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Washington playing ‘high stakes poker game’ with Big Tech: Analyst

Washington’s war on Big Tech is more of a high-stakes poker game than a real threat to the businesses of Google, Amazon, Apple, and Facebook, according to a new note from Wedbush Securities.

Silicon Valley behemoths including Facebook (FB), Apple (AAPL), Amazon (AMZN), and Google (GOOG) have been under the spotlight on Capitol Hill over the past two days as lawmakers grill executives on everything from antitrust rules to Facebook’s cryptocurrency project.

Facebook’s head of Libra David Marcus faced two days of questions from the House Financial Services Committee and the Senate Committee on Banking. Marcus tried to reassure lawmakers skeptical of the company’s trustworthiness given past consumer data privacy breaches by asserting that “customers’ account and financial information will not be shared with Facebook, and as a result cannot be used for ad targeting.”

Lawmakers from the House Judiciary subcommittee on Tuesday probed executives of Google, Amazon, Facebook, and Apple on antitrust concerns and the impact their platforms have on innovation. Google was asked about the fairness of its search engine’s algorithms; Apple was questioned about fees it imposes on companies through its app store, and Amazon was probed about favoritism towards its own products vs. those of third-party sellers.

Antitrust concerns and the accompanying media glare bump up tech’s headline risks in the short-term, but don’t present a real “break-up” threat, Wedbush wrote. The worst-case scenario would be the imposition of additional billion-dollar fines, not company break-ups.

“We believe this is more noise vs. the start of broader structural changes. This [House Antitrust Subcommittee] hearing could be kicking off a multi-year, high-stakes poker game between these tech stalwarts and the U.S. government,” said Wedbush analyst Dan Ives.

Quotes from Treasury Secretary Steve Mnuchin are displayed behind David Marcus, CEO of Facebook's Calibra digital wallet service, left, as he speaks during a House Financial Services Committee hearing on Facebook's proposed cryptocurrency on Capitol Hill, July 17, 2019. (AP Photo/Andrew Harnik)

Political bullseye

As the 2020 presidential race gets going, many of the Democratic candidates, including Sen. Elizabeth Warren and Sen. Bernie Sanders, have been vocal about the concentration of power among a handful of big tech companies. Other lawmakers feel similarly: in a recent interview with Yahoo Finance, Sen. Sherrod Brown, the top Democratic Senator on the Banking Committee, said big tech companies like Facebook have too much power. “They wreaked too much havoc on our economy 10 years ago because of their market power, and we're seeing the same in the tech companies,” he said.

Facebook reportedly reached a $5 billion settlement with U.S. regulators last week. The FTC probed the social media giant’s Cambridge Analytica privacy scandal in which the data of 87 million users was shared without their consent. Wedbush analyst Dan Ives said that while fines are not ideal because it’s money that could have been used for further investments in the company, it’s better than having structural changes imposed on Facebook.

Wedbush views the antitrust probes as a long-term positive that will encourage Big Tech to be even more innovative and voluntarily diversify their businesses.

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