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Everyone suffers losses these days due to the lockdown — profits surge, businesses shut down and leave millions of employees to search for other options. A significant exception for negative businesses is tech giants which improved their sales during the pandemic and are expected to grow further. Amazon, Facebook, Google and Apple are among the tech giants whose influence once boosted the economy of the US with innovations and now harms it together with customers by building an unbreakable monopoly.
An epochal event happened on Wednesday 29th - the leaders of four tech giants were summoned to the Congress to answer the allegations and complaints from competitors which the lawmakers were thoroughly collecting during the year. All four CEO’s were answering the questions from congress representatives at the same time for more than six hours. If you feel like watching and analysing the long and barely efficient talk, we recommend the coverage by Digital Trends.
We’ll try to deliver it in a shorter way to highlight the main claims from the lawmakers and ways to answer them from the CEO.
The claims to the companies are different, but the central accusation which unites Facebook, Amazon, Apple and Google is their undeniable move towards monopoly on the tech market. With plenty of evidence that they are monopolists already, it’s still a long process to prove it juridically and break the companies up into smaller ones.
Among the claims to Amazon, Facebook, Google and Apple, we can name common violations of business ethics which leads to judicial processes:
- Conflicts of interest. Google and Amazon not only provide the platform for advertising and trade but offer their own product which often wins in unfair competition. It’s not very different for Apple and Facebook; all these companies are putting pressure on smaller competitors.
- Spreading bias and favouring certain political candidates to interfere with campaigns. Previously Facebook was involved in a high-profile case of Cambridge Analytica while other companies contributed to political campaigns with numerous donations. As this year is crucial for the US with elections coming, the questions and claims about the financing of personal preferences and facilitation of promo campaigns will come up again.
- Unauthorised access to users data or vague conditions of its use. Both claims are difficult to prove, but the lawmakers have reasonable doubts when Google and Facebook CEO’s declare that what they do with web traffic to defeat competitors is not a surveillance mechanism, but market research.
- Copying rivals products using their data. Especially famous for this claim is Amazon since it both produces and later promotes its own products which are surprisingly similar to the products of its rivals.
Let’s move from a general overview to each of the giants: what they did and why we can legitimately call them ‘cyber barons’?
Amazon - ‘’Customer obsession”
We’ve started from Amazon for a reason: its CEO Jeff Bezos is currently the richest person on Earth with a current net worth of $134,3B. Amazon continues to grow with amazingly stable rates: it adds up to 25% increase of revenue year-over-year (that’s nearly $300B) and the pandemic time doesn’t influence this success.
Amazon declares that everything in its policy is directed towards customer satisfaction: better products, lower prices and fast delivery. So they just behave according to it when launching Amazon products which become hot sellers and leaving no chance for similar products of third parties who use Amazon as a selling platform.
No one would blame Amazon for participating in the fair race, but Jeff Bezos admitted that data privacy of customers and sellers might be a concern. Amazon denies that it uses data from third-party sellers regularly to copy their products and eventually poach their customers. Though, Amazon doesn’t deny that it may happen and currently conducts an internal investigation.
So, the main accusation to Amazon is their strong involvement in the conflict of interest since they play on two sides being both a seller and a platform to sell. It doesn’t make any sense to compete with Amazon while they have all the marketing statistics: their product will be always better, cheaper and give more customer satisfaction just as Amazon promised. Absence of competition on the American market will do no good for the economy in a longer perspective - therefore, the Congress isn’t interested in the defensive speech of Jeff Bezos who says that Amazon provided an enormous number of working places.
Facebook - ”American dream”
The same suspicion of creating a monopoly situation and destroying the competitors with internal market knowledge had to answer Mark Zuckerberg. As well as Amazon, Facebook continually grows and increases its revenue - an estimated growth of this year is nearly 25% which turns into $75B of revenue. Amazing results and stability can be explained not only by great technologies and interesting products (Facebook owns Messenger, WhatsApp, Instagram and Oculus) but access to the massive amounts of clients data.
Facebook is designed in a way that no external observer can understand which data is collected, how it is used and stored. Therefore, we can’t blame the lawmakers for not asking the questions regarding Facebook data which could reveal its new practices of misconduct. But they did ask about conflicts of interest in which Facebook is constantly involved. Antitrust law should have prevented Facebook from buying Instagram since it’s a clear conflict of interest, but it didn’t happen.
