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From: Glenn Petersen8/14/2020 5:03:05 PM
2 Recommendations   of 15431
 
Applicable to both AAPL and GOOGL:

APPLE HAS FINALLY MET ITS FORTNITE MATCH

Apple’s walled garden gets an epic test

By Tom Warren @tomwarren
The Verge
Aug 14, 2020, 10:12am EDT

Epic Games executed its most ambitious Fortnite live event yesterday, leading both Apple and Google to remove one of the world’s most popular games from their app stores. It was a well choreographed sequence of events designed to highlight the power Apple and Google hold over app stores, especially Apple’s walled garden. Epic Games has now filed lawsuits against both Apple and Google in a battle that’s likely to last months. Epic Games is uniquely positioned to pull off a stunt like this, and now poses a serious threat to how Apple, in particular, operates its App Store and iOS operating system.

Apple originally launched the App Store as a way to add value to the iPhone and sell more of its handsets. “It costs money to run it,” explained Steve Jobs in a Wall Street Journal interview at the launch of the App Store in 2008. “Those free apps cost money to store and to deliver wirelessly. The paid apps cost money, too. They have to pay for some of the free apps. We don’t expect this to be a big profit generator. We expect it to add value to the iPhone. We’ll sell more iPhones because of it.” Apple’s App Store is now a massive $519 billion developer ecosystem. It’s also a key part of Apple’s growing services business, which is the second biggest revenue driver for the company, behind the iPhone.

Yet Apple has maintained a lucrative 30 percent cut of in-app purchases for digital goods for more than a decade now. It’s a policy that continues to annoy developers and the basis for a fresh and very visible challenge from Epic Games.

The latest controversy kicked off when Epic implemented a “permanent discount” yesterday on the V-Bucks digital currency used within Fortnite to purchase skins and other virtual goods. The roughly 20 percent discount was made possible this week because Epic Games now offers its own in-app payment scheme within Fortnite on iOS and Android, blatantly bypassing Google and Apple app store guidelines. Both Apple and Google have, for years, forced developers to use their own in-app payment schemes that require developers to hand over a 30 percent cut of in-app purchases on digital goods, which is only lowered to 15 percent for long-term subscriptions after someone subscribes for at least a year.

Apple and Google both argue this huge 30 percent fee is necessary for them to maintain their app stores and the security and simplicity they provide, but developers don’t agree. Others have tried to fight Apple’s 30 percent tax in the past by encouraging customers to sign up to services or purchase digital goods outside of Apple’s App Store. Some have compromised by jacking up their iOS prices to help recoup the lost 30 percent.



While this policy is central to the battle between Epic Games and Apple and Google, the fight is ultimately about power, control, and Apple’s approach to games and the App Store. Epic Games is uniquely positioned to fight Apple and Google with a game that’s played around the world by more than 350 million people. The game maker demonstrated its own power yesterday.

While most iOS and Android apps have to be approved and updated through Apple’s App Store or the Google Play Store, both companies make exceptions for games to allow developers to regularly update them within a shell app. You download a smaller container app, and then this app downloads the larger game files. Epic used this exception to its advantage, implementing its in-app purchase system without Apple or Google having to approve or deny it.

This blatant disregard for the rules left Apple and Google no choice but to remove Fortnite from their app stores. Epic’s quick, calculated response shows that the real target of its attention (and attention seeking) is Apple.

To start with, the company immediately launched a protest video inside the game designed to mock Apple’s iconic “1984” Macintosh commercial.

Apple originally used this Super Bowl commercial to highlight IBM’s dominance back in 1984, comparing the corporation to the dystopian novel by George Orwell that focuses on totalitarian political systems. “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation,” says Epic Games. “Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear.”

Epic’s also encouraging Fortnite players affected by the ban to tweet at Apple with the #FreeFortnite hashtag. Epic is using all of its own power to execute a marketing campaign designed to highlight Apple’s control and power.

Epic made no such viral video or campaign targeting Google.

Given that Google has largely followed in the footsteps of Apple’s App Store, it makes sense that Epic’s attention seeking would mainly target Apple. You can also still play Fortnite on Android by sideloading the app, avoiding the Google Play Store. There’s also a lot more controversy surrounding Apple’s policy decisions and the inability for consumers to install iOS apps from outside the App Store.

Apple’s power and control over the App Store has come under increased scrutiny this year. Developers have typically avoided publicly calling out Apple for fear of retribution, but things are starting to change. Spotify was the first to file a formal antitrust complaint with the European Union last year, arguing that Apple harms consumer choice and stifles innovation through the rules it enforces on the App Store.




The EU is investigating Apple’s App Store policies. Illustration by Alex Castro / The Verge`
------------------------------
The EU opened a formal investigation into Apple’s App Store and Apple Pay practices earlier this year, and Epic Games, Match Group, and Rakuten all joined Spotify in protesting Apple’s App Store fees.

