U.S. Markets closed

State attorneys general join forces to take on Google

On Monday, a bipartisan group of state attorneys general stood on the steps of the U.S. Supreme Court and announced an antitrust investigation into Alphabet’s (GOOGL) Google.

Texas Attorney General Ken Paxton is leading the investigation, which includes attorneys general from 48 states, Puerto Rico and the District of Columbia.

“While many consumers believes that the internet is free, certainly we know from Google’s profits of $117 billion that the internet is not free. This is a company that dominates all aspects of advertising on the internet and searching on the internet,” said Paxton.

Paxton said for now, the group is focusing on Google’s dominance in advertising — looking at whether the company has stifled competition, restricted access or harmed consumers.

“The facts will lead to where the facts lead,” said Paxton.

Other attorneys general mentioned search and data privacy issues throughout the press conference.

“This is an unusual setting right here. I’m next to friends of mine with whom I vehemently disagree with on issues like immigration, repo rights, gun rights and other issues. Certainly health care,” said District of Columbia Attorney General Karl Racine. “But we are acting as one today in regards to launching what I know will be a fair and full investigation.”

"Google's services help people every day, create more choice for consumers, and support thousands of jobs and small businesses across the country. We look forward to working with the attorneys general to answer questions about our business and the dynamic technology sector,” said Jose Castaneda, a Google spokesperson.

California and Alabama are the only states not involved in the probe.

“California remains deeply concerned and committed to fighting anti-competitive behavior,” the California attorney general’s office said in a statement to Yahoo Finance.

This is the second antitrust investigation led by attorneys general announced in the past week. On Friday, New York Attorney General Letitia James announced she was opening an antitrust probe into Facebook.

Increased possibility for a breakup?

The attorneys acknowledge the Google investigation is in its early stages and said it would be premature to predict the outcome.

“Generally speaking, you’ve got to find liability, before we get to any remedies,
said Racine. “We’re better off leaving remedies unless and until we get to a remedy stage.”

The AGs said all options are on the table, if they find Google has acted inappropriately.

“There’s nothing wrong with being the dominant player if it’s done fairly. That’s what our investigation intends to uncover and reveal — whether Google has played by the rules and acted fairly. There’s a fine line sometimes between aggressive business practices and illegal ones,” said Utah Attorney General Sean Reyes.

John Yun, an associate professor at the Global Antitrust Institute and former FTC official, said it’s too early to predict how the investigations will shake out, but says new investigations raise the odds for a big tech breakup.

“It clearly increases the risk for those companies when there's another set of resources investigating harm,” said Yun. “It will obviously all come down to what the court determines whether or not they violate the antitrust laws and if so, what would be the fix? And I think we're orders of magnitudes away from that, but it certainly has increased that possibility.”

Why not leave it to federal antitrust enforcers?

Federal regulators and Congress already have their sights set on big tech.

The Department of JusticeFederal Trade Commission and the House Judiciary Committee are all eyeing the tech giants. The Senate’s antitrust subcommittee will hold a hearing on digital platform mergers later this month.

Federal Trade Commission (FTC) Chairman Joe Simons announces that Facebook Inc has agreed to a settlement of allegations it mishandled user privacy during a news conference at FTC Headquarters in Washington, U.S., July 24, 2019. REUTERS/Yuri Gripas

“This is a state action — so whether they [federal regulators] get involved or don’t get involved, that’s really up to them,” said Paxton. “We’re not reacting to Congress, we’re not trying to lead Congress, we’re trying to do what we think is right for our consumers.”

The attorneys stressed their investigation is independent from the other probes underway in Washington.

“State attorneys general — they are an independent bunch. They can be quite tenacious,” Racine said. “I’m very confident this bipartisan group is going to be led by the facts and not be swayed by any conclusion that may fall short, if you will, that’s inconsistent with our facts, on the Fed side. So we’re going to do what we think is right, based on our investigation.”

Yun said he was surprised the state attorneys general would want to jump in the fight, too.

“I think the federal agencies have the expertise and the resources to really investigate these matters,” said Yun.“They've brought actions in the past and they're doing currently, so they're really well oiled to investigate these. So I don't think the expertise is as strong in the states.”

Mark McCareins, a professor at Northwestern’s Kellogg School of Business, focused on antitrust and competition, told Yahoo Finance the AGs likely do not have the resources to handle the investigations internally.

“So the question would become: would they offshore some of the responsibility to private law firms or special state attorneys general that their group hired? Honestly, that can be very expensive and at the end of the day, I think, just a duplicate of what the DOJ and the FTC might be doing,” said McCareins.

The Google logo is displayed outside the company offices in New York, U.S., June 4, 2019. REUTERS/Brendan McDermid

Critics argue federal regulators aren’t doing enough — so the state attorneys general are stepping up to fill in the gaps.

“They feel they need to fill a void, a regulatory void, that’s being left open by federal antitrust enforcers,” said Hal Singer, an economist and managing director of Econ One Research, in an interview with Yahoo Finance’s The First Trade.

McCareins, who practiced antitrust law for more than 30 years, warned the big tech investigations won’t be quick or easy.

“The investigation would relate to the collection of documentary evidence — in the form of memos, emails, internal documents — that the government would request these various companies about certain practices. That could take months if not years to not only collect the information from the parties and to assemble it, but then to digest it,” said McCareins.

While the Justice Department isn’t commenting on the states’ Google or Facebook investigations right now, Yun said eventually the attorneys general could work together down the line.

“Especially if some of the series of harm start to overlap,” said Yun. “I would fully expect at some point for them to either combine forces or certainly keep each other updated.”

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

CBO warns tariffs could hurt economic growth

Amazon, Google, Facebook testify against France’s digital sales tax

Democratic senator to Powell: Get moving on faster payments