Protocol | Policy

Senators don't want Amazon and Google to take over home devices, too

At a hearing, lawmakers from both sides of the aisle said they didn't want the companies to become even more dominant than they already are.

Nest Audio speakers of different colors lined up

In the midst of a fervor for antitrust, lawmakers want to make sure Amazon and Google face competition in the smart device market.

Photo: Google

Lawmakers warned Amazon and Google on Tuesday that they don't want to see the companies take over the smart home device market.

"In home technology we see some of the most powerful firms that dominate tech today poised to dominate platforms of the future," said Democratic Sen. Amy Klobuchar, the chair of a subcommittee holding a hearing on competition among voice assistants, smart speakers, connected TVs, thermostats and other devices.

She and other lawmakers on the panel said the session was an effort that could result in legislation to get ahead of potential problems in a rapidly expanding market rather than waiting for those issues to become dire. Concern came from Democrats and Republicans that the giant companies could use their power to keep rivals off of devices, boost their own offerings and squash upstarts.

The hearing came at the beginning of a new moment in tech antitrust in the United States: Earlier on Tuesday, the Senate confirmed Lina Khan, a critic of competitive practices in Big Tech who helped build a movement to reform antitrust law, to serve on the Federal Trade Commission in a bipartisan vote. Klobuchar announced during the hearing that President Joe Biden had designated her the agency's chair.

Last week, the leaders of the House's antitrust subcommittee that probed competition by Apple, Amazon, Facebook and Google also released a long-awaited set of bipartisan bills that represent some of the most serious proposals to alter antitrust law in decades. Perhaps the most controversial bill would allow government enforcers to seek to break up big digital platforms when "conflicts of interest" exist between its business lines.

European regulators also signaled earlier in June that they had concerns about competition among IoT devices that could soon lead to the opening of new competition cases.

"Big Tech already controls nearly everything we do online," said Sen. Mike Lee, the top Republican on the subcommittee, during the hearing. "Are we now willing, for the sake of some minor convenience, to give them control over our homes as well?"

"Surely we already know enough to know that this isn't going to end well," Lee added.

Firewalls and restrictions

Among the concerns that senators raised at the hearing was that Amazon or Google could erect technical barriers to competitors' services working on devices, or that the companies could stop devices from working together. Amazon could theoretically block competitors to its Alexa voice assistant from working on its Echo devices, for instance, or could have the speakers push owners to replenish their empty refrigerators with Whole Foods groceries rather than wares from a supermarket that Amazon doesn't own.

The lawmakers also worried that the dominant firms could use their financial might to subsidize subpar offerings, or extract information on rivals working on their platforms and use the data to compete against them.

"It's an environment, as a result of that conflict, that is rife with exploitation and appropriation every bit as serious as in the days of the oil well titans or the railroad behemoths," said Democratic Sen. Richard Blumenthal, who called for "lines-of-business restrictions and data firewalls to prevent Big Tech from weaponizing those troves of sensitive data to further their own business interest and squash competition."

In many ways, the lawmakers appeared to worry that Amazon, Google and other big tech companies would repeat the steps that have already led them to become dominant in other digital markets. Google in particular faces government antitrust lawsuits over its distribution of search and its giant ad tech operation. It says it faces tough competition and focuses on improving its offerings for users.

In the hearing, representatives for Amazon and Google touted their efforts to try to ensure that devices and services could work together and cited the variety of other companies seeking to make devices and services for smart home systems.

"There's a robust conversation happening across the industry to try to address some of these issues," said Wilson White, a senior policy official at Google, calling openness a corporate "north star." Yet White admitted that their company's approach to working with rivals and partners is evolving, and he alluded to worry that fully-open digital platforms could raise privacy concerns.

The senators also heard from a representative from smart speaker maker Sonos, a longtime Google critic and competitor.

Eddie Lazarus, the company's chief legal officer, said consumers should be able to use the biggest voice assistants on the same device. He added that Amazon's current partnerships with other companies are "just an on-ramp into the Amazon ecosystem now, because you can't mix-and-match between the big companies."

Following the hearing, Lazarus told Protocol that he was encouraged by nonpartisan nature of the hearing. "They came well prepared," he said. "They were sending a signal that they intend to craft some legislation." Lazarus said that he walked away believing that it could lead to real action. "I think this is a singular moment in time from a legislative standpoint," he said.

