Concern that giant tech companies like Apple, Amazon, Facebook and Google are using their digital might to shape markets unfairly took a local turn Friday as a Congressional antitrust subcommittee held a hearing in Boulder.
Inside the Wittemyer Courtroom at the University of Colorado Law School, lawmakers including U.S. Reps. Ken Buck, R-Windsor, and Joe Neguse, D-Lafayette, listened to testimony from tech executives who called the tech giants bullies, extortionists and draconian. U.S. Rep. Ed Perlmutter, D-Arvada, also sat in on the hearing.
Boulder-based PopSockets, the snappy plastic phone gripper that comes in a multitude of designs, decided to end its relationship with Amazon because of the unwritten understanding that if Amazon discounted the products, PopSockets must pay the difference.
“Their response was ‘No, you’re not leaving the relationship,’” founder David Barnett said during the hearing. “While bullying is not technically illegal, when there’s bullying by an extremely successful company with all these partners that continue to do business with it, one has to ask how is it that a successful business maintains partnerships with so many companies by bullying them. It’s because of the power symmetry, of course, that companies tolerate this. They have to tolerate this.”
In a statement, Amazon said it has worked with PopSockets to address concerns and the company is free to choose which retailers to work with.
The U.S. House Judiciary’s Subcommittee on Antitrust, Commercial and Administrative Law met in Boulder as part of a series of hearings investigating the companies. (A field hearing by the Select Committee on the Climate Crisis was also held in Boulder in August.)
The antitrust committee is looking at the state of competition in the digital marketplace and it was the fifth in a series of meetings investigating online platforms, which included hearing comments from the major tech firms themselves last July.
“It’s become clear that these firms have tremendous power as gatekeepers to shape and control commerce online,” said U.S. Rep. David Cicilline, a Democrat from Rhode Island and chairman of the antitrust subcommittee.
Cicilline mentioned that he’s heard the horror stories of how an abrupt change in terms and conditions or a software update can destroy a small business or startup.
“And because these platforms actively compete with the very businesses that rely on them, what may be portrayed as an innocent change could very well be a deliberate strategy to crush any existing or potential competition,” he said.
Executives from tech companies Sonos, Basecamp and Tile also shared their qualms about competing on a gameboard created, managed and owned by these few large tech competitors. Even as they were successful at getting started and gaining an audience, the market has changed dramatically because a few companies hold so much power, said Patrick Spence, CEO of Sonos, which started selling a smartspeaker three years after launching in 2002, — well before today’s now-dominant competitors Amazon’s Alexa and Google Home.
“I’m concerned that the market conditions that allowed us to innovate and thrive over the past two decades are being endangered by the rise of a small group of dominant companies with unprecedented power,” Spence said.
Worse, he added, companies like Google are “using their power in one market to conquer or destroy adjacent markets.”
He said Google Home and Amazon’s Alexa now control 85% of the smartspeaker market “which we invented,” he said. Sonos earlier this month sued Google for infringing on five of its patents.
“The opportunity for these companies is to dominate yet another important consumer market and more critical, to use the smartspeaker to collect vast amounts of consumer data which can be monetized on their already dominant platforms,” Spence said.
David Heinemeier Hansson, a co-founder of the Chicago-based project management software Basecamp and the creator of open-source software Ruby on Rails, said his company operates in an environment where Google can learn a lot about a company’s competitive marketing campaign and how customers find it because Google dominates the search market. Companies must buy Google ads to make sure their products stand out to consumers searching for them.
“Google uses this monopoly to extort businesses like ours to pay for the privilege so consumers who search for our trademark brand names can find us because if we don’t, they will sell our brand name as misdirection to our competitors,” Hansson said. “Google feigns interest in recognizing trademark law by banning the use of trademark terms in ad copy but puts the onus of enforcement on victims and does nothing to stop repeat offenders, unless of course, the trademark terms belongs to Google itself. Then enforcement is swift and automatic.”
Google could not be reached for comment, but in a Reuters story in November, the committee released company responses that were requested earlier. Google denied favoring its own services, such as YouTube.
Cicilline said the committee will continue to investigate.
“It’s our responsibility to make sure that the marketplace is working, that it’s promoting competition, that it’s protecting innovation,” he said. “That’s the focus of this investigation, to figure out how to get this marketplace working and what are the consequences that are being experienced by entrepreneurs, small businesses and consumers as a result of this tremendous market concentration.”