What you need to know
- Makan Delrahim detailed some ways that the DOJ will look into tech giants at an antitrust conference.
- The investigation will cover several aspects, including buying up competition to stifle innovation and his "no economic sense" test.
- Stock prices have taken a dip for the tech companies following the news of the antitrust probe.
Not too long ago, we covered how the U.S. was going to begin looking into antitrust allegations against some of the world's biggest tech companies.
As part of the probe, the Department of Justice is investigating Apple and Google's parent company Alphabet while the Federal Trade Commission will evaluate Amazon and Facebook.
After a recent speech from the assistant attorney general Makan Delrahim during the Antitrust New Frontiers Conference in Tel Aviv, we are now getting a peek at just how the DOJ could go after Google and Apple.
One of the ways to determine if antitrust laws have been breached is by using the "no economic sense test" says Delrahim. An example of this would be a company buying up a smaller company simply to remove them from the competition and to create a monopoly.
But even if a company achieves monopoly position through legitimate means, it cannot take actions that do not advance plausible business goals but rather are designed to make it harder for competitors to catch up.
For those who think antitrust laws are only about keeping prices down, Delrahim says it's also about quality. Many of Google's services are free, so it's hard to argue that using a free service can get any cheaper, but competition can provide higher quality by increasing features (such as privacy, for example).
As an example, privacy can be an important dimension of quality. By protecting competition, we can have an impact on privacy and data protection.
Exclusivity is another way in which competition can be harmed. Through exclusive deals, larger companies can exclude smaller competition from access to technology to help them compete. Delrahim is also arguing that the acquisition of young companies can be anticompetitive by using it to protect a monopoly or block competitors.
It is not possible to describe here each way that a transaction may harm competition in a digital market, but I will note the potential for mischief if the purpose and effect of an acquisition is to block potential competitors, protect a monopoly, or otherwise harm competition by reducing consumer choice, increasing prices, diminishing or slowing innovation, or reducing quality. Such circumstances may raise the Antitrust Division's suspicions.
Coordination is another aspect which Delrahim will explore during the probe, looking into "coordinated conduct that creates or enhances market power." He cited an advertising agreement between Google and Yahoo from 2008 and would have given them 90 percent of internet search advertising market. However, the companies later scrapped the agreement after being informed there would be a lawsuit.
Some tech advocates have argued that the antitrust laws are antiquated and cannot be applied to the digital economy. However, Delrahim says the "U.S. antitrust law is flexible enough to be applied to markets old and new."
After his speech, it appears the DOJ has several reasons to investigate the tech giants, but don't expect it to be over quickly. The last time the FTC probed Google it lasted more than two years. In the meantime, stocks have taken a dip for all four of the tech companies since the news of the investigations.