Now facing its fifth government antitrust lawsuit, Google appears to be the biggest target in the wave of Big Tech investigations around the world.
“Google isn’t the only one in the crosshairs of policy makers,” antitrust attorney Ashley Keller told MarketWatch, echoing the opinions of legal experts.
Aggressive state legislation is already looking into the sway of Apple Inc.’s
App Store while waiting for a decision in the Epic Games Inc. antitrust lawsuit, and some colorful language in a recent decision on a Federal Trade Commission lawsuit against Facebook Inc.
suggests the social network isn’t in the clear. Adding to the climate, Lina Khan’s FTC has its eyes on Amazon.com Inc.
reportedly including its recently announced $8.5 billion acquisition bid for movie studio MGM.
“This is the first time I have seen movement coalesce. Federal, state, and local government agree: Big Tech is a big problem,” said Pat Garofalo, director of state and local policy at the American Economic Liberties Project, a nonprofit organization that researches monopolies and advocates for deconcentration of power in economic markets.
“What they [government legislators and agencies] are doing shows the weakness of current antitrust law, and how courts are wedded to a consumer-harm definition of antitrust law,” Garofalo told MarketWatch. “For the antitrust movement to achieve what it wants to achieve, laws have to change.”
“This is the first time I have seen movement coalesce. Federal, state, and local government agree: Big Tech is a big problem.”
The latest Google complaint, filed in federal court in Northern California by attorneys general in 36 states and the District of Columbia last week, targets the influence of the Android app store, known as the Google Play Store, and the 30% commission fee it levies on developers. It also contends Google imposes technical barriers that “strongly discourage or effectively prevent third-party app developers from distributing apps outside the Google Play Store,” and that the company forces Google’s proprietary apps to be “pre-loaded” on Android devices.
“No matter how big a company is, it has to play by the rules,” North Carolina Attorney General Josh Stein, one of the lead plaintiffs in the Google suit, said in a statement. “Google isn’t. It is using its monopoly power to cut off competition and increase its power and profits at the expense of North Carolina consumers by forcing Google Play Store customers to overpay for apps.”
In a blog post, Wilson White, Google’s senior director of public policy, said the lawsuit “completely ignores the competition we face from other platforms such as Apple’s incredibly successful app store, which accounts for the majority of mobile app store revenues according to third-party estimates.”
Apple’s recent battle with “Fortnite” maker Epic Games mirrors many of the same charges — unfair fees and control over the platform. In federal court in Oakland, Calif., earlier this year, Epic hammered with metronomic precision an argument that Apple unfairly rules over its mobile Android rival, iOS, to benefit itself. The argument is also somewhat similar to the government’s approach against Microsoft Corp.
when it required its web browser to be bundled with Windows — a dominant operating system favoring its own software (and company) unfairly.
The Microsoft case, decades later: Big Tech was built by the same type of antitrust actions that could now tear it down
Alphabet has already faced a record $5.15 billion fine because of the way it operates Google’s Play Store, after the European Commission ruled in 2018 that Google used the Android mobile operating system to thwart rivals. Reuters reported Monday that Google will attempt to reverse that antitrust fine at a five-day hearing in September.
In addition to last week’s suit, Google is the target of search engine-focused lawsuits from the Justice Department and two separate groups of state AGs. Another action, by Ohio Attorney General Dave Yost, seeks a court to declare Google a public utility and to regulate it.
“Google has the most obvious monopoly with its dominance of search as referenced in the DoJ lawsuit,” Julian Baring, president, Americas, at digital-media advertising company Adform, told MarketWatch. “They’ve taken advantage of this to vertically integrate across the whole value chain and extract significant rates and dominate the ad market.”
Google may have the most obviously dominant business, but Facebook, Apple and Amazon could be increasingly vulnerable based on Biden’s executive order, federal investigations, state bills and a new head of the FTC, experts said.
On Friday, President Biden signed a sweeping executive order to apply several antitrust changes, including 72 initiatives involving more than a dozen federal agencies, to spur competition in big business, including tech. After Biden signed the order, he handed the pen to newly minted FTC Chair Khan, who was standing behind him, in a clear message to Big Tech. A few minutes after the event wrapped, news broke that Khan’s FTC may have opened a lengthy probe into Amazon’s acquisition of MGM studios.
Several bits of the order jumped out at Keller: A focus from the White House on non-compete agreements, which would allow a freer movement of labor among the major players, and a fresh look at mergers that “kinda gives the green light to [Khan]” to review Facebook’s acquisitions of Instagram and WhatsApp. Another reference to “access to information of what sellers are selling” has ominous trappings for Amazon’s unfair use of market power, he added.
