FTC Chief Warns Tech Companies Will Be Broken Up If Necessary

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Federal Trade Commission's Chairman Joe Simons has clarified that tech giants will be broken up if the need arises. If the agency reaches the conclusion that past mergers harmed competition, they will be undone. The FTC chief is leading the commission's broad inspection of the technology sector.

While Simons agrees that breaking up tech conglomerates can be a messy business, he said that this might be just what the industry needs to contain dominant players and encourage competition. Per antitrust experts and regulators, tech giants have stifled competition in the industry by buying promising startups, thereby eliminating threats.

The investigation will focus on what would have become of the startups had they not been gobbled up. For instance, the inquiry will attempt to answer questions such as whether Instagram would have grown into the success that it is today had it not been acquired by Facebook. In short, the inquiry will focus on whether the startups were already set up for success and if they were taken over merely to thwart competition. It doesn't matter that the mergers in question were previously greenlit by the FTC itself. If given court approval, the agency will simply say it made a mistake and go ahead with the breakup.

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Alongside the FTC, the Justice Department is also probing the tech industry for anticompetitive practices. The two have apparently divvied up responsibilities, with FTC investigating Facebook and Amazon, and DOJ looking into Google and Apple. However, FTC's chief Simons says that the investigation has been divided on the basis of conduct, and not company wise. Thus, there should be no concerns about overlap.

This means both FTC and DOJ can be simultaneously investigating the same company for different conducts. According to the example given by the FTC chief, this could mean his agency scrutinizing Amazon for the purchase of a grocer and the DOJ investigating it for acquiring a music-streaming website. Again, this will be an insanely complex task and require cooperation between the two agencies that in the past have fallen out with each other over tech.

For a long time, governments and consumers simply marveled at the wonders of technology before realizing there are plenty of downsides too. And now, the tech firms have grown into mammoths. Facebook is reportedly gearing up to merge Facebook Messenger, WhatsApp, and Instagram so that it becomes impossible to disintegrate them. Other tech giants likely have similar tricks up their sleeves. Thus, tech giants will resist these moves by arguing that certain components of their business are integral to their operation.

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Moreover, it also remains to be seen if FTC and DOJ are actually serious about restoring competition in the industry or is it just all talks to get critics off their backs. However, the U.S. has broken up monopolies in the past as well. So,  tech giants are not going to take these investigations lightly.

And it seems like they aren't. For instance, it was reported recently that Facebook opted out of a merger just because it feared more federal scrutiny. Thus, whether or not past mergers are undone, the investigation surely seems to be having an effect already.