The CEOs of four of the biggest tech companies in the United States — Apple, Amazon, Facebook, and Google — will testify before Congress on Wednesday, which is investigating whether those companies are violating antitrust laws. It’s a dramatic escalation of the “techlash” that has been brewing the last few years, one that could lead to a massive shakeup of Big Tech. But what exactly is going on, and why should you watch?
What is antitrust?
Antitrust laws are how the United States regulates “the concentration of economic power,” as Cornell Law puts it. In the 19th century, numerous interstate industries were dominated by powerful monopolies (or “trusts” as they were called). These companies controlled so much of the markets for things like steel and oil that it was effectively impossible for competitors to challenge them, and they could dictate the market prices for products. That’s bad for small businesses and consumers.
The foundations of antitrust law in the U.S. are the Sherman Act of 1890 and the Clayton Act of 1914, which outlawed practices like price-fixing or mergers that remove competition from the markets.
Early in the 20th century, the government aggressively enforced antitrust regulations, but from the 1970s onward, economists, lawmakers, and the courts have been less enthusiastic about enforcement.
What’s behind this hearing?
Big Tech companies have grown vast and powerful over the last decade, and it seems as if lawmakers have only recently awoken to just how mighty they are. The House Judiciary Committee has launched an investigation of anticompetitive conduct in the tech space, and Wednesday’s hearing will be a chance for lawmakers to question the CEOs of these companies on their conduct. It’s the first time that all four of these executives will be testifying before Congress at the same time. Although it’s merely a hearing (the committee can’t break up Facebook at the end of it), information from this hearing it could swing the future of antitrust measures against these companies.
The CEOs, and why they’re under fire
Tim Cook, Apple
The big issue with Apple is its App Store. For app developers who want to reach iOS users, the App Store is the gateway, and Apple charges a hefty entry fee of 30% of revenue. On top of that, Apple releases its own apps that compete with independent sellers on its marketplace. Spotify, for example, has argued that Apple’s 30% fee forces Spotify to increase the price of its app above that of Apple Music. Apple gets to sell a product and while effectively dictating what its competitors can charge.
Jeff Bezos, Amazon
Amazon is one of the world’s largest online platforms for merchants, and it also sells its own products on that platform. An investigation by The Wall Street Journal found that Amazon employees “used data about independent sellers on the company’s platform to develop competing products,” despite the company’s policy against doing that.
The antitrust argument against Amazon is that it uses its platform to figure out what products are working for independent sellers, then uses that data to develop similar products and box out their smaller competitors.
Mark Zuckerberg, Facebook
One major antitrust argument against Facebook is its habit of buying up competitors. According to The New York Times, that’s one angle the FTC is taking in its probe of the company: Facebook has bought more than 80 companies in 15 years, including Instagram, WhatsApp, and Giphy.
In gobbling up smaller social media platforms, Facebook ensures it has dominance over even users who don’t want to use Facebook. As Dina Srinivasan writes for Berkeley Business Law Journal, “Consumers effectively face a singular choice — use Facebook and submit to the quality and stipulations of Facebook’s product or forgo all use of the only social network used by most of their friends, family, and acquaintances.”
Facebook is also a dominating presence in advertising. Facebook and Google together control about 60% of the online ad market, according to Adweek. That duopoly effectively squeezes out the competition.
Sundar Pichai, Google
Like Apple, Google has its own app store where it is both a player and the party making the rules. According to a report by The Information, Google employees monitor data on the usage of third-party apps on Google devices, then use that data to design Google-owned competitors.
Google is also an advertising juggernaut that, along with Facebook, consumes most of the pie in the ad industry. Attorneys general across the U.S. have launched probes into Google’s ad business, with Texas Attorney General Ken Paxton saying that Google dominates “the buyer side, the seller side, the auction side, and the video side with YouTube.”
- The best Android apps (March 2021)
- Facebook reportedly has a Clubhouse clone in its sights
- The best iPhone apps (March 2021)
- 2020 forced Big Social to address its flaws, but it’s too late for an easy fix
- How to sell on eBay