Can tech giants’ tweaks stave off antitrust action?
Apple, Amazon, Facebook and Google are all making changes amid FTC scrutiny.
The regulators are coming, and big tech companies are trying everything they can to survive antitrust scrutiny.
Alphabet, Amazon, Apple and Facebook are under investigation on multiple fronts, and given their size, reach and power, it's unsurprising that the companies are trying whatever they can to deflect regulators. They're even going so far as to consider changes to their core businesses.
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"What's new about these proposals is that they seem directed at core aspects of the business that have been integrated for a long time," said Mark Lemley, professor at Stanford Law School who teaches about antitrust issues. "I think it's a sign that the companies are taking the antitrust threat seriously."
Here's a look at some of big tech's strategies — both confirmed and reported — how they might turn out, and whether they'll be enough.
Opening up the ecosystem
Apple is weighing whether to allow users to change the default browser and email app on iPhones, according to Bloomberg. If it's true, that would be a significant departure for the company that's notoriously pushy about its own apps for key services — which has been a sore spot for app developers who say they can't compete.
The development is "fascinating," according to antitrust lawyer Donald Polden, dean emeritus at Santa Clara University School of Law. He said the topic prompted a heated discussion with students last semester. "How can Apple get away with it when Microsoft got whacked for similar exclusionary practices?" they wanted to know, referencing the 1990s antitrust case that centered on Microsoft's bundling Internet Explorer browser with Windows. While the U.S. action fell short of breaking up Microsoft, the company was forced to offer a version of Windows that did not have IE as the default browser.
In another possible move that seems aimed at a complaint about Apple, Bloomberg reported that the company is considering letting third-party music applications stream to the HomePod. That's an issue over which music-streaming giant Spotify had submitted an antitrust complaint to European Union regulators last year.
Morgan Reed, executive director of Washington, D.C.-based ACT-The App Association, said the biggest companies, such as Spotify, have been complaining the loudest about Apple's default apps. He noted that Apple's App Store currently gives small app makers the same amount of space to promote their apps as big app makers, and said he hoped the company would keep its app marketplace "democratic," even in the face of pressure from big competitors.
Meanwhile, one change Amazon implemented last year in the United States was removing the restriction that third-party sellers could not offer lower prices elsewhere. Amazon did the same thing in Europe years ago after regulator pressure there.
It's a "smart move" by Amazon, Polden said, adding that the companies may be thinking that they ought to correct or address certain issues now so "they're not a 'gotcha' or a major point" that federal and state regulators can bring up against them in the future. He compared it to war, saying the companies' "right flank and left flank are both exposed to the enemy … [so] they better cover up what they can."
But Ed Rosenberg, an Amazon seller who offers tips to other sellers looking to resolve disputes with the online retailer, said the company continues to wield enormous power over its sellers.
Amazon's removal of the price-parity provision is "a win, I guess," Rosenberg said. But he said it is low on sellers' lists of concerns because most of them would rather be on Amazon's dominant platform more than anywhere else anyway.
If regulators were to ask Amazon sellers their biggest concern, he said it would be lack of due process when they are suspended by Amazon. Rosenberg said he understands that Amazon must be strict because there are some fraudulent sellers from all over the world on its platform. But he pointed to a recent poll by Jungle Scout, which makes software for Amazon sellers: 76% of sellers are concerned about the company shutting down their accounts for no reason.
"In [Amazon's] quest to protect the platform and to block these shady guys from ruining it, their policies tend to catch in their net legitimate U.S. sellers," Rosenberg said.
Blocking the breakup
Facebook's long-reported intention of more tightly integrating back-end technology of Facebook, WhatsApp and Instagram could have the very convenient consequence of making it more difficult to unwind the companies, Federal Trade Commission Chairman Joseph Simons has said. The FTC is considering blocking this interoperability, according to The Wall Street Journal.
"I do think trying to avoid a breakup by integrating the systems," Lemley said. "But I also don't know that a breakup along those vertical dimensions would solve the problems that worry regulators most about Facebook."
Those worries have to do with the company's handling of privacy, which some experts don't necessarily see as an antitrust issue.
But Polden, of Santa Clara University, said "antitrust is a useful device to get at some of these erosions, or failure to respect privacy."
As for Google, The Wall Street Journal reported earlier this month that the company is weighing whether to sell its third-party ad-tech business because of regulatory pressure from the Department of Justice and state attorneys general, which are conducting separate investigations into the company's ad business. But a Google spokesperson told the Journal that the company had no such plans.
"The [U.S.] agencies have made it clear that advertising practices are a central area of inquiry" like they were in Europe, Polden said, adding that he expects the regulators to be interested in Google's DoubleClick acquisition, preferential pricing, use of data collected while promoting advertising on Google search and more.
Will it work?
Experts expect the changes to keep coming, though none of the moves by themselves are likely to pacify lawmakers, regulators and others calling for big changes to big tech. The complaints also keep coming.
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Case in point: On Thursday, a coalition of labor unions — including the Teamsters and the Service Employees International Union — filed an FTC antitrust complaint against Amazon, asking the agency to investigate what it calls the company's anti-competitive behavior.
Polden said big tech's moves being made and considered are all "part of the strategy to avoid or contain possible liability in a government case against them following the investigations." In addition, he said, "I am also sure that each company's strategies are more complex … and will involve legislative lobbying and regulatory negotiation as well as media spin."