On May 17th, economics reporter Ranjan Roy of The Margins shared a story about a friend of his— a New York City pizzeria owner who realized a hole in DoorDash‘s business model and decided to take advantage of it.
The story went something like this… Roy’s friend runs AJ’s NY Pizzeria, a dine-in and take-out pizza joint in Manhattan. The restaurant does not do delivery, but the owner somehow started getting complaints about faulty orders coming to their houses. After some investigation, it became clear that the deliveries were carried out via DoorDash, an app that set up a delivery option right on the restaurant’s Google Listing without permission.
What was more conspicuous, however, was that DoorDash was charging $16 for pizzas that should have costed $24. At Roy’s suggestion, AJ’s owner decided to do a little experiment, ordering a large number of pizzas from his own store using DoorDash. Because of the app’s underpricing, AJ’s ended up turning a profit by doing this. Testing the app even further, the owner started ordering more pizzas from himself, but began filling the boxes with nothing but dough. DoorDash never caught on, and he flipped an easy $8 for every “pizza” that the delivery driver came to pick up.
Ultimately, AJ’s made a couple risk-free hundred bucks from this trial. Roy dubbed the story “Pizza Arbitrage,” a fun parable of a local business beating out the corporate middleman. Nevertheless, as Roy and other economics reporters have fleshed out, AJ’s DoosDash experiment demonstrates the immense flaws in the seemingly ubiquitous delivery app economy.
DoorDash’s underpricing of AJ’s pizzas was a mistake. However, its shortsightedness, exploitation, and wastefulness exhibited throughout the situation were not anomalous. First off, the fact that DoorDash unwarrantedly inserted itself into AJ’s Google Listing is business-as-usual for most apps of the kind. Even through AJ’s does not do delivery itself, DoorDash has made it look like a seamless part of the restaurant’s platform. Therefore, if DoorDash messes up on a delivery, it still ends up reflecting poorly on AJ’s from a consumer’s limited point of view.
The app operates similarly for restaurants that offer delivery as well, yet this creates even more damage, as DoorDash then takes away from that established aspect of the business. Suddenly, restaurants are not profiting off of their delivery service, facing a twisted internal competition as their own employees are cheated out of essential work and tips.
Then, even when things go according to plan for DoorDash, it rarely turn a sufficient profit for itself. In the longterm, these apps are hardly sustainable. DoorDash reportedly lost $450 million in 2019. Similar services like GrubHub, Uber Eats, and Postmates saw comparable losses, and a clear rebound is not on the horizon for any of them.
Phantom Toll Both or Actual Service Upgrade?
For all the damage these apps do by intervening with small businesses and rerouting the economy in unstable directions, the sad reality is that they are not even subsisting well enough for themselves. Mergers and buyouts seem like the only possibility for these companies to stay relevant in the future, but given their deplorable track records, it’s questionable whether even that is a good idea.
Essentially, these apps are only staying alive for the sake of competition rather than profit right now. Economics 101 will tell you that such is not a suitable business model in a capitalist system. In the end, economists reckon that the only winner amongst the delivery apps will be whatever service lasts the longest and beats out the others. At that point, though, it would probably just be easier—and more economical—for the delivery economy to go back to its fundamental roots, with in-house delivery rather than these intermediary apps.
DoorDash, UberEats, and other apps in this system are all vying to be the Amazon of their niche field. They are in a giant game of Monopoly, and everyone is losing. Another sad truth is that Amazon itself is overdue for an antitrust suit. Thus, these apps are fighting for a legally (not to mention ethically) dubious fantastical endgame. Even if a sole delivery service does survive this nonsensical competition, it may find out that its efforts were too exploitative to persist in a fair and equitable society all along.
Above: Photo Collage / Lynxotic / Apple / Telegram
The chairman of a congressional subcommittee has asked Apple and Google to help stop fraud against U.S. taxpayers on Telegram, a fast-growing messaging service distributed via their smartphone app stores. The request from the head of the House Select Subcommittee on the Coronavirus Crisis came after ProPublica reports last July and in January revealed how cybercriminals were using Telegram to sell and trade stolen identities and methods for filing fake unemployment insurance claims.
Rep. James E. Clyburn, D-S.C., who chairs the subcommittee (which is part of the House Committee on Oversight and Reform), cited ProPublica’s reporting in March 23 letters to the CEOs of Apple and Alphabet, Google’s parent company. The letters pointed out that enabling fraud against American taxpayers is inconsistent with Apple’s and Google’s policies for their respective app stores, which forbid apps that facilitate or promote illegal activities.
“There is substantial evidence that Telegram has not complied with these requirements by allowing its application to be used as a central platform for the facilitation of fraud against vital pandemic relief programs,” Clyburn wrote. He asked whether Apple and Alphabet “may be able to play a constructive role in combating this Telegram-facilitated fraud against the American public.”
Clyburn also requested that Apple and Google provide “all communications” between the companies and Telegram “related to fraud or other unlawful conduct on the Telegram platform, including fraud against pandemic relief programs” as well as what “policies and practices” the companies have implemented to monitor whether applications disseminated through their app stores are being used to “facilitate fraud” and “disseminate coronavirus misinformation.” He gave the companies until April 7 to provide the records.
Apple, which runs the iOS app store for its iPhones, did not reply to a request for comment. Google, which runs the Google Play app store for its Android devices, also did not respond.
The two companies’ app stores are vital distribution channels for messaging services such as Telegram, which markets itself as one of the world’s 10 most downloaded apps.The company has previously acknowledged theimportance of complying with Apple’s and Google’s app store policies. “Telegram — like all mobile apps — has to follow rules set by Apple and Google in order to remain available to users on iOS and Android,” Telegram CEO Pavel Durov wrote in a September blog post. He noted that, should Apple’s and Google’s app stores stop supporting Telegram in a given locale, the move would prevent software updates to the messaging service and ultimately neuter it.
By appealing to the two smartphone makers directly, Clyburn is increasing pressure on Telegram to take his concerns seriously. His letter noted that “Telegram’s very brief terms of service only prohibit users from ‘scam[ming]’ other Telegram users, appearing to permit the use of the platform to conspire to commit fraud against others.” He faulted Telegram for letting its users disseminate playbooks for defrauding state unemployment insurance systems on its platform and said its failure to stop that activity may have enabled large-scale fraud.
Clyburn wrote to Durov in December asking whether Telegram has “undertaken any serious efforts to prevent its platform from being used to enable large-scale fraud” against pandemic relief programs. Telegram “refused to engage” with the subcommittee, a spokesperson for Clyburn told ProPublica in January. (Since then, the app was briefly banned in Brazil for failing to respond to judicial orders to freeze accounts spreading disinformation. Brazil’s Supreme Court reversed the ban after Telegram finally responded to the requests.)
Telegram said in a statement to ProPublica that it’s working to expand its terms of service and moderation efforts to “explicitly restrict and more effectively combat” misuse of its messaging platform, “such as encouraging fraud.” Telegram also said that it has always “actively moderated harmful content” and banned millions of chats and accounts for violating its terms of service, which prohibit users from scamming each other, promoting violence or posting illegal pornographic content.
But ProPublica found that the company’s moderation efforts can amount to little more than a game of whack-a-mole. After a ProPublica inquiry last July, Telegram shut some public channels on its app in which users advertised methods for filing fake unemployment insurance claims using stolen identities. But various fraud tutorials are still openly advertised on the platform. Accounts that sell stolen identities can also pop back up after they’re shut down; the users behind them simply recycle their old account names with a small variation and are back in business within days.
The limited interventions are a reflection of Telegram’s hands-off approach to policing content on its messenger app, which is central to its business model. Durov asserted in his September blog post that “Telegram gives its users more freedom of speech than any other popular mobile application.” He reiterated that commitment in March, saying that Telegram users’ “right to privacy is sacred. Now — more than ever.”
The approach has helped Telegram grow and become a crucial communication tool in authoritarian regimes. Russia banned Telegram in 2018 for refusing to hand over encryption keys that would allow authorities to access user data, only to withdraw the ban two years later at least in part because users were able to get around it. More recently, Telegram has been credited as a rare place where Russians can find uncensored news about the invasion of Ukraine.
But the company’s iron-clad commitment to privacy also attracts cybercriminals looking to make money. After the COVID-19 pandemic prompted Congress to authorize hundreds of billions of small-business loans and extra aid to workers who lost their jobs, Telegram lit up with channels offering methods to defraud the programs. The scale of the fraud is yet unknown, but it could stretch into tens if not hundreds of billions of dollars. Its sheer size prompted the Department of Justice to announce, on March 10, the appointment of a chief prosecutor to focus on the most egregious cases of pandemic fraud, including identity theft by criminal syndicates.
As reported from Reuters, in the 80 page new complaint, the U.S. Federal Trade Commission (FTC) accuses Facebook of illegally monopolizing power. The refiled case includes additional evidence which is intended to support FTC’s case that Facebook dominates the U.S. personal social networking market.
In the headline of its press release, FTC alleges the company resorted to “illegal buy-or-bury- scheme to crush competition after string of failed attempts to innovate”.
“Despite causing significant customer dissatisfaction, Facebook has enjoyed enormous profits for an extended period of time suggesting both that it has monopoly power and that its personal social networking rivals are not able to overcome entry barriers and challenge its dominance,”
AMENDED complaint – federal trade COMMISSION
The FTC voted 3-2 to file the amended lawsuit. They also denied Facebook’s request that Lina Khan be recused, Khan participated in the filing of the new complaint.
In her new book, Klobuchar tries to connect the historical roots of antitrust actions to populism and her own ancestry. That’s not all, however. Although difficult, particularly for readers who are not legal scholars, there’s an important and deeper historic thread here that she is aiming to contribute to.
That job is to find a way to illuminate how the digital age, with all its challenges and complexities, can come to terms with the simple question of how to measure damage that is being done by big tech monopolies, through sheer size, power and lack of external accountability.
Moreover, there is an issue of how antitrust law and practice veered away from the remedies and goals, first established during the Gilded Age, toward a laissez-fair, anti-regulatory stance that gained steam in the Regan years.
