Displaying items by tag: DoJ
The anti-trust probe into Google elicited little more than a shrug from markets. Investors seem to think this just Washington saber-rattling. However, what is not well understood is that the probe is not just a risk for Google, but a major one for Apple. Apple is intimately connected to the case the DOJ is trying to form. In particular, Google pays Apple billions of Dollars a year to be the default search engine on iPhone, a fact which the DOJ has centered its case on. That money flows into Apple’s services unit, which has been its biggest growth driver in recent years. According to an analyst from Bernstein “There’s a risk, if you play it out, that there actually could be more financial impact to Apple than there is for Google”.
FINSUM: The market seems to have fundamentally misunderstood the risk here. Google got the headlines, but Apple potentially has even bigger risk.
A few weeks ago there was a great deal of press, and some investor anxiety, about simultaneous anti-trust probes being launched from the FTC and DOJ into America’s biggest tech companies. Before those efforts seem to have even gotten off the ground, the investigation seems to be backtracking. The head of the FTC said this week that the integration of Facebook and Instagram and WhatsApp will likely stymie any effort to break up the social media giant. The TFC chief also acknowledged it would be hard to get the courts to reverse a merger that the FTC itself had already approved, which is the case with Facebook and its acquisitions of Instagram and WhatsApp.
FINSUM: This seems like a pretty notable surrender after only a few weeks of work. We wonder why the FTC is changing its tone so strongly?
Consider it a warning shot across the bow of Silicon Valley, the opening salvo in a potentially brutal antitrust war. The head of the Department of Justice said in a public speech yesterday that low prices and free services would not shield “monopolists” from scrutiny. “There are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems, and electronic book sales … This is true in certain input markets as well. For example, just two firms take in the lion’s share of online ad spending”, said the head of the DOJ, Makan Delrahim. He continued “Like today’s tech giants, Standard Oil was pioneering and generated a number of important patents. Scholars have noted, however, that Standard Oil’s innovation slowed as it became an entrenched monopolist”. Delrahim also listed specific behaviors which would spark investigation, including bundling products together.
FINSUM: The government is poised to launch a large and multi-fronted war on big tech. How long this will take, or how it will play out in markets is anyone’s guess, but it is hard to find any positives as far as big tech company share prices are concerned.
While the SEC seems to have largely shrank from the limelight surrounding its investigation of Tesla, there is news on that front, and in a big way. The DOJ is now investigating Tesla, and specifically, it has launched a criminal investigation into Elon Musk’s now infamous tweet about taking the company private. The investigation sits alongside a civil inquiry by the SEC. Tesla said it had received a “voluntary request” for documents but that there was no “subpoena, a request for testimony, or any other formal process”.
FINSUM: Hard to see where this may go, but we imagine it could turn into a big headache (and distraction) for Musk and the company, as well as its shareholders.
Top tech industry executives have spent their week speaking with the Senate and answering tough questions about their data security, fake news, and political content. Many fear it is a preamble to a big regulatory crackdown on the sector by the Senate. Well, that has not occurred yet, but in a worrying development US attorney general Sessions has announced that his department is looking into the tech sector in regards to competition and free speech issues. Sessions said he would be meeting with state attorney generals to discuss a “growing concern” that tech companies “may be hurting competition and intentionally stifling the free exchange of ideas”.
FINSUM: This might be the beginning of a major regulatory move against the sector. We think the market will start handicapping the odds of a big crackdown as more news comes out.