Google Buys Fitbit Even Though U.S. and Australia May Still Oppose

The Google/Fitbit deal could ultimately get blocked.

Even though the European Union (EU) has signed off on Google’s acquisition of Fitbit with some conditions, the United States (U.S.) and Australia are still assessing the deal. Moreover, given that both nations are in the midst of acting against Google and other tech companies, one, if not both, may find the deal violates antitrust or competition laws and seek to force Google to reverse the merger.

In blog posting, Google Senior Vice President, Devices & Services Rick Osterloh stated “Google has completed its acquisition of Fitbit and I want to personally welcome this talented team to Google.” Osterloh asserted “[y]our privacy and security are paramount to achieving this and we are committed to protecting your health information and putting you in control of your data.” Osterloh claimed:

This deal has always been about devices, not data, and we’ve been clear since the beginning that we will protect Fitbit users’ privacy. We worked with global regulators on an approach which safeguards consumers’ privacy expectations, including a series of binding commitments that confirm Fitbit users’ health and wellness data won’t be used for Google ads and this data will be separated from other Google ads data. We’ll also maintain access to Android APIs that enable devices like fitness trackers and smart watches to interoperate with Android smartphones, and we’ll continue to allow Fitbit users to choose to connect to third-party services so you’ll still be able to sync your favorite health and fitness apps to your Fitbit account. These commitments will be implemented globally so that all consumers can benefit from them. We’ll also continue to work with regulators around the world so that they can be assured that we are living up to these commitments. 

Last month, following the completion of its “in-depth” investigation, the European Commission (EC) cleared Google’s acquisition of Fitbit with certain conditions, removing a significant hurdle for the American multinational in buying the wearable fitness tracker company. In its press release, the EC explained that after its investigation, “the Commission had concerns that the transaction, as initially notified, would have harmed competition in several markets.” To address and allay concerns, Google bound itself for ten years to a set of commitments that can be unilaterally extended by the EC and will be enforced, in part, by the appointment of a trustee to oversee compliance. However, a number of these commitments are binding only in the European Economic Area (EEA) (i.e. the EU plus a handful of non-EU European nations).

The EC was particularly concerned about:

  • Advertising: By acquiring Fitbit, Google would acquire (i) the database maintained by Fitbit about its users’ health and fitness; and (ii) the technology to develop a database similar to that of Fitbit. By increasing the already vast amount of data that Google could use for the personalisation of ads, it would be more difficult for rivals to match Google’s services in the markets for online search advertising, online display advertising, and the entire “ad tech” ecosystem. The transaction would therefore raise barriers to entry and expansion for Google’s competitors for these services to the detriment of advertisers, who would ultimately face higher prices and have less choice.
  • Access to Web Application Programming Interface (‘API’) in the market for digital healthcare: A number of players in this market currently access health and fitness data provided by Fitbit through a Web API, in order to provide services to Fitbit users and obtain their data in return. The Commission found that following the transaction, Google might restrict competitors’ access to the Fitbit Web API. Such a strategy would come especially at the detriment of start-ups in the nascent European digital healthcare space.
  • Wrist-worn wearable devices: The Commission is concerned that following the transaction, Google could put competing manufacturers of wrist-worn wearable devices at a disadvantage by degrading their interoperability with Android smartphones.

As noted, Google made a number of commitments to address competition concerns:

  • Ads Commitment:
    • Google will not use for Google Ads the health and wellness data collected from wrist-worn wearable devices and other Fitbit devices of users in the EEA, including search advertising, display advertising, and advertising intermediation products. This refers also to data collected via sensors (including GPS) as well as manually inserted data.
    • Google will maintain a technical separation of the relevant Fitbit’s user data. The data will be stored in a “data silo” which will be separate from any other Google data that is used for advertising.
    • Google will ensure that European Economic Area (‘EEA’) users will have an effective choice to grant or deny the use of health and wellness data stored in their Google Account or Fitbit Account by other Google services (such as Google Search, Google Maps, Google Assistant, and YouTube).
  • Web API Access Commitment:
    • Google will maintain access to users’ health and fitness data to software applications through the Fitbit Web API, without charging for access and subject to user consent.
  • Android APIs Commitment:
    • Google will continue to license for free to Android original equipment manufacturers (OEMs) those public APIs covering all current core functionalities that wrist-worn devices need to interoperate with an Android smartphone. Such core functionalities include but are not limited to, connecting via Bluetooth to an Android smartphone, accessing the smartphone’s camera or its GPS. To ensure that this commitment is future-proof, any improvements of those functionalities and relevant updates are also covered.
    • It is not possible for Google to circumvent the Android API commitment by duplicating the core interoperability APIs outside the Android Open Source Project (AOSP). This is because, according to the commitments, Google has to keep the functionalities afforded by the core interoperability APIs, including any improvements related to the functionalities, in open-source code in the future. Any improvements to the functionalities of these core interoperability APIs (including if ever they were made available to Fitbit via a private API) also need to be developed in AOSP and offered in open-source code to Fitbit’s competitors.
    • To ensure that wearable device OEMs have also access to future functionalities, Google will grant these OEMs access to all Android APIs that it will make available to Android smartphone app developers including those APIs that are part of Google Mobile Services (GMS), a collection of proprietary Google apps that is not a part of the Android Open Source Project.
    • Google also will not circumvent the Android API commitment by degrading users experience with third party wrist-worn devices through the display of warnings, error messages or permission requests in a discriminatory way or by imposing on wrist-worn devices OEMs discriminatory conditions on the access of their companion app to the Google Play Store.

The EC allowed the deal to move ahead despite concerns about harms to users in the EU. Amnesty International (AI) sent EC Executive Vice-President Margrethe Vestager a letter, arguing “[t]he merger risks further extending the dominance of Google and its surveillance-based business model, the nature and scale of which already represent a systemic threat to human rights.” AI asserted “[t]he deal is particularly troubling given the sensitive nature of the health data that Fitbit holds that would be acquired by Google.” AI argued “[t]he Commission must ensure that the merger does not proceed unless the two business enterprises can demonstrate that they have taken adequate account of the human rights risks and implemented strong and meaningful safeguards that prevent and mitigate these risks in the future.”

In late December, the Australian Competition & Consumer Commission (ACCC) “announced that it will not accept a long-term behavioural undertaking offered by Google that sought to address competition concerns about its proposed acquisition of wearables supplier and manufacturer Fitbit.” In light of the ongoing fights between the ACCC and Google, this was hardly a surprising outcome. The agency added it “will therefore continue its investigation into Google’s proposed acquisition of Fitbit and has set a new decision date of 25 March 2021.” The agency said Google had offered a deal similar to the one accepted by the EC, but ACCC Chair Rod Sims remarked “[w]hile we are aware that the EC recently accepted a similar undertaking from Google, we are not satisfied that a long term behavioural undertaking of this type in such a complex and dynamic industry could be effectively monitored and enforced in Australia.”

The ACCC claimed:

  • The proposed acquisition also further consolidates Google’s leading position in relation to the collection of user data, which supports its significant market power in online advertising and is likely to have applications in health markets.
  • Google sought to address the ACCC’s competition concerns by offering a court enforceable undertaking that it would behave in certain ways towards rival wearable manufacturers, not use health data for advertising and, in some circumstances, allow competing businesses access to health and fitness data.
  • The proposed acquisition has received conditional clearance in Europe, but several other competition authorities, including the U.S. Department of Justice, are yet to make a decision.  Both companies are based in the U.S. and Fitbit’s market share is higher in the U.S. than in most other countries. The ACCC will continue to work closely with overseas agencies on these important competition issues. 

In its June 2020 Statement of issues on the proposed merger, the ACCC turned up a reasons why Google’s offer to not use Fitbit data for Google Ads (an offer the EC accepted) will not stop the use and possible abuse of such data:

The health and fitness data collected by Fitbit will provide Google with access to consumer data that is likely to be an important element of services in several markets.

Google will not use these data in Google Ads, but what about Google Maps? Could it find ways to profitably use people’s health data in perhaps selling access to population level health trends to companies aside and apart from Google Ads? I would think the answer is yes even if my example is uninformed or unrealistic.

The ACCC added:

In relation to data-dependent health services, the ACCC is concerned that the acquisition may eliminate potential competition between Fitbit (either under current ownership or under alternative ownership) and Google. Google has a strong focus on new and developing markets and will likely become a strong competitor in the supply of data-dependent health services with or without the proposed acquisition. The health and fitness data collected by Fitbit puts Fitbit in a strong position to enter and compete in data-dependent health markets. The proposed acquisition eliminates this potential competition between Google and Fitbit.

The ACCC’s rejection of the terms accepted by the EU must be seen in light of other regulatory actions. In 2019, the ACCC announced a legal action against Google “alleging they engaged in misleading conduct and made false or misleading representations to consumers about the personal location data Google collects, keeps and uses” according to the agency’s press release. In its initial filing, the ACCC is claiming that Google mislead and deceived the public in contravention of the Australian Competition Law and Android users were harmed because those that switched off Location Services were unaware that their location information was still be collected and used by Google for it was not readily apparent that Web & App Activity also needed to be switched off.

