Antitrust Violations: New Report Alleges Facebook and other Tech Giants Used “Copy, Acquire, Kill” and Other Unfair Business Tactics
An antitrust report has just been released by top Democratic congressional lawmakers. The report was compiled by several Democratic members of the House Judiciary Subcommittee on Antitrust. The main mission of the report was to investigate whether or not the four biggest tech companies, Amazon, Google, Facebook, and Apple broke antitrust laws.
According to the 400-page report, the tech giants have indeed done so, and U.S. antitrust laws need to be revamped so that there can be more competition for companies in the American online economy.
The report begins by comparing the current U.S. online economy to that of the Industrial Revolution. The report states, “To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”
What are U.S. Antitrust Laws?
American antitrust laws are also sometimes referred to as competition laws. These are laws that were developed to protect consumers from business practices that ultimately harm consumers by stifling competition and therefore consumer choice. The laws exist to promote healthy competition between businesses in the U.S. economy.
Without antitrust laws, there would be a limit to where a consumer shops for their services and products. A direct result of this would mean higher prices for consumers and limited access to products because monopolies would reign king. Antitrust laws typically protect against these practices:
- Market allocation: When companies agree to stake out separate territories and refrain from competing in each other’s space.
- Bid rigging: When two companies devise a plan so that one will be the “loser” and another be the “winner” as a negotiation tactic for getting ahead.
- Price-fixing: When companies have control over the price of a service or good as opposed to the consumer letting the market naturally run its course, ultimately giving consumers the ability to set the price.
- Monopolies: When one company will purposefully dominate an entire industry by imposing its product or service on others. Take, for example, Microsoft when they forced their own web browser on computers that had downloaded Windows OS.
- Mergers and acquisitions: When mergers occur between companies for the purpose of killing the acquired company. Mergers should be to the benefit of the consumer in allowing options, not in the benefit of the company that can ultimately monopolize the industry.
Overall, antitrust laws are meant to level the playing field for companies in the marketplace with the benefit ultimately passing on to the consumer, not the company itself.
How Have These Tech Giants Violated Antitrust?
The quick rise of these four tech companies has brought into question whether or not their practices violate antitrust laws. These tech companies have amassed massive growth, with tech giant Amazon leading the way in exponential growth. During the COVID-19 pandemic, Amazon hit a major growth milestone with shares jumping over 60%.
The congressional report on these four tech giants spanned over 16 months of investigation. Because these tech giants found their success online, questions about the need to update the U.S. antitrust laws were a major focus of the report. A breakdown of the accusations toward each company is as follows:
Amazon
Amazon has faced extensive backlash on it's data collection techniques. By sourcing data from third-party sellers, the company has been able to target customers in ways few other companies have. Additionally, the company repeatedly uses the tactic of recommending its own brand products over other non-Amazon brand products on its platform. This, in turn, leads to more profit revenue for the e-commerce giant.
While the brand advertises itself as a great platform for small businesses, its practices spell otherwise as seller fees are continuously increasing and sellers are penalized if products on Amazon are sold more cheaply on other platforms, including retail stores.
Facebook has also been under intense scrutiny, especially for its "copy, acquire, kill" strategy. The company is accused of purchasing the competition for the purpose of killing it. More recently, Facebook purchased Instagram and made it so that their new purchase does not compete with Facebook. In emails, testimonies, and memos between Facebook corporate employees, the report issued by lawmakers points to evidence in which Facebook exerted monopoly power to gain an advantage. According to the report, one email between Zuckerberg and a former CTO shows the company's anti-competitive interests with the following statement from Zuckerberg reading in part, “how much should be willing to pay to acquire mobile app companies like Instagram.”
The report accuses Google of finding online dominance through two methods. The first method is Google's aggressive campaign that undermines “vertical search providers.” Their aggressive campaign blocked out credible search practices (ex: Searching Yelp for the best restaurant) and prioritized Google's “inferior content” instead. The second method was through “a series of anti-competitive contracts.” By acquiring Android in 2005, the Google search engine was forced on Android phones, creating an environment free of competition. According to the report, “documents show that Google required smartphone manufacturers to pre-install and give default status to Google’s own apps.”
Apple
Apple is facing violations of antitrust in the fact that its phones allow you to download software from Apple’s App Store only. Software outside of the company's platform is not compatible with iPhones, therefore automatically creating an absence of competition. Apple responded to the allegations with the following statement, “Our company does not have a dominant market share in any category where we do business. Last year in the United States alone, the App Store facilitated $138 billion in commerce with over 85% of that amount accruing solely to third-party developers. Apple’s commission rates are firmly in the mainstream of those charged by other app stores and gaming marketplaces.”
The practice was challenged earlier this year when the makers of popular game Fortnite, Epic Games, sued the tech giant for unfair practices after Apple charged a 30% fee for purchasing the game's virtual currency through the App Store. Apple responded by banning the game from the App Store, ultimately leaving millions of players unable to access the service.
Not all lawmakers are in support of the antitrust violation report. Representatives Ken Buck (R-CO) and Jim Jordan (R-OH) shared their own reports in which they disagree with the Democrats’ findings.
Next Steps
The official report released early last week accusing the companies of antitrust violation is the first step in investigating whether these tech giants are indeed abusing antitrust laws. In addition to the report, the Department of Justice is planning to sue Google for practices that minimize competitiveness in the marketplace. The Federal Trade Commission is also investigating the tech giants. Antitrust litigation has already been initiated against Facebook, which should set off alarm bells for the other tech giants that might soon find themselves in a similar situation.
