DOJ Launches Probe into Big Tech Companies

The U.S. Department of Justice (DOJ) has announced that it is "reviewing the practices of market-leading online platforms," with a view towards determining whether they have "reduced competition, stifled innovation, or otherwise harmed consumers." The DOJ press release indicates that they are responding to "widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online."

Goal of the Review

The goal of this review is to "assess the competitive conditions in the online marketplace...and to ensure that Americans have access to free markets in which companies compete on the merits to provide services that users want."

Assistant Attorney General Makan Delrahim of the Antitrust Division provided this quote for the press release: "Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands."

The DOJ says that it will "seek redress" for any violations of law, without offering any further specifics.

Likely Targets

The DOJ press release does not mention specific companies, but its language suggests that the key targets of this review are likely to be among the mega cap FAANG members. Facebook Inc. (FB) is the leader in social media, Amazon.com Inc. (AMZN) is the preeminent online retailer, and the Google division of Alphabet Inc. (GOOGL) is by far the dominant search engine. Apple Inc. (AAPL), meanwhile, has been mentioned in various press reports as another likely target.

Double Trouble

The DOJ already has been partnering with Federal Trade Commission (FTC) in reviewing competitive practices in the tech industry, with an eye towards possible antitrust violations, per an earlier report in Barron's. According to that article, the FTC is taking the lead on Amazon.com and Facebook, while the DOJ leads on Apple and Alphabet.

However, the current announcement from the DOJ seems to be ratcheting up the pressure on the tech giants, The Wall Street Journal reports. It now seems possible that a given company may face antitrust actions launched by both the DOJ and the FTC, greatly increasing the potential penalties. Meanwhile, executives from these same tech giants testified last week before a U.S. House of Representatives subcommittee on antitrust matters.

Calls For Breakup

All four FAANG members mentioned above have been under fire from various quarters for allegedly monopolistic practices. In a recent "private presentation" to the DOJ, critics of Facebook, including some academics, reportedly argued that the company should be broken up, per the Journal. Google and Amazon also have faced calls for breakup at various times in recent years, from various constituencies.

"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," U.S. Attorney General William Barr testified during his confirmation hearings in January, per the Journal.