Feds open antitrust review of big tech companies

The federal government has turned its full investigative powers toward examining the world’s biggest technology companies, building on a backlash against the industry that has been growing for over a year.

The Justice Department said Tuesday that it would start an antitrust review into how internet giants had accumulated market power and whether they had acted to reduce competition. Similar inquiries are underway in Congress and at the Federal Trade Commission, which shares antitrust oversight responsibilities with the Justice Department.

The action is the clearest sign yet that the longtime arguments that helped shield the tech giants from antitrust scrutiny are eroding. Since the 1970s, a consensus in antitrust circles has been that if companies were focused on consumer welfare — for example, by offering low prices — they were not likely to attract federal intervention. Since companies like Google and Facebook largely provide free services, the thinking went, they were not subject to federal antitrust examination.

But that approach has evolved, pushed by scholars and others, as concerns about the clout and reach of Google, Facebook, Amazon and Apple have grown. The Justice Department has recently been meeting with tech industry experts to learn what kinds of harm the companies may have caused, said two people with knowledge of the talks, who spoke on the condition they not be identified because the meetings were confidential.

“Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands,” Makan Delrahim, head of the Justice Department’s antitrust division, said in a statement. “The department’s antitrust review will explore these important issues.”

Attorney General William Barr himself has plunged into the conversation about tech power. On Tuesday, he said in a speech in Manhattan that tech companies should stop using advanced encryption and other security measures that effectively turn devices into “law-free zones,” essentially criticizing Apple and its iPhones without naming them.

In announcing its review, the Justice Department did not name specific companies, but said it would look into concerns about search, social media and some retail services — presumably putting Google, Facebook and Amazon on notice.

The Justice Department declined to comment beyond its announcement; Google and Facebook also declined to comment. Amazon did not immediately respond to a request for comment. Apple referred to comments made by Tim Cook, its chief executive, in a recent television interview with CBS News.

“I think we should be scrutinized,” Cook said at the time. “But if you look at any kind of measure about, ‘Is Apple a monopoly or not?’ I don’t think anybody reasonable is going to come to the conclusion that Apple’s a monopoly.”

The Justice Department’s review may not lead to full-blown investigations of the companies. But the timing of the announcement ratchets up pressure on the tech giants. Across Washington in recent weeks, lawmakers and regulators have united to raise questions about Facebook, Google, Amazon and Apple.

This month, the FTC voted to fine Facebook about $5 billion for mishandling users’ personal information, by far the agency’s largest fine against a tech company. An official announcement of a settlement is expected as soon as Wednesday.

Last week, Facebook faced lawmakers over two days of grilling for a new cryptocurrency initiative called Libra. Google was at the center of a Senate subcommittee hearing about censorship in search. And at a separate House hearing, with witnesses from Google, Facebook, Amazon and Apple, Rep. David Cicilline, D-R.I., who leads a subcommittee on antitrust law, said that the government stance for too long was to celebrate the new tech economy rather than scrutinize its corporate leaders.

“Congress and antitrust enforcers allowed these firms to regulate themselves with little oversight,” Cicilline said. “As a result, the internet has become increasingly concentrated, less open and growingly hostile to innovation and entrepreneurship.”

On Tuesday, Cicilline sent letters to three of the companies at last week’s hearing — Google, Facebook and Amazon. He said he was seeking answers to questions that the witnesses were asked but did not directly answer. Cicilline characterized those earlier replies as “evasive, incomplete or misleading.”

The Justice Department has stepped up its consideration of tech companies since May, said one person with knowledge of the discussions. Around then, the Justice Department and the FTC split up potential antitrust investigations into Facebook, Google, Amazon and Apple, this person said.

The review announced Tuesday is a separate and next step beyond those moves with the FTC, this person added. In recent weeks, antitrust and tech policy experts have more frequently visited the Justice Department as it sought to understand harms the tech companies may have created. It has not yet settled on a theory of harm, this person said. In announcing its review, the Justice Department said it would look into whether the internet companies were “harming consumers.”

Sam Weinstein, a former antitrust official at the Justice Department, said the announcement was unusual because the agency tends to keep its work, usually investigations, under wraps.

Weinstein, a professor at Cardozo Law School, said the Justice Department could be signaling it wants to respond to concerns about the growing power of tech giants and to let their competitors know that the door is open for complaints.

“There is a lot of criticism of the agencies that they are not doing enough about big tech and this is a way to respond to that criticism,” he said.

While the major American tech companies have largely avoided antitrust scrutiny at home, they have been investigated more aggressively around the world, especially in Europe.

In March, European authorities fined Google $1.7 billion for antitrust violations in the online advertising market.

The action is the clearest sign yet that the arguments that helped shield the tech giants from antitrust scrutiny are eroding.