businesses. That includes specialized equipment to assemble iPhones, hulking computer hubs and undersea internet cables that zip YouTube videos to your phone, and the warehouses for Amazon workers to assemble and ship orders. What the companies spend on physical assets that last for years — capital expenditures, for you wonks — is one of the best glimpses at how Big Tech leverages success into even more success. The combined profits of these five companies climbed more than 25 percent in the most recent year, according to financial statements. The tech giants have the cash and the permission from their investors to spend almost whatever it takes to stay on top. It’s an advantage that few companies can match.

Wait, so if these super-valuable companies didn’t massively invest in their businesses, their critics would express alarm. But they do invest massively in their businesses — yet I guess that’s supposed to be alarming, too? One can’t help but be reminded of — and see the wisdom in — the philosophical underpinning of American competition law: Antitrust exists to protect competition, not competitors — even if those competitors are feisty upstarts or merely entrepreneurs with big dreams. As antitrust experts John W. Mayo and Mark Whitener explained in The Washington Post last year:

[Antitrust] recognizes that the potential for economic rewards is what incentivizes investment and risk-taking. The resulting competition for marketplace supremacy can be fierce, and weaker firms often fail along the way. Those left standing should not be punished for their success — even if only one survives. As the Supreme Court said more than 50 years ago, monopolies should be targets of antitrust enforcement only when there is “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Antitrust doesn’t condemn a firm for developing a universally popular search engine, ketchup or pharmaceutical drug, even if that success leads to market dominance. It’s how a monopoly is obtained or preserved that matters — not its mere existence.

And given the current hostility to Big Tech in Washington, it’s pretty obvious that the dominance is being maintained more by providing value to consumers rather than by exploiting America’s political system like a bunch of crony capitalists. Wall Street banks frequently release reports highlighting the very real antitrust and regulatory risks to Alphabet, Amazon, Apple, and Facebook. But I would note that those companies frequently occupy the top spots in lists of the most innovative firms in America and the world. (For example: here, here, and here.) Same with R&D spending. They seem to be staying on top by mostly doing things the right way. And if you have a problem with that, too, then you really have slipped into “big is bad because big is bad” territory.

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