Competition: Big Four tech companies increasingly on radar of European and US regulators

Neil Hodge

The United States Department of Justice (DoJ) announced on 24 July that it will conduct an antitrust review of search, social media and some retail services online – a group thought to include Amazon, Facebook and Google – to investigate whether their practices have ‘reduced competition, stifled innovation or otherwise harmed consumers’.

Apple, Amazon, Facebook and Alphabet’s Google – collectively known as the ‘Big Four’ tech companies in the West – are increasingly under regulatory scrutiny over the way they run their businesses and whether they are simply too dominant in their respective markets.

In March, US Senator Elizabeth Warren, a Democratic presidential candidate for the 2020 election, proposed ‘breaking up’ the major tech companies due to their size and perceived power.

Politics also plays a big part. There will be powerful lobbies that make life difficult for the regulators

Angelene Duke
Associate, Womble Bond Dickinson

Currently, regulators are more inclined to hand out ever-larger fines for anti-competitive behaviour, or even create new tech-focused watchdogs.

In February 2019, the US Federal Trade Commission (FTC) created a task force to monitor competition in US technology markets. The FTC noted the potential for the task force to take enforcement action where necessary.

Timothy Gray, an associate at Patterson Belknap, says that until recently, US oversight of the ‘Big Four’ has not focused on alleged antitrust concerns, but rather on data security and alleged privacy violations. ‘It remains unclear to what extent existing antitrust laws will be implicated and what types of conduct, if any, may be targeted for investigation,’ he says. The FTC is reportedly making direct outreach to smaller technology companies for reports of anticompetitive conduct and evidence of anticompetitive mergers. 

Major tech companies have already faced significant fines for competition infringements. In December 2018, Italy’s competition authority fined Facebook €10m for failing to properly tell users that their personal information could be sold on. Facebook is also facing other competition investigations across Europe.


Amazon box

The European Commission, meanwhile, launched an antitrust investigation into Amazon on 17 July over how the e-commerce company might be using sensitive commercial data from independent retailers on its Marketplace service to further its own dominance.

Google has received three major antitrust fines, totalling €8.25bn, in three successive years. In March, the European Commission handed Google a €1.49bn fine for blocking rival online search advertisers from getting a foothold in the market. The Commission found that between 2006 and 2016, Google imposed restrictive clauses in its contracts with third-party websites via its ‘AdSense for Search’ platform. This prevented competitors from placing their search adverts on the same websites. This was despite Google having a market share as high as 70 per cent for some of the period concerned.

In June 2017, the Commission fined Google €2.42bn for abusing its dominant position by promoting its own comparison shopping service in its search results – while demoting those of competitors. In July 2018, it fined the company again – this time for €4.34bn – for using its Android mobile operating system and mobile apps and services to further cement the dominance of its own search engine.

National competition authorities in Europe have found it harder to rein in the influence of big tech firms, however, whose in-house legal teams often outweigh those of the regulatory bodies investigating them.

On 3 July, the UK Competition and Markets Authority (CMA), the UK’s competition watchdog, launched a study into online platforms and the UK’s digital advertising market. It warned that a new regulator may be needed to deal specifically with the market dominance of tech firms and how they use and sell customer data to maintain market share.

The CMA also hinted at blocking technology giants from sharing data between different parts of their businesses via apps as a way of boosting revenues through online advertising. This would mirror the approach taken by Germany’s competition authority, the Bundeskartellamt, against Facebook in February, where it barred the social media platform from pooling data collected from its Instagram app, other subsidiaries and third-party websites.

Any remedies, says the CMA, are likely to focus on ‘recommendations to government for the development of an ex ante regulatory regime’, which would require new legislation. The regulator said it would also weigh proposals for a new regulatory body with powers of enforcement. This would build on the broad proposals made in March 2019 by Jason Furman, previously an adviser to former US President Barack Obama. In his report to the UK government, Furman and his expert panel concluded that the UK’s digital ad market is ‘dominated by two players and suffers from a lack of transparency’ and that a ‘digital markets unit’ should be set up to regulate competition issues in the tech sector specifically.

Angelene Duke, an associate at Womble Bond Dickinson who specialises in competition issues, says that it appears that regulators are ‘playing catch up’ when it comes to overseeing tech and social media companies. A lack of resources is apparently at the heart of the problem, she says, especially given the amount of information regulators have to sift through to build a case.

‘Since regulators have a limited budget, the problem is the waste of resources caused by overlapping investigations, which can be minimised by them working together and sharing information where appropriate,’ says Duke.

‘Politics also plays a big part,’ she adds. ‘There will be powerful lobbies that make life difficult for the regulators.’

Duke does not believe fines have a significant enough deterrent effect. Instead, she says that negative publicity and reputational damage will need to play a bigger part in deterrence ‘since these big players earn such high turnover'.

She adds that individual liability could also be an increasingly important deterrent. According to Duke, director disqualifications are becoming increasingly popular with the CMA and it has indicated that it intends to pursue directors of larger companies in the future.