DOJ, FTC Probe On Top Tech Push Facebook, Google, Amazon Stocks Down

A new investigation by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) into alleged anti-competitive behavior by tech giants Amazon, Apple, Facebook, and Google pummeled the stocks of these firms and will likely lead to increased government regulation and oversight.

The DOJ on May 31 received jurisdiction over a federal government probe into Apple’s practices as part of a broader investigation into the business behavior of tech companies. On the other hand, the FTC has assumed oversight of Amazon and Facebook and is looking at how these two tech leaders might be harming competition.

Since both probes are in their early stages, no fines are expected to be levied aginst the firms. Neither will these firms be forced to break-up nor made to change their business practices in the near future.

Analysts said the simultaneous probes of four of the world’s five most valuable companies suggest the days of untrammeled growth for the tech industry is about to end in a flurry of restrictive government regulations.

News of the probes didn't go over well on Wall Street. Shares of Facebook and Google parent Alphabet Inc. on Monday each plunged more than 6 percent. Amazon lost more than 4 percent, while Apple slid more than 1 percent.

As a whole, these three tech giants lost more than $130 billion in market value and led the NASDAQ Composite to a 1.5 percent slump. Worse, it sent the NASDAQ into correction territory, meaning the index has now lost more than 10 percent compared to its record high set in late April at 7,333.02.

The rout at the NASDAQ quickly infected the two other indices. The S&P 500 gave up 0.3 percent to 2,744.45 while the Dow Jones Industrial Average ended trading on Monday a tad above breakeven at 24,819.78.

“The whole component of what’s going on in tech right now goes back to the rhetoric of Sen. Elizabeth Warren threatening to break up tech giants,” said Jeff Kilburg, CEO of KKM Financial, a boutique investment adviser.

“We thought that was just rhetoric. But now with this news hitting, it’s really impactful.”

Communications services, consumer discretionary and tech were the worst-hit sectors in the S&P 500. Communications lost more than 2.5 percent, its biggest one-day fall since October 2018, while consumer and tech both closed more than 1 percent lower.

The investigations represent “the potential for antitrust and regulation across the globe” and are hurdles for future expansion, said a report by inancial services firm, D.A. Davidson Companies.

“Additionally, foreign governments are also realizing the dangers of allowing a few tech titans to have such enormous influence on consumer’s day-to-day lives, including not only Amazon, but also Apple, Facebook, and Google and the potential for regulatory disruption is increasing by the day, in our view, and, therefore, is something we are monitoring closely,” according to the report.