Analysis: Big Tech is having a terrible week. Things will only get worse.
After years of operating largely free of federal regulation, our tech overlords are now firmly in the regulatory spotlight. And for them, the worst is almost certainly yet to come.
On Monday, lawmakers in the House announced that they would investigate whether the country's most powerful tech companies had abused their power over the digital economy. Rep. David Cicilline, D-R.I., the head of the House Judiciary antitrust subcommittee, made the motivations clear: Four decades of lax antitrust enforcement and bad case law have failed competition and consumers. It's now on Congress to determine whether new laws are needed to police the ever-growing power of Facebook, Amazon, Google and Apple. (Amazon Chief Executive Jeff Bezos owns The Washington Post.)
The announcement of the bipartisan investigation added to what had been an already-awful few days for the tech giants. News broke over the weekend and into Monday that the two U.S. antitrust agencies, the Federal Trade Commission and the Justice Department, had completed their internal process of deciding jurisdiction over the big four tech companies, with the Justice Department landing Google and Apple, while the FTC will oversee Facebook and Amazon. According to reports, the agencies are now on the precipice of opening antitrust investigations into Google at Justice and Facebook at the FTC.
This is not a performance. The agencies don't go through an often arduous clearance process for show. Eight years ago, when the FTC began investigating Google's search practices, then-FTC Chair Jon Leibowitz had to strike a handshake deal with DOJ antitrust chief Christine Varney and agree to give up turf on other matters to get Google. The result was a months-long, staff-intensive investigation that ended only when the commissioners failed to agree on a lawsuit. Swapping oversight of Google and Facebook was probably just as burdensome. The agencies wouldn't go through it if they didn't have serious plans to investigate and potentially sue those companies.
As difficult as this moment is for the tech giants, it's only the beginning.
For years, antitrust activists have targeted the companies for what they see as abuses of their dominant positions in search, retail commerce, Web hosting, mobile apps, operating systems and other parts of our online world. This week's boiling news cycle shows that those views have penetrated the thinking of antitrust enforcers and policymakers in the United States, who will soon join their international counterparts in investigating the power of the companies and finding ways to fix any possible abuses they find.
The proposed fixes span the regulatory and enforcement spectrum. Hal Singer, an economist at Georgetown University, says regulators should apply the same regime to Facebook and Amazon as they do to integrated cable companies such as Comcast and put rules in place stopping them from using their dominant platforms to promote their adjacent products and services. Others propose an approach similar to that of Yale professor Fiona Scott Morton, who has, among other things, suggested creating a new agency that would oversee the tech monopolists and, if necessary, force Facebook and others to allow their users to move their data elsewhere. Even more ardent pro-enforcement folks say structural separation is the only real cure: They argue that the antitrust agencies forcing Facebook to sell Instagram and WhatsApp, Amazon to spin off Amazon Web Services and so on would bolster competition and consumer freedom.
Whatever the fix might be, a fix is coming. There's little to no chance that Google, Facebook and Amazon escape this moment of antitrust scrutiny unharmed, especially given that enforcers around the world have already opened investigations and brought cases against the four. The suspicions and evidence that triggered those probes exist on this side of the Atlantic as well. Now that the agencies have claimed their turf, domestic versions of these investigations could evolve quickly.
For all of the grief the FTC has caught for its reluctance to use its authority to make more stringent antitrust rules and bring more aggressive cases, the launch of its digital economy task force suggests imminent enforcement in the tech space. Joe Simons, the FTC's chairman, was at the agency more than a decade ago when it designed a path to revamp its enforcement against harmful hospital mergers: carry out hearings , launch a task force and, eventually, bring cases . Simons has followed that path precisely when examining the digital economy. A major case or two against the big tech companies now firmly in the FTC's jurisdiction - Amazon and Facebook - seems a probable result.
And in Congress, the tech giants face two of their most ardent and powerful critics. Lina Khan, counsel for the House antitrust subcommittee, has spent much of her career studying the power of Amazon and the other major tech platforms and has identified ways in which she thinks the companies have violated the law. In Cicilline, the growing pro-enforcement movement has found a lawmaker with both the power and interest needed to drag big tech executives to Capitol Hill and grill them on the power and harms Khan and others have identified.
Big Tech's antitrust woes may only grow. Should Sen. Elizabeth Warren, D-Mass., or Sen. Bernie Sanders, I-Vt., win the Democratic nomination and the White House in 2020, scholars like Khan and Morton could quickly find themselves with far more power to make their vision for heightened antitrust enforcement a reality. Rohit Chopra, the FTC's activist Democratic commissioner whom Khan formerly advised, would be the odds-on favorite to take over as chairman. Tech monopolies would be on notice - as would corporate power in agriculture, pharmaceuticals and throughout the economy.
Of course, the most extreme scenarios are at least 18 months away. But Facebook and its fellow tech titans have plenty to worry about now.
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Knox is an editor at Global Competition Review, an antitrust journal and news service.