At around the same time, Apple got caught up in a bitter dispute over Hey — a new subscription email app — just days before its annual developers conference. Apple initially approved the Hey app in the App Store before rejecting a bug-fix update because it claimed Hey violated the rules by not offering in-app subscriptions. This led to a public back-and-forth that highlighted the inconsistent way Apple applies its rules, and it revealed just how much developers are terrified of Apple.

The Hey incident also led the chairman of the House antitrust subcommittee to label Apple a bully and say that Apple’s App Store fees are “highway robbery.” Separately, Apple CEO Tim Cook then appeared at a House Judiciary Committee hearing, alongside the CEOs of Google, Facebook, and Amazon a month later. The Big Tech antitrust hearing saw all four companies try to convince Congress that their business practices aren’t anti-competitive monopolies.

Cook’s testimony was particularly interesting, as he tried to argue that Apple’s rules are applied fairly and evenly to all developers. “We treat every developer the same,” said Cook. “We have open and transparent rules. Those rules apply evenly to everyone.” We know this can’t be true. Apple created a special program for “premium subscription video entertainment providers” that allows apps like Amazon Prime Video to let existing subscribers avoid Apple’s in-app purchases and 30 percent cut.

It’s a deal we still don’t really know enough about, although documents show that Apple brokered a special deal with Amazon that involved a 15 percent cut instead of the typical 30 percent for in-app purchases. Either way, it’s certainly not part of what Cook calls Apple’s “open and transparent rules.” This is just one, albeit significant, example of Apple not applying its rules consistently. Apple also tried to argue that “client apps” are allowed for business apps but not consumer ones in its justification for rejecting the Hey email app, even though this distinction never appears in Apple’s App Store guidelines.

These inconsistencies and rules have irked developers for years, but many have simply been too scared to call Apple out. The iPhone maker is the judge and jury when it comes to approving apps, and if you’re rejected, then there’s often no appeals process unless you can generate the press and attention to force Apple to change its mind. Hey eventually returned to the App Store on a wave of publicity (and a minor functionality tweak to its app). It’s a playbook that Epic is now looking to reuse.



Photo by Vjeran Pavic / The Verge
------------------
Epic Games is aligning itself to lead the fight for the entire industry, and the company has prior form. A mysterious “configuration issue” saw Xbox and PS4 owners playing against each other for the first time in Fortnite back in 2017, just months after Sony had refused to enable cross-platform play for both Rocket League and Minecraft. It put the focus squarely on Sony blocking cross-play, and eventually led to a public outcry when it was revealed Sony was blocking Fortnite cross-play between PS4 and Nintendo Switch players. Sony eventually backed down, after Epic Games laid the blame squarely on the PlayStation maker. Cross-play has since become an increasingly common feature in everything from Call of Duty to No Man’s Sky.

Epic Games’ rebellion against Apple and Google also comes just weeks after both Microsoft and Facebook spoke out against Apple. Microsoft condemned Apple for blocking its new xCloud game streaming service on iPhones and iPads. “Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass,” said Microsoft. Google is allowing Microsoft to launch xCloud on the Google Play Store, although in-app purchases on Android will only be available through Samsung’s Galaxy Store. Samsung also demands 30 percent of in-app purchases, but it also makes it clear that developers can negotiate an “alternative revenue share rate” during the certification phase for apps.

Facebook’s criticism of Apple’s App Store policies went a step further than Microsoft’s, describing Apple’s move to block its mini-games inside a Facebook Gaming app as a “shared pain across the games industry, which ultimately hurts players and devs and severely hamstrings innovation on mobile for other types of formats, like cloud gaming.”




Epic Games CEO Tim Sweeney is determined to fight Apple and Google. Photo by Rachel Luna/Getty Images
--------------------------
It’s clear that Epic Games wants things to change for both its own benefit and the broader benefit of the gaming community. Most smaller developers can’t afford to take on Apple or Google, but Epic Games is now valued at $17.3 billion and can certainly put up a fight. Games are also a key part of any mobile app store and a big part of how Apple generates revenue through its own App Store. Developers want a fairer cut of that revenue, but Epic also wants to shift Apple’s control here.

“We’re fighting for open platforms and policy changes equally benefiting all developers,” says Epic Games CEO Tim Sweeney. “And it’ll be a hell of a fight!” It’s a fight that Epic has prepared for, and its lawsuit specifically alleges that Apple has a monopoly in the form of the iPhone, its iOS ecosystem, and the App Store that binds them all together.

Epic has enlisted the counsel of Cravath, Swaine & Moore, which includes Christine Varney, a former US assistant attorney general of the antitrust division for the Obama administration. Varney also served as the Federal Trade commissioner for the Clinton administration. Katherine Forrest, a partner at Cravath, is also part of Epic’s lawsuit. Forrest is a former judge and antitrust litigator, and the Cravath law firm was also part of Qualcomm’s lawsuit against Apple.

