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Amazon, Apple, Facebook, and Google grilled on Capitol Hill

Amazon, Apple, Facebook, and Google grilled on Capitol Hill

While the Silicon Valley’s elite chiefs testified before Congress virtually, the Indian industry shared concern on possible impact of the final proposed solutions on their ecosystem

Four Big Tech CEOs testified in a five-and-half-hour virtual hearing, hosted by the House Judiciary antitrust subcommittee in an antitrust hearing on July 29. Amazon Founder and CEO, Jeff Bezos; Facebook Founder and CEO, Mark Zuckerberg; Apple CEO, Tim Cook; and Alphabet and Google CEO, Sundar Pichai defended their companies against accusations of anticompetitive practices.

The Silicon Valley’s elite chiefs managed to steer clear of most of the accusations, arguing that their platforms are politically neutral. But under questioning related to their business practices, including their corporate acquisitions, the tycoons appeared more vulnerable.

Each of the tech executives took great pains to stress their contributions to the US economy. Amazon described itself as one of the most popular consumer brands, where consumers can get their goods quickly and cheaply. Apple said it had enabled a wildly popular ecosystem of apps and widely prized, high-end phones to match. Facebook said it had stood for free expression and speech against a rising tide of international censorship, pointing to new competitors, including TikTok. And, Google said its tools made it possible for people to find information and businesses worldwide to grow.

Five key takeaways from the landmark proceedings

Amazon questioned on use of sales data by private sellers. When Rep Pramila Jayapal, D-Wash., asked Jeff Bezos whether his company accesses and uses data on the third-party sellers who use its platform in its business decisions, the manner in which Bezos answered was notable. “I cannot answer that question yes or no,” Bezos told Jayapal. He said Amazon has a policy against using third-party data but that he could not “guarantee that policy has never been violated.”

During the course of its investigation, the subcommittee questioned an Amazon associate general counsel, Nate Sutton, who testified that the company does not “use any seller data to compete” with third-party sellers. Sutton also said Amazon does not use those sellers’ “individual data when we are making decisions to launch private brands.”

But on April 23, a Wall Street Journal report asserted that Amazon has done exactly that. Judiciary Chairman Jerrold Nadler, D-NY; and Rep David Cicilline, D-RI the subcommittee chairman, issued a statement that if the report is accurate, Sutton’s testimony would “appear to be misleading, and possibly criminally false or perjurious.”

Amazon is conducting an internal investigation into the allegations. Bezos said he would share the results with the committee once it is complete.

Google accused of stealing content from Yelp. The committee’s investigation showed Google had stolen the content of other websites, including Yelp, in order “to bootstrap its own rival local search business.”

When Yelp asked Google to stop doing that, the search engine giant responded by threatening to “delist Yelp entirely,” David Cicilline, Chairman (D-RI) said. “In other words, the choice Google gave you was let us steal your content or effectively disappear from the web. Isn’t that anti-competitive?”

Sundar Pichai, CEO, Google said the company was focused on giving users what they wanted and offered to provide more answers after understanding details of the case that Cicilline mentioned.

In addition to stealing other websites’ content, Google searches also “privilege its own sites,” Cicilline said, adding that most web searches that start on Google also “end somewhere on Google’s own websites.”

Taken together, “the evidence seems very clear to me as Google became the gateway to the internet it began to abuse its power and use its surveillance over web traffic to identify competitive threats and crushed them,” Cicilline said. 

Facebook’s acquisition of Instagram under scrutiny. In an early exchange, House Judiciary Committee Chairman, Jerry Nadler (D-NY) said, documents unearthed by the investigation showed that Facebook saw Instagram, the popular photo-sharing app, as a “powerful threat that could siphon business away from Facebook.”

Rather than compete with Instagram, Facebook “bought it,” Nadler said of the 2012 acquisition.

“This is exactly the type of anti-competitive acquisition the antitrust laws were designed to prevent,” Nadler said. “This should never have been permitted to happen, and it cannot happen again.”

Mark Zuckerberg, CEO, Facebook defended the acquisition, saying it was cleared by federal antitrust regulators when it was proposed and has proven to be “wildly successful” largely because of efforts by Facebook to grow Instagram.

“I have been clear that Instagram was a competitor in the space of mobile photo sharing,” Zuckerberg said. “By having them join us, they certainly went from being a competitor … to an app that we could help grow.”

Jayapal questioned Zuckerberg about internal emails from 2012 showing that the company sought to copy features and aspects of its competitors’ products, especially Instagram.

Zuckerberg said the company had “certainly adapted features that others led in,” as have others.

Jayapal also said she had documents showing that Facebook had “threatened to clone the products of another company while also attempting to acquire that company,” referring to Facebook’s attempts to develop a camera app to rival that of Instagram.

Instagram founder, Kevin Systrom had said in emails to some investors that he felt threatened that if he did not sell his company to Facebook, then Zuckerberg would copy or clone the photo feature to destroy Instagram.

Zuckerberg denied he had ever threatened Systrom.

App Store could spell trouble for Apple. Rep. Hank Johnson, D-GA, said Apple wielded “an enormous amount of power” because of the coveted app marketplace and the rules “get changed to benefit Apple at the expense of app developers in the App Store.”

Tim Cook, CEO, Apple said that the company evaluates every app before it is featured on the App Store and treats every developer equally and that the rules were “open and transparent.”

Johnson also said that Apple assigned some of its employees to help large app developers, such as China’s Baidu to navigate Apple’s bureaucracy, compared with smaller developers, who had to deal with the process on their own.

Cook said he was unaware of such practices, adding that Apple executives engage with app developers large and small.

Cook also denied allegations that the company threatened or retaliated against app developers who went public with their criticisms and also denied that Apple had increased commissions it charges app developers.

Next steps. David Cecilline ended the hearing with next steps. The subcommittee is expected to publish a report with the findings of their investigation and proposed solutions.

“These companies that exist today have monopoly power,” he said. “Some need to be broken up, all need to be properly regulated.”

Learnings for India

The outcome of the hearings have relevance for the Indian policymakers too.

As companies become huge, can they be allowed to use their dominance to shut out rivals? It may happen by them letting market forces operate freely and the incumbent offering cut-throat prices that the smaller seller is driven to bankruptcy. Also, as consumers engage with the companies, the data which the companies are able to collect may be monetized leading to encroachment of privacy and data misuse.

If there is no definite outcome of the hearings, will it over time become a tussle between American and Chinese conglomerates, with not just India, but every country having to side with one of them?

And finally, if Big Tech is broken up, while the Chinese would gain, it would also open up opportunities for the Indian tech companies–and those from other countries–to play at the highest end of the tech market on a far more equal footing, whether in the area of artificial intelligence platforms or social media ecosystems or mobile applications.

And closer to the Big 4,  the combined power of Facebook, Google, and the plethora of Jio apps could take on Amazon and Flipkart with the sheer might of their combined data bank–the biggest the country may ever see!

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