On Tuesday afternoon, the House Antitrust Subcommittee released the long-awaited report summarizing its findings from a 16-month investigation into competition in online markets. The investigation, which focused on Apple, Amazon, Facebook, and Google, was the first major congressional antitrust activity in decades. The report gives the most thorough look yet into how Congress, particularly the Democratic leadership of the subcommittee, views the power of Big Tech—and how it proposes to solve the problems that power has caused.
At more than 400 pages (and 2,540 footnotes), it’s not easy to summarize, but my WIRED colleagues and I picked out some of the most revealing portions—including newly released internal emails, interviews with former employees, and the subcommittee’s own dramatic conclusions.
Illustrating the extent of Amazon’s overly broad approach to identifying the relevant market and its top competitors, in response to the Committee’s request for “a list of the Company’s top ten competitors,” Amazon identified 1,700 companies, including Eero (a company Amazon owns), a discount surgical supply distributor, and a beef jerky company.
One of the key challenges when deciding whether a company is a monopoly is defining the market it competes in. Here, Amazon is trying to play down its dominance in online retail by emphasizing how many companies compete against various lines of its business. But it may have had the opposite effect. When you can claim everyone under the sun as your competitor—and even forget that you own one of them—it’s a sign that you’ve gotten pretty big. The committee report concludes that Amazon has a monopoly share of online retail.
“In 2010, I started working on the Amazon marketplace team … It was widely known that many (10+) of my peers were running very successful [third-party] accounts, where they were pulling private data on Amazon seller activity, so they could figure out market opportunity, etc. Totally not legitimate, but no one monitored or seemed to care.”
The investigation focused on the conflicts of interest that arise from so many third-party sellers having no choice but to do business on Amazon, even as Amazon competes against them with its own products and services. Here, a former employee alleges that Amazon staff used their insight into third-party seller data to unfairly compete against them with their own side hustles.
A 2010 review of its baby formula business identified Amazon’s “most frequently matched internal competitor” as ABCBabyFormula, which “typically … price[d] 15-20% below [Amazon’s] cost” … The document notes of ABCBabyFormula that “manufacturers do not sell to them directly and believe they are sourcing black market stolen goods.” Amazon frequently price-matched, at significantly below-cost, a competitor that it had reason to believe was sourcing baby formula from illegal and potentially dangerous sources—indicating the lengths to which Amazon was willing to go to ensure product selection and, in turn, growth.
Amazon famously operated on thin profit margins while its stock price soared. Selling below cost in order to drive out competition—so-called “predatory pricing”—is technically illegal, but it’s very hard to prove in court that a company is doing it. The House investigation uncovered several internal documents showing how committed Amazon was to selling below cost to undercut competitors, even ones on its own platform.
While Amazon often denies public reporting that it steals and copies technology from young startups, Amazon’s emails suggest that it does replicate some of the startups it meets with or invests in. An email out of Amazon’s Lab 126 regarding Ring indicated that Amazon “could easily replicate all of their hardware to be better, [and] operate in a more secure and robust infrastructure, for a LOT less than [the] cost of buying them.” In the same email chain, Amazon employees wondered “if we move forward with due diligence, then decide not to buy [Ring], could we have legal issues if we go into the market by ourselves as a competitor and materially impact their business?”
The subcommittee appears to be referring to a recent report from The Wall Street Journal in which several entrepreneurs said that “Amazon appeared to use the investment and deal-making process to help develop competing products.” While in this case, Amazon eventually did acquire Ring after an initial investment, the WSJ reporters spoke to other startups who say they weren’t so lucky.
In the absence of competition, Facebook’s quality has deteriorated over time, resulting in worse privacy protections for its users and a dramatic rise in misinformation on its platform.
The tricky thing about calling Facebook a monopoly is explaining how that harms consumers. Here, the subcommittee lays out its theory of the case: By taking over the social media market, often through acquisitions, Facebook has freed itself from the need to compete on quality. If it faced more competition, maybe the market would pressure it to clean up some of its most controversial attributes.
“He wanted Instagram to grow naturally and as widely as possible. But Mark was clearly saying ‘do not compete with us’ … It was collusion, but within an internal monopoly. If you own two social media utilities, they should not be allowed to shore each other up. It’s unclear to me why this should not be illegal. You can collude by acquiring competitors and forbidding competition.”
The subcommittee’s critique of Facebook focuses heavily on its acquisitions of up-and-coming rival social networks. Antitrust law is supposed to prevent mergers that reduce competition and consumer choice. Here, a former employee describes the conflict between Mark Zuckerberg and Instagram cofounder Kevin Systrom following Facebook’s purchase of the photo-sharing platform. If this account is accurate, it provides evidence of Facebook deliberately preventing Instagram from making improvements to compete for users—exactly the kind of anticompetitive behavior that antitrust is supposed to prevent.
