Big Tech on the Antitrust Hot Seat and 3D Printing

Charles Goulding Jr. examines the recent anti-trust lawsuits in the US and how they may affect 3D printing.

On October 20, the Department of Justice (DOJ) and eleven state attorneys general sued Google for monopolistic practices involving internet search and search advertising.

The suit came after years of speculation that Google had been using its enormous market power to stifle competition (it is not illegal to be a monopoly, only to use monopoly power to preserve or advance that monopoly).

A similar chorus has grown with respect to other tech giants like Apple, Amazon, and Facebook. The same month as Google’s suit, the House Judiciary Subcommittee on Antitrust found anti-competitive behavior within all of the aforementioned firms, as well as within Google.

Heightened antitrust scrutiny has bipartisan support. In April, Republican Senator Josh Hawley (R-MO) sent a letter to the Attorney General calling for a criminal antitrust probe of Amazon. On the left, meanwhile, Senator Amy Klobuchar (D-MN) introduced an aggressive bill in March aimed at preventing exclusionary conduct and other antitrust abuses.

Less Consolidation, More Innovation

If the Google suit marks a turning point in antitrust regulation, the R&D-related implications for a host of industries could be enormous. The purpose of antitrust regulation is to promote business competition. Competition, in turn, tends to spur innovation, since innovative products and services are one way firms distinguish themselves and win market share.

The government could start to break up some of the largest players in industries across the business landscape, and it could start applying far greater scrutiny to certain business practices and to proposed mergers. The result of such efforts would be to deconsolidate industries presently dominated by small handfuls of market players.

Many of the most consolidated industries are industries that have already embraced the 3D printing revolution. Deconsolidation could open up opportunities for more and more firms to use 3D printing technology to grow themselves.

The following table shows some of the industries that are both 1) marked by industry consolidation and 2) part of the 3D printing revolution.

Industry	Industry Consolidation	3D Printing Influence
Defense Contracting	According to the USGAO, “Three huge firms—Boeing, Lockheed Martin, and Raytheon—have emerged from recent mergers and acquisitions. Together, the three firms receive a substantial portion of what DOD spends annually to acquire its weapons and other products.”	According to Defence IQ, 75% of industry leaders believe 3D printing will be standard within the industry before 2020
Medical Devices	Acquisitions by Integer, Molex, Jabil, Flextronics, and Medplast account for over $4bn in revenue	Parts made by 3D printing now include surgical instruments, orthopedic and cranial implants, dental restorations and external prosthetics
Automobile Components	The top ten parts manufacturers control 60% of market share	The market value of 3D printing within the industry is expected to reach $2.5bn by 2023
Lab Equipment	The 2006 merger of the two largest firms, Thermo Electron and Fisher Scientific, heavily consolidated the industry	3D printing is used for both simple products like beakers to advanced products like microscopes
Aerospace	The top ten aerospace and defense contracting companies accounted for 86% of revenue in 2016; more suppliers follow a one-stop shop model that has further consolidated the field	3D printed parts lower fuel costs due to reduced weight. Boeing aircraft currently use over 20,000 3D printed parts
Appliances	In 2006, Whirlpool’s acquisition of Maytag resulted in its control of 50-80% of U.S. sales of washing machines, dryers and dishwashers	Smart appliances like FirstBuild’s ChillHub refrigerator are developed using 3D printing

The Research & Development Tax Credit

Whether it’s used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.

Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

• Must be technological in nature
• Must be a component of the taxpayer’s business
• Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
• Must eliminate uncertainty through a process of experimentation that considers one or more alternatives

Eligible costs include U.S. employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, U.S. contract research expenses, and certain costs associated with developing a patent.

On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit has been used to offset Alternative Minimum Tax (AMT) for companies with revenue below $50MM and for the first time, pre-profitable and pre-revenue startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.

Conclusion

The next few years may be a turning point for US antitrust regulation within big tech and within American business at large. Meanwhile, 3D printing continues to emerge as one of the key ways firms have been innovating. The R&D tax credit can help any innovative firm looking to make headway within a changing business landscape.