- The House Judiciary subcommittee on antitrust, commercial and administrative law released a major report on four companies: Apple, Amazon, Facebook and Google, saying that they all engaged in anti-competitive monopoly tactics
- Either via acquiring their competition, using self-preferencing tactics, or taking advantage of their massive stockpiles of consumer data, the report says that these companies have established and maintained dominance and have exploited their power to minimize competition.
- The subcommittee has suggested sweeping antitrust reform in response to this, an action that is supported by Democrats but opposed by Republicans.
- The companies have responded to this report, defending themselves and their practices.
Findings in Subcommittee Report
The House Judiciary subcommittee on antitrust, commercial and administrative law released a lengthy report on Tuesday accusing Apple, Amazon, Facebook and Google of engaging in anti-competitive tactics to enjoy monopoly power in their respective arenas.
The report was the result of a 16-month investigation into those companies and is around 450 pages long. The subcommittee has a Democratic majority and has suggested sweeping reform to antitrust laws as a result of their findings.
During the investigation, the CEOs of each company gave testimonies about their business practices and the evidence suggesting that they have exploited their power in digital markets in abusive ways. The report says their answers were “often evasive and non-responsive, raising fresh questions about whether they believe they are beyond the reach of democratic oversight.”
While the report notes that each company is different, it concludes that their business practices all have the same issues and that each acts as a gatekeeper in key channels of distribution.
“By controlling access to markets, these giants can pick winners and losers throughout our economy,” the report says. “They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.”
It also claims that these companies use their gatekeeper status to maintain their power by surveilling potential rivals so they can either buy them out, copy them, or cut out their competitive threats by other means.
“Whether through self-preferencing, predatory pricing, or exclusionary conduct, the dominant platforms have exploited their power in order to become even more dominant,” the subcommittee wrote.
“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,” the report adds. “Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price.”
Amazon and Facebook Acquisitions
The report says that Amazon got to the top by acquiring competitors, and now, the company’s control reaches across business lines “in ways that undermine free and fair competition.”
“As a result of Amazon’s dominance, other businesses are frequently beholden to Amazon for their success,” the report says.
Much of the subcommittee’s findings with Amazon pertain to its relationship with its third-party sellers. There are 2.3 million active third-party sellers on the platform, 37% of which rely on Amazon for their sole source of income. While Amazon publicly calls their third party sellers “partners,” documents studied in the report reveal that behind closed doors they are referred to as “internal competitors.” The report says this creates an inherent conflict of interest in the company, which then incentives Amazon to exploit its access to competing seller’s data and information.
The report also claims that Amazon’s ability to acquire so much of its competition has not only led to fewer consumer choices but has also reinforced its stockpile of consumer data.
“Amazon is first and foremost a data company, they just happen to use it to sell stuff,” a former employee told the subcommittee.
The report accused Facebook of similar acquisition and data exploitation tactics.
“The company used its data advantage to create superior market intelligence to identify nascent competitive threats and then acquire, copy, or kill these firms,” the report says.
“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.”
One of Facebook’s largest and most prominent acquisitions occurred back in 2012 when the social media giant absorbed Instagram. Instagram is now so massive that Facebook’s biggest competition is, in many ways, itself. A former Instagram employee said that the head of the app wanted Instagram to grow as widely as possible, which was discouraged by Facebook CEO Mark Zuckerberg, who did not want the photo-sharing app to compete with his social networking platform.
“It was collusion, but within an internal monopoly,” the employee said. “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 a company.”
Self-Preferencing at Apple and Google
When it came to Apple, much of the subcommittee’s findings had to do with the App Store. The report said that while the company’s ecosystem has “significant benefits” for both app developers and customers, the company still functions on an extreme and controlling bias. This control creates barriers for competition and allows Apple to discriminate against rivals so it can promote its own apps.
“Apple also uses its power to exploit app developers through misappropriation of competitively sensitive information and to charge app developers supra-competitive prices within the App Store,” the subcommittee said.
When it comes to Google, the report says that small businesses, entrepreneurs and major corporations alike depend on the web giant for traffic and have no alternate search engine to adequately serve as a substitute. The report accuses Google of conducting an “an aggressive campaign to undermine vertical search providers, which Google viewed as a significant threat.”