In an interview conducted by Subcommittee staff, a former employee explained that as a product manager at Facebook “your only job is to get an extra minute. It’s immoral. They don’t ask where it’s coming from. They can monetize a minute of activity at a certain rate. So the only metric is getting another minute.”
In response to past antitrust inquiries, including ones in Europe and Australia, Facebook has tried to deny it has a monopoly by claiming it competes not just against other social networks, but against everything else users could do with their time and attention. Here, a former employee suggests that the company really does see itself as competing for all of human attention.
“If you can put them together, you can pull them apart. Facebook can always pull out the data that Instagram would not need. They spent the last year pushing the two products together, it just simply doesn’t make sense that they can’t work back to where they were in 2019. It’s not like building a skyscraper and then suddenly needing to knock the building down again.”
One of the biggest questions looming over the current spate of antitrust investigations is whether the tech giants will be forced to undo any of their past acquisitions. Facebook has argued that it would be almost impossible to split off subsidiaries like Instagram and WhatsApp at this point. This former employee disagrees.
“From a principal perspective it would be good if we could actually just crawl our product pages and then have the rank organically. Problem is that today if we crawl it will never rank.”
The subcommittee report accuses Google of unfairly using its dominance in search to give its other business offerings—like Froogle, now known as Google Shopping—an advantage over competitors who rely on Google search to reach customers. In this internal email, from 2009, a Google employee acknowledges that Froogle, which the company was featuring at the top of search results, would not earn that position if it had to play by Google’s general search rules.
Shortly after releasing Chrome, Google began promoting the browser in the top corner of the Google.com homepage … At the time, several Google employees expressed concerns internally that this promotion strategy was unfairly harnessing Google’s search dominance to boost Chrome. In an email among Chrome employees in 2009, one employee wrote, “I find the very, very high-profile promotion of Google Chrome on Google.com quite frankly, startling.”
Another theme of the report is Google’s use of its position in search to build “interlocking monopolies” in other areas. Apparently some employees had concerns about the tactic more than a decade ago.
In light of the extensive attention already given to this issue, a comprehensive examination of the digital advertising market is beyond the scope of this Report.
If you find it hard to keep track of how many markets Google dominates, well, so does the Antitrust Subcommittee. Apart from search, Google also controls up to 90 percent of various parts of the online advertising industry. Apparently we’ll have to wait to hear what Congress thinks about that.
Phillip Shoemaker, former director of app review for the App Store, similarly told Subcommittee staff that during his time at Apple an app developer proposed an innovative way to wirelessly sync the iPhone and Mac. The app did not violate any of Apple’s Guidelines, but it was rejected from the App Store nonetheless. Apple then appropriated the rejected app’s feature for its own offerings.
The subcommittee has no problems with the overwhelming success of Apple’s iPhone. Rather, it accuses Apple of exploiting its control over the App Store—the only place where app developers can reach roughly 55 percent of the American mobile market—to benefit itself at the expense of developers. Asked at the July hearing whether Apple reserves the right to use developers’ confidential information to compete against them, CEO Tim Cook said, “We would never steal somebody’s IP.”
“I’d like Apple to have a deeper relationship with Baidu,” Cook wrote, noting that “some of” the Baidu executive’s requests were “great starts.” In response to the Baidu executive’s request for “APP Review Fast Track,” Mr. Cook wrote, “We can set up a process where Baidu could send us a beta app for review and this can often speed up the process.”
Asked at the July hearing whether Apple gave Chinese search giant Baidu special treatment, Cook insisted, “We treat every developer the same.” These internal emails from 2014 suggest otherwise. Following the hearing, Cook told the subcommittee that all developers are equally free to submit formal expedited review requests.
The Big Picture
In addition to these specific reforms, the Subcommittee recommends that Congress consider reasserting the original intent and broad goals of the antitrust laws, by clarifying that they are designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.
This might sound boring, but it could actually be the most important line in the report. You don’t hear about antitrust cases very often, because it’s really hard for the government to win them. A key reason: In the 1970s, the Supreme Court decided to interpret the federal antitrust statutes as being designed exclusively to promote “consumer welfare.” That allows monopolists to keep monopolizing as long as prices stay low—even if that causes damage that doesn’t show up on retail receipts. Here, the subcommittee is suggesting that Congress pass a new law to override the Supreme Court’s precedents and kill the consumer welfare standard. That would have big implications across the whole economy, not just in tech.
Lauren Goode, Steven Levy, Eve Sneider, and Nicholas Thompson contributed to this story.
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