It’s easy to dismiss this as giant companies squabbling with each other, filing lawsuits, and ruining Fortnite on mobile devices, but the resolution will have far-reaching consequences for Epic Games and the many other developers that rely on mobile app stores. Apple has met a defiant competitor that’s been able to bypass App Store rules and put two prices side by side to demonstrate the “Apple tax” that so many developers are upset about. Epic Games might not win its lawsuit in the US, but this isn’t about a single lawsuit. Epic is weaponizing Fortnite as a means to highlight Apple’s App Store policies and rally hundreds of millions of players to demand change.




Epic Games demonstrates the “Apple tax.
------------------


It’s a risky move that Epic might be forced to reverse, especially as mobile players could miss Fortnite’s next season. Epic has gambled that most people already have Fortnite installed on their phones and tablets, so it’s unlikely to immediately anger its community, which can now see how much cheaper V-Bucks could be. More importantly, it has put the App Store, Apple, and Google directly in the spotlight for a showdown that will involve lawsuits, regulators, and the fate of mobile app stores.

Epic doesn’t want Apple to pay its way out of a lawsuit or reach a special deal with the company. It wants regulators in Europe and the US to stand up and pay attention. Epic isn’t your typical Fortnite player that hides in a bush until they’re the last person standing, it’s trying to be the loud and colorful llama standing strong as the circle shrinks around Apple and Google.

theverge.com

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From: TimF8/19/2020 3:29:28 PM
   of 15431
 
Google Responds To Hong Kong's New National Security Law By Rejecting Its Government's Requests For Data
techdirt.com

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From: TimF8/19/2020 3:37:34 PM
   of 15431
 
Open letter to Australians
about.google

Google Warns Australians That The Government's Plan To Tax Google To Give Money To Newspapers Will Harm Search & YouTube
techdirt.com

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To: TimF who wrote (15379)8/19/2020 3:40:24 PM
From: John Carragher
   of 15431
 
I'm surprised the google employees didn't take china's side!

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From: TimF8/27/2020 3:47:52 PM
2 Recommendations   of 15431
 
Google’s Plan to Disrupt the College Degree Is Exactly What the Higher Education Market Needs
fee.org

Message 32904301

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From: Glenn Petersen9/3/2020 5:28:04 PM
1 Recommendation   of 15431
 
Justice Dept. Plans to File Antitrust Charges Against Google in Coming Weeks

New York Times
September 3, 2020

WASHINGTON — The Justice Department plans to bring an antitrust case against Google as soon as this month, after Attorney General William P. Barr overruled career lawyers who said they needed more time to build a strong case against one of the world’s wealthiest, most formidable technology companies, according to five people briefed on internal department conversations.

Justice Department officials told lawyers involved in the antitrust inquiry into Alphabet, the parent company of Google and YouTube, to wrap up their work by the end of September, according to three of the people. Most of the 40-odd lawyers who had been working on the investigation opposed the deadline. Some said they would not sign the complaint, and several of them left the case this summer.

Some argued this summer in a memo that ran hundreds of pages that they could bring a strong case but needed more time, according to people who described the document. Disagreement persisted among the team over how broad the complaint should be and what Google could do to resolve the problems the government uncovered. The lawyers viewed the deadline as arbitrary.

While there were disagreements about tactics, career lawyers also expressed concerns that Mr. Barr wanted to announce the case in September to take credit for action against a powerful tech company under the Trump administration.

But Mr. Barr felt that the department had moved too slowly and that the deadline was not unreasonable, according to a senior Justice Department official.

A former telecom industry executive who argued an antitrust matter before the Supreme Court, Mr. Barr has shown a deep interest in the Google investigation. He has requested regular briefings on the department’s case, taking thick binders of information about it on trips and vacations and returning with ideas and notes.

When Mr. Barr imposed a deadline on the investigation, some lawyers feared that the move was in keeping with his willingness to override the recommendations of career lawyers in cases that are of keen interest to President Trump, who has accused Google of bias against him.

The Google case could also give Mr. Trump and Mr. Barr an election-season achievement on an issue that both Democrats and Republicans see as a major problem: the influence of the biggest tech companies over consumers and the possibility that their business practices have stifled new competitors and hobbled legacy industries like telecom and media.

A coalition of 50 states and territories support antitrust action against Google, a reflection of the broad bipartisan support that a Justice Department case might have. But state attorneys general conducting their own investigations into the company are split on how to move forward, with Democrats perceived by Republicans as slow-walking the work so that cases can be brought under a potential Biden administration, and Democrats accusing Republicans of rushing it out under Mr. Trump. That disagreement could limit the number of states that join a Justice Department lawsuit and imperil the bipartisan nature of the investigation.

Some lawyers in the department worry that Mr. Barr’s determination to bring a complaint this month could weaken their case and ultimately strengthen Google’s hand, according to interviews with 15 lawyers who worked on the case or were briefed on the department’s strategy. They asked not to be named for fear of retribution.

