House nears conclusion of big tech antitrust investigation

The U.S. House Judiciary Committee held a seventh and final hearing on an investigation into the business practices of Amazon, Apple, Facebook and Google, laying the groundwork for potentially censorious new legislation.

During today's hearing, committee chairman David Cicilline (D-RI) provided an overview of the investigation so far, outlining recurring themes that could inform reforms to existing antitrust law, reports CNBC.

Expert witnesses also offered testimony on mergers and the need to separate businesses within an entity that might cause a conflict of interest. The latter consideration is of notable importance to Apple, which is under the microscope for promoting its own apps in the App Store.

According to the report, Cicilline discussed themes including the shifting of responsibility to companies to prove that mergers will not harm competition, separating business verticals to minimize conflicts of interest, enhancing enforcement agency resources, prohibiting "discriminatory behavior," and reversing court decisions that "changed the intention of Congress" on antitrust law.

A congressional aide told the publication that committee members will likely review the report in the coming days prior to a public release. Lawmakers are expected to take up the recommendations to introduce formal bills, though any proposed legislation is unlikely to proceed until the next Congress enters session.

Today's session was held two months after CEOs of America's biggest tech companies offered testimony and answered questions about their respective businesses.

Apple CEO Tim Cook faced relatively light scrutiny, but was grilled on mandatory App Store fees and pushing users to first-party apps instead of third-party solutions, among other issues.

"In the more than a decade since the App Store debuted, we have never raised the commission or added a single fee. In fact, we have reduced them for subscriptions and exempted additional categories of apps," Cook said in his prepared testimony. "The App Store evolves with the times, and every change we have made has been in the direction of providing a better experience for our users and a compelling business opportunity for developers."

Adding to the overarching government examination, Apple has recently faced intense pushback on App Store policy from developers. Most vocal among the bunch is Epic, which is waging an all-out legal battle reduce App Store fees and force Apple into allowing third-party app stores on the platform.

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3 Comments

chasm

said about 3 years ago

Bottom line: maybe there is a case to be made that 30 percent is too high, especially for top moneymakers. Maybe. But overall the App Store fees are standard, fair, and applied relatively equally around the industry.

Out in the real world, 30 percent for doing the work of selling a thing is considered very low. For example: the author of a book that is sold in the various mass markets (paper and e-book/audiobook) should expect to see around 10-15 percent of the purchase price (which is often heavily discounted, let's not forget) of the title -- meaning that the publisher, distributors, and sellers (bookstores and digital) take 85-90 percent. Artists selling CDs through mainstream channels get even less -- maybe a dollar per CD sold -- and streaming pays far, far less than that.

IOW, software is a digital media good: similar to books/ebooks, and records/CDs/streaming. The main difference from retail is there are fewer hands that need to take a cut, but the claim that resellers like Google and Apple should dramatically reduce their fees because they are large companies just doesn't hold any credible water. The App Store isn't just run off a Mac mini in a closet: Apple has spent billions on server farms, bandwidth infrastructure (which is not controlled by them), payment processing services, employees that maintain it all, and many other services it provides developers that all cost money. Yes, they charge more than it costs, but um that is the foundation of all businesses, and Apple isn't a charity. If they're "overcharging," then so is the rest of the industry -- but only Apple seems to get much scrutiny in this regard, even though they are hardly the only "walled garden." The growth in the profitability of the App Store comes mostly from the continued expansion of customers and their spending -- which you would think is obvious since Apple has never raised the commission or introduced new fees.

As for the antitrust claims, it will be interesting to see what the report reveals -- but I doubt there's really much there. Any bombshells would have been leaked by this point, and any severe actions are going to have a far more anti-competitive/harmful effect on US businesses than on foreign companies. Congress is traditionally loathe to damage the competitiveness of US-based companies, and there are few industries that are as completely US-dominated as the tech sector. The report might inspire some new legislation in minor areas, even presuming this present Congress isn't overthrown -- but there's clearly no big, obvious case of antitrust among these companies on the horizon, and the notion that Twitter/FB/Google et all are "censoring" certain voices is mostly fantasy (indeed, in extremist/violent/illegal cases there might need to be less, not more, access to social media platforms).

foregoneconclusion

said about 3 years ago

IMO, the 'Glass-Steagal' idea for separating business interests will be the one of most concern for Apple. Can't claim to know what the final proposal from this committee will look like, but they've made general statements about not allowing the platform owner to also compete on the platform. The problem there is how do you define "platform"? Is it an operating system like macOS? An application like Facebook? A search engine like Google? A game console like the Xbox? It will be interesting to see what that part of the recommendation ends up looking like, as it seems to be far more complicated of an issue with technology than it would be with banking...and the U.S. abandoned Glass-Steagal for banking back in the '90s.

flydog

said about 3 years ago

foregoneconclusion said:

IMO, the 'Glass-Steagal' idea for separating business interests will be the one of most concern for Apple. Can't claim to know what the final proposal from this committee will look like, but they've made general statements about not allowing the platform owner to also compete on the platform. The problem there is how do you define "platform"? Is it an operating system like macOS? An application like Facebook? A search engine like Google? A game console like the Xbox? It will be interesting to see what that part of the recommendation ends up looking like, as it seems to be far more complicated of an issue with technology than it would be with banking...and the U.S. abandoned Glass-Steagal for banking back in the '90s.

This discussion is academic because it won't happen. Historically, around 3% of all proposed legislation actually becomes law, and since January 2019 it's closer to 1%. 95% of proposed legislation doesn't even make it to a vote.

In this case, it's even less likely because Congress will never pass any law dictating what a business can charge or splitting up a business. That would be unprecedented and likely unconstitutional.

Congress could amend antitrust law to narrow the scope of relevant market and brooding the scope of unfair conduct. Then the Justice Department would need to file suit and prove that a violation occurred. While such a law be more likely to pass constitutional muster, the odds of it passing are zero because there simply aren't enough votes.

The more likely outcome will be a set of proposed laws that are more surgical in that they target specific conduct such as privacy practices. But unless whatever is proposed has strong bipartisan support, it will not even make it to a vote.

This is all political posturing ahead of an election (Cicilline is up for re-election this year). After November, you won't hear much.

And just FYI, Glass-Steagal was repealed in 1999. There have been multiple attempts to reinstate it, but all those efforts failed, even after the Great Recession when there was a pretty decent argument for reinstating it. And if Congress will not split up banks in the face of rampant malfeasance as there was before the banking collapse, they will not do it now with Apple when the only alleged harm is that developers aren't paid enough.