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Trump DOJ Escalates Big Tech Scrutiny With New Antitrust Probe

David McLaughlin, Kurt Wagner and Naomi Nix
Trump DOJ Escalates Big Tech Scrutiny With New Antitrust Probe

(Bloomberg) -- The U.S. Justice Department sent the strongest signal yet that it’s prepared to take on technology giants like Facebook and Google, announcing a broad antitrust review into whether the companies are using their power to thwart competition.

The department’s antitrust division disclosed plans Tuesday to scrutinize tech platforms following mounting criticism across Washington that the companies have become too big and too powerful. The department didn’t specify which firms it would look at but strongly suggested Facebook Inc., Alphabet Inc.’s Google and Amazon.com Inc. are in the cross-hairs.

“The history of these DOJ investigations is that they kill the company that they investigate” as the firm turns its focus to defending itself, said Mark Grady, a law professor at the University of California Los Angeles. “It’s a giant distraction.”

The announcement is the latest sign of the escalating pressure on tech giants, from Capitol Hill to President Donald Trump, who accuses the companies of silencing conservative views. The giants of the industry are under fire over massive collection of user data, failing to police content on their platforms, and claims that they are harming competition and reducing choices for consumers.

The spotlight on the industry will carry into Wednesday when a record $5 billion privacy fine against Facebook is set to be announced by the Federal Trade Commission for a series of privacy violations.

The Justice Department review, led by antitrust chief Makan Delrahim, represents a new level of scrutiny of the industry after news in May that the U.S. antitrust agencies carved up oversight of four tech giants, with the department taking Google and Apple Inc., and the FTC claiming Facebook and Amazon.

Companies are now potentially exposed to investigations by both agencies, because their accord calls for separating the scrutiny by business practices, according to two people familiar with the matter. The Justice Department in its statement suggested that possibility because it signaled that it would look at Amazon and Facebook, even though the FTC will be examining those companies under the agreement.

Attorney General William Barr encouraged the review of the industry, according to one of the people. He met earlier this year with European Union competition chief Margrethe Vestager, who has slapped Google with record fines over antitrust violations, the person said.

Treasury Secretary Steven Mnuchin backed the effort, saying it’s an “important issue” worthy of reporting recommendations to the president.

“If you look at Amazon, although there’s certain benefits to it, they’ve destroyed the retail industry across the United States, so there’s no question they’ve limited competition,” Mnuchin said Wednesday in an interview on CNBC. “There’s areas where they’ve really hurt small businesses, so I don’t think this is a one-size-fits-all, and I don’t have an opinion going in other than I think it’s absolutely right that the attorney general is looking into these issues.”

The department’s scrutiny comes after repeated attacks on the industry’s biggest names by Trump, who is more outspoken on antitrust than any president in possibly a century, said New York University law professor Harry First.

The president repeatedly accuses tech platforms of bias against conservative views, which the companies deny, while directing ire toward Amazon founder Jeff Bezos, threatening his company with antitrust enforcement and higher shipping fees.

The antitrust division is already taking steps in its inquiry, hearing out third parties who have complaints about competitive harm, according to the people. Its review will look at concerns raised by consumers, businesses and entrepreneurs about search, social media and online retail, according to the statement.

Amazon, Google, Apple and Facebook Inc. declined to comment on the Justice Department’s announcement.

For more: YouTube’s Trampled Foes Plot Antitrust Revenge

Tech giants are separately contending with a broad investigation by the House antitrust panel led by David Cicilline, a Rhode Island Democrat. Cicilline on Tuesday accused Facebook, Google and Amazon of “evasive, incomplete, or misleading answers” when their executives testified before his committee last week.

“We should all welcome greater scrutiny of dominant online platforms,” he said after the Justice Department’s announcement. “Unfortunately, I don’t have a lot of confidence that Donald Trump’s Justice Department will put the interests of working people ahead of billionaires for a change.”

Still, the move was cheered by others.

“American consumers and news publishers desperately need high tech markets to be more competitive,” said Dina Srinivasan, a former digital advertising executive who wrote a paper titled “The Antitrust Case Against Facebook.”

“Increased competition will help to solve the systemic privacy problems that consumers face with companies like Google and Facebook,” she said.

While the Justice Department pursues its own review, FTC Chairman Joseph Simons earlier this year formed a task force to investigate conduct in the industry and review past acquisitions to determine whether mergers harmed competition.

The efforts put pressure on antitrust enforcers to bring cases against tech companies, said William Kovacic, a former FTC commissioner who is now a professor at George Washington University Law School.

“All of this creates momentum. You can only go so far in saying we’re doing investigations, we’re going to do this broad study before you have committed yourself to say we’re going to take enforcement action,” he said. “Can you imagine standing in front of a press conference and saying, never mind, we didn’t find anything?”

(Adds Mnuchin comment in ninth, tenth paragraphs.)

--With assistance from Mark Bergen, Vicky Graham, Ben Brody and Ryan Beene.

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Kurt Wagner in San Francisco at kwagner71@bloomberg.net;Naomi Nix in Washington at nnix1@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Alex Wayne, Justin Blum

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