Piling on: State AGs intend to launch their own antitrust investigation against tech biggies

A coalition of about 12 state attorneys general is getting ready to launch an antitrust investigation of U.S. tech giants, the Wall Street Journal reported Monday. The specific companies were not identified in the report, but they are likely Google, Facebook, Amazon and possibly Apple. 

This would be a separate inquiry from the current federal and Congressional investigations going on. According to the report the focus will be whether “a handful of dominant tech platforms use their marketplace powers to stifle competition.”

Bi-partisan state effort. The group is reportedly bi-partisan and probably includes Texas, North Carolina and Mississippi, among others. A formal announcement is expected next month. It’s not clear whether the federal and state investigations, assuming the latter goes forward, would be coordinated in any way or independent. 

Previously the Department of Justice (DOJ) and Federal Trade Commission (FTC) reached agreement on antitrust investigations of the four companies, with the DOJ pursuing Google and Apple and the FTC taking jurisdiction over Amazon and Facebook. 

Breakup on the table. And last week, FTC Chairman Joe Simon said that the government would consider breaking up companies “to restore competition,” although that was not the FTC’s immediate or preferred approach. Specifically, the government might “unwind acquisitions” made by one or more of the companies.

Facebook is seeking to more closely integrate its flagship app, Instagram and WhatsApp. One explanation is to create a unified platform for marketers. However, some critics see an attempt to pre-empt any potential breakup of the company. Indeed, the FTC acknowledged that operationally merged companies are much harder to break up. 

Outcomes unpredictable. The outcome of these various active and emerging investigations is not at all clear. It could and will likely be years before any resolution. And any decision by the government to break up one or more of the companies — the potential remedies could be very different by company — would be litigated in court. 

In 1999, Microsoft was formally determined to be an abusive monopoly by Judge Thomas Penfield Jackson. Jackson also recommended the company be split in two: one company for Windows OS and the other for everything else.

The split never happened, in part because Jackson’s remedy was rejected on appeal and partly because the incoming Bush administration had a very different perspective on competition and the market. In 2001 Microsoft settled with the DOJ, leaving the company intact.

As with Microsoft the 2020 election could also have an impact on any active antitrust investigations, though that’s now harder to predict than in 2000. All of the targeted companies have issued statements arguing they face a strongly competitive market and that they contribute to the economy. 

A taxing situation. On another front, U.S. tech companies now face a 3% tax on revenues generated in France. This applies to companies making more than 25 million euros in France and more than 750 million globally. This would include all the major technology companies. The tax was approved in July. Beyond the immediate concern over the tax itself, it’s possible that more countries could follow France’s lead, seeing U.S. technology firms as a source of new revenues.

Why we should care. Even though a resolution is probably years away, these investigations could result in structural changes to the U.S. digital market. Alternatively, nothing much might change. That was the case with the original FTC antitrust investigation of Google, which closed after Google agreed to modest changes to some of its practices.

The antitrust framework that U.S. regulators have used to determine whether to approve acquisitions or mergers is an evaluation of potential “consumer harm.” In that context, most of the big tech companies have convincingly argued that they are delivering convenience or lower cost to consumers.

The Europeans have been less persuaded by these arguments. And there are some indications that U.S. antitrust law and theory may be in flux. 

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About The Author

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.

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