Here’s how the DOJ’s inquiry into Google, Facebook, and Amazon could lead to further scrutiny of tech giants (GOOGL, AMZN, FB)

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The US Department of Justice’s (DOJ) inquiry into Amazon, Facebook, and Google (among others) on antitrust grounds signals greater incoming scrutiny as to whether these companies have engaged in anticompetitive behavior, per The New York Times.

The review could trigger a wave of changes across the tech space. Business Insider Intelligence predicted that tech giants would face antitrust regulations in its Top 10 Trends in Digital Media at the end of last year.

Giants in the tech space have been spreading into additional vertical areas as they seek to open new revenue streams and extend engagement with users. Here are some of the ways that Amazon, Facebook, and Google have been extending their tendrils to ensnare users in areas beyond their core businesses.

Amazon has evolved from a bookseller into the world’s leading e-commerce marketplace and a top seller on its own platform: It racked up $117 billion in gross merchandise in 2018, while all third-party merchants on its marketplace managed $160 billion. It has expanded its logistics business in a bid to control much of the process of moving goods — its own and its partners’ — to consumers. Amazon also tops the global public cloud market, boasting an estimated 32% share, and the smart home and smart speaker segment, with its Alexa-powered Echo smart speakers. And it has expanded into the grocery and digital media spaces with its respective purchase of Whole Foods and launch of its Prime Music and Video services.

Facebook owns the world’s largest social media platforms, but has also expanded into a range of other segments through internal developments and acquisitions. The extent of Facebook’s dominance over social interactions has attracted regular scrutiny from regulators who have looked at its influence over advertising as well as political messaging. It also released the Portal smart displays to enable better video communication. Beyond social and communication, Facebook acquired Oculus in a bid to win users in the consumer and enterprise VR spaces. It’s also created its own video-on-demand service, Facebook Watch, to keep eyes on the site.
Google has grown from a search website into Alphabet, a tech giant with fingers in nearly all things digital. The company dominates global search and brings in the largest advertising revenue total from search and its related ads business. Its Gmail and G Suite applications are also widely used by consumers, enterprises, and in education, while its Chrome browser is by far the most used globally. Google’s Android mobile operating system (OS) is the most popular global smartphone OS by number of users, and it operates an MVNO as well as a home internet broadband service. It also boasts a public cloud offering and a wide-ranging analytics business that enterprises and smaller web operators can use to track traffic. Google competes with Amazon in the smart home and smart speaker segment, while its video platform YouTube is the world’s most-watched. Finally, it’s developing delivery drones, balloons to provide internet service, and an autonomous mobility service, among a range of other "moonshots."

The bigger picture: The DOJ could radically transform the tech landscape should it move to break up businesses for exercising undue influence across domains.

High-profile antitrust cases such as US v. Microsoft and US v. AT&T can provide guidance as to what regulators will look for in their review. In the 2001 Microsoft case, the DOJ sued the tech company for unfair practices in forcing the bundling of its Internet Explorer browser with it Windows OS.

Regulators will likely look in the upcoming reviews for similar attempts to leverage one business to benefit another, which could raise questions about how Google operates the Play Store for Android, for instance.

But the case against the old AT&T in the early 1980s, then the sole provider of phone service throughout most of the US, could prove more instructive.

AT&T’s Western Electric subsidiary manufactured nearly all telecom equipment used in the US, which the DOJ alleged effectively subsidized its other businesses and allowed it to charge lower prices and keep out competition. Sound familiar? Tech giants today lean on advertising and cloud profits to support money-losing endeavors, giving them latitude to compete where they might not be able to otherwise.

If the DOJ forced settlements and broke up tech giants like it did AT&T, markets would look radically different than they do today. Take the public cloud market as an example. Amazon, Google, and Microsoft account for 60% of total customers. If those businesses were divorced from their tech parents, they would likely lose some of the resources they boast as well as technical knowledge.

This could allow competitors to spring up and compete, but those competitors wouldn’t have access to the same scale the current incumbents do, probably leading to higher costs, especially in the short term. Customers would have more choices, but those choices would cost more, much like how the market evolved following the breakup of AT&T.

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