A Justice Department spokeswoman declined to comment on the continuing investigation. A Google spokesman said that the company would “continue to engage with ongoing investigations” and that its business practices enabled “increased choice and competition.”

When the Justice Department opened its inquiry into Alphabet in June 2019, career lawyers in the antitrust division were eager to take part. Some within the division described it as the case of the century, on par with the breakup of Standard Oil after the Gilded Age. It also offered a chance for the United States to catch up to European regulators who had been aggressive watchdogs of the technology sector.

Alphabet was an obvious antitrust target. Through YouTube, Google search, Google Maps and a suite of online advertising products, consumers interact with the company nearly every time they search for information, watch a video, hail a ride, order delivery in an app or see an ad online. Alphabet then improves its products based on the information it gleans from every user interaction, making its technology even more dominant.

For nearly a year, dozens of Justice Department lawyers and other staff members worked in two groups, each overseeing a separate line of inquiry: Google’s dominance in search and its control over many aspects of the ecosystem for online advertising.

Google controls about 90 percent of web searches globally, and rivals have complained that the company extended its dominance by making its search and browsing tools defaults on phones with its Android operating system. Google also captures about one-third of every dollar spent on online advertising, and its ad tools are used to supply and auction ads that appear across the internet.

The Justice Department amassed powerful evidence of anticompetitive practices, three people said.

But the lawyers also described internal politics that at times slowed down the department’s work or drove a wedge among members of the team.

Makan Delrahim, the head of the Justice Department’s antitrust division, had pushed the department to investigate Google but was recused from the case because he represented the company in a 2007 acquisition that helped it to dominate the online advertising market.

In an unusual move, Mr. Barr placed the investigation under Jeffrey A. Rosen, the deputy attorney general, whose office would not typically oversee an antitrust case. Mr. Barr and Mr. Delrahim also disagreed on how to approach the investigation, and Mr. Barr had told aides that the antitrust division had been asleep at the switch for decades, particularly in scrutinizing the technology industry.

Mr. Rosen does have a tech background: He was the lead counsel for Netscape Communications when it filed an antitrust complaint against Microsoft in 2002.

In October, Mr. Rosen hired Ryan Shores, a veteran antitrust lawyer, to lead the review and vowed to “vigorously seek to remedy any violations of law, if any are found.”

Mr. Barr also had a counselor from his own office, Lauren Willard, join the team as his liaison. She met with staff members and requested information about the investigation. She also issued directives and made proposals about next steps.

The case seemed to have two leaders who were not always in sync about who was in charge, and one of them sat in the office of the attorney general.

As debates arose over how best to move forward against Google — primarily over whether to file a complaint that included both the search and advertising elements, or to focus on one line of attack — lawyers wondered who would have the last word. Mr. Barr stepped in this spring to clarify that Mr. Shores was in charge. Ms. Willard still had a hand in Google, but she stepped back from the case to focus on other assignments.

State attorneys general also disagreed on whether to bring a narrow case that could be filed during Mr. Trump’s presidency or to take more time to file a broader complaint. Attorney General Phil Weiser of Colorado, a Democrat who worked in the Obama Justice Department, drove the effort to bring a broad lawsuit, three people with knowledge of his plans said. But Attorney General Ken Paxton of Texas, a Republican, was in the advanced stages of a case focused on Google’s advertising technology and felt that it could be brought quickly.

A spokesman for Mr. Weiser declined to comment. A spokeswoman for Mr. Paxton did not immediately respond to a request for comment.

When the Justice Department this summer shared a potential approach to the case that was focused on advertising technology, several state attorneys general viewed it as too narrow for them to support, said one person who was familiar with the presentation.

Google’s lawyers hope to seize on Mr. Trump’s politicization of the matter should the Justice Department sue the company. Republican lawmakers like Senator Ted Cruz of Texas and Representative Jim Jordan of Ohio, the top Republican on the House Judiciary Committee, have accused platforms like YouTube and Facebook of censoring conservative voices.

Data from the companies undermine their claims, showing that Republicans are among the most visible figures on their services. And few figures have as much reach on social media as Mr. Trump himself.

But the president had made the accusations personal. In 2018, he said that when searching for “Trump News,” Google’s search engine turned up only reports from news organizations that he said were biased against him.

“Google search results for ‘Trump News’ shows only the viewing/reporting of Fake News Media,” he said on Twitter. “In other words, they have it RIGGED, for me & others.” He also said Google had potentially violated the law.

Mr. Barr recently echoed the president’s criticism and said that antitrust laws could be used to keep companies from restricting the spread of conservative views.

Many career staff members in the antitrust division, including more than a dozen who were hired during the Trump administration, considered the evidence solid that Google’s search and advertising businesses violated antitrust law. But some told associates that Mr. Barr was forcing them to come up with “half-baked” cases so he could unveil a complaint by Sept. 30, according to three people with knowledge of the discussions.

