Shares of Amazon.com, Google parent Alphabet, Facebook, and Apple fell Tuesday as a report emerged that a US House subcommittee that has investigated anticompetitive business practices for more than a year would recommend splitting them up and limiting the scope of their future acquisitions.
Amazon’s shares took the biggest hit on Tuesday, dropping 3.1%. Apple was down 2.8%, while Google slid 2.1%, and Facebook declined by 2.2%.
The House Judiciary Antitrust, Commercial and Administrative Law Subcommittee has held hearings for more than a year to investigate the business practices of Amazon, Apple, Alphabet (Google) and Facebook.
Last week, the Judiciary subcommittee held its seventh and final hearing, and issued a toughly-worded report on the companies’ actions on Tuesday.
The report isn’t law and while President Donald Trump wants to control the social media giants like Facebook and Twitter because they are now controlling and censoring his lying Tweets and posts, it is unlikely that he would support Democrat ideas to crack down on the business activities of Big Tech.
But it is likely that should the Democrats win the Senate and/or the Presidency then some sort of new controls on big tech will be hard to resist.
The Republicans on the Committee split from the Democrats and didn’t support the final report.
But that opposition is looking pretty marginal as the report is expected to see other actions against the tech giants.
The US Justice Department has been working to file an antitrust complaint against Google, followed by separate suits against the internet search giant from state attorneys general.
Antitrust investigations of Amazon, Apple, and Facebook are also underway at the Justice Department, the Federal Trade Commission, and four dozen state attorneys general, according to the New York Times.
However, seeing the mega techs have driven this year’s rebound from the March lows (and much of the Wall Street surge in the past three years), the threat of new laws to control their business activities is likely to undermine the sector and see a sell-off emerge as the election approaches, and then possibly accelerate should the Democrats do well.
The report said the companies had abused their dominant positions, setting and often dictating prices and rules for commerce, search, advertising, social networking, and publishing (That will get support from media groups like News Corp, Fox, The New York Times, Disney and in Australia, Nine Entertainment).
The report recommended restoring competition by restructuring many of the companies. It also proposed reforming antitrust laws, in the biggest potential shift since the Hart-Scott-Rodino Act of 1976 created stronger reviews of big mergers, according to the report in the Times.
“The totality of the evidence produced during this investigation demonstrates the pressing need for legislative action and reform,” the report said. “These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement.”
The New York Times reported that “the House report is the most significant government effort to check the world’s largest tech companies since the government sued Microsoft for antitrust violations in the 1990s. It offers lawmakers a deeply researched road map for turning criticism of Silicon Valley’s influence into concrete actions.”
On Wednesday investors remained wary about the value of the megatechs. While Amazon shares regained their losses with a rise of 3% in an upbeat wider market market of the other giants were weak. Apple shares were up 1.7%, Alphabet (Google) shares added 0.47% and Facebook shares again fell, losing 0.21%.
