EU ‘Hit List’ And US House Antitrust Report Could Spell Big Trouble For Big Tech
Size and market share are likely to be determining factors in who ends up on the “Big Tech hit list.”
As reported by the Financial Times, regulators in the European Union are crafting a “hit list” of roughly 20 companies – Big Tech marquee names among them – that will face tougher rules over market competition and other operational activities.
According to reports, the new rules would also change the way these firms gather and use data.
Citing unnamed sources, the FT reported that the companies on the list will be selected based on market share of revenues and number of users – and though the actions are ostensibly not targeting individual companies, many firms such as Facebook (and Google and Apple) will fall within the criteria governed by the list.
Just what may happen is anyone’s guess, but as reported in this space earlier in the year, the scrutiny keeps on coming for Big Tech firms, and in addition to the “list,” it may take the shape of injunctions aimed at certain discrete corporate actions.
In Europe, Margrethe Vestager, who serves as executive vice president of the EU Commission, has said she would look to use more injunctions against Big Tech, tied at least in part to cases already underway.
The US Take
Based on recent events here at home, there may be at least some read-across to what happens in the EU.
Last week, the U.S. House of Representatives antitrust subcommittee published its report on larger technology firms and competition in digital markets. Among the most prominent names in the report: Amazon, Facebook, Apple and Google.
There is discussion of each company’s activities, and allegations that they are dominating and hobbling the competitive landscape at the expense of smaller players.
Drilling down into the report, titled “Investigation of Competition and Digital Markets,” we find a number of key takeaways and arguments:
The Gatekeeper Argument
At a high level, the subcommittee alleges in the report, “studying their business practices has revealed common problems. First, each platform now serves as a gatekeeper over a key channel of distribution.”
The report contends that “by controlling access to markets,” Facebook, Google, et al can effectively pick winners and losers throughout the economy – and leverage the platform model to conduct harmful business practices, such as “charging exorbitant fees, imposing oppressive contract terms and extracting valuable data from the people and businesses that rely on them.”
As a result, these firms have become monopolies, according to the report. Amazon in particular, say the lawmakers, has shown a pattern of allegedly “exploiting sellers.”
Acquisitions, Acquisitions, Everywhere
The antitrust subcommittees’ findings state that the durable market power enjoyed by Big Tech is due to several factors, among them the high volume of acquisitions these platforms have made throughout the years. Taken as a whole, these companies have acquired hundreds of other firms in just the past decade. Those acquisitions had different strategic goals, including neutralizing threats or even shutting firms down in order to eliminate their products and services entirely – aka “killer” acquisitions.
The network effect is amped, then.
“For example, the strong network effects associated with Facebook has tipped the market toward monopoly, such that Facebook competes more vigorously among its own products — Facebook, Instagram, WhatsApp and Messenger — than with actual competitors,” the report states.
Individual Company Practices
In reference to anticompetitive practices deployed by other firms, the antitrust committee said in its report that in the search arena, Google‘s “dominance is protected by high entry barriers, including its click-and-query data and the extensive default positions that Google has obtained across most of the world’s devices and browsers.”
There exists no alternative for the entities that rely on Google’s search engine for traffic, per the report, which went on to state that “documents show that Google used its search monopoly to misappropriate content from third parties and to boost Google’s own inferior vertical offerings, while imposing search penalties to demote third-party vertical providers.”
Amazon, for its part, has 2.3 million active third-party sellers on its marketplace worldwide, and the committee said that 37 percent of them — about 850,000 sellers — rely on Amazon as their sole source of income. “Amazon’s dual role as an operator of its marketplace that hosts third-party sellers, and a seller in that same marketplace, creates an inherent conflict of interest,” alleges the report.
As for Apple, the company has focused its efforts on growing its software and services business, “and collecting commissions and fees in the App Store. In the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harms to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers.”
In a general discussion tied to online platforms, the subcommittee alleged that there is an “absence of adequate privacy guardrails in the United States,” and that consumer data is collected and misused. Later, the report describes the digital markets as structured as “winner take all” markets that tend to be dominated by just one or two firms, where switching is cost-prohibitive for consumers.
“Online platforms rarely charge consumers a monetary price — products appear to be ‘free,’ but are monetized through people’s attention or with their data.” And in the absence of fully competitive markets, “consumers are forced to either use a service with poor privacy safeguards or forego the service altogether.”
Data collection can also create “information asymmetries “and grant firms access to non-public information that gives them a significant competitive edge. The platforms, according to the report, get more out of consumers than consumers get out of them.
The report on the digital economy also mulls actions for regulators to take – and, as we reported recently, those actions may amount to restricting the business lines in which Big Tech firms can operate. That’s tied to what the report refers to as “two mainstay tools of the anti-monopoly toolkit: structural separation and line of business restrictions.” Structural separations can prohibit dominant companies from operating in competition with the firms dependent on the very infrastructure provided by that dominant company. Limits on the lines, of course, put certain markets …. well, off-limits.
The end result? That’s unclear for now.
But pressures are clearly mounting, both here and abroad, with the quartet of names (Apple, Google, Facebook, Amazon) serving as, perhaps, prohibitive examples for peers and even companies yet to be formed. Privacy and competition guardrails are one thing – straight jackets are another. Finding the right balance between markets that are fair or fraught is a tricky dance.
And as Karen Webster noted in a column from the summer, various platforms, focused on content or services, have a knack for meeting consumers where they want, and giving them what they want.
In the end – with injunctions, hit lists, and perhaps even breakups in sight – might the consumer be forced to hunt and peck among fragmented, online landscapes, with constant nostalgia for the way it might have been (and was)?