Klobuchar has previously introduced her own detailed proposals to rein in Big Tech's power and published a book on the subject earlier this year. Her bill to boost fees for mergers also recently passed the Senate.

While Klobuchar's proposals didn't go as far as those in the House, lawmakers from both chambers are working together to advance legislation, and Lee also unveiled his opening legislative bid on Monday. His bill would tighten rules around mergers while codifying that antitrust cases should focus on harm to consumers in the form of increased prices, restricted output and other economic measures.

The hearing represented a sequel to earlier testimony on mobile app stores in April. During that hearing, Klobuchar and Lee expressed bipartisan frustration with Google and Apple as developers spilled their longtime allegations of bullying in public testimony.

"It's time to get moving, and we're ready to go," Klobuchar said at the end of Tuesday's session.

Janko Roettgers contributed to the reporting.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

The way we work has fundamentally changed. COVID-19 upended business dealings and office work processes, putting into hyperdrive a move towards digital collaboration platforms that allow teams to streamline processes and communicate from anywhere. According to the International Data Corporation, the revenue for worldwide collaboration applications increased 32.9 percent from 2019 to 2020, reaching $22.6 billion; it's expected to become a $50.7 billion industry by 2025.

"While consumers and early adopter businesses had widely embraced collaborative applications prior to the pandemic, the market saw five years' worth of new users in the first six months of 2020," said Wayne Kurtzman, research director of social and collaboration at IDC. "This has cemented collaboration, at least to some extent, for every business, large and small."

Keep Reading Show less
Kate Silver

Kate Silver is an award-winning reporter and editor with 15-plus years of journalism experience. Based in Chicago, she specializes in feature and business reporting. Kate's reporting has appeared in the Washington Post, The Chicago Tribune, The Atlantic's CityLab, Atlas Obscura, The Telegraph and many other outlets.

Protocol | Workplace

How to make remote work work

Hofy made an early bet that COVID-19 would have a long-term impact on workplaces. The company recently raised $15.2 million for its remote workforce equipment management solution.

Hofy recently raised $15.2 million for its remote workforce equipment management service.

Photo: Jannis Brandt/Unsplash

It's your new employee's first day of remote work, but their laptop hasn't shown up yet. Not a good look.

This very 2021 persistent problem is part of why Hofy, a remote workplace management tool, recently raised $15.2 million to help companies deploy laptops, chairs, desks and other physical equipment to their remote employees. The idea for Hofy, which is launching out of stealth today, emerged in the early days of the COVID-19 pandemic — before lockdowns went into effect in the U.S. and the U.K. Hofy's co-founders, Sami Bouremoum and Michael Ginzo, had a feeling that COVID-19 would have a long-term effect on society.

Keep Reading Show less
Megan Rose Dickey

Megan Rose Dickey is a senior reporter at Protocol covering labor and diversity in tech. Prior to joining Protocol, she was a senior reporter at TechCrunch and a reporter at Business Insider.

Protocol | Policy

Tech giants want to hire Afghan refugees. The system’s in the way.

Amazon, Facebook and Uber have all committed to hiring and training Afghan evacuees. But executing on that promise is another story.

"They're authorized to work, but their authorization has an expiration date."

Photo: Andrew Caballero-Reynolds/AFP via Getty Images

Late last month, Amazon, Facebook and Uber joined dozens of other companies in publicly committing to hire and train some of the 95,000 Afghan refugees who are expected to be resettled in the United States over the next year, about half of whom are already here.

But nearly two months since U.S. evacuations from Kabul ended and one month since the companies' public commitments, efforts to follow through with those promised jobs remain stalled. That, experts say, is partly to do with the fact that the vast majority of Afghan arrivals are still being held at military bases, partly to do with their legal classification and partly to do with a refugee resettlement system that was systematically dismantled by the Trump administration.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Protocol | Fintech

How European fintech startup N26 is preparing for U.S. regulations

"There's a lot more scrutiny being placed on fintech. We are definitely mindful of it."

In an interview with Protocol, Stephanie Balint, N26's U.S. general manager, discussed the company's approach to regulations in the U.S.

Photo: N26

N26's monster $900 million funding round announced Monday underlined the German startup's momentum in the digital banking market.

Stephanie Balint, N26's U.S. general manager, said the funding will be used for expansion and also to improve "our core offering to make this the most reliable bank that our customers can trust," she told Protocol.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Latest Stories