Going After FAANG in the United States: States Attorneys General Begin Investigation into Google

An interesting question is when do you regulate a new technology.  Do you regulate it early, potentially impeding its development?  Or, do you give it time to develop and the industry around it?  One issue with respect to waiting to regulate concerns the difficulty in doing so because of public choice issues.  The industry becomes too powerful to regulate effectively, or essentially captures the agency regulating it.  Some may argue that the United States, through the federal government, has failed to effectively regulate the FAANG companies—Facebook, Amazon, Apple, Netflix and Google.  However, another set of potential regulators exist in the United States—State Attorneys General.  Indeed, state attorneys general have led lawsuits against many industries, including tobacco and more recently the pharmaceutical industry.  Those attorneys general may be subject to similar public choice issues; however, sometimes they still act.  And, now, 50 attorneys general are going after Google.  Here is the press release: 

Attorney General Ken Paxton today announced that Texas is leading 50 attorneys general in a multistate, bipartisan investigation of tech giant Google’s business practices in accordance with state and federal antitrust laws.

The bipartisan coalition announced plans to investigate Google’s overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers. Legal experts from each state will work in cooperation with Federal authorities to assess competitive conditions for online services and ensure that Americans have access to free digital markets.

“Now, more than ever, information is power, and the most important source of information in Americans’ day-to-day lives is the internet. When most Americans think of the internet, they no doubt think of Google,” said Attorney General Paxton. “There is nothing wrong with a business becoming the biggest game in town if it does so through free market competition, but we have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy, and put Google in control of the flow and dissemination of online information. We intend to closely follow the facts we discover in this case and proceed as necessary.”  

Past investigations of Google uncovered violations ranging from advertising illegal drugs in the United States to now three antitrust actions brought by the European Commission. None of these previous investigations, however, fully address the source of Google’s sustained market power and the ability to engage in serial and repeated business practices with the intention to protect and maintain that power.

Regulate Early or Later: Open Banking, Fintech and Innovation

At a relatively recent international conference, I discussed how the United States generally tends to take a hands off approach to regulating new technologies which create new markets at the outset of the development of the technology.  For the most part, we allow the market to sort out the best way for the technology to develop and be deployed to consumers.  The downside with this approach concerns public choice issues.  Once the industry develops and matures—along with obvious problems, such as privacy, consumer safety and competition concerns—there tend to be issues associated with regulating that industry and the problems created.  The relatively more mature industry may attempt to capture agencies and exercise considerable influence over our politicians and other parts of government.  This is tricky because we avoid overregulating early and dampening the development of new markets and technology, but we also tend to under-regulate and pay later.  However, from the big picture perspective, it is likely better to have the industry than not have it at all.  Interestingly, we do seem to be pretty good at allowing new technologies to overrun existing markets (apparently with players who are too slow to react to changing technology and are not well-organized).  As an example, think of taxi drivers and that industry. 

Stanley V. Ragalevsky, Judith E. Rinearson and Linda C. Odom of K&L Gates in the United Kingdom have authored an article titled, “Is Open Banking Coming to the United States?”  In the article, the authors essentially describe how the EU and UK have adopted an open approach – which allows consumers to require banks to share their information with third party providers which may enable faster innovation in the Fintech industry.  The United States is apparently taking a much more cautious approach and not mandating that banks must share based on consumer request apparently amidst concerns with privacy—slightly ironic given the differences in approach to privacy between the United States and Europe. 

The United States may have a new general consumer privacy law soon.  One interesting issue is whether it will preempt all state law privacy laws.  A unified approach may reduce costs associated with compliance and potentially lead to more innovation.  Stay tuned!