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A Game of Thrones: Big Tech’s Legal Reckoning

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When a hot new tech story broke on my Instagram feed yesterday morning (#MillennialLife), I immediately jumped onto Google.com and began systematically typing key words into the infamous search engine. It took no less than four open tabs in my browser for me to realize that I was using Google.com to research a joint investigation by 50 state attorneys general, from over four dozen states and territories, into the potential antitrust violations of big tech. Led by Texas State Attorney General, Ken Paxton, and the Attorney General of the District of Columbia, Karl Racine, this legal brigade officially announced on Monday, September 9, 2019 that they were beginning joint investigations into the corporate behavior and market power of big tech companies. The investigation will focus primarily on tech monoliths, Google and Facebook. As a cybersecurity consultant, privacy evangelist, and cloud junkie (the irony not withstanding), I am ready for this investigation to make some monstrous waves in the tech sphere.

 

So, for those of us who are not lawyers nor economists, what is antitrust anyway? It’s a term that has been thrown around like confetti by one or two dominant democratic candidates and occasionally, irreverently, featured in the headlines of large news outlets such the New York Times and Forbes, but the concept itself hasn’t typically incited genuine public interest until recently. The mission of antitrust laws is to “enforce the rules of the competitive marketplace… to promote vigorous competition and protect consumers from anticompetitive mergers and business practices”.[1] Again, for those of us who are non-lawyers in the room, antitrust laws are in place to allow the Federal Trade Commission (FTC) and U.S. Department of Justice to ensure that competition in the United States economy is dynamic and allows for new market entrants. According to economic theories of capitalism, “competition is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choice of goods and services high… [while encouraging] businesses to offer new and better products.” [2]  Anti-trust laws, also known as “Competition Policy”, were established when Congress passed the Sherman act in 1890 and the Clayton Act of 1914. These laws were enacted to preserve free and unfettered competition as the rule of trade, and to protect consumers from unlawful monopolization of an industry by one company. If one or two corporate organizations are so powerful that they can control the market supply of a good or service and they can prevent the entrance of new competitors in their industry, anti-trust laws grant the higher courts wide latitude to interpret and enforce laws that preserve economic competition and protect consumers from harm as a result of unfair competitive practices and business tactics.

 

Anti-trust laws… are the magna carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.        

-U.S. Supreme Court Justice Thurgood Marshall, U.S. v. Topco Associates, Inc.

 

The application and interpretation of antitrust laws among attorneys and economic professors typically progress to meet the demands of the current economic and political environment. Which brings us to the digital age of the 21stcentury and the story at hand. Google and Facebook are coming under public scrutiny… and with good reason. At first, Google and Facebook were the essence of new wave online dreams. They were pinnacles of invention and innovation, but slowly these organizations succumbed to the rot of corporate greed and big business politics. Facebook’s incompetence during the 2016 election and their recent data privacy blunders serve as a prime example of consumer harm. Google’s proliferate and blatant ownership of online advertising and consumer searches prevents the entrance of other competitors and has,  consequently, stripped consumers of their strongest economic advantage, choice.I was on Google.com researching this article before I even knew what I was doing. That is how ingrained Google has become in the daily lives of consumers interacting with the tech industry.

 

Not since 2013, when Google successfully fought off criticism from competitors and the FTC investigations into their questionable, monopolistic business practices, has this company been through the proverbial public wringer. However, after Mark Zuckerberg’s very public incineration by Congress and the EU Parliament, it was only a matter of time until Google would face similar scrutiny. In 2019 the Alphabet, Inc. subsidiary, YouTube, was fined $170 million dollars to settle its “alleged” violation of the Children’s Online Privacy Protection Act (COPPA) by directing a large portion of content distribution towards children – using children’s data. [3] And Google’s failure to comply with EU antitrust regulations resulted in a record-breaking fine of $2.7 billion dollars to the European Union (though in actual monetary value that’s more akin to a parent’s giving their teens $40 for the movies). Google’s dominating power in online advertising and web search provides a critical function for its own business rivals– as well as for everyday consumers. The essential functions Google, Facebook, and Amazon provide to the economy, which make up the proverbial backbone of the internet, form the basis of politically active progressive reformers’ argument that regulators must “scrutinize their competitive practices” and to view their services as public utilities, rather than the services of private entities. [4]

 

Google is also guilty of taking more from consumers than we may be willing to give in regard to our privacy. For a very long time, the concept and protection of consumer privacy was assumed. For that reason, we willingly placed our trust in these online platforms that promised to give us access to information and digital spaces– ostensibly for free. However, in 2017 the trepidatious warnings of privacy advocates were vindicated as the Cambridge Analytica and Facebook conspiracy launched to the forefront of every American’s mind. The scandal even has its own critically acclaimed documentary streaming on Netflix, The Great Hack. The public sees these organizations as leviathans that we can’t live with, but can’t live without.

