Regulators have struggled to keep pace with the growth of technology companies in recent years. Photo / Supplied
Google and Amazon have thrived as US regulators largely kept their distance. That may be changing.
Politicians on the right and left are decrying the tech companies' enormous power. President Donald Trump and other Republicans have taken swipes at Amazon over taxes and at Google over search results they say are biased. Democrats have focused on whether the companies stifle competition.
And now, the two federal agencies that handle antitrust matters have split up oversight of the two companies, with the Justice Department taking Google and the Federal Trade Commission taking Amazon, according to three people with knowledge of the matter.
The decisions do not mean that the agencies have opened official federal investigations, the people said. But by staking claims over the two tech giants, the agencies are signaling the potential for greater scrutiny.
Regulators have struggled to keep pace with the growth of technology companies in recent years.
With huge profits and workforces, the companies have come to dominate large swaths of the economy. Amazon is the de facto force in online retailing. Google is the starting point for many people searching online.
While tech giants are awash in cash, data and ambition, they are also increasingly mired in controversy. A wide range of concerns have recently dogged Google, Amazon, Facebook and Apple, including their influence on consumer privacy, labor conditions and public discourse.
With Amazon, some consumer groups and vendors have complained that its powerful e-commerce platform edges out new competition, particularly as the company enters into new business lines like groceries and fashion.
With Google, the Justice Department is exploring an investigation of the advertising and search business, according to several people with knowledge of the discussions. The agency's interest, in part, stems from rivals' complaints.
The regulators' moves are small and preliminary, and could easily come to nothing. But if the agencies pursue cases, Google and Amazon will almost certainly face reams of bad publicity, rising consumer distrust and falling employee morale. An inquiry would remind everyone that Google, with its early motto of "Don't be evil," held itself to standards it sometimes could not match.
"This is more of a warning to the companies that they're being carefully scrutinised and they need to be careful not to play fast and loose given their dominant positions in the digital marketplace," said Gene Kimmelman, a former senior antitrust official at the Justice Department who is now president of the consumer group Public Knowledge.
A prospect that should really worry Google and Amazon is a replay of the government's case against Microsoft in the 1990s.
Microsoft did not have to break itself into two, which was the government's goal. But the company was distracted for at least a decade, which allowed space for startups like Google. Microsoft's reputation took a dive.
"The damage to the monopolist's position comes from the public airing of the facts," said Gary Reback, a Silicon Valley lawyer who was instrumental in the case against Microsoft and has worked with companies that argue they have suffered unfair competition from Google.
Even without formal government investigations, the political pressure for action has been mounting.
"It's time to fight back," Sen. Elizabeth Warren of Massachusetts, a Democratic candidate for president, said after news of the Google developments emerged. Sens. Josh Hawley, R-Mo, and Richard Blumenthal, D-Conn, each said the scrutiny of Google was overdue.
The White House did not respond to questions about whether the president would support an investigation into Google. But according to two people familiar with his thinking, Trump would probably welcome any action.
Trump, like many other Republicans, has repeatedly complained publicly that Google suppresses positive news about conservatives in search results. The president has accused Amazon of avoiding taxes and has called The Washington Post, which has done tough coverage of his administration, a lobbyist for Amazon. Amazon's chief executive, Jeff Bezos, owns The Post.
An Amazon spokesman declined to comment, as did Google, whose parent company is Alphabet. Representatives for the Justice Department and the Federal Trade Commission likewise declined to comment.
The FTC has been public in its scrutiny of tech of late. It announced in February the creation of an antitrust task force to look at the tech industry. The agency is also nearing the end of negotiations with Facebook over a fine for violating a 2011 privacy settlement, which could be as high as $5 billion.
Now the Justice Department is joining the fray. In the past, the agency's head of antitrust, Makan Delrahim, has said that "credible evidence" would need to exist before officials would step in.
Inside the White House, broader discussions about regulating Google have not taken place, one of the people close to Trump said on Saturday. But that person said that Delrahim had built up "a lot of authority" in the Trump administration, and that there would be comfort with what the agency recommends.
While the Justice Department is increasing its focus on Google, it may not translate into action. "Until we see what they intend to do, none of this means anything," said Barry Lynn, director of the Open Markets Institute, a Washington think tank that has played a leading role in raising antitrust concerns. "Maybe they are simply blowing smoke so the president gets happy for a moment so they can go back to doing nothing."
This is more of a warning to the companies that they're being carefully scrutinised and they need to be careful not to play fast and loose given their dominant positions in the digital marketplace.
The decision to divide oversight was part of a discussion a few weeks ago between the agencies' antitrust divisions. To avoid overlap, the agencies routinely negotiate to determine which one will take on merger reviews and antitrust cases.
The oversight of Amazon was earlier reported by The Washington Post.
It is unclear what the FTC will explore with Amazon and it does not appear that the agency has started a formal investigation, the three people said.
The company has been criticized for using its vast online sales site to edge out competitors and harm third-party sellers that use the platform to sell goods. Amazon has argued it was not a monopoly in retailing and that Walmart and other companies made up a big chunk of the market.
As Reback noted, it does not always take a trial to improve behavior. After two professors explained in a paper how Amazon was restricting its third-party sellers from selling their goods more cheaply on other platforms, an anti-competitive move, Blumenthal picked up on the issue. He wrote a four-page letter to the FTC and the Justice Department saying he was "deeply concerned," and Amazon quietly dropped the practice.
The FTC's most prominent technology antitrust case in the past decade involved Google. In 2011, the commission opened an investigation into whether the company ranked the search results of competing shopping, travel and reviews sites unfairly low. It closed the investigation in 2013 in a unanimous vote of the five-member commission that left Google largely unscathed outside of some minor voluntary commitments.
Consumer groups have chastised the FTC decision as a failure of U.S. antitrust enforcement that paved the way for tech giants to grow into monopolies.
Since the FTC investigation closed, the complaints against Google have expanded. Competitors that have complained to U.S. regulators include Yelp, the consumer review site, and travel sites like TripAdvisor.
European regulators have accused Google of abusing its dominance in the smartphone industry with its Android operating system, which is used in 80% of the world's smartphones. In July, European regulators fined Google $5.1 billion for automatically installing its search engine and other apps on Android phones.
Sundar Pichai, the company's chief executive, has rebutted allegations of antitrust violations, as well as the accusations of biased results. After the European decision, he said on Twitter that "rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition."
"Android has enabled this and created more choice for everyone, not less," he added.
Written by: Cecilia Kang, David Streitfeld, Katie Rogers and Stephanie Saul
© New York Times
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