Ahead of antitrust hearing, tech CEOs defend their companies
Heads of Amazon, Apple, Facebook and Google say their companies have lots of competition and are spearheading U.S. innovation
The chief executives of Amazon, Apple, Google and Facebook will seek to convince a House panel Wednesday that their companies face stiff competition, do not wield too much power, and ultimately benefit the U.S. economy in ways that smaller companies cannot.
In testimony released ahead of the noon hearing before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law, Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Google’s Sundar Pichai argue their platforms do not hold dominant positions in their respective markets, and that they are good for consumers.
The executives also will frame their companies as the product of American ingenuity and essential to the country’s dominant position in the global economy.
The four men face off with a subcommittee chairman, Rep. David Cicilline, D-R.I., who is skeptical of those claims. Cicilline believes the companies possess the means and incentive to undercut competitors, and should be subject to greater antitrust scrutiny.
For that reason, the prepared testimony signals a common strategy among the executives: A strong defense, albeit a respectful one, is the best offense.
“I am here today because scrutiny is reasonable and appropriate,” Cook plans to say. “We approach this process with respect and humility. But we make no concession on the facts.”
Bezos will argue that “just like the world needs small companies, it also needs large ones.”
“There are things small companies simply can’t do,” his testimony reads. “I don’t care how good an entrepreneur you are, you’re not going to build an all-fiber Boeing 787 in your garage.”
In a move designed to appeal to lawmakers’ political sensibilities, Google’s Pichai will highlight examples of small business owners across the country, including a bakery in New York City, a fitness studio in Austin, Texas, and a digital marketing firm in Urbana, Ohio, using Google’s advertising, analytics, and calendar tools, as well as YouTube to reach their customers and grow their businesses.
“I am deeply proud that because of our tools, businesses on Main Street can compete in a way that wasn’t possible 20 years ago, including globally,” Pichai plans to say.
Pichai also will highlight the company’s key role in developing advanced technologies — artificial intelligence, quantum computing, self-driving cars among others — that both Republicans and Democrats see as vital to sustaining American power against China’s growing might.
“At the end of 2019, our R&D spend had increased almost 10 times over 10 years, from $2.8 billion to $26 billion,” Pichai will say. “We’ve invested over $90 billion over the last five years.”
The hearing — the culmination of a 13-month bipartisan investigation of the market power of digital platforms and whether that market power violates antitrust laws, which are designed to guarantee competition and protect consumers from harm — will be a historic affair.
But questions remain as to whether lawmakers will stick to questions about antitrust or branch out into other lines of inquiry not related to antitrust, such as online disinformation, data privacy, or perceptions of anti-conservative bias on social media.
[Related: Big antitrust hearing could be colossal, or mere theater]
If the hearing stays on topic, it will be up to the executives to convince lawmakers that they do not wield too much market power. According to the released pieces of testimony, here’s how they will frame those arguments.
Much of the criticism of Amazon from antitrust observers has focused on the company’s retail business, along with its perceived dominance in the web services industry. Specifically, critics have argued that Amazon gathers data on successful products offered on its platform by third-party sellers, copies them, and sells them at a lower price.
Bezos will argue that from a retail perspective, Amazon is hardly in a class of its own. The company accounts for less than 1 percent of the $25 trillion global retail market, he will say, and less than 4 percent of the U.S. market. The company competes against Walmart, Target and Costco, among others, Bezos says.
“Unlike industries that are winner-take-all, there’s room in retail for many winners,” he says. “For example, more than 80 retailers in the U.S. alone earn over $1 billion in annual revenue.”
But Bezos also says he welcomes the committee’s inquiry.
“I believe Amazon should be scrutinized,” he says. “We should scrutinize all large institutions, whether they’re companies, government agencies, or non-profits. Our responsibility is to make sure we pass such scrutiny with flying colors.”
Cook will use Apple’s ubiquitous iPhone to argue that the company faces stiff competition in the computer hardware industry. The iPhone is the best available, his testimony says, but “we know it is far from the only choice available to consumers.”
The longtime Apple employee, who took over the CEO role from Steve Jobs in 2011, argues that the smartphone market is rife with competition from companies like Samsung, LG, Huawei and Google.
“Apple does not have a dominant market share in any market where we do business,” his testimony reads. “That is not just true for iPhone; it is true for any product category.”
Cook’s testimony also addresses allegations that the company acts as a “gatekeeper” of its own app store by forcing companies to share certain user data with Apple and taking a cut of sales made on an iPhone or iPad. Cook will argue that Apple’s commissions “are comparable to or lower than commissions charged by the majority of our competitors.”
Cook portrays the app store as an avenue for budding entrepreneurs, rather than an effort to exclude them from the market.
“After beginning with 500 apps, today the App Store hosts more than 1.7 million — only 60 of which are Apple software,” he says. “Clearly, if Apple is a gatekeeper, what we have done is open the gate wider.”
Google’s Pichai will say that despite the company’s global dominance in online search, competitors from across the technology world are routinely challenging and expanding options for online search.
“For example, people have more ways to search for information than ever before — and increasingly this is happening outside the context of only a search engine,” Pichai will say. “Often the answer is just a click or an app away: You can ask Alexa a question from your kitchen; read your news on Twitter; ask friends for information via WhatsApp; and get recommendations on Snapchat or Pinterest.”
Google also faces competition in the digital advertising marketplace, Pichai will say, pointing to options such as Twitter, Instagram and Pinterest that have driven down online advertising costs by 40 percent over the last 10 years.
Pichai, a first generation immigrant from India who came to the United States for graduate studies, and in the past 16 years has risen to the top tier of Silicon Valley, said the company has through its Android operating system encouraged innovation by keeping the platform free for developers of devices and apps.
“This greatly reduces device prices, and today billions of consumers around the globe are now able to afford cutting-edge smartphones, some for less than $50,” Pichai says. “And in doing so they are able to access new opportunities — whether it’s sharing a video with friends and family around the world, gaining an education for themselves or their children, or starting a business.”
Facebook’s Zuckerberg, who has faced more scrutiny from lawmakers and others than any other tech industry CEO after the social media platform’s key role in enabling foreign interference in the 2016 election, also will frame his company’s growth and success in America-versus-the-world terms.
“Although people around the world use our products, Facebook is a proudly American company,” Zuckerberg says. “We believe in values — democracy, competition, inclusion and free expression — that the American economy was built on.”
In a thinly veiled warning, Zuckerberg says that any potential weakening of American-led technology and values could lead to the emergence of an alternate world view.
“Many other tech companies share these values, but there’s no guarantee our values will win out,” he will say. “For example, China is building its own version of the internet focused on very different ideas, and they are exporting their vision to other countries.”
Zuckerberg says that being a large company with significant reach allows Facebook also to tackle problems “at scale” although he leaves out the fact that the problems being addressed are themselves the result of the platform’s size and reach.
“From election security to building more privacy-protective products, we are bringing significant technical and financial resources to bear on the challenges we face,” Zuckerberg says. “For example, we now have more than 35,000 people working on safety and security — three times as many as we had just three years ago.”
Zuckerberg, like Google’s Pichai, also highlights the company’s work on artificial intelligence, augmented and virtual reality technologies, adding that Facebook invests about $10 billion annually in research and development.
Under American law it’s not a crime to be a big company, Zuckerberg says, adding that large companies go out of business, for example, like Sun Microsystems, a once dominant Silicon Valley player.