“Google appears to be siphoning off traffic from the rest of the web, while entities seeking to reach users must pay Google steadily increasing sums for ads. Numerous market participants analogized Google to a gatekeeper that is extorting users for access to its critical distribution channel, even as its search page shows users less relevant results,” the report says.
The report also says that Google uses anti-competitive contracts. For example after buying the Android operating system, Google used contractual restrictions so that Google’s monopoly could extend beyond desktop to mobile. Those contracts required Google apps to be pre-installed or given default status.
As a result of these findings, the subcommittee said that there is a “pressing need for legislative action and reform.” The report then laid out extensive and detailed suggestions, which would lead to some of the most sweeping antitrust laws against these tech giants. Those reforms include addressing anti-competitive conduct in digital markets, strengthening merger and monopolization enforcement, and improving the sound administration of the antitrust laws.
The report listed out dozens of potential policies to that could be in this kind of legislation, including enacting nondiscrimination requirements that would prevent these companies from favoring their products and boosting them ahead of rivals; a presumptive prohibition against future mergers and acquisitions by the dominant platforms; reasserting the anti-monopoly goals of the antitrust laws and their centrality to ensuring a healthy and vibrant democracy; and restoring congressional oversight of antitrust laws and bringing federal antitrust agencies to their full strength.
These recommendations come from House Democrats and are not fully supported by Republicans. While many on the right oppose much of what the Democrats have put on the table when it comes to this, some see it as a starting point for negotiations.
The tech companies, for their part, are all on the defense when it comes to the report’s findings and suggestions. All four are advocating against any legislation that would limit their practices and maintaining that none of their behavior has been anti-competitive. Now, as far as what these companies are saying, well they all seem to be on the defense.
“All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong,” Amazon said in a blog post.
Facebook told CNBC that the company is an American success story with plenty of competition.
“Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people. Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses,” the company added.
Apple released a statement with similar messaging to that of Amazon and Facebook.
“We have always said that scrutiny is reasonable and appropriate but we vehemently disagree with the conclusions reached in this staff report with respect to Apple,” the company said.
“We’ve built the App Store to be a safe and trusted place for users to discover and download apps and a supportive way for developers to create and sell apps globally.”
Google also put out a blog post addressing the report, saying that the suggestions laid in it are not best for the American people.
“Americans simply don’t want Congress to break Google’s products or harm the free services they use every day,” Google wrote. “The goal of antitrust law is to protect consumers, not help commercial rivals.”
See what others are saying: (CNBC) (New York Times) (Washington Post)
Robinhood Crypto Trading Crashes Twice as Dogecoin Multiplies in Value, Enraging Users
- Robinhood users found themselves unable to buy or sell cryptocurrency Thursday night, an issue reminiscent of the app’s decision to restrict GameStop trades earlier this year.
- While Robinhood resolved the problem within a matter of hours, it came amid a massive rally on Dogecoin, a cryptocurrency that started out as a joke. The app’s crypto services briefly went down again Friday morning as the rally continued.
- Robinhood has denied that its crypto trading outages were an intentional effort to drive down Dogecoin prices and instead blamed the outages on “unprecedented demand for Robinhood Crypto services.”
- By Friday morning, Dogecoin briefly soared to $0.45, more than 400% of the value it had at the beginning of the week and more than 4,500% of the value it had at the beginning of the year.
Robinhood Crashes Amid Dogecoin Rally
The joke cryptocurrency Dogecoin has surged more than 400% this week alone, but around 10 p.m. EST Thursday night, the free-to-trade app Robinhood tweeted that it was “experiencing issues with crypto trading.” In turn, that caused many of the app’s users to find themselves unable to execute trades.
Dogecoin first began to spike Tuesday ahead of the market debut of the cryptocurrency exchange Coinbase, which raised $86 billion in its first day of trading. That morning, one Dogecoin amounted to about $0.07. By midnight, it had doubled in value. Those gains continued Thursday evening when Dogecoin spiked to around $0.33.
