Trust busters
The global investigation into big tech's market dominance
Trusty is an email newsletter exploring how technology and tech policy are changing the ways people build trust online. If this is your first time reading, make sure to subscribe below to keep up with the latest issues.
Programming update: moving forward, Trusty will come out each Thursday. Also, I’ll be testing out some new formats and content and would love input from you all! Take the survey below and let me know what you’re most curious about in the tech and policy space.
Hey Trustees,
This week, Apple was busy with its iPhone launch event, Amazon was creating 30,000 jobs, Google was strategically leaking details about its Pixel 4 smartphone, and Facebook was working to prevent suicide.
However, two of the biggest stories that dominated the tech news cycle didn’t bode as well for these companies:
On Monday, 50 attorneys general announced an unprecedented “multistate bipartisan antitrust investigation” into Google’s business practices.
Last Friday, eight states and the District of Columbia joined together on a separate probe into Facebook.
This week’s issue was going to look at the 2020 candidates’ positions on tech issues, but since industry observers from D.C. to Silicon Valley to Wall Street seem fixated on these investigations, I wanted to offer some context. Read on for an overview of the key players and investigations to follow as the conversations around big tech and antitrust continue.
But first, some news:
Faceoff
Article: Alexandra Levine / Politico
What happened: as Congress returns from its summer break, a coalition of 30+ civil rights and consumer advocacy groups have launched a new campaign aimed at pressuring lawmakers to ban law enforcement’s use of facial recognition technology.
Why it matters: Democratic primary candidate Sen. Kamala Harris rolled out her criminal justice reform agenda Monday, which proposed “regulations and protections” to prevent racially biased uses of the technology, but stopped short of calling for a full ban, as Sen. Bernie Sanders’ plan did in August.
What’s next: in Congress, the House Oversight Committee is considering legislation that would freeze federal funding for new or expanded uses of facial recognition by federal agencies, but the coalition wants it to go further by banning current uses as well.
Others Need Not Apply
Article: Jack Nicas + Keith Collins / NYT
What happened: since 2013, Apple’s apps have consistently appeared higher in its App Store search results than competitors’ apps, according to an analysis from the New York Times. For at least 700 search terms, Apple’s own products got the top spot, even when unrelated to the search. For some searches, users saw 14 Apple apps before seeing any from other publishers.
Why it matters: Apple is both a referee and competitor in its lucrative App Store, which generated $50 billion in sales last year. This analysis suggests the company has been leveraging that power to give itself an unfair edge over competitors by favoring, say, Apple Music over Spotify or Apple Maps over Google Maps in search results.
What’s next: if true, this analysis could bolster regulators’ antitrust cases against Apple — read on for more about that. Also, the Supreme Court in May allowed a massive class action antitrust lawsuit against Apple to proceed. The case could challenge Apple’s use of its monopoly power to take a 30% cut of developers’ revenue from App Store downloads.
And now, a highlight reel of big tech, big regulators and antitrust:
Trust busters
Over the past few years, tech companies have increasingly been accused — and in some cases, found guilty — of using their market dominance to engage in business practices that illegally harm consumers or undermine competition. (Need a primer on what antitrust is and why it matters? Click here).
As awareness of big tech’s influence has grown, consumers, competitors, advocacy groups, academics, politicians and lately, regulators, have all raised concerns about whether that influence is too highly concentrated. There are some notable exceptions, but most of the current ire is directed at the big four, or “GAFA,” tech companies: Google, Amazon, Facebook and Apple.
Regulators in the European Union, led primarily by Margrethe Vestager, have been quicker and more aggressive in bringing antitrust cases as well as cases under Europe’s new data privacy law, GDPR (Google has already faced $9.5 billion in fines from the EU since 2017). The U.S. is beginning to follow suit, but fragmented legal and regulatory environments have led to a confusing web of investigations, settlements, lawsuits and task forces coming from multiple federal agencies, congressional committees and state attorneys general aimed at various companies.