Facebook can easily create a copy of the app or use its advertising mechanisms to shut down the rival or significantly slow down its development. Therefore, if Facebook decides to buy a company, it will be done sooner or later: this way, Facebook strengthens its influence and can’t be beaten by competitors because it provides numerous types of services. “Kill or be killed” - that’s the motto of Facebook when it comes to dealing with competitors, and the board has chosen to gather all of the social media attractions under one umbrella.
Mark Zuckerberg’s strategy in answering the questions from the lawmakers was sticking to the great story (similar to the one of Jeff Bezos). The story of the American dream. It’s the American laws which made development and growth of Facebook possible. Now it uses the same tools of competition, so what’s the problem? The problem is in the monopoly on the market, the Congress says, but Facebook fails to listen.
Google - “Multitasker”
If you locate the destinations, translate, advertise, search, email, listen to music and watch videos, most likely you are using Google services. Or Alphabet, to be more precise - a parent company of Google and the owner of Google, YouTube, Waze and more. Annual revenue of Alphabet is more than $150B, and it also steadily grows as the other three tech giants in this story.
Facebook and Amazon are already famous for scandals, but what’s wrong with ethics in Google? So-called market analytics from Google led to the bankruptcy of numerous companies. Within a relatively short time, Google can redirect the traffic from its rival to the product of Google with the help of suggestions and Google Ads. Travel industry lost millions of dollars after Google started to suggest the routes itself.
You don’t need to search for a specific website and its flight options; now everything is present in one place - Google. And the same goes for song lyrics, translation - in the majority of cases you will see Google ads or products at the top of the search line. And not always these suggested results will be best and relevant, which Google is trying to deny. Making the most of its profit on ads, Google continuously prioritises its own products and leaves smaller competitors out of the game.
Sundar Pichai, the CEO of Google, denied all the claims from the lawmakers regarding the monopoly and conflict of interest. According to Pichai, Google helped to lower prices for the customers being one of the competitors in big advertising race (together with Instagram, Walmart and others).
Yes, Google is a huge player in the marketing industry, but it is not alone - therefore, it’s not a damaging monopoly. It is hard to agree with Mr Pichai since the evidence on Google is very clear - it controls over 30% of the digital ad market in the US and uses this benefit to place its own ads in front of the same offers from competitors. Yet, Google still claims that it just provides the most relevant results, and it’s always the choice of a customer where to go. If you don’t believe in these excuses just as we do, check this experiment by TheMarkup. How long should you scroll to find a good piece of advice?
Apple - ”The gatekeeper”
The last, but not the least in this rank Apple completed the big four making AppStore a complicated for entrance pool of developers creations. A quick reminder: Apple’s revenue is nearly $270B, with 3,5% annual increase, which makes it a stable monopolist on the market.
During the congressional hearing, Tim Cooks was defending the position of Apple’s “security gate”, which means that all the apps which come through the App Store are carefully selected. What are the criteria of this selection was the question the lawmakers tried to figure out.
It turns out that developers have no influence on the App Store policy, which is constantly changing. Tim Cook, the CEO of Apple, claims that all the apps and their developers are treated evenly: if the policy is violated, Apple kicks out the app from the App Store. However, the policy isn’t that clear. Apple claims that some screen time applications were removed from the App Store for using the technology of surveillance, while the lawmakers argue that the apps with the same technology are still used in Saudi Arabia.
More questions appear when it comes to Apple’s products in App Store: again, similarly to Amazon, Apple launches the products which seem to be the clones of existing apps from other developers. Obviously, Apple denies it, but if you dig it up and read more reviews from those who create the apps and try to promote them, it becomes apparent. Apple not only takes 30% of revenue and makes the prices higher for average customers (having a monopoly for all the apps for iPhones) but makes its market hard to enter. Either you abide by the rules and agree that the policy can be changed at any time or lose your revenue and work only for the Android market.
That was a long story, right? And it is just a small piece of information on tech giants - the investigations in each of the companies are ongoing. We will update you on the eventual results of a congressional hearing in a long perspective - now Amazon, Facebook, Apple, and Google are so powerful that congressional interrogation served them as a PR campaign. What we can see now is that unethical practices are present in these companies for sure: presenting the conflict of interest as a good business model will do no good for us in the nearest future.