In October 2020, the United States (U.S.) Department of Justice (DOJ) and a number of states finally filed the antitrust suit against Google that has been rumored to be coming since late summer. This anti-trust action centers on Google’s practices of making Google the default search engine on Android devices and paying browsers and other technology entities to make Google the default search engine. Of course, this type of conduct, even if true, does not necessarily bear on the DOJ’s deliberations on whether the U.S. should act against the Google/Fitbit deal. And yet, given the renewed focus on antitrust in Washington, the DOJ under new President Joe Biden might indeed take a look at the deal on the grounds that a massive company is getting much bigger.

In its press release on the October antitrust action, the DOJ claimed

Today, the Department of Justice — along with eleven state Attorneys General — filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets and to remedy the competitive harms. The participating state Attorneys General offices represent Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas.

The DOJ added

As one of the wealthiest companies on the planet with a market value of $1 trillion, Google is the monopoly gatekeeper to the internet for billions of users and countless advertisers worldwide. For years, Google has accounted for almost 90 percent of all search queries in the United States and has used anticompetitive tactics to maintain and extend its monopolies in search and search advertising.  

The DOJ claimed:

As alleged in the Complaint, Google has entered into a series of exclusionary agreements that collectively lock up the primary avenues through which users access search engines, and thus the internet, by requiring that Google be set as the preset default general search engine on billions of mobile devices and computers worldwide and, in many cases, prohibiting preinstallation of a competitor. In particular, the Complaint alleges that Google has unlawfully maintained monopolies in search and search advertising by:

  • Entering into exclusivity agreements that forbid preinstallation of any competing search service.
  • Entering into tying and other arrangements that force preinstallation of its search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference.
  • Entering into long-term agreements with Apple that require Google to be the default – and de facto exclusive – general search engine on Apple’s popular Safari browser and other Apple search tools.
  • Generally using monopoly profits to buy preferential treatment for its search engine on devices, web browsers, and other search access points, creating a continuous and self-reinforcing cycle of monopolization.

These and other anticompetitive practices harm competition and consumers, reducing the ability of innovative new companies to develop, compete, and discipline Google’s behavior. 

In December, two other suits were filed against Google, arguing that the company’s dominance in the search engine and online advertising markets. One suit is led by Colorado’s attorney general and the other by Texas’ attorney general. The two suits have overlapping but different foci, and it is possible these new suits get folded into the suit against Google filed by the DOJ. There are also media reports that some of the states that brought these suits may be preparing yet another antitrust action against Google over allegedly anti-monopolistic behavior in how it operates its Google Play app store. (see here for more detail.)

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

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U.S. Federal Government and States Ask Court To Break Up Facebook

Antitrust suits finally filed against Facebook. The U.S. and state governments want to spin off WhatsApp and Instagram.

As has been long rumored, the Federal Trade Commission (FTC) and state attorneys general have filed lawsuits against Facebook, claiming the social media giant has pursued anti-competitive practices in violation of federal and state laws. This is the second major lawsuit filed this fall against a tech giant and may not be the last. The lawsuits make the case that the appropriate way to rectify the pattern of abuse is to spin off WhatsApp and Instagram among other requested legal relief. Probably not by accident, but both suits were filed in the same federal court, and consequently the suits will likely be consolidated with the FTC and the states working together in litigating against Facebook. This case may not be resolved until well into the Biden Administration.

The FTC voted to proceed with the antitrust and anti-competition action on a 3-2 vote with Chair Joseph Simons siding with the two Democratic Commissioners. The other two Republicans voted no but did so without issuing a dissent or statement, explaining their views or arguing the majority’s approach is wrong or misguided.

In the suit filed in the District Court of the District of Columbia, the FTC claims that Facebook has violated Section 2 of the Sherman Antitrust Act and by extension Section 5 of the FTC Act through buying potential rivals WhatsApp and Instagram and forcing any companies that want to use Facebook’s application programming interfaces not to compete with Facebook or Facebook Messenger. As a result, the FCT claims, people have no functional options for social messaging and personal networking and the online advertising market hurts advertisers and ultimately consumers given Facebook’s dominance of the market.

The FTC asserted:

  • Facebook has maintained its monopoly position by buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire.
  • Facebook holds monopoly power in the market for personal social networking services (“personal social networking” or “personal social networking services”) in the United States, which it enjoys primarily through its control of the largest and most profitable social network in the world, known internally at Facebook as “Facebook Blue,” and to much of the world simply as “Facebook.”
  • Facebook’s unmatched position has provided it with staggering profits. Facebook monetizes its personal social networking monopoly principally by selling advertising, which exploits a rich set of data about users’ activities, interests, and affiliations to target advertisements to users. Last year alone, Facebook generated revenues of more than $70 billion and profits of more than $18.5 billion.
  • Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defense through anticompetitive means. After identifying two significant competitive threats to its dominant position—Instagram and WhatsApp—Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that “it is better to buy than compete.” To further entrench its position, Facebook has also imposed anticompetitive conditions that restricted access to its valuable platform—conditions that Facebook personnel recognized as “anti user[,]” “hypocritical” in light of Facebook’s purported mission of enabling sharing, and a signal that “we’re scared that we can’t compete on our own merits.”
  • As Facebook has long recognized, its personal social networking monopoly is protected by high barriers to entry, including strong network effects. In particular, because a personal social network is generally more valuable to a user when more of that user’s friends and family are already members, a new entrant faces significant difficulties in attracting a sufficient user base to compete with Facebook. Facebook’s internal documents confirm that it is very difficult to win users with a social networking product built around a particular social “mechanic” (i.e., a particular way to connect and interact with others, such as photo-sharing) that is already being used by an incumbent with dominant scale. Even an entrant with a “better” product often cannot succeed against the overwhelming network effects enjoyed by a dominant personal social network.
  • In an effort to preserve its monopoly in the provision of personal social networking, Facebook has, for many years, continued to engage in a course of anticompetitive conduct with the aim of suppressing, neutralizing, and deterring serious competitive threats to Facebook Blue. This course of conduct has had three main elements: acquiring Instagram, acquiring WhatsApp, and the anticompetitive conditioning of access to its platform to suppress competition.

The FTC detailed the harm to people and to competition:

  • Through at least the foregoing conduct, Facebook suppresses, deters, hinders, and eliminates personal social networking competition, and maintains its monopoly power in the U.S. personal social networking market, through means other than merits competition. In doing so, Facebook deprives users of personal social networking in the United States of the benefits of competition, including increased choice, quality, and innovation. Facebook cannot justify this substantial harm to competition with claimed efficiencies, procompetitive benefits, or business justifications that could not be achieved through other means.
  • By suppressing, neutralizing, and deterring the emergence and growth of personal social networking rivals, Facebook also suppresses meaningful competition for the sale of advertising. Personal social networking providers typically monetize through the sale of advertising; thus, more competition in personal social networking is also likely to mean more competition in the provision of advertising. By monopolizing personal social networking, Facebook thereby also deprives advertisers of the benefits of competition, such as lower advertising prices and increased choice, quality, and innovation related to advertising.

The FTC asked the court for a ruling that:

  1. that Facebook’s course of conduct, as alleged herein, violates Section 2 of the Sherman Act and thus constitutes an unfair method of competition in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a);
  2. divestiture of assets, divestiture or reconstruction of businesses (including, but not limited to, Instagram and/or WhatsApp), and such other relief sufficient to restore the competition that would exist absent the conduct alleged in the Complaint, including, to the extent reasonably necessary, the provision of ongoing support or services from Facebook to one or more viable and independent business(es);
  3. any other equitable relief necessary to restore competition and remedy the harm to competition caused by Facebook’s anticompetitive conduct described above;
  4. a prior notice and prior approval obligation for future mergers and acquisitions;
  5. that Facebook is permanently enjoined from imposing anticompetitive conditions on access to APIs and data;
  6. that Facebook is permanently enjoined from engaging in the unlawful conduct described herein;
  7. that Facebook is permanently enjoined from engaging in similar or related conduct in the future;
  8. a requirement to file periodic compliance reports with the FTC, and to submit to such reporting and monitoring obligations as may be reasonable and appropriate; and
  9. any other equitable relief, including, but not limited to, divestiture or restructuring, as the Court finds necessary to redress and prevent recurrence of Facebook’s violations of law, as alleged herein.

