4 tech giants, one virtual war: Power

Amazon, Apple, Facebook and Google have been the envy of corporate America, admired for their size, influence and remarkable growth. Now that success is attracting a different kind of spotlight. In Washington, Brussels and beyond, regulators and lawmakers are investigating whether the four technology companies have used their size and wealth to quash competition and expand their dominance.

The companies are lumped together so often that they have become known as Big Tech. Their business models differ, as do the antitrust arguments against them. But those grievances have one thing in common: fear that too much power is in the hands of too few companies. Let’s take a look at the different antitrust hearings on the impact of competition on data and privacy.

Here is the case against Big Tech – and what Big Tech has said in response:

Amazon, favoring its own products

Over the years, politicians and regulators have floated the idea of breaking up Amazon. That has included spinning off its hugely profitable cloud computing business or rolling back its acquisition of Whole Foods, the upscale supermarket chain.

But much of the recent scrutiny of Amazon in Europe and Washington centers on whether the company improperly favors its own products over those of third – party sellers, which depend on sales from Amazon. Regulators are also looking at whether sellers need to use certain Amazon services, like ads and the fulfillment network, to sell their products. When Amazon began, it was mostly structured like a traditional retailer, buying products from brands and manufacturers at a wholesale price and selling the items to consumers. Amazon has expanded what’s available on its site by having third – party merchants sell products directly to customers. By 2015, more than half the sales on Amazon – 51% – were made by these outside sellers. Last year, that number grew to 58%.

One line of antitrust questioning looks at the products that Amazon sells under its own brands, like Amazon Basics for batteries or Mama Bear for diapers and wipes. Amazon has more than 140 private labels, according to TGI Research. Lawmakers have asked if Amazon takes advantage of data it collects from sellers to develop its own offerings. They have also questioned whether Amazon’s products get preferential promotion on its site.

Amazon has told Congress that it uses aggregated data like overall sales, not information “related specifically to individual sellers; and that private – label products make up about 1% of total sales.

Italy’s antitrust authority is looking into whether Amazon gives better visibility and search rankings to sellers that ship products through its vast fulfillment network, which sellers pay to use. Lawmakers in Washington have asked similar questions.

Amazon counters that products sold via its logistics network do well in its algorithms because it provides a better and more reliable shipping experience for customers.

Amazon also faces questions about its growing advertising business, which had more than 10 billion US-Dollar in revenue this past year. Much of that came from product ads that show up high as sponsored listings in search results. At a house hearing a lawyer for Amazon was asked what prevented it “from using ads as another way to charge a toll for using its platforms”. The lawyer for Amazon responded that the ads were “an optional service” and that the large majority of products sold on Amazon were not sold through advertisements.

The Power of Apple’s App Store

Apple’s critics have homed in on its control of the App store, the digital marketplace for apps on iPhones, iPads, and Mac computers. The App Store has become a crucial way for digital, businesses to reach customers, and Apple exerts strict control over which companies can appear in the store and how.

Apple says it has the right to “curate” the App Store to ensure high quality and to rid the store of fraud. As a result, Apple’s store generally includes fewer fraudulent apps than Google’s. But while Apple is the App store’s sole referee, it is also one of the biggest competitors on it. Apple has bet its future on getting customers to spend more on its apps and services, and that relies in part on people opting for them over the apps of rivals.

Some app developers have accused Apple of abusing its control on the App Store to harm competitors and benefit itself. Spotify has filed such a complaint with European regulators, and makers of parental – control apps have complained to regulators in Europe, including Russia, and the United States about Apple’s restrictions of their apps after the release of its own competing service.

Apple has said that it faces intense competition that it doesn’t favor its own products in the App Store and that it isn’t a monopoly because it doesn’t have a majority share in most markets.

Facebook’s hold on social media

For years, venture capitalists and tech strategists across Silicon Valley have admired Mark Zuckerberg’s foresight. While many industry experts wondered during Facebook’s early years whether it would turn out to be the next Myspace, Mr. Zuckerberg was always searching for an edge to stave off any threats of digital irrelevance for his company.

His efforts have worked – perhaps too well. The Federal Trade Commission (FTC) is investigating what some have called Facebook’s “program of serial defensive acquisitions”, a method of maintaining the company’s dominance in social networking. Regulators could claim the acquisitions were a violation of the Sherman and Clayton Antitrust Act – two laws that have been foundational in the past century of federal antitrust prosecutions.

That could include some of Facebook’s largest acquisitions, like Instagram, the photo – sharing network that it bought for 1 billion US-dollar in 2012.

At the same time, it was an enormous sum for a smartphone app. Just two years later, Facebook spent 19 billion US-Dollar for WhatsApp, the global messaging application used by more than a billion people.