Some lawyers who felt they needed more time laid out their concerns in the memo and left the case; about 20 lawyers remain on the team. Department lawyers said that Mr. Shores planned to slim down the team this summer. Some people also left because the coronavirus pandemic had made it hard for them to dedicate time to the case. A lawyer in the department’s civil division joined the remaining members of Mr. Shores’s team.

The department approached litigators from at least three outside law firms to take on a potential case, according to two people with knowledge of the talks. But they all declined, citing conflicts of interest and other logistical obstacles created by the pandemic.

David McCabe contributed reporting.

dnyuz.com

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From: Glenn Petersen9/28/2020 3:27:58 PM
1 Recommendation   of 15431
 
Google to enforce 30% cut on in-app purchases next year

PUBLISHED MON, SEP 28 20202:13 PM EDT
Kif Leswing @KIFLESWING
CNBC.com\
KEY POINTS

-- Google said Monday it will enforce rules that require app developers distributing Android software on the Google Play Store to use its in-app payment system.

-- The move means that developers who have had customers pay them directly with a credit card for digital content will soon have to use Google’s billing system, which takes a 30% fee from payments.

-- Google’s existing policy said that developers needed to use Google’s billing system on in-app purchases made within the Google Play store, but it had not been enforced.

Google said on Monday that it will enforce rules that require app developers distributing Android software on the Google Play Store to use its in-app payment system.

The move means developers have until Sept. 30, 2021 to use Google’s billing system, which takes a 30% fee from payments, instead of independent payment systems. The announcement brings Google Play’s policies in line with Apple’s App Store policies, which have come under fire from developers and regulators over several issues, including its own 30% cut.

Apple has argued against scrutiny of its App Store by pointing out that other app stores, like Google Play, also take a 30% fee from in-app purchases.

Google’s existing policy said developers have to use Google’s billing system on in-app purchases made within the Google Play Store, but it had not been enforced, Google said on Monday in a blog post.

Google didn’t name apps that had been skirting the rule. It said 97% of developers selling digital goods already comply with its policies. Netflix and Spotify prompt users inside their Android apps to use a credit card to pay them directly.

“We want to be sure our policies are clear and up to date so they can be applied consistently and fairly to all developers, and so we have clarified the language in our Payments Policy to be more explicit that all developers selling digital goods in their apps are required to use Google Play’s billing system,” Google said in the announcement, signed by Sameer Samat, a VP of product management.

Epic Games, the maker of Fortnite, updated its Android software in August to allow gamers to directly pay Epic for in-app purchases of digital goods like colorful outfits, which circumvented Google Play billing.

Google responded by removing Fortnite from the Play Store. “While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies,” Google said at the time. Epic Games sued Google.

Apple also removed Fortnite from its App Store and is embroiled in its own legal battle with Epic Games.

Google’s Play Store doesn’t attract as much attention as Apple’s App Store
Google has received significantly less attention than Apple over its 30% cut, even though its policies are similar to Apple’s.

One core complaint from Apple developers is that Apple takes 30% from digital purchases made within the app, which can hamper services like Spotify, which have significant costs associated with their services like rights to music.

Android allows users to install apps without using the Play Store, including apps that distribute other apps, such as Samsung’s Galaxy App Store, the company pointed out in its Monday blog post. But, the Google Play Store is the way most users download applications on an Android phone.

Google hasn’t taken as much heat on its cut of in-app purchases, however.

Developers including Epic Games, Spotify, and Tinder parent company Match have created a nonprofit group to challenge Apple’s App Store practices, for example.

And, when Apple CEO Tim Cook testified in front of the House Judiciary subcommittee on antitrust this summer, he answered specific questions about which apps Apple allows on its platform and how it uses its power to hamper smaller developers.

When Google CEO Sundar Pichai testified at the same hearing, he faced questions about Google’s role in advertising, search, and data collection, instead of how much Google charges app-makers to use the Google Play store.

Google said next year’s Android release will “make it even easier for people to use other app stores” without compromising user security.

cnbc.com

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To: Glenn Petersen who wrote (15384)10/2/2020 12:33:42 PM
From: Labrador
   of 15431
 
This is why it is great to be a GOOGL shareholder.

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From: Glenn Petersen10/6/2020 9:39:04 PM
   of 15431
 
House Democrats say Facebook, Amazon, Alphabet, Apple enjoy ‘monopoly power’ and recommend big changes

PUBLISHED TUE, OCT 6 20204:06 PM EDT
UPDATED 36 MIN AGO
Lauren Feiner @LAUREN_FEINER
CNBC.com

KEY POINTS

-- After a 16-month investigation into competitive practices at Apple, Amazon, Facebook and Google, the House Judiciary subcommittee on antitrust has released its findings and recommendations on how to reform laws to fit the digital age.

-- The report concludes that the four Big Tech companies enjoy monopoly power and suggests Congress take up changes to antitrust laws that could result in parts of their businesses being separated.

