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NEW DELHI: A House panel released a report proposing reforms to curb the power of America’s four largest Internet companies.
Here are the main accusations:
Apple
the iPhone maker is a monopolist who uses his dominance to harm rivals and consumers, according to the report. The subcommittee argued that Apple’s cut in purchases in the App Store, typically 30%, is “exorbitantly high” and that it prioritizes its applications in the App Store.
Apple works to create high switching costs for users, producing a lock-in effect that allows it to exercise monopoly power over app developers who are unlikely to leave the mobile platform, the subcommittee argued. He also alleged that the App Store rules threaten developers who compete with Apple’s new apps and that the company changes the rules to benefit itself, rather than the developers.
The report quoted Phillip Shoemaker, a former App Store review chief, who said Apple executives would arbitrarily create reasons to remove apps that competed with Apple’s software and services. Shoemaker added that an app for syncing Mac computers and iPhones was rejected from the App Store despite not violating any specific rules, and that Apple later released its own similar tool.
The subcommittee also said that Apple searches for popular apps on the App Store and then copies them, quoting Apple co-founder Steve Jobs as saying “we’ve always been cheeky about stealing great ideas.”
The report noted that Apple has increasingly focused on pushing developers to adopt in-app purchases, another source of revenue for the company. This year, Apple’s services segment, which it credits the App Store as one of its main drivers, surpassed $ 50 billion in annual revenue for the first time.
“Our company does not have a dominant market share in any category in which we do business,” Apple said in a statement. “Apple’s commission rates are firmly in the mainstream of what other app stores charge.”
Amazon
The House of Representatives subcommittee argued that Amazon has monopoly power over small online sellers in the US.
“Amazon functions as a gatekeeper for e-commerce,” the report says. Many sellers interviewed by the subcommittee complained that they are unable to turn to alternative markets, regardless of the cost of doing business on Amazon or how they are treated, because the company has such a large share of online shopping in the US.
The subcommittee cited reports that Amazon likely accounts for more than half of online sales in key product categories. The weight of the company “allows it to have its own preference and put competitors at a disadvantage in ways that undermine free and fair competition,” according to the report.
As Covid-19 drives more American shoppers online, Amazon’s market power has grown. The subcommittee argued that the company is willing to use this to put pressure on suppliers and favor its own products over those sold by third parties.
Amazon initially responded to the pandemic-driven sales surge by refusing to accept or deliver non-essential supplies from third parties. However, the company continued to ship its own nonessential products while restricting the ability of third-party sellers to use alternative distribution channels to continue selling through its platform.
The company criticized in a blog post what it called “misinformed regulatory spit on antitrust.” Amazon also compared itself to the broader retail market, rather than the e-commerce sector in the US, a common tactic companies use to defend themselves against monopoly allegations.
Google
The internet giant recognized the threat from “vertical search engines” early on and moved to neutralize them, according to the report. Vertical search engines focus on a specific niche, such as TripAdvisor Inc. for travel reviews, Monster for job listings, and Yelp Inc. for local businesses.
Google has added its own search tools for many of these categories over the years, but argued that they only serve to help netizens find the services they want faster. However, the subcommittee alleged that Google lobbied these markets to prevent competitors from growing at its expense.
“Vertical search is of enormous strategic importance to Google,” the company said in an internal message quoted in the report. “Otherwise, the risk is that Google is the go-to place to find information only in cases where there is a potential for monetization low enough that no niche vertical search competitor has filled the space with a better alternative. “.
The report also cited Google documents showing executives discussing the use of Google search results to promote other products of the company.
“Google adjusted its search algorithm to automatically raise the ranking of some of Google’s services above those offered by its rivals,” the subcommittee said in its report. “Typically these benefits are not available to competing verticals.”
The House report also revealed how Google used contracts with Android phone manufacturers to differentiate search, email and payment services from competitors, as well as operating systems from competitors.
Google offers Android for free in exchange for requirements to pre-install apps like Gmail and Maps. From 2009 to 2014, Google more than doubled the number of applications required to 30, according to the report. Emails and internal documents the subcommittee produced showed how Google rebuffed manufacturers’ efforts to remove Google apps or renegotiate the deals. In a 2016 email, Google employees discussed plans to put its payment app on Android phones more prominently than a competing version from a phone maker.
The primary use of these Android offerings was to solidify Google’s leadership in search. Google started licensing Android to protect itself from search offers from Microsoft Corp. and Yahoo, according to the report. That directive came from above. An email of the cited report came from an Android team manager who summarized a meeting with Sundar Pichai, now Google’s CEO. “His main response was … Search is sacred, it must be front and center,” the email read.
“We compete fairly in a highly competitive and fast-moving industry,” Alphabet Inc’s Google said in a statement. “We do not agree with today’s reports, which present outdated and inaccurate allegations from commercial rivals about search and other services.”
Facebook
The subcommittee argued that Facebook is a monopoly because the company considers the services it already owns, including Instagram and WhatsApp, to be fiercer competition for the social network than external apps like Twitter and Snapchat. Facebook hasn’t allowed Instagram to grow to its full potential despite owning it, restricting the template and other resources, while using Instagram to drive traffic to Facebook’s main social network.
“It was a collusion, but within an internal monopoly,” a former executive source said in the report. “If you have two social media services, they should not be allowed to support each other. It is not clear to me why this should not be illegal. You can collude by acquiring a company. ”
Facebook has also restrained smaller competitors by monitoring their growth and devising strategies to buy or squash them, sometimes using intimidation tactics, according to the report. Without real outside competition, “Facebook’s quality has deteriorated over time, resulting in poorer privacy protections for its users and a dramatic increase in misinformation on its platform,” the subcommittee concluded.
Facebook has argued that Instagram would never have been so successful if it had remained independent. But the committee obtained documents showing projections for the application prior to its acquisition. The numbers suggest that Instagram had the resources and access to the infrastructure it needed to grow independently without Facebook.
“Facebook’s support for the growth of Instagram after acquiring it is overblown,” argued the subcommittee.
The company said that Instagram and WhatsApp “have reached new heights of success because Facebook has invested billions in those businesses. Regulators thoroughly reviewed each deal and rightly saw no reason to stop them at the time. ”