“Executive orders have immediate impact when they are focused; this one is sweeping, so its impact will be felt across many different debates in Congress, in regulatory agencies and courtrooms and across numerous industries,” Bhaskar Chakravorti, dean of global business at the Fletcher School at Tufts University, told MarketWatch.
The wave of antitrust sentiment against tech has been building steadily for years amid market dominance in search, ad tech, and app stores, Garofalo said — from Facebook’s entanglement in the Cambridge Analytica data debacle, to Amazon’s “brazenness” in awarding its HQ2 campus, to the “obscene power” of every major tech company during the pandemic.
“The pandemic, in particular, got the attention of lawmakers whose states give massive subsidies to help tech companies build out their businesses with data centers and warehouses,” he said.
Apple’s Epic challenge
Apple, whose App Store draws similar anticompetitive comparisons to Play Store, is awaiting a federal judge’s decision later this year in Epic’s antitrust claim. Epic has also sued Google in a case that could go to court in 2022. Apple faces charges in the Epic case around its 30% commission fee to many developers, and its competitive policies.
Epic vs. Apple: The (predicted) verdict is in
The meat of the complaint sounds similar to the lawsuit filed against Google, which is being led by the attorney general of North Carolina, the home state of Epic Games. North Carolina AG Stein said the latest lawsuit against Google stems from an antitrust investigation that began in September 2019 over its search monopoly. When asked directly about similar charges against Apple, a spokeswoman for Stein said he will “continue to closely monitor the conduct of powerful tech companies in the marketplace, and will take appropriate action if they do not comply with federal or state antitrust laws.”
Bills in several states, including Arizona, New York, Illinois, Massachusetts, Georgia and North Dakota, would prevent Apple and Google from forcing developers to use the platforms’ payment systems. Some of the bills are backed by the Coalition for App Fairness, a nonprofit organization founded by Epic Games, Spotify Technology
Apple did score a victory in court last Friday. A federal judge in Delaware dismissed Blix Inc.’s lawsuit that claimed Apple harmed competition in the mobile operating system market by requiring developers to offer an Apple-specific login function. Blix plans to appeal.
Facebook is far from home free
Facebook appeared to be in the clear after a recent victory in federal court against the FTC, but one line in Judge James E. Boasberg’s decision that dismissed the FTC suit should cause pause.
“The agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp,” Boasberg wrote in his decision. “The Court rejects Facebook’s argument that the FTC lacks authority to seek injunctive relief against those purchases.”
“The judge ruled that the FTC claims were right. If I were Facebook, I wouldn’t be particularly happy with this ruling,” Garofalo said.
A portion of Biden’s executive order challenges older mergers, prompting the Justice Department and FTC to announce they will consider revisions to merger guidelines.
“Over the past 10 years, the largest tech platforms have acquired hundreds of companies — including alleged ‘killer acquisitions’ meant to shut down a potential competitive threat,” the White House said in a fact sheet. “Too often, federal agencies have not blocked, conditioned, or, in some cases, meaningfully examined these acquisitions.”
The FTC has 30 days to revise its lawsuit challenging Facebook’s deals with Instagram and WhatsApp, enough time to sharpen its argument, said Alden Abbott, a senior research fellow at the Mercatus Center at George Mason University who was general counsel of the FTC until January.
Keller and his law firm, meanwhile, filed a class-action suit in federal court in Northern California last year, alleging Facebook’s attempts to monopolize the social network market.
“Facebook consistently and intentionally deceived consumers about the data-privacy protections it provided to its users,” the suit claims. “Facebook exploited the rich data it deceptively extracted from its users to identify nascent competitors and then ‘acquire, copy, or kill’ these firms.”
FTC hones in on Amazon
Amazon has largely escaped the scrutiny of federal regulators. But if the FTC does decide to deepen its probe of Amazon’s proposed $8.5 billion acquisition of MGM, it is likely to take months.
The FTC’s Khan has a history of questioning Amazon’s business practices. Her paper on the company’s “antitrust paradox” established Khan’s credentials as a leading expert on the topic.
Meanwhile, the agency is separately investigating Amazon’s business practices.
Amazon last month filed a 25-page motion with the FTC, seeking recusal of Khan from ongoing antitrust probes of the e-commerce giant. The company cited Khan’s past criticisms of the company’s power, including it is “guilty of antitrust violations and should be broken up.”
“Amazon should be scrutinized along with all large organizations. However, even large companies have the right to an impartial investigation,” Amazon spokesman Jack Evans told CNBC. “Chair Khan’s body of work and public statements demonstrate that she has prejudged the outcome of matters the FTC may examine during her term and, under established law, preclude her from participating in such matters.”