The United States on Tuesday announced it would begin an antitrust review of major online platforms to determine if they have "stifled" innovation or reduced competition.

The announcement by the Justice Department did not name specific companies but appeared to signal the department was targeting Google, Facebook and Amazon, which dominate key sectors of the digital economy.

When contacted for comment, Google referred AFP to testimony director of economic policy Adam Cohen gave US legislators during a recent hearing.

"In the face of intense competition, we are proud of our record of continued innovation," Cohen said.

"We have consistently shown how our business is designed and operated to benefit our customers."

Cohen contended that Google's platform has reduced prices and expanded choices for consumers and merchants around the world.

It was not immediately clear if the probe would also target Apple, which despite not being the dominant smartphone maker wields power over services via its App Store.

During a recent interview with CBS News, Apple chief executive Tim Cook was adamant that the company was not a monopoly but accepted that it warranted scrutiny due to its size.

"I think scrutiny is good, and we'll tell our story to anybody that we need to or wants to hear it," Cook said.

"I don't think anybody reasonable is going to come to the conclusion that Apple's a monopoly."

Amazon and Facebook did not immediately respond to requests for comment.

The antitrust division is reviewing "whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers," the Justice Department said in a statement.

It added that investigators are "conferring with and seeking information from the public, including industry participants who have direct insight into competition in online platforms, as well as others."

The probe comes after the European Union imposed hefty fines on Google over charges that it abused its dominant position and also launched a formal investigation into online commerce leader Amazon.

"Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands," Assistant Attorney General for the Antitrust Division Makan Delrahim said.

- Breakups unlikely -

US antitrust enforcers have broad authority over companies and can impose fines for violating antitrust law, impose "structural" remedies to allow for more competition or even break them up.

Some lawmakers including Democratic presidential candidate Elizabeth Warren have been calling for a breakup of major tech firms, saying they are too big and powerful.

Breakups have been ordered only for Standard Oil in 1911 and AT&T in the 1980s, and many analysts say they are unlikely to be applied to Big Tech.

"The DOJ does not typically get involved unless they think there is fire in with the smoke," said technology analyst Rob Enderle of Enderle Group.

"With the amount of animosity aimed at Facebook at the moment, they are probably the most at risk."

Facebook has argued that a breakup would not address concerns over its privacy missteps, but rather lead to a number of smaller firms with similar issues.

Analyst Dan Ives of Wedbush Securities said in a research note that breakup orders appear unlikely based on current US law.

"We reiterate our belief that this broader Beltway vs. Big Tech battle is more bark than the bite of broader structural changes across the tech food chain and will likely result in business model tweaks... rather than forced breakups of the underlying businesses," Ives wrote.

"Current antitrust law does not provide for a forced breakup solely due to the size of the business; if it did, Walmart would have been broken up decades ago."

Much scrutiny of top internet companies is done through a traditional lens that too narrowly defines wrongful market power, erroneously assuming Amazon, Facebook and Google are monopolies, according to International Center for Law and Economics president Geoffrey Manne.

Patrick Moorhead of Moor Insights & Strategy said he sees breakups as highly unlikely.

"I don't think the US is any mood to break up these companies because a bigger fear is that Chinese tech companies keep getting bigger," he said.

Big Tech's big earnings week overshadowed by political backlash
Washington (AFP) July 23, 2019 - A big earnings week for Big Tech firms is being overshadowed by the heated political environment that is turning up the pressure on giants Facebook, Google and Amazon as their profits and dominance grow.

Facebook will be in focus Wednesday with its earnings update and a likely finalization of a massive $5 billion fine by US regulators for data protection missteps.

On Thursday, Amazon and Google parent Alphabet, both facing pressure over their growing clout, report quarterly results. Twitter's update is set for Friday.

The Justice Department on Tuesday announced it was launching an antitrust review of major online platforms to determine if they have stifled innovation or competition.

The review "will consider the widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media and some retail services online," the department said in a statement.

The tech giants are facing intense scrutiny, with some political leaders calling for a breakup of the dominant players and others seeking tougher privacy and content moderation rules.

Google, which has been a target of EU antitrust probes, is likely to face a hefty fine from US regulators for failing to protect children from harmful content and data collection on YouTube.

Amazon has also drawn attention for its power in online commerce, and now faces a formal European Union probe over whether it misuses data from retail partners in its online marketplace.

Patrick Moorhead of Moor Insights & Strategy said breakups are unlikely despite calls by lawmakers such as presidential candidate Elizabeth Warren.

"I don't think the US is in any mood to break up these companies because a bigger fear is that Chinese tech companies keep getting bigger," he said.

Still, Silicon Valley giants are being hit by political crosswinds including attacks by President Donald Trump and his allies alleging "bias" against conservatives.

Needham & Co. analyst Laura Martin said tech firms can live with the fines if they keep their users.

"Anything that chases away users means revenue falls, and that becomes more serious," Martin said.

Here are key tech firms reporting earnings this week:

- Facebook -

The leading social network is expected to report growth in its global user base as well as ad revenues, with Instagram contributing more ad revenue.

"Facebook continues to be the top outlet in social (and perhaps all of digital) media," for advertising, noted analysts Maria Ripps and Michael Graham at Canaccord Genuity.

Yet Facebook was ripped at recent congressional hearings on its Libra digital currency plan, with lawmakers complaining that the company did not deserve to be trusted.

"We will be closely monitoring how the company responds to the regulatory scrutiny," said eMarketer analyst Debra Aho Williamson.

"Any sign of reduced engagement or usage will cause advertisers to become more restless."

- Alphabet/Google -

Google dominates internet search as well as online advertising with a 31 percent share of the global digital ad market, according to eMarketer.

Canaccord Genuity expects 18 percent growth in core Google operations thanks to new ad products.

Google could face more antitrust fines in Europe and other penalties in the United States but a breakup would be a major departure from precedent.

"In our opinion a broad movement to break up large tech companies solely because of their size will fail without a change to existing antitrust laws, and in order to change the laws Congress would have to agree, which we view as exceedingly unlikely," said Dan Ives of Wedbush Securities.

Ives said the scrutiny could "cause some near-term uncertainty, but ultimately we view it as a positive, potentially acting as a catalyst for more technology innovation."

- Amazon -

Amazon celebrated its biggest-ever sales event this month known as Prime Day just as the EU opened its antitrust probe.

"I think we'll see a super-strong showing from Amazon on the retail side and (cloud computing unit) AWS keeps growing at 40 percent a year," Moorhead said.

Amazon has been a dominant player in e-commerce, but eMarketer recently revised down its estimate of its share of the US market to 37 percent, from nearly 50 percent based on new data.

Analyst Andrew Lipsman of eMarketer said Amazon has seen "supercharged" growth in recent quarters but now faces tougher competition and that its e-commerce growth is "now only slightly outpacing the overall sector."

- Twitter -

Twitter has become profitable but its user growth has been sluggish as it seeks to weed out fake accounts and crack down on inappropriate content.

The short messaging service will no longer report "monthly active users" and instead shift to a measure of "monetizable" daily active users as it looks to expand beyond its core of journalists, politicians and celebrities. Canaccord Genuity sees 11 percent user growth using this measure.

"Twitter continues to prioritize the health of the platform over user growth," said analyst Jasmine Enberg of eMarketer.

"That said, Twitter has shown over the past several quarters that it is able to grow its revenues without significantly growing its user base."

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