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Google Is at the Center of a Storm Brewing Over Big Tech Google and Amazon Are at the Center of a Storm Brewing Over Big Tech
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SAN FRANCISCO — Google, one of the most successful companies in history, has generally gotten its way with American regulators. That may be changing. SAN FRANCISCO — Google and Amazon have thrived as American regulators largely kept their distance. That may be changing.
Politicians on the right and left are decrying the tech company’s enormous power. President Trump and other Republicans have focused on whether the company’s online search results are biased. Democrats have focused on whether the company stifles competition. And now, the Justice Department is exploring an investigation of the advertising and search firm, according to several people with knowledge of the discussions. Politicians on the right and left are decrying the tech companies’ enormous power. President Trump and other Republicans have taken swipes at Amazon over taxes and at Google over search results they say are biased. Democrats have focused on whether the companies stifle competition.
It is a small and preliminary step, and it could easily come to nothing. But if the agency pursues a case, it will almost certainly inspire reams of bad publicity, promote consumer distrust, sink employee morale and remind everyone that Google, with its early motto of “Don’t be evil,” held itself to standards it sometimes could not match. And now, the two federal agencies that handle antitrust matters have split up oversight of the two companies, with the Justice Department taking Google and the Federal Trade Commission taking Amazon, according to three people with knowledge of the matter.
A prospect that should really worry Google is a replay of the government’s case against Microsoft in the 1990s. Microsoft did not have to break itself into two, which was the government’s goal. But the company was distracted for at least a decade, which allowed space for start-ups like Google. Microsoft’s reputation took a dive. The decisions do not mean that the agencies have opened official federal investigations, the people said. But by staking claims over the two tech giants, the agencies are signaling the potential for greater scrutiny.
Regulators have struggled to keep pace with the growth of technology companies in recent years. With huge profits and work forces, the companies have come to dominate large swaths of the economy. Amazon is the de facto force in online retailing. Google is the starting point for many people searching online.
While tech giants are awash in cash, data and ambition, they are also increasingly mired in controversy. A wide range of concerns have recently dogged Google, Amazon, Facebook and Apple, including their influence on consumer privacy, labor conditions and public discourse.
With Amazon, some consumer groups and vendors have complained that its powerful e-commerce platform edges out new competition, particularly as the company enters into new business lines like groceries and fashion.
With Google, the Justice Department is exploring an investigation of the advertising and search business, according to several people with knowledge of the discussions. The agency’s interest, in part, stems from rivals’ complaints.
The regulators’ moves are small and preliminary, and could easily come to nothing. But if the agencies pursue cases, Google and Amazon will almost certainly face reams of bad publicity, rising consumer distrust and falling employee morale. An inquiry would remind everyone that Google, with its early motto of “Don’t be evil,” held itself to standards it sometimes could not match.
“This is more of a warning to the companies that they’re being carefully scrutinized and they need to be careful not to play fast and loose given their dominant positions in the digital marketplace,” said Gene Kimmelman, a former senior antitrust official at the Justice Department who is now president of the consumer group Public Knowledge.
A prospect that should really worry Google and Amazon is a replay of the government’s case against Microsoft in the 1990s. Microsoft did not have to break itself into two, which was the government’s goal. But the company was distracted for at least a decade, which allowed space for start-ups like Google. Microsoft’s reputation took a dive.
“The damage to the monopolist’s position comes from the public airing of the facts,” said Gary Reback, a Silicon Valley lawyer who was instrumental in the case against Microsoft and has worked with companies that argue they have suffered unfair competition from Google.“The damage to the monopolist’s position comes from the public airing of the facts,” said Gary Reback, a Silicon Valley lawyer who was instrumental in the case against Microsoft and has worked with companies that argue they have suffered unfair competition from Google.
Even without a formal government investigation, Google’s reputation started to fray over the weekend as politicians jumped on the news. Even without formal government investigations, the political pressure for action has been mounting.
“It’s time to fight back,” said Senator Elizabeth Warren of Massachusetts, a popular condender for the Democratic nomination for president. Senators Josh Hawley, Republican of Missouri, and Richard Blumenthal, Democrat of Connecticut, each said the scrutiny was overdue. “It’s time to fight back,” Senator Elizabeth Warren of Massachusetts, a Democratic candidate for president, said after news of the Google developments emerged. Senators Josh Hawley, Republican of Missouri, and Richard Blumenthal, Democrat of Connecticut, each said the scrutiny of Google was overdue.
The White House did not respond to questions about whether the president would support an investigation by the Justice Department. But according to two people familiar with his thinking, Mr. Trump would probably welcome any action. The White House did not respond to questions about whether the president would support an investigation into Google. But according to two people familiar with his thinking, Mr. Trump would probably welcome any action.
