Facebook, Google brace for wave of antitrust probes from states

Facebook Inc. and Google are facing intensifying scrutiny by state law enforcement officers with authority to impose vast fines and even break up companies that are found to have violated antitrust and privacy rules.

New York is leading a coalition of states in a wide-ranging investigation of Facebook and the Texas attorney general said Friday that he’ll announce a separate multi-state probe Monday into anti-competitive behaviour by large tech companies. Bloomberg reported this week that the investigation is targeting Alphabet Inc.’s Google.

The developments create fresh problems for Facebook and Google after a wave of criticism by politicians from both parties over their market dominance. And on Sept. 12, the House subcommittee focused on antitrust law will hold a hearing on the impact of data and privacy. The state probes target a wide range of practices that generate billions of dollars in revenue for the world’s biggest social-media company and the largest seller of search-based advertising.

Federal antitrust enforcers have also opened investigations. Google disclosed on Friday that it has received from the Justice Department a civil investigative demand, which is akin to a subpoena. The demand seeks information and documents relating to all prior antitrust investigations of the company.

“We expect to receive in the future similar investigative demands from state attorneys general,” the company said in a regulatory filing.

The Justice Department is probing Google’s role in the online advertising market and its search operations and the US Federal Trade Commission is scrutinizing acquisitions by Facebook as part of an early stage antitrust investigation of the social media platform, Bloomberg has reported.

Earlier on Friday, New York Attorney General Letitia James had said that the probe she’s leading will examine whether Facebook stifled competition and put users at risk by increasing the price of advertising, reducing consumer-choice quality and mishandling personal information.

“We will use every investigative tool at our disposal,” said James, a Democrat. “Even the largest social media platform in the world must follow the law and respect consumers.”

Texas Attorney General Ken Paxton, a Republican, said the investigation his state is leading will focus on “whether large tech companies have engaged in anti-competitive behavior that stifled competition, restricted access, and harmed consumers.”

He didn’t specify which companies would be probed.

Paxton’s announcement characterized his group as “a broad coalition of states.”

“We have always worked constructively with regulators and we will continue to do so,” said Google’s chief lawyer Kent Walker in a blog post Friday. “We look forward to showing how we are investing in innovation, providing services that people want, and engaging in robust and fair competition.”

States have the power to issue fines as well as order changes to corporate policy and even a corporate break up if serious violations are uncovered. Such remedies aren’t being considered for Facebook at this point in the probe but are on the table in any such investigation, according to a person familiar with the investigation. Other states have expressed an interest in joining the probe and the coalition could expand, the person said.

Facebook is already under investigation by New York over its unauthorized collection of 1.5 million users’ email contacts without their permission during an email-password verification process for new users. When announcing that probe in April, James said the harvest may have exposed hundreds of millions of people to targeted advertising by the social-media company.

The other states probing Facebook are Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio and Tennessee, plus the District of Columbia, according to James’s statement.

“If we stop innovating, people can easily leave our platform. This underscores the competition we face,” Will Castleberry, Facebook’s vice president for state and local policy, said in a statement. “We will work constructively with state attorneys general and we welcome a conversation with policymakers about the competitive environment in which we operate.”

The FTC‘s Facebook investigation covers concerns across a wide swath of its business — from social media to digital advertising and mobile applications. In July, the company was fined a record $5 billion for violating an order to protect users’ data privacy.

Some critics have called for antitrust enforcers to break up Facebook and the FTC chairman has said he’s prepared to break up the company, or other major technology platforms, if necessary by undoing past mergers if they violated antitrust law by harming competition.

Specifically, those critics have called for the unwinding of Facebook’s acquisitions of apps, particularly the Instagram photosharing service and the Whats App chat platform. It would likely prove difficult to convince a court to approve such a break-up.

Source: Bloomberg

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