June 5, 2019 / 8:13 PM / in 10 days

Explainer: Should Big Tech fear U.S. antitrust enforcers?

(Reuters) - The arcane topic of antitrust law is getting more attention with the U.S. government gearing up to investigate whether Alphabet Inc’s Google, Facebook Inc, Apple Inc, and Amazon.com Inc compete fairly.

The Federal Trade Commission (FTC) and the Department of Justice, which both have jurisdiction to enforce antitrust laws, have divided oversight over the four companies, with Amazon and Facebook under the watch of the FTC, and Apple and Google under the Justice Department, sources told Reuters.

The potential investigations have been welcomed by some consumer advocates, who say big technology companies stifle competition and hold too much sway over speech and commerce.

But some legal experts said the investigations may not lead to major reforms, noting that U.S. law makes it difficult to prove an antitrust violation.

The following answers some questions about the basics of U.S. antitrust law and what regulators will focus on:

What are antitrust laws for?

Antitrust laws seek to promote fair competition.

A law from 1914, the Clayton Act, lets the government block mergers that would harm consumers.

The Sherman Act, passed in 1890, prohibits price-fixing conspiracies and other agreements that restrain competition.

The Sherman Act also lays out rules regarding monopoly power. It is these laws that the Justice Department and the FTC would likely focus on if they initiate investigations of the technology companies, legal experts said.

Why would Google, Facebook, Amazon, and Apple face scrutiny?

The Justice Department’s focus is expected to be on allegations that Google favors its own products in search results and abuses its clout in the online advertising market, although it is expected to look at all of the company’s businesses, sources told Reuters.

It is not known what aspects of Amazon, Facebook, and Apple could be investigated.

Google has said that changes to its search algorithms are made with consumers in mind, and that it is transparent in how it promotes its own services.

Facebook has been called a social media monopoly by co-founder Chris Hughes, who said in a New York Times op-ed that it should be forced to sell off subsidiaries WhatsApp and Instagram.

Facebook spokesman Nick Clegg, in his own op-ed, said, “In this competitive environment, it is hard to sustain the claim that Facebook is a monopoly.”

Clegg wrote that Facebook is responsible for the sort of rapid, consumer-friendly innovation antitrust law is meant to encourage.

In the United States, half of all online shopping transactions happen on Amazon, giving the ecommerce company sway over merchants that use its platforms.

But in a 2018 letter to shareholders, Chief Executive Officer Jeff Bezos said “Amazon remains a small player in global retail” because most commerce still happens offline.

Finally, some software developers argue Apple has a monopoly on its app marketplace, and uses this power to demand hefty commissions and engage in other anticompetitive practices.

Apple Chief Executive Officer Tim Cook told CBS News in an interview that aired on Tuesday that Apple does not have a dominant position in any market.

What would the U.S. government need to prove to bring a case against the tech companies?

It is difficult to show a violation of U.S. antitrust law, legal experts said.

It is not enough for regulators to establish that a company has monopoly power. They must also show anticompetitive conduct - an abuse of that dominant position aimed at bypassing fair competition.

“You can get a monopoly just by being a good competitor and that’s fine,” said Chris Sagers, a professor of antitrust law at Cleveland State University.

Under current precedent, the Department of Justice and the FTC also need to show that consumers are being harmed, something that in recent decades has typically been measured by whether prices are going up and innovation is slowing.

Using these metrics, it could be difficult to prove that technology companies, which do not charge money for many of their services, are hurting consumers, some legal experts said.

But Charlotte Slaiman, an antitrust lawyer with consumer rights group Public Knowledge, said there is a growing consensus among economists and the public that it is misleading to call services such as Google and Facebook free.

“What is really going on is that consumers are bartering with their data in exchange for a service,” Slaiman said.

In 2013, the FTC closed an investigation into Google’s search practices. The agency said that, while Google’s changes to how it displayed search results likely harmed some rivals, there was “ample evidence” that Google was trying to improve user experience.

FILE PHOTO: The logos of Amazon, Apple, Facebook and Google in a combination photo from Reuters files. REUTERS

What can the U.S. government do if investigators find an antitrust violation?

The FTC and Justice Department can both file civil lawsuits in federal court and ask judges to order changes to a company’s business model.

The Justice Department can also bring criminal antitrust cases, but those prosecutions usually relate to cartels and price-fixing, making charges against big technology firms unlikely.

Reporting by Jan Wolfe and Diane Bartz; Editing by Noeleen Walder and Grant McCool

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