That may not seem like much, but if a person invested $1,000 in Dogecoin when it was selling for around $0.01 at the beginning of the year, by Thursday evening, that person would be sitting on a small fortune of around $33,000 before taxes.
Robinhood Users Angry Yet Again
Many Robinhood users found themselves frustrated when they were unable to sell off their existing dogecoins, especially since the cryptocurrency’s value was rapidly falling.
In fact, within the matter of just over an hour, it had dipped to around $0.25. Using the last example above, that would mean thousands of dollars of missed opportunity.
“Are you going to cover my account?!?” one user asked Robinhood when she found herself unable to sell her dogecoins. “This is a technical error, not my own risk. Ive been trying to execute this transaction for almost two hours! None of my crypto comes up!”
Are you going to cover my account?!? This is a technical error, not my own risk. Ive been trying to execute this transaction for almost two hours!— JT (@JenninNYC) April 16, 2021
None of my crypto comes up! pic.twitter.com/rZ4qoXostn
This is not Robinhood’s only bout with controversy. Earlier this year, the company infamously blocked its users from buying GameStop stock during a frenzy that sent shares from under $20 to nearly $500 at one point; however, Robinhood still allowed users to sell their existing shares — a move that even if it lacked the intention, had the effect of attempting to drive share prices for GameStop down.
Though CEO Vlad Tenev later argued that the company “had no choice” but to restrict buying, Robinhood’s decision nonetheless sparked the ire of its users and even prompted Congressional investigations.
Many Robinhood users were quick to point that out Thursday when they once again found themselves unable to execute trades. Some even accused the company of more nefarious intentions.
Service Restored… Until It Went Down Again
At 11:46 p.m. Thursday night, Robinhood tweeted that crypto trading had been “fully” restored.
“Like others, we were experiencing unprecedented demand for Robinhood Crypto services, which created issues with crypto trading,” the company said. “We’ve resolved the issue and apologize for the inconvenience.
Multiple times since Thursday evening, the company has denied that it intentionally halted crypto trading to affect Dogecoin prices.
“Unprecedented demand for Robinhood Crypto services created temporary issues with crypto trading,” a Robinhood spokesperson told the New York Post Friday. “That’s it, plain and simple.”
On Friday morning, Dogecoin went on to spike at a current 52-week high of $0.45; however, it soon dipped back into the mid- to upper-thirty-cent range, where it remained around 3 p.m. EST.
Meanwhile, amid the surging demand, Robinhood experienced yet another crypto outage around 10:30 a.m. EST Friday. Just before 11 a.m., it said that trading had been restored for most customers.
See what others are saying: (New York Post) (Business Insider) (Coindesk)
Child Safety Advocates Urge Facebook To Scrap Plans for Instagram Kids
- Nearly 100 child safety experts and international organizations sent a letter to Facebook Thursday criticizing its plans to develop an Instagram app for children under 13.
- Facebook claims the app will offer parental controls and is meant to create a safer space for kids, who are often lying about their age to access the normal version of Instagram.
- Still, critics point out that children already on Instagram are unlikely to switch to a kids version. Many also cited concerns about screen time, mental health, and privacy, arguing that younger children are not ready for such a platform.
- U.S. Lawmakers expressed similar concerns earlier this month, saying, “Facebook has an obligation to ensure that any new platforms or projects targeting children put those users’ welfare first, and we are skeptical that Facebook is prepared to fulfill this obligation.”
Instagram for Kids
An international group of 35 organizations and 64 experts, coordinated by the Campaign for a Commercial-Free Childhood, released a letter Thursday urging Facebook to abandon its plans to release an Instagram app for kids under 13-years old.
Plans for Instagram Kids have been public for about a month after Buzzfeed News obtained emails about the app in mid-March. Since then, there have been widespread concerns about how such an app could affect children.
Thursday’s letter argues that a version of Instagram targeting under-13-year-olds raises concerns about privacy, screen time, mental health, self-esteem, and commercial pressure. Stephanie Otway, a spokesperson for Facebook, said the company understands the concerns presented by the Campaign for a Commercial-Free Childhood.