That shift is, in many ways, to blame for the current extreme state characterized by dangerous levels of concentrated wealth and power by big tech.
This effort may seem like one that is doomed to being ignored by all but the already long-since converted. But, make no mistake, it is a topic that will grow, reverberate and become more relevant as the current administration in Washington consolidates and comes into its own.
“People have just gotten beaten down. I wanted to show the public and elected officials that you’re not the first kids on the block with this. What do you think it was like back when trusts literally controlled everyone on the Supreme Court, or literally elected members of the Senate before they were elected by the public?”
— Amy Klobuchar, in Wired interview with Steven Levey
When President Biden recently nominated Lina M. Khan to the Federal Trade Commission, in addition to Columbia Law School professor Tim Wu, who announced earlier this month he would join the National Economic Council, he set forth a clear path for an antitrust direction that has the potential to be more than just rhetoric and window dressing.
Khan is an unequivocal proponent of a new era of antitrust, one that is, not coincidentally, along the lines of what Klobuchar advocates. Likely sharing these ultra clear views from her long and celebrated research, Khan, along with Wu, is a key addition to Biden’s growing roster of Big Tech critics, and there is already a blueprint for actions and cases that will build to a crescendo over the next several years.
Biden’s call for the repeal of Section 230 of the Communications Decency Act, meanwhile, a hotly contested and possibly flawed legal shield some feel is exploited by Internet platforms, is another indicator of the tenor of the coming actions.
In a sense, with this bestselling book [on Amazon: #1 in Political Economy, #1 in Government Management, #1 in Business Law (Books)] the gargantuan task of connecting the culpability of massive, nearly infinitely powerful behemoths, each in it’s own territory, to the social and economic catastrophes that they’ve brought down on the world.
However, while politicians like Klobuchar may not have the charisma and energy to set a fire under the population, it is the very deeds themselves that will eventually conspire to ignite an uprising and put pressure on the government and the courts to take real, substantive measures. And with young, new faces and minds such as possessed by Khan and Wu, ultimately there is a bulwark of criticism against monopolist abuses building in government and among the public at large.
“I am never saying, ‘Get rid of their products.’ But let’s have more of the products that give you more choices. You can keep one product, but it’s better to have other products, because we’re not China.”
Amy Klobuchar in Wired interview with Steven Levey
In response to Klobuchar’s quote above Steven Levey in Wired wrote; “In other words, Facebook could keep it’s main app, but the public might benefit if Instagram and WhatsApp were not Mark Zuckerberg productions.”
While this kind of “moderate” view may not be the earth shattering remedy that would turn the juggernauts around in a heartbeat, from Zuckerberg’s perspective it would not be ideal, to say the least.
And, since we have seen the unfettered and viral growth of big tech, for at least a quarter century in some cases, and since there was a aura of hero worship afforded their leaders for most of that time, a break-up, such as that could ultimately turn out to be the beginning of more sweeping changes. A welcome outcome for those that have been harmed the various monopolistic structures that rule nearly all our lives, or at least it seems, at times.
Levey then asked Klobuchar why legislators so often embarrass themselves in hearings with irrelevant partisanship, clueless technical questions, and time-wasting grandstanding. Her response;
“Welcome to my life,” she says. “I get it—there’s going to be hearings that are irritating to people who know a lot. But that’s a great argument for tech to use because they don’t want this oversight.”
Amy Klobuchar in Wired interview with Steven Levey
In defense of using the word “antitrust in the title, while also advocating its eradication in future she responded:
“Well, I thought antitrust was an interesting word”. “It’s not only about this body of law; it’s also about not trusting anyone.”
Amy Klobuchar in Wired interview with Steven Levey
Perhaps it is more the course of history that led to the current and incredibly extreme situation and obscene dominance by big tech that is what should never have be trusted to arise in the first place.
Perhaps these firms will one day be seen, looking back from future generations, as a temporarily necessary, but evil mistake of history, as was the toothless interpretation of laws that led to their rise from “scrappy underdog startups” into malignant monopolies run amok.
The opinions expressed “pro” or “con” regarding big tech abuses of power are both overlooking far more serious issues that lie beneath
After years of public and insider opinion gradually shifting from a state of wonder, awe and hero worship of tech giants and their founders and CEOs, toward a more skeptical stance, and now, finally, government action begins; the fundamental issues that lie beneath are still barely mentioned, let alone widely understood.
In a filing at the U.S. District Court in Washington D.C., on December 9th, 2020, the Federal Trade Commission, together with 46 states, plus the District of Columbia and Guam, alleged that Facebook employed anticompetitive tactics, allowing it to bully and bury its rivals. In a strongly worded brief it recommends that the massive company be broken up, specifically by divesting itself of Instagram and WhatsApp.
While past antitrust cases were complex and difficult to understand fully, particularly for the general public, from the little known A & P case in the 30s and 40s to Standard Oil and Ma Bell / AT&T, in each case there were complex issues to address.
However, one simple thing tied them together that could be understood by virtually anyone: businesses that have a win-at-all-costs approach to business tactics and then achieve monopoly power almost always use that power to fulfill ambitions based on self-perpetuating greed at the expense of society as a whole.
Many, from all walks of life, particularly in the U.S., worship the ethos of “winner take all” and even if they are at the lowest levels of the economic ladder still cheer on the most ruthless and morally bankrupt “winners” as heroes, using a bizarre logic, that somehow they might one day see themselves in the winners circle.
This perspective is similar to societies where dictators, such as Ferdinand Marcos in the Philippines, or emperors are worshiped fervently by the very people that are most exploited and downtrodden under their regimes. Perhaps this is a hardwired genetic human trait, impossible to alter.
In the case of tech giants of the internet era, beginning with Microsoft and its antitrust case, a similar dynamic is no less present, and, no different from the steps that dictators take to encourage obedience and worship from their subjects. In this case it’s massive amounts of money and power used for required self-serving PR and the brutal economic repression of any dissenting voices.
Try to find a book on Amazon’s Jeff Bezos that is not a hero-worship nonsense-title purporting to offer you a way to become a “business genius” like him. You will find a few exceptions, of course, these purporting to offer “hard-hitting” investigative journalism and a sober look at the “real facts”.
These will be watered down, meekly subservient, weak and impotent tombs barely scratching the surface of any negative perspectives on the real problems Amazon and its founder have created, not only for millions of people around the world but for society as a whole.
Even among those that are the most incisive and have a real desire to “dig-deep” and reach the roots of the real problems, there is often still the a priori assumption that somehow, the 26 year evolution of business models that could “succeed” in internet and software based business are to be measured on a scale that presumes that the business models themselves are basically valid, simply because they were able to survive and create massive, nearly immeasurable, wealth for a tiny handful of individuals. .
Taking into account the pervasive pro-big-business bias, it is a miracle in a sense, that the public opinion has shifted so far, to the point where antitrust actions can be seen as valid, by enough of the public at large, that these giant monopolistic tech companies are called into question at all.
The miracle, if we call it that, is only a reflection of just how purely evil and out of control the situation has become, and how many people have been harmed, and in how many different ways this harm has occurred.
From teen suicides to thousands of bankrupt and struggling small businesses to privacy rights trampled in the dirt, the list of abuses and harm, if it were ever brought to light, could fill a thousand page treatise and would read like a recounting of the atrocities of war.
And then there’s the fact that the war is fought with computer code and over territory that has no physical address
Much as collateralized debt obligations and other arcane “synthetic” financial products nearly collapsed the entire world economy in 2008, partially due to the intentional complexity, which served only to hide the stupidity, complex computer algorithms are now at the heart of an ever larger and even more dangerous economic debacle that continues to unfold.
And much of the lack of any pushback against this is the simple ability to hide behind the complex computer methods and concepts that have allowed tech giants to build an even bigger and more dangerous kind of monopolistic behavior than even the so called “Robber Barons” of the Gilded Age.
Even those, in government or in the press, who are pushing back are doing so with, apparently, little understanding of the real dangers that are buried in the code and in the tricks used by very sophisticated, technologically educated people in control of these trillion dollar behemoths.
For example, Facebook is already claiming that the government should not be able to question the acquisitions of Instagram and WhatsApp because they already approved the mergers at the time they happened.
In his excellent article published on medium.com , Will Oremus points out:
But I looked up the FTC’s public statements following those reviews, and it states explicitly that the matter should not be considered permanently settled.
“This action is not to be construed as a determination that a violation may not have occurred,” the FTC’s closing letter said. It added, “The Commission reserves the right to take such further action as the public interest may require.” Facebook did not immediately respond to a request for comment.
Also in that article, titled; ‘Competition Is for Losers’: How Peter Thiel Helped Facebook Embrace Monopoly the idea succinctly embodied in the title which refers to a Wall Street Journal piece on Thiel’s book “Zero to One” which he describes as having been “embraced as a business bible in Silicon Valley and beyond” and quotes from including this characterization:
(Thiel) made the case for monopoly as the ultimate goal of capitalism. Indeed, “monopoly is the condition of every successful business,” he asserted. With it, you’re free to set your own prices, think long-term, innovate, and pursue goals other than mere survival. Without it, you’re replaceable, and your profits will eventually converge on zero.
And this provides the context within which the current struggle unfolds. To understand the real dangers of the total domination of the internet, which has become the vital lifeline of our economy and social existence, by a handful of trillion dollar companies, that not only embrace limitless greed and dictatorial status within their industry, but see it as the divine right that they hold, and believe they are entitled to aspire toward without interference.
And in another context such behavior would be known as immoral, destructive to society and social justice, and if the laws are adequate to apply; criminal.
And there’s the rub. The antitrust statutes, possibly already inadequate to take on this new kind of robber, have also been weakened since the 80s. Add to that how the pre-existing biases are heavily slanted toward minimizing any accountability for such behavior and is follows that any real reform must rise from the public at large.
The birth of the internet was anything but immaculate
The tragi-comic farce of the story, when seen through the lens of internet history, is how Facebook, Google and Amazon all followed the same absurd arc.
