Will the US break up the tech giants?
24 July 2019
The US Department of Justice has announced what many consider to be a long-overdue investigation into the tech giants. But should the likes of Google, Amazon and Facebook be worried? The decision to probe whether tech firms are competing properly follows heightened scrutiny of the companies in Washington. And it comes as Facebook is expected to be fined $5bn (PS4bn) by the Federal Trade Commission (FTC) for privacy violations. Meanwhile, in Europe, Google has been fined more than PS7bn in three different antitrust investigations by the European Commission. Now, the DoJ, which is seen as more easily politically influenced than the FTC, has become the latest to ratchet up pressure on the companies - although it did not name which "digital platforms" it was looking into. It has only said that it was seeking to address "widespread concerns" around social media, search engines and online retail services and whether their actions had harmed consumers. Firstly, it may be worried about being seen as falling behind European regulators and lawmakers, as well at the FTC, according to Ioannis Kokkoris, professor of law and economics at Queen Mary University in London. The body's counterparts in Europe have pursued the firms, while the DoJ had "done nothing", he said. The academic expects the DoJ to look at whether the firms have too much data. But rather than focusing on privacy concerns, he expects the DoJ to look at whether the tech giants are using that customer information to stifle competition. He thinks the DoJ will also look for things like anti-competitive language in Amazon's contracts with its suppliers, and notes that the scope of the investigation could extend beyond an overall look at the market to become a probe into an individual firm. The US president has certainly given tech executives cause for concern. Just last week he promised to take a look into suggestions from tech entrepreneur Peter Thiel, that Google should be investigated for treason over its dealings in China. And he has repeatedly sparred with Amazon boss Jeff Bezos, who owns the Washington Post, a paper that has been critical of the Trump administration Professor Kokkoris described it as a  "very nice coincidence" that this investigation had been launched as the administration appeared to be souring on the tech firms. He said the DoJ was unlikely to have launched the probe if it was going to be seen unfavourably by the administration. Ultimately, it could break the firms up. And it has some support, not least from Facebook's co-founder Chris Hughes who has said Whatsapp and Instagram, which are both owned by Facebook, should be made into separate companies. And the call has also gained support from US lawmakers. Most notably, US Democratic presidential hopeful Elizabeth Warren has said she'd consider dismantling the tech giants should she ever get the top job. However Prof Kokkoris thinks that is highly unlikely. US competition law makes it very hard for courts to find a legal basis on which to justify splitting up a large company.  If there is evidence of bad behaviour then a judge could conceivably make such a demand.  But companies can promise to fix the bad behaviour and move on. And that is what Professor Kokkoris expects to happen.  He thinks the DoJ may look to change the way the sector works to make it more competitive. At this stage, he would not be too worried if he was at the helm of one of the firms - but he said that could change if the DoJ decides to probe a specific company.
Firstly, it may be worried about being seen as falling behind European regulators and lawmakers, as well at the FTC, according to Ioannis Kokkoris, professor of law and economics at Queen Mary University in London. The body's counterparts in Europe have pursued the firms, while the DoJ had "done nothing", he said. The academic expects the DoJ to look at whether the firms have too much data. But rather than focusing on privacy concerns, he expects the DoJ to look at whether the tech giants are using that customer information to stifle competition. He thinks the DoJ will also look for things like anti-competitive language in Amazon's contracts with its suppliers, and notes that the scope of the investigation could extend beyond an overall look at the market to become a probe into an individual firm.
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What are the DoJ's concerns?
The US president has certainly given tech executives cause for concern. Just last week he promised to take a look into suggestions from tech entrepreneur Peter Thiel, that Google should be investigated for treason over its dealings in China. And he has repeatedly sparred with Amazon boss Jeff Bezos, who owns the Washington Post, a paper that has been critical of the Trump administration Professor Kokkoris described it as a  "very nice coincidence" that this investigation had been launched as the administration appeared to be souring on the tech firms. He said the DoJ was unlikely to have launched the probe if it was going to be seen unfavourably by the administration.
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 Is this because of Trump?
Ultimately, it could break the firms up. And it has some support, not least from Facebook's co-founder Chris Hughes who has said Whatsapp and Instagram, which are both owned by Facebook, should be made into separate companies. And the call has also gained support from US lawmakers. Most notably, US Democratic presidential hopeful Elizabeth Warren has said she'd consider dismantling the tech giants should she ever get the top job. However Prof Kokkoris thinks that is highly unlikely. US competition law makes it very hard for courts to find a legal basis on which to justify splitting up a large company.  If there is evidence of bad behaviour then a judge could conceivably make such a demand.  But companies can promise to fix the bad behaviour and move on. And that is what Professor Kokkoris expects to happen.  He thinks the DoJ may look to change the way the sector works to make it more competitive. At this stage, he would not be too worried if he was at the helm of one of the firms - but he said that could change if the DoJ decides to probe a specific company.
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What could the DoJ do?