July 24, 2019 / 5:16 PM / 2 months ago

Breakingviews - Silicon Valley giants face regulatory quicksand

The U.S. Department of Justice building is pictured in Washington, U.S., March 21, 2019. REUTERS/Leah Millis

NEW YORK/SAN FRANCISCO (Reuters Breakingviews) - The four horsemen of Silicon Valley could soon be facing their Microsoft moment. The U.S. Department of Justice is investigating whether dominant search engines, social-media platforms and e-retailers squelch competition. Apple, Alphabet, Amazon and Facebook, while not mentioned, are obvious targets. The mandate is broad and could conflict with other watchdogs’ efforts. As the software giant founded by Bill Gates discovered two decades ago – and AT&T more recently - such investigations may ultimately come to little or nothing. But the distractions they cause come at a cost.

More than 20 years ago, the DOJ went after Microsoft for using its operating-system dominance to foist its Internet Explorer browser on customers. Gates emerged victorious, although the company had to abide by consent decrees. But the stock barely moved from 1998 until the order ended in 2011. It also missed the shift to mobile tech.

In late 2017, top antitrust litigator Makan Delrahim went after AT&T’s $85 billion acquisition of Time Warner, a year after the two unveiled it. The telecom firm won the more than year-long fight, but the consequences can still be felt. Chief Executive Randall Stephenson plans to launch a video-streaming service called HBO Max, the cornerstone of the tie-up, early next year. Had they closed the merger sooner, the product could have debuted earlier – perhaps to coincide with last spring’s season finale of “Game of Thrones.”

This latest regulatory broadside has some nuances. First, the various Washington watchdogs charged with overseeing the industry are engaged in turf wars, Breakingviews has learned, rather than divvying up territory as they usually did in the past. The DOJ’s Tuesday announcement, for example, stole the thunder of the Federal Trade Commission’s long-awaited $5 billion fine against Facebook a day later.

Having to deal with multiple agencies on similar issues means devoting more resources to the effort. That knock-on effects include deals taking longer to complete – and executives taking their eye off the ball.

Second, the review is a sign the DOJ is alert to the shifting winds of consumer sentiment and could possibly redefine the notion of competition in as yet unknown ways. At present in the United States that is largely centered on pricing. That adds another element of uncertainty.

America’s tech giants may well be able to pull themselves out of the regulatory quicksand intact. But the price they end up paying may not be in dollars alone.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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