46 states, the District of Columbia, and the territory of Guam filed suit the same day against Facebook, alleging violations of Sections 16 and 7 of the Clayton Act and Section 2 of the Sherman Act. The suit was also filed in the District Court of the District of Columbia. The state attorneys general who filed suit against Facebook represent the following jurisdictions: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, the territory of Guam, Hawaii, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

The states made their case that Facebook has violated federal antitrust and anti-competition laws:

  • Every day, more than half of the United States population over the age of 13 turns to a Facebook service to keep them in touch with the people, organizations, and interests that matter most to them. For them, Facebook provides an important forum for sharing personal milestones and other intimate details about their lives to friends and family: for example, announcing the birth of a child or grieving the loss of a close relative; sharing photos and videos of children and grandchildren; and debating politics and public events.
  • Users do not pay a cash price to use Facebook. Instead, users exchange their time, attention, and personal data for access to Facebook’s services.
  • Facebook makes its money by selling ads. Facebook sells advertising to firms that attach immense value to the user engagement and highly targeted advertising that Facebook can uniquely deliver due to its massive network of users and the vast trove of data it has collected on users, their friends, and their interests. The more data Facebook accumulates by surveilling the activities of its users and the more time the company convinces users to spend engaging on Facebook services, the more money the company makes through its advertising business.
  • For almost a decade, Facebook has had monopoly power in the personal social networking market in the United States. As set forth in detail below, Facebook illegally maintains that monopoly power by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers.
  • Facebook’s illegal course of conduct has been driven, in part, by fear that the company has fallen behind in important new segments and that emerging firms were “building networks that were competitive with” Facebook’s and could be “very disruptive to” the company’s dominance. As Facebook’s founder and CEO, Mark Zuckerberg observed, “[o]ne thing about startups . . . is you can often acquire them,” indicating at other times that such acquisitions would enable Facebook to “build a competitive moat” or “neutralize a competitor.”
  • Zuckerberg recognized early that even when these companies were not inclined to sell, if Facebook offered a “high enough price . . . they’d have to consider it.” Facebook has coupled its acquisition strategy with exclusionary tactics that snuffed out competitive threats and sent the message to technology firms that, in the words of one participant, if you stepped into Facebook’s turf or resisted pressure to sell, Zuckerberg would go into “destroy mode” subjecting your business to the “wrath of Mark.” As a result, Facebook has chilled innovation, deterred investment, and forestalled competition in the markets in which it operates, and it continues to do so.
  • Facebook’s unlawfully maintained monopoly power gives it wide latitude to set the terms for how its users’ private information is collected, used, and protected. In addition, because Facebook decides how and whether the content shared by users is displayed to other users, Facebook’s monopoly gives it significant control over how users engage with their closest connections and what content users see when they do. Because Facebook users have nowhere else to go for this important service, the company is able to make decisions about how and whether to display content on the platform and can use the personal information it collects from users solely to further its business interests, free from competitive constraints, even where those choices conflict with the interests and preferences of Facebook users.
  • choice in personal social networks, suppressed innovation, and reduced investment in potentially competing services. Facebook’s conduct deprives users of product improvements and, as a result, users have suffered, and continue to suffer, reductions in the quality and variety of privacy options and content available to them.
  • By eliminating, suppressing, and deterring the emergence and growth of personal social networking rivals, Facebook also harms advertisers in a number of ways, including less transparency to assess the value they receive from advertisements, and harm to their brand due to offensive content on Facebook services.
  • Facebook’s anticompetitive campaign to forestall competing services that might threaten its dominance in personal social networking services includes a variety of tactics.

The states are asking the court for the following relief:

  1. That Facebook be adjudged to have violated Section 2 of the Sherman Act, 15 U.S.C. § 2;
  2. That Facebook be enjoined and restrained from continuing to engage in any anticompetitive conduct and from adopting in the future any practice, plan, program, or device having a similar purpose or effect to the anticompetitive actions set forth above;
  3. That Facebook be enjoined and restrained from making further acquisitions valued at or in excess of $10 million without advance notification to Plaintiff States;
  4. That Facebook be enjoined and restrained from making further acquisitions without such disclosures to Plaintiff States as would be required to the federal government under the Hart-Scott-Rodino Act for transactions falling within the scope of such Act;
  5. That Facebook’s acquisition of Instagram be adjudged to be in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18;
  6. That Facebook’s acquisition of WhatsApp be adjudged to be in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18;
  7. That each Plaintiff State be awarded its costs, including reasonable attorneys’ fees pursuant to 15 U.S.C. § 15(c); and
  8. That the Court order such other and further equitable relief as this Court may deem appropriate to restore competitive conditions and lost competition and to prevent future violations, including divestiture or reconstruction of illegally acquired businesses and/or divestiture of Facebook assets or business lines.

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2020. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

Further Reading, Other Developments, and Coming Events (7 October)

Coming Events

  • The European Union Agency for Cybersecurity (ENISA), Europol’s European Cybercrime Centre (EC3) and the Computer Emergency Response Team for the EU Institutions, Bodies and Agencies (CERT-EU) will hold the 4th annual IoT Security Conference series “to raise awareness on the security challenges facing the Internet of Things (IoT) ecosystem across the European Union:”
    • Artificial Intelligence – 14 October at 15:00 to 16:30 CET
    • Supply Chain for IoT – 21 October at 15:00 to 16:30 CET
  • The Federal Communications Commission (FCC) will hold an open commission meeting on 27 October, and the agency has released a tentative agenda:
    • Restoring Internet Freedom Order Remand – The Commission will consider an Order on Remand that would respond to the remand from the U.S. Court of Appeals for the D.C. Circuit and conclude that the Restoring Internet Freedom Order promotes public safety, facilitates broadband infrastructure deployment, and allows the Commission to continue to provide Lifeline support for broadband Internet access service. (WC Docket Nos. 17-108, 17-287, 11- 42)
    • Establishing a 5G Fund for Rural America – The Commission will consider a Report and Order that would establish the 5G Fund for Rural America to ensure that all Americans have access to the next generation of wireless connectivity. (GN Docket No. 20-32)
    • Increasing Unlicensed Wireless Opportunities in TV White Spaces – The Commission will consider a Report and Order that would increase opportunities for unlicensed white space devices to operate on broadcast television channels 2-35 and expand wireless broadband connectivity in rural and underserved areas. (ET Docket No. 20-36)
    • Streamlining State and Local Approval of Certain Wireless Structure Modifications –
    • The Commission will consider a Report and Order that would further accelerate the deployment of 5G by providing that modifications to existing towers involving limited ground excavation or deployment would be subject to streamlined state and local review pursuant to section 6409(a) of the Spectrum Act of 2012. (WT Docket No. 19-250; RM-11849)
    • Revitalizing AM Radio Service with All-Digital Broadcast Option – The Commission will consider a Report and Order that would authorize AM stations to transition to an all-digital signal on a voluntary basis and would also adopt technical specifications for such stations. (MB Docket Nos. 13-249, 19-311)
    • Expanding Audio Description of Video Content to More TV Markets – The Commission will consider a Report and Order that would expand audio description requirements to 40 additional television markets over the next four years in order to increase the amount of video programming that is accessible to blind and visually impaired Americans. (MB Docket No. 11-43)
    • Modernizing Unbundling and Resale Requirements – The Commission will consider a Report and Order to modernize the Commission’s unbundling and resale regulations, eliminating requirements where they stifle broadband deployment and the transition to next- generation networks, but preserving them where they are still necessary to promote robust intermodal competition. (WC Docket No. 19-308)
    • Enforcement Bureau Action – The Commission will consider an enforcement action.
  • On October 29, the Federal Trade Commission (FTC) will hold a seminar titled “Green Lights & Red Flags: FTC Rules of the Road for Business workshop” that “will bring together Ohio business owners and marketing executives with national and state legal experts to provide practical insights to business and legal professionals about how established consumer protection principles apply in today’s fast-paced marketplace.”

