House Accuses Amazon, Apple, Google and Facebook of Monopoly Power in Antitrust Report

A House panel released a report proposing reforms to curb the power of the four largest U.S. internet companies. Here are the main allegations:

The iPhone maker is a monopolist that uses its dominance to harm rivals and consumers, according to the report. The subcommittee argued that Apple’s cut of App Store purchases, typically 30%, is “exorbitantly high,” and that it gives its apps priority in the App Store.

Apple works to create high switching costs for users, producing a lock-in effect that lets it exert monopoly power over app developers who are unlikely to ditch the mobile platform, the subcommittee argued. It also alleged the App Store rules threaten developers that compete with new Apple apps and that the company changes the rules to benefit itself, rather than developers.

The report cited Phillip Shoemaker, a former head of App Store review, who said Apple executives would arbitrarily create reasons to remove apps that competed with Apple’s own software and services. Shoemaker added that an app for synchronizing Mac computers and iPhones was rejected from the App Store despite not violating any specific rule and that Apple later released its own similar tool.

The House subcommittee alleged Amazon has monopoly power over small online sellers in the U.S. The report documented instances where the company treats third-party merchants as if they were disposable, banking that lost products from one seller leaving the online store would quickly be replaced by another.

“Amazon functions as a gatekeeper for e-commerce,” the report said. Many sellers interviewed by the subcommittee complained that they can’t turn to alternative marketplaces -- regardless of the cost of doing business on Amazon or how they are treated -- because the company has such a large share of online shopping in the U.S.

The subcommittee cited reports that Amazon likely accounts for more than half of online sales in key product categories. The company’s heft “enables it to self-preference and disadvantage competitors in ways that undermine free and fair competition,” the report said.

The internet giant recognized the threat of “vertical search engines” early on and moved to neutralize them, according to the report. Vertical search engines focus on a specific niche, such as TripAdvisor Inc. for travel reviews, Monster for job postings and Yelp Inc. for local businesses.

Google has added its own search tools for many of these categories over the years, but argued they only serve to help web surfers find the services they want faster. However, the subcommittee alleged Google pushed into these markets to stop competitors from growing at its expense.

“Vertical search is of tremendous strategic importance to Google,” the company said in an internal message cited in the report. “Otherwise the risk is that Google is the go-to place for finding information only in the cases where there is sufficiently low monetization potential that no niche vertical search competitor has filled the space with a better alternative.”

The subcommittee argued that Facebook is a monopoly because the company considers services it already owns, including Instagram and WhatsApp, to be fiercer competition for the social network than outside apps like Twitter and Snapchat. Facebook has not allowed Instagram to grow to its full potential despite owning it, restricting headcount and other resources, while using Instagram to direct traffic to the main Facebook social network.

“It was collusion, but within an internal monopoly,” a former executive source was quoted as saying in the report. “If you own two social media utilities, they should not be allowed to shore each other up. It’s unclear to me why this should not be illegal. You can collude by acquiring a company.”

Facebook has also restrained smaller competitors by monitoring their growth and coming up with strategies to buy or crush them, sometimes using bullying tactics, according to the report. Absent real outside competition, “Facebook’s quality has deteriorated over time, resulting in worse privacy protections for its users and a dramatic rise in misinformation on its platform,” the subcommittee concluded.

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