-- Republicans have voiced objections to some of the bolder proposals in the report, such as imposing structural separations.

A Democratic congressional staff report recommends changes to antitrust laws and enforcement that could result in major changes for Big Tech companies, such as spinning off or separating parts of their businesses or making it harder to buy smaller companies.

The staff found, after a 16-month investigation into competitive practices at Apple, Amazon, Facebook and Google, that the four businesses enjoy monopoly power that needs to be reined in by Congress and enforcers.

In a nearly 450-page report, the Democratic majority staff laid out their takeaways from hearings, interviews and the 1.3 million documents they scoured throughout the investigation.

You can read the full report here.

The recommendations from Democratic staff include:

-- Imposing structural separations and prohibiting dominant platforms from entering adjacent lines of business. This means that the Democratic staff recommends solutions including forcing tech companies to be broken up or imposing business structures that make different lines of business functionally separate from the parent company. For example, this could include a scenario such as forcing Google to divest and separate from YouTube, or Facebook doing the same with Instagram and WhatsApp. Subcommittee Chairman David Cicilline, D-R.I., has previously referred to this method as a type of “Glass-Steagall” law for the internet, referring to the 1930s law that separated commercial from investment banking.

-- Instructing antitrust agencies to presume mergers by dominant platforms to be anticompetitive, shifting the burden onto the merging parties to prove their deal would not harm competition, rather than making enforcers prove it would.

-- Preventing dominant platforms from preferencing their own services, instead, making them offer “equal terms for equal products and services.”

-- Requiring dominant firms to make their services compatible with competitors and allow users to transfer their data.

-- Overriding “problematic precedents” in antitrust case law.

-- Requiring the Federal Trade Commission to regularly collect data on concentration.

-- Increasing budgets for the FTC and Department of Justice Antitrust Division.

-- Strengthening private enforcement by eliminating forced-arbitration clauses and limits on class-action lawsuits.

Republicans have voiced objections to some of the bolder proposals in the report, such as imposing structural separations. Rep. Ken Buck, R-Colo., a key ally of the subcommittee majority who has been in favor of antitrust reform, has prepared his own response to the report outlining areas of “common ground” and “non-starters,” according to a draft version obtained by CNBC.

Following the majority report’s release, Judiciary Committee ranking member Rep. Jim Jordan, R-Ohio, put out his own response about allegations of platforms’ bias against conservatives, which the companies have repeatedly denied. Four other Republicans signed onto the report, including Buck and former Judiciary ranking member Doug Collins of Georgia, and subcommittee members Reps. Matt Gaetz and Greg Steube of Florida.

Buck stressed in his own response, however, that he is supportive of the investigation and its findings and continues to push for bipartisan antitrust reform.

Subcommittee ranking member Rep. Jim Sensenbrenner, R-Wis., said in a statement that while he does not approve of sweeping changes to the antitrust laws, “There actually is a lot that we agree on, including the lack of sufficient scrutiny on past activity by these companies.”

He expressed support for greater funding of antitrust enforcers but said he was skeptical of the Glass-Steagall type of approach, presumptive bans on merger activity and mandates for data interoperability, fearing it would stifle innovation.

The Democratic report found that the four tech companies enjoy monopoly power in their respective domains. Below are some of the key findings the staff laid out in the report for each company:

Facebook
Facebook enjoys monopoly power in the online advertising and social networking markets, according to the report.

One surprising finding in the course of the investigation had to do with Facebook’s acquisition of Instagram, according to a counsel for the antitrust subcommittee who spoke with reporters Tuesday. According to the counsel, documents outlining Instagram’s projected growth just before its $1 billion acquisition by Facebook in 2012 painted the picture of a fast-growing company, rather than a weak competitor that might have floundered without Facebook’s help. While there is no way to reverse engineer what would have happened to Instagram were it to remain independent, the question of whether Facebook bought Instagram to squander a growing competitor has been a recurring one for many antitrust observers.

Recommendations by the Democratic majority staff would address the concern that dominant companies may be able to engage in “killer acquisitions” of competitors by shifting the burden onto those companies to prove their deals won’t harm competition.

The report also discusses what it calls the “Cunningham memo,” a document produced in 2018 by a senior Facebook data scientist named Tom Cunningham that was first reported by The Information in 2019. According to the report, it was prepared for senior executives including Facebook CEO Mark Zuckerberg.

In an interview with the subcommittee staff, a former senior employee at Instagram who sat in on meetings as the memo was being prepared said the document was meant to answer how the company could “position Facebook and Instagram to not compete with each other,” according to the report. The former employee told the staff in an interview cited with Friday’s date that then-Instagram chief Kevin Systrom “wanted Instagram to grow naturally and as widely as possible. But Mark was clearly saying ‘do not compete with us.’ ... It was collusion, but within an internal monopoly.”

CNBC previously reported that new information on the Facebook-Instagram deal from a whistleblower had prompted the report’s first delay, according to a source.

