Is Big Tech Too Big? An Event Study Analysis of European Union Commission Fines on Big Tech Companies Over the Past Two Decades

Abstract

Over the past decade and a half, the European Union has taken a harder stance towards American big tech companies entering the European market and establishing themselves as the dominant player in the industry. Fears of increasingly monopolistic business practices have led to a slew of antitrust fines levied against these companies that have increased both in frequency and size over this time period. This paper seeks to examine the effect of these fines on big tech companies through an event study methodology by applying an abnormal returns model to the daily stock returns of the companies. The findings of this paper reveal that the EU Commission’s penalties have had little to no impact on the stock market performance of the companies in question, implying that investors are unconcerned with both the financial penalty and the wider changes in practice that the European Union is pushing on big tech. The exception to these findings was the July 2017 Google fine, which resulted in a significantly negative reaction in returns. Factors that might explain big tech’s unassailability despite the EU’s efforts include the amount of cash that these companies have on their balance sheets, the diversity in their revenue sources, and the large lobbying efforts that have recently been made in Brussels by big tech companies. Investors may also doubt the EU Commission’s ability to truly enforce large scale changes in practice for these companies, which is the bigger concern of these penalties, instead of the financial aspect.