From “underdogs” with massive losses and no income to ridiculously “valuable” “FANG” members championed from the rooftops as heroic winners of darwinian battles to build out the internet for profit. And, finally, after decades of unfettered expansion, being seen more and more for what they are: profit-seeking scams using each a different method to restrain competition and destroy the most valuable asset humanity has ever built: the internet itself.
The complexity of the scams is still the most useful cloak for them to hide behind, each with a different insanely complicated way to force what is a public asset, the internet, into a tool for private greed, at the expense of any real innovation. And the victims are not the competitor firms that they might have destroyed (or bought), but rather the entire population of any territory that they control, with North America being the center of the empire.
The question asked for example of Google or Facebook should not be, “do they provide any services from the public can benefit, in exchange for their obscenely privileged monopoly control over “search” and “social networking”, respectively. The question should be “are they the best possible solution, from the perspective of what is in the best interest of society, for those extremely important functions in our new digital world.
It is not enough to say that “consumers have chosen” each as their go-to tool. If any company or group of companies could do a better job of enabling humanity to communicate, interact and become educated via the internet, why should those other solutions be buried forever under a mountain of greed and self-interest?
This is the infinitely elusive point: No different than Bernie Madoff, the damage they have wrought, by destroying what could have been, will only be understood once they are either gone or forced to cease what they depend on for domination, which would lead to their ultimate demise over time, just as Peter Thiel himself stated:
Without (a monoply), you’re replaceable, and your profits will eventually converge on zero.
Or as Jeff Bezos explained, in what his become his predatory raison d’être: The competition is always one-click-away. This makes every other online seller, in his view, an enemy that must be destroyed at all costs, no matter how small, no matter how weak.
In this sick paranoid view of the world it is truly an all or nothing struggle for survival, with death of all competitors, literally and figuratively, the only acceptable outcome.
With this mindset at the heart of these companies, and with the government and most of the press taking a milk-toast submissive approach (in contrast) the struggle to rein in these monstrous, utterly corrupt empires, will take years if not decades.
However, 2020 will always be seen as the beginning of the end the the gruesome mistake of history that these companies represent.
Companies that achieved dominance and monopoly control of a system meant for public benefit, through the most destructive methods they were able to devise, and then redoubled efforts infinitely to expand using those same destructive and corrupt methods.
In the end there is only one power large enough to intervene, as already at their current size, and while, like a virus, they double in power and economic domination almost annually, and that is the power of the billions that use their platforms everyday. Change will arise when they have damaged themselves by damaging the very societies they prey on, and once damaged, those societies will have no choice but to shed them like the murderous parasites that they are.
That will not happen anytime soon. The general view of these companies, is still very mild and forgiving. And it’s important to note that each case is different and this article applies only to Facebook, Google and Amazon.
Just as most have either forgiven or forgotten the massive bailouts that criminal companies were gifted during the 2008 financial crisis, the perception that these massive tech companies are at worst mildly anti-competitive and at best harmless and just practicing good, successful capitalism, will not be changed overnight.
It can only come after much more pain at the hands of this corrupt system that currently controls the internet, and therefore, our digital lives.
In a filing at the U.S. District Court in Washington D.C., on December 9th, 2020, the Federal Trade Commission, together with 46 states, plus the District of Columbia and Guam, alleged that Facebook employed anticompetitive tactics, allowing it to bully and bury its rivals. In a strongly worded brief it recommends that the massive company be broken up, specifically by divesting itself of Instagram and WhatsApp.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition. By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived to be potential threats.”
–New York attorney general, Letitia James, representing the state group, at a news conference
After the 18 month long investigation, charges are finally arriving, well after Facebook has already made extensive retaliatory changes to its products. The changes that were implemented, which interlinked the functionality of Facebook apps with Instagram and WhatsApp, are clearly meant to try and make it technically impossible, or at least difficult for them to function separately again.
This amounts to a way of using computer code to fabricate a “moat”, basically an excuse or impediment which they hope, apparently, would make it impossible to reverse the changes, in the event they are forced to sell off the previously separate companies.
The brazen and obvious action which appears designed to impede and block any remedies that the court could impose is reminiscent of the now infamous “move fast and break things” motto often attributed to Mark Zuckerberg, and the, just as famous, Silicon Valley truism “Ask forgiveness not permission”.
This kind of preemptive obstruction, while not necessarily illegal in any way, is nevertheless a perfect reflection of the attitude also associated with Facebook via Peter Thiel: “Competition is for Losers” phrase which stems from title of a WSJ article on Thiel’s book and which was adopted fondly by the billionaire.
It is important, from a layman’s perspective, to note that being big or being, effectively, a monopoly, is not enough, necessarily, to justify drastic government imposed remedies. The behavior, however, in other words, wether or not there was abuse of the power a monopoly affords, is crucial.
In the past several years Facebook has been found to be guilty of abuses, primarily in European cases, as have Google and Amazon. All the evidence, so pervasive as to be easily noted by even a casual observer, points to a pattern of behavior that could be seen, and possibly even proven to be, predatory and abusive of market power.
The response from Facebook has been anything but substantive, with the initial defense being a very weak statement that the government should not be allowed “do-overs”:
“Those acquisitions were cleared and if you can buy a company, and eight years, 10 years later, the government can clear them and unwind it — that’s going to be a really big chilling problem for American business, we are not going to be competitive around the world,”
Facebook COO Sheryl Sandberg, in a recent interview with Tamron Hall
The facts in no way back up this surprisingly flaccid response, since the mergers were, in fact never, “approved” just not blocked at the time, and in public statements, in writing, the FTC clearly and specifically stated:
“This action is not to be construed as a determination that a violation may not have occurred, The Commission reserves the right to take such further action as the public interest may require.”
As for the decades old “we are not going to be competitive around the world,” comment that is the oldest excuse for awarding big internet companies with special status to run amok going back to Al Gore’s “Internet Superhighway” exemptions from the early 90s.
To quote Kara Swisher in a recent New York Times opinion piece:
“Those charged with regulation have given companies like Google, Facebook and Amazon a very wide berth to grow into some of the most valuable entities in the history of the planet. Their founders are among the richest people ever.”
— Kara Swisher, in the New York Times
And, in case anyone is feeling sorry for poor Facebook, it’s also pertinent to point out that what they claim to need or be entitled to is exactly the kind of special treatment and license to break rules that others would have to abide by.
And that status and privilege is exactly what enabled Facebook (and Amazon and Google) to become so massive and so intensely inclined toward abuse of market power in the first place.
“Action as the public interest may require. “ Remember that phrase, you may be hearing it often, over the next few years, in relation to Facebook, Google and Amazon. And, in the end, it is the public verdict in the marketplace that will ultimately have the power to intercede with enough force to achieve change.
Search Battle Lynxotic Predicted is about to Breakout Big time
In a year that has already offered AppleOne, 5G, and perpetual AirTag teases, Apple Inc might have yet another major project hidden up its sleeve. According to a report from the Financial Times, the tech company has recently partaken in research and development indicative of creating a new original search engine.
For years, Google has been the default search engine on Apple devices. This is part of an ongoing deal between the two companies where Google pays Apple a pretty penny to foreground their services. Now, however, Google is facing an antitrust suit from the Department of Justice. This case claims that Google has a monopoly over search and directly sites its relationship with Apple as evidence.
If the DOJ manages to win against Google, it could be the end of its search engine arriving pre-encrypted in all iPhones, iPads, and Macs. Thus, an in-house Apple search engine comes at an opportune time. Not only will it provide Apple with a new default search platform, but it will also muster some competition against Google— one of the things that the antitrust case desperately calls for.
Any Engine at All by Apple is Earth-shattering to the Status Quo of Big Tech
Nothing is set in concrete about this speculative Apple search engine yet. All we know for sure is that the latest version of iOS 14 shows signs of increased search technology. Under the upgraded operating system, iPhone users can type in questions directly on their devices’ home screens and arrive at Internet results without any middleman. This has also led to an uptick in Apple’s spidering tools, which comb and datafy the web for a smoother search experience.
These changes in iOS 14 are subtle, but given the context, they could be laying the seeds for something much larger. Tellingly, former Google head of search John Geannandrea also oversees these recent Apple advancements. Geannandrea joined Apple three years ago, and while his main focus at the company has been Siri thus far, he obviously has the expertise and experience for helming a Google-like project.
Some believe that Siri is the base of Apple’s increased search interests. Perhaps the new technologies are simply working to refine the voice assistant rather than setting up a wholly alternative Google competitor. At the same time, though, with the proper expansion, Siri could very well evolve into a worthy Google rival, especially if it becomes the one-stop search engine on all Apple devices.For now, users will just have to wait while events unfold. Experts say that the antitrust case against Google will go on for years, and if Apple is indeed developing its own search engine alternative, it will likely take just as long.
Internet giants finally receiving long overdue legal scrutiny
After months of investigation and inquiry, the United States’ Justice Department has formally accused Google of illegally sustaining a monopoly over search and search advertising in America. The Department filed the lawsuit on October 20th in the U.S. District Court, beginning what could be a turning point in the Internet economy.
Republicans and Democrats alike have been watching big tech companies for a while now, scrutinizing the big four—Google, Apple, Facebook, and Amazon – as they’ve grown into corporate behemoths and played cat-and-mouse with American antitrust laws. Only now is the federal government (along with over forty states and jurisdictions that have investigated Google) finally making a move to attempt to keep these juggernauts in check.
Antitrust laws essentially make sure that American businesses cannot develop into illegal monopolies. Monopolies are illegal if they are established or maintained through improper conduct, sfor example, exclusionary or predatory acts.
Conventionally, the laws protect consumers from situations where a single company holds all of the supply. In the current digital age, though, most of these services are nominally free to consumers. Nevertheless, they can still become hegemonic at the expense of competition.
Because the site’s ascendency has left consumers with the impression that they are unaffected, superficially, Google personnel have long been able to refute the fact that they hold a proper monopoly. However, given that eighty percent of Internet searches go through Google, many politicians (and users) suspect something legally dubious at hand.
