SINGAPORE (Dec 10): One afternoon back in the 1990s, when I worked for a Malaysian brokerage firm, I could not help overhearing one of my senior colleagues talking on the telephone to a fund manager about a company called Renong.

Main image: The hearing of the International Grand Committee on Fake News and Disinformation, held at the UK’s parliament, was attended by parliamentarians from nine countries

Known as Malaysia’s “political blue chip” stock, it was controlled by a young cigar-chomping businessman named Halim Saad, and had benefitted from a slew of government contracts and privatisation deals. Its businesses spanned construction and infrastructure development, toll roads, transportation, oil and gas, and telecommunications.

Renong had a huge amount of debt, however, and cash flows from its various units were light. And, the evidently close nexus between the company and the political establishment raised questions about its long-term sustainability. Moreover, the whole manner in which Renong operated seemed the antithesis of traditional competitive market capitalism that is supposed to create jobs and wealth for everybody.

Many analysts and investors were prepared to overlook these issues, though. During those heady days, Renong seemed to have no problem obtaining credit for any project it wanted to pursue. And, its lofty stock was actually creating wealth for its shareholders. “There’s no other company like this,” I heard my colleague tell the fund manager.

This moment from my past career came to mind as I watched a video of the hearing of the International Grand Committee on Fake News and Disinformation, held at the UK’s parliament on Nov 27. It was attended by parliamentarians from nine countries. Attending on behalf of Singapore were Senior Minister of State for Law and Health Edwin Tong, Senior Parliamentary Secretary to the Ministry of National Development Sun Xueling and MP for Aljunied GRC Pritam Singh.

Mark Zuckerberg, founder and CEO of Facebook, had been invited to attend, but did not show up. Richard Allan, vice-president of policy solutions at Facebook, faced the committee alone, sitting next to an empty chair that had been pointedly left for Zuckerberg.

The session kicked off with Canadian politician Charlie Angus laying into Allan for Zuckerberg’s absence. “We’ve never seen anything quite like Facebook, where, while we were playing on our phones and apps, our democratic institutions, our form of civil conversation seem to have been up-ended by frat-boy billionaires from California,” he said. “So, Mr Zuckerberg’s decision not to appear here at Westminster to me speaks volumes.”

Angus went on to suggest that the time had come for Facebook to be subject to more regulation. “When Mr Zuckerberg says that the plan was to move fast and break things, and that breaking may have involved our democratic institutions, does Mr Zuckerberg not believe or not think that parliamentarians around the world are willing to push back?” Angus said.

Other participants at the hearing took a similar line, bringing up issues and asking questions that left Facebook looking dishonest and interested in little more than perpetuating and exploiting its formidable market position. Then, things became worse this past week. On Dec 5, a trove of internal emails that show Facebook executives discussing ways to undermine competitors and conceal its collection of personal data was released.

The emails were disclosed by Facebook under seal in a lawsuit brought against it in 2015 by a company called Six4Three, which had created an app to find pictures of Facebook users in bathing suits. The emails had been obtained by a British parliamentary committee, and had been referenced at one point during the hearing on Nov 27.

In essence, the emails showed that Facebook had engaged in deceptive and anti-competitive behaviour. For instance, it had worked to find ways to collect data of Android users without alerting them. It had also prevented a video-sharing service belonging to Twitter called Vine from using its platform to grow. Only months later, Instagram — which Facebook owns — started a similar service. Facebook was also shown to have used a privacy app to collect data on which apps people used most. This appears to have alerted it to the growing popularity of WhatsApp, which it subsequently purchased for US$14 billion ($19 billion).

Capitalism needs competition

Companies with unchecked monopolistic power are bad news for society, regardless of whether the source of that power is political patronage or astute risk-taking and superior technology. Capitalism is only a positive force for society when it is constrained by robust competition and rules set by democratically elected governments. But analysts and investors love companies with a durable competitive advantage. And, in this age of neoliberal thinking, unfettered market power is sometimes celebrated as the much-deserved fruits of a company’s success, rather than seen as a cause for concern.

It is perhaps the reason many industries are becoming dominated by fewer and fewer big companies. According to a book called The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper, only two companies control 90% of the US beer market, four players control the country’s beef market, and three companies will soon control 70% of the world’s pesticide market and 80% of the US corn-seed market.

It is even worse in the technology field. Google has a nearly 90% share of internet searches, while Facebook has an almost 80% share of social networks. Apple’s iPhone and Google’s Android basically control the mobile app market in a duopoly. Meanwhile, is disrupting the retailing industry.

Dominance kills productivity?

Apart from leaving consumers with fewer choices, and potentially higher prices, the growing dominance of big companies is also weighing on productivity, according to Tepper. For starters, companies that become large naturally grow more slowly. They end up having to hire more simply to manage their growing headcount. And, companies that dominate their industries tend to spend less on R&D, Tepper says, citing various studies.

On the other hand, new companies that survive their start-up phase show productivity growth of 20% in the first five years of operation, according to Tepper. The trouble is that large, established companies tend to buy smaller upstarts in an effort to boost their growth. Google (whose parent company is Alphabet),, Apple, Facebook and Microsoft have bought more than 500 companies in the past decade, Tepper says.

Many young, potentially exciting companies do not get a chance to grow and compete once they are in the belly of a larger company, though. Case in point: In 2013, Google acquired Boston Dynamics, as well as eight other companies, to create a new robotics division called Replicant. The move excited the robotics industry. But many of these companies were eventually shut down. The reason? Google was really in the business of selling internet ads, according to Tepper. Last year, Alphabet sold Boston Dynamics to Japan’s SoftBank Group.

This is not a new phenomenon. In the 1960s and 1970s, Xerox had a monopoly on its copying technology, but its research unit went on to invent the modern computer and internet. It also came up with the graphical user interface, computer-generated bitmap images, object-oriented programming and even Ethernet cables. But Xerox just was not interested in doing anything outside of its core copying business, according to Tepper.

Conversely, many companies that have been spun out of larger ones have gone on to deliver phenomenal growth. Notably, McDonald’s spun out Chipotle, eBay spun out PayPal, and Sara Lee spun out Coach, Tepper points out.

Corrupting politics?

Worse than any of this, however, is the potential for increasingly large and borderless companies to bend the political agendas of national governments to their advantage. Interestingly, Facebook’s Allan is not just the company’s vice-president of policy solutions. He is also a British peer, and is sometimes referred to as Baron Allan of Hallam. Before obtaining his peerage, he was the Liberal Democrat member of parliament for Sheffield Hallam.

Allan’s parliamentary seat was later occupied by Nick Clegg, who went on to become leader of the Liberal Democrats in 2007. In 2010, Clegg became Deputy Prime Minister of Britain, in a coalition government with the Conservative Party, which was led by David Cameron. Clegg resigned as party chief after the 2015 elections, and lost his parliamentary seat in the 2017 elections. Clegg recently became head of Facebook’s global policy and communications office.

To my mind, Facebook’s ability to draw senior former politicians from around the world into its fold to help it fend off regulation seems far more menacing than a company like Renong that was simply tapping its local political connections to win some plum government deals. Indeed, even if Renong was leeching off the Malaysian economy back in the 1990s, it was at least a Malaysian leech. With companies such as Amazon and Facebook, our economies and politics are in the hands of distant monopolists. 

This story appears in The Edge Singapore (Issue 860, week of Dec 10) which is on sale now. Subscribe here