Google and Amazon have thrived as regulators largely kept their distance. Moves by the Justice Department and the F.T.C. suggest that may be changing.
June 3, 2019
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Regulators kick off battles with Big Tech
Google and Amazon have thrived over the years as American regulators largely kept their distance. That may be changing, the NYT reports.
Regulators are getting tactical. The two federal agencies that handle antitrust issues are divvying up oversight of two dominant tech companies: Unnamed sources say that the Justice Department is taking Google and the Federal Trade Commission is handling Amazon.
• “With Amazon, some consumer groups and vendors have complained that its powerful e-commerce platform edges out new competition, particularly as the company enters into new business lines like groceries and fashion.”
• “With Google, the Justice Department is exploring an investigation of the advertising and search business, according to several people with knowledge of the discussions.”
The moves “are small and preliminary, and could easily come to nothing,” the NYT says. And the news does not mean that the agencies have opened official investigations.
But it does signal a growing scrutiny of tech giants among regulators. And if the regulators pursue cases, “Google and Amazon will almost certainly face reams of bad publicity, rising consumer distrust and falling employee morale.”
“A prospect that should really worry Google and Amazon is a replay of the government’s case against Microsoft in the 1990s. Microsoft did not have to break itself into two, which was the government’s goal. But the company was distracted for at least a decade, which allowed space for start-ups like Google.”
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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
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Trump’s ever-expanding trade war
President Trump’s trade war is escalating on numerous fronts, raising concerns around the world about America’s reliability as a trading partner and worrying officials seeking deals with his administration.
• His administration announced Friday that it would strip India of a special status that exempts billions of dollars of its products from U.S. tariffs.
• The trade war with China continues to rumble: Beijing appeared on Friday to retaliate against U.S. bans of Huawei by creating an “unreliable entities list” of foreign companies and people.
“The Trump administration has sent a message to the world with its new tariff threats against Mexico,” Neil Irwin of the Upshot writes: “No deal is ever a done deal.”
And China made clear that it will not be pushed around. In a white paper released yesterday, Beijing blamed Washington for a breakdown in negotiations and “struck a defiant stance” about how the future trade negotiations will play out, Alexandra Stevenson of the NYT writes.
Mr. Trump is “upending the United States economy, and perhaps jeopardizing his re-election prospects, with an abrupt escalation of protectionist trade policies,” Jim Tankersley of the NYT writes.
Meanwhile, Kevin Hassett, the White House’s top economist, will step down “shortly.” Though he has defended the administration’s trade moves, Mr. Hassett has been an advocate for traditional conservative free-trade policies — a view that has carried less weight recently.
Masayoshi Son, the C.E.O. of SoftBank. Charly Triballeau/Agence France-Presse — Getty Images
A cold shoulder for SoftBank’s second Vision Fund
SoftBank is trying to set up a successor to its Vision Fund, the nearly $100 billion technology investment fund that has reshaped the industry. But several big investors have shown little or no interest in participating, according to the WSJ.
• Giant investors like the Canada Pension Plan Investment Board and Saudi Arabia’s Public Investment Fund — which invested $45 billion in the first Vision Fund — plan to make small or no contributions to the new fund, the WSJ reports.
• One reason: Many big funds now have their own programs to invest in tech start-ups, and don’t want to pay fees to someone else to do it for them.
• Other investors are reportedly worried about transparency, and are wary of betting on the investing prowess of one man: SoftBank’s C.E.O., Masayoshi Son.
• The stakes are big: SoftBank considers the Vision Fund to be its growth engine.
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Late changes raised risks for Boeing’s 737 Max
Alterations to the design of the 737 Max — that weren’t fully appreciated by test pilots, engineers or regulators involved — increased the risks posed by an automated piloting system now suspected of playing a role in two airplane crashes, the NYT reports.
Anti-stall software was given a bigger role at the last minute. The software, known as MCAS, was meant to function only in rare situations. But test pilots said they thought it should be used more often, including at low speeds.
That meant removing some safeguards. MCAS was originally designed to use two sensors: one that tracked the angle of a plane relative to the wind and another that measured the force on the plane that typically comes from accelerating. Boeing switched to using just the first sensor.
And the company didn’t fully brief the F.A.A. on the changes. The aviation regulator had approved a previous version of the software, but didn’t review the revisions. It also approved a Boeing request to remove a mention of MCAS from the pilot’s manual, under the impression that the software was benign and rarely used.
The family of Ms. Chao, the transportation secretary, runs Foremost, a New York-based shipping business with extensive ties to China. The NYT found that Ms. Chao (who is married to the Senate majority leader, Mitch McConnell) has repeatedly used her connections to benefit the company — even while overseeing the American shipping industry.
• “Her efforts on behalf of the family business — appearing at promotional events, joining her father in interviews with Chinese-language media — have come as Foremost has interacted with the Chinese state to a remarkable degree for an American company.”
• “The company’s primary business — delivering China’s iron ore and coal — is intertwined with industries caught up in a trade war with the United States.”