Other Developments

  • Consumer Reports released a study it did on the “California Consumer Privacy Act” (CCPA) (AB 375), specifically on the Do-Not-Sell right California residents were given under the newly effective privacy statute. For those people (like me) who expected a significant number of businesses to make it hard for people to exercise their rights, this study confirms this suspicion. Consumer Reports noted more than 40% of data brokers had hard to find links or extra, complicated steps for people to tell them not to sell their personal information.
    • In “CCPA: Are Consumers Digital Rights Protected?,” Consumer Reports used this methodology:
    • Consumer Reports’ Digital Lab conducted a mixed methods study to examine whether the new CCPA is working for consumers. This study focused on the Do-Not-Sell (DNS) provision in the CCPA, which gives consumers the right to opt out of the sale of their personal information to third parties through a “clear and conspicuous link” on the company’s homepage.1 As part of the study, 543 California residents made DNS requests to 214 data brokers listed in the California Attorney General’s data broker registry. Participants reported their experiences via survey.
    • Consumer Reports found:
      • Consumers struggled to locate the required links to opt out of the sale of their information. For 42.5% of sites tested, at least one of three testers was unable to find a DNS link. All three testers failed to find a “Do Not Sell” link on 12.6% of sites, and in several other cases one or two of three testers were unable to locate a link.
        • Follow-up research focused on the sites in which all three testers did not find the link revealed that at least 24 companies on the data broker registry do not have the required DNS link on their homepage.
        • All three testers were unable to find the DNS links for five additional companies, though follow-up research revealed that the companies did have DNS links on their homepages. This also raises concerns about compliance, since companies are required to post the link in a “clear and conspicuous” manner.
      • Many data brokers’ opt-out processes are so onerous that they have substantially impaired consumers’ ability to opt out, highlighting serious flaws in the CCPA’s opt-out model.
        • Some DNS processes involved multiple, complicated steps to opt out, including downloading third-party software.
        • Some data brokers asked consumers to submit information or documents that they were reluctant to provide, such as a government ID number, a photo of their government ID, or a selfie.
        • Some data brokers confused consumers by requiring them to accept cookies just to access the site.
        • Consumers were often forced to wade through confusing and intimidating disclosures to opt out.
        • Some consumers spent an hour or more on a request.
        • At least 14% of the time, burdensome or broken DNS processes prevented consumers from exercising their rights under the CCPA.
      • At least one data broker used information provided for a DNS request to add the user to a marketing list, in violation of the CCPA.
      • At least one data broker required the user to set up an account to opt out, in violation of the CCPA.
      • Consumers often didn’t know if their opt-out request was successful. Neither the CCPA nor the CCPA regulations require companies to notify consumers when their request has been honored. About 46% of the time, consumers were left waiting or unsure about the status of their DNS request.
      • About 52% of the time, the tester was “somewhat dissatisfied” or “very dissatisfied” with the opt-out processes.
      • On the other hand, some consumers reported that it was quick and easy to opt out, showing that companies can make it easier for consumers to exercise their rights under the CCPA. About 47% of the time, the tester was “somewhat satisfied” or “very satisfied” with the opt-out process.
    • Consumer Reports recommended:
      • The Attorney General should vigorously enforce the CCPA to address noncompliance.
      • To make it easier to exercise privacy preferences, consumers should have access to browser privacy signals that allow them to opt out of all data sales in one step.
      • The AG should more clearly prohibit dark patterns, which are user interfaces that subvert consumer intent, and design a uniform opt-out button. This will make it easier for consumers to locate the DNS link on individual sites.
      • The AG should require companies to notify consumers when their opt-out requests have been completed, so that consumers can know that their information is no longer being sold.
      • The legislature or AG should clarify the CCPA’s definitions of “sale” and “service provider” to more clearly cover data broker information sharing.
      • Privacy should be protected by default. Rather than place the burden on consumers to exercise privacy rights, the law should require reasonable data minimization, which limits the collection, sharing, retention, and use to what is reasonably necessary to operate the service.
  • Two agencies of the Department of the Treasury have issued guidance regarding the advisability and legality of paying ransomware to individuals or entities under United States (U.S.) sanction at a time when ransomware attacks are on the rise. It bears note that a person or entity in the U.S. may face criminal and civil liability for paying a sanctioned ransomware entity even if they did not know it was sanctioned. One of the agencies reasoned that paying ransoms to such parties is contrary to U.S. national security policy and only encourages more ransomware attacks.
    • The Office of Foreign Assets Control (OFAC) issued an “advisory to highlight the sanctions risks associated with ransomware payments related to malicious cyber-enabled activities.” OFAC added:
      • Demand for ransomware payments has increased during the COVID-19 pandemic as cyber actors target online systems that U.S. persons rely on to continue conducting business. Companies that facilitate ransomware payments to cyber actors on behalf of victims, including financial institutions, cyber insurance firms, and companies involved in digital forensics and incident response, not only encourage future ransomware payment demands but also may risk violating OFAC regulations. This advisory describes these sanctions risks and provides information for contacting relevant U.S. government agencies, including OFAC, if there is a reason to believe the cyber actor demanding ransomware payment may be sanctioned or otherwise have a sanctions nexus.
    • Financial Crimes Enforcement Network (FinCEN) published its “advisory to alert financial institutions to predominant trends, typologies, and potential indicators of ransomware and associated money laundering activities. This advisory provides information on:
      • (1) the role of financial intermediaries in the processing of ransomware payments;
      • (2) trends and typologies of ransomware and associated payments;
      • (4) reporting and sharing information related to ransomware attacks.
  • The Government Accountability Office (GAO) found uneven implementation at seven federal agencies in meeting the Office of Management and Budget’s (OMB) requirements in using the category management initiative for buying information technology (IT). This report follows in a long line of assessments of how the federal government is not spending its billions of dollars invested in IT to maximum effect. The category management initiative was launched two Administrations ago as a means of driving greater efficiency and savings for the nearly $350 billion the U.S. government spends annually in services and goods, much of which could be bought in large quantities instead of piecemeal by agency as is now the case.
    • The chair and ranking member of the House Oversight Committee and other Members had asked the GAO “to conduct a review of federal efforts to reduce IT contract duplication and/or waste” specifically “to determine the extent to which (1) selected agencies’ efforts to prevent, identify, and reduce duplicative or wasteful IT contracts were consistent with OMB’s category management initiative; and (2) these efforts were informed by spend analyses.” The GAO ended up looking at the Departments of Agriculture (USDA), Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), Justice (DOJ), State (State), and Veterans Affairs (VA).
    • The GAO found:
      • The seven agencies in our review varied in their implementation of OMB’s category management activities that contribute to identifying, preventing, and reducing duplicative IT contracts. Specifically, most of the agencies fully implemented the two activities to identify a Senior Accountable Official and develop processes and policies for implementing category management efforts, and to engage their workforces in category management training. However, only about half the agencies fully implemented the activities to reduce unaligned IT spending, including increasing the use of Best in Class contract solutions, and share prices paid, terms, and conditions for purchased IT goods and services. Agencies cited several reasons for their varied implementation, including that they were still working to define how to best integrate category management into the agency.
      • Most of the agencies used spend analyses to inform their efforts to identify and reduce duplication, and had developed and implemented strategies to address the identified duplication, which, agency officials reported resulted in millions in actual and anticipated future savings. However, two of these agencies did not make regular use of the spend analyses.
      • Until agencies fully implement the activities in OMB’s category management initiative, and make greater use of spend analyses to inform their efforts to identify and reduce duplicative contracts, they will be at increased risk of wasteful spending. Further, agencies will miss opportunities to identify and realize savings of potentially hundreds of millions of dollars.
  • The Department of Homeland Security’s (DHS) Cybersecurity and Infrastructure Security Agency (CISA) provided “specific Chinese government and affiliated cyber threat actor tactics, techniques, and procedures (TTPs) and recommended mitigations to the cybersecurity community to assist in the protection of our Nation’s critical infrastructure.” CISA took this action “[i]n light of heightened tensions between the United States and China.”
    • CISA asserted
      • According to open-source reporting, offensive cyber operations attributed to the Chinese government targeted, and continue to target, a variety of industries and organizations in the United States, including healthcare, financial services, defense industrial base, energy, government facilities, chemical, critical manufacturing (including automotive and aerospace), communications, IT, international trade, education, videogaming, faith-based organizations, and law firms.
    • CISA recommends organizations take the following actions:
      • Adopt a state of heightened awareness. Minimize gaps in personnel availability, consistently consume relevant threat intelligence, and update emergency call trees.
      • Increase organizational vigilance. Ensure security personnel monitor key internal security capabilities and can identify anomalous behavior. Flag any known Chinese indicators of compromise (IOCs) and TTPs for immediate response.
      • Confirm reporting processes. Ensure personnel know how and when to report an incident. The well-being of an organization’s workforce and cyber infrastructure depends on awareness of threat activity. Consider reporting incidents to CISA to help serve as part of CISA’s early warning system (see the Contact Information section below).
      • Exercise organizational incident response plans. Ensure personnel are familiar with the key steps they need to take during an incident. Do they have the accesses they need? Do they know the processes? Are various data sources logging as expected? Ensure personnel are positioned to act in a calm and unified manner.
  • The Supreme Court of the United States (SCOTUS) declined to hear a case on an Illinois revenge porn law that the Illinois State Supreme Court upheld, finding it did not impinge on a woman’s First Amendment rights. Bethany Austin was charged with a felony under an Illinois law barring the nonconsensual dissemination of private sexual pictures when she printed and distributed pictures of her ex-fiancé’s lover. Because SCOTUS decided not to hear this case, the Illinois case and others like it remain Constitutional.
    • The Illinois State Supreme Court explained the facts of the case:
      • Defendant (aka Bethany Austin) was engaged to be married to Matthew, after the two had dated for more than seven years. Defendant and Matthew lived together along with her three children. Defendant shared an iCloud account with Matthew, and all data sent to or from Matthew’s iPhone went to their shared iCloud account, which was connected to defendant’s iPad. As a result, all text messages sent by or to Matthew’s iPhone automatically were received on defendant’s iPad. Matthew was aware of this data sharing arrangement but took no action to disable it.
      • While Matthew and defendant were engaged and living together, text messages between Matthew and the victim, who was a neighbor, appeared on defendant’s iPad. Some of the text messages included nude photographs of the victim. Both Matthew and the victim were aware that defendant had received the pictures and text messages on her iPad. Three days later, Matthew and the victim again exchanged several text messages. The victim inquired, “Is this where you don’t want to message [because] of her?” Matthew responded, “no, I’m fine. [S]omeone wants to sit and just keep watching want [sic] I’m doing I really do not care. I don’t know why someone would wanna put themselves through that.” The victim replied by texting, “I don’t either. Soooooo baby ….”
      • Defendant and Matthew cancelled their wedding plans and subsequently broke up. Thereafter, Matthew began telling family and friends that their relationship had ended because defendant was crazy and no longer cooked or did household chores.
      • In response, defendant wrote a letter detailing her version of events. As support, she attached to the letter four of the naked pictures of the victim and copies of the text messages between the victim and Matthew. When Matthew’s cousin received the letter along with the text messages and pictures, he informed Matthew.
      • Upon learning of the letter and its enclosures, Matthew contacted the police. The victim was interviewed during the ensuing investigation and stated that the pictures were private and only intended for Matthew to see. The victim acknowledged that she was aware that Matthew had shared an iCloud account with defendant, but she thought it had been deactivated when she sent him the nude photographs.
    • In her petition for SCOTUS to hear her case, Austin asserted:
      • Petitioner Bethany Austin is being prosecuted under Illinois’ revenge porn law even though she is far from the type of person such laws were intended to punish. These laws proliferated rapidly in recent years because of certain reprehensible practices, such as ex-lovers widely posting images of their former mates to inflict pain for a bad breakup, malicious stalkers seeking to damage an innocent person’s reputation, or extortionists using intimate photos to collect ransom. Austin did none of those things, yet is facing felony charges because she tried to protect her reputation from her former fiancé’s lies about the reason their relationship ended.
      • The Illinois Supreme Court rejected Petitioner’s constitutional challenge to the state revenge porn law only because it ignored well-established First Amendment rules: It subjected the law only to intermediate, rather than strict scrutiny, because it incorrectly classified a statute that applies only to sexual images as content neutral; it applied diminished scrutiny because the speech at issue was deemed not to be a matter of public concern; and it held the law need not require a showing of malicious intent to justify criminal penalties, reasoning that such intent can be inferred from the mere fact that the specified images were shared. Each of these conclusions contradicts First Amendment principles recently articulated by this Court, and also is inconsistent with decisions of various state courts, including the Vermont Supreme Court.
    • Illinois argued in its brief to SCOTUS:
      • The nonconsensual dissemination of private sexual images exposes victims to a wide variety of serious harms that affect nearly every aspect of their lives. The physical, emotional, and economic harms associated with such conduct are well-documented: many victims are exposed to physical violence, stalking, and harassment; suffer from emotional and psychological harm; and face limited professional prospects and lowered income, among other repercussions. To address this growing problem and protect its residents from these harms, Illinois enacted section 11-23.5,720 ILCS 5/11-23.5. Petitioner—who was charged with violating section 11-23.5 after she disseminated nude photos of her fiancé’s paramour without consent—asks this Court to review the Illinois Supreme Court’s decision rejecting her First Amendment challenge.
  • Six U.S. Agency for Global Media (USAGM) whistleblowers have filed a complaint concerning “retaliatory actions” with the Office of the Inspector General (OIG) at the Department of State and the Office of Special Counsel, arguing the newly installed head of USAGM punished them for making complaints through proper channels about his actions. This is the latest development at the agency. the United States Court of Appeals for the District of Columbia enjoined USAGM from “taking any action to remove or replace any officers or directors of the OTF,” pending the outcome of the suit which is being expedited.
  • Additionally, USAGM CEO and Chair of the Board Michael Pack is being accused in two different letters of seeking to compromise the integrity and independence of two organizations he oversees. There have been media accounts of the Trump Administration’s remaking of USAGM in ways critics contend are threatening the mission and effectiveness of the Open Technology Fund (OTF), a U.S. government non-profit designed to help dissidents and endangered populations throughout the world. The head of the OTF has been removed, evoking the ire of Members of Congress, and other changes have been implemented that are counter to the organization’s mission. Likewise, there are allegations that politically-motivated policy changes seek to remake the Voice of America (VOA) into a less independent entity.
  • The whistleblowers claimed in their complaint:
    • Each of the Complainants made protected disclosures –whether in the form of OIG complaints, communications with USAGM leadership, and/or communications with appropriate Congressional committees–regarding their concerns about official actions primarily taken by Michael Pack, who has been serving as the Chief Executive Officer for USAGM since June 4, 2020. The Complainants’ concerns involve allegations that Mr. Pack has engaged in conduct that violates federal law and/or USAGM regulations, and that constitutes an abuse of authority and gross mismanagement. Moreover, each of the Complainants was targeted for retaliatory action by Mr. Pack because of his belief that they held political views opposed to his, which is a violation of the Hatch Act.
    • Each of the Complainants was informed by letter, dated August 12, 2020, that their respective accesses to classified information had been suspended pending further investigation. Moreover, they were all concurrently placed on administrative leave. In each of the letters to the Complainants, USAGM claimed that the Complainants had been improperly granted security clearances, and that the Complainants failed to take remedial actions to address personnel and security concerns prior to permitting other USAGM employees to receive security clearances. In addition, many or all of the Complainants were earlier subject to retaliatory adverse personnel actions in the form of substantial limitations on their ability to carry out their work responsibilities(i.e. a significant change in duties and responsibilities), which limitations were imposed without following appropriate personnel procedures.

