Big Tech Bullies / Humans + Tech - #34

Apple, Amazon, Google, and Facebook are all facing antitrust investigations in the EU and the US.

Hi,

Big Tech is facing antitrust probes in both the US [NBC] and Europe [Financial Post]. Apple, Amazon, Facebook, and Google, are all targets of US and EU regulators for the different ways that they are exhibiting anti-competitive behaviour.

Apple

Apple was a company I admired and had a soft spot for. Not anymore.

On Tuesday the EU announced they are opening two antitrust investigations into both Apple’s App Store and Apple Pay practices [The Verge]. On the same day, the founders of Basecamp, a project management and team communication app, who have been working for the last two years on HEY, a reimagination of email, said that Apple rejected an update to their app, demanding HEY incorporate in-app payments. Apple takes a 30% cut of first-time subscriptions from in-app payments and 15% for renewals.

David Heinemeier Hansson (DHH) is one of Basecamp’s co-founders. HEY’s email service is $99 per year. Apple’s rules have so far disallowed apps that don’t use their payments system, from redirecting users to pay via the web. Hey took this into account and like their Basecamp app which has been in the App Store for 8 years or more, didn’t provide any link for users to sign up. All their help screen says is this:

Trying to join HEY?
You can’t sign up for HEY in the app. We know that’s a pain. After you’ve created an account, you’ll be able to use the app.

Need help from a person?
Send us an email at support@hey.com and we’ll get right back to you.

Apple argued that this type of app was only allowed for business apps, so Basecamp was allowed but HEY was not. However, their official App Store rules make no such distinction between personal and business apps.

Apple also argued that this provided a bad experience for users who downloaded the app because it did nothing until they purchased a subscription. They asked HEY to incorporate a subscription in-app. However, apps like Netflix, Kindle, Dropbox, and Spotify are not subject to the same requirements. They said their App Store rules only provided exemptions to this rule for “Reader” apps, but email, messaging, etc are not considered “Reader” apps. Not sure how everyone else consumes email, but I mostly read mine.

You can read Apple’s response to Jason Fried, Basecamp’s other Co-Founder, here [TechCrunch].

Forbes has listed ten apps on Apple’s App Store that don’t do anything when you download them but have still been approved. Uber’s app is also unusable until you create an account and sign in, but Apple hasn’t demanded they incorporate in-app payments. John Gruber in a post addressing these inconsistencies writes [Daring Fireball]:

At some level there’s a clear distinction here — Netflix and Kindle are clearly consumption services. But Dropbox? Dropbox is a lot closer to an email or messaging service like Hey than it is to Netflix or Kindle. The stuff in my Dropbox account is every bit as personal as the stuff in my email account. When you put Dropbox in the same bucket with Netflix and Amazon Kindle, it seems to me like the distinction is not so much between what is and isn’t a “reader” app or what is or isn’t a “business” app, but between companies which are too big for Apple to push around and those they can.

This whole situation highlights the inconsistencies in Apple’s implementation of its rules and seems to provide exemptions to different players based on their whims. This is discrimination.

Apple’s App Store is largely a reason for the success of the iPhone. Instead of appreciating the developers who have contributed to this success, Apple appears to be fleecing them. 30% is a huge premium to pay to Apple. Most businesses hardly make 30% in margins. Even 15% on renewals is a huge chunk of revenue to give away for acquiring customers through the app store.

The worst part is that Apple has so much power, most are even afraid to speak out. Ben Thompson of Stratechery, writes (Stratechery’s article is only accessible via a subscription - I got the excerpt below from Matt Stoller’s newsletter [BIG]):

I now have over 50 stories from developers who have had Apple squeeze their web services for in-app purchase flows over the last few months, and they range from one-person shops to some of the biggest companies in the world. It is extremely clear to me that this is not an accident, but a coordinated campaign to drive more App Store revenue…

In fact, I would go so far as to say that executives in the tech industry are more afraid of Apple in 2020 than they were of Microsoft two decades ago. App Store Review is such an absolute gatekeeper, and the number of ways that Apple can retaliate are so varied and hard to verify, that no one is willing to publicly breathe a word against the company — again, except for Basecamp. I wish I could prove this to you — the stories I have received the last few days tell the tale — but no one is willing to go on the record, to me or to regulators. The risk is too great, because Apple’s level of control, and willingness to use it, is so overwhelming. I wish I were exaggerating, but I’m not.

John Gruber writes [Daring Fireball]:

To say that “many developers do not want to speak out for fear of falling afoul of Apple” is an understatement. Almost none do. And one thing I’ve learned this week — mostly via private communication, because, again, they fear speaking out publicly — is that there are a lot of them.

[…]

This resentment runs deep and is stunningly widespread. You have to trust me on the number of stories I’ve been told in confidence, just this week. Again, putting aside everything else — legal questions of antitrust and competition, ethical questions about what’s fair, procedural questions regarding what should change in the written and unwritten App Store rules, acknowledgement of all the undeniably great things about the App Store from the perspective of users and developers — this deep widespread resentment among developers large and small is a serious problem for Apple.

Apple manually reviews each app in their App Store and that is primarily the reason that the app store is generally free of malware, spyware, and other nefarious apps. They deserve credit for that and should rightfully make money from their platform. What they need to remember is that this is a symbiotic relationship. They are providing a great platform and a large userbase for developers, but the success of their platform is hugely dependent on the great apps developers have built over the years that make the iPhone a beloved and useful product. In its current state, the App Store rules and Apple’s relationship with developers seem largely one-sided and only in their favour.