“Facebook is an American success story. We compete with a wide variety of services with millions, even billions, of people using them,” a Facebook spokesperson said in a statement. “Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people. Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses. A strongly competitive landscape existed at the time of both acquisitions and exists today. Regulators thoroughly reviewed each deal and rightly did not see any reason to stop them at the time.”

Amazon

Amazon has monopoly power over most of its third-party sellers and many of its suppliers, the majority staff alleges.

Amazon’s market share of U.S. online retail sales is “likely understated” at 40%, according to the report, which says “more credible” estimates place it around 50% or more.

The staff claim “Amazon’s market power is at its height” when it comes to its relationship with third-party sellers on its platform.

“Amazon has engaged in extensive anticompetitive conduct in its treatment of third-party sellers,” the report’s authors write. “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 has argued in written statements and testimony that it relies on its third-party sellers to fuel its platform and that it would not be in its interest to work against them. The staff argues, however, “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.”

The authors also claim Amazon reached its dominance partly through acquiring competing sites such as Diapers.com and Zappos as well as adjacent businesses to add customer data and “shor[e] up its competitive moats.”

In a statement, an Amazon spokesperson said: “All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong. And yet, despite overwhelming evidence to the contrary, those fallacies are at the core of this regulatory spit-balling on antitrust. This flawed thinking would have the primary effect of forcing millions of independent retailers out of online stores, thereby depriving these small businesses of one of the fastest and most profitable ways available to reach customers. For consumers, the result would be less choice and higher prices. Far from enhancing competition, these uninformed notions would instead reduce it.”

Apple

Apple’s monopoly power exists in the market for software app distribution on iOS devices, according to the Democratic staff.

The report says Apple’s mobile ecosystem has provided “significant benefits” to both consumers and app developers. Even so, the report alleges Apple uses its control of its operating system and app store “to create and enforce barriers to competition and discriminate against and exclude rivals while preferencing its own offerings.”

The staff also alleges Apple uses its market power “to exploit app developers through misappropriation of competitively sensitive information and to charge app developers supra-competitive prices within the App Store.”

Apple CEO Tim Cook pressed on whether App Store treats all developers equally

In the past year, Apple has faced a growing number of app developers complaining about its rules and commission in exchange for placement on its App Store. Most recently, Apple faces a lawsuit from Epic Games over such complaints.

“In the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harms to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers,” the staff wrote.

In a statement, Apple said, “The App Store has enabled new markets, new services and new products that were unimaginable a dozen years ago, and developers have been primary beneficiaries of this ecosystem. Last year in the United States alone, the App Store facilitated $138 billion in commerce with over 85% of that amount accruing solely to third-party developers. Apple’s commission rates are firmly in the mainstream of those charged by other app stores and gaming marketplaces. Competition drives innovation, and innovation has always defined us at Apple. We work tirelessly to deliver the best products to our customers, with safety and privacy at their core, and we will continue to do so.”

Google

Google has a monopoly of the online general search and search advertising markets, the majority staff concluded.

It described Google’s dominance as operating “as an ecosystem of interlocking monopolies.” By linking together various services with extensive user data, Google is able to reinforce its dominance, the report alleges.

Based on internal communications from Google, the staff wrote, “Google exploits information asymmetries and closely tracks real-time data across markets, which—given Google’s scale—provide it with near-perfect market intelligence. In certain instances, Google has covertly set up programs to more closely track its potential and actual competitors, including through projects like Android Lockbox.”

Google has been able to maintain its dominance with high barriers to entry, including the default position it’s secured in many browsers and devices, according to the staff. It’s also maintained its monopoly in search “through a series of anticompetitive practices,” according to the report.

Google allegedly boosted its own vertical offerings by misappropriating content from third parties, the staff said, based on documents it reviewed. Competitors such as Yelp have previously complained of such conduct, and Google agreed in a 2012 FTC settlement not to scrape content from third parties.

The staff wrote that Google has been “blurring the distinction between paid ads and organic results” since capturing its monopoly in general search while stacking its results page with ads.

“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,” according to the report. “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.”

The report also alleges Google used “anticompetitive contracts” to maintain its monopoly power in search. For example, it would require smartphone manufacturers to pre-install Google apps and give them default status, according to documents reviewed by the subcommittee staff. The authors claim such status harmed competitors in search and app markets. Google may once again be looking to maintain its monopoly as mobile voice becomes more popular for search, the staff alleged, based on interviews with third parties.

“Google’s free products like Search, Maps and Gmail help millions of Americans and we’ve invested billions of dollars in research and development to build and improve them,” a Google spokesperson said in a statement. “We compete fairly in a fast-moving and highly competitive industry. We disagree with today’s reports, which feature outdated and inaccurate allegations from commercial rivals about Search and other services.”

