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GOOGL, AMZN & FB Stock Fall as Antitrust Investigations Hit Silicon Valley, Again

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Alphabet Inc. (GOOGL - Free Report) and Amazon.com Inc. (AMZN - Free Report) stocks opened Monday down big, with Amazon down 3% and Google down over 6%. Both companies are facing speculation of an antitrust investigation. The U.S. Department of Justice is reportedly going after Google, while the Federal Trade Commission is trying to tackle Amazon and Facebook. Amazon closed the day down around 5% while Alphabet closed around -6.5%.

Meanwhile, Facebook (FB - Free Report) is just now nearing the end of the Cambridge Analytica scandal and will be paying $3-5 billion for its privacy violations based on reports. Facebook opened Monday down 3% amid the concerns around other tech giants and closed the day down around 7% as the FTC will reportedly be including Facebook in their antitrust investigation.

DOJ Investigation

Alphabet’s subsidiary Google is under pressure as the DOJ looks to open an investigation into "Google’s business practices related to its search and other businesses," as first reported by the Wall Street Journal. With Alphabet being the tech power that it is, it’s hard to know exactly what the DOJ is set to look into.

Many of the worries seem to be focused on Google’s collection of search data and control of the digital advertising market. Google’s search engine currently claims about 75% of the worldwide search engine market share for desktops and that number is even higher for mobile and tablet devices. Google also made up 38% of the digital advertising market in 2018, 17% more than its closest competitor, Facebook.

Google has faced many investigations in the past, paying out billions to the European Commission over the past few years. The FTC has also previously investigated Google, which ended with Google agreeing to pay a $22.5 million fine after denying any guilt.

FTC Investigation

The Federal Trade Commission has started the first steps of an investigation into Amazon. There is no clear sign of what the FTC will be specifically looking into, but Amazon’s control in the online retail sector has always been an area of concern for politicians. This, coupled with its growing influence in multiple markets, make it a prime target.

Amazon is also currently under investigation by the European Union who believe Amazon may be stifling competition due to its size. As seen with the previous Google investigation, the European Union is not afraid to fine these big tech companies in the name of consumer protection. The EU also tends to be significantly stricter than the US when it comes to regulation of these large companies.

Facebook was added to the investigation after initial reports were focused on just Amazon and Google. The investigation into Facebook will focus on whether or not it stifles competition and has acted in an unlawful and monopolistic nature. This comes on the back of an FTC investigation regarding privacy issues and Facebook’s user data collection. 

Public Pressure

These investigations come after the companies and tech giants as a whole have come under bipartisan pressure from government officials. President Trump, backed by other Republicans, has accused Google of having biased search results and has had something of a personal feud with Amazon CEO Jeff Bezos.

Meanwhile, Democrats have concentrated on whether or not these tech-giants cut off competition. Antitrust regulation has become a main focus of Democratic Sen. Elizabeth Warren’s 2020 presidential campaign and her thoughts have been echoed by Sen. Amy Klobuchar and Sen. Bernie Sanders. With this much support behind the investigations, it could prove troublesome for the companies.

This investigation is just in the very early days and although the government pressure is large, all these companies have large legal teams and resources at their disposal so it is nothing to be overly worried about at the moment, but should be watched as it continues to progress.

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