What You Need to Know From Congress’ Landmark Big Tech Antitrust Hearing
Facebook, Amazon, Apple, and Google are jointly worth nearly $5 trillion and, along with Microsoft, make up 22 percent of the entire S&P 500. In other words, they’re flat-out dominating their respective markets. And on Wednesday Facebook CEO Mark Zuckerberg, Amazon CEO Jeff Bezos, Apple CEO Tim Cook, and Google CEO Sundar Pichai appeared remotely before the House Judiciary Antitrust Subcommittee to answer questions about exactly how they became so dominant, and what they’re doing to maintain their stranglehold on the competition.
The landmark hearing was part of a going-on-13-month antitrust investigation that has already involved hundreds of hours of interviews, the collection of over 1.3 million documents, and five previous hearings. The tech giants at the center have been accused of a variety of anti-competitive practices, and, as committee Chairman David Cicilline (D-R.I.) put it in his opening remarks, have “wielded their power in destructive, harmful ways in order to expand,” while depriving consumers of options.
The hearing, which lasted well over five hours, unfolded about as expected. Republicans on the committee did their best to hijack the proceedings and press the CEOs about largely imagined anti-conservative bias. Democrats held the CEOs’ feet to the fire on several key issues, but throughout the day ran into non-answers and obfuscations.
Broadly, the defense put up by the CEOs revolved around the idea that if the entirety of human connectivity, commerce, information gathering, advertising, and hardware are taken into account, then they can’t really be considered monopolies. Any market control they do exert, they argued, is simply American. Zuckerberg said that Facebook is a “proudly American company” achieved its success “the American way.” Bezos touted how much Amazon does for American workers and small businesses, and that the nation he grew up in does not “stigmatize entrepreneurial risk-taking.” Cook described Apple as a “uniquely American company” that has enriched people’s lives. Pichai propped up Google’s role in the “long tradition of American innovation.”
Unfortunately for these titans of industry, the nation they love so much also has a slate of antitrust laws, and the committee they appeared before on Wednesday was able to produce documents that prove they might not be quite as magnanimous as they let on in their opening statements. Cicilline told the press to expect a report on the investigation sometime in August, which will go a long way in determining how Congress plans to proceed in terms of reforming antitrust law and/or attempting to regulate the tech industry.
Here’s everything you need to know about what went down during the landmark hearing:
Why they were there: Facebook’s approach to competitors has largely been to just buy them. Most notably, it gobbled up Instagram in 2012, and the messaging service WhatsApp two years later. The tech behemoth has also made moves to hamstring other apps, like when it went out of its way to prevent Vine users from connecting with their Facebook friends on the app. As is always the case with Facebook, how the company is using data gathered from its platforms is also a concern.
What they said: In his opening statement, Zuckerberg argued Instagram and WhatsApp would not be the forces they are today if not for the infrastructure provided by Facebook, and that, in the end, the company just wants to connect the world and “bring value to people’s lives.” Is that such a crime?
What happened at the hearing: Lawmakers zeroed in on Facebook’s acquisitions, particularly Instagram in 2012, which — according to documents obtained by Congress and published by The Verge — Zuckerberg described as “neutralizing a competitor” that could “meaningfully hurt us.” Zuckerberg responded with a point he made in his opening remarks: that Instagram was a relatively small company when Facebook acquired it, and it may not have become the photo-sharing giant it is today without the help of Facebook. “The acquisition has done wildly well not just because of the founders’ talent, but because we invested heavily in building up the infrastructure and promoting it,” Zuckerberg said. “And I think that this has been an American success story.”
The committee wasn’t buying it. “Mergers and acquisitions that buy off potential competitive threats violate the antitrust laws,” Nadler charged, citing the newly released documents. “In your own words, you purchased Instagram to neutralize a competitive threat.”
Rep. Pramila Jayapal (D-Wash.) later grilled Zuckerberg over emails in which Facebook executives discussed copying competitors and “threatening to clone the products of another company while also attempting to acquire that company.” After Zuckerberg denied the latter accusation, Jayapal reminded him he was under oath before citing documents noting that Facebook attempted to develop a product called Facebook Camera before it acquired Instagram.
