US States Launch Investigation into Tech Firms’ Potential Monopolistic Practices
As government officials step up investigations into US tech firms, various US states, along with the District of Puerto Rico and Columbia have launched an investigation into Google Inc on September 9th over concerns of antitrust offenses.
Leading the antitrust probe is Ken Paxton, the Texas Attorney General. At a media conference on Monday 9th of September, he told the press that the states of California and Alabama will not participate in the investigation and raised questions regarding Google’s control of the online advertising space, hinting at a potential monopoly, along with the way it handles user data.
“Today 50 attorney generals from different states and territories are launching an investigation into Google’s potential monopolistic behavior. That behavior and what the subject matter of our inquiry is, focuses immediately on two areas: search, which obviously Google dominates, attorney generals really care about where the rubber meets the road and that is for the residence of their states and consumers. We also care about businesses, especially small businesses that may be locked out as a result of what may be monopolistic power,” said Karl Racine, Washington DC Attorney General.
Ken Paxton then went on to say: “while many consumers believe that the internet is free, certainly we know from Google’s profits of 117 billion dollars that the internet is not free. This is a company that dominates all aspects of advertising on the internet, and searching on the internet, as they dominate the bar side, the seller side, the auction side, and even the video side with YouTube. This investigation is not a lawsuit, it is an investigation to determine the facts. Right now we are looking at advertising, but the facts will lead to where the facts will lead. Even as we speak there will be about 3.8 million searches and a lot of advertising dollars made every minute, with Google in control of many of those searches.”
Quotations sourced from Reuters.com, click here to watch the media conference.
On Friday 6th of September, a similar investigation was launched into potential violations made by the social networking giant Facebook lead by Letitia James, New York’s Attorney General. Seven additional states including the District of Columbia will also take part in the antitrust probe into Facebook.
Shares in Alphabet, Google’s parent company, dropped by roughly 0.9 percent as the antitrust probe was declared.
In response to the inquiries Google’s Senior Vice President for Global Affairs and Chief Legal Officer, Kent Walker published an article on its blog entitled Google’s services create choice for consumers, and spur innovation in the U.S.
In the article he writes: ‘We have answered many questions on these issues over many years, in the United States as well as overseas, across many aspects of our business, so this is not new for us. The DOJ has asked us to provide information about these past investigations, and we expect state attorneys general will ask similar questions. We have always worked constructively with regulators and we will continue to do so.’
‘We look forward to showing how we are investing in innovation, providing services that people want, and engaging in robust and fair competition.’
The latest state-led probe increases the stress that both Google and Facebook are under. Facebook announced in July that the FTC (Federal Trade Commission) had issued the social media giant a penalty of 5 billion dollars as it found breaches of privacy policies. As reported by The Wall Street Journal, the US Department of Justice is expected to launch an antitrust probe into Google’s handling of advertising space, search results and customer data.
Thus far, fines and regulatory action by the FTC has had little effect on the most influential tech firms. The penalties imposed on Facebook and Google are just a small percentage of their quarterly profits.
However, antitrust concerns are directly linked to the way a firm operates and conducts its business. This means that if state or federal officials find evidence of monopolistic behavior, the guilty firm will need to change its business models.
This could just be the beginning of a series of intense investigations into many global tech companies.
Global technology companies that were formerly celebrated and valued for their role in boosting the economy have steadily faced scrutiny and criticism after supposedly manipulating their business models to maximize profits and for violating regulations.
Google has faced increasing criticism on how it manages online advertising, and Facebook has been charged with not doing enough to tackle the growing number of fake news posts and scam ads.
The Cambridge Analytica scandal had proved costly for Facebook after it had to pay a 5 billion dollar fine for distributing its users’ data with the UK based consultation firm.
The Vice President for State and Local Public Policy and Community Engagement at Facebook, Will Castleberry said that the social media giant would fully work with the state officials during the investigation period.
Similarly, Apple and Amazon have also been criticized for the way in which they make it difficult for competitors to enter the markets.
the US Senator Elizabeth Warren wrote the following in an article entitled Here’s how we can break up Big Tech:
‘America’s big tech companies provide valuable products but also wield enormous power over our digital lives. Nearly half of all e-commerce goes through Amazon. More than 70% of all Internet traffic goes through sites owned or operated by Google or Facebook.’
‘Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector. Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business. The number of tech startups has slumped, there are fewer high-growth young firms typical of the tech industry, and first financing rounds for tech startups have declined 22% since 2012.’