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Editor’s note: The following is excerpted from Winner Takes All: Case Studies in How Online Marketplaces Are Creating Modern Monopolies, by Seattle tech veteran Shirish Nadkarni.
The Big Tech companies (Amazon, Apple, and Google) have achieved monopoly or near monopoly power in their respective markets. They have abused their monopoly power in various instances to the detriment of smaller companies. This abuse has ranged from collecting market intelligence about competitors, to leveraging monopoly power in one market segment to strike favorable terms in another, to extracting excessive fees from companies seeking distribution on their platform. Through the House antitrust subcommittee, Congress has explored these abuses of power. However, Congress has not taken any concrete actions to stem the monopoly power of the Big Tech companies.
Misappropriation of Third-Party Data
Both Amazon and Google have been guilty of misappropriating third-party data and leveraging the data to quash third-party products. While Amazon claims to have established barriers for its private label group from accessing market-performance data of third-party products, there is sufficient evidence to show that Amazon employees have violated lax internal company policies to gain access to third-party data. For example, Amazon employees allegedly accessed sales data from Austin-based Upper Echelon products, which sells a popular office-chair seat cushion. In September 2019, Amazon Basics launched its own version of the office-chair seat cushion. Similarly, Google has leveraged its Android operating system to track usage trends and growth patterns of third-party apps on the Android platform, giving it key insights about various competitive categories of applications. Thanks to the European Union’s actions, Amazon has agreed to no longer misappropriate third-party data to build competing products.
Leveraging monopoly power across markets
All the Big Tech firms (Amazon, Apple, and Google) have leveraged their monopoly power in one market to gain dominance or favorable terms in another market. For example, Google leveraged its position in the Android market to establish Google Search and the Google Play Store as the default apps across all third-party Android handsets. In 2018, Apple introduced a Screen Time app, a new feature that allowed parents to track and control how much time their children were spending on their iPhones. Soon thereafter, Apple removed a number of parental-control apps from its App Store.
According to a Wall Street Journal investigative report, Amazon told smart thermostat maker Ecobee that it had to share data from its voice-enabled devices even when customers weren’t using them. Allegedly, Amazon told the company that if Ecobee didn’t share the data, that would affect its ability to sell its devices through the Amazon marketplace. In addition, Amazon told the company that it could potentially not retain Amazon’s certification on future models or have access to big selling events like Amazon Prime Day.
Subsidizing entry into other markets
Amazon is a prime example of abuse of this power. In 2010, Amazon was closely tracking Quidsi, the owner of Diapers.com, and identified Diapers.com as its largest and fastest-growing competitor in the online diaper and baby care space. Amazon was very concerned about the pricing pressure that the company was putting on it and its high level of customer service. According to the House antitrust report, Amazon executives took swift and predatory action in response to this competitive threat. Internal Amazon documents showed that the firm entered into an aggressive price war, in which Amazon was willing to bleed more than $200 million in losses on diapers in one month. Under extreme price pressure, the founders of Quidsi.com had no other option but to sell the company to Amazon.
Structural separation of businesses
To address the conflicts of interest identified, Congress should consider regulations that draw upon the two key components of its anti-monopoly toolkit: structural separations and line of business restrictions. Structural separation would prohibit a marketplace intermediary from operating in markets in competition with third-party sellers. Line of business restrictions would limit the markets that a marketplace could compete in. For example, Amazon could be asked to divest itself of its private-label business so that it couldn’t develop products that compete with third-party sellers.
There is good precedence for Congress to utilize its anti-monopoly powers to structurally separate business as it has done in the railroad and telecommunications industry. For example, in the late 1800s, Congress found that the railroad industry had entered the coal production industry and was utilizing its monopoly power to deprioritize the shipment of coal by independent producers. Subsequently, Congress enacted legislation to prohibit railroads from transporting any coal that the railroads produced.
Sometimes, it is not feasible to structure a line of business separately from its parent. In that situation, it would be beneficial for Congress to enact legislation to strictly prohibit the sharing of data between the parent and its lines of businesses and impose significant penalties for any violations. The Justice Department or the Federal Trade Commission should also investigate predatory pricing behaviors by large players to drive out smaller players from their markets. Subsequent mergers could also be prohibited where the acquiring company was shown to have acted in a predatory fashion.
Essential facilities and refusal to deal
There have been several instances where dominant platforms have utilized their monopoly position in a market to secure an advantage in another market where they are not a dominant platform. For example, Amazon threatened Ecobee that it would not certify its product for sale through its marketplace unless the company shared data about its usage with Amazon. To address this concern, the antitrust subcommittee has recommended that Congress consider revitalizing the “essential facilities” doctrine, the legal requirement that dominant firms provide access to their infrastructural services or facilities on a nondiscriminatory basis.
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