Mr. Trump, like many other Republicans, has repeatedly complained publicly that Google suppresses positive news about conservatives in search results. He has also criticized big tech companies like Amazon, Facebook and Twitter. Mr. Trump, like many other Republicans, has repeatedly complained publicly that Google suppresses positive news about conservatives in search results. The president has accused Amazon of avoiding taxes and has called The Washington Post, which has done tough coverage of his administration, a lobbyist for Amazon. Amazon’s chief executive, Jeff Bezos, owns The Post.
Google, whose parent company is Alphabet, declined to comment, as did representatives for the Justice Department and the Federal Trade Commission. An Amazon spokesman declined to comment, as did Google, whose parent company is Alphabet. Representatives for the Justice Department and the Federal Trade Commission likewise declined to comment.
Like Amazon, Apple and Facebook, Google is awash in cash, data and ambition, and increasingly controversial. The F.T.C. announced in February an antitrust task force to look at the technology field. But in an unusual move, the commission has now agreed to give oversight of Google to the Justice Department. That puts pressure on the department’s head of antitrust, Makan Delrahim, to follow through with a robust investigation. The F.T.C. has been public in its scrutiny of tech of late. It announced in February the creation of an antitrust task force to look at the tech industry. The agency is also nearing the end of negotiations with Facebook over a fine for violating a 2011 privacy settlement, which could be as high as $5 billion.
In the past, Mr. Delrahim has said that “credible evidence” would need to exist before antitrust officials would step in. Inside the White House, broader discussions about regulating Google have not taken place, one of the people close to Mr. Trump said Saturday. But that person said that Mr. Delrahim had built up “a lot of authority” in the Trump administration, and that there would be comfort with what the agency recommends. Now the Justice Department is joining the fray. In the past, the agency’s head of antitrust, Makan Delrahim, has said that “credible evidence” would need to exist before officials would step in.
In exchange for the Justice Department’s claim over the antitrust issues related to Google, the F.T.C. took over antitrust oversight of Amazon, according to two people familiar with the decision. Inside the White House, broader discussions about regulating Google have not taken place, one of the people close to Mr. Trump said on Saturday. But that person said that Mr. Delrahim had built up “a lot of authority” in the Trump administration, and that there would be comfort with what the agency recommends.
The online retailing giant has been criticized for using its massive online sales site to edge out competitors and harm third-party sellers that use the platform to sell goods. Amazon has argued it was not a monopoly in retail and that Walmart and other companies made up a big chunk of the retail market. While the Justice Department is increasing its focus on Google, it may not translate into action. “Until we see what they intend to do, none of this means anything,” said Barry Lynn, director of the Open Markets Institute, a Washington think tank that has played a leading role in raising antitrust concerns. “Maybe they are simply blowing smoke so the president gets happy for a moment so they can go back to doing nothing.”
The decision to divide antitrust oversight of the two tech giants was part of negotiations a few weeks ago between the agencies’ antitrust divisions. To avoid overlap, the agencies routinely negotiate to determine which one will take on merger reviews and antitrust cases. The decision to divide oversight was part of a discussion a few weeks ago between the agencies’ antitrust divisions. To avoid overlap, the agencies routinely negotiate to determine which one will take on merger reviews and antitrust cases.
The two people familiar with the decision said that the decision to divide responsibilities over the two companies is a nascent step toward antitrust scrutiny of Google and Amazon.
The oversight of Amazon was earlier reported by The Washington Post.The oversight of Amazon was earlier reported by The Washington Post.
It is unclear what the F.T.C. will explore in its scrutiny of Amazon and it does not appear that the agency has started a formal investigation into the company, the two people said. It is unclear what the F.T.C. will explore with Amazon and it does not appear that the agency has started a formal investigation, the three people said.
The F.T.C. is near the end of negotiations with Facebook about the size of a fine for violating a 2011 privacy settlement. It might be as high as $5 billion. Facebook faces other investigations on multiple continents as governments seek to rein in the social media site. The company has been criticized for using its vast online sales site to edge out competitors and harm third-party sellers that use the platform to sell goods. Amazon has argued it was not a monopoly in retailing and that Walmart and other companies made up a big chunk of the market.
As Mr. Reback pointed out, it does not always take a trial to improve behavior. After two professors explained in a paper how Amazon was restricting its third-party sellers from selling their goods more cheaply on other platforms, an anti-competitive move, Mr. Blumenthal picked up on the issue. He wrote a four-page letter to the F.T.C. and the Justice Department saying he was “deeply concerned,” and Amazon quietly dropped the practice. As Mr. Reback noted, it does not always take a trial to improve behavior. After two professors explained in a paper how Amazon was restricting its third-party sellers from selling their goods more cheaply on other platforms, an anti-competitive move, Mr. Blumenthal picked up on the issue. He wrote a four-page letter to the F.T.C. and the Justice Department saying he was “deeply concerned,” and Amazon quietly dropped the practice.
Mr. Reback said the Justice Department’s move was significant. “They wouldn’t open something unless they at least thought there was smoke,” he said. The F.T.C.’s most prominent technology antitrust case in the past decade involved Google. In 2011, the commission opened an investigation into whether the company ranked the search results of competing shopping, travel and reviews sites unfairly low. It closed the investigation in 2013 in a unanimous vote of the five-member commission that left Google largely unscathed outside of some minor voluntary commitments.