As is also the case with Amazon and Facebook there are, like an iceberg of crimes hiding beneath the waterline, these giant firms are engaged in many practices are highly anticompetitive. The behaviors, however rampant, have either gone unnoticed or, in a purported attempt to bolster internet commerce in a general way, have been intentionally overlooked by governing bodies for decades.
In order for the case to effectively convict Google on antitrust laws, the Justice Department must prove two things. First, that Google has dominance over search. Second, that it actively stifles competition in the search market through deals with other companies.
The fact that Google has dominance over search is quite hard to argue against nowadays. To sell the second part of the case, however, the DOJ will have to look into Google’s business behaviors and deals with other companies such as Apple.
Google essentially pays Apple up to $11 billion to be the default search engine on all iPhones, iPads, and Macs. This is just one example of Google buying its way to the top of the market and making sure that other search engines do not stand a chance.
Of course, Google denies doing anything illegal or sidestepping antitrust laws. The company argues that users actually retain choice when it comes to search engines, but people consistently go to Google for quality. As for the deals with companies like Apple, Google likens it to a cereal brand paying a grocery store for a better spot on the shelf. To Google, it’s simple business.
The courts, however, might not find it quite so simple, as many politicians are reframing antitrust laws in their perspective toward the case and the online marketplace.
This is not the end of the story but barely the beginning with many revelations yet to come
American antitrust laws, and how they are applied, are severely outdated. Most of them were written over a century ago when computers (let alone the Internet) were hardly a concept. Despite a few public outings where tech moguls have had to answer before Washington, the Federal government has not taken much action against these massive modern institutions. Exceptions include a 2001 antirust case against Microsoft for maintaining a monopoly over PC software and a former near-trial against Google when the Federal Trade Commission investigated the Alphabet Inc. for antitrust in the early 2010s.
Meanwhile, other countries have been far more active in holding big tech accountable. The European Union enforces much more timely antitrust policies, and has brought three cases against Google in recent years.
In America, however, Google has been riding off of the free market since its very conceptualization at Stanford University in 1998. The same could be said for Amazon, or Facebook and their respective, nearly mythic, ostensibly humble origins. While this nation’s laws and economy give companies the unique ability to grow, thrive, and expand into global phenomenon, they also have a duty to protect the people and even the playing field when those same companies abuse freedom or gain too much power.
This case will not be a short ride. It will likely take years, but such is the slow, magnificent, changing tide of justice and progress.
Subscribe to our newsletter for all the latest updates directly to your inBox.
New Reports call for laws to rein in giant monopolies
Amid a zany week of political theater and election drama, the federal government has actually managed to make quiet, nonpartisan progress on an important issue. On Tuesday, October 7th, Democratic members of the House Judiciary Subcommittee on Antitrust finally released a long-awaited report concerning the dominant technological companies in America and their legally dubious corporate power.
The report comes at the end of a sixteen-month investigation into the tech giants, arriving to the conclusion that America’s four biggest tech companies—Amazon, Google, Facebook, and Apple— all partake in anti-competitive practices that could be reprehensible by law.
Essentially, with the exception of Apple, these four conglomerates have created near-monopolies in their respective fields. Amazon controls 40% of e-commerce in America, and endorses business models that squander the competition and abuse third-party sellers through data mining. Apple has argued that they do not have a monopoly stake in phones, Android (google) and Samsung, have a larger worldwide base, and in other areas Apple has an even less dominant position. Only in dollar denominated success do they hold the absolute top spot.
Google has an even larger monopoly on Internet searches, also utilizing data to bind users to their content and prioritize their services over all other websites.
Facebook, meanwhile, is a hegemonic vacuum for social media outlets, endorsing a “copy, acquire, and then kill” technique according to the report. Essentially, rather than compete with other platforms, Facebook sucks them into inescapable, self-serving positions.
Apple is not in quite as much hot water as the other three companies. The report mainly accuses Apple of binding its users to the Apple Store, which creates an extra, sometimes expensive, hurdle for App developers to get over if they want their product widely available. The report accuses Google of doing something similar with Android, saying that the software forces people to use Google on their devices.
Of course, all of these companies have denied any illegality in their actions— each citing the free market and defending their business practices as entirely fair when responding to the report.
Generally in gridlock and inept, this is one area where Government must act decisively
However, Congress does not seem to agree. In light of the recent report, many Democrats are in favor of rewriting the U.S. Antitrust Laws to better protect a fair, competitive economy. Traditionally, the Antitrust Laws keep businesses in check on behalf of consumers, but they have not been touched in decades, and capitalism has developed immensely since then.
The amount of power that these three companies have garnered demonstrates that the laws now need to consider affairs between businesses as well, lest a handful of power-hungry entities override the market.
Some Republicans, however, have pushed back against the idea of rewriting the Antitrust Laws. Notably, Representative Kelly Armstrong from North Dakota did not sign the committee’s report on Tuesday. While he agrees that something nefarious is at hand with these tech companies, his remedy focuses on greater oversight from the Department of Justice and the Federal Trade Commission, upping the enforcement rather than adjusting the laws itself.
Even if certain politicians disagree on how to address the issue, the nonpartisan support for cracking down on big-tech in America is nevertheless a milestone, and it comes at a crucial time. While thousands of Americans are facing economic strife due to the COVID-19 pandemic, billionaires (especially tech moguls) are seeing their stocks skyrocket.
According to a financial study covered in USA Today, billionaires now hold more of the world’s wealth than ever before— $10.8 trillion. Tech billionaires in particular hold $1.8 trillion of that, a whopping 42.5% increase from just a year and a half ago.
The bulk of American Antitrust Laws were written at the turn of the twentieth century. Since then, the state of the world has changed. The state of the economy has changed. And perhaps most immensely, the state of technology has changed. Algorithmic dictatorships are growing almost as quickly as class divides in America. So perhaps it is time for the law to change as well.
Subscribe to our newsletter for all the latest updates directly to your inBox.
Each of the big four have new strategies to diversify into each other’s garden
‘This is the beginning of the end of Big Tech as we know it’ according to professor Scott Galloway and the Big Tech giants are well aware of this fact. Unsurprisingly, they are already at work to undermine one another and find ways to grab pieces of each other’s pies.
Where one has a stranglehold, such as Amazon does based on the sheer size and breath of its 3rd party marketplace, another, such as Google, will look for a way to gain a foothold, no matter how small, as the winds of change rise in Washington and among the public.
Amazon’s dominance is based on its virtual monopoly in eCommerce transactions, which is itself, a result of “bribing” customers with below wholesale prices on hot items, giving the customer the illusion of an unbeatable deal site.
The strategy is powerful for obvious reasons (unless you are a foreign exporter to the US, then it is illegal). Who doesn’t like to pay below wholesale prices with “free” shipping (if you pay for Prime)? A second benefit of this strategy (also potentially against antitrust laws) is that no competitor can afford to use a similar strategy unless they want to go bankrupt in short order.
Enter another untouchable giant: Google. Since it’s Google Shopping and other eCommerce search features struggle based on the unbeatable system Amazon has devised (even as Google commands 91.75% of search traffic), the only way to get a jump on the game is to fight back in kind. Bribe somebody. Fortunately for the US economy, truth and justice, this time the parties to be enticed are the 3rd party sellers.
With fees for 3rd party sales on Amazon rising as high as 30% in some cases, even as Amazon competes directly against those small businesses (“internal competitors” in Amazonian parlance), Google’s new idea of a zero commission structure just might gain some traction.
Already under fire for rigging search results to favor itself, Google is doubling down, in a sense, via drastically lowering fees for 3rd party sellers to use Google Shopping to get direct sales from Shopify or other non-Amazon sources.
Since Amazon’s fees can approach 30% for some lower cost items (such as books) this will be a powerful incentive for sellers to shift focus away from Amazon’s predatoryfee structure and to a platform that potentially could bring in sales with less cost to the seller (and therefore a better end value to the buyer).
Change is welcome, especially at zero percent
Google is offering zero commission listing and, in a big announcement, also currently charging zero, in the US, for the “buy on google” checkout system. This is in the process of expanding and rolling out, and, potentially, by the fall and holiday season, could provide an interesting shift in how small business can operate online.
Walmart started allowing 3rd party sellers onto its online store several years ago but, recently, kicked that process into overdrive with a new system that allows all Shopifyaccounts the choice to sell on Walmart.com via a direct link between the two.
Bookshop.org, with whom Lynxotic is affiliated via our sister site Cherrybooks.org, is also a company that is attempting to break the stranglehold Amazon has had on online book sales. Surprisingly successful already, its B Corp non-profit-like structure and alliances with independent bookstores has exploded. Affiliate advertising from huge media companies such as the New York Times have climbed on board and the largest book distributor in the US is a partner for fulfillment. Bookshop.Org has been able to put a tiny dent in the largest, most powerful competitor imaginable, showing, perhaps, that there are cracks emerging in the corrupt business models of these giants and they are not 100% invulnerable after all.
Apple will expose the worst of predatory surveillance by Facebook, Amazon and Google with new privacy features
While wrong is wrong regardless of the perpetrator, when it comes to gargantuan tech behemoths, a company with a clearly defined mission such as Apple or Tesla are in a different category than Amazon, Facebook and Google.
While Tesla’s stated mission is to “accelerate the world’s transition to sustainable energy” and Apple’s original mission statement, written by Steve Jobs was “to make a contribution to the world by making tools for the mind that advance humankind”, predatory vultures hide behind ridiculous slogans like “aim to be Earth’s most customer centric company” (while decimating partners and competitors by any means necessary) and “don’t be evil” (don’t get caught) and “to give people the power to build community and bring the world closer together” (…all while stealing data for profit from every person on earth).
Click to See “Steve Jobs“ and to help Lynxotic and Independent Bookstores. Also Available on Amazon.
It’s just not the same – particularly as Steve Jobs, while at Apple, pushed himself and his company to invent and build many powerful examples of “tools for the mind” and Elon Musk’s Tesla brought the electric car back from the dead (after it was nearly snuffed out by big oil) and is making incredible headway in revolutionizing battery and solar technology, all with a view to literally save the planet from a climate catastrophe.