Further Reading

  • Big Tech Was Their Enemy, Until Partisanship Fractured the Battle Plans” By Cecilia Kang and David McCabe — The New York Times. There’s a bit of court intrigue in this piece about how Republicans declined to join Democrats in the report on the antirust report released this week, sapping the recommendations on how to address Big Tech of power.
  • Facebook Keeps Data Secret, Letting Conservative Bias Claims Persist” By Bobby Allyn — NPR. Still no evidence of an anti-conservative bias at Facebook, according to experts, and the incomplete data available seem to indicate conservative content may be more favored by users than liberal content. Facebook does not release data that settle the question, however, and there are all sorts of definitional questions that need answers before this issue could be definitely settled. And yet, some food for thought is a significant percentage of sharing a link may be driven by bots and not humans.
  • News Corp. changes its tune on Big Tech” By Sara Fischer — Axios.  After beating the drum for years about the effect of Big Tech on journalism, the parent company of the Wall Street Journal and other media outlets is much more conciliatory these days. It may have something to do with all the cash the Googles and Facebooks of the world are proposing to throw at some media outlets for their content. It remains to be seen how this change in tune will affect the Australian Competition and Consumer Commission’s (ACCC) proposal to ensure that media companies are compensated for articles and content online platforms use. In late July the ACCC released for public consultation a draft of “a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook.”
  • Silicon Valley Opens Its Wallet for Joe Biden” By Daniel Oberhaus — WIRED. In what will undoubtedly be adduced as evidence that Silicon Valley is a liberal haven, this article claims according to federal elections data for this election cycle, Alphabet, Amazon, Apple, Facebook, Microsoft, and Oracle employees have contributed $4,787,752 to former Vice President Joe Biden and $239,527 to President Donald Trump. This is only for contributions of $200 and higher, so it is likely these data are not complete.
  • Facebook bans QAnon across its platforms” By Ben Collins and Brandy Zadrozny — NBC News. The social media giant has escalated and will remove all content related to the conspiracy group and theory known as QAnon. However, believers have been adaptable and agile in dropping certain terms and using methods to evade detection. Some experts say Facebook’s actions are too little, too late as these beliefs are widespread and are fueling a significant amount of violence and unrest in the real world.

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2020. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

Image by Katie White from Pixabay

Antitrust Report Released

A far reaching set of recommendations on how the U.S. should remake its antitrust policies to take on Big Tech

The subcommittee of the House Judiciary Committee that has been investigating digital competition for over a year issued its final report and is calling for nothing less than a complete remaking of United States (U.S.) antitrust policy and law. In the view of the subcommittee a handful of technology companies have strangleholds on a number of key markets, and the health of the U.S. economy demands that the companies be broken up and reformed. The four companies the subcommittee focused on are Amazon, Apple, Facebook, and Google, four of the world’s largest companies by market capitalization. Even though the tide has turned against these and other large technology companies that were feted during the Obama Administration, if the response of Republicans on the committee encapsulates the feeling of party members in the Senate, there is no likely path for enactment of many of these proposals even under a Biden Administration unless the filibuster is junked. And even then, tech companies would find many sympathetic moderate and centrist Democrats who could not go along with a wholesale reform of antitrust enforcement.

The House Judiciary Committee’s Antitrust, Commercial, and Administrative Law Subcommittee started its inquiry over a year ago and held seven hearings, including one this past summer with the CEOs of the four companies. Subcommittee Chair David Cicilline (D-RI) has long made his leanings clear in his opening statements and questions as has the full Committee Chair Jerrold Nadler (D-NY). They agree that these companies are too large and current antitrust enforcement and law are inadequate to the job of addressing dominance of inline markets to rival to trusts from more than 100 years ago.

The Subcommittee found:

  • Over the past decade, the digital economy has become highly concentrated and prone to monopolization. Several markets investigated by the Subcommittee—such as social networking, general online search, and online advertising—are dominated by just one or two firms. The companies investigated by the Subcommittee—Amazon, Apple, Facebook, and Google—have captured control over key channels of distribution and have come to function as gatekeepers. Just a decade into the future, 30% of the world’s gross economic output may lie with these firms, and just a handful of others.
  • In interviews with Subcommittee staff, numerous businesses described how dominant platforms exploit their gatekeeper power to dictate terms and extract concessions that no one would reasonably consent to in a competitive market. Market participants that spoke with Subcommittee staff indicated that their dependence on these gatekeepers to access users and markets requires concessions and demands that carry significant economic harm, but that are “the cost of doing business” given the lack of options.
  • This significant and durable market power is due to several factors, including a high volume of acquisitions by the dominant platforms. Together, the firms investigated by the Subcommittee have acquired hundreds of companies just in the last ten years. In some cases, a dominant firm evidently acquired nascent or potential competitors to neutralize a competitive threat or to maintain and expand the firm’s dominance. In other cases, a dominant firm acquired smaller companies to shut them down or discontinue underlying products entirely—transactions aptly described as “killer acquisitions.”
  • In the overwhelming number of cases, the antitrust agencies did not request additional information and documentary material under their pre-merger review authority in the Clayton Act, to examine whether the proposed acquisition may substantially lessen competition or tend to create a monopoly if allowed to proceed as proposed. For example, of Facebook’s nearly 100 acquisitions, the Federal Trade Commission engaged in an extensive investigation of just one acquisition: Facebook’s purchase of Instagram in 2012.

