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Will the U.S. Break Up Big Tech? Don’t Hold Your Breath

Saber-rattling from D.C. about curbing the power of tech titans Google, Facebook, Amazon and Apple has gotten louder. The growing backlash against Silicon Valley giants, who are viewed as harming competitors and wielding inordinate power over a key sector of the economy, could become part of the conversation in the 2020 U.S. presidential election.

But could that lead to the U.S. breaking up one or more of the tech companies? It’s a long shot. Even if government regulators decide they have credible grounds to pursue antitrust cases against Big Tech, it will be at least five years — perhaps longer — before anything concrete happens as they wind through the court system, according to legal experts and industry analysts.

One of the issues is that current U.S. antitrust laws are geared around price harms to consumers, whereas the likes of Google and Facebook offer their services for free. That would likely require a new federal law (or new interpretation of existing law) to bar the type of anticompetitive behavior the major tech players have been accused of.

For a “let’s break up Big Tech” antitrust movement to happen, as Sen. Elizabeth Warren (D-Mass.) has proposed, “there would have to be a sea change first in how the antitrust enforcement agencies think about antitrust and then in how the courts think about it,” says Prof. Daniel A. Crane, senior professor of law at the University of Michigan Law School.

Political pressure is building on U.S. regulators to do something, or at least make it look like they’re trying. The Justice Department and the Federal Trade Commission in the past few weeks have divvied up their oversight of Big Tech with potential antitrust probes in the offing, per multiple reports. The DOJ is looking into Google and Apple and the FTC is examining Facebook and Amazon, according to a Wall Street Journal report.

The prospect of major regulatory action against tech companies spooked investors — shares of Alphabet, Google’s parent company, fell 6% on Monday — but tech stocks rebounded Tuesday amid a broader market uptick.

House Speaker Nancy Pelosi (D-Calif.) joined the fray Monday in a pair of tweets, citing the House Judiciary’s launch of “a long overdue investigation to determine if dominant digital platforms have harmed Americans in the marketplace & the voting booth.” Her statements come a week after she lashed out at Facebook when the company refused to remove a doctored video.

“Unwarranted, concentrated economic power in the hands of a few is dangerous to democracy — especially when digital platforms control content,” Pelosi wrote. “The era of self-regulation is over.”

The question is what legal grounds the U.S. can use to rein in the big tech firms. Historically, antitrust law considers consumer harms in terms of pricing. But if, for example, Amazon or Facebook steal an idea from a competitor or acquire a startup before it can become a rival, “that doesn’t result in higher prices — it’s some future innovation harm,” says Hal Singer, fellow at George Washington Institute Public Policy. Going down the antitrust path could take up to a decade to reach a resolution, according to Singer.

Congress might get there faster through legislation, akin to the Glass-Steagall provisions of the Banking Act of 1933, which forced banks to separate commercial and investment banking. Even so, it’s not clear that breaking up tech giants would actually work to fix the problem, for example, by requiring Facebook to spin off Instagram and WhatsApp or making Google divest YouTube, says Singer.

“If you had five Baby Facebooks, they would still have an incentive to steal” or otherwise use their scale to thwart rivals, Singer says.

It’s worth noting that two decades ago, the U.S. government filed an antitrust suit — joined by 20 states — against Microsoft, seeking to break it up. The complaint centered on the software giant’s bundling of Windows and Internet Explorer together. The DOJ won an initial ruling approving splitting Microsoft into two entities (an OS company and an applications company). But the D.C. Court of Appeals rejected the idea that Microsoft should be broken up as the remedy for anticompetitive behavior. The Justice Department later reached a settlement with Microsoft, which among other concessions agreed to share APIs with third parties.

“Breakup remedies are radical and they frequently have unintended consequences,” says Prof. Herb Hovenkamp of the University of Pennsylvania and the Wharton School. “Judges aren’t good at breaking up companies.”

For now, expect business as usual among the big technology companies, according to Wall Street analysts.

For Google, the worst-case scenario of the U.S. antitrust probes would be a fine like the $5 billion penalty the European Commission imposed last year, according to Citigroup analyst Mark May. European regulators ruled that parts of agreements between Google and Android partners violated European law, including requiring manufacturers to pre-install the Google Search app and Chrome browser app as a condition for licensing Google’s Play Store app. Meanwhile, a U.S. antitrust case against Facebook is “even less clear than it is for Alphabet,” May added.

Any U.S. action against Google would come after “significant business practice scrutiny by the EU that has resulted in limited impact on Google’s ad business,” BofA Merrill Lynch analyst Justin Post wrote in a note Monday. He also pointed out that an FTC probe into Google ended in 2013 “without further action into whether Google used its dominant web search position to disadvantage rivals.”

But the current political climate is somewhat different, Post acknowledged, and he believes that if the DOJ moves ahead against Google that “would likely embolden critics of Facebook, Amazon and other tech giants as well” heading into the 2020 election year.

The chorus for the American government to “do something” about Big Tech has included Facebook co-founder Chris Hughes (who hasn’t worked at Facebook in over a decade) urging the U.S. government to find a way to break up the social giant to rein in its “unprecedented and un-American power.”

It may be becoming fashionable to speak out against Big Tech. But for now, the idea that Facebook, Google, Apple or Amazon will be broken up remains just rhetoric.

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