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Will 3 tech giants face a federal crackdown?

Facebook faces new scrutiny

Are America's trio of tech titans actually sinister forces that the government should rein in -- or even break up into less-dominant pieces? A buzz is rising in Washington's halls of power, echoed in government circles in Europe, that Google parent Alphabet (GOOG), Facebook (FB) and Amazon (AMZN) are too big for our own good. 

The power of these three has started to provoke unease due to a constant drip-drip-drip of news that makes them look either arrogant or reckless. Special counsel Robert Mueller recently got a search warrant for the contents of Facebook accounts associated with Russian operatives trying to undermine the 2016 presidential election. 

Google, whose slogan is "Don't Be Evil," has faced accusations of manipulating searches to highlight its own products and those of big advertisers, as well as avoiding taxation in places like Great Britain by allegedly using complex licensing agreements. And Amazon gets blamed for the decline of physical stores, thus throwing people out of work.  

Calls to break up the three are most prominent in liberal and Democratic corners. Democratic leaders, when announcing their "Better Deal" economic platform announced in July, called for antitrust action against Amazon. Sen. Cory Booker, D-New Jersey, has complained that "anti-democratic forces" are "undermining the strength and power of citizenship in America," meaning the big tech outfits. 

Two other Democratic senators, Mark Warner of Virginia and Marvin Heinrich of New Mexico, have called for regulatory scrutiny of social media ads, the same as TV ads.

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But the populist right has joined them. President Donald Trump talked about breaking up Amazon during last year's political race. Steve Bannon, until recently Mr. Trump's chief strategist, has proposed regulating Google and Facebook. They charge that Google and Facebook, which together now furnish a majority of Americans with their news, have a liberal bias. Last year, a hullabaloo arose after a Facebook staffer accused the company of blocking conservative stories from its Trending Topics section. 

The three companies counter that they're mindful of their civic duties and try to deliver the best products and services for the public. Mark Zuckerberg, Facebooks's chief executive, in a manifesto he penned last February, proclaimed that "Facebook stands for bringing us closer together and building a global community." 

To allay suspicions, Google in June announced it would stop reading people's Gmail in search of opportunities to sell ads. Both Google and Facebook say they'll monitor hate speech and other upsetting content, mainly after advertisers protested they they didn't want their messages placed next to such stuff. Amazon, which has taken over upscale supermarket chain Whole Foods, immediately set about cutting store prices.

For the moment, though, Wall Street is far from alarmed at the politicians' rumblings. "In the long run, these won't be very significant for their businesses," said Michael Cuggino, founder of the Permanent Portfolio fund family, referring to the Russia Facebook probe and other blemishes on the tech leaders. "These are growing pains. They want to be good corporate citizens and protect their reputations." 

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"Washington will be slow to regulate Facebook," said Andy Kapyrin, research director at RegentAtlantic Capital. "They don't know what to do and how." The tech companies will move to repair any damage, he said. Afraid of offending advertisers, they likely will get better at spotting offensive content, with the help of artificial intelligence -- or even people power.

To that end, Facebook Chief Operating Officer Sheryl Sandberg said in a blog post on Wednesday that it is adding more human oversight to its automated ad sales system in a bid to weed out offensive ads. The company will also toughen its enforcement against ads deemed to violate Facebook's community standards, she said.

To the extent anyone has visualized what a tech breakup would look like, it involves dividing the corporations into functional areas. Amazon, for example, would be split into companies specializing in books, cloud computing and so on. And they might be forbidden from buying other businesses, like Google did with YouTube.

The three massive tech companies are new on the scene of Corporate America. Yet they've soared to dominance rapidly. "They've grown so quickly that regulators and tax authorities are behind the curve," just as they were in the late 1800s with the bursting growth of industries like steel and railroads, said economist Gary Shilling.

Alphabet (founded 1998) garners 80 percent of search-based ad revenue, Facebook (2004) has a similar dominance of social media usage and Amazon (1994) dominates cloud computing and is elbowing into the retail sector, reigning over the book market and ranking as the nation's 12th largest retailer.

You could argue that Apple (AAPL) and Microsoft (MSFT) should also be on the antitrust villain's list. But both have plenty of competition, for smartphones and software.

Indeed, Europe has been much tougher on the tech giants, especially on Google. The European Commission, the administrative body of the European Union, has brought three antitrust cases against Google over the past two years. Meanwhile, the finance ministers of 10 European nations are backing a plan to wring more taxes out of the three U.S. tech giants and others.

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In his book "Move Fast and Break Things," Jonathan Taplin, a professor at the University of Southern California, contends that Google, Facebook and Amazon need to be broken up, not only for what they've done, but for what they could do. For example, Amazon showed how it could boycott book publishers, which it did in a dispute with Hachette. Google and Facebook could exercise the same power over advertisers by threatening to shun their ads, he contended. 

Still, technology is inherently disruptive, and there's no assurance that today's dominant tech trio will remain that way. Time was that Myspace was the No. 1 social network and Yahoo the top search provider. 

Google, Facebook and Amazon are so big because customers like them -- that's the argument of Mark Jamison, a scholar at the American Enterprise Institute. Should they falter due to market forces, then that's for the greater good, by this reasoning. Jamison asked whether searchers would be better off if they were limited to using Google for no more than one-third of their searches. 

The closest model to a tech giant antitrust action was the years-long federal lawsuit against Microsoft, when the government argued that the company was exploiting its commanding position to squelch the competition. A 2002 consent decree, among other things, required Microsoft to make Windows compatible with other companies' software. So now, for instance, you can use Windows on your Apple Mac. 

But the advance of technology has made such issues irrelevant. Consider browsers. Because broadband now is ubiquitous, it doesn't matter whether the laptop you buy comes with Microsoft's Internet Explorer. Paying nothing, you're able to download a plethora of other browsers, from Google Chrome to Mozilla Firefox. 

A longstanding technophile credo is: "The internet must be free." That notion may end up being true, or being tested up ahead.