Big Tech and Regulation

• SENATORS KLOBUCHAR AND GRASSLEY INTRODUCED A BILL TO KEEP BIG TECH FROM USING THEIR DOMINANCE TO SQUELCH COMPETITION AND DISADVANTAGE RIVALS KLOBUCHAR AND GRASSLEY’S BILL WAS WIDELY SUPPORTED ON BOTH SIDES OF THE AISLE, WITH 5 REPUBLICANS AND 5 DEMOCRATS CO-SPONSORING IT
  • Klobuchar and Grassley introduced the ‘American Innovation And Choice Online Act’ (AICOA) which would create rules for dominant tech platforms to prevent anti-competitive behavior. A CNBC headline read “Klobuchar, Grassley to lead antitrust bill barring big tech from disadvantaging rivals.” The two said their bill would create rules “for dominant digital platforms to prevent them from abusing their market power to harm competition, online businesses and consumers.” Klobuchar said she was “proud to introduce this much-needed legislation alongside Senator Grassley and a bipartisan group of our colleagues.” Grassley said the bill would “help create a more even playing field and ensure that small businesses were able to compete with [dominant tech] platforms.” The bill was cosponsored by Democratic Senators Blumenthal, Booker, Durbin, Hirono and Warner. The bill’s Republican cosponsors were Senators Daines, Graham, Hawley, Lummis and Kennedy.
• KLOBUCHAR AND GRASSLEY’S BILL WAS LAUDED BY A BIPARTISAN GROUP OF 32 ATTORNEYS GENERAL, VARIOUS CONSUMER GROUPS AND TECH COMPANIES LIKE YELP, SPOTIFY, AND ROKU
  • A bipartisan coalition of 32 State Attorneys General called for the passage of AICOA, believing the bill would improve antitrust laws. The Attorneys General wrote a letter to Congress urging them to improve the country’s antitrust laws.
  • 60 consumer advocacy groups, labor groups and public interest groups supported the passage of AICOA. The groups said passing AICOA would “enhance consumer choice and allow for greater competition.” The co-founder of the group Accountable Tech said AICOA took “direct aim at some of the most exploitative tactics Silicon Valley ha[d] long employed to unfairly entrench their dominance.”
  • Well-known tech companies similarly saw AICOA as a positive step towards regulating Big Tech’s dominance and anti-competitive behavior. Yelp and Trip Advisor complained that Google had unfairly lowered their sites in search results in favor of their own Google Maps tool. Yelp’s Senior VP of Public Policy said AICOA would “restore competitiveness in the online marketplace.” Spotify’s Head of Global Affairs and Chief Legal Officer said AICOA would deter “gatekeeper platforms” from distorting the market to help themselves. DuckDuckGo’s CEO said the bill would stop Big Tech from using “self-preferencing behavior.” Roku’s Senior VP for Corporate Affairs and Communications said the bill would “protect consumers in the digital age.”
• BIG TECH AND MAJOR TECH INDUSTRY GROUPS PILED ON AICOA, SAYING IT WOULD RESULT IN BARRIERS FOR SMALL BUSINESSES AND LIMIT CONSUMER CHOICE
  • Google warned of dire consequences for small businesses if AICOA passed, saying it would increase the resources needed for advertising and marketing while making it harder for consumers to find businesses. Google warned that if AICOA passed, it would cost small businesses their “time and money by making it harder for customers to find you.” Google added that bills like AICOA would make “digital marketing less effective.” Google claimed that the passage of AICOA could have “unintended consequences” and could break “a range of popular products that people use[d] every day.”
  • Amazon threatened to boot all third-party sellers from their platform in AICOA passed. Amazon had reached out to companies on its online marketplace about the bill, warning that the legislation could lead to them to stop giving other companies the ability to sell their products via the Amazon marketplace.
  • Big Tech deployed industry groups to attack AICOA on their behalf.
    • The Computer & Communications Industry Association (CCIA) called AICOA a “radical” bill that was “arbitrary and inconsistent.” The president of CCIA said the bill would “hamstring” the leading Big Tech companies and “could prevent innovations that consumers [relied] upon like Amazon Basics and same day delivery for Amazon Prime. The CCIA believed antitrust bills for Big Tech would end up “fundamentally undermining U.S. tech competitiveness” and give “an unearned advantage to foreign rivals.”
