The Justice Department’s surprise 'reveal' of a Big Tech investigation was highly unusual, and it could actually turn out to be good news for the tech giants (AMZN, AAPL, GOOGL, FB)

The US Justice Department's surprise announcement that it's launching an antitrust review of the big tech companies was a very unusual move.
Federal enforcement agencies rarely announce, or even confirm, ongoing investigations into people or companies.
The move was likely a response to growing political pressure, antitrust experts said.
Ironically, it may be good news for the tech giants.
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The US Department of Justice's surprise press release Tuesday of its Big Tech investigation was designed to send a signal to a lot of groups — but tech companies were not really one of them.

The announcement was an unusually public performance by a federal regulator which typically prizes confidentiality in such matters. That's because it was basically a notice, intended particularly to a key figure in Congress, that the Justice Department will now be spearheading the antitrust investigations into the big tech companies, said David Balto, an antitrust lawyer in Washington D.C. with decades of experience working for and with competition regulators officials there.

For tech companies, the DOJs' announcement was if anything, a subtle indication that the government may not come down as hard on them as it might seem, he said.

"This is good news for the companies," Balto said.

That may seem a bit ironic, given the substance of the announcement. In its statement, the Justice Department said it would review the market power of the "leading online platforms" to see if they have thwarted competition or harmed consumers. The agency vowed to "seek redress" if it found violations, essentially threatening to sue the companies.

Read this: The Department of Justice just launched a broad probe into whether big tech companies like Amazon, Facebook, and others illegally harm competition

The announcement came as something of a surprise. Numerous reports have indicated that the Justice Department and the Federal Trade Commission were starting to look into the competitive practices of the big tech companies. But the agencies had declined to comment on the record for those reports. In fact, federal enforcement agencies rarely acknowledge ongoing investigations into particular people or companies.

The agency is likely responding to political pressure

Unusual as it was, the Justice Department's move didn't come out of nowhere. Political figures on the left and right, including senators Elizabeth Warren and Bernie Sanders and President Donald Trump, have been calling for increased scrutiny of the market power of the big tech companies and even, in many cases, for breaking them up.

"There is enormous political pressure on the agencies in Washington to be seen as doing something about big tech," said Daniel Crane, a professor at the University of Michigan's law school who focuses on antitrust issues. He continued: "This is their way of responding to the political pressure."

But Balto thinks there something more going on. Last month, The Wall Street Journal reported that the FTC and the Justice Department had divvied up oversight over the tech giants. Under the agreement, the FTC was to get authority over Facebook and Amazon, while the Department of Justice would oversee Apple and Google parent Alphabet.

The problem with that arrangement was that Mike Lee, who serves as chairman of Senate Judiciary Committee's subcommittee on antitrust, competition policy and consumer rights, objected to it, Balto noted. In an opinion piece published by the Washington Examiner last month, Lee lambasted the idea that the agencies would split oversight duties over the big tech companies. The two agencies risked duplicating efforts and causing a divergence in enforcement, he said.

Mike Lee

"These investigations will clearly cover much of the same ground," Lee said in his op-ed. "Splitting antitrust investigations of these firms between two agencies," he continued, "is just analytically inefficient."

The Justice Department is saying it's in charge

Lee's subcommittee was scheduled to hold a hearing on Tuesday with top antitrust regulators in the Trump administration at which he was expected to question them over the decision to split up oversight of the tech companies. That hearing ended up being postponed, but, in Balto's view, the Justice Department's announcement was its way of responding to Lee's concerns by staking out its turf.

"This is really the (Justice Department) saying, 'thank you, it's my football, and I plan to play with it,'" he said.

The Wall Street Journal reported Tuesday that the Justice Department's review would not pre-empt the investigations already underway by the FTC into the companies under its purview.

Balto says that while the Justice Department may leave some issues to the FTC, Tuesday's announcement indicates that the DOJ is laying claim to all inquiries involving online platform and marketplace issues — the core of the antitrust charges made against the big tech companies. Senator Elizabeth Warren and others have raised concerns about how those companies use their control over their platforms and marketplaces to give their own products and services a leg up over rivals.

"These issues are incredibly complex, time consuming, and really difficult, and to have two agencies looking at the same conduct really didn't make sense," Balto said.

Lee's office did not respond to calls or an email seeking comment. Likewise, the Justice Department did not respond to an email seeking comment.

The move could be good news for the tech giants

The news that the Justice Department was opening up its review was seen as a negative sign on Wall Street Tuesday. The big four companies' stock prices all fell following the announcement.

But having the Justice Department take point on antitrust review is actually a good thing for the tech companies, Balto said. The Department of Justice hasn't filed a major suit under the Sherman Antitrust Act since the Microsoft case two decades ago. And the agency actually has fewer legal options when it comes to policing competition than does the FTC, he said.

"I don't think anybody's going to lose any more sleep that this is all with the Justice Department," Balto said. "If anything, they'll feel more comfortable in their legal position."

Mark Zuckerberg, CEO Facebook

For his part, Crane is dubious that anything much will come of the investigations in the near future, regardless of which agency is leading the charge. When it comes to antitrust enforcement, the FTC's track record is not much better than the Department of Justice in recent decades, despite theoretically having enhanced enforcement powers, he said.

The courts have made it difficult for regulators to win antitrust cases, and even when such cases are successful, they tend to take many years to play out. Because of that, there's little chance the big tech companies will be broken up anytime soon, despite the political pressure on them, he said.

"The kind of blockbuster, 'let's break them up' case that is being trumpeted politically, I just don't see that being in the offing," Crane said.

Got a tip about the tech industry? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.