Bezos? Became the richest living human via the destruction of millions of small business and jobs all while undercutting competitors by selling virtually anything he got his hands on at a significant loss; simply to cause the demise of any competitor or partner that might threaten his rise to idiotically massive personal wealth.
Zuckerberg? Pioneered ways to suck data from virtually every human with a view to monetizing every living soul exclusively for himself and his company. Illustration? Dividing Facebook’s market cap by the number of employees it has yields the sum of $14,906,500.00 per employee. Macy’s? That’d be $16,829. (Thanks to Scott Galloway for the numbers)
Google merely owns (91.75% as of June 2020) the search entryway to all web sites. It decides if you should or should not find them. If it can boost profits by hiding one and featuring another, either through “paid search” or by pointing you toward its own properties while hiding competitors from you, it will do exactly that. Ask the European Union’s anti-trust investigators. For them, this company is a convicted law breaker.
Announced at WWDC 2020, Apple is adding serious features to its various new operating systems. One big feature in Safari is the ability to track, and block as desired, all manner of data intrusions. These are not only identified, but shown and tracked and analyzed with a kind of professional dashboard, showing just how invasive and persistent these invisible spies are.
Apple is big, with more than 1.4 billion devices. Starting in around 2021 they will all be able to identify and block data surveillance by Amazon (the largest of all spies), Google and Facebook, among others. Thanks that’s not a big deal? Think again.
…the overall stance being taken regarding online tracking and surveillance should be seen for what it is: the first step to correcting the mistake of history that allowed the internet to be kidnapped and held hostage by a handful of companies that pretend to be “free” or “customer obsessed” while they are, in fact, Robber Barons that make the Standard Oil monopoly look like Santa Claus.
– D.L.
Tracking the Trackers will Change Your Life
Tracking the trackers is a clear and aggressive privacy stance, taken by the one company among the big four, that does not have a huge stake in you being the victim of online surveillance and tracking.
Not to say that Apple is blameless. Many are complaining about its fee structure for software sold by third parties via the app stores. While this issue is certainly a valid one, the overall stance being taken regarding online tracking and surveillance should be seen for what it is: the first step to correcting the mistake of history that allowed the internet to be kidnapped and held hostage by a handful of companies that pretend to be “free” or “customer obsessed” while they are, in fact, Robber Barons that make the Standard Oil monopoly look like Santa Claus.
Subscribe to our newsletter for all the latest updates directly to your inBox.
A building chorus of dissenting voices from well heeled and carefully researched corporate ad buyers
Zuckerberg faces the music (collage / Lynxotic)
The Facebook ad boycott has been going on for several weeks now, as more and more companies are abstaining from promoting content on the social media website until it makes greater amends to eliminate hate speech on its platform. At first, many expected that the boycott would not be enough to spark real change. After all, only about a hundred companies are engaged in it, and Facebook hosts over 8 million advertisers. However, now that a few key players have joined the movement, Facebook is facing palpable financial and PR consequences, heralding an indirect response.
Companies started to boycott ads on Facebook earlier this month, as civil rights groups such as the NAACP, the Anti-Defamation League, Sleeping Giants, Color Of Change, Free Press and Common Sense criticized the site for providing a platform for racist and bigoted content. These groups were particularly critical of Facebook failing to censor President Trump‘s inflammatory post regarding the Black Lives Matter protests following George Floyd’s death. In the post, Trump stated, “When the looting starts, the shooting starts,” endorsing a hateful rhetoric riddled with dark precedents.
Facebook was defensive of allowing Trump’s post go unedited at first, with CEO Mark Zuckerberg playing the free-speech card that has kept Facebook relatively unaccountable in the past for the mounds of unsavory content plastered on the site.
Now, however, Facebook is waking up to a significant hit to the wallet.
Major ad contributors have joined the boycott against Facebook including Verizon, Coca-Cola, Unilever, and dozens upon dozens more, with most making a statement that they will abstain from advertising on Facebook through the summer or until the site changes its methods. It is part of a movement titled “Stop Hate For Profit,” targeted at companies that make money off of bigotry.
Money matters, apparently, particularly big, big sums
As mentioned above, the companies who have joined the movement are but a drop in Facebook’s ocean of advertisers. Nevertheless, amidst the boycott and all of the negative PR Facebook has acquired as a result, the site’s stock price has dropped significantly. On Friday, June 26th, its stock went down more than 8%, representing a loss $56 billion in market value for the company. Even for a company like Facebook, that is not exactly chump-change.
Non-coincidentally, later that same day, Zuckerberg released a statement outlining Facebook’s plans to be more proactive about censoring content on the website. In a thirteen minute video and accompanying post, the CEO explained that going forward, Facebook will be making more efforts to ensure that all users feel safe on the website. This includes prohibiting ads that target or demean certain demographics, making it more apparent when content is or is not deemed “newsworthy,” and increasing security for content related to the upcoming election, flagging hoax videos and removing the spread of misinformation.
A long list of convictions and potential crimes is beginning to mount
The larger question exists as to why now, after facebook’s lax and predatory behaviors are well known and documented, suddenly these major advertisers have woken to the urgency of change? BLM and antitrust, along with a long list of highly critical investigative reports from major news over a period of years, might just be building into a tsunami of anti-facebook sentiment too big to ignore.
It was Facebook’s complacency with spreading misinformation during the 2016 Election—as well as the Cambridge Analytica privacy breeches— that instigated the website’s fall from grace nearly four years ago. Since then, Facebook among other big-tech labels have been the subject of greater criticism for their role in politics, culture, and public discourse.
While Zuckerberg’s latest video feels more substantial than most of his responses to criticism. It attempts to off some possible real solutions to the problems rather than just hollow suggestions or distractive rebranding techniques. Still, many are not satisfied, hoping that Facebook will focus more on removing all hateful content rather than simply flagging it, or adjusting its corporate allegiances so they stop selling data to or providing a platform for institutions that aim to disenfranchise people.
As the boycott continues, perhaps Facebook’s response will grow more progressive, but Zuck and his company continue to toe that delicate line between upholding freedom of speech and quelling unambiguously offensive content. Likewise, it will be interesting to see what the boycotters do in the coming months. Facebook is a crucial advertising platform for most of these corporations. By the end of the summer, will they start using the site again, or will they continue to hold out until greater change comes about?
To endorse the former would seem like a sellout, like the entire boycott was but a disingenuous gesture. However, to carry on with the boycott indefinitely begs the question of how much Facebook needs to adjust itself before returning to the public’s (as well as other business’) good graces.
Ultimately, the question is whether real change is finally coming; for us all to have a choice of more than a single, solitary option for our social media network (facebook), search engine (google) or eCommerce destination (amazon).
With half the world seemingly at the beach, and most of us focused on the right way to survive coming out of lock-down, you may have missed the incredibly active news coming out of the tech space. Not just space itself, but a variety of interesting looks toward the future, both in law and anti-trust issues and, yes, space itself both from the fantasy as well as reality perspective.
With the coronavirus pandemic implications for the economy and business at the forefront of looming threats, at least in terms of non-medical issues, the big tech giants; Amazon, Google and Facebook are all getting warnings that the government are a-coming with serious questions as to the behavior of the former, if not outright legal actions. And the people at large, in particular small business owners may not be far behind.
A Bully with a “Nice” Promise is Still just a Bully:
Photo Collage / Lynxotic / Adobe Stock
Funny thing about promises made by politicians and owners of public companies. Although truth will eventually come out due to public access to accounting, these are often so far in the future that virtually anything can be promised today with no need for a specific plan or transparent numbers to back them up. Click to see complete story.
From “Star Trek” to “Star Wars,” “Interstellar” to “2001,” outer space has been the primary setting for a wide range of science fiction and action movies over the years. Still, never has a film actually been shot in the infinite frontier. Sure we have footage from the stars (even from the moon and Mars), but no feature film has been bold enough to actually construct a full-length narrative with principal photography occurring in space. Click to see complete story.
On Friday, May 15th, Facebook announced that it will be buying Giphy— the world’s most popular GIF site on the internet, social media, and messaging services. Giphy is already an integrated part of iMessage, Tinder, Slack, and Twitter, and Facebook now owns it for a reported $400 million. Click to see complete story.
It is safe to say that Google is a hegemonic force in the digital world. The site practically has a monopoly on internet searches and it holds nearly a third of the money tied up in online advertising. Because of the United States’ lax laws regarding cyber security, Google’s dominance has largely gone unchecked over the years. That is, until now. Click to see complete story.
This is a tiny snippet from an upcoming exposé of the inner workings of the nightmare produced by Facebook, Google and Amazon
Isn’t it funny that the so called bursting of the dot-com bubble in 2000 which resulted in a nearly 75% drop in the tech heavy NASDAQ index by March, 2000. Ultimately, among survivors and upstarts, the winner-takes-all saga led to no less than three trillion dollar companies.
If the internet is, or at lest was, a dead end for any company trying to profit, how could these few have profited so obscenely in such a short time?
Most of the answers to that question attempted for the last two decades have been blatant hero worship and “to the victors go the spoils” nonsense with hardly any media attention paid (at least until around 2016) to the deeper, and darker, story that explains this regrettable paradox.
While the truth, particularly when it comes to tech and the internet, is often maddeningly complex, hiding behind a veil of complexity is a standard technique for anyone wants to keep their billion dollar golden geese a secret, shell companies, offshore banking, derivatives and “CDOs” and the like all benefit from being opaque and complex.
And while the absolute details would take mountains of pages to explain, mainly to explain away all the contradictions, the base issues are at the same time, in many ways, insanely simple.
Fraud, Ponzi schemes, illegal monopolistic behavior, all the usual suspects are not only present but rampant and rancid like a planet sized pile of moldy cheese.
And those are the larger threads, the ones that fit into a framework of past anti-trust cases and prior greed fueled crime sprees.
The devil as they say, is always in the details. Here are a few, some general and others much more specific, that point to how we could have gotten to this absurd destination.
Google and the “hiding engine” from hell
Click to see “Goliath” and help Lynxotic and all independent bookstores
While it is lovely that Google “allows” us to find out Lucille Ball’s birthday with a single click – or the capital of Afghanistan just as easily, what if you are looking for something a little less obvious? What if the information you need is worth something? What if you need fair, honest advice or even wisdom?
