July and early August are usually a relatively quiet patch here in Silicon Valley.
Executives scatter to all corners of the world on vacation to recharge. Companies retrench from tech conference season. And their antagonists – regulators and lawmakers – usually take a break.
So what could possibly disrupt things?
In a word: Antitrust. Following the Department of Justice’s landmark win in federal court last week, Bloomberg is reporting DoJ officials are considering breaking up Alphabet Inc.’s Google after proving the company illegally paid Apple Inc., Samsung Electronics and others billions of dollars to establish Google as their default search.
The earth-shaking news — no, that was not an earthquake in the San Francisco Bay Area but close — has Big Tech girding for even more investigations in the U.S., Europe and Asia. Antitrust busters at the Justice Department and Federal Trade Commission were anxiously awaiting a judge’s decision in Justice’s years-long case and lawsuit against Google. Now, they are likely to pursue anticompetitive business cases against the other world’s most-valuable companies. Indeed, Justice is expected to go after Apple next after the iPhone maker was dinged by the EU for its Apple Store practices and policies toward app makers. Even more investigations are expected in Europe now that the Digital Markets Act and EU AI Act are law.
In fact, Apple said it will open its tap-and-go mobile payments system to rivals in Europe, ending a four-year long investigation that could have resulted in a hefty fine for the iPhone maker of about $2 billion.
“Definitely terrifies big tech, and everyone in any consolidated industry that has been seeing major acquisitions (think United Healthcare),” tech attorney Abiel Garcia said in a text. “Do I think it will happen, small chance.”
Who’s next? Microsoft? Amazon.com Inc.? Meta Platforms Inc.? The possibilities are dizzying and the ripples would impact the handful of companies chiefly driving the digitally-intertwined global economy, as well as their thousands of business partners across the planet.
A formal breakup is not likely to happen for that reason, but Google’s loss could undercut the U.S.’s position as tech’s epicenter. It’s already happening in Europe, where Google and Apple are bracing for fines in the privacy-obsessed EU. Punitive fines there have already stalled AI development by Apple, and led to billions of dollars in payments by Google to date.
For now, financial analysts do not expect near-term disruption to Google’s operations. A final resolution — a stiff fine and some organizational changes — will take time.
“It may take several quarters and possibly years for a final outcome to be reached, and we do not expect any disruption to Google’s near-term operations as a result of this ruling,” Dan Ives, an influential analyst for Wedbush Securities, wrote in a note Wednesday. “The DOJ has not formally communicated what possible remedies it may pursue, and proceedings will likely be held in the coming months to determine potential remedies.”
Indeed, breaking up big tech companies is hard to do.
We’ve been down this path before. The Justice Department pursued an antitrust case against Microsoft Corp. for years in the 1990s and early 2000s, won in court and pursued dismantling Microsoft over its bundling of Internet Explorer. Ultimately, that didn’t happen although Microsoft made changes to its business that satisfied the government.
The same scenario is likely to happen to Google, which came along with a search engine of its own during Microsoft’s entanglement with the feds.
The irony of the antitrust moment is not lost on long-time tech observers. Following years of adulation between the Obama administration and Big Tech, the then-Trump administration announced investigations in June 2019, an outgrowth of claims that Silicon Valley censored hard-right views on their platforms. Now, a passel of tech billionaires are lined up behind Trump in his presidential bid for tax breaks and hopes of a de-fanged Justice Department.
If anything, the Justice-Google case proves antiquated antitrust laws work in the absence of federal laws, and U.S. lawmakers are all about getting ahead of generative AI before it gains monopoly status among the usual suspects — in this case, Microsoft and Google, plus newcomers Nvidia Corp. and OpenAI. The DoJ and FTC have started investigations.
In other words, the DoJ and FTC will see Big Tech in court again.
