Image: iStock/ablokhin

While the waning weeks of 2020 have held some positive news for most of us, with multiple COVID-19 vaccines coming to market, a rising stock market, and the “beginning of the end” of a bitter presidential election, the news has not been so positive if you’re a large tech or social media company. In a rare show of solidarity and agreement among a diverse collection of states, nearly 40 states have launched antitrust lawsuits against Google, with the US government joining the party with an antitrust lawsuit against Facebook. These suits are in addition to the European Union filing antitrust charges against Amazon, and a host of companies suing Apple over alleged anti-competitive behavior.

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Lawsuits against high-profile (and well-funded) companies are nothing new, but the increased frequency and targeting of the most visible technology companies indicates a shifting sentiment on the part of government, intriguingly one of the few areas of politics that both major political parties in the US seem to agree on. In a world where one or more of these companies likely provides significant portions of your technology stack, what could all this legal action mean for tech leaders?

Microsoft 2.0?

The obvious parallel to all this legal excitement is the famous Microsoft antitrust lawsuit launched by the federal government in the late 1990s. If you’re of a certain age, you might remember a younger Bill Gates’ deposition being broadcast on the evening news, and “smoking gun” emails that convinced a federal judge to order Microsoft’s breakup. The breakup was ultimately avoided on appeal, and the crux of the lawsuit, whether Microsoft’s inclusion of Internet Explorer in the Windows operating system was anti-competitive, seems rather quaint in a world where the browser and underlying operating system matter little for accessing content.

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However, the potential remedy of breaking up the large technology companies, an outcome that has been suggested for Google and stated explicitly for Facebook, could set an interesting precedent that’s broadly applied to all the large tech companies if successful.

What this means for tech leaders

With the Microsoft antirust action more than 20 years in the past, perhaps the first obvious lesson that’s applicable to today’s tech giants is that whatever happens, it will happen slowly. Microsoft was sued in May 1998, and the settlement reached during the appeals process was approved in 2004. Much can happen in technology in six years; in fact, Google went from a university project to preparing for IPO during the full course of the Microsoft lawsuit. These companies are probably some of the few entities with the breadth and depth of legal resources to match the US government, so any action as dramatic as a forced breakup or significant restructuring of these giants that would significantly impact customers is likely years away at the earliest.

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In the nearer term, however, expect the tech giants to launch significant marketing efforts to polish up their public appearances and present themselves as champions of consumers and unwitting victims of government overreach. This campaign to generate goodwill may manifest itself in more transparent contractual terms, lower pricing, or more transparency for customers, benefits that will likely come available for little more than mentioning that you’re concerned about the potential outcome of these lawsuits.

In the medium term, lawsuits that could dramatically impact these companies will certainly take resources away from other pursuits. Funding and executive attention that might have been spent on new features or enhancements might be spent with lawyers and courtrooms rather than engineers. Similarly, companies distracted by legal wrangling might be less adept at spotting potential competitors or market transitions. The Microsoft of 2004 was far less relevant to business and personal computing, and the Internet writ large, than the seemingly unassailable behemoth of 1998, a fate that could befall today’s tech giants.

In the long term, things get a bit more interesting. What seems like the maximum “punishment” for these companies, a forced breakup, could actually prove to be a boon for an Amazon or Google, and perhaps more of a punishment for a company like Facebook. In the case of Amazon and Google, they’ve morphed from online retail and search into something that resembles more of a holding company with a set of diverse businesses, a fact that Google tacitly acknowledged when it became Alphabet and its former namesake search merely a product in a larger portfolio. Removing AWS and Google Cloud from their parent companies would create two new tech giants overnight, and independent management and direct control over revenue could actually unleash new potential monopolies. In essence a breakup of these two giants could actually be a boon rather than a punishment.

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For Facebook, a breakup might be more impactful, since its “product” is ultimately data about consumers, and its platforms like Instagram and the Facebook are merely data acquisition and ad delivery tools rather than standalone products.

Like the legal battles, breakups are distracting, so in the longer term watch for competitors and upstarts trying to take advantage of the moment and offer something compelling and new while the giants fret over lawyers and org charts. Thankfully for tech leaders, despite the sound and fury in the media, direct impacts from these legal actions are likely years away. In the near-term, expect kinder and gentler tactics from these companies as they attempt to burnish their image in the public eye, a situation that could play to your advantage. Longer-term, watch for new market entrants and emerging technologies that could catch the “big guys” at a moment of weakness.