That view was challenged by Barry Lynn, director of the Open Markets Institute, a Washington think tank that has played a leading role in raising antitrust concerns. Consumer groups have chastised the F.T.C. decision as a failure of American antitrust enforcement that paved the way for tech giants to grow into monopolies.
“Until we see what they intend to do, none of this means anything,” Mr. Lynn said. “Maybe they are simply blowing smoke so the president gets happy for a moment so they can go back to doing nothing.”
The F.T.C.’s highest-profile technology antitrust case in the past decade involved Google. In 2011, the commission opened an investigation into whether the company ranked the search results of competing shopping, travel and reviews sites unfairly low. It closed the investigation in 2013 in a unanimous vote of the five-member commission that left Google largely unscathed outside of some minor voluntary commitments.
In 2015, The Wall Street Journal obtained the original F.T.C. staff report, which was much more critical than what was publicly revealed at the time. Google’s “conduct has resulted — and will result — in real harm to consumers and to innovation in the online search and advertising markets,” the report concluded.
Consumer groups have chastised the F.T.C. decision as a failure of American antitrust enforcement that set the pace for tech giants to grow into monopolies. Google, Facebook and Amazon control the online advertising market, and Google has grown from $38 billion in revenue in 2011 to $136 billion last year.
Since the F.T.C. investigation closed, the complaints against Google have expanded. Competitors that have complained to American regulators include Yelp, the consumer review site, and travel sites like TripAdvisor.Since the F.T.C. investigation closed, the complaints against Google have expanded. Competitors that have complained to American regulators include Yelp, the consumer review site, and travel sites like TripAdvisor.
European regulators have accused Google of abusing its dominance in the smartphone industry with its Android operating system, which is used in 80 percent of the world’s smartphones. In July, European regulators fined Google $5.1 billion for automatically installing its search engine and other apps on Android phones.European regulators have accused Google of abusing its dominance in the smartphone industry with its Android operating system, which is used in 80 percent of the world’s smartphones. In July, European regulators fined Google $5.1 billion for automatically installing its search engine and other apps on Android phones.
Sundar Pichai, the company’s chief executive, has rebutted allegations of antitrust violations, as well as the accusations of biased results. After the European decision, he said on Twitter that “rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition.”Sundar Pichai, the company’s chief executive, has rebutted allegations of antitrust violations, as well as the accusations of biased results. After the European decision, he said on Twitter that “rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition.”
“Android has enabled this and created more choice for everyone, not less,” he added.“Android has enabled this and created more choice for everyone, not less,” he added.
The reference to “falling prices” points to a hurdle for any investigation. John Sherman, the Ohio senator for whom the Sherman Antitrust Act of 1890 is named, was able to decry monopolistic overcharges as “extortion which makes the people poor.” Modern antitrust theory revolves around the notion that unless there is direct harm to consumers, there is no case. And Google’s services are free to consumers. The reference to “falling prices” points to a hurdle for any investigation. John Sherman, the Ohio senator for whom the Sherman Antitrust Act of 1890 is named, was able to decry monopolistic overcharges as “extortion which makes the people poor.” Modern antitrust theory revolves around the notion that unless there is direct harm to consumers, there is no case. Google’s services are free to consumers, while Amazon has helped drive down prices.
The queasiness over the big tech companies is more spiritual than financial. Polls show a growing anxiety about the influence of technology on American lives, and the issue has emerged as a litmus test for the 2020 Democratic presidential field.The queasiness over the big tech companies is more spiritual than financial. Polls show a growing anxiety about the influence of technology on American lives, and the issue has emerged as a litmus test for the 2020 Democratic presidential field.
Ms. Warren said Saturday that she had been “talking for years about how Google is locking out competition.” A billboard her campaign erected last month near a train stop in San Francisco was designed to appeal to Silicon Valley commuters, particularly those who have been squeezed to distant housing by the area’s tech-fueled property boom. Ms. Warren said that she had been “talking for years about how Google is locking out competition.” A billboard her campaign erected last month near a train stop in San Francisco was meant to appeal to Silicon Valley commuters, particularly those who have been squeezed to distant housing by the area’s tech-fueled property boom.
It asks passers-by to “join our fight” to “Break Up Big Tech” by sending a text message.It asks passers-by to “join our fight” to “Break Up Big Tech” by sending a text message.
On Saturday, a spokesman for Senator Bernie Sanders of Vermont, another leading contender, said the senator “has been trying to sound the alarm for years that the concentration of economic power in the hands of a few threatens our democracy and leads to rigged political and economic systems.”On Saturday, a spokesman for Senator Bernie Sanders of Vermont, another leading contender, said the senator “has been trying to sound the alarm for years that the concentration of economic power in the hands of a few threatens our democracy and leads to rigged political and economic systems.”