The spokesperson said Google supports Congress working to clarify laws in certain areas mentioned in the report, such as data portability and interoperability.

cnbc.com

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From: Glenn Petersen10/12/2020 7:06:04 AM
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Feds may target Google’s Chrome browser for breakup

Prosecutors for the Justice Department and state attorney general offices are discussing ways of curbing the search giant's market power as they prepare to sue the company.

By LEAH NYLEN
Politico
10/10/2020 07:00 AM EDT

Justice Department and state prosecutors investigating Google for alleged antitrust violations are considering whether to force the company to sell its dominant Chrome browser and parts of its lucrative advertising business, three people with knowledge of the discussions said Friday.

The conversations — amid preparations for an antitrust legal battle that DOJ is expected to begin in the coming weeks — could pave the way for the first court-ordered break-up of a U.S. company in decades. The forced sales would also represent major setbacks for Google, which uses its control of the world’s most popular web browser to aid the search engine that is the key to its fortunes.

Discussions about how to resolve Google’s control over the $162.3 billion global market for digital advertising remain ongoing, and no final decisions have been made, the people cautioned, speaking anonymously to discuss confidential discussions. But prosecutors have asked advertising technology experts, industry rivals and media publishers for potential steps to weaken Google’s grip.

DOJ is separately preparing an antitrust suit accusing Google of abusing its control on the online search market, which the department could file as soon as next week. Targets of that complaint are expected to include the ways Google uses its Android mobile operating system to help entrench its search engine, POLITICO reported last week.

Spokespeople for Google and the Justice Department declined to comment Friday.

The expected litigation comes as Google and fellow tech industry heavyweights Facebook, Amazon and Apple are facing growing scrutiny from both Republicans and Democrats in Washington for issues such as their squashing of competitors, treatment of users’ private data and handling of disinformation in the presidential race.

One major question facing the prosecutors in both suits: What fixes should they seek to curb Google’s power?

In the advertising investigation, DOJ and state attorneys general have asked rivals and other third parties for their views on which businesses Google should have to sell. They have also asked whether any existing competitors should be off-limits as potential buyers, the people said.

The lawyers have also asked whether any of Google’s properties outside of the advertising technology market should be targeted for potential sale — leading some to single out Google’s Chrome browser, they said.

The browser, which Google introduced in 2008 and has the largest market share in the U.S., has been at the center of rivals’ accusations that the search giant uses its access to users’ web histories to aid its advertising business.

That criticism escalated in January, when Google said it would phase out the use of third-party cookies in its Chrome browser within two years to enhance consumer privacy. But cookies — small files a browser uses to track visits to websites — are also a key tool for publishers to demonstrate the effectiveness of advertising campaigns to ad buyers.

Google’s own estimates show that eliminating those cookies will reduce advertising revenue to news outlets that show online ads by as much as 62 percent.

While other browsers such as Apple’s Safari and the Mozilla Foundation’s Firefox already block cookies, the move by Google’s Chrome is likely to have broader reach as it’s used by nearly 60 percent of desktop computers and 37 percent of mobile devices in the U.S., according to analytics firm StatCounter.

A major antitrust report that the House Judiciary Committee released this week found that Chrome’s market share allows Google to “effectively set standards for the industry,” an issue of particular relevance as Chrome phases out cookies.

“Google’s ad-based business model can prompt questions about whether the standards Google chooses to introduce are ultimately designed primarily to serve Google’s interests,” the House report said. “Market participants are concerned that while Google phases out third-party cookies needed by other digital advertising companies, Google can still rely on data collected throughout its ecosystem.”

Google has said it is working with the advertising industry and others to develop alternatives to cookies. For example, the search giant has proposed a new system, nicknamed Turtledove, in which advertising auctions would take place within the browser instead of sending data to outside servers. Google argues this would better protect user privacy because a person’s data never leaves her computer or phone. Advertising industry representatives, though, are wary of giving over that much control without oversight to browsers — and, in effect, Google.

Short of demanding that Google sell the browser, prosecutors could also consider asking a court to limit how Google uses the data derived from Chrome to aid its other products, one of the individuals and a fourth person involved in the ad technology market said.

Google’s control over the technology that underlies advertising across the open web traces back to the search giant’s 2007 purchase of DoubleClick, a company that helped websites and advertisers serve online ads. The Federal Trade Commission reviewed the acquisition at the time and voted, 4-1, to let it move forward, despite concerns that the deal would enable Google to strong-arm website publishers into using its other advertising services.

At least one of the commissioners who voted in favor of the deal, William Kovacic, a Republican, told the New York Times he would have supported challenging the merger if he knew then what he knows now.

Since the DoubleClick buy, Google has also scooped up other ad tech properties including Admob, a mobile advertising company; ad auctioneer Invite Media; and AdMeld, a platform for ad buyers. Those deals helped Google create a suite of technologies that cover every stage of the process for both buying and selling online display ads.

Requiring Google to either unwind some of those acquisitions or sell off its business on either the buyer or seller side of the market are among the possibilities being discussed, the people involved in the conversations said.

politico.com

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