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Facebook pulls of coup against the bureaucrats, will others follow?

1 July 2021

Despite the coup that the almost invincible "big tech" cohorts in Silicon Valley has managed to pull off against United States government lawyers, confidence in stock remains low. In its attempt to reduce the control that the big four West Coast giants, Facebook, Apple, Tesla and Amazon have over the global markets and over government policy, the United States Federal Trade Commission (FTC) launched a lawsuit last week accusing many of these companies of breaching antitrust laws.

Part of the agenda behind this was to attempt to force companies of that size to be broken up, for example, in accusing Facebook of abusing its power, the antitrust lawsuit called for Facebook to sell WhatsApp and Instagram, both enormous in their own right.

At the end of last week, Facebook stood accused of breaking competition law by suppressing innovation, cutting privacy protections for users of its platforms and monetising data, according to New York's attorney general, Letitia James. Here we are, just a few days later, and the lawsuit has been dismissed by federal judge James Boasberg, dealing a blow to the socialist-led US government in its attempt to rein in publicly traded tech giants.

Despite this rare victory against a determined and well-organized government department, Facebook's stock remains volatile, today having dropped by 1.72% which equates to -5.27 points after rocketing by a tremendous amount yesterday. Judge Boasberg stated that the claims by the state against Facebook were 'legally insufficient' and that there was not enough evidence to prove that Facebook is a monopoly.

Despite the short-lived rally which tailed off today, Facebook stock rose from $344 to $356 during the course of yesterday's US trading session which, when looked at over a 5-day period, has contributed toward Facebook stock having risen by 10.24 points which is 3.02%, a remarkable rise.

Facebook's victory over the bureaucrats has caused analysts to begin to look at other big tech stocks, and Apple is the next on the list. Today, investors have begun to consider that volatility may ensue in Apple stock, to the point that some fund managers are beginning to favor UK stock markets.

Fund manager Daniel Egger told the Wall Street Journal that he favors the UK stock market because of its high concentration of banks and mining companies. “We do think that commodities will be a very attractive asset class after they have been in the doldrums for quite some time,” he said, pointing to lingering concerns about inflation.

Many consider that despite Facebook's victory, other big tech firms are still facing the courtroom under the Antitrust lawsuit, and analysts have said today that this action is the greatest danger for Apple at present, as the company tries to fight impending US legislation that could force anything from opening up alternative payment methods in the App Store through diluting the Apple ecosystem to – in one extreme but still plausible scenario – refraining from pre-installing Apple apps that compete against third-party ones.

However, if a legal precedent is set by the Facebook case having been dismissed, it could keep investors' eyes on the stock. Volatility may well ensue, however Apple stock has already displayed a degree of fluctuations recently, as it has risen almost 50% in the past 12 months.

So much for the US government's FTC department's assertion that Facebook's "predatory acquisition" of companies had sapped confidence in the market. The lawsuit brought by Ms James, along with 45 other states and three districts having the court consider that Facebook's acquisitions of Instagram and WhatsApp be judged illegal.

The court did not agree that Facebook had employed a 'systematic strategy' to remove any of its competition from existence. The reality is that Instagram and WhatsApp are huge worldwide. The content is user-driven and has dominance due to community-driven interaction and is not forced by anyone. Competitors are free to oppose it on an open market. These days, it's all about capturing the crowd, something that Facebook understood 15 years ago, and its Instagram division understands now. Volatility in the stock prices may occur, however the dominance of the big tech giants is here to stay.

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