Tech stocks plunged this morning after a major announcement. The news? Big Tech may face tough regulation as an antitrust bill continues to garner support. The US Online Innovation and Choice Act first received bipartisan approval from the Senate Judiciary Committee in January. Now a letter has revealed she has the support of the Department of Justice (DOJ).
As the the wall street journal reports, this development represents “the Biden administration’s first unqualified endorsement of the antitrust measure.” It’s not nothing. If the bill passes, it could significantly limit the power of many of the biggest names in tech, preventing companies from favoring their own products over the products of their competitors.
Tech stocks have already started to tumble on this new pull on bills. Right now, Apple (NASDAQ:AAPL) is down 0.60% for the morning. Alphabet (NASDAQ:GOOG, GOOGL) is down 0.30%. To finish, Amazon (NASDAQ:AMZN) is having an even worse day, dropping 1.5% as of this writing.
What’s going on with tech stocks?
This is not the first attempt by the government to try to limit the power of Big Tech. The DOJ’s backing is a key endorsement, however. The DOJ letter expresses the following:
“The Department views the rise of dominant platforms as a threat to open markets and competition, with risks to consumers, businesses, innovation, resilience, global competitiveness and our democracy.”
This bill absolutely poses a threat to the tech sector, especially “dominant tech platforms.” And, although the tech lobby has worked hard to fight the bill, the new letter from the DOJ indicates that Big Tech faces powerful forces.
Of course, this news does not come at the right time for tech stocks. So far, 2022 has been generally difficult for the sector. Geopolitical tensions generated negative market momentum in February. Additionally, AAPL and GOOGL shares fell earlier this week. Now, new legislation is casting a shadow over the industry. Investors could find it difficult to move forward with confidence if the bill gains more support.
Yet while this is bad news for Big Tech, it doesn’t necessarily have to be the case for the industry as a whole. The bill aims to encourage the growth of small technology companies. Thus, the bipartisan bill aims to spur growth, even as it limits major players in the industry.
What this means
The politicians behind America’s Online Choice and Innovation Act aren’t looking to dismantle America’s tech industry. Far from there. On the contrary, they employ a classical economic principle; markets are driven by competition.
Importantly, even if the bill passes, Big Tech stocks will not fall. Yes, they may fall. But not to the point that they can no longer get up. That said, investors may want to consider alternative technology investments in the future. This kind of antitrust legislation could mean the rise of new tech names that aren’t yet on Wall Street’s radar.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.