This whole @RepJayapal – Zuckerberg exchange is a must-watch:
Jayapal: “Has Facebook ever threatened to clone the products of another company while also attempting to acquire that company?
Jayapal: “I’d like to remind you that you’re under oath.” pic.twitter.com/mOzLFvmZ10
— Take On Wall St (@TakeOnWallSt) July 29, 2020
As for copying competitors, Zuckerberg said he disagreed with the premise. Not all of his employees agree.
Rep Jayapal: "Do you copy your competitors?"
Zuckerberg: "We've certainly adopted features…"
A Facebook employee who just texted me: "We’re literally copying TikTok right now."
— Ryan Mac 🙃 (@RMac18) July 29, 2020
In addition to antitrust issues, Zuckerberg was pressed about what the company has done since 2016 to safeguard against election interference, as he has been many times, as well as the recent advertiser boycott spurred by the proliferation of hate speech and misinformation on the platform. “We’re not going to set our policies based on advertisers,” Zuckerberg said, while also acknowledging that he was concerned.
Zuckerberg was also caught snacking on what appear to be Combos.
Why they were there: Amazon has been accused of taking data from the independent sellers using its marketplace to develop and optimize its own Amazon-branded products to compete with those sellers. These Amazon products, of course, receive better promotion on Amazon. The company last year denied to Congress that it did this, but in April the Wall Street Journal reported otherwise. A few months later, the European Union announced it plans to sue the company for this very practice.
What they said: In his opening statement, Bezos, who had never testified before Congress prior to Wednesday, argued Amazon serves as a buoy for the small- and medium-sized businesses that use the platform, and that allowing third parties to sell on Amazon was an altruistic decision to offer more selection to consumers.
What happened at the hearing: It was Pramila Jayapal (D-Wash.) who first pressed Bezos on Amazon’s use of third-party data to design and launch its own products. Bezos acknowledge Amazon should not be doing this, but not that they haven’t. “I can’t answer that question yes or no,” Bezos said. “What I can tell you is we have a policy against using seller-specific data to aid our private label business. But I can’t guarantee you that policy has never been violated.”
Amazon's Assoc. General Counsel told me under oath that Amazon does NOT, “use any specific seller data when creating its own private brand product.”
Reports revealed that was a lie: that they DO access data on third party sellers.
So I just asked Jeff Bezos which it is. Watch: pic.twitter.com/MiR7NHI7Y8
— Rep. Pramila Jayapal (@RepJayapal) July 29, 2020
When asked if he denied the Wall Street Journal’s report that Amazon had indeed violated the policy, Bezos deflected by saying they’re looking into it.
He did the same when asked by Rep. Mary Gay Scanlon (D-Pa.) about the company’s acquisition of Quidsi, the parent company of Diapers.com. Rep. Scanlon laid out Amazon’s strategy of temporarily lowering its price of diapers in order to cripple Diapers.com and force Quidsi to sell itself to Amazon. Bezos said he couldn’t recall specifics, as the sale took place over 10 years ago.
But it’s hard to plead ignorance considering how seriously Amazon took the success of Diapers.com, and the lengths the company went to muscle them into selling, including setting up a competing “Amazon Mom” as they were working to undercut Diapers.com’s sales. In his book The Everything Store, Brad Stone goes into detail about Amazon’s push to acquire the site, writing of Bezos’s “Khrushchev-like willingness to use the thermonuclear option” and drive diaper prices down to zero if Quidsi sold to Walmart, which was also interested, instead of Amazon. Stone writes that Quidsi ultimately made the deal with Amazon “largely out of fear.”
But Bezos says he doesn’t remember.
Why they were there: Apple has been accused of undercutting competitors in its App Store, mostly by taking a 30-percent cut of the revenue from sales made through the store, but also through other App Store regulations that make it difficult for competitors to succeed.
