GOOGL Alphabet Inc

By John D. McKinnon 

WASHINGTON -- Top state law-enforcement officials from across the country are formally launching antitrust probes into Facebook Inc. and Alphabet Inc.'s Google starting next week, further pressuring tech giants already under federal scrutiny over whether their online dominance stifles competition.

The moves, involving two large bipartisan coalitions of state attorneys general, add considerable heft to the investigative efforts under way in Washington. As in the government's antitrust action against Microsoft Corp. two decades ago, state attorneys general are likely to provide important contributions to the substance of the investigations, complementing the federal efforts.

"The states can play a crucial role in augmenting federal antitrust enforcement," said Gene Kimmelman, a senior adviser at Public Knowledge, a consumer group that focuses on tech issues. "Cases are so resource intensive that dividing the work could be enormously valuable to cover the entire digital landscape."

Details of the Google probe are to be disclosed at a news conference outside the U.S. Supreme Court on Monday. A bipartisan group of perhaps more than 40 attorneys general will join that effort, which is being led by Texas Attorney General Ken Paxton, a Republican, according to people familiar with the matter.

In a news release Friday, Mr. Paxton's office said the news conference will detail "a multistate investigation into whether large tech companies have engaged in anticompetitive behavior that stifled competition, restricted access and harmed consumers."

Formal civil subpoenas are likely to begin going out from that effort soon, according to the people familiar with the matter. The investigation will examine Google's impact on digital advertising and information markets, according to one of the people, as well as whether the firm has stifled innovation or harmed consumer choice and privacy.

Separately, New York Attorney General Letitia James, a Democrat, confirmed a Wall Street Journal report Friday that her office is organizing a bipartisan, multistate antitrust probe into whether social-media company Facebook "has stifled competition and put users at risk," as she said in a statement. "We will use every investigative tool at our disposal to determine whether Facebook's actions may have endangered consumer data, reduced the quality of consumers' choices, or increased the price of advertising."

Joining in the Facebook investigation so far are attorneys general of Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia, Ms. James said. The wide-ranging investigation focuses on Facebook's "dominance in the industry and the potential anticompetitive conduct stemming from that dominance," her office said.

Facebook recently agreed to shell out $5 billion to settle Federal Trade Commission allegations that it repeatedly used deceptive disclosures and account settings to lure users into sharing personal information, and it remains under federal scrutiny for issues including whether it acquired companies such as Instagram to stave off competition. State attorneys general also are expected to examine those issues, along with Facebook's use of data and its role in the huge digital advertising market.

This year, Google's share of the total U.S. digital ad market will be 37%, and Facebook's will be 22%, according to eMarketer, a research firm.

Facebook declined to comment.

Google, which also is facing a Justice Department antitrust probe, said it is cooperating with the inquiries.

"Google's services help people every day, create more choice for consumers, and support thousands of jobs and small businesses across the country," said Google spokesman Jose Castañeda. "We continue to work constructively with regulators, including attorneys general, in answering questions about our business and the dynamic technology sector."

Tech firms generally have contended that they operate in highly competitive markets.

The action by the attorneys general, which has been anticipated for weeks, could be expanded to other companies beyond Google and Facebook soon, some of the people said.

Public-opinion polls suggest Americans are increasingly growing disenchanted with tech companies, in particular social-media platforms, even as they remain hooked on their services.

Some of the state officials already contend that the tech companies' dominance is producing harmful effects.

"The extreme concentration in the technology industry is bad for the consumer, and in our opinion it's bad for America," Tennessee Attorney General Herbert Slatery III said at a June hearing on antitrust concerns in the tech industry, flanked by two other state attorneys general. "The concentration has stifled innovation with market distortions [in] research and development, as entrepreneurs avoid competing with Google and Facebook and other tech giants. So we need to do something about that."

Google also is drawing particular attention for its outsize role in the digital advertising market.

"Practically everything the [Securities and Exchange Commission] wouldn't allow on a commodities exchange happens every day in Google's digital advertising space," Louisiana Attorney General Jeff Landry said at the June hearing, held by the FTC. Because of Google's extensive control of the digital-advertising market, Mr. Landry added, "Google gets to pick the winners and losers, because the system is rigged in their favor and ripe with conflicts."

For now, it appears unlikely the state and federal investigations will be formally coordinated. But the federal enforcers have been meeting with state attorneys general, and closer cooperation could develop as the probes move forward.

"The FTC values our cooperative relationship with the AGs and routinely coordinates on tech and antitrust issues," a spokeswoman for the FTC said.

The Justice Department declined to comment.

The participation of so many attorneys general of both parties in the probe is potentially worrisome for the big tech companies. About 20 attorneys general were involved in the federal government's antitrust case against Microsoft two decades ago.

Microsoft eventually agreed to an array of conditions in that case, including making the Windows platform more accessible to third-party software developers.

At a minimum, the state officials' involvement this time is sure to add complexity and cost for the companies. For instance, the state attorneys are often able to extract large fines in antitrust cases, in circumstances where federal enforcers can't.

At the same time, the state attorneys will face the challenge of coordinating complex investigations among so many offices. Some attorney general offices, particularly in smaller states, also lack the personnel and resources to throw into the demanding job.

While the state attorneys' involvement is important, "this is a heavy lift," said Harry First, a New York University law professor who co-wrote a book on the Microsoft case. "It's important to have the states in there, they can perform the role they performed in the Microsoft case, which was to really dig into the investigation."

Write to John D. McKinnon at john.mckinnon@wsj.com

(END) Dow Jones Newswires

September 06, 2019 17:35 ET (21:35 GMT)

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