US tech stocks were dragged down on Monday amid fears US antitrust officials were preparing to investigate Apple, Facebook and Google parent Alphabet, as the political winds turn against the tech sector.
Alphabet’s shares briefly fell into bear market territory, losing $52bn or 6.9% from its market value as its shares fell to $1,032.04 – the lowest level for the company’s stock in five months and down 20.4% from its April high of $1,296.97.
The tech-heavy Nasdaq exchange was pushed into correction territory after Facebook shares lost about $41bn or 5.7% of its value on similar fears of increased government scrutiny. Officials from the Federal Trade Commission are reportedly preparing to investigate any practices that may harm competition in the digital market.
Separately, Reuters reported that the US justice department had taken jurisdiction for a potential investigation of Apple, as part of a broader review of whether technology giants use their size to act in an anti-competitive manner.
That inquiry comes after the streaming music leader Spotify and others complained to EU antitrust regulators that Apple charges a 30% fee for content-based service providers to use Apple’s in-app purchase system.
The company has previously defended its fee structure, arguing that “our users trust Apple – and that trust is critical to how we operate a fair, competitive store for developer app distribution”.
The increasing likelihood that Google, Facebook and Apple will be investigated represent the first signs that the Trump administration is taking seriously the potential for anti-competitive conduct among the tech giants.
“The days of the essentially unregulated ‘wild west’ for big tech could be nearing an end,” says law professor Carl Tobias at the University of Richmond. “The developments could signal that the federal government intends to subject big tech to rigorous scrutiny. Corrective measures could limit monopoly power, open access for others and better protect critical privacy interests.”
Under a carve-up agreement between federal regulatory bodies, the justice department had given the FTC control of any antitrust investigation into Facebook, while its own investigators will maintain oversight of Alphabet, Google and Apple.
The existence of the inquiries sent shares of Amazon down as much as 5.4% and Apple as much as 2.7%. Overall, the wave of anti-trust actions wiped $137bn from Fang (Facebook, Apple, Netflix and Google) stocks’ market values.
Trade commission investigators have been looking into Facebook’s handling of privacy issues related to how it handles users’ data for over a year. Placing the inquiry in the hands of the FTC suggests regulators are interested in a wider review of the company beyond questions of whether the social media giant is stifling competition.
Google and Facebook dominance of the digital ad revenue market is not in question; According to the research company eMarketer, in 2018 Google commanded 38.2% of the digital ad market with revenues of $41.bn. Facebook enjoys 21.8% of the market, on revenues of 23.6bn. By 2021, Google’s ad revenues are projected to rise to $61.5bn, and Facebook’s to $39.4bn.
In contrast, the justice department’s examination of Google’s search practices, first reported by the Wall Street Journal last week, is probably focused on antitrust issues. A previous FTC investigation into Google was shut down in 2013 without major action against the company. Renewed US scrutiny follows EU regulatory action that led to multibillion-dollar antitrust fines.
Both inquiries comes as US tech giants face increased political heat from lawmakers who question their size and dominance. Earlier this year, the Massachusetts senator and Democratic presidential candidate Elizabeth Warren called for their breakup, while other candidates have called for increased scrutiny.
On the other side of the political divide, the president and senior Republicans have complained that Facebook, Google and Twitter act to suppress conservative views.
Google’s rivals have long lobbied the US antitrust regulators to take action, and some former senior Facebook executives have called for tighter controls on their old company. Political pressure intensified last week when Facebook refused to take down a video of the House speaker, Nancy Pelosi, that had been slowed to make her appear intoxicated.