Regarding the four companies themselves, the Subcommittee claimed:

  • Facebook
    • Facebook has monopoly power in the market for social networking. Internal communications among the company’s Chief Executive Officer, Mark Zuckerberg, and other senior executives indicate that Facebook acquired its competitive threats to maintain and expand its dominance. For example, a senior executive at the company described its acquisition strategy as a “land grab” to “shore up” Facebook’s position, while Facebook’s CEO said that Facebook “can likely always just buy any competitive startups,” and agreed with one of the company’s senior engineers that Instagram was a threat to Facebook.
    • Facebook’s monopoly power is firmly entrenched and unlikely to be eroded by competitive pressure from new entrants or existing firms. In 2012, the company described its network effects as a “flywheel” in an internal presentation prepared for Facebook at the direction of its Chief Financial Officer. This presentation also said that Facebook’s network effects get “stronger every day.”
  • Google
    • Google has a monopoly in the markets for general online search and search advertising. Google’s dominance is protected by high entry barriers, including its click-and-query data and the extensive default positions that Google has obtained across most of the world’s devices and browsers. A significant number of entities—spanning major public corporations, small businesses, and entrepreneurs—depend on Google for traffic, and no alternate search engine serves as a substitute.
    • Google maintained its monopoly over general search through a series of anticompetitive tactics. These include an aggressive campaign to undermine vertical search providers, which Google viewed as a significant threat. Documents show that Google used its search monopoly to misappropriate content from third parties and to boost Google’s own inferior vertical offerings, while imposing search penalties to demote third-party vertical providers. Since capturing a monopoly over general search, Google has steadily proliferated its search results page with ads and with Google’s own content, while also blurring the distinction between paid ads and organic results. As a result of these tactics, Google appears to be siphoning off traffic from the rest of the web, while entities seeking to reach users must pay Google steadily increasing sums for ads. Numerous market participants analogized Google to a gatekeeper that is extorting users for access to its critical distribution channel, even as its search page shows users less relevant results.
    • A second way Google has maintained its monopoly over general search has been through a series of anticompetitive contracts. After purchasing the Android operating system in 2005, Google used contractual restrictions and exclusivity provisions to extend Google’s search monopoly from desktop to mobile. Documents show that Google required smartphone manufacturers to pre-install and give default status to Google’s own apps, impeding competitors in search as well as in other app markets. As search activity now migrates from mobile to voice, third-party interviews suggest Google is again looking for ways to maintain its monopoly over search access points through a similar set of practices.
  • Amazon
    • Amazon has significant and durable market power in the U.S. online retail market. This conclusion is based on the significant record that Subcommittee staff collected and reviewed, including testimonials from third-party sellers, brand manufacturers, publishers, former employees, and other market participants, as well as Amazon’s internal documents. Although Amazon is frequently described as controlling about 40% of U.S. online retail sales, this market share is likely understated, and estimates of about 50% or higher are more credible.
    • As the dominant marketplace in the United States for online shopping, Amazon’s market power is at its height in its dealings with third-party sellers. The platform has monopoly power over many small- and medium-sized businesses that do not have a viable alternative to Amazon for reaching online consumers. Amazon has 2.3 million active third-party sellers on its marketplace worldwide, and a recent survey estimates that about 37% of them—about 850,000 sellers—rely on Amazon as their sole source of income.
    • Amazon achieved its current dominant position, in part, through acquiring its competitors, including Diapers.com and Zappos. It has also acquired companies that operate in adjacent markets, adding customer data to its stockpile and further shoring up its competitive moats. This strategy has entrenched and expanded Amazon’s market power in e-commerce, as well as in other markets. The company’s control over, and reach across, its many business lines enables it to self-preference and disadvantage competitors in ways that undermine free and fair competition. As a result of Amazon’s dominance, other businesses are frequently beholden to Amazon for their success.
    • Amazon has engaged in extensive anticompetitive conduct in its treatment of third-party sellers. Publicly, Amazon describes third-party sellers as “partners.” But internal documents show that, behind closed doors, the company refers to them as “internal competitors.” Amazon’s dual role as an operator of its marketplace that hosts third-party sellers, and a seller in that same marketplace, creates an inherent conflict of interest. This conflict incentivizes Amazon to exploit its access to competing sellers’ data and information, among other anticompetitive conduct.
  • Apple
    • Apple has significant and durable market power in the mobile operating system market. Apple’s dominance in this market, where it controls the iOS mobile operating system that runs on Apple mobile devices, has enabled it to control all software distribution to iOS devices. As a result, Apple exerts monopoly power in the mobile app store market, controlling access to more than 100 million iPhones and iPads in the U.S.
    • Apple’s mobile ecosystem has produced significant benefits to app developers and consumers. Launched in 2008, the App Store revolutionized software distribution on mobile devices, reducing barriers to entry for app developers and increasing the choices available to consumers. Despite this, Apple leverages its control of iOS and the App Store to create and enforce barriers to competition and discriminate against and exclude rivals while preferencing its own offerings. Apple also uses its power to exploit app developers through misappropriation of competitively sensitive information and to charge app developers supra-competitive prices within the App Store. Apple has maintained its dominance due to the presence of network effects, high barriers to entry, and high switching costs in the mobile operating system market.

The Subcommittee summarized its recommendations:

a. Restoring Competition in the Digital Economy

  • Structural separations and prohibitions of certain dominant platforms from operating in adjacent lines of business;
  • Nondiscrimination requirements, prohibiting dominant platforms from engaging in self- preferencing, and requiring them to offer equal terms for equal products and services;
  • Interoperability and data portability, requiring dominant platforms to make their services compatible with various networks and to make content and information easily portable between them;
  • Presumptive prohibition against future mergers and acquisitions by the dominant platforms;
  • Safe harbor for news publishers in order to safeguard a free and diverse press; and
  • Prohibitions on abuses of superior bargaining power, proscribing dominant platforms from engaging in contracting practices that derive from their dominant market position, and requiring due process protections for individuals and businesses dependent on the dominant platforms.

b. Strengthening the Antitrust Laws

  • Reasserting the anti-monopoly goals of the antitrust laws and their centrality to ensuring a healthy and vibrant democracy;
  • Strengthening Section 7 of the Clayton Act, including through restoring presumptions and bright-line rules, restoring the incipiency standard and protecting nascent competitors, and strengthening the law on vertical mergers;
  • Strengthening Section 2 of the Sherman Act, including by introducing a prohibition on abuse of dominance and clarifying prohibitions on monopoly leveraging, predatory pricing, denial of essential facilities, refusals to deal, tying, and anticompetitive self-preferencing and product design; and
  • Taking additional measures to strengthen overall enforcement, including through overriding problematic precedents in the case law.

c. Reviving Antitrust Enforcement

  • Restoring robust congressional oversight of the antitrust laws and their enforcement;
  • Restoring the federal antitrust agencies to full strength, by triggering civil penalties and other relief for “unfair methods of competition” rules, requiring the Federal Trade Commission to engage in regular data collection on concentration, enhancing public transparency and accountability of the agencies, requiring regular merger retrospectives, codifying stricter prohibitions on the revolving door, and increasing the budgets of the FTC and the Antitrust Division; and
  • Strengthening private enforcement, through eliminating obstacles such as forced arbitration clauses, limits on class action formation, judicially created standards constraining what constitutes an antitrust injury, and unduly high pleading standards.

The Ranking Member on the Antitrust, Commercial, and Administrative Law Subcommittee, Jim Sensenbrenner (R-WI) signaled his agreement with some of the recommendations made in the report but articulated his views:

  • I disagree with the view that there needs to be a wholesale rewrite of our country’s antitrust laws.
  • Congressional review of our antitrust laws in the age of Big Tech was absolutely warranted.  Oversight of the existing legal and regulatory framework is one of the key functions of the committee system, and I applaud Chairman Cicilline on his undertaking of this project in a bipartisan manner. 
  • There actually is a lot that we agree on, including the lack of sufficient scrutiny on past activity by these companies.  For example, the report highlights that Facebook only had one acquisition extensively reviewed by the FTC out of nearly 100.  That lack of enforcement raises significant questions. What becomes clear is that better resources and funding for the enforcement agencies are key to having an effective antitrust framework.
  • Ultimately, I am concerned with several of the recommendations made by the committee.  A ‘Glass-Steagall’ like approach to tech regulation does not benefit consumers and will lead to too much government regulation of a very innovative industry.  Likewise, mandating data interoperability could hamper future innovation by preventing the development of new and better systems.
  • I am also opposed to several of the proposed changes to merger activity.  A presumptive ban on future acquisitions, especially now with economic uncertainty plaguing the world, could hinder potentially fruitful, beneficial business decisions. Also, shifting the burden of proof in merger cases misplaces the obligation upon companies to prove their innocence rather than the government proving their guilt.

