Big Tech pile-on could block future moon shots

Alphabet’s Google and Facebook are being inundated with challenges

  
Image used for illustrative purpose. An illuminated Google logo is seen inside an office building in Zurich, Switzerland December 5, 2018.

Image used for illustrative purpose. An illuminated Google logo is seen inside an office building in Zurich, Switzerland December 5, 2018.

REUTERS/Arnd Wiegmann

(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)

NEW YORK/SAN FRANCISCO  - Alphabet’s Google and Facebook are facing a mountain of lawsuits claiming the duo are abusing their market power. They may beat back the charges, but too much distraction could make them miss the next big thing.

Both tech giants are being inundated with challenges. On Thursday a group of 38 U.S. states and territories sued Google, alleging the division of the over $1 trillion giant is trying to muscle its search engine into cars and smart devices a day after Texas and other states took aim at its digital advertising dominance. The Department of Justice in October accused it of abusing its market power with search and search-related advertising. Facebook was sued earlier this year by nearly every state attorneys general, along with the Federal Trade Commission, alleging the $782 billion company’s acquisition strategy, like its 2012 purchase of Instagram, was aimed at squashing competition.

The tech twins face serious risks even if they aren’t broken up. Both will likely spend years in costly battles across multiple courts. For example, Apple’s e-book price-fixing case took about four years to resolve, including appeals. And Microsoft faced a challenge over its dominance in computer operating systems from the Department of Justice in the late 1990s that lasted about three years. These new challenges could involve the release of reams of documents, including potentially embarrassing emails, and chief executives will likely be grilled by prosecutors.

But the ultimate cost could be even greater if these distractions stop them both from making changes or deals. At least 80% of Google and Facebook’s roughly $260 billion in revenue comes from ads. Finding new sources of money will be key to future growth, and these paths are narrowing. Also, Google boss Sundar Pichai is still waiting for U.S. regulators to approve the company’s $2.1 billion purchase of fitness tracker Fitbit, after finally getting clearance from the European Union on Thursday. Last month, Mark Zuckerberg’s firm bought customer-relations platform Kustomer for about $1 billion, but antitrust scrutiny could still scupper this.

The cautionary tale is Microsoft. While the company, run by Bill Gates at the time, wasn’t broken up, and did eventually bounce back after its fight with Uncle Sam, it missed out on the mobile-phone boom. The antitrust pile-on targeting Google and Facebook could now block their future moon shots.

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(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)

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