TECH TITANS IN HOT SEAT
U.S. committee likens firms’ tactics to railway cartels of old during anti-trust hearing
As the CEOS of the largest and most ubiquitous technology companies in United States faced an hours-long grilling before the House Judiciary Committee’s anti-trust sub-committee this week, one of their interrogators looked back more than a century for a comparison.
Were Apple Inc., Facebook Inc., Google parent Alphabet Inc. and Amazon.com Inc. — the tech behemoths of our day — guilty of the same type of behaviour, committee chair Jerry Nadler mused, as the powerful U.S. railroad cartels of the late 19th century?
The railroads were brought to heel through fines and other measures after they were found to have violated anti-trust legislation by favouring their own operations, getting into lucrative new lines of business and squashing those who got there first, and exercising their monopolistic power to pick winners and losers among suppliers who relied on their services.
“Today, it is effectively impossible to use the internet without using, in one way or another, the services of these four companies,” Nadler said, calling some of the anti-trust sub-committee’s findings so far during a year-long examination of the tech giants “disturbing.”
In a riveting example of American political theatre on Wednesday, elected representatives lobbed questions at Facebook CEO Mark Zuckerberg, Google head Sundar Pichai, Amazon’s founder Jeff Bezos, and Apple Inc. chief Tim Cook — captivating even though the four CEOS were connected by video link.
The relentless grilling went on for more than five hours, with several members of the committee accusing the tech titans of wielding their market power unfairly to squeeze out competition, including through acquisitions, and to censor unpopular voices. They also questioned the firms about whether they were profiting from the global pandemic as demand skyrockets for their products and services including smartphones, online shopping and social media communications with so many people confined to or staying close to home — a suggestion all four tech titans rebuffed.
But those deflections were countered the following day by estimate-shattering earnings, which propelled most of the firms’ stock prices upwards. Apple shares were pushed so high the iphone maker briefly became the most valuable publicly listed company in the world, at US$1.76 trillion, pushing aside oil company Saudi Aramco.
Still, Wednesday wasn’t an entirely rough ride for the tech titans, with one Judiciary Committee member suggesting firms such as
Google and Amazon ought not to be broken up despite their obvious market power.
U.S. Representative Jim Sensenbrenner, a Republican from Wisconsin, warned that dismantling the dominant providers of internet search, online shopping, smart phones and social media would be disruptive and could ultimately have little effect. He pointed to the creation of “Baby Bells” following the breakup of AT&T in the 1980s — a failed bid to stimulate competition in the telecom business, which has reverted to a tight group of dominant players following a string of mergers and acquisitions.
However, pressure has been and continues to build on today’s tech behemoths. The U.S. Department of Justice and state attorneys general are preparing a to bring an anti-trust lawsuit against Google over its advertising business, according to numerous media reports. And regulators and competition authorities across Europe, the United Kingdom, and Australia have all been probing segments of the large, dominant tech firms.
On Thursday, Australia took action with the release of a draft code of conduct — to become law later this year — that will require Google and Facebook to start paying news companies whose content they feature on their platforms.
“It’s about ensuring that we have increased competition, increased consumer protection, and a sustainable media landscape,” Australian Treasurer Josh Frydenberg told reporters Friday in Melbourne, according to a Reuters report.
Some market watchers think the U.S. politicians landed solid punches during this week’s hearing in Washington, at least enough to hint at an impending crackdown.
“The most powerful moments came from well-researched analysis of the documentary evidence supplied to the committee and almost always involved allegations of anti-competitive behaviour,” said Michael Geist, a law professor at the University of Ottawa who holds the Canada Research Chair in internet and e-commerce Law.
“This cut across all four companies with allegations of efforts to limit competition or take unfair advantage of their powerful positions,” he said, adding that he thinks this line of inquiry “will have legs” and become “a focal point of potential action.”
In fact, Geist predicted that there will be a “dual” crackdown on the tech firms, with the United States taking the lead on anti-trust issues while Europe goes after governing the use of content and data.
“The EU has been heavily focused on content and data protection harms — misuse of personal information, hate speech, misinformation (and) I expect that to continue,” he said. “But … the anti-trust issues have a more direct link to the U.S. economy since it impacts other U.S. companies and U.S. consumers.”
Canadian authorities are likely to rely on these efforts, he said, even though this country’s competition watchdog has taken an active interest in what’s happening in the digital economy.
“I think Canada will struggle to go it alone on these issues since we’re a relatively small market with limited enforcement tools,” Geist said. “I expect to see some legislative or regulatory reforms, but also efforts to align (with) countries with similar concerns.”
During the questioning Wednesday by elected representative in the U.S., the tech CEOS were put on the defensive about how far-reaching their grasp is becoming. They rebuffed suggestions they are emulating the early railroad monopolies by using their market power to rake in huge profits and take command of new lines of business, squeezing out would-be competitors there.
But events that unfolded in the following 48 hours again challenged the rebuttals.
Amazon, for example, which started 26 years ago as an internet book seller and has grown into the largest online retailer in the world, posted its largest-ever quarterly profit on Thursday and, on the same day, announced a $10-billion project to build more than 3,000 satellites that enable high-speed broadband service. The project “is not the kind of initiative that can start small,” the company said in a blog post.
As was pointed out during the hearing on Wednesday, Amazon — run by Bezos, the world’s wealthiest person after surpassing Microsoft Corp. co-founder Bill Gates — has already branched out from its retail base into logistics, web services, subscription entertainment services, and “smart” voice-activated home technology.
But Kaan Yigit, president of Solutions Research Group, a Toronto-based consultancy with a focus on digital technology, said the tech titans should not be knocked for their success.
The “blowout” financial results this week could make it less likely — not more — that a potentially harmful case will be mounted against the business models of the tech giants amid the continuing pandemic, he said.
“I mean, we need positive news of companies making money because who else is going to employ people or keep the economy afloat?” Yigit said.
As for this week’s hearing, he said they were far from a knockout blow delivered to the tech firms. In fact, he characterized the showdown with U.S. politicians, which included the CEOS being routinely cut off mid-sentence only to be asked a searing follow-up question, as little more than “light sparring ” with “no major punches landed.”
“We have not heard what is fundamentally wrong with any of these companies other than the fact that they are big and large numbers of people use their products,” Yigit said.
“As much as there was griping during the sessions … this was also a forum for the CEOS to make the case about what and how they are contributing to American economy. And I saw those points got some good ink.”
We have not heard what is fundamentally wrong with any of these companies other than the fact that they are big and large numbers of people use their products.