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Power

Democrats just made their case against Big Tech. Here’s what comes next.

Lawmakers laid out their arguments and evidence at a hearing with the CEOS of Amazon, Apple, Facebook and Google. Will anything come of it?

The CEOs being sworn in via Webex

Even if Congress doesn't pass any meaningful antitrust legislation, tech giants still face intense and mounting scrutiny from the DOJ, the FTC and state attorneys general across the country.

Screenshot: Shakeel Hashim/Protocol

If it seemed like Democrats on the House Judiciary antitrust subcommittee were building a methodical antitrust case against the biggest tech companies Wednesday, that's because they were.

Lined up one after the other, transcripts of the Democrats' exchanges with Mark Zuckerberg, Jeff Bezos, Sundar Pichai and Tim Cook would read like a detailed indictment of the companies they lead — complete with excerpts from damning documents and sometimes dissembling responses from the CEOs.

Rep. Jerrold Nadler cited internal documents collected by the committee that showed Facebook acquired Instagram after identifying it as a "threat." Rep. Jamie Raskin cornered Bezos into admitting that Amazon Alexas are priced below market, making them difficult to compete with. Rep. David Cicilline, the chairman of the House Judiciary antitrust subcommittee, jabbed Pichai over a Google email showing some websites were "getting too much traffic."

These arguments — and the evidence to support them — will surely be a centerpiece of the subcommittee's final report, which a senior aide said is coming "later this year." That report will lay out what the committee has discovered after six hearings, 385 hours of calls and meetings, and 1.3 million documents from the companies, said another aide. And it will likely establish how exactly the Democrats believe antitrust law should be changed in order to keep pace with the digital age — and lay the groundwork for a serious legislative undertaking if the Democrats sweep both chambers and the White House later this year.

Even if Congress doesn't pass any meaningful antitrust legislation, tech giants still face intense and mounting scrutiny from the Department of Justice, the Federal Trade Commission and state attorneys general across the country — all of which are now probing tech giants' potential antitrust violations. Those agencies and state governments could use any of the testimony from Wednesday to bolster their own cases against the Big Tech companies.

The FTC has several investigations going on simultaneously, the most advanced of which is an inquiry into Facebook, which the company disclosed last year. The probe reportedly includes a look at Facebook's history of acquiring potential competitors, including Instagram and WhatsApp. In an interview last summer, FTC Chairman Joseph Simons told the Financial Times that he planned to wrap up the investigation in time for the presidential election. But a recent New York Times report suggested that timeline will not be feasible, with the investigation likely extending into next year.

The FTC also announced in February that it would be looking into Facebook, Amazon, Apple, Google and Microsoft's history of smaller acquisitions that hadn't previously been reviewed by the commission. "We wanted to get a handle on why they were not reportable, what their transactions look like, whether they were potentially problematic or not and whether there was something we should do about it," Simons told reporters at the time.

Meanwhile, the FTC has also been interviewing Amazon merchants as part of an inquiry into the ecommerce giant's treatment of sellers and competing products on its platform, but that investigation appears to be in earlier stages.

Whenever the FTC investigation concludes, its options for financial penalties are limited, says Michael Kades, director for markets and competition policy at the Washington Center for Equitable Growth and a 20-year veteran of the FTC. The FTC can seek a fine only after a company has violated an order, and the Supreme Court is currently set to decide whether the FTC even has the power to recover money through disgorgement, a tool it's used in the past. That means that if the FTC does find, say, Facebook to be at fault, the repercussions would be mainly structural. The agency could, for instance, require Facebook to divest from those businesses, prohibit Facebook from kicking competition off of its platform or limit its ability to make acquisitions.

Kades predicts Facebook would fight such an order. "They'd argue these happened so long ago … there's no way you can unscramble the egg," Kades said. Facebook could also settle, as it did last year, when it paid the FTC $5 billion for privacy violations.

The FTC's inquiries into tech giants have been complicated by simultaneous investigations of the same companies at the DOJ. The FTC and DOJ had reportedly agreed to split the workload, with the FTC overseeing Facebook and Amazon, while the DOJ took the reins on Apple and Google. But during a congressional hearing last year, Makan Delrahim, head of the DOJ's antitrust division, acknowledged "squabbles" between the two agencies over each other's jurisdictions. "It's not the best model of efficiency," Delrahim said.

In one antitrust case the FTC brought against Qualcomm, the DOJ went so far as to publicly oppose the FTC and side with Qualcomm. And despite the supposed division of labor, the DOJ is also reportedly investigating Facebook for antitrust violations, as well.

Kades calls the infighting between the DOJ and the FTC "bizarre" and unlike anything he saw during his two decades at the FTC. "You would hope they're not looking at the same thing," he said. "They're short enough on resources."

Attorney General Bill Barr, a controversial figure in Washington, has made it clear that he hopes to wrap up the DOJ's antitrust investigation into the top tech companies and bring a serious case against Google sooner rather than later. The impending antitrust lawsuits against Google, which could come as soon as this summer and are likely to garner support from multiple states, are expected to focus on Google's dominance in online advertising and search. It's the most serious threat to Google's business in the U.S. in years.

"The Google investigation [is] where the real action is," said one business community source who has been tracking the antitrust investigations and litigation closely. "That's where people are going to see, 'How big of a problem does Google have?' That's where the energy will focus."

The DOJ's case against Google will be closely watched by both its rivals and detractors, including Yelp and Brave, as well as the other dominant tech firms, to see which "theory of the case" DOJ lands on to justify the lawsuit. Google declined to comment.

The DOJ's tech antitrust work is mired in skepticism from critics who say they're concerned that the DOJ has been tainted by political pressure, namely from President Donald Trump. Trump has repeatedly pummeled tech companies, including Google, over unsubstantiated allegations that they are biased against conservatives.

"What you will see is a case that's brought for political reasons, that's timed in order to get the best political attention," said David Balto, a former lawyer in the DOJ's antitrust division. Balto is now a private antitrust attorney who has advised several top tech firms, including Amazon and Google.

It's unusual for an attorney general to bring a significant case so close to an election, when it's possible that another administration will ultimately take the reins. Still, former FTC Chairman Bill Kovacic said he's waiting to see the DOJ's complaint to determine whether it's a serious case.

Kovacic, who is now the director of the George Washington University's Competition Law Center, said he believes the FTC, DOJ and state attorneys general will have to bring at least one lawsuit against the companies in order to be seen as "legitimate enforcement agencies."

All 50 state attorneys general have joined an antitrust investigation into Google, spearheaded by Texas Attorney General Ken Paxton. Paxton has already hit Google with a civil investigative demand, ordering the company to answer a detailed list of questions and turn over documents in its inquiry into Google's advertising practices. Google responded by requesting a vast array of documents from Paxton's office, having to do with, among other things, how outside consultants and Google critics may have influenced the investigation. Paxton's office declined to comment for this story.

Facebook faces a similarly broad investigation in the states, with 47 state attorneys general joining a probe led by New York Attorney General Letitia James. James' office also declined to comment, beyond the initial announcement.

While Amazon and Apple have, so far, skirted any public announcements from states, recent reports suggest they're both facing their own antitrust inquiries in a number of states. Apple declined Protocol's request for comment, and Amazon didn't respond. The attorneys general offices in California and Washington wouldn't confirm or deny the existence of any investigations into Amazon.

For Kovacic, this groundswell of action from lawmakers and regulators suggests that Wednesday's public airing of grievances was only the beginning. "The states and the enforcement agencies have staked an enormous amount of their institutional credibility on doing something," he said. "They cannot walk away."

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Photo: David Vives/Unsplash

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