Antitrust Troubles Snowball for Tech Giants as Lawmakers Join In

The Justice Department will oversee antitrust complaints about Apple while the Federal Trade Commission will take on Facebook.
Credit
Tom Brenner for The New York Times

Image
The Justice Department will oversee antitrust complaints about Apple while the Federal Trade Commission will take on Facebook.CreditCreditTom Brenner for The New York Times
By Cecilia Kang, David Streitfeld and Annie Karni
June 3, 2019

WASHINGTON — The federal government is stepping up its scrutiny of the world’s biggest tech companies, leaving them vulnerable to new rules and federal lawsuits. Regulators are divvying up antitrust oversight of the Silicon Valley giants and lawmakers are investigating whether they have stifled competition and hurt consumers.

After a spate of unusual negotiations, the Justice Department has agreed to handle potential antitrust investigations related to Apple and Google, while the Federal Trade Commission will take on Facebook and Amazon.

Lawmakers in the House said on Monday that they were looking into the tech giants’ possible anti-competitive behavior. That could lead to the first overhaul of antitrust rules in many decades, an effort to keep up with an industry that didn’t exist when antitrust laws were written.

The question of whether tech companies violate antitrust laws has long been the subject of academic debates and industry griping. But now the industry is in the sights of President Trump, Democrats running for president, Congress and consumers. Silicon Valley has faced fierce criticism over disinformation, privacy breaches and political bias.
ADVERTISEMENT

Investors pummeled technology stocks on Monday. Shares of Facebook fell more than 7 percent. Google and Amazon shares were also sharply lower, and Apple’s stock fell about 1 percent.

It does not appear that the agencies have opened official investigations. But the scrutiny from Washington could lead to years of headaches for the companies, raising the prospect of lawsuits to break up companies, hefty fines or new laws limiting their reach.

“This is about how do we get competition back in this space,” Representative David Cicilline, Democrat of Rhode Island, said Monday at a news conference. Mr. Cicilline is the chairman of the House Judiciary’s subcommittee on antitrust, which during the next 18 months plans a set of hearings, testimony from executives from top companies, as well as subpoenas for internal corporate documents.

Mr. Cicilline said the investigation would focus on major digital platforms. The House committee on Monday informed four tech companies, Google, Apple, Facebook and Amazon, of the plans. If the House investigation finds wrongdoing, lawmakers will pressure the Justice Department or the F.T.C. to investigate, he said.
ADVERTISEMENT

“This is long overdue,” he said.

The F.T.C. and Justice Department declined to publicly comment Monday. All four companies also declined to comment, though they have rebutted accusations of anticompetitive behavior in the past.
Tech Stocks on Monday
Percentage change in each company’s share price at five-minute intervals.

Source: Refinitiv By The New York Times
A few weeks ago, the Justice Department and the F.T.C. began negotiations over dividing up the responsibilities for overseeing competition in the tech sector, according to several people close to the discussions.

The two agencies often split responsibilities for reviewing mergers. But the recent negotiations show that both agencies were keen on looking into the companies, and that they had probably received complaints from rivals and others.

ADVERTISEMENT

Two people close to President Trump said White House officials were supportive of the agencies’ steps toward greater antitrust oversight over tech companies.

But the people, who would speak only on the condition of anonymity, insisted there was no direct pressure on the agencies or involvement from Mr. Trump or any top West Wing officials. The officials attributed the moves to Mr. Trump’s appointees at the agencies.

One of the officials said antitrust issues had not recently been a focus of the president, and had not come up in Oval Office meetings with his economic advisers.

Mr. Trump’s lack of involvement could be good news for the potential investigations: After he publicly opposed the AT&T-Time Warner merger, AT&T tried to use his comments in the case as a defense, saying the Justice Department was carrying out a political agenda.
ADVERTISEMENT

“Big tech plays a huge role in our economy and our world,” Representative Doug Collins, a Republican of Georgia and ranking member of the Judiciary Committee, said in a statement about the House investigation. “As tech has expanded its market share, more and more questions have arisen about whether the market remains competitive.”

It could be years before regulators take action or Congress passes new antitrust laws. Some consumer groups have called for regulators to break up the companies, and Chris Hughes, a Facebook co-founder, has said the company must be broken up in order to solve its problems. But most lawmakers and global regulators have stopped short of supporting the breakup of any tech company.

Talk of antitrust is suddenly fashionable, but efforts by the government to break up companies have been rare, time-consuming and not always successful.

The government’s case against IBM went on for 13 years before being dropped. The pursuit of AT&T lasted a decade until the company was broken into the seven Baby Bells. The government chased Microsoft for 12 years, from the first F.T.C. investigation until a settlement was approved by an appeals court.

ADVERTISEMENT

One reason for the slow pace: If you’re big enough to be drawing antitrust heat, you’re big enough to have a lot of lobbyists, lawyers and employees in congressional districts all around the country.
“This is about how do we get competition back in this space,” Representative David Cicilline, Democrat of Rhode Island, said on Monday.
Credit
Gabriella Demczuk for The New York Times

Image
“This is about how do we get competition back in this space,” Representative David Cicilline, Democrat of Rhode Island, said on Monday.CreditGabriella Demczuk for The New York Times
In recent decades, a reinterpretation of traditional antitrust theory created a major barrier to regulatory action.
Robert Bork, a former federal judge and conservative legal theorist, argued in his 1978 book, “The Antitrust Paradox,” that if the government protected weaker competitors, it would make businesses less efficient, raising prices for consumers.

ADVERTISEMENT

His consumer welfare standard — all that counts is what happens in the consumer’s wallet — has been widely used by courts, including the Supreme Court.

This interpretation of antitrust helps big tech companies. It is difficult to argue that consumers are being robbed — the argument made by the Senate for passing the original antitrust laws more than a century ago — when companies like Google and Facebook do not charge users. Amazon prides itself on charging low prices.

“Federal enforcers have a lot of catching up to do,” said Sarah Miller, the deputy director of the Open Markets Institute, a nonprofit that is critical of the giant tech companies.

The antitrust law in Europe is more receptive to the recent complaints about large tech companies, and critics of the businesses have pursued actions there.

ADVERTISEMENT

European regulators fined Google 1.5 billion euros this year for antitrust violations in the online advertising market. It was the third antitrust move against the company by European officials in three years.

European regulators have expressed concerns about Apple’s dominance in music. In March, Spotify, the music streaming service, filed a competition complaint with European regulators about how Apple controlled its app store. Spotify accused Apple of unfairly charging fees to its competitors and imposing burdensome rules about marketing.
Apple has argued that the fees are reasonable given that it operates the App Store. It argues that the App Store also gives Spotify and other companies access to millions of potential customers.

Ms. Miller said she wasn’t holding her breath that the new government steps would change the American approach.

“Time will tell if this announcement leads to meaningful action,” she said.
Follow Cecilia Kang on Twitter: @ceciliakang.

Cecilia Kang and Annie Karni reported from Washington, and David Streitfeld from San Francisco. Ben Sisario contributed reporting from New York.
— Read on www.nytimes.com/2019/06/03/technology/facebook-ftc-antitrust.html