Competitors believe that long before Facebook bought either of those companies Mr. Zuckerberg kept a close eye on start-ups that could pose a threat to his company. Facebook has acquired more than 70 companies over roughly 15 years.

For investigators, one other eyebrow – raising acquisition was Facebook’s purchase of Onavo, a mobile analytics company, in 2013. Onavo’s apps were marketed as free products that allowed consumers to manage and compress their data and download rates, a cost savings for people who live in countries where unlimited data plans aren’t common. But the service also gave Facebook insight into what new competitors were doing.

Facebook walked away from at least one acquisition late last year, the social video app Houseparty, for fear of attracting antitrust scrutiny from regulators in Washington, according to two people familiar with the matter.

It also has taken steps to improve its user data policies as a result of a previous FTC investigation into Facebook’s privacy practices. The social network reached a settlement with the agency in July, paying 5 billion US-Dollar in fines and agreeing to some concessions involving improved oversight of the company. Facebook has made the case that it faces stiff competition both at home and abroad, pointing to fast – rising competitors like Apple in the United States and WeChat in China. Further, as it testified before Congress in the summer, the company claims that the barriers to starting a would be challenger to its business are lower than ever. Start-ups like Snapchat, TikTok, and others have sprung up quickly over the past 10 years, snapping up early adopters and teenagers, a youthful demographic that Facebook – and its advertisers -value immensely.

Google’s search results

Google is dominant in several different markets and could face antitrust claims in multiple jurisdictions.

One battle is likely to be in search. When Google debuted in 1996, its search results were a simple list of 10 blue links to websites if believed could answer the user’s query. “We want to get you out of Google and to the right place as fast as possible”, Larry Page, Google’s co-founder, said in an interview 15 years ago.

Years later, Google has changed from sending users elsewhere to answering the questions itself. It has crowded its search results with its own products and services, such as Google flights. Google has got feel so good at answering users’ questions that more than half of Google searches now end on Google without a click to another site, according to a recent analysis by Rand Fishkin, an online – search analyst.

Google’s new approach has given users quicker answers. But some competitors argue that Google is abusing its dominance in search and inducing Internet users not to click beyond Google, which starves those competitors of customers for their products or users to see ads on their sites. How Google presents its search results could be subject to antitrust laws because it has an effective monopoly, handling more than 90% of searches worldwide, according to some estimates.

Because Google has become the primary way customers find businesses, steering users to its own products could be considered anticompetitive behavior under some laws. The FTC investigated Google for such a practice. They settled, and the agency did not conclude there was harm to consumers. In 2017, the European Union fined Google 2.7 billion US-Dollar for favoring each shopping service over rivals in search results. Google has said that it faces ample competition and that its search engine is designed to give users the most relevant results, not favor itself.

While Google is predominantly known for search, it makes most of its money on digital ads. It dominates that market too. Over two decades, Google has built a complex web of services that underpin the sale of most ads on the Internet. Google is the biggest seller of digital ad space. It is among the biggest providers of digital – ad analytics. And it is, in effect, the broker in most digital – ad transactions.

Competitors say Google has leveraged that control of the Internet’s ad ecosystem to push companies to use its advertising technology and buy its ads. Brian O’ Kelley, the former chief executive of the ad technology company App Nexus, said Google had undercut his business. He argued that Google forced advertisers to use Google’s competing ad – technology if they wanted to work with other Google – owned services. And this year, the European Union fined Google 1.7 billion US-Dollar for imposing unfair terms on companies that used its search bar on their websites in Europe.

Google said in response to the fine that it had made several product changes to increase the visibility of competitors. “We’ve Always agreed on one thing – that healthy, thriving markets are in everyone’s interest; the company said. Google’s Android software powers at least three of every four of the world’s smartphones, according to analyst estimates. Google has achieved such scale by giving Android away for free -almost. In return for handset makers’ use of its version of Android Google has required them to place its search engine front and center on their phones and preinstall a series of other Google apps.

The strategy has helped Google broaden its dominance in online search, reach more than a billion monthly users across nine separate services and continue to expand its advertising business. Regulators are considering whether Google unfairly leverages Android’s dominance.

Handset makers are effectively locked into Android because it is the only available smartphone software that hosts the apps that users demand, like Instagram and Uber – Apple’s software also hosts the apps but is exclusively for iPhones-. With that leverage, Google imposes unfair terms on the handset makers, critics have argued. That European Union agreed, fining Google 5.1 billion US-Dollar last year.

Google has argued that Android has increased competition in the smartphone market by enabling phone makers to compete with Apple.

At the end, one thing is clear to us: Fining the monopolies will not bring the necessary changes to the power game!