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Saturday, October 31, 2020

Explained: The dominance of big tech

Why was the House of Representatives probing big tech companies? What are the findings? What has the panel recommended? What global impact could the US panel recommendations have?

Written by Aashish Aryan | New Delhi | Updated: October 11, 2020 10:56:13 am
Amazon CEO Jeff Bezos speaks via videoconference during a hearing of the House of Representatives committee in July. (AP Photo/ File)

On Wednesday, a US House of Representatives panel submitted the report of a bipartisan investigation into the working of Amazon, Apple, Google and Facebook. The 449-page report called for the big technology companies to be broken up and for a “presumptive prohibition against future mergers and acquisitions by the dominant platform”.

Why was the House of Representatives probing big tech companies?

These companies have been on the government radar in many countries for being big spenders and trying to steamroll competition by either buying out their rivals or pushing vendors to avoid working with their competitors. For example, the US Congress wanted to know from Apple if it had, in order to promote an app that allows parents to limit screen time for children, thrown out a rival app on the pretence that it was not safe.

As part of reviewing the state of competition online, the US House panel from June 2019 probed Apple, Amazon, Google and Facebook, and how they controlled the flow of data for themselves as well as their competition. It collected 1.3 million documents, listened to secret testimonies from several employees in these firms, and questioned company heads Jeff Bezos (Amazon), Tim Cook (Apple), Mark Zuckerberg (Facebook) and Sundar Pichai (Google) over the evidence that suggested the companies have exploited, entrenched and expanded their power over digital markets in anti-competitive and abusive ways.

The logos of Amazon, Apple, Facebook and Google. (Reuters Photos)

What are the findings?

The panel observed that the answers by Bezos, Cook, Zuckerberg and Pichai were often “evasive and non-responsive”. This, it said, raised fresh questions on the powers assumed by these big tech companies and whether they considered themselves “beyond the reach of democratic oversight”.

The panel said each of these companies was now acting as a “gatekeeper” over a key channel of distribution, which meant that they had full control over what went on in their respective domains. “By controlling access to markets, these giants can pick winners and losers throughout our economy. 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,” the chair of the House panel said in his remarks.

In a way, the panel said, these companies ran the marketplace for their respective domains, while also competing in it. And to ensure they retain the number one position, the companies have restored to “self-preferencing, predatory pricing, or exclusionary conduct”, it noted.

What has the panel recommended?

One recommendation is to push for “structural separations” of the big tech companies. What this essentially means is that the panel wants these companies to be broken into smaller companies to ensure that they would not be able to have as much influence as they have currently over the digital marketplace.

Another recommendation of the panel is that these companies be prohibited from operating in an “adjacent line of business”.

A third recommendation is that there should be a “presumptive prohibition” against big tech companies going for mergers and acquisitions. Zuckerberg, whose companies had bought Instagram and WhatsApp in some of the biggest deals in technology space, has been accused of using money power to outright buy competition and then pushing them aggressively against other competitors.

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What did the probe find about big tech influence in India?

The role of the of big tech companies in stifling competition in India finds mention in the US panel’s report. It refers to the various antitrust probes going on against Google in India. Google has had run-ins with regulators, especially the Competition Commission of India (CCI).

In the last two years, the CCI has raised issues with Google’s commercial flight search option, its dominant position in the search marketplace, the abuse of its dominant position in the Android phone and smart television market, and others.

(From left) Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Google CEO Sundar Pichai and Facebook CEO Mark Zuckerberg. (AP Photo/Pablo Martinez Monsivais, Evan Vucci, Jeff Chiu, Jens Meyer, File)

In 2019, for example, India’s antitrust body had held Google guilty of misuse of its dominant position in the mobile Android market and said the company had imposed “unfair conditions” on device manufacturers to prevent them from using other operating systems. In its 14-page order, CCI had held that requiring mobile phone makers to pre-install the entire Google mobile services pack was unfair. Recently, Google has also been accused of following a high and unfair commission mechanism for apps listed on its Play Store.

With the US House panel focusing on the dominance of big tech companies across the world, the companies are likely to come under more scrutiny from regulators including the CCI in India. In coming years, as India plans to regulate the use of personal and non-personal data, these tech companies could face scrutiny over how they manage and use the data they collect from users in India, according to experts.

Amazon and Facebook, which are trying to enter the retail space in India, are also likely to be under the lens for the way they price their products and the space they give/deny to their competition.

What global impact could the US panel recommendations have?

Although the recommendations of the House panel are not legally binding on either the US government or any other agency, it could set the ball rolling in the direction of more controls.

For example, the panel has said Congress should bring back its culture of probing and asking tough questions of companies that seem to break monopoly and anti-competitive laws. It has also said the law on vertical mergers and overriding problematic precedents in the law should be given a rethink.

These recommendations may not impact any big tech companies directly as of now, but could increase the scrutiny of regulators and probe agencies worldwide.

Apart from increased federal scrutiny, big tech companies are also likely to face more questions and probes from states in the US, which have in the recent past hauled these firms up for not doing more to control their influence on day-to-day aspects of life.

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