To break things down, let’s look at the major investigators and investigations currently underway in the U.S. and EU. This is just a slice of the conversation around antitrust and big tech, but hopefully it will help you keep things straight when the next headline breaks.
The Investigators
Federal Trade Commission
U.S. / Federal / Executive
What it is: the FTC’s mission involves “protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices.” It is one of two key federal agencies tasked with looking into potential violations of U.S. antitrust law by the tech industry, via its Bureau of Competition.
What it’s doing: the FTC launched a 17-person “task force” in February to investigate “potential anticompetitive conduct” by tech companies and take legal action if/when necessary. It also launched a probe into Facebook and its past moves to acquire competitors.
Who to know:
Joe Simons, Chairman (head of the FTC).
Bruce Hoffman, Bureau of Competition Director (leads the agency’s antitrust work).
Department of Justice
U.S. / Federal / Executive
What it is: the DOJ is the nation’s top law enforcement agency and handles all varieties of legal issues. Its antitrust division has a similar mandate as the FTC’s Bureau of Competition, and the two agencies’ jurisdictions sometimes overlap.
What it’s doing: in July, DOJ launched a wide-reaching investigation into whether and how major tech companies have “reduced competition, stifled innovation, or otherwise harmed consumers” and said it will look into “search, social media, and some retail services online.”
Who to know:
William Barr, Attorney General (head of the Justice Department).
Makan Delrahim, Assistant Attorney General for the Antitrust Division (leads the agency’s antitrust work).
House Judiciary Committee
U.S. / Federal / Legislative
What it is: this powerful congressional committee, currently controlled by Democrats, deals with various legal issues, but its 13-member Subcommittee on Antitrust, Commercial and Administrative Law has specific jurisdiction over antitrust.
What it’s doing: in June, the committee launched a bipartisan investigation into “competition in digital markets,” noting its concern over “a small number of dominant, unregulated [tech] platforms.”
Who to know:
Rep. Jerrold Nadler (D-NY), Chairman (ultimately has control over the committee’s actions).
Rep. David N. Cicilline (D-RI), Antitrust Subcommittee Chairman (will lead the subcommittee’s hearings during the investigation).
State Attorneys General coalitions
U.S. / State / Executive
What they are: similar to how the federal government has William Barr, states, territories and D.C. also have attorneys general, and they’ve become increasingly important as Congress struggles to make progress on new legislation. Often, multiple states will form coalitions to bolster their political leverage and pool resources when bringing legal actions or investigating potential violations of state law.
What they’re doing: on Monday, an unprecedented coalition of 48 states, D.C. and Puerto Rico came together to launch an investigation into Google’s “overarching control of online advertising markets and search traffic.” Also, on Friday, an eight-state coalition said it would look into whether Facebook “endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”
Who to know:
Ken Paxton, Texas Attorney General (will lead the Google probe).
Letitia James, New York Attorney General (will lead the Facebook probe).
European Competition Commission
EU / Executive
What it is: the European Commission is the executive arm of the European Union, and its competition division has jurisdiction over antitrust issues across the region. The EU itself can open investigations, as can the antitrust authorities in any of its member states.
What it’s doing: the European Competition Commission has been one of the most activist regulators of the tech industry worldwide when it comes to antitrust, and it’s currently investigating potential violations around:
Amazon using the data it collects from sellers to give an edge to its own brands;
Apple favoring its own App Store offerings over competitors’ apps;
Google leveraging its dominance in search to steer traffic to its job search tool;
Facebook crowding out competitors with its Libra cryptocurrency project.
Who to know:
Margrethe Vestager, Competition Commissioner and Executive Vice President for Digital (Vestager has held the former position since 2014, and on Monday was appointed for another five-year term in addition to gaining new powers in her new role as the EU’s digital czar).
The Investigations
Antitrust investigations often begin behind closed-doors, with regulators sending requests for information directly to the company (or its competitors). So, while agencies do sometimes make public announcements, investigations are often made public through companies’ quarterly earnings filings or media reports.
50 Attorneys General → Google
Became public: September 9, 2019
Investigator: attorneys general from 48 states, D.C. and Puerto Rico
Companies: Google
Scope: the coalition plans to look into “Google’s overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers.”
