For the past 18 months, Big Tech companies have been under mounting pressure from regulators and lawmakers over their data privacy practices, culminating this summer with a massive $5 billion fine handed out by the Federal Trade Commission (FTC) against Facebook. Now comes more bad news for Big Tech firms, as state attorneys general from 48 different states – plus AGs from the District of Columbia and Puerto Rico – are launching sweeping antitrust probes into the competitive practices of Big Tech firms like Facebook and Google.
New state antitrust probes put pressure on Big Tech
Right now, there are two different antitrust probes being led by state attorneys general, making it all but certain that the pressure is about to be turned up on Big Tech very soon. The first antitrust probe involves a coalition of eight different state attorneys general, led by New York State Attorney General Letitia James. They are looking to investigate whether tech firms such as Google and Facebook now control too much of the flow of online information. This probe is about much more than just user privacy or personal data – it strikes at the very core of Big Tech’s business model. The way a Big Tech company like Facebook or Google generates revenue is by monetizing the personal data of their users, usually by packaging up all that personal information and data for advertisers, who can then serve up targeted ads. That’s why this antitrust probe has so much potential to put pressure on Big Tech – it calls into question not just a few shady business practices, but the very essence of how these companies make money.
The second antitrust action is even more sweeping and problematic for Big Tech giants because it involves 48 state attorneys general and the AGs from the District of Columbia and Puerto Rico. There’s a bit of overlap here with the first antitrust probe (e.g. New York is involved in both antitrust probes), but the important point to grasp here is that literally the entire nation is turning against Big Tech. The only two states that have opted out of this antitrust probe are California (the home state of both Google and Facebook) and Alabama.
Why the state antitrust probes are moving forward now
So why the sudden decision to pool resources and turn up the pressure on Big Tech? One big reason has to do with these states’ disapproval of how the federal government has thus far dealt with Big Tech. The feeling in many quarters is that the feds have not done enough to really penalize Big Tech. Take the $5 billion FTC fine against Facebook, for example. On the surface, that sounds like a staggering sum of money. But Facebook makes tens of billions of dollars in revenue every quarter, so the $5 billion is really just a drop in the bucket. It’s not going to force Facebook to change its business practices. For $5 billion, Facebook was essentially able to clear the deck of all federal lawsuits, pending or in motion, all for a price that Facebook CEO Mark Zuckerberg deemed worth paying.
So, the current buzz in legal circles is that all 48 states are likely to join a federal antitrust case against Big Tech, if the U.S. Department of Justice (DOJ) decides to proceed with an antitrust investigation into Big Tech firms Google, Facebook, Apple and Amazon. The idea here is that such concerted involvement by all 48 states would show that there is enough momentum for a federal case to proceed and win.
According to legal scholars who have opined on the antitrust probe, the federal government has much greater power to impose civil fines on Big Tech, or potentially to force a breakup of these companies. For example, Facebook could be forced to break up into different pieces, such that WhatsApp and Instagram are allowed to become separate companies. States might be able to impose one-time fines or penalties, but they have almost no ability to force a breakup of Big Tech. For companies in Silicon Valley, the ultimate threat of being forced to break up into different pieces must be much scarier than just paying a fine (no matter how distasteful that fine might be).
Review of anti-competitive and monopolistic practices
The big question, of course, is whether any antitrust probe will actually be successful. Some have suggested that the state attorneys general are essentially going on a legal “fishing expedition,” hoping to find something incriminating against Big Tech, but not sure of exactly what they will find. The biggest risk, from the perspective of Big Tech, is that any antitrust probe will focus on online advertising. If that’s the case, it might pose an existential risk for Big Tech.
From a legal perspective, these antitrust probes will have to prove more than just the existence of a few unsavory business practices (such as routinely favoring partners over rivals on their social media platforms). Rather, they will have to prove that these practices recklessly endangered consumers, reduced the overall quality of consumers’ choices online, or imposed certain costs on consumers, as the result of stifling competition in the marketplace.
Of course, it’s impossible to bring up the topic of an antitrust probe into Big Tech without also mentioning Microsoft. The big tech giant is hardly mentioned anymore when it comes to antitrust, due to Microsoft’s willingness to work constructively with regulatory agencies, and there are no longer any real concerns that Internet Explorer has a monopoly-like grip on the browser market. In part, that’s because consumers are free to choose between different platforms and different browsers, such as Safari or Firefox.
Most likely, Big Tech will try to invoke much the same argument now, suggesting that online social media users fed up with Facebook can just move to a rival platform like Twitter. Google might be a dominant technology juggernaut, but it’s hard to say that it stifles competition – anyone else in Silicon Valley is free to build a better search engine. And while Google does use its Android mobile platform to its advantage, mobile consumers are still free to switch to Apple iOS, right? Google will claim that innovation and research and development (R&D), not anticompetitive practices, are what keep it one step ahead of its rivals.
The winter of Big Tech discontent
This is shaping up to be the winter of discontent for Big Tech. Just when they thought they had dodged a bullet over data privacy, they are now facing an antitrust investigation into how they make money. And, to make matters worse for them, new data privacy legislation is now on the horizon, in the form of the California Consumer Privacy Act (CCPA). This could turn out to be a very long winter for Big Tech.