“We agree that any experience we develop must prioritize their safety and privacy, and we will consult with experts in child development, child safety and mental health, and privacy advocates to inform it,” she said.
“The reality is that kids are online. They want to connect with their family and friends, have fun and learn, and we want to help them do that in a way that is safe and age-appropriate. We also want to find practical solutions to the ongoing industry problem of kids lying about their age to access apps,” Otway added, noting the reality of how many children interact with age-gated apps.
Unlikely To Stop Children From Joining Regular Instagram
The idea that children would just switch to Instagram Kids received pushback from the Campaign for a Commercial-Free Childhood. In fact, the group’s executive director, Josh Golin, pointed out that most kids who are currently on Instagram are between 10 and 12-years-old, and they likely wouldn’t migrate over to Instagram Kids because it will be perceived as “babyish and not cool enough.”
”The children this will appeal to will be much younger kids,” Golin explained. “So they are not swapping out an unsafe version of Instagram for a safer version. They are creating new demand from a new audience that’s not ready for any type of Instagram product.”
It’s unknown exactly how the app would work, but it would feature content similar to what is allowed in other age-appropriate apps, such as YouTube Kids. One of the few details given out so far is that Instagram Kids will be ad-free and feature parental control options.
Concerns over Instagram Kids has also come from lawmakers. On April 5th Senators Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.), alongside Representatives Kathy Castor (D-Fla.) and Lori Trahan (D-Mass.), sent a letter to Facebook CEO Mark Zuckerberg expressing concerns that “children are a uniquely vulnerable population online, and images of kids are highly sensitive data.”
“Facebook has an obligation to ensure that any new platforms or projects targeting children put those users’ welfare first, and we are skeptical that Facebook is prepared to fulfill this obligation.”
See what others are saying: (TechCrunch) (BBC) (NBC News)
Retail Sales Jump Amid Stimulus Spending, Unemployment Claims Plunge To Pandemic Low
- The Commerce Department released a report Thursday recording a 9.8% spike in retail sales for the month of March.
- That surge was largely driven by stimulus check spending, with restaurant, sporting goods, clothing and accessory, and auto sales all being among the top-performing sectors in retail for the month.
- Coupled with that news, the Labor Department reported that 576,000 unemployment claims were filed last month — a pandemic low.
- That figure is still significantly higher than the roughly 200,000 weekly unemployment claims filed before the pandemic.
Retail Sales Spike
U.S. retail sales for the month of March jumped 9.8% from February, according to a Thursday morning report from the Commerce Department.
That spike is largely thanks to the most recent round of stimulus checks from Congress.
March was the best month of retail spending since May of last year, which at the time saw an 18.3% gain following the first wave of stimulus checks.
Sales in the bar and restaurant industry rose 13.4%, making them among the retail sectors that saw the biggest spikes last month. That’s largely a result of relaxed lockdowns stemming from the country’s current pace of around three million vaccinations a day. Meanwhile, sporting goods spending rose 23.5%, clothing and accessory sales rose 18.3%, and motor vehicle parts and dealer sales rose 15.1%.
“Spending will almost certainly drop back in April as some of the stimulus boost wears off,” wrote Michael Pearce, senior U.S. economist at Capital Economics, “but with the vaccination rollout proceeding at a rapid pace and households finances in strong shape, we expect overall consumption growth to continue rebounding rapidly in the second quarter too.”
Unemployment Hits Pandemic Low
The retail sales data came around the same time that the Labor Department released this past week’s unemployment figures, which dropped to a new pandemic low of 576,000 claims.
That’s a massive difference from almost exactly a year ago when 6 million people filed for unemployment in a single week. It’s also a significant decline from the 769,000 people that filed jobless claims last week, especially since some analysts had predicted there would be around 700,000 jobs lost with this week’s report.
That said, unemployment claims are still much higher than the around 200,000 a week that were being filed prior to pandemic closures.
“You’re still not popping champagne corks,” Diane Swonk, chief economist at the accounting firm Grant Thornton, said according to The New York Times. “I will breathe again — and breathe easy again — once we get these number[s] back down in the 200,000 range.”