In his statement, Ranking Member Jim Jordan (R-OH) again chose to ignore the competition and market dominance issues on which a number of his Republican colleagues agreed with Democrats to again reiterate unproven Republican talking points about alleged conservative bias:

Big tech is out to get conservatives. Unfortunately, the Democrats’ partisan report ignores this fundamental problem and potential solutions and instead advances radical proposals that would refashion antitrust law in the vision of the far left.

On the same day, a small group of committee Republicans released their report on “Big Tech” with their proposed policy and legal solutions. This effort was led by Representative Ken Buck (R-CO), a subcommittee member who participated in the hearings in a bipartisan fashion even praising Cicilline for his evenhanded conduct of the proceedings. However, Buck did indicate he could not agree with some of the directions his Democratic colleagues seem to be heading in response to the evidence. Buck was joined by Representatives Matt Gaetz (R-FL), Doug Collins (R-GA), and Andy Biggs (R-AZ).

They noted:

We write this response to join Chairman Cicilline and the majority staff on certain recommendations, offer modifications to some recommendations, and argue against the wisdom of proceeding on a few recommendations. We also want to point out that the committee’s ongoing efforts should emphasize issues that have been ignored but must be addressed in the future for a truly bipartisan approach to reforming Big Tech’s dominant position in the marketplace. Finally, we want to thank the Chairman for not using this report as an opportunity to push a progressive labor, environmental, or other unrelated policy agenda under the guise of antitrust enforcement. We sincerely appreciate the Chairman’s friendship and dedication to making this process open and accessible to all members.

Buck, Gaetz, Collins, and Biggs added:

The majority staff report offers a comprehensive review of the technology marketplace and accurately depicts the harmful effects of Big Tech’s anticompetitive reign over the digital economy. Many of the factual findings detailed in the report are undeniable. The majority staff accurately portrays how Apple, Amazon, Google, and Facebook have used their monopoly power to act as gatekeepers to the marketplace, undermine potential competition, and pick winners and losers, all while simultaneously cozying up to unfriendly nations like China in order to further expand their global footprint.

In terms of where they agree with Cicilline and the Democrats, they remarked:

  • We agree that antitrust enforcement agencies need additional resources and tools to provide proper oversight. However, these potential changes need not be dramatic to be effective. By reinforcing presumptions that certain behaviors are likely to reduce competition, lowering evidentiary burdens in litigated cases, and emphasizing that anticompetitive effects are not limited to price effects and include innovation competition, quality, output, and consumer choice, Congress can make a meaningful difference.
  • We also agree with a number of the majority’s other legislative recommendations, including proposals to shift the burden of proof for companies pursuing mergers and acquisitions and empowering consumers to take control of their user data through data portability and interoperability standards. Additionally, the report offers recommendations where we believe there is common ground, but the subcommittee should receive expert feedback before pushing forward. Some of these proposals include the majority’s monopoly reforms related to predatory pricing, monopoly leveraging, the Essential Facilities Doctrine, and policies related to the Supreme Court’s recent decision related to two-sided markets in Ohio v. American Express Co.

Buck, Gaetz, Collins, and Biggs spelled out the recommendations made by the majority they could not join:

  • However, the majority also offers policy prescriptions that are non-starters for conservatives. These proposals include eliminating arbitration clauses and further opening companies up to class action lawsuits. Similarly, the majority’s desire to institute Glass- Steagall for America’s tech sector and modeling the majority’s equal terms for equal services recommendation on President Obama’s net neutrality rule will not garner support from Republicans.
  • While we agree in principle with the findings identified in the report, we cannot endorse all of the legislative recommendations offered by the majority. We will work with the Chairman in a bipartisan fashion to help enact the legislative solutions where we can agree. However, we are concerned that sweeping changes could lead to overregulation and carry unintended consequences for the entire economy. We prefer a targeted approach, the scalpel of antitrust, rather than the chainsaw of regulation.

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2020. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

Image by xresch from Pixabay

Big Tech CEOs Appear At Hearing

In a marathon hearing, Democrats make their case on why big tech is engaged in antitrust and anti-competitive practices. Whether this hearing and a future report change anything is an open question.

First things first, if you would like to receive my Technology Policy Update, email me. You can find some of these Updates from 2019 and 2020 here.

On  29 July, the House Judiciary Committee’s Antitrust, Commercial, and Administrative Law Subcommittee held its sixth hearing on “Online Platforms and Market Power” titled “Examining the Dominance of Amazon, Apple, Facebook, and Google” with the heads of Amazon, Apple, Google, and Facebook that lasted more than five hours. Democrats largely focused their questions on the documents and information provided by the companies to make the case each had engaged in practices that are at the least anti-competitive if not illegal under the Sherman and Clayton Antitrust Acts. On the other hand, Republicans largely avoided discussing anti-competitive or antitrust issues except in connection with lines of questioning regarding social media moderation of content that is allegedly biased against conservatives and the People’s Republic of China (PRC).

The subcommittee is expected to issue its report in the near term with possible recommendations on how to amend US law to address the problems turned up during the investigation. However, the Republican-controlled Senate and the White House will likely not be receptive to legislation to update the US’ antitrust or anti-competitive laws. And yet, a Democratic White House and Senate may prove more receptive and able to effect changes in these laws. It remains to be seen whether the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) bring broad cases against these companies for potential violations. Likewise, groups of states are collectively investigating Google and Facebook, and the attorney general of California is looking into Amazon’s business practices. Finally, the European Commission (EC) is also investigating a number of this companies as its new leadership considers the size and power of tech companies a central issue in the European Union.

Subcommittee Chair David Cicilline (D-RI) asserted “[a]lthough these four corporations differ in important and meaningful ways, we have observed common patterns and competition problems over the course of our investigation:

  • First, each platform is a bottleneck for a key channel of distribution. Whether they control access to information or to a marketplace, these platforms have the incentive and ability to exploit this power. They can charge exorbitant fees, impose oppressive contracts, and extract valuable data from the people and businesses that rely on them.
  • Second, each platform uses its control over digital infrastructure to surveil other companies—their growth, business activity, and whether they might pose a competitive threat. Each platform has used this data to protect its power, by either buying, copying, or by cutting off access for any actual or potential rival.
  • Third, these platforms abuse their control over current technologies to extend their power. Whether it’s through self-preferencing, predatory pricing, or requiring users to buy additional products, the dominant platforms have wielded their power in destructive, harmful ways in order to expand.

Cicilline stated that

  • At today’s hearing we will examine how each of these companies has used this playbook to achieve and maintain dominance—and how their power shapes and affects our daily lives. Why does this matter? Many of the practices used by these companies have harmful economic effects. They discourage entrepreneurship, destroy jobs, hike costs, and degrade quality. Simply put: They have too much power. This power staves off new forms of competition, creativity, and innovation. And while these dominant firms may still produce some new innovative products, their dominance is killing the small businesses, manufacturing, and overall dynamism that are the engines of the American economy.
  • Several of these firms also harvest and abuse people’s data to sell ads for everything from new books to dangerous “miracle” cures. When everyday Americans learn how much of their data is being mined, they can’t run away fast enough. But in many cases, there is no escape from this surveillance because there is no alternative. People are stuck with bad options. Open markets are predicated on the idea that if a company harms people, consumers, workers, and business partners will choose another option. We are here today because that choice is no longer possible.

Cicilline stated “I am confident that addressing the problems we see in these markets will lead to a stronger, more vibrant economy…[b]ecause concentrated economic power also leads to concentrated political power, this investigation also goes to the heart of whether we, as a people, govern ourselves, or whether we let ourselves be governed by private monopolies.”

Subcommittee Ranking Member James Sensenbrenner (R-WI) lauded the technological innovations the four companies have provided Americans that made coping with the COVID-19 pandemic easier. He reiterated that “being big is not inherently bad” and asserted the opposite was true because in the US success should be rewarded. Sensenbrenner said the hearing is designed to help the subcommittee better understand the roles the companies play in the digital marketplace and the effect on consumers and the public at large. He said that data drives the marketplace and those who control the data, in essence, control the marketplace. Sensenbrenner said there are broader questions around data such as who owns it; do they share data with their customers or competitors; what is the fair market value of that data; is there anything monopolistic in acquiring this data; and what are the implications of monetizing data.

Sensenbrenner claimed that since the “tech investigation” began, “we have heard rumblings from many” who say your companies have grown too large. He stated that since the hearing was announced the complaints have gotten even louder. Sensenbrenner said he found these complaints informative, but he did not plan on litigating each complaint today. He asserted antitrust law and the consumer welfare standard have served the US well for over a century and have provided a framework for some of the US’s most successful and innovative companies. Sensenbrenner allowed that as the economy evolves, antitrust law may need updating to meet the needs of the nation and its consumers. He stated his concern that market dominance in this space is ripe for abuse, “particularly when it comes to free speech,” as Facebook, YouTube, and Twitter have become the public space of today as political debate unfolds in real time. Sensenbrenner said that reports of “dissenting views, often conservative views” are targeted or censored are seriously troubling. He stressed that “conservatives are consumers, too” and “they need the protection of antitrust laws.” He argued that the power to shape debate carries tremendous responsibility.

