09/17/2020

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Antitrust Concerns Loom for Big Tech



Google Faces Criticism Surrounding Advertising Practices


While technology products and services have unquestionably helped the global economy power through the coronavirus pandemic, some Silicon Valley giants are now back in the spotlight in regards to antitrust concerns. Google (GOOGL) is one tech-titan that will likely face antitrust lawsuits in the coming months for what some lawmakers view as anti-competitive behavior.

Both the Justice Department and a group of state attorneys general are moving towards filing against the company. Antitrust concerns about the search engine are largely related to its online advertising business, since Google controls every step in the process of connecting advertisers and publishers. The Justice Department’s investigation will also examine Google’s dominance over other search engines.

The company has long defended itself against accusations of anti-competitiveness, stating in a blog post last year, “To suggest that the ad tech sector is lacking competition is simply not true. To the contrary, the industry is famously crowded. There are thousands of companies, large and small, working together and in competition with each other to power digital advertising across the web.”

Facebook’s Acquisition of Giphy


Facebook (FB) is also facing antitrust scrutiny after its recent purchase of Giphy, a platform for sharing animated images. The acquisition was valued at roughly $400 million.

Though the deal did not qualify for a mandatory merger control review, it may still face investigation. Senator Amy Klobuchar, a ranking member of the Senate Judiciary Antitrust Subcommittee, called for an investigation , saying “Many companies, including some of Facebook’s rivals, rely on Giphy’s library of sharable content and other services, so I am very concerned.”

An investigation would involve questions about whether or not current market conditions would allow a competitor to build a product similar to Giphy. Since Giphy is compatible with a variety of platforms, Facebook could have an incentive to cut off some of its interoperability capabilities. This has antitrust lawmakers worried. However, Facebook has assured users that developers and API partners will still be able to use Giphy’s resources. Because Facebook and Giphy are not directly in competition, some have noted that Facebook does not need to be concerned about antitrust regulations.

In addition to antitrust questions, the merger has raised concerns about whether Facebook will use Giphy to mine data about people when they use it outside of Facebook. Facebook could also face copyright law struggles, since Giphy’s library is made up of so many clips from movies and other media.

The Proposed Merger of Uber and Grubhub


Uber (UBER) and Grubhub (GRUB) have also faced criticism from antitrust advocates as they mull over talks to merge. By market share, Uber Eats is the second-largest food delivery company and Grubhub is the third, behind first-ranked DoorDash. If they joined forces, Uber and Grubhub would control about 55% of the US food delivery market and DoorDash would control 35%. In some places, like New York City, Uber’s market share would skyrocket from 17% to 80% if it acquired Grubhub.

Some lawmakers worry that this merger would leave restaurants, which have already been battered by coronavirus, even more beholden to delivery apps. Senator Klobuchar also shared her thoughts on this matter, taking to Twitter on Sunday, saying “When big companies corner the market it usually means more for them and less for you, especially in a pandemic.”

In their defense, Uber and Grubhub might make the case that Grubhub will not be able to weather fallout from coronavirus without the merger, due to shrinking profit margins. Investors, lawmakers, and consumers will be closely following the two food-delivery companies’ next moves.


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