U.S. Markets closed

US launches investigation into breaking up 'big tech'

Margi Murphy
Google, Amazon, Facebook are expected to be be scrutinised by the Department of Justice - AFP

The US Department of Justice has opened an investigation into whether Amazon, Facebook, Google have “stifled innovation” by killing competition unlawfully and “harmed consumers”.

The antitrust division did not name the companies but announced on Tuesday that it was reviewing market-leading “online platforms” to see how they have come to power and whether they engaged in illegal practices that reduced competition and made it difficult for smaller companies to thrive.

It has received a number of complaints against so-called “big tech” that include allegations surrounding search, social media and retail services .

The investigation signals increasing anti-technology rhetoric in Washington, which under Barack Obama’s tenure enjoyed a cosy relationship. President Donald Trump has repeatedly accused technology companies of bias against conservatives, and presidential hopeful Elizabeth Warren has pushed for breaking up Silicon Valley, which has avoided the scrutiny of the law for a number of years owing to legal grey areas and definitions about its position as a platform, rather than a publisher.  There have been concerns over Facebook, which operates WhatsApp and Instagram, and Alphabet, which owns numerous different companies across different industries.

Assistant Attorney General Makan Delrahim of the Antitrust Division said: “Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands.

“The Department’s antitrust review will explore these important issues”.

Google has already been dealt three antitrust fines from Europe totalling $9.3bn in the last three years . It found that Google abused its dominance in the smartphone market through its operating system, Android, and that it forced its AdSense customers to use only Google’s services. The European Commission also found it was unfairly promoting its preferred merchants on Google Shopping.

Daniel Ives, Webrush analyst said: “We ultimately believe this is more noise versus the start of broader structural changes across the tech food chain and will likely result in business model tweaks and potential DOJ/ FTC fines in a worst case scenario rather than forced breakups of the underlying businesses.”

When approached for comment, a Google spokesman pointed the Telegraph to the testimony of Adam Cohen, director of economic policy, during a hearing at Capitol Hill last week.

He said: “In the face of intense competition, we are proud of our record of continued innovation. We have helped reduce prices and expand choice for consumers and merchants in the US and around the world.

“We have created new competition in many sectors, and new competitive pressures often lead to concerns from rivals. We have consistently shown how our business is designed and operated to benefit our customers.”

The DoJ said that it would be asking the public for help with their investigation.

Alphabet, Facebook and Amazon shares dipped roughly 1.5pc each on the news. The latter were not immediately available for comment.  Both Alphabet and Facebook will reveal earnings for the previous three months this week. Facebook is expected to share more about the terms of a $5 billion FTC settlement following a probe in the company’s alleged failure to protect consumer privacy.