  • Chamber of Progress’ CEO warned that AICOA would take a “hammer” to beloved tech products. The CEO said the bill wouldn’t “do anything to make the internet better for families.”
  • The Connected Commerce Council suggested AICOA would lead to more dangerous online marketplaces and app stores. The Connected Commerce Council said AICOA would make Amazon “look like a street corner flea market” rather than “a powerful sales tool.” It further alleged that the passage of AICOA would lead to Apple’s App Store “having less control over product security and data harvesting apps.” It also warned that AICOA could force Facebook to spin off Instagram leading to small businesses losing “the benefits of platform integration and access to capital.” The Council’s President said AICOA was “a way to punish companies for giving their customers what they want[ed] when they want[ed] it.”
• BIG TECH’S OPPOSITION TO AICOA STOOD IN STARK  CONTRAST TO THEIR PUSH FOR AN OPEN AND FREE INTERNET WHEN THEY DEFENDED NET NEUTRALITY EVERY MAJOR TECH COMPANY PUSHED FOR NET NEUTRALITY AND PUT THEIR WEIGHT BEHIND EFFORTS TO SAVE IT
  • Amazon, Google, and Facebook supported Net Neutrality Rules. WIRED noted that Big Tech giants like Amazon, Facebook and Google “[planned] to throw their collective weight behind efforts to save Net Neutrality. The tech giants even joined legal battles fighting against the repeal of Net Neutrality rules.”
  • During the Net Neutrality debates, Big Tech companies acknowledged an open internet drove innovation on the web and increased economic growth. In 2014, Amazon, Facebook and Google joined a letter supporting Net Neutrality which said innovation in the internet space “happened in a world without discrimination” and argued that an open internet was “a central reason why the internet remain[ed] an engine of entrepreneurship and economic growth.”
  • Big Tech Companies threw their weight behind legal challenges opposing the repeal of Net Neutrality but used industry groups to do so. The Internet Association, which represented Big Tech companies like Facebook and Google, joined a legal fight to protect net neutrality. The New York Times said the move “made clear for the first time that Facebook, Google, Netflix and other large tech firms would put their reputations and financial clout behind the [Net Neutrality] challenge.”
  • Industry groups for Big Tech were fierce in their support of Net Neutrality. The Internet Association’s chief executive, Michael Beckerman, said repealing Net Neutrality “defie[d] the will of a bipartisan majority of Americans and fail[ed] to preserve a free and open internet.” The Internet Association had long fought for Net Neutrality. In 2014, it stated that the FCC “must act to create strong, enforceable Net Neutrality rules for mobile and wireline networks.” It submitted comments to the FCC “urging commissioners to take strong and decisive action to guarantee an open internet.” The Internet Association’s Chief Executive said the “segregation of the internet into fast lanes and slow lanes [would] distort the market, discourage innovation and harm internet users.” The Internet Association also said that an “open and decentralized” model for the internet was “precisely what enabled the internet to become one of the greatest engines for growth, prosperity and progress” and believed the internet should be “free from [...] anticompetitive behavior.”
• BIG TECH PLATFORMS THEMSELVES WERE VOCAL ABOUT THE NEED TO PROTECT NET NEUTRALITY, SAYING IT ENSURED COMPETITION THAT BENEFITED CONSUMERS
  • Amazon said Net Neutrality and an open internet had guarded against anti-consumer and anti-competitive practices. Amazon believed there needed to be “rules to protect the open internet and guard against anti-consumer and anti-competitive activities.” In 2017, Amazon lobbied the FCC in person to protect net neutrality. When Net Neutrality was repealed, Amazon’s chief technology officer went on twitter to post that he was “extremely disappointed in the FCC decision to remove Net Neutrality protections.”
  • Apple called for “strong, enforceable open internet protections” and safeguarding the web from artificial barriers for new online services. Apple claimed that the repeal of Net Neutrality would “fundamentally” alter the internet to the detriment of consumers, businesses and innovation. The company said an open internet “ensure[d] that hundreds of millions of consumers [got] the experience they wante[d].” Apple warned that paid prioritization arrangements resulting from Net Neutrality’s repeal would result in “fundamentally altering the internet as we know it today to the detriment of consumers, competition, and innovation.” The company feared that repealing Net Neutrality would lead to ISPs being able to “pick internet winners and losers” instead of allowing the consumer to do so. Apple worried any barriers to entry resulting from the repeal of Net Neutrality would result in “an internet with distorted competition” and “create artificial barriers to entry for new online services.” Apple said those barriers would make it “harder for tomorrow’s innovations to attract investment and succeed.”
