Congress Hits At Tech Giants Amazon, Apple, Facebook And Google: Could Companies Be Forced To Split?

Five new bills introduced to U.S. Congress are aimed at the largest technology companies in the world and possible anti-competitive practices.

If the bills are passed, it could force the companies to split up or sell some of their assets to meet new qualifications.

The Bills: Bipartisan legislation announced Friday marks the biggest congressional attempt to fight companies such as Amazon.com, Inc. AMZN, Apple Inc AAPL, Facebook, Inc. FB and Alphabet Inc GOOGGOOGL according to the Wall Street Journal.

The Ending Platform Monopolies Act would require companies to break up their businesses. The act would make it unlawful for an online platform to also own a platform that allows the sale of products or services.

Another bill targets mergers done by large companies. The bill would make it unlawful for large platforms to acquire rivals or potential rivals.

“They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers and put folks out of work. Our agenda will level the playing field,” U.S. Rep. David Cicilline (D - Rhode Island) said.

The bills will face hurdles being passed, but they should still be on investors' radars. The bills would need passage by both the U.S. House of Representatives and Senate. All the bills have support from Republicans and Democrats including seven Republicans, according to sources.

Related Link: Could A Facebook Breakup Boost Share Value, Experts Weigh-In

Targeted Companies: None of the big four tech companies listed above are specifically targeted in the bills. The companies do meet the threshold of what makes a big tech company.

The bills will target companies with a market capitalization of $600 million or more and having either 50 million monthly active users or 100,000 monthly active business users.

Certain wording in the bills also targets these companies. The Ending Platform Monopolies Act discusses how companies can’t favor their own products over competitors' products, which could be a direct reference to Amazon.

A reference in the bills that “a search engine could not own a video service that has incentives to favor in search results” is a direct hit on Google’s ownership of YouTube.

The way that Apple operates its app store, which has been a hot topic in 2021, could also be targeted by the new bills.

One company that is voicing support of the legislation is Roku Inc ROKU. The company praised lawmakers “taking a crucial step toward curbing the predatory and anticompetitive behaviors of some of the country’s most powerful companies.” Roku faced a battle with Google earlier this year.

Benzinga’s Take: While the legislation faces an uphill battle to get the necessary support from Republicans and Democrats, this does look to be a big effort against big tech.

Shareholders shouldn’t be too concerned at this point and could actually benefit from breakups in the future.

Several of the big tech companies have higher valuations than their current market caps when a sum of the parts analysis is done. Facebook could be worth more if it has to spin off its Messenger, Instagram and WhatsApp businesses.

For years, analysts have wondered how much a business like YouTube would be worth if traded separately from Google.

Large tech companies could try to get ahead of the legislation and spin-out businesses to have time to seek multiple bidders or fetch the best valuation for shareholders. Otherwise, Congress may dictate the timing of such a move.

(Photo by Louis Velazquez on Unsplash)