IMF warns rising tech giants threaten investment and deter innovation

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The International Monetary Fund stops short of recommending a breakup of large companies, but advocates for changes to competition policy

Washington — The growing market power of a small fraction of companies in wealthy countries could crimp investment and hurt workers, the International Monetary Fund said on Wednesday, as the growing role of tech giants such as Google fuels debate about regulation of the industry., but said interest in the problem has mounted amid the rise of the tech industry.

“Further increases in the market power of these already-powerful firms could weaken investment, deter innovation, reduce labour income shares, and make it more difficult for monetary policy to stabilise output,” the IMF said.Elizabeth Warren vowed to break up Amazon.com, Facebook and Alphabet’s Google. She has proposed legislation that would require tech companies that offer online marketplaces to refrain from competing on their own platform and promised to nominate regulators who would unwind acquisitions such as Facebook’s deal for WhatsApp and Instagram.The IMF said the evidence for a “moderate” rise in corporate market power in advanced economies lies in increasing mark-ups charged by a small fraction of companies.

“With mounting risks of adverse growth and income distribution effects from rising corporate market power, policymakers should keep future market competition strong,” the IMF said. The fund stopped short of recommending a breakup of large companies, but advocated for slashing domestic barriers to entry, changing competition policy, and easing obstacles to technological catch-up by lagging firms.

 

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