  • Facebook said it supported Net Neutrality because it gave everyone the ability to “access all the opportunities that came with the internet.” In a Facebook post, Mark Zuckerberg noted his support for Net Neutrality and the FCC’s rules that ensured the internet continued to be an open platform for everyone. Zuckerberg said “if we want everyone in the world to have access to all the opportunities that come with the internet, we need to keep the internet free and open.” Sheryl Sandberg said the repeal of Net Neutrality was “disappointing and harmful” and believed “an open internet was critical for new ideas and economic opportunity.” Facebook said it was “ready to work” with policymakers “on a framework” to protect an open internet. The platform said it “continued to support strong Net Neutrality protections that ensure[d] the internet remain[ed] open for everyone.” Facebook said it was “disappointed” that the FCC proposed repealing Net Neutrality in the first place because it “ensure[d] the internet remained open for everyone.”
  • Google had been fighting for Net Neutrality since 2006, when co-founder Sergey Brin traveled to D.C. to visit with lawmakers and defend an open internet. In 2006, Brin met with lawmakers to press for legislation that would prevent internet providers from charging sites more for fast content delivery. He acknowledged that Google could cut deals with internet providers but believed Google searches were only valuable if consumers could quickly access the sites listed in the results. Brin also noted his belief that the FCC’s 2005 policy statement on an open internet did not go far enough and called for stronger language. Google “kept a pretty low profile” during the 2017 debates on Net Neutrality but did say the current rules were “working well” and that it was “disappointed” by the proposal.
• DESPITE THEIR PLEDGE TO SUPPORT AN OPEN & EQUITABLE INTERNET, BIG TECH ENGAGED IN SOME OF THE MOST ANTI-COMPETITIVE PRACTICES POSSIBLE AMAZON DOMINATED THE E-MARKET SPACE GIVING THEM IMMENSE INSIGHT ON CONSUMER TRENDS, WHICH IT USED TO RIP OFF ITS THIRD-PARTY SELLERS PRODUCTS
  • Amazon’s colossal growth gave it outsized power in the online marketplace. 89% of consumers were more likely to buy products from Amazon than other E-commerce sites. The Wall Street Journal noted that as Amazon grew, “so ha[d] its capacity to take on an ever-growing array of competitors.” Forbes further noted that for third-party sellers, “competing directly with Amazon for shopper attention [was] an uphill battle.” Amazon did in fact “exercise total power over the third-party sellers on its platform” Forbes noted. Not only did they exercise their power on their platform, they also barred sellers from using FedEx ground for Prime deliveries. If sellers wanted to use FedEx, they’d have to pay for its more expensive Express Service.
  • Amazon used data gathered on its platform about independent sellers to determine high selling products they could copy, produce and sell through their private label. Amazon was found to be using data about independent sellers on its platform to develop competing products. Using seller data was a common practice at Amazon and discussed openly in meetings. The information from sellers helped Amazon decide how much to price an item, which features of the product to copy or whether to enter a product segment based on its earning potential. Amazon’s drive to swallow competitors led them to produce their own versions of small products like camera tripods and hip shoes. The Wall Street Journal said “no competitor is too small to draw Amazon’s sights.” In fact, Amazon cloned a line of camera tripods created by a small company. The vendor’s sales became a fraction of their original size after Amazon introduced their version of the product. Amazon also ripped off a popular shore made with natural and recycled materials, but they themselves did not use environmentally friendly materials for their shoes and sold them for half the price. More than half of 1,000 third party sellers said Amazon sold its own product that directly competed with theirs. Amazon’s response to their anti-competitive practices was essentially ‘that’s just business.’ The company said ripping off popular products was “a common practice across the retail industry.”
• APPLE’S REIGN OVER THEIR APP STORE ALLOWED THEM TO PLACE THEIR OWN APPS AT THE TOP OF SEARCH RESULTS.
