Tech giants facing Washington’s glare

Big tech appears headed for a reckoning with big government.

The US House Judiciary Committee announced on Monday that it would launch a bipartisan investigation into whether there is enough competition among American technology giants.

Although the panel did not name specific companies, four major players on the US tech landscape — Alphabet Inc (parent of Google), Amazon.com Inc, Apple Inc and Facebook Inc — are reportedly the focus of the probe.

The West Coast tech shops also are reportedly facing scrutiny from the Department of Justice (DOJ) and the Federal Trade Commission (FTC), news of which pinched the stock of all four in Monday trading.

The House panel's investigation will focus on three main areas: "documenting competition problems in digital markets; examining whether dominant firms are engaging in anti-competitive conduct; and assessing whether existing antitrust laws, competition policies, and current enforcement levels are adequate to address these issues".

"A small number of dominant, unregulated platforms have extraordinary power over commerce, communication, and information online," the Judiciary Committee stated in a news release that included the names of both Democratic and Republican members. "Based on investigative reporting and oversight by international policymakers and enforcers, there are concerns that these platforms have the incentive and ability to harm the competitive process.

"The Antitrust Subcommittee will conduct a top-to-bottom review of the market power held by giant tech platforms. This is the first time Congress has undertaken an investigation into this behavior."

The announcement came after news reports that the FTC and the DOJ, which enforce antitrust laws in the United States, have split up oversight of the four companies, two sources told Reuters, with Amazon and Facebook coming under the watch of the FTC, and Apple and Google under the DOJ.

"There is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content, and communications," House Judiciary Committee Chairman Jerrold Nadler, a New York Democrat, said in the announcement.

"There's been tremendous concentration in these digital market places that are resulting in anti-competitive behavior, serious breaches of privacy, consumers not having control of their own data," said Rhode Island Congressman David Cicilline, who chairs the Antitrust Subcommittee.

Shares of Facebook fell 7.5 percent on Monday, while Alphabet shed more than 6 percent. Amazon shares lost 4.6 percent, and Apple Inc slid 1 percent. Those selloffs led to the tech-heavy Nasdaq Composite index dropping 120 points, or 1.6 percent.

"If the DOJ moves ahead, an investigation would likely embolden critics of Facebook, Amazon and other tech giants as well, causing rhetoric to heat up during the 2020 election year," a Merrill Lynch note to investors said.

US President Donald Trump has called for closer scrutiny of social media companies and Google, accusing them of suppressing conservative voices online.

He also has accused Amazon of taking advantage of the US Postal Service. Trump has criticized Amazon CEO Jeff Bezos, who privately owns The Washington Post, a newspaper often critical of the president.

Republican Senator Lindsey Graham said that the business model of companies such as Google and Facebook needs to be scrutinized, saying that they have "so much power, and (are) so unregulated".

Republican Senator Marsha Blackburn said the panel would do a "deeper dive" into big tech companies.

"Their predatory power grabs demand strict & stiff investigation & antitrust action," Democratic Senator Richard Blumenthal of Connecticut wrote on Twitter.

A billboard by the campaign of US Senator Elizabeth Warren of Massachusetts, a candidate for the Democratic presidential nomination, went up in San Francisco last week. It says "Break Up Big Tech," and included a number for sending a text message.

News broke on Friday that the DOJ was laying the groundwork to investigate Google to determine whether the world's largest online advertising platform was using its size to box out smaller competitors in violation of laws designed to ensure fair competition.

While the four technology companies, all worth hundreds of billions of dollars, have drawn scrutiny from regulators and lawmakers around the world, it was not clear what the US Justice Department or FTC would focus on.

Lawmakers have argued that Amazon's low prices have hurt brick-and-mortar retailers, many of whom have closed.

Apple is the subject of a European Union investigation into a complaint made by streaming music provider Spotify Technology SA that the California company misuses its power over app downloads. In 2014, the iPhone maker settled a DOJ lawsuit that said it conspired with publishers to raise the price of e-books.

Facebook, which owns onetime rivals Instagram and WhatsApp and has more than 1.5 billion daily users, has been criticized for allowing misleading posts and "fake news".

Google has faced accusations that its web search service leads consumers to its own products to the detriment of competitors. The company has been fined multiple times by the European Union, most recently in March for $1.7 billion in a case focused on illegal practices in search-advertising brokering.

Reuters and Bloomberg contributed to this story.