After years of largely unchecked growth, big tech has come under heightened scrutiny not seen since the Microsoft antitrust suit ended in 2002. While concerns about the role of big tech in data privacy, online speech, and e-commerce have been in the public consciousness for years now, the discussion of how to address the market power of these large firms has taken on a new form with the announcement of antitrust investigations into Amazon, Apple, Facebook, and Google over the last few months.
Back in June, the European Commission launched a formal antitrust investigation into whether Apple’s terms of service for developers violate competition rules as well as a separate investigation to determine whether Apple was stifling competition from rivals to the company’s mobile payment system Apple Pay. The former case emerged after Spotify and several other companies lodged complaints over the 30% commission that Apple places on all digital purchases. European regulators have concluded that the commission on digital purchases has raised the price of products that compete with Apple and led to higher prices for consumers. For instance, in 2014 Spotify raised its monthly subscription price from $10 to $13 to maintain the same amount of revenue and still cover Apple’s fees. The next year, Apple introduced its own competing music app Apple Music for $10 a month, prompting Spotify to move subscription purchases from the app to their website so it could return its price to $10 a month. Epic Games, the creator of Fortnite, initiated private legal action over this same Apple commission issue earlier this fall.
Just over a week ago, the European Commission brought charges against Amazon for harvesting nonpublic data from third-party sellers who use its marketplace so it can find popular products to replicate and sell at a lower price. Amazon argues that its retail arm only comprises a small portion of global retail business, but because the company wields such immense power over a marketplace that merchants rely on to sell their products, concerns are often raised that it gives its own products better placement on the site. In fact, the European Commission found that merchants’ concerns are supported by a review of data on more than 80 million transactions and 100 million products. And with the ongoing global pandemic, Amazon’s e-commerce marketplace has only grown as more people choose to purchase items online rather than in-person.
In general, Europe has taken on a position of aggressive action with respect to regulation of big tech. Margrethe Vestager, the European Commission’s vice president for digital issues, has argued that the big tech companies “are essentially micro-economies, setting rules and policies with little transparency that determine the fate of millions of other businesses that have no choice but to follow along.” In sharing this sentiment, lawmakers in Germany and Britain have discussed changes to their antitrust laws so authorities can more easily bring cases against big tech. Also, in December the European Commission is expected to announce a number of new laws regulating the tech industry, potentially including rules prohibiting preference for one’s own products and requiring the biggest companies to share data with smaller rivals.
In addition to European countries, Australia, India, Brazil, and even China are taking action to regulate technology companies. China recently unveiled legislation that proposes limits on exclusivity requirements, selling products below cost, and different treatment of partners based on algorithms. The announcement led the Chinese internet giants of Alibaba, Tencent, and Meituan to see a drop in their share prices, but the potential effect this legislation would have on the major American tech companies is not yet clear. These moves by a number of countries seem to indicate a larger shift in attitude about the tech industry and a recognition of the need to reign in these major companies to protect the interests of individuals and small businesses.
While Europe has typically taken the lead in antitrust action, the United States has made some big moves this fall. After a congressional hearing this past summer and a 16-month investigation, the House Subcommittee on Antitrust released a report in which it recommended a breakup of the four big tech companies and substantial reforms to antitrust laws. The report recognized most of the major complaints arising in the recent antitrust actions such as Amazon’s use of sales and product data to create products that undercut third-party sellers, Google’s deal with Apple to be the default search engine on all Apple devices, and Facebook’s elimination of competitors through buyouts and copying their products. Even though the report was only endorsed by Democratic lawmakers, antitrust action is an issue with largely bipartisan support. Members of both parties agree that Section 230 of the Communications Decency Act, which shields companies from liability for content created by their users, should be eliminated, and they also agree that the large concentration of power in these four companies is antithetical to the value America places on economic competition. Although the establishment of a new administration might have dulled antitrust momentum as was the case with Microsoft in the early 2000’s, President-elect Biden indicated support for continued action against big tech during his campaign when he said, “Our commitment to [American] values [of competition, choice, and shared prosperity] must compel us to do far more to ensure that excessive market power anywhere … is not hurting America’s families and workers.”
In line with the conclusions in the House report, the Justice Department filed an antitrust lawsuit against Google last month, alleging that Google has maintained its dominant position in web search through an unlawful agreement with Apple that guarantees its search engine is the preset default on all Apple devices. The deal between the two companies was made fifteen years ago, and according to the Justice Department, roughly half of Google’s search traffic now comes from Apple devices. A former general counsel for Apple describes the relationship between the two companies as “co-opetition.” They compete over smartphones, apps, and laptops, but they cooperate with each other in agreements such as this where Apple benefits from the steady influx of $8 billion to $12 billion every year in exchange for Google’s virtually exclusive access to internet searches on Apple products. The Justice Department is asking the court for an injunction that would prevent Google from entering into deals like the one it made with Apple. If the government’s case were to succeed, then Google would lose the traffic from searches on Apple products with no obvious way to replace it. This would open up opportunities for smaller search engines like DuckDuckGo to snag a larger share of the market and create greater competition that might spur innovation in search engine products. However, if Google prevails, future challenges to big tech might be weakened, leaving legislative action as the strongest path to check the power of the tech companies.
The desire to regulate Amazon, Apple, Google, and Facebook has been growing over the last decade as these companies have found ways to invade every aspect of daily life and further consolidate power in the process. These four companies have a combined valuation of around $5 trillion dollars and have completely revolutionized the way people think about commerce, advertising, media, and speech. Just as antitrust action against IBM opened the door for software companies like Microsoft to emerge and the government’s antitrust case against Microsoft kicked down the door for browser-reliant companies like Google to thrive, maybe this round of antitrust action will crack open the door just enough to jumpstart the rise of the next wave of big tech.