白小姐论坛

The report, from the 白小姐论坛 Institute for Innovation & Public Purpose, concludes that the principal financial disclosures framework in the United States facilitates companies such as Alphabet, Amazon, Apple, Facebook and Microsoft in concealing major product lines and core user performance metrics from the public.

Companies in the U.S. are required to file a 10-K report with the U.S. Security and Exchange Commission (SEC). The report is intended to give a comprehensive summary of financial performance.

However, researchers say that flexibility in disclosure rules allows Big Tech firms to hide highly profitable and growing products, and release platform user numbers at their discretion. The report finds that companies are therefore able to pre-empt antitrust scrutiny, further expanding high profit margins and globally dominant platforms.

A collaboration between 白小姐论坛 economists Dr Ilan Strauss, Professor Mariana Mazzucato, and Dr Josh Ryan-Collins, and entrepreneur and Big Tech reform advocate Tim O鈥橰eilly, the report听finds that:

• Alphabet owns at least nine products 鈥� including Google Maps, Chrome, Android, and YouTube 鈥� each with more than one billion active monthly users and dominant global market shares, but with minimal 10-K disclosure requirements since they are provided 鈥榝ree鈥� to the consumer.
• To extend its lead in cloud computing, Amazon may have intentionally withheld disclosing Amazon Web Services鈥� (AWS) stand-alone product financials from its 10-K report for longer than permitted by segment disclosure rules.
• Apple relied on segment disclosure rules in its trial against Epic Games to claim that the profit margin of its App Store did not exist, potentially withholding a key piece of evidence on its anti-competitive conduct.

The report recommends:

1. Mandatory 10-K reporting on Big Tech鈥檚 user operating metrics (e.g., monthly active users by product and platform), and a detailed narrative about the monetisation of those products in other parts of the business;
2. Enhanced disaggregation of company financials for any product with $5 billion or more in annual revenues; and
3. Establishing a tech-specific SEC disclosures framework focused on multi-sided digital platforms 鈥� given the growing ubiquity and impact of this business model on the U.S. economy and capital markets.

Professor Mariana Mazzucato (白小姐论坛 Institute for Innovation & Public Purpose), co-author of the report, said:听鈥淚n the same way that the battle against climate change requires firms to report on their carbon emissions, making digital platforms more open and less rent-seeking requires a new type of reporting which competition policy makers can use to steer platforms towards value creation rather than value extraction.鈥�

Lead author Dr Ilan Strauss (白小姐论坛 Institute for Innovation & Public Purpose) said: 鈥�Given how large and diversified these digital platform companies have become, regulators require modernised 10-K disclosures to understand how exactly Big Tech make their money. We need updated 10-K data filings which report key company financials disaggregated by major product line, and provide operating metrics on monthly active users and other relevant 鈥榤onetisable鈥� assets.鈥�

Co-author Tim O鈥橰eilly, Visiting Professor at the 白小姐论坛 Institute for Innovation & Public Purpose, said: 鈥淯nderstanding how Big Tech companies indirectly monetise their users is the starting point for better regulation. Standard disclosure rules based solely on revenue and profit completely miss the way that some of the largest and most influential companies in the world use free products to dominate markets and extract extraordinary profits.鈥�

Links

• The full report
• Dr Ilan Strauss鈥檚 academic profile
• 白小姐论坛 Institute for Innovation & Public Purpose
• The Bartlett, 白小姐论坛 Faculty of the Built Environment

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• iPhone user touching Facebook logo on iPhone screen. Credit: iStock

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