You’re out of luck. Since the entire basis for this business to to charge you (or somebody, regardless) for information that is, in reality, publicly available (the internet is public after all and the information on it does not belong to google), the primary function of Google’s vaunted trillion dollar algorithm is to hide any information of value from you until they have extracted a price.
Since they are known as a “search engine” this is counterintuitive but it will make more sense as we delve into the other two “winners” of the dot-com era. Each of these three companies share this one thing in common. They are all build to exclude, hide and criminally manipulate essentially public information for the benefit of a private enterprise. k?
Facebook and the lure of “exclusive membership”
As has been well documented, to the extent of having been memorialized in a feature length hollywood film, the fast start in membership that Facebook achieved was based on two “triggers” related to exclusivity and “hiding” of information. The first was, during the initial launch at harvard and for a period of time at various other colleges and universities, a requirement for membership was “proof” that you were a student in the form of an “edu” suffixed email. This added popularity to the site as those joining felt they had not only potential access to others where they went to school, but also would not be associating with non-students, or in the extreme initial example, not socializing with non-harvard people.
Click to see “World Without Mind” and help Lynxotic and all independent bookstores
While this seems innocuous enough and a great marketing ploy, indeed it was heralded as genius by hundreds of sycophantic scribes, the next bit is where the system that exists to this day became an engine for corporate greed at the expense of virtually the entire world population.
Once you join Facebook, you are “allowed” to have contact only with “friends” that authorize you to do so. But the recommendations for “friending” those people, other than from your own laborious manual searching, are controlled by Facebooks algorithms.
This is a familiar tune. The real purpose of this structure was not to give you exclusivity or for you to benefit from the “wisdom” of the algorithm, but to block private and, in particular, business entities from coming in contact with you without first paying Facebook. In other words, using its log-in membership system and proprietary software labyrinth as a private, separate internet sphere, it was able to build the largest network of phantom tool booths the world has ever seen and now collects hundreds of billions simply because “the public” has opted-in and has no idea what an open alternative would look like or the damage that has been done by this harmless seeming “social platform”.
The real potential of networked human communications, a.k.a. the internet, is almost totally lost to history, with the surviving structure entirely based on the systems that these three giants have constructed with a view to nothing more than private, personal enrichment.
While this opinion may seem harsh, looking at the inner workings of the software and who financially benefits vs. who loses (a.k.a. everybody else) will, in time expose one of the greatest swindles ever perpetrated on the public, in this case the entire world population, or at least the population of internet users across the globe.
Amazon and the alleged layers of deceit and corruption beyond all imaginings
It is fairly common these days to hear criticism of Amazon and “worlds richest man” Bezos, which is understandable since the operation is so massive and, like any huge concern, likely to step on a few toes here and there, regardless.
Naturally there is also plenty of hero worship, particularly the insane love of “Bezonomics” and a cult of personality toward the founder and CEO for, well, stepping on the most faces of any human, other than perhaps Genghis Kahn.
Again, the real devil is in the details. It is easy to defend any criticism of the company by pointing out the “good” that it has done or continues to do and to create a “straw man” argument that the company should somehow get “credit” for those things and that they somehow offset any valid critique.
That is like saying someone who succeeded in getting elected president by bribing millions of voters should therefore be allowed to wage war or imprison anyone he likes since he has earned “credit” by doing right by those who were bribed.
There a little story, told to us by an anonymous source, who’s stories have all checked out before, that illustrates the system at work when you step onto the private property of Amazon’s web site.
Click to see “Life After Google“ and help Lynxotic and all independent bookstores
Again search is at the center of the story, as is the requirement to log in and agree to terms and conditions. This is tantamount to agreeing that you are leaving the public sphere and are agreeing to abide by the rules and be subject to the whims of the private entity on whose “sole property” you are now “standing” / shopping.
In that private world Amazon, and by extension Bezos, not only play god, they are god.
To illustrate this fact let’s say you have a 7 year-old child that loves a certain children’s character and you want to buy a book that has “pop-up” cut-outs to entertain and delight. And this exact item can be found via “search”.
Naturally, you type in the name of the book or character and perhaps add “pop-up”. What shows up in the “search” results is exactly what you are looking for. It’s the precise item and it looks exactly as you had hoped. Then you look at the price. $50. Hmmm that’s a little high you think. With a little further research you find out that the “MSRP” for this item, a.k.a. the list price is $30 which seems a bit odd.
You keep trying to search and click any link on the site that will lead you to the same item at a more reasonable price – but that is only available “used” and you will not purchase a used item for your child!
In the end you rationalize, it must be a very rare item to have such a high price, and since the Amazon search results “must be scientific” there are apparently no lower priced copies available. So you buy it.
This scenario was repeated hundreds if not thousands of times for this one product over a period of several months. And likely was repeated millions of times over a period of years across thousand, if not millions of items. So what?
The search is rigged, that’s what. How do I know? The person that related this story was the seller, in 2014, of over 1000 copies of the item at $50. He did not create this fraud, merely piggybacked on what Amazon itself had set up. Only they have control of the search results.
What’s the big deal you say, after all there were no cheaper units available so it is just “surge pricing”; supply and demand, right?
Wrong. There was, after all, another listing of the same item, expertly hidden by Amazon, where only a hacker or software expert could find it. On that listing, for those that Amazon chose not to swindle, was the exact same item for the standard, heavily discounted, price of $16 or nearly 50% off the list or MSRP. You see, the result is, regardless of who is selling the item, Amazon earns triple (triple the fees) when the price is higher, as in this example.
This is not an isolated “mistake”. Many who have experience working inside the Amazon system have seen literally thousands of similar examples all tied to this “malfunctioning” search engine.
What’s more a calculation of the possible financial benefits during the time in question amounted to nearly the entire reported net profit of the entire company. It was common knowledge that the company was reporting little or no net profit during many years, even as it remained a darling of stockholders.
And if any one would bring such a specific case to Amazon’s attention? Naturally they would blame the seller, software issues, the moon and the stars, anything but admit that they use every inch of their private real estate for one purpose and one purpose only, to maximize the amount of money that ends us in their accounts.
And many who are reading this still don’t get it. “Why not?” It’s capitalism after all! To the victor go the spoils! Hail Ceasar! Heil Hitler. It’s your internet. Not theirs.
Anti-trust Actions and Consumer Frustration Building for Years Coming to a Head in Post-Pandemic World
A groundswell of dissatisfaction bordering on outrage, particularly in Europe, built to a peak by the end of 2019. Lawsuits, investigations, protests and more lay siege on the biggest of the big tech giants. Google, Facebook and Amazon were at the forefront of much of the turmoil.
Judgements, convictions and fines levied against google included a whopping $1.7 billion fine in the European Union for violating antitrust regulations involving unfair advertising practices. The E.U. had already convicted the giant search company twice for similar violations in its business practices. The total fines as of the Match 2019 judgement totaled 9.3 billion imposed by the E.U. alone. While this may be pocket change to a trillion dollar company with a virtual monopoly in search in many parts of the world, it also indicates and impacts a rising awareness of the disturbing anti-competitive behavior of the tech giant.
Click to buy “The Four” and at the same time help Lynxotic and all independent local bookstores. Also on Amazon
Both Facebook and Amazon have been similarly targeted for various anti-trust violations and non-competitive behaviors and were fined accordingly. Although in some ways less targeted for traditional anti-trust violations to date, Amazon, has been increasingly scrutinized and investigated for its methods of market domination. Treasury Secretary Mnuchin was quoted in a televised speech stating that “Amazon destroyed the retail industry”. Amazon’s complex structure and claim to “only” account for 5% of retail sales (and 50% of online retail) make traditional monopolistic behavior claims more difficult to prove. Antitrust experts have called the massive online company a monopsony instead, which can mean having a majority power over suppliers rather than consumers. A similar set of issues and concerns was the focus of famous antitrust battles against the A&P Grocery chain during the Great Depression with a judgement against the giant finally rendered in 1946.
Also recently, the Wall Street Journal published a disturbing story detailing how sellers on Amazon were able to sell products sourced from dumpsters, clean them up and pass off as new. This was a tip-of-the-iceberg moment opening up inquiries into the state of the “3rd party marketplace” which represents more than 50% of Amazon’s revenue.
Coronavirus COVID-19 Global Cases by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University
After the Pandemic Troubles Likely to Remain for Tech Behemoths
Now, as of the date of this writing the confirmed coronavirus cases in the U.S. total over five hundred thousand cases with over one hundred thousand deaths worldwide. The U.S. death toll, at over 2.3k , has surpassed every other country, including China (although the numbers coming out of China may not be reliable). The number of cases and the death toll has not yet peaked, according to experts, and Lock-downs across the country are likely to continue for weeks, even months longer.
Click to buy “World Without Mind” and at the same time help Lynxotic and all independent local bookstores. Also on Amazon
Although this situation effectively postpones government investigations and county actions against the giants, public anger and frustration, particularly with Amazon appears to be on the rise. Low paid warehouse workers for Amazon have staged walk outs and protests, delivery times have lengthened dramatically, the newly launched Amazon branded delivery system was cancelled and overall chaos appears on the rise.
None of these or any other side-effects of the pandemic and the lock-downs, such an an increase in streaming and online use in general is likely to be a positive public relations win for any of these massive companies. The trend of the last several years is likely to not only continue but intensify as the world slowly emerges from a state of quarantine shock and gradually tries to find a path to a new business as usual.
Meanwhile, enough time has elapsed that not only articles but books about the Big-Tech backlash and the problems that have been clearly identified in the business models of these companies have been published. Many are zeroing in on the negative impact of these enormous companies on society, the job market and small businesses in particular as they snowball into larger and more dominating versions of themselves .
We have featured a few on this page but they are being published literally as I write this article, and we will continue to catalog and update the subject on our sister site Cherrybooks.
