Internet giants have swallowed up 400 smaller rivals over the past decade 

Giant internet firms have swallowed up more than 400 smaller rivals over the past decade in a ‘killer’ strategy that allows them to exploit their users, an official report has warned.

The number of takeovers by Amazon, Apple, Facebook, Google and Microsoft was so great it was extinguishing competition among technology firms, according to a review for the UK Government by a former adviser to Barack Obama.

Jason Furman, now a Harvard economist, has called on Ministers to launch a crackdown on big deals that reduce competition in a bid to protect customers.

He said Britain could lead a global fightback against the power held by online firms by laying out strict new rules on how large social media and technology firms operate.

These could include giving customers the right to move their data from one website to another at the touch of a button – and even encouraging firms such as Facebook and Google to pay users for access to personal information.

The new rules would make it easier for online competitors to take on the internet giants. They could then grow into legitimate rivals rather than being subject to takeovers when the technology titans felt threatened.

The number of takeovers by Amazon, Apple, Facebook, Google and Microsoft was so great it was extinguishing competition among technology firms, according to a review for the UK Government by a former adviser to Barack Obama. Instagram, above, is owned by Facebook [File photo]

Mr Furman warned that the five web giants now dominate so much of users’ time online that they get away with practices that are ‘harmful’ to the public.

The report said that while the rise of a few powerful internet firms offering free services had largely benefited the public, the downsides included the giant firms:

• Manipulating the results on search engines to boost profits;

• ‘Overriding’ users’ privacy to sell their data;

• Charging high commissions to businesses such as retailers, which pass on price hikes to their customers and reduce their ranges;

• Penalising users with unfair terms and conditions, which are often buried in small print.

The Furman Review found that 250 of the 400-plus acquisitions made by technology firms in the past decade had taken place within the past five years. 

Among the key takeovers highlighted were Facebook’s acquisitions of Instagram and WhatsApp, and Microsoft’s 2016 deal for LinkedIn.

Internet users in Britain now spend a third of their time online on websites owned by Google and Facebook, the review said, while Amazon had become the ‘default option’ for many online shoppers and Google accounted for more than 92 per cent of internet searches.

Mr Furman said the UK’s takeover watchdog, the Competition and Markets Authority (CMA), should be given stronger powers to stop these types of deals and criticised the current rules for having been ‘unduly cautious’ in the past.

‘Historically there has been little scrutiny and no blocking of an acquisition by the major digital platforms,’ the report said, adding that this may have resulted in ‘approving mergers that should not have been allowed’.

Jason Furman, now a Harvard economist, has called on Ministers to launch a crackdown on big deals that reduce competition in a bid to protect customers [File photo]

The report said none of the takeovers in the past five years had been blocked or subjected to conditions set by the CMA. 

In future, the regulator should take ‘more frequent’ and ‘firmer’ action, it added.

This should include weighing up whether technology mergers would be ‘on balance beneficial or harmful’ to the public in the long term.

To aid the crackdown, Mr Furman called for an analysis of the big takeovers of the past decade to see whether they had in fact benefited society and the economy. 

Under his proposals, large technology companies would in future have to notify the CMA before attempting to take over a rival.

The review acknowledged the Government may have to write new laws to implement its suggestions, but Mr Furman said the CMA already had powers to stop international takeovers, as long as the companies concerned had customers in the UK.