The US Justice Department opens a broad antitrust review case against tech giants

The U.S. Justice Department is opening a broad antitrust review into whether dominant technology firms are unlawfully stifling competition, the Wall Street Journal reported yesterday.

The review is geared toward examining the practices of online platforms that dominate internet search, social media and retail services, which includes Facebook, Google, Amazon and Apple, according to the report.

The move is the strongest by DOJ so far towards big tech, which faces increased scrutiny from both political parties because of the expanded market power the companies have and the tremendous amount of consumer data they control.

The review is designed to go above and beyond recent plans for scrutinizing the tech sector that were crafted by the Justice department and the FTC.

DOJ will examine big tech’s growth in size and reach

The Justice Department will examine issues including how the most dominant tech firms have grown in size and expanded their reach into additional businesses. They are also interested in how these tech companies have leveraged the powers that come with having very large networks of users, the department said.

There is no defined end-goal yet for the review than to understand whether there are antitrust problems that need addressing, the officials said. The inquiry could eventually lead to more focused investigations of specific company conduct, they said.

The review also presents risks for the companies beyond whether antitrust issues are identified. The department won’t ignore other company practices that may raise concerns about compliance with other laws, officials said.

“Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands,” Justice Department antitrust chief Makan Delrahim said in a statement. “The department’s antitrust review will explore these important issues.”

At a broader level, the division will work in close coordination with Deputy Attorney General Jeffrey Rosen, the officials said.

DoJ hosted a meeting with critics of social media giants

WSJ further mentioned that the department had recently hosted a private presentation where officials heard from critics of Facebook, who walked through their concerns about the social-media giant and advocated for its breakup. Tech and antitrust observers believed issues related to Facebook’s dominance were to be handled by the FTC.

Both the FTC and the Justice Department have made clear that they view tech-sector competition issues as a priority. Under agreements brokered in recent months between Mr. Delrahim and FTC Chairman Joseph Simons, the Justice Department obtained clearance to proceed with a probe of whether Google has engaged in illegal monopolization tactics, as well as jurisdiction over Apple for similar issues.

FTC has already undertaken a lengthy consumer-protection investigation of Facebook’s privacy practices, and imposed a $5 billion fine to Facebook for which the company was already prepared.

Justice Department officials said those agreements weren’t meant to be open-ended or all-encompassing. But in any case the department isn’t trying to pre-empt the FTC’s work, they said, and suggested the two agencies might explore different tech practices by the same company, as well as different legal theories for possible cases.

Apart from the Justice Department and FTC scrutiny, a House antitrust subcommittee also is taking a broad look at potential anticompetitive conduct in the tech sector. Executives from Facebook, Google, Apple and Amazon all testified before the panel last week.

“I don’t think big is necessarily bad, but I think a lot of people wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers,” Mr. Barr told senators. “You can win that place in the marketplace without violating the antitrust laws, but I want to find out more about that dynamic.”

The market and community reactions

Hours after this news on Tuesday, shares for the four companies were down. Apple was down by about 0.4%, Amazon by about 1.13%, Alphabet by about 0.96%, and Facebook by about 1.65% according to CNBC report.

On this news, Professor at NYUStern, Rob Seamans put forth his views and proposes a few ideas on how the law makers can regulate the big tech. He says  lawmakers should break big tech in a horizontal way, which means that the big tech firm is divided into two smaller, but similar-looking firms. Another idea of break up can be vertical in nature, which means that the big tech firm’s platform remains the same, but it has to spin off anything that uses the platform. For example, Google’s search platform would no longer be able to provide its own maps or other “edge services.”

https://twitter.com/robseamans/status/1153849902629314562

On Hacker News, this development has gained significant attention and discussions revolve around the question of whether scientifically the tech companies have made any progress. One of the user comments reads, “I just finished the Eric Weinstein/Peter Thiel podcast, and came away mostly agreeing with their assessment that we’ve really stagnated when it comes to progressing scientifically.

I definitely feel like there’s this illusion of tech innovation coming from these big companies that suck up all the tech talent, but at the end of the day the best and brightest are working on optimizing ad clicks (FB, Goog) or getting people to buy crap (Amazon) or working on incremental hardware improvements (Apple).

 

If anything, I would hope any outcome against big tech would level the playing field when it comes to attracting talent, and create an environment where working on true “moonshot” tech was not so risky.”

Democratic presidential candidates like Elizabeth Warren have  been calling for the breakup of companies like Google and Facebook since the start of the year. And a few Republicans have voiced concerns about whether tech companies disfavor conservative voices on their platform.

Last month the US regulators had already planned to probe Google on anti-trust issues; Facebook, Amazon & Apple were also under legal scrutiny. This month the EU Commission opened an antitrust case against Amazon on the grounds of violating the EU competition rules under Article 101.

EU Commission opens an antitrust case against Amazon on grounds of violating EU competition rules

US regulators plan to probe Google on anti-trust issues; Facebook, Amazon & Apple also under legal scrutiny

Facebook sets aside $5 billion in anticipation of an FTC penalty for its user data practices