This whole situation has destroyed the soft spot I had for Apple. I thought they were better than this. From now onwards, they are just another company that makes products that I need to do my work.

Free HEY Invitation Codes

I had signed up for HEY’s invite list a few months back. I received my invitation code this week, but $99/year for a personal email is too much for me at present, although I love the privacy features in particular, that they have built [HEY].

I have 3 codes to give out—you get a 14-day free trial to check the service out and it’s $99/year after that. Reply to this email and ask me for a code if you’re interested. First come, first serve.

Amazon

Amazon is being accused of using data from its third-party resellers to develop its own competing products. A Wall Street Journal investigation [WSJ - Paywall] in April found that Amazon executives had access to and used seller data to discover bestselling items to develop competing products. You can read a summary of the WSJ investigation on CNBC.

Amazon is also being accused of using their most prominent advertising spots on the Amazon website for promoting their own products ahead of products from third-party sellers [Pro Publica].

“This is madness,” Boyce said. “They’re putting their own product right in the front of the line.”

He said the clients, whom he declined to name because they feared retaliation from Amazon, were outraged. “They were thinking, ‘What is Amazon going to do next?’” he said.

Like app developers, afraid of retaliation by Apple, sellers on Amazon fear retaliation for speaking out against them.

Facebook

Facebook is facing antitrust investigations on multiple fronts. In the US, several states are investigating Facebook's impact on advertising prices, data and consumer privacy as well as the company's acquisitions of Instagram and WhatsApp [CNN].

Facebook’s recent acquisition of Giphy is under investigation in the UK and Australia [CNN].

India’s antitrust watchdog is also looking into Facebook’s proposed multi-billion-dollar investment in India’s top telecom operator, Reliance Jio, for a 9.9% stake [TechCrunch].

Fiona Scott Morton, a former top antitrust official in the Obama administration released a report two weeks back [Competition Policy International], stating that Facebook had “fought for at least a decade to avoid competition on the merits in the social networks market.” 

“Without antitrust or regulatory intervention, it is unlikely that anything is going to change,” they write. “Facebook can collect monopoly rents, manage the flow of information to most of the nation, and engage in virtually unlimited surveillance into the foreseeable future.” 

“It’s like having the old AT&T regulated monopoly back again. Only it’s not regulated,” Ms Morton told the Financial Times, referring to the telephone monopoly AT&T held until the US government broke up the company in the 1980s.

Google

Google is facing antitrust probes into both its dominance of search on Android [CNN], as well as monopolistic behaviour in the online advertising space [S&P Global].

Fiona Scott Morton, an economics professor at Yale University, said in an interview that because of Google's dominance in the online advertising market and ecosystem, it is plausible that antitrust enforcers could determine that Google cannot have its hand in all sides of its advertising exchange.

Google is the dominant player at every layer between advertisers and websites, with its tools used both by publishers looking to sell ad inventory and by advertisers looking to buy. It also operates the exchange where many of these transactions take place and sells its own search and video advertising inventory.

Scott Morton said the "simplest thing" for regulators would be to say that, like a financial market, "If you own the exchange, you can't work for either side. Or, if you work for a publisher, you have a fiduciary responsibility to the publisher to fill their spots with the highest-priced, highest-revenue content. Not to favor your own content or favor your own advertisers."

In Matt Stoller’s newsletter on Tuesday [BIG], he wrote:

P.S. I often hear from people abused by Amazon or Google, but rarely both. Here’s a reader of BIG relaying a fun set of experiences.

Two quick stories about big tech from my personal experience:

I started a business on the side selling goods on Amazon's platform. We worked to grow our business until we were on pace to have gross revenues of a million dollars in a year. That's when something was wrong. We paid Amazon to fulfill for us, but we started getting poor reviews because people were receiving the wrong products. Soon, our ranking plummeted and we struggled to figure out what was happening as we were leading into the heavy season. It took us months to figure out what happened: Amazon had relabeled our products without our knowledge and they had mislabeled half of it randomly. They destroyed our business and refused to do anything about it. Well, that's not completely true: they offered us a refund of six months of the online sellers fee of $30 / month. 

Google: At the business I work at now, we were doing paid search analysis and found that we were getting a lot of "clicks" from our paid search that came to our home page and then "bounced." As we dug further, we found that all of those clicks were coming from just a handful of URLs. As we tallied it up, we had paid Google over $700,000 over the prior 12 months on clicks that were clearly fraudulent. We brought it to their attention and all they said was "trust the algorithm." Our legal team never even considered suing because of the death sentence of being banished from Google as an online business. 

$700,000 in fake click charges forgone because of the fear of being banished by Google is simply scary.

What now?

Antitrust investigations take many years to reach a conclusion. We are only at the beginning stages.

These four companies are global companies whose actions and policies affect businesses and consumers worldwide. They wield huge amounts of power and it’s disheartening to watch them use it to intimidate and bully their customers, vendors, partners, and developers.

It would be nice to see these companies behave ethically without being forced to by regulators. They all have deep pockets and their worth has only increased during the pandemic. A little more compassion from them would be welcome.


Quote of the week

Antitrust law isn’t about protecting competing businesses from each other, it’s about protecting competition itself on behalf of the public.

—Al Franken

I wish you a brilliant day ahead :)

Neeraj