Tech draws scrutiny from rival agencies
On paper, the Justice Department and the Federal Trade Commission are co-equals when it comes to making sure companies compete freely and fairly. But now the two antitrust enforcers are pursuing dueling probes of the country’s internet giants.
The FTC on Tuesday announced that it’s demanding information on hundreds of smaller acquisitions by five technology giants that avoided regulatory scrutiny over the past decade.
The Justice Department, under the close watch of Attorney General William Barr, is already running its own broad inquiry of the huge internet platforms. So are most states and several congressional committees. Companies “trying to make decisions with some level of comfort and certainty” are finding out that there is little of either, said Barbara Sicalides, a partner at the law firm Pepper Hamilton LLP. “That is very scary for businesses.”
Some interpreted the FTC move as a sign it won’t cede ground to the Justice Department on antitrust investigations of tech companies. It came a day after the White House proposed a 13% increase in the budget of the Justice Department’s antitrust division, which would allow it to fill 87 positions, while the FTC’s request was essentially flat.
The same day, one of Congress’s leading tech antagonists, Sen. Josh Hawley, R-Mo., snubbed the FTC by proposing that the Justice Department absorb the independent agency. “The FTC really could bring an analytic capacity to DOJ that would really make the enforcement stronger,” said Hawley, who nonetheless praised the FTC initiative.
Some antitrust experts found the senator’s suggestion worrisome, coming as Barr has been accused of politicizing his department by doing President Donald Trump’s bidding rather than following the rule of law.
Similar allegations have been aimed at Barr’s antitrust chief, Makan Delrahim. “What we’re seeing is a very, very different DOJ under the Trump administration,” said Diana Moss, president of the American Antitrust Institute. “I’m really talking unprecedented.”
Both agencies declined to discuss specific cases and downplayed the friction. “The FTC hasn’t lost any territory to grab back,” said Ian Conner, who directs the FTC’s competition bureau. But Conner said it would be a bad idea to combine the Justice Department with the FTC, which he said was created out of concern that Justice in the past didn’t have the tools or interest to perform studies like the one the FTC just opened.
The FTC made its sweeping request for information to Facebook Inc., Amazon.com Inc., Google parent Alphabet Inc., Apple Inc. and Microsoft Corp. under Section 6(b) of the FTC Act. That authority allows it to collect nonpublic information from companies that can bolster its understanding of markets.
The information it gathers can’t be shared with the Justice Department but could be used to open its own enforcement actions, which could lead to information sharing. FTC Chairman Joe Simons said the information would be used to produce a study for “research and policy,” but it could also result in the FTC trying to unwind transactions it finds problematic.
The FTC’s aggressiveness contrasts with its recent track record on tech companies, which some have criticized as weak. It cleared Facebook’s acquisitions of Instagram and WhatsApp, two deals now seen by some as anticompetitive, and it closed a 2013 Google investigation into whether the company was skewing search results, even as the European Union went on to rack up $9 billion in fines against Google.
The new effort could produce a large amount of proprietary information, giving the FTC an advantage over its rival two blocks away. From 2010 to 2019, the five top tech companies made at least 362 acquisitions that were probably below the threshold that triggers a government review, which ranged from $63.4 million in 2010 to $90 million in 2019, according to data compiled by Bloomberg.
The two agencies have seemed to be engaged in oneupmanship over the technology sector for most of the past year. The FTC’s Simons made good on a promise to scrutinize dominant tech companies when he formed a task force in February 2019 to investigate potentially anticompetitive conduct. Facebook disclosed in June that it was under investigation by the agency, and Bloomberg reported in September that a team of FTC investigators had begun interviewing companies that sell products on Amazon to determine if the e-commerce giant is using its market power to stifle smaller competitors.
The Justice Department, meanwhile, announced its own broad antitrust inquiry into the technology companies in July. In saying the review would focus on search, online retail services and social media platforms, the DOJ did little to conceal it was targeting Google, Amazon and Facebook. In October, Facebook disclosed it was also the target of a Justice Department investigation.
The agencies usually figure out a way to agree on which one will tackle a merger or a type of conduct in a process called clearance. Technology is one sector where the agencies have passed jurisdiction back and forth, over Google in particular. During the Obama administration, they worked out a deal where the FTC investigated anticompetitive conduct and the DOJ reviewed mergers.