Sensenbrenner said facts should guide the inquiry. He noted the companies are large, successful, and powerful, all of which are fine. He asserted he wanted to leave the hearing with a better picture of how these qualities affect consumers.

Amazon CEO Jeff Bezos claimed

  • The global retail market we compete in is strikingly large and extraordinarily competitive. Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, there’s room in retail for many winners. For example, more than 80 retailers in the U.S. alone earn over $1 billion in annual revenue.
  • Like any retailer, we know that the success of our store depends entirely on customers’ satisfaction with their experience in our store. Every day, Amazon competes against large, established players like Target, Costco, Kroger, and, of course, Walmart—a company more than twice Amazon’s size. And while we have always focused on producing a great customer experience for retail sales done primarily online, sales initiated online are now an even larger growth area for other stores. Walmart’s online sales grew 74% in the first quarter.
  • And customers are increasingly flocking to services invented by other stores that Amazon still can’t match at the scale of other large companies, like curbside pickup and in-store returns. The COVID-19 pandemic has put a spotlight on these trends, which have been growing for years. In recent months, curbside pickup of online orders has increased over 200%, in part due to COVID19 concerns. We also face new competition from the likes of Shopify and Instacart—companies that enable traditionally physical stores to put up a full online store almost instantaneously and to deliver products directly to customers in new and innovative ways—and a growing list of omnichannel business models. Like almost every other segment of our economy, technology is used everywhere in retail and has only made retail more competitive, whether online, in physical stores, or in the various combinations of the two that make up most stores today. And we and all other stores are acutely aware that, regardless of how the best features of “online” and “physical” stores are combined, we are all competing for and serving the same customers. The range of retail competitors and related services is constantly changing, and the only real constant in retail is customers’ desire for lower prices, better selection, and convenience.
  • It’s also important to understand that Amazon’s success depends overwhelmingly on the success of the thousands of small and medium-sized businesses that also sell their products in Amazon’s stores. Back in 1999, we took what at the time was the unprecedented step of welcoming third-party sellers into our stores and enabling them to offer their products right alongside our own. Internally, this was extremely controversial, with many disagreeing and some predicting this would be the beginning of a long, losing battle. We didn’t have to invite third-party sellers into the store. We could have kept this valuable real estate for ourselves. But we committed to the idea that over the long term it would increase selection for customers, and that more satisfied customers would be great for both third-party sellers and for Amazon. And that’s what happened.
  • Within a year of adding those sellers, third-party sales accounted for 5% of unit sales, and it quickly became clear that customers loved the convenience of being able to shop for the best products and to see prices from different sellers all in the same store. These small and medium-sized third-party businesses now add significantly more product selection to Amazon’s stores than Amazon’s own retail operation. Third-party sales now account for approximately 60% of physical product sales on Amazon, and those sales are growing faster than Amazon’s own retail sales. We guessed that it wasn’t a zero sum game. And we were right—the whole pie did grow, third-party sellers did very well and are growing fast, and that has been great for customers and for Amazon. There are now 1.7 million small and medium-sized businesses around the world selling in Amazon’s stores. More than 200,000 entrepreneurs worldwide surpassed $100,000 in sales in our stores in 2019. On top of that, we estimate that third-party businesses selling in Amazon’s stores have created over 2.2 million new jobs around the world.

Apple CEO Tim Cook asserted

  • The smartphone market is fiercely competitive, and companies like Samsung, LG, Huawei and Google have built very successful smartphone businesses offering different approaches.
  • Apple does not have a dominant market share in any market where we do business. That is not just true for iPhone; it is true for any product category.
  • What motivates us is the continuous improvement of the user experience, and we focus relentlessly on and invest significantly in new breakthroughs, innovative features and deepening the principles that set us apart.
  • Privacy and security are key examples of this drive. This is true for the iPhone and for every device we make. We build products that, from the ground up, help users protect their fundamental right to the privacy of their personal data. This principle is foundational and touches everything else we do.
  • We created the App Store in 2008 as a feature of the iPhone. Launching with a little more than 500 apps, it was our ambitious attempt to dramatically expand the features and customizability of every user’s device. We wanted to create a safe and trusted place for users to discover apps—and a means of providing a secure and supportive way for developers to develop, test and distribute apps to iPhone users globally.
  • Apple continuously improves, and provides every developer with cutting-edge tools like compilers, programming languages, operating systems, frameworks and more than 150,000 essential software building blocks called APIs. These are not only powerful, but so simple to use that students in elementary schools can and do make apps.
  • The App Store guidelines ensure a high-quality, reliable and secure user experience. They are transparent and applied equally to developers of all sizes and in all categories. They are not set in stone. Rather, they have changed as the world has changed, and we work with developers to apply them fairly.
  • For the vast majority of apps on the App Store, developers keep 100% of the money they make. The only apps that are subject to a commission are those where the developer acquires a customer on an Apple device and where the features or services would be experienced and consumed on an Apple device.
  • Apple’ s commissions are comparable to or lower than commissions charged by the majority of our competitors. And they are vastly lower than the 50 to 70 percent that software developers paid to distribute their work before we launched the App Store.
  • In the more than a decade since the App Store debuted, we have never raised the commission or added a single fee. In fact, we have reduced them for subscriptions and exempted additional categories of apps. The App Store evolves with the times, and every change we have made has been in the direction of providing a better experience for our users and a compelling business opportunity for developers.
  • I am here today because scrutiny is reasonable and appropriate. We approach this process with respect and humility. But we make no concession on the facts.

Alphabet CEO Sundar Pichai contended

  • Google operates in highly competitive and dynamic global markets, in which prices are free or falling, and products are constantly improving. Today’s competitive landscape looks nothing like it did 5 years ago, let alone 21 years ago, when Google launched its first product, Google 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. 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. When searching for products online, you may be visiting Amazon, eBay, Walmart, or any one of a number of e-commerce providers, where most online shopping queries happen.
  • Similarly, in areas like travel and real estate, Google faces strong competition for search queries from many businesses that are experts in these areas.
  • A competitive digital ad marketplace gives publishers and advertisers, and therefore consumers, an enormous amount of choice. For example, competition in ads — from Twitter, Instagram, Pinterest, Comcast and others — has helped lower online advertising costs by 40% over the last 10 years, with these savings passed down to consumers through lower prices.
  • We also deliberately build platforms that support the innovation of others. Using Android — a product I worked on for many years — thousands of device makers and mobile operators build and sell devices without any licensing fees to us or any requirement to integrate our products. This greatly reduces device prices, and today billions of consumers around the globe are now able to afford cuing-edge smartphones, some for less than $50. 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. Competition also sets higher standards for privacy and security. I’ve always believed that privacy is a universal right and should be available to everyone, and Google is committed to keeping your information safe, treating it responsibly, and putting you in control of what you choose to share. We also never sell user information to third parties. But more must be done to protect users across industries, which is why we’ve long supported the creation of comprehensive federal privacy laws.

Facebook CEO Mark Zuckerberg asserted

  • Our story would not have been possible without U.S. laws that encourage competition and innovation. I believe that strong and consistent competition policy is vital because it ensures that the playing field is level for all. At Facebook, we compete hard, because we’re up against other smart and innovative companies that are determined to win. We know that our future success is not guaranteed, especially in a global tech industry defined by rapid innovation. The history of technology is often the history of failure, and even industry leading tech companies fail if they don’t stay competitive. This is why we’re focused on delivering better services for people and businesses, and competing as vigorously as we can within the rules.
  • Although people around the world use our products, Facebook is a proudly American company. We believe in values — democracy, competition, inclusion and free expression — that the American economy was built on. Many other tech companies share these values, but there’s no guarantee our values will win out. 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. As Congress and other stakeholders consider how antitrust laws support competition in the U.S., I believe it’s important to maintain the core values of openness and fairness that have made America’s digital economy a force for empowerment and opportunity here and around the world.
  • Like many companies, we’ve both built our own products from the ground up, and we’ve moved others forward through mergers and acquisitions. Our acquisitions have helped drive innovation for people who use our own products and services and for the broader startup community. Acquisitions bring together different companies’ complementary strengths. When you acquire a company, you can benefit from their technology and talent, and when you are acquired you get access to resources and people you otherwise might never have been able to tap into.
  • Facebook has made Instagram and WhatsApp successful as part of our family of apps. Instagram and WhatsApp have been able to grow and operate their services using Facebook’s bespoke, lower-cost infrastructure and tackle spam and harmful content with Facebook’s integrity teams and technology.
  • Following its acquisition, Instagram was able to get help stabilizing infrastructure and controlling runaway spam. It also benefited from the ability to plug into Facebook’s self-serve ads system, sales team and existing advertiser relationships to drive monetization, and was able to build products including IG Direct and IG Video that used Facebook’s technology and infrastructure. Before it was acquired, WhatsApp was a paid app with a reputation for secure communications; together we built on that by introducing end-to-end encryption and making it free to use. Since its acquisition, WhatsApp has also been able to develop products such as voice and video calling that were built on Facebook’s technology stack.
  • These benefits came about as a result of our acquisition of those companies, and would not have happened had we not made those acquisitions. We have developed new products for Instagram and WhatsApp, and we have learned from those companies to bring new ideas to Facebook. The end result is better services that provide more value to people and advertisers, which is a core goal of Facebook’s acquisition strategy.

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