Amazon finally Admits to Facilitating Safety Issues and Fakes in Online Product Listings
Chinese products listed on the e-commerce site have been known to present a multitude of issues for US sellers on the platform. Consumers are also put into potential risks whenever purchasing an item from overseas on Amazon’s site. Counterfeits, unsafe goods, and items that lack the necessary US FDA approval, despite including the logo, are among some of the problems that have frequently occurred.
On the U.S. site, Amazon doesn’t require a seller’s locations to be disclosed, which makes it harder for Chinese sellers to be held accountable when fake and unsafe goods are identified after shipping.
When consumers attempted to sue Amazon in court proceedings in the past, Amazon’s argument was that they held no burden on product liability, claiming that the items in question were neither manufactured nor sold directly by the company and that they merely allowed those items to be listed for sale.
An extremely dangerous case happened when a customer purchased a hoverboard on Amazon from a third party seller and the board exploded and resulted in the buyer’s house catching on fire and burning down. In that 2016 court proceeding, Amazon won the case and was not held responsible.
However, for the first time ever, Amazon is finally admitting that such risks actually exist. The 2018 Securities and Exchange Commission (SEC) file stated “Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers’ descriptions. We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies”
Whether Amazon can be held liable in court for damages that result from this passivity appears to be another story.
Mysterious Third-Party Chinese Vendors Lack Accountability on Amazon’s Seller Platform
Chinese sellers within the Amazon marketplace could represent a significant portion of the third-party sellers. Although Amazon does not publicly disclose any data of sellers’ location on the Amazon.com US site, according to Market Place Pulse, approximately 38% of the top sellers are based in China and 44% of China sellers were calculated among the 5 marketplaces (France, Germany, Italy, UK and Spain).
The majority of Chinese sellers, more than 79%, utilize Amazon Fulfillment (FBA) services that allow for customers to receive items quickly. This has resulted in US sellers struggling to compete in the market while also allowing customers to experience the same shipping experience regardless of the products’ origin.
Legitimate US Companies Can’t Compete with Rampant Flock of Fraudulent Chinese Vendors
This insurgence of sellers from China are affecting US sellers that have sold products imported from overseas because they are not able to provide competitive prices against Chinese suppliers that are now selling the same products on the site.
In an interview with the WSJ, a US based company that sells goose-feather duvets claims that they’ve struggled to compete with Chinese sellers that claim to sell the same quality goods but are counterfeits. This US company bought the Chinese “equivalent” and had the materials tested and found that they were duck feathers, instead of its proclaimed goose-feathers, and were being sold at a fraction of the price.
These deceptive listings not only hurt the customers that believe that they are purchasing one thing but actually receive another, but they are also killing a number of legitimate companies’ chances to make a living. The company brought the testing results to Amazon’s attention and the counterfeits were removed. However, the burden of responsibility in locating vendors that sell “fakes” should not be on the third party seller’s shoulders.
Consumers have also been deceived into thinking a product is great based on 5 star feedback when, in actuality, a string of companies have been proven to directly influence inauthentic reviews by bribing customers with gift cards in exchange for a high rating.
Consensus Building Rapidly Against the Business Models of Internet Giants
Earlier this week, Amnesty International, a non-governmental organization from the UK, called Google and Facebook’s practices of omnipresent surveillance on people around the world an “assault on privacy.” The organization, which focuses on human rights, recently released a report outlining how these two major tech companies hold too much power and should change their business models to stop infringing on users’ personal information.
Amnesty International’s accusations may seem extreme, but that does not mean that they are inaccurate. While Google and Facebook might appear to be free websites, the reality is that you pay for their services with your data. Whenever you search for something, you feed the sites information—information that they can sell, manipulate, market, or use for a countless number of other things, some of them perhaps unethical.
The upside is that data is cheap, and therefore these websites are not about to start charging you. The downside, however, is that there are really no limits to how tech juggernauts like Google or Facebook (or Apple, or Amazon, or Microsoft for that matter) use the data you provide them. No concrete laws in the United States monitor these companies’ use of data, and given that the Internet was built as a place of free-flowing information, there are no internal boundaries that stop these websites from taking full, unrestricted advantage of your information.
This is not the first time that Facebook and Google have been called out for issues regarding privacy and cyber-ethics. Facebook founder and CEO Mark Zuckerberg has found himself before Congress on more than one occasion recently. Ever since it became known that Cambridge Analytica used web data to falsely advertise on Facebook during the 2016 elections, the social network’s surveillance tactics have been in question.
Benign Monarchs? Not Likely.
As for Google, the website practically has a monopoly on web-searches across the world. The search engine accounts for 90% of the Internet searches on Earth, and it is not always transparent about what it does with the resulting data. With such huge numbers, though, Google can afford to distribute your extensive information to just about anyone—even government organizations or institutions with malintent.
The two companies usually respond to these kinds of accusations with vague optimism about current and future cyber-safety. Google claims to have changed its model within the last year, making the site more user-friendly and giving its patrons more control. Meanwhile, Facebook has largely stood its ground when it comes to online freedom. Zuckerberg and other Facebook officials have suggested that they will heighten security, but they simultaneously stand by that censorship on any scale is constrictive and antithetical to the website’s intent.
Facebook also owns Instagram, Messenger, WhatsApp, and several other websites/apps that are used across borders, making the issue a conglomerate and worldly one. Although they are both American companies by origin, both Facebook and Google are international entities. Thus, creating laws around their practices is a complicated and culturally sensitive process.
At the same time, though, these enterprises have been going unchecked and unchallenged for well over a decade now. When they started, the digital world was much smaller and very different than it is now. Technology has changed, and so has the world— now the rules that govern it must follow suit.
Imagine a Monster Dictator who claims he wants to Free us all from “Traditional Gatekeepers” while he Controls the Ultimate Gate with Iron Fist
Here, a man who almost single-handedly controls the world’s largest social network – with users counted in billions, implies that there is any connection whatsoever with heroes of the history of journalism and what is now disparaged as “The Media” but was once called the 4th Estate.
People having the power to express themselves at scale is a new kind of force in the world — a Fifth Estate alongside the other power structures of society. People no longer have to rely on traditional gatekeepers in politics or media to make their voices heard, and that has important consequences.
– Mark Zuckerberg
Claiming that, somehow, thousands of independent newspapers with tens of thousands of writers and editors, challenging governments and investigating corruption and lies is similar in any way to a digital dictatorship that controls every word or image through its algorithms, and has as its only goal to maximize private profits, is an outrage – and yet this point has only been hinted at in even the most critical coverage.
Express Ourselves at Scale? Really? As long as His Algorithm deems it in Facebook’s Monetary Interest
Mentioning the “traditional gatekeepers” blocking voices, as if his private, for-profit platform has no gate and makes no decision in which voices are heard and by whom is a lie, told in plain sight, so enormous it is shocking.
Except, as he clearly hopes, on hearing vague pronouncements about a fantasy world, most will just switch focus, away from the real way his digital empire functions to some kind of vague discussion of “free speech”. And, in the case of political advertising, speech that he collects millions of dollars to promote and propagate, with no thought of actual free speech that will be drowned out and silenced by his dictatorial decision. That’s the real gatekeeper at work.
Talking about “free speech” as having any role whatsoever on a platform where exposure is controlled 100% by the same network’s private corporate ownership is worse than any Jospeh Goebbles propaganda the Nazi’s ever came up with and is an Orwellian nightmare come to life.
Since Zuckerberg’s speech was clearly designed to confuse and cover up this simple, obvious fact, using Trump style repetition of simple irrelevant lies to influence people to abandon the more complex truths, the underlying truth bears repeating.
I heard #MarkZuckerberg's ‘free expression’ speech, in which he referenced my father. I'd like to help Facebook better understand the challenges #MLK faced from disinformation campaigns launched by politicians. These campaigns created an atmosphere for his assassination. pic.twitter.com/h97gvVmtSZ
Yelling “fire” in a Crowded Theater is of no use if the Crowd can be digitally disappeared at any time
Claiming that “censorship” of “free speech” is not appropriate for a platform that controls who sees and hears that content 100% at all times has to stand as the criminal obfuscation of the century.
As misleading propaganda it is brilliant in its stupidity. To imply that any speech at any time is “free” on a platform that controls access by each and every user at all times is ludicrous at best and vile propaganda at worst.
Have millions of dollars to spend to ensure that your lies are seen by millions? No problem. Have inflammatory disgusting views to share? Sure, the algorithms love anything that increases “engagement”.
On the other hand, as members of the actual 4th Estate found out during the “Great Purge” of 2018, if Zuckerberg & Co decide that you should not be seen for any reason, usually a reason that pertains to increasing profits for Facebook, then you are disappeared, Pinochet style, and can forget about your “free speech” being heard or seen ever again.
Nice way to build a “5th Estate “ to protect us from “traditional gatekeepers”.
We intentionally made a Facebook ad with false claims and submitted it to Facebook’s ad platform to see if it’d be approved. It got approved quickly and the ad is now running on Facebook. Take a look: pic.twitter.com/7NQyThWHgO
Algorithmic Crimes are the Real Story, bigger and worse than Traditional Antitrust Violations
Just mention the word “algorithm” and we all tend to get glossy-eyed and begin to lose interest.
Never mind that the results of your Google search are controlled by algorithms that “decide” what you should be allowed to see or not, while what you may buy is controlled by the private, infinitely biased algorithm employed by Amazon, whose only goal is to increase its own profits at your expense. And then there’s Facebook.
A master of dystopian science fiction would be hard pressed to envision a more sinister, hellish world than the one we already inhabit, where what you think, what you think you “know”, what you believe and what you consume are all controlled by what are essentially robot brains, owned and controlled by evil private corporations with trillion dollar market caps.
And Mr. Zuckerberg has the nerve to talk about “Free Speech” on Facebook? In the words of Greta Thunberg “How dare you!”, and as in the struggle against the powers that profit from the accelerated extinction of future generations, it’s time to end the Algorithmic Dictatorships and, via the real Fourth Estate and free the billions that are, as yet, unknowingly victimized, by whatever means necessary.
According to “a source knowledgeable about the probe” and quoted by Reuters and The Washington Post in stories today, more than 30 attorneys general will announce the investigation next week.