 

Let’s not leave Amazon out of this equation, though. How often do you go into a brick and mortar store, and say to yourself, “Let’s look on Amazon to see if I can find                  for a cheaper price?” Or, how often do you search for something on Google or Amazon, then log into your Facebook account to find ads specifically for that item or brand pop up in your feed? Sometimes it seems these companies know your tastes better than your own family. It’s because platforms like Google, Facebook, and Amazon have made the collection and monetization of consumer data the keys to the kingdom. Unlike other commodities in a free market where the economic laws of supply and demand apply, data is transferred from the consumer to online platforms without the usual exchange of value., such as cash value for a commodity The data archiving your political ideals, religious beliefs or the very personal emails sent between you and your spouse are hardly worth the search results for “compression yoga leggings”.

 

Another infraction of Google’s seemingly benign service is that they prioritize advertisements for their own products and services over those of other, rival organizations. These competitors end up paying Google exorbitant costs for online advertising and priority listing in search results, but Google is subversively rigging the system against competitors and consumers for their own financial benefit. Florida Attorney General, Ashley Moody, summarized the quintessential conflict between consumer welfare and tech giants when she was quoted as having said, “ When there is no longer a free market or competition, this increases prices, even when something is marketed as free, and harms consumers. Is something really free if we are increasingly giving over our privacy information? Is something really free if online ad prices go up based on one company’s control?” So, in response 48 states and our territories of DC and Puerto Rico have built up enough a bi-partisan backing and public support to muster the resources needed to investigate the corporate practices of profiting from our data, without exchange of equally valued compensation, and the indisputable subterfuge of market competition by rigging the advertising game against Big Tech’s would-be competitors.

 

What’s so interesting about this sudden galvanizing by the states Attorneys General to investigate Google and Facebook is that Amazon is not listed as one of the organizations facing a bulk of the scrutiny–yet. Notably, a Chicago-based software company owned in part by Amazon CEO Jeff Bezos, Basecamp, was one of the first to go public in its gripes about Google’s price gouging for online advertisements. Basecamp CEO Jason Fried went viral on Twitter last Friday after he posted, “When Google puts 4 paid ads ahead of the first organic result for your own brand name, you’re forced to pay up if you want to be found. It’s a shakedown. It’s ransom.” While other small tech firms are less enthusiastic about publicly airing their grievances, I suppose having someone like Jeff Bezos as a backing proprietor gives a company a bit more gumption to voice their criticisms of Google. Jeff Bezos and Amazon are one of Google’s chief competitors, particularly in cloud services and online shopping industries. So, it does warrant questioning whether or not flying under the radar is Jeff Bezos’ strategy to out-perform and out-maneuver his primary competitors, giving himself and his $2.5B organization more room to grow itself. While that assertion may border on the fringes of a conspiracy theory, it is still a question to ponder as this story unfolds.

 

Regardless of Amazon’s conspicuous absence from these antitrust investigations, Google and Facebook are coming to a reckoning. Googlewill have to fight on multiple fronts against the feds, states, and in district courts. Google and Facebook will also have to reckon with the growing loss of their corporate reputation and fervent criticism from their smaller tech competitors, as well as a potential market insurgence from Jeff Bezos (who I believe to be our very own Game of Thrones-esque Night King). It behooves anyone in the tech industry to watch this story closely, and form a new understanding about the intersection of technology and the law, because this unanimous coalition formed by the country’s Attorneys General has historically been the catalyst for real, sweeping changes throughout many industries and signals a dynamic shift in society.

 

 

[1]https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws

[2]Competition Counts: How Consumers Win When Businesses Compete, FTC: Bureau of Competition, May 2015

[3]Elias, Jennifer., Feiner, Lauren. YouTube will pay 170 million to settle claims it violated child privacy laws. CNBC. 4 September 2019.

[4]Phillips Sawyer, Laura. U.S. Antitrust Law and Policy in Historical Perspective.Harvard Business School. 2019