  • Apple used its power over the App Store to ensure their apps were the first search results. The Wall Street Journal found that Apple’s mobile apps routinely appeared first in search results ahead of competitors in its App Store. The Washington Post noted that Apple had a monopoly on how consumers accessed apps on the iPhone. Apple’s App Store had “helped fuel Apple’s remarkable growth” according to the New York Times.
  • Apple abused its control over the app store by downgrading popular apps when they came out with a competing product. After its release, Apple placed its own Apple Books app above the #1 ranked audiobook app, Audiobooks.com. The downgrade in search results led to a 25% decline in Audiobooks.com’s daily app download rate. Worse, Apple even removed apps from the App Store when they directly competed with one of their products. After introducing a screen time feature on the iPhone, Apple began removing similar apps that were widely popular among users, claiming those apps violated App Store rules. The company removed or restricted 11 of the 17 most downloaded screen-time and parental control apps after they released their own screen time tracker. One of the most popular parental-control apps saw their business plummet after Apple forced changes to its app that made it less useful than Apples.
• FACEBOOK ENGAGED IN FAR-REACHING ANTI-COMPETITIVE PRACTICES TO ENSURE THEIR DOMINANCE WOULD NOT BE DIMINISHED.
  • Facebook acquired an app that allowed it to detect early competitive threats and acquire, copy or bury them in response. In 2013, Facebook bought an apple called Onavo, which allowed the platform to detect early competitive threats. Onavo helped inform and influence Facebook’s acquisition of WhatsApp for $22 billion in 2014. The platform used the app to identify WhatsApp as their biggest competitor. Onavo showed that WhatsApp was sending more than twice as many messages per day as Facebook’s messenger app. The UK Parliament said Facebook used Onavo to conduct global surveys on the usage of mobile apps by consumers as well as the usage of mobile apps by customers. The FTC alleged that Facebook bought Instagram because it was an “existential threat to Facebook’s monopoly power.”
  • The FTC said Facebook had engaged in illegal buy or bury schemes to “maintain its dominance” which “suppressed innovation.” The FTC alleged that Facebook engaged in illegal buy-or-bury schemes “to main its dominance.” They added that Facebook’s actions had “suppressed innovation and product quality improvements.” The FTC believed Facebook had “severely hamper[ed] the ability of rivals and would-be rivals to compete on merit.
  • Facebook would threaten to cut off third-party software developers from plugging into their platform if those third parties made competing products. When Twitter released the video feature Vine, Facebook shut down the API that would have allowed Vine to access friends via Facebook. When Facebook approached Snapchat and Foursquare about an acquisition, Zuckerberg said they either had to let Facebook buy them or it would copy their products and make operating more difficult, which it did: Facebook later discouraged influencers from referencing Snapchat on their Instagram accounts, saying those who did reference Snapchat risked losing their “verified” status.
• GOOGLE USED ITS MAMMOTH REACH IN THE SMARTPHONE AND SEARCH SPACE TO ENSURE THEIR PRODUCTS WERE THE DEFAULT APPS AND SEARCH ENGINE ON DEVICES
  • Google was sued by the Department of Justice for incentivizing Apple and Verizon to use their search engine instead of other search engines. The Department of Justice took issue with Google’s agreement with Apple to feature Google as the preselected search engine on iPhones and other devices.
  • Google required phone manufacturers using Android’s OS to exclusively pre-install Google’s apps and not competitors apps. Google would not give phone makers the Google Play App Store if they did not pre-install Google Search, Chrome, Gmail, YouTube and Maps. In 2018, The European Commission fined Google $5 billion for their practice of requiring phone makers to install their apps.
  • Google buried its comparison-shopping competitors in search results, at times placing them on the fourth results page. The European Commission fined Google $2.7 billion for burying its competitors in search results.
  • Google partnered with Facebook on ad buying after Facebook floated moving into the ad space, giving Facebook a sweetheart deal, including double the time to bid on ads. After Facebook announced that it was testing a move into the ad space, Google offered Facebook a sweetheart deal to be an ad partner with them instead. During ad auctions, Google gave Facebook 300 milliseconds to bid for ads whereas other partner companies had just 160 milliseconds or less to bid. Google did not give other ad partners the same generous terms that Facebook received. The New York Times observed that the disclosure of Google’s sweetheart deal with Facebook to partner on ads had “renewed concerns about how the biggest technology companies band together to close off competition.”