What they said: In his opening statement, Cook argued that the commission Apple charges is not out of the ordinary, and that the App Store generates so many jobs and so much commerce (1.9 million and $138 billion in the U.S., respectively, according to Apple) that the company couldn’t possibly be anti-competitive.
What happened at the hearing: Each of the four CEOs insisted they do not hold a monopoly and have plenty of valid competitors, but none more so than Cook, who seemed annoyed Apple was even involved in the antitrust investigation. “Our goal is the best not the most,” he said, adding that the company doesn’t “have a dominant market share in any business we are in.”
But the issue with Apple is how it gate-keeps its App Store. Cook on Wednesday categorically denied there’s anything funny going on with how Apple relates to developers. “We apply the rules to all developers evenly,” he insisted when pressed by Rep. Hank Johnson (D-Ga.).
.@tim_cook throughout this investigation, we’ve heard concerns that the review process is tough to navigate, and your rules are inconsistently interpreted and enforced. Do you believe @Apple treats similar apps equally, no matter what? pic.twitter.com/WMgR67CQ1j
— Rep. Hank Johnson (@RepHankJohnson) July 29, 2020
Cook also insisted that Apple would never raise it’s 30-percent fee for developers using the App Store, but documents obtained by the committee make clear that raising the fee isn’t such a far-fetched within Apple. It was even proposed by an executive.
Documents from the Hearing on “Online Platforms and Market Power: Examining the Dominance of Amazon, Apple, Facebook and Google" pic.twitter.com/42o2Ye13jI
— House Judiciary Dems (@HouseJudiciary) July 29, 2020
Cook received the fewest questions of any of the four CEOs testifying.
Why they were there: Google has faced scrutiny for allegedly giving favorable rankings to its own services in search results, as well as for its efforts to maintain dominance over the search engine market (it reportedly pays Apple an 11-figure sum to be the default search engine on Apple devices). Google has also been accused of making moves to corner the online advertising market.
What they said: In his opening statement, Pichai argued that, actually, Google doesn’t dominate the search engine market, as people also use Twitter, Amazon’s Alexa, “friends” on WhatsApp, and other services to find what they’re looking for online. Nor does it dominate the online retail marketplace, which also features vendors like Walmart, eBay, and Amazon. Essentially, Pichai is saying that the mere existence of other services proves Google is not anti-competitive.
What happened at the hearing: Chairman Cicilline began by pressing Pichai on Google allegedly stealing content from other websites, citing “consistent reports” the committee has received throughout the investigation.
Pichai said he disagrees with the characterization, noting that Google “support[s] 1.4 million small businesses.”
During a House antitrust hearing, Representative David Cicilline asked Google CEO Sundar Pichai about his company allegedly stealing content from small businesses https://t.co/TOyBHKFOkU pic.twitter.com/eHnZYM4OtC
— Reuters Business (@ReutersBiz) July 29, 2020
“As Google became the gateway to the internet, it began to abuse its power,” Cicilline said later. “It used its surveillance over web traffic to begin to identify competitive threats and crush them. It has dampened innovation and new business growth, and it has dramatically increased the price of accessing users on the internet, virtually ensuring that any business that wants to be found on the web must pay Google a tax.”
Data was also an issue. While Picahi assured lawmakers Google is in compliance with regulations and “cares deeply” about the privacy of its users, Rep. Val Demings (D-Fla.) pressed the CEO on the totality of data possessed by the company, and how it used a company it bought called DoubleClick to combine data across its services, something Google in the past told Congress it would not do.
“This decision meant that your company would now combine all of my data on Google, my search history, my information from Google maps, information from my email, my Gmail, as well as my personal identity with the record of almost all of the websites I visited,” Demings said. “That is absolutely staggering.”
As for advertising, Pichai insisted that there is plenty of competition. When asked by Rep. Pramila Jayapal (D-Wash.) about Google’s ad share, he said he didn’t know. “I’m not exactly familiar,” he said. “I’ve seen various reports, but you know, we are a popular choice.”
“Popular” is one way to put it.