Large tech companies including social media giant Facebook have recently become targets of a Department of Justice antitrust investigation. At least eight state governments and the District of Columbia have already launched their own antitrust probes into Facebook and Google. As state and federal governments try to determine if high-profile companies such as Facebook are creating a monopoly for online services, consumers watch to see if increased enforcement of antitrust regulations will better protect consumer rights.
Reduction of Competition
Government investigators are examining the growing accumulation of market power by technology companies and its effect on consumers. Several high-tech companies including Facebook, Google, and Amazon have been accused of reducing competition in this business sector. These companies have experienced exponential growth in the last few years leading many business watchdog groups to worry about the creation of a monopoly for online goods and information sharing.
The antitrust probe into large tech companies follows a controversial $5 billion penalty recently assessed on Facebook by the Federal Trade Commission for alleged violations of consumer privacy. Allegations against Facebook include that the company shared private user information with third party companies accessed through a user’s Facebook “friends.” Facebook users who took a quiz via an app unknowingly allowed political consulting company Cambridge Analytica access to personal information including names and which posts were “liked” or “shared.”
The social media company agreed to the $5 billion settlement, which included a requirement that Facebook create an independent privacy committee as part of its Board of Directors and hire several privacy compliance officers. This is not the first settlement entered into by Facebook for alleged data misuse. In the past, the company paid $100 million to the Securities and Exchange Commission after publishing misleading disclosures to users regarding use of personal data.
While privacy and other consumer protection issues can result in substantial fees, often this type of governmental regulatory action has minimal financial impact on big tech companies. Even hefty fines or penalties in the billions constitute only a small part of the company’s quarterly profits. However, real damage to the bottom line of these companies, and an incentive to comply with antitrust laws, could result from stricter enforcement.
If any of the federal or state antitrust probes produce evidence of anti-competitive behavior, the government could force companies to adjust their business models to allow easier access to consumers by its rivals. By forcing a tech company to change its algorithms so rival companies have equal opportunities to obtain customers, the profit margins of the allegedly monopolistic company could be reduced. In other cases, proof of monopolistic behavior could lead to a government directive to sell off related business entities. Forcing the breakup of a company would be a last resort if other antitrust measures fail to level the playing field.
This is not the first time the government has stepped in to regulate anticompetitive nature in the tech industry. Software giant Microsoft was the target of an extensive antitrust investigation in the 1990s which lead to a multi-billion dollar settlement and a significant change in the company’s business practices.
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