Google parent Alphabet Inc., Facebook Inc. and Apple Inc. tumbled as the companies appear set to undergo U.S. antitrust probes after the Justice Department and the Federal Trade Commission agreed to split up oversight of technology giants.
The DOJ’s preparations to investigate Google, first reported late Friday, mark the Trump administration’s first concrete step to scrutinize the potentially anti-competitive conduct of a large technology firm. On Monday, a person familiar with the matter said the FTC will oversee antitrust scrutiny into whether Facebook’s practices harm competition in the digital market. Reuters reported that the DOJ has been given jurisdiction over a potential probe of Apple.
Alphabet fell as much as 7.2% to $1,027.03 in New York, its lowest since January. Facebook tumbled as much as 9.3% to $161.01, the most since July. The news also sent shares of Amazon.com Inc. down as much as 5.4% and Apple as much as 2.7%.
“If the DOJ moves ahead, an investigation would likely embolden critics of Facebook, Amazon and other tech giants as well, causing rhetoric to heat up during the 2020 election year,” analysts led by Justin Post at Merrill Lynch wrote in a note to investors.
Amazon could also be scrutinized as a result of a new agreement between regulators that puts it under the jurisdiction of the FTC, the Washington Post reported over the weekend.
American antitrust officials are under increasing pressure from both Democratic and Republican lawmakers to step up scrutiny of technology giants, and several presidential candidates have already weighed in. Massachusetts Senator Elizabeth Warren laid out a detailed plan for breaking up the tech giants in March.
European officials have already been aggressively pursuing antitrust cases against American tech firms, including Google, while so far the U.S. has been mostly hands-off.
That may be changing amid continuing criticism that lax enforcement in the U.S. has allowed tech platforms to dominate their markets. The FTC earlier this year set up a task force to examine the conduct of tech companies and their past mergers. President Donald Trump and many Republicans have complained that Facebook, Google and Twitter Inc. suppress conservative views.
Google, with a sprawling empire of businesses that could feasibly be targets, is in the dark about the focus of the investigation and hopes to learn more this week, according to another person familiar with the situation. A Google spokesman declined to comment.
An investigation of Google will likely drag on for five years or more, causing a distraction for management, Bank of America’s Post said, though long-term a breakup could have a positive effect on the company’s valuation.
“Potential implications for Google could include new regulations on business practices, or an antitrust probe leading to a breakup,” Post said. “It is very rare to break up a company but not unheard of.” Post has a buy rating on the stock.
At stake is the internet giant’s position as one of the most profitable companies in history. Despite the opacity surrounding the U.S. focus, Google already has a well-defined set of arguments for pushing back against antitrust challenges, honed over years of doing battle with regulators, especially the EU.
Kevin Rippey, an analyst at Evercore ISI, said an investigation would add “to the near-term challenges” facing Google, but said it’s unlikely an investigation would result in radical changes. In order for investors to become “substantially more concerned” about potential violations, “the basic framework of U.S. antitrust laws would need to be overhauled,” he said.