In the same week that Slack (NYSE: WORK) brought an anti-competitive suit against Microsoft (NASDAQ: MSFT), it seems a new spotlight has been put on these mega-cap companies that seemed so untouchable for so long as they drove the market higher. The leaders of Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), and Amazon (NASDAQ: AMZN) are testifying in front of the U.S. House Judiciary Antitrust Subcommittee this week in a media frenzy which will be sure to garner a lot of political clout and have the billionaires in question sweating under their designer suits.
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While the fact that all four CEOs are being brought in front of the committee together shows the surface-level, box-ticking nature of the circus, there will still be a lot to learn from the four horsemen of the techpocalypse answering questions under oath. I’m going to break down the reason why each company has been brought in front of the committee, and some of the questions they may face.
Build it and they will come, but they’re not getting in for free.
The App Store is the backbone of the mobile economy, along with Google’s Play Store. Unfortunately, any app developer, MyWallSt included, will know all about the 30% cut Apple takes from sales made over the platform. The questions Tim Cook will be faced with will surround whether Apple is stifling competition by charging its tenants too high a price to rent a spot in its ecosystem and whether this added charge will be passed on to the customers.
Those names big enough to shun the charges like Netflix (NASDAQ: NFLX) and Spotify (NYSE: SPOT) have encouraged customers to sign up outside of the app. However, for those smaller developers avoiding the App Store and its 1 billion+ connected devices is not an option. Tim Apple will have to provide satisfactory answers on whether the App Store is hurting both developers and consumers, and whether the platform gives the company an unfair advantage in promoting its native apps.
With the build-up to the presidential election, Zuckerberg’s past performance in front of Congress, and the recent press about Facebook, it’s hard not to see this being the main event of the afternoon. As much as I’m looking forward to the arbiter of free speech squirming arbitrarily on account of Congressmen and women speaking freely, this line of questioning has the potential to be over-politicized. Much of the committee will be lining up to get their shots in on Zuckerburg and come away with a soundbite, while the youngest of the four CEOs is sure to be ultra-prepared on the company’s stance on political ads and targeting, foreign interference in elections, as well as questions over the promotion of hate and lack of policing on the platform. After Twitter’s (NYSE: TWTR) recent hack, the security of the social media giant is also sure to come under scrutiny.
What would be more interesting for us investors to hear about is if there is any talk of breaking up Facebook’s cadre of apps which dominate so much of how we communicate online. Facebook, Whatsapp, Messenger, and Instagram have found themselves in more pockets than lint balls and a meager message citing “By Facebook” at their respective opening screens is surely insufficient in making people aware that the thousands of messages they send a day are all facilitated by the same company.
About a third of the world is on Facebook’s platform in one form or another, yet responsibility for the content and information disseminated over it is non-existent. As we see the range of impacts of social media, from the geopolitical tightrope world leaders walk every day to the detrimental mental health effects it has on its younger users, accountability and leadership from Zuckerburg are needed now more than ever. Just don’t hold your breath.
Google is no stranger to the subcommittee hot seat, with today’s serving surrounding their dominance in the online advertising industry, and, in particular, the aggregation of its ad tech. About one-third of every dollar spent on digital advertising ends up in Google’s pocket and this is in no small part thanks to the strength of its product suite, which compliment each other so well. A little too well, according to a number of state Attorneys General, which will look to break it up.
Google essentially owns the entire ad buying process through a number of products. Advertisers initially bid for ads through its products Display & Video 360 for display ads and Adwords for search ads. It also owns the ad exchange and the advertising space under its product Google Ad Manager, which is made of older products AdX (the exchange) and DoubleClick for Publishers (the ad space). This is a little too symbiotic for regulators who will look to break up this online advertising dominance. However, it may be a tough one to get over the line. While Google has made it incredibly difficult for another online advertiser to enter the fray, customers aren’t too put out by it hogging all the market share, and consumer harm is where the focus of antitrust law has been placed in recent years.
The primary reason for Amazon and Bezos’ appearance on this Zoom (NASDAQ: ZM) call from hell is the company’s alleged use of data from its army of third-party sellers. Amazon must answer questions around whether they used this data to develop and strengthen their own private label brands. While Amazon has long denied this allegation, an investigation by the Wall Street Journal which asked more than 20 former employees paints a very different picture.
The ability of Amazon to promote its products over the competition and claim top ad spots for themselves is also one that will raise a few eyebrows on the antitrust committee. Imagine being in a store and instead of going to the Nike (NYSE: NKE) or Adidas section, those brands are at the back of the rack behind the store’s own branded clothes. This is what Amazon has the potential to do by selling its private label products on its own platform where they compete with third-party sellers. No wonder it has taken over Google as the company with the most lobbyists in Washington.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above Read our full disclosure policy here.
Content Manager at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.