• “As her political stature has grown — she has served in the cabinet twice and has been married to Mr. McConnell for 26 years — Beijing has sought to flatter her family.”
• “Public records show that she has benefited from the company’s success. A gift to Ms. Chao and Mr. McConnell from her father in 2008 helped make Mr. McConnell, the Republican majority leader, one of the richest members of the Senate.”
• Yet “since Elaine Chao became transportation secretary, records show, the agency budget has repeatedly cut programs intended to stabilize the financially troubled maritime industry in the United States, moving to cut new funding for federal grants to small commercial shipyards and federal loan guarantees to domestic shipbuilders.”
HBO’s price could crimp AT&T’s streaming goals
In buying Time Warner, AT&T hoped to build a new streaming giant. But there’s a problem, Edmund Lee of the NYT points out: Its crown jewel, HBO, is too expensive.
HBO costs $15 a month, compared to $13 for the standard Netflix plan or $12 for the ad-free Hulu plan. (Disney’s forthcoming service will charge just $7 a month.) And AT&T can’t lower the price because of contracts with distributors like Comcast and Dish.
“HBO at $15 looks unreasonable compared with Disney, which has a stronger content lineup,” the analyst Craig Moffett told Mr. Lee, referring to Disney’s ownership of Marvel, Pixar and Lucasfilm.
AT&T plans to offer several streaming tiers, all of which are likely to feature HBO. But AT&T may end up having to offer its service for free to people who already pay for HBO online, depriving it of important streaming revenue.
Tim Cook, Apple's C.E.O., at last year's Worldwide Developers Conference. Marcio Jose Sanchez/Associated Press
It’s Apple Day! Here’s what to expect
All eyes in the tech world will be on Apple’s Worldwide Developers Conference, which kicks off in San Jose, Calif., today. Here are a few major themes to look out for:
Apps, apps, apps. Apple has drawn major criticism — and legal scrutiny, both in Europe and the U.S. — in recent months about the anti-competitive nature of its App Store. The company is expected to play up the economic impact of its app ecosystem, the FT notes, but it will be interesting to see if it makes any concessions.
Operating systems. Apple will unveil the latest changes to its MacOS and iOS software, the Verge explains. Perhaps the biggest potential news: The possibility that the company might finally announce the ability to run iPhone apps on Mac computers.
And some kind of hardware. Apple’s big product announcements usually happen in the fall, but it’s expected to show off a new and improved version of its Mac Pro desktop computer. And one possible curveball: a Bluetooth tracker to help people keep track of their keys.
Revolving door
Emmet Flood, the White House lawyer who oversaw the administration’s response to Robert Mueller’s investigation, plans to step down.
David Cameron, the former British prime minister, will lead an advisory board for Afiniti, an American company that produces artificial intelligence software for call centers.
The speed read
Deals
• Blackstone agreed to buy the U.S. warehouses of GLP, a Singaporean investment firm, for $18.7 billion, reportedly a record for a real estate deal. (FT)
• Fiat Chrysler is reportedly considering stronger job guarantees and a special dividend for Renault to ensure that the French government supports its proposed merger of the two carmakers. (Reuters)
• Infineon agreed to buy Cypress Semiconductor, a maker of memory chips and controllers, for about $10 billion. (Infineon)
• Huawei plans to sell its undersea telecommunications cable business, according to a regulatory filing. (Reuters)
• The Global Fashion Group, an online clothing retailer, plans to hold an I.P.O. on the Frankfurt Stock Exchange. (Reuters)
Politics and policy
• Fox News has become a surprisingly influential player in the Democratic presidential primary. (NYT)
• President Trump plans to give Arthur Laffer, the economist who has long championed Republican tax cuts, the Presidential Medal of Freedom. (NYT)
• The U.S. is requiring visa applicants to disclose information about their social media accounts from the past five years. (NYT)
• Mr. Trump, whose state visit to Britain began today, has already roiled British politics by pushing for a no-deal Brexit and promoting Boris Johnson’s bid to become prime minister. (NYT)
Tech
• As Slack prepares to go public, its C.E.O., Stewart Butterfield, has become unusually quiet. (NYT)
• Some Google services, and other sites and services that rely on them, were disrupted for several hours yesterday. The company said it wasn’t the result of a cyberattack. (NYT)
• Twitter took down accounts of some Chinese political commentators, just before the 30th anniversary of the Tiananmen Square protest. (NYT)
• Facebook has started discussions with the Commodity Futures Trading Commission about its plans for a new digital currency. (FT)
• “What happens to companies that defy the Huawei ban?” (Verge)
• Wall Street investors are increasingly pessimistic about Tesla. (DealBook)
Best of the rest
• The British businessman Philip Green has been charged in the U.S. with four counts of misdemeanor assault tied to sexually inappropriate behavior. (NYT)
• How a Trump Organization development project in Uruguay almost ground to a halt. (NYT)
• Here are the best schools to go to for executive education, according to the FT. (FT)
• The Silicon Valley veteran Reid Hoffman says that if you’re successful, you don’t get to say you’re apolitical. (NYT)
