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Laurie Clarke

Reporter

Antitrust hearing concludes with a call to break up Big Tech – here are the highlights

Yesterday’s congressional antitrust hearing – which dragged on for more than five gruelling hours – was less about explosive revelations and more of a grim reappraisal of the monopolistic practices that Big Tech uses to strangle competition and dominate their respective spheres.

The hearing opened with a statement from House Antitrust Committee chairman David Cicilline, in which he said the way Google, Facebook, Apple and Amazon operate jeopardises entrepreneurship and ensures sustained market dominance: “Simply put, they have too much power.”

The session closed with Cicilline saying: “This hearing has made one fact clear to me: these companies as they exist today have monopoly power. Some need to be broken up, all need to be properly regulated and held accountable. We need to ensure the antitrust laws first written more than a century ago work in the digital age.”

The monopolistic practices of most of these companies are pretty obvious to anyone remotely paying attention to the world of tech. It’s clear that Facebook purchased Instagram because it believed it to be a threat. It’s also clear that Facebook went on to replicate design features of smaller rival Snapchat in Instagram after it refused to be bought by the social media goliath, which had the effect of decimating Snapchat’s user base.

However, documents released by the committee during the hearing (more than 1.3 million were collected during the course of the committee’s year-long investigation) rendered this even more incontrovertible. Several documents contained emails illustrating that Zuckerberg bought Instagram (in 2012 for $1 billion in cash and stock) in order to quash a competitive threat.

Representative Jim Sensenbrenner said that the documents were evidence that Facebook perceived Instagram to be a “powerful threat that could siphon business away from Facebook […] Rather than compete with it, Facebook bought it.”

Representative Pramila Jayapal questioned whether Facebook had directly threatened Instagram with the fact Facebook was developing a similar product to the photo-sharing platform. She quoted Instagram co-founder Kevin Systrom, who characterised Facebook as threatening, saying “he feared you would go into ‘destroy mode’ if he didn’t sell Instagram to you”.

Zuckerberg denied making such a threat, claiming that it was common knowledge that Facebook was developing a rival product to Instagram at the time. He also emphasised the role that Facebook’s investment in Instagram and “building up the infrastructure and promoting it” played in the app’s success – which he said was not an inevitability even though it might seem like it today. He described it as “an American success story”.

For Amazon, the main antitrust issue concerned its treatment of third-party sellers, and its strategy of undercutting competition thanks to its ability to sustain greater short-term losses. In the first case, Rep. Jayapal quoted former Amazon employees who told the committee that the company’s staff see third party seller data as “a candy shop” that they can exploit in the development of Amazon’s competitor products.

Bezos deflected on this issue, saying that “third party sellers in aggregate are doing extremely well on Amazon.” He claimed that Amazon has “a policy against using seller-specific data to aid our private label business, but I can’t guarantee you that that policy has never been violated.” This is a smart move that undermines the accusation that this type of behaviour is part of Amazon’s business strategy, and instead shifts the emphasis onto whether a number of ‘bad apple’ employees may have abused the system.

There were also accusations that Amazon intentionally undercut former competitor Diapers.com on the price of diapers in order to destabilise and eventually purchase the company. Congresswoman Mary Scanlon said: “In 2010 amazon hatched a plot to go after Diapers.com and take it out… in one month Amazon was willing to bleed over 200 million dollars in diaper profit losses. How much money was Amazon willing to lose in this campaign against Diapers.com?”

She said that this strategy is outlined in company documents, but Bezos simply deflected: “I don’t remember that at all. What I remember is that we match competitor prices. I believe we followed Diapers.com.”

Google faced questioning about its promotion of its own sites, and wielding its search market dominance (which stands at 92 per cent) in order to exploit the display advertising market. Cicilline accused Google of stealing content from other websites to keep users trapped within its own product ecosystem, and hence reap more ad revenue.

“The evidence seems very clear to me as Google became the gateway to the internet, it began to abuse its power and use its surveillance over the web traffic to identify competitive threats and crush them,” Cicilline said.

Specifically, he honed in on Google getting caught stealing reviews from Yelp in 2017. “The choice Google gave Yelp was let us steal your content or disappear from the web,” he said. Pichai responded “I don’t believe that happens…”

Cicilline went on to ask, “Did Google ever use its surveillance over web traffic to identify competitive threats?” To which Pichai responded with another non-sequitur: “We’re really focused on improving our products.” Pichai claimed that the majority of Google’s search results do not contain ads and that the company acts in the best interest of users when it provides responses to queries.

Apple received the least scrutiny, with CEO Tim Cook being asked very few questions in the first half of the session. Where the company came under fire was for its treatment of developers on its app store. Rep. Hank Johnson alleged that the app store was a non-competitive walled-garden.

“We’ve heard concerns that rules governing the app store development process are not made available to app developers… they’re made up as you go along,” said Johnson. Cook replied: “We treat every developer the same, we have open and transparent rules.”

Johnson asked “Some developers are favoured over others, isn’t that correct?” To which Cook responded that it was not correct. However, the committee released documents that appear to show a 2014 email in which Cook offers Baidu’s chief executive an “app review fast track” and will provide two employees to help assist the process.

It was also highlighted that Amazon doesn’t have to pay the app store’s flat 30 per cent commission – a central point of contention for developers – for its video-streaming service in exchange for making Apple and Amazon products work better together. Cook said that such a deal would be available to any company.

Throughout the hearing, (mostly Republican) representatives attempted to derail the antitrust hearing by bringing up instead the charge of an anti-Republican bias on platforms such as Facebook, Google and YouTube – an accusation that is often repeated by Trump’s supporters but remains unsubstantiated. Unrelated topics such as whether Google works with the Chinese military (it doesn’t) and what Facebook is doing about hate speech also undermined the supposed focus of the hearing.

What matters now is whether anything happens as a result of the committee’s investigation. The companies present are the focus of a number of other investigations, from both federal and state antitrust officials. The Justice Department is investigating Google about alleged antitrust violations in online advertising. The Federal Trade Commission is investigating Facebook over its acquisitions, as well as Amazon. Amazon is also being investigated by state officials with regard to its treatment of third-party sellers. Finally, Apple is being investigated by the DOJ for its app store business practices. But whether any meaningful new regulation will introduced as a result remains to be seen.