US announces antitrust review of Big Tech firms
Dubbed the GAFA tax, an acronym for Google, Apple, Facebook and Amazon, the law will levy a 3% tax on total annual revenues of the largest tech firms providing services to French consumers AFP/File

The United States on Tuesday announced it would begin an antitrust review of major online platforms to determine if they have "stifled" innovation or reduced competition.

The announcement by the Justice Department did not name specific companies but appeared to signal the department was targeting Google, Facebook and Amazon, which dominate key sectors of the digital economy.

When contacted for comment, Google referred AFP to testimony director of economic policy Adam Cohen gave US legislators during a recent hearing.

"In the face of intense competition, we are proud of our record of continued innovation," Cohen said.

"We have consistently shown how our business is designed and operated to benefit our customers."

Cohen contended that Google's platform has reduced prices and expanded choices for consumers and merchants around the world.

It was not immediately clear if the probe would also target Apple, which despite not being the dominant smartphone maker wields power over services via its App Store.

During a recent interview with CBS News, Apple chief executive Tim Cook was adamant that the company was not a monopoly but accepted that it warranted scrutiny due to its size.

"I think scrutiny is good, and we'll tell our story to anybody that we need to or wants to hear it," Cook said.

"I don't think anybody reasonable is going to come to the conclusion that Apple's a monopoly."

Amazon and Facebook did not immediately respond to requests for comment.

The antitrust division is reviewing "whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers," the Justice Department said in a statement.

It added that investigators are "conferring with and seeking information from the public, including industry participants who have direct insight into competition in online platforms, as well as others."

The probe comes after the European Union imposed hefty fines on Google over charges that it abused its dominant position and also launched a formal investigation into online commerce leader Amazon.

"Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands," Assistant Attorney General for the Antitrust Division Makan Delrahim said.

- Breakups unlikely -

GETTY IMAGES NORTH AMERICA/AFP/File / CHIP SOMODEVILLA Assistant Attorney General for Antitrust Makan Delrahim will lead the review of whether Big tech firms have stifled competition

US antitrust enforcers have broad authority over companies and can impose fines for violating antitrust law, impose "structural" remedies to allow for more competition or even break them up.

Some lawmakers including Democratic presidential candidate Elizabeth Warren have been calling for a breakup of major tech firms, saying they are too big and powerful.

Breakups have been ordered only for Standard Oil in 1911 and AT&T in the 1980s, and many analysts say they are unlikely to be applied to Big Tech.

"The DOJ does not typically get involved unless they think there is fire in with the smoke," said technology analyst Rob Enderle of Enderle Group.

"With the amount of animosity aimed at Facebook at the moment, they are probably the most at risk."

Facebook has argued that a breakup would not address concerns over its privacy missteps, but rather lead to a number of smaller firms with similar issues.

Analyst Dan Ives of Wedbush Securities said in a research note that breakup orders appear unlikely based on current US law.

"We reiterate our belief that this broader Beltway vs. Big Tech battle is more bark than the bite of broader structural changes across the tech food chain and will likely result in business model tweaks... rather than forced breakups of the underlying businesses," Ives wrote.

"Current antitrust law does not provide for a forced breakup solely due to the size of the business; if it did, Walmart would have been broken up decades ago."

Much scrutiny of top internet companies is done through a traditional lens that too narrowly defines wrongful market power, erroneously assuming Amazon, Facebook and Google are monopolies, according to International Center for Law and Economics president Geoffrey Manne.

Patrick Moorhead of Moor Insights & Strategy said he sees breakups as highly unlikely.

"I don't think the US is any mood to break up these companies because a bigger fear is that Chinese tech companies keep getting bigger," he said.