The antitrust target on Big Tech’s back is growing.
With separate antitrust actions by 48 attorneys general and the Federal Trade Commission’s against Facebook Inc.
charges by the European Union against Amazon.com Inc.
and two fresh state AG cases on top of a Justice Department lawsuit vs. Alphabet Inc.’s
Google, only Apple Inc.
among the Big Four has yet to face official regulatory actions. Yet Apple faces a high-profile private lawsuit and a developer backlash, leaving it far from unscathed.
It just got worse: A week after the early December suits against Facebook, two consortiums of state AGs filed antitrust actions against Google. The most troublesome was led by Colorado Attorney General Phil Weiser, a Democrat, and Nebraska AG Doug Peterson, a Republican. It allege Google’s search engine engaged in unlawfully manipulating search results in a clear “concentration of power.” The suit, which also outlines the dangers of Google’s sway over smart cars and other devices through its search-engine dominance, seeks to consolidate with a Justice Department suit filed in October.
“The issue of monopoly control and misinformation is one of the few areas that Republicans and Democrats agree (on),” Dan Wang, who teaches technology strategy at Columbia University, told MarketWatch. “They have different reasons, but have reached the same conclusion. There ought to be some sort of government action.”
The sentiment to take action is palpable on Capitol Hill, though it remains unclear when more actions may be taken and how far they will go.
Big Tech’s dominance “has real consequence on businesses that operate online, and whether these markets are open and fair, or increasingly controlled by just a few dominant firms,” said Rep. David Cicilline, D-R.I., whose antitrust subcommittee issued a lacerating 449-page report in October with remedies that include cleaving off divisions and blocking large acquisitions.
What impact, then, will inevitable antitrust actions have on tech stocks and innovation beyond Apple, Amazon, Google and Facebook? So far, it hasn’t hurt shares of the four companies — each is up at least 30% in 2020, and their combined market value is $5.5 trillion.
In the short term, the threat could be significant as large companies are on their best behavior while they haggle with the federal government in court and closely eye legislators threatening punitive laws.
“I look at it as a mixed bag to a net positive” for Silicon Valley, Matthew Cowan, a general partner at venture-capital firm Next47, told MarketWatch. “There will be a chilling effect on any large acquisition by the five largest tech companies, including Microsoft
On the flip side, it will prompt companies like Google to be more careful in their business practices, and spur innovation among startups.
“The threat of antitrust enforcement is almost as effective as enforcement,” Cowan added.
Luigi Congedo, principal analyst at venture-capital firm BootstrapLabs, told MarketWatch he expects “more competition, a greater distribution of talent, and more IPOs in the short term.”
For most of the second half of 2020, Google and Facebook were dissuaded from pursuing big M&A deals despite a raft of multibillion-dollar deals in tech, based on data analysis by news site The Information. This could change if Facebook proceeds with a reportedly planned purchase of Kustomer, a customer-relationship management startup, for $1 billion. The likelihood of such a deal, however, probably dimmed considerably with Wednesday’s antitrust lawsuits filed against Facebook.
At the same time, Google continues to plow forward with a proposed $2.1 billion purchase of Fitbit Inc.
— the EU is set to approve the deal — and is reportedly eyeing a $1 billion buyout of ShareChat, a social-media platform based in India.
Executives at tech’s largest players are closely weighing the benefits of major M&A vs. their impact on regulatory scrutiny, said John Chambers, the former CEO of Cisco Systems Inc. “Regulation and antitrust is coming, and it is absolutely part of a company’s strategy,” Chambers told MarketWatch.
Lawsuits could last years, or there could be quick settlements on scaled-back charges as armies of lawyers from both sides battle in court, offers Constantin Kogan, managing director at Wave Financial.
Mentions of antitrust and related keywords grew more than 100% from Q1 to Q3 this year for all company filings compared with the same period last year, according to GlobalData, a leading data and analytics company.
This much is certain for now: President-elect Joe Biden is expected to confront Silicon Valley giants over antitrust, privacy and misinformation in a sharp departure from polices pursued while he was vice president under President Barack Obama, reflecting current bipartisan support to constrain Big Tech.
“The evidence we reviewed showed that by controlling access to certain markets, these companies can pick the winners and losers throughout the economy,” Cicilline, chairman of a House antitrust subcommittee, which issued a scathing report on the business practices of Big Tech, told the UBS European Virtual Conference on Nov. 10. “Not only are they dominant, but the evidence showed they abuse their dominance in two key ways—by exploiting firms that rely on their platforms and excluding rivals.”
The report, released in October, concluded Big Tech poses a grave threat to markets that might require breaking up the most prominent U.S. tech companies and limiting their acquisitions — the same remedies suggested in the suits filed against Facebook on Wednesday.
Headed into 2021, probes of the Big Four U.S. tech companies have sprouted across the U.S. and Europe, exposing each to various charges of antitrust abuses, privacy violations and other misconduct.
However, each investigation comes with caveats, such as how the Biden administration proceeds with the Google and Facebook cases inherited from the Trump administration; uncertainty over control of the U.S. Senate; whether the EU provides a clear regulatory road map for American authorities; if more developers join in Epic Games Inc.’s lawsuit against Apple; as well as how the COVID-19 pandemic affects efforts.
The game developer sued Apple in August, alleging the smartphone giant has engaged in “monopolistic” behavior with its App Store practices, which allow Apple to collect up to 30% of revenue from digital purchases made through apps that are downloaded through its App Store.
Epic had tried to take payments via its own technology within “Fortnite” on iOS devices, but Apple removed the game from its App Store because its policy is not to allow developers to bypass the App Store’s traditional payment mechanism.
“COVID-19 will absolutely be the catalyst for the breakup of big tech, but it’s indirect,” said Scott Galloway, a professor of marketing at New York University’s Stern School of Business.
Galloway, whose most recent book, “Post Corona,” recently told MarketWatch the incoming Biden-Harris administration is already having an impact on the actions of Facebook and Twitter
who began to identify misinformation related to the U.S. election on their platforms, starting in early fall.
“We are going to have antitrust, it is going to be slower and more deliberate. It’s not going to be legislation or policy that doesn’t stand up to legal scrutiny,” Galloway said.
For more on the individual companies’ potential antitrust paths, see these stories:
Amazon and antitrust: As EU inquiry begins, U.S. ponders similar actions
Google and antitrust: Big Tech’s first target could face more legal action
Facebook and antitrust: The effort to force spinoffs of Instagram and WhatsApp starts a long legal path