In response to the news Google issued the following statement:
“We continue to work constructively with regulators, including attorneys general, in answering questions about our business and the dynamic technology sector”
Google representative Jose Castaneda
The source also intimated that the probe would be focused “on the intersection of privacy and antitrust”, but did not give any further detail.
In July, the US Justice Department announced that it would begin a broad investigation into the possible anticompetitive practices of the largest technology companies. It has been considered likely that Google, Amazon, Facebook and possibly even Apple would be in the crosshairs.
The Federal Trade Commission, who are also responsible for the enforcement of antitrust violations, is looking into Amazon and Facebook and whether they have abused their dominance in online retail and social media, respectively.
Google, after having large fines levied against them in Europe in March for antitrust violations relating to online advertising, will now face the task of changing the outcome of similar accusations of misconduct in the US.
Amazon also has had difficulties coming out on top in European cases. Only yesterday in Paris, the Commercial Court handed down a verdict against the online giant, resulting in a 4 million euro fine and a demand that 7 key clauses in their agreement with “marketplace seller partners” be brought into compliance with French laws.
Meanwhile, Facebook is also under scrutiny as they are under investigation by the FTC for a potential breach of antitrust regulations. Similar to Google in the European case mentioned above, the probe into facebook involves its social media, digital advertising and mobile applications.
Graphic / Lynxotic / Adobe Stock
In a separate matter, Facebook is also under scrutiny by the European Commission in questions relating to its new Crypto Currency “Libra”. A more general inquiry into its possibly anticompetitive behaviors within the EU in also underway.
Overall, it appears likely that these various probes are only the beginning, as all of the massive tech companies mentioned are already the target of governments and politicians, particularly in the US and Europe.
In a peculiar twist, both Republicans and Democrats in the US seem to agree on at least one thing, that these companies are too big and too powerful and should be investigated at minimum and potentially targeted in antitrust actions for illegal behaviors.
The Trump Administration, AOC, Elizabeth Warren, even Joe Biden have come out in favor of breaking up big tech at the hands of the government, after serious violations of antitrust law have been established.
Most significant aspect is not the tiny fine, but the requirement that Amazon change it’s marketplace seller agreement on 7 of 11 practices that were deemed unfair
In a related development to our opinion piece published yesterday, the commercial court in Paris fined the giant US firm for clauses in it’s mandatory agreement for sellers that were found to be abusive and unfair.
In an exclusive story published (in French) by Next INpact the verdict was explained based on ongoing local coverage of the story.
In the article, which you can read in a google-generated translation provided below, it is noted that, similar to the US marketplace, in France approximately 60% of the income for Amazon’s online retail sales is generated by third-party sellers, using the Amazon Marketplace. Total sales are approximately 5 billion Euros per year.
Screen Shot of the Court Document (can be downloaded as PDF below
Of the 11 clauses that were scrutinized in the suit – 7 of them were deemed to be in violation of:
”Article L442-6 of the Commercial Code prohibits “to submit or attempt to subject a trading partner to obligations creating a significant imbalance in the rights and obligations of the parties”.
– Next Inpact reporting on the verdict in the commercial court of paris
Some examples of the offending clauses are summarized in the verdict, which will sound very familiar to US marketplace sellers:
“one of them allows Amazon to modify at any time, without notice, and in its absolute discretion the contract binding to sellers.
Result: either the seller resigns or he loses a significant share of turnover. A clause deemed “exorbitant of French law and contrary to all uses” concludes the decision.”
Nextinpact.com
“Another clause pinned, the one that allows Amazon to terminate a contract with immediate effect “for any reason and at any time by simple notification.
‘A contractual condition much too “general, discretionary and imprecise”, considers the court which notes the absence of notice and proportionality.”
“In the end, the court ruled that 7 of the 11 clauses pinned by Bercy were clearly unbalanced to the detriment of third-party sellers.“
nextinpact.com
With US anti-trust actions potentially moving forward at anytime, it is doubtful that this ruling, although representing little more than a “parking fine”, will be overlooked by prosecutors seeking to build a future case against the giant retailer.
As follows the full, rough, translation of the original article:
EXCLUSIVE.
The Paris Commercial Court sentenced Amazon to a fine of 4 million euros. The platform is also obliged to amend seven clauses under penalty. In question, the existence of a significant imbalance to the detriment of third-party sellers passing through this marketplace. Next INpact releases the judgment of 2 September 2019. In 2015 and 2016, the Directorate-General for Competition, Consumption and Fraud Control launched several surveys of marketplaces accessible in France. The goal? Gauge this sector and update any anti-competitive or restrictive practices.
Three companies stand out, all related to Amazon: Amazon Payments Europe, Amazon Service Europe and Amazon France Services, respectively APE, ASE and AFS. In December 2017, Bercy revealed his procedure initiated before the Commercial Court in July 2017. The administration recalled the ban on restrictive practices. Article L442-6 of the Commercial Code prohibits “to submit or attempt to subject a trading partner to obligations creating a significant imbalance in the rights and obligations of the parties”.
It claimed for this purpose in particular a civil fine of 9.5 million euros. The importance of this amount is easily explained. The company generates in France a turnover of over 5 billion annually.
And more than the majority of sales (60%) are made by third-party sellers, those using its marketplace. During its investigation, the DGCCRF identified several clauses that constitute a significant imbalance. They relate to contracts linking third party vendors with Amazon.
The jurisdiction of the French courts
Over the 49 pages, only APE, which deals with the part “payment”, could finally be put out of cause, not the other two companies. In this respect, Amazon France Service has been considered as a commercial partner of ASE, associated in the development of marketplaces.
ASE has also tried another circumvention: to oppose to the court the clause that attributes jurisdiction to the Luxembourg courts, while ensuring that two thirds of its sellers would be installed abroad.
The blow of the sword touched the water: the provisions in question being police laws, they are not subject to contractual conditions.
A significant imbalance
In the body of the decision, three points were sought: the existence of an economic bid, obviously unbalanced contract clauses and finally a possible rebalancing for the benefit of sellers in the benefits of using this platform.
The criterion of the tender was retained without difficulty, by the combination of several ingredients. Vendors face non-negotiable clauses. Amazon enjoys an economic power without equivalent.
The site is even essential for small third-party sellers, boosted by the network effect (or snowball).
“Amazon is obviously one of the” superstars “of the Internet, which this network phenomenon explains the exponential growth.
11 clauses were identified by the Minister of the Economy in his procedure.
For example, one of them allows Amazon to modify at any time, without notice, and in its absolute discretion the contract binding to sellers. It is up to the seller to look for this information published in the conditions of the site.
Unhappy, he can still terminate the contract, “but then without having had time to find a substitute,” said the court.
Result: either the seller resigns or he loses a significant share of turnover. A clause deemed “exorbitant of French law and contrary to all uses” concludes the decision.
Amazon was unsuccessful in arguing that trading with 170,000 vendors was impossible in an automated process. What the court told him was that “the automated system, precisely because it is, would work just as well with notice.”
With a certain malice, he also recalls that billions of transactions are made every day and that Amazon is in perfect ability to send them a letter on the order, and another on the state of delivery.
discretionary clauses
Another clause pinned, the one that allows Amazon to terminate a contract with immediate effect “for any reason and at any time by simple notification.”
A contractual condition much too “general, discretionary and imprecise”, considers the court which notes the absence of notice and proportionality.
Similarly, Amazon offers the possibility of imposing limits on salespeople based on “performance factors” without explaining their scope and the consequences of non-compliance with the evaluation criteria.
Still in the same vein, the platform is sanctioned for having the freedom to prohibit or restrict access to the site “at its sole discretion”. According to Amazon, the idea is to fight against the sale of dangerous products.
Only problem, the consular judges have not found this clarification in the contract. Same fate for the part that authorizes ASE to refund a customer even in case of non-return of the product of the third-party seller.
An imbalance not compensated by the benefits removed
In a logic of “balance”, the court then examined whether the imbalance of most pinned clauses was not offset by a series of benefits for sellers:
consumer confidence for Amazon, tools sharpened to facilitate management commercial operations, in addition to the storage of products.
The judges mainly recalled that these different benefits are not offered, but have as counterpart “the level of the various commissions paid to ASE by the third vendors”.
And these different benefits also benefit ASE for its own products and attract more and more third party sellers.
“On the other hand,” he says, “some of the shortcomings, especially those relating to business performance indicators, are such as to allow Amazon Service Europe to use a stipulation to, after testing a new product on a market. launched by a third-party seller, favoring the sale of his own to determine that of the third-party seller after aligning his price “.
7 censored clauses, 4 million euros fine
In the end, the court ruled that 7 of the 11 clauses pinned by Bercy were clearly unbalanced to the detriment of third-party sellers.
Amazon will have to modify them. 3 will remain intact, and one has been modified during the procedure. Amazon will have to modify them within 6 months, on pain of 10,000 euros per day.
Rather than the 9.5 million euros defended by Bercy, the court has finally revised down the fine to 4 million euros, especially given the good faith of Amazon, and different “positive steps” since the opening of the procedure.
Note however that the DGCCRF had requested the parameters of the algorithm used, from the United States, to highlight the products in the “Buy Box” Amazon … In vain.
The court finally refused the publication on the grounds that the press release of Bercy dated December 18, 2017 had been very widely (disseminated) and that this judgment should suffer a similar fate.
Teeth or not in Inquiry? Jawboning or action for Targeted Tech?…
Commenting on the antitrust review announced by the Justice Department on Tuesday, in an interview on CNBC, Mnuchin said that “it is good that the attorney general is going to look into this”.
Also saying that Amazon has “limited competition”, “hurt small businesses”, and that it was “absolutely right” for the Attorney General to look into “these issues”.
Amazon "has destroyed the retail industry across the United States," says Treasury Secretary Mnuchin. "It's absolutely right the Attorney General is looking into" anti-trust issues. pic.twitter.com/z5Mhc96xMa
On Tuesday, the Justice Department announced via press release that it would initiate a review to determine if major online platforms had “reduced competition, stifled innovation or otherwise harmed consumers”.
”The Department of