9 Attorneys General → Facebook
Became public: September 6, 2019
Investigator: attorneys general from 8 states and D.C.
Companies: Facebook
Scope: the coalition plans to look into “whether Facebook’s actions may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”
European Competition Commission → Google
Became public: August 27, 2019
Investigator: European Competition Commission
Companies: Google
Scope: in a speech, Margrethe Vestager said the commission is looking into whether Google broke EU competition rules by favoring its own “Google for Jobs” tool, drawing parallels to a similar practice the company employed with its comparison shopping tool, for which the EU fined it $2.7 billion in 2017.
European Competition Commission → Facebook
Became public: August 20, 2019
Investigator: European Competition Commission
Companies: Facebook
Scope: Bloomberg reported that the EU sent out an information-gathering questionnaire regarding its concerns over “possible competition restrictions” created by the “governance structure and membership” of Facebook’s cryptocurrency initiative, the Libra Association.
FTC → Facebook
Became public: July 24, 2019
Investigator: FTC
Companies: Facebook
Scope: in its latest earnings report, Facebook said the FTC had opened a probe that potentially involves its “social networking or social media services, digital advertising, and/or mobile or online applications.” The Wall Street Journal also reported the FTC is looking at past acquisitions like Instagram and WhatsApp, which could have massive implications.
DOJ → GAFA
Became public: July 23, 2019
Investigator: DOJ
Companies: (likely) all GAFA companies
Scope: DOJ announced it’s investigating “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”
European Competition Commission → Amazon
Became public: July 17, 2019
Investigator: European Competition Commission
Companies: Amazon
Scope: the commission said it will investigate “whether Amazon's use of sensitive data from independent retailers who sell on its marketplace is in breach of EU competition rules.”
European Competition Commission → Facebook
Became public: July 2, 2019
Investigator: European Competition Commission
Companies: Facebook
Scope: MLex, a legal media outlet, reported that the commission is looking into whether Facebook leverages data from its suite of apps to unfairly stifle competition.
FTC → Amazon + Facebook
DOJ → Apple + Google
Became public: June 6, 2019
Investigator: FTC + DOJ
Companies: all GAFA companies
Scope: according to a report from Reuters, the FTC and DOJ have negotiated a (highly unusual) deal where the FTC will take the lead on potential investigations involving Amazon and Facebook, while the DOJ will take point on Apple and Google. However, the DOJ’s announcement in July seemed to indicate each agency may be undertaking multiple investigations into big tech.
House Judiciary Committee → GAFA
Became public: June 3, 2019
Investigator: House Judiciary Committee
Companies: all GAFA companies
Scope: the committee said it will focus on: “documenting competition problems in digital markets; examining whether dominant firms are engaging in anti-competitive conduct; and assessing whether existing antitrust laws, competition policies, and current enforcement levels are adequate to address these issues.”
European Competition Commission → Apple
Became public: May 5, 2019
Investigator: European Competition Commission
Companies: Apple
Scope: the Financial Times (subscription required) reported that the EU will launch a formal investigation in response to a complaint from Spotify alleging Apple was “tilting the playing field to disadvantage competitors.”
The takeaway
The above list is hardly exhaustive. For example, regulators in the UK are investigating Google and Facebook, while Germany recently settled a case with Amazon. But it should offer a sense of the number of different legal battlefields where these companies are currently waging wars and which regulators are most frequently involved.
The landscape has evolved significantly in the past few years, as awareness grows about the tech industry’s influence and regulators face stronger political pressure to crack down on anticompetitive practices.
Attention has so far been mostly on European regulators. With Vestager newly empowered, that will likely continue, but may shift gradually as investigations in the U.S. begin to bear fruit.
Tech Tip of the Week
Opening a new app on your desktop? Use a keyboard shortcut to save time. Windows users, press the windows key (⊞ ) and start typing the application name, then press enter to launch it. Mac users, press CMD + SPACE to open Spotlight and type your search there.
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