Regardless of who wins in November, the antitrust scrutiny currently faced by U.S. tech giants (4 of the 5, anyway) clearly isn't going away.
At a time when Alphabet (GOOGL) , Facebook (FB) , Apple (AAPL) and Amazon.com (AMZN) are all facing DOJ or FTC antitrust probes, with formal antitrust charges against Alphabet and Facebook quite possibly arriving soon, the Democrat-controlled House Judiciary Committee added fuel to the fire this week by releasing a 449-page report going over perceived antitrust abuses by the aforementioned companies.
A lot of the ground that's covered will feel familiar to those who have been following the DOJ and FTC probes: Google's vertical search integration and search ad placements get attention, as do Facebook's acquisitions of Instagram and WhatsApp, Apple's App Store policies and the ties between Amazon's direct e-commerce operations and its marketplace operations. But there are also many other fields of inquiry (some more questionable than others), including Google Chrome and Maps' market positions, Amazon's impact on the logistics industry and Apple's refusal to allow third-party voice assistants to act as the default assistant on its hardware.
And perhaps more importantly, the report floats an extensive list of remedies for perceived antitrust abuses (see pages 20 and 21). Among them: "Structural separations" (read: breakups); rules that prevent "dominant platforms" from favoring their own offerings relative to those of rivals; mandating interoperability and data portability for such platforms; and a "presumptive prohibition" on further M&A.
There's also a call for "reasserting the anti-monopoly goals" of antitrust laws, and for strengthening parts of the Clayton and Sherman antitrust acts, which were respectively passed in 1914 and 1890.
Here are a few quick thoughts on the report:
1. Don't Bet on Breakups for the Time Being
This is one instance where I agree with Steve Ballmer: Breaking up the tech giants is a lot easier said than done.
Any attempt to break up a tech giant would require a lengthy legal fight in the courts, with any initial breakup ruling pretty much guaranteed to be appealed. Moreover, regulators will need to make a strong case that consumers will benefit if, say, Google is forced to divest YouTube, Facebook is forced to divest Instagram and WhatsApp or Amazon is forced to split its first-party and third-party online retail businesses.
At the risk of generalizing, convincingly making such arguments typically won't be easy -- particularly how much work has been put into (and continues to be put into) creating integrated products and services that involve these platforms.
2. The Report Suggests a Biden Administration Could Be Even Tougher on Tech Giants
As previously noted, the number of businesses that the House's report voices concerns about goes well beyond the number that have been reported to be probed by the DOJ and FTC. And though we don't know yet exactly what actions the DOJ and FTC will call for if and when they file antitrust charges against a tech giant, it's hard to imagine that their proposals will on the whole be as severe as what the House report just floated.
There's no guarantee, of course, that a Biden Administration will support all or even most of the proposals that the House Judiciary Committee offered on pages 20 and 21 of its report. But the report does signal that there's even more of a hard-line mood towards the tech giants among Democrats than there is within the Trump Administration.
3. This Type of Scrutiny Will Continue Influencing How the Tech Giants Act
By and large, Alphabet, Facebook and Amazon have been fairly restrained in their M&A activity over the last couple of years (so has Apple, for that matter, but it has historically been cautious about making large acquisitions). And at a time when these companies are being closely scrutinized over past acquisitions and their expansion into markets adjacent to ones that they're dominant in, it's likely this restraint will remain in place in the near-term.
Intense antitrust scrutiny could also influence how the tech giants act in other ways. See, for example, Google's recent decision to make it easier to use third-party app stores on Android 12.
4. The Tech Giants' Products and Services Remain Very Popular -- And That Matters
Unlike, say, the old AT&T back when it was in the DOJ's crosshairs, public opinion polls have repeatedly made it clear that most U.S. consumers have positive attitudes towards the tech giants and their various products/services, even if many do have concerns about the power that they now wield. And this definitely hasn't changed in 2020, as consumers came to rely heavily on the tech giants' offerings as they dealt with COVID-19 lockdowns.
All of this gives the tech giants a lot of leverage in the court of public opinion if and when they have to defend themselves in federal courts against proposed breakups or business practice changes. And judging by how much the CEOs of the companies highlighted the various positive things their firms have done over the years during recent Congressional hearings, this is leverage that the tech giants will be quick to make use of.
5. Microsoft Is Getting Off Unscathed -- For Now
Just as the DOJ and FTC aren't currently probing Microsoft's business practices, the House report is focused only on Alphabet, Amazon, Apple and Facebook's perceived antitrust abuses, even if the software giant's name does often pop up while the other companies are discussed.
This lack of antitrust scrutiny (at least outside of an EU antitrust complaint filed this year by Slack (WORK) ) does clearly have its benefits. For example, it's currently hard to imagine Alphabet, Facebook or Amazon announcing a $7.5 billion deal to buy a company whose products compete against some of their own offerings, while suggesting that some of the acquired company's future products will be exclusive to one of the tech giant's own platforms.
But that's what Microsoft did last month when it announced its deal to buy game developer Bethesda Softworks, while stating the availability of future Bethesda titles on rival gaming platforms will be decided "on a case-by-case basis."
However, while Satya Nadella & Co. could be amused by how little antitrust heat their company is feeling right now -- 20 years after the DOJ tried to break it up -- they also have to be aware that Microsoft, which had a $1.6 trillion market cap as of Wednesday's close, might not remain off the hook forever in an environment such as the current one.