Executive order zeros in on big tech, anticompetitive behavior

What the EO does

The Biden administration is asking for greater merger scrutiny, particularly by dominant internet platforms, with a focus on acquisitions of competitors and data accumulation.

The executive order follows Amazon's recent plans to acquire MGM for $8.5 billion and a judge's dismissal of both the FTC and state attorneys general lawsuits alleging Facebook attained a monopoly over the social networking market through anticompetitive practices. The federal judge said the FTC and state attorneys general lawsuits were vague and lacked sufficient evidence, but left the door open for the FTC to refile its suit.

The Biden administration also encouraged the FTC to establish rules on data accumulation and to bar unfair competitive practices in online marketplaces run by companies that also sell products in those marketplaces. The EO follows a move last week by the FTC to extend its antitrust enforcement powers and rulemaking capabilities.

Why the EO matters

Alan Pelz-Sharpe, founder of consulting firm Deep Analysis, said Biden's push to crack down on anticompetitive behavior has produced one of the most significant EO's for the tech sector, especially its focus on data collection.

Big tech is built on massive amounts of consumer data, which once accumulated represents an "impossible bar for other nascent competitors to reach," he said. He believes the EO could have two effects: a pathway for smaller firms to grow rather than just be acquired and the potential to foster more innovation.

"Simply having a lock on a consumer's -- or business's -- internet history means you don't have to try that hard to sell to them or keep them as customers, as you essentially own them," he said. "If that lock is opened, it then opens opportunities to build less intrusive and more equitable relationships between sellers and buyers."

Andrew Bartels, a vice president and principal analyst at Forrester, said the increased antitrust enforcement activity will primarily affect B2C-focused companies like Facebook, Google, Amazon and Apple. Tech vendors that sell to businesses will not be the target of increased antitrust activity, he said.

However, how the order could affect big tech's B2B products is still unknown.

"The main exception would be the hyper-scalers like AWS, Google Cloud and Microsoft Azure, but even there it might be collateral impacts -- pressures for Amazon to spin off AWS or Alphabet to spin off Google Cloud would be likely to create more competition for IaaS or PaaS," he said.

Bartels said he doesn't expect the federal government to come for Microsoft, however, either for OS or its Office products, "given the outcome of past efforts to tackle Microsoft's market dominance."

Lee Sustar, principal analyst at Forrester, said there is growing concern that cloud providers like AWS, Google Cloud and Microsoft Azure are creating vendor concentration risk.

Although the executive order seems primarily focused on consumer-facing companies, Sustar said businesses would like to see continued competition for cloud service offerings and pricing as cloud adoption and transition grows beyond the early adopters.

"It isn't yet clear if business[es] will push the Biden administration to use antitrust efforts to achieve that outcome," Sustar said.

Also this week

• Google is facing another antitrust lawsuit, this time filed by 37 state attorneys general alleging the company engaged in illegal and anticompetitive behavior to maintain the company's monopoly power in the mobile app distribution and in-app payment processing market through its Google Play app store. New York Attorney General Letitia James, who is leading the suit, said in a news release that Google has "deprived Android device users of robust competition that could lead to greater choice and innovation, as well as significantly lower prices for mobile apps." Wilson White, Google's senior director of public policy, responded to the lawsuit in a blog post, noting that consumers can download apps from Google Play, as well as rival app stores. He said, "it's strange that a group of state attorneys general chose to file a lawsuit attacking a system that provides more openness and choice than others."
• Former President Donald Trump filed class-action lawsuits Wednesday targeting Facebook, Google and Twitter. The lawsuits ask that the companies' abilities to censor content be stopped. At the end of his presidency, Facebook and Twitter banned Trump from their platforms, and Facebook decided last month to extend Trump's ban for two years. The lawsuits were filed in the Southern District of Florida.
• China announced Tuesday that it is stepping up its supervision of Chinese companies listed in offshore markets. The announcement follows Beijing's launch of a cybersecurity investigation into ride-hailing company Didi Global Inc. after it was listed on the U.S. stock market.

Elsewhere

• Twitter no longer has immunity over content posted on the platform by third parties in India. In May, India adopted new information technology rules, which the country determined Twitter has been non-compliant with, resulting in the loss of its protection, according to CNN Business. That means Twitter could potentially be held liable for third-party content. Section 230 in the U.S. protects companies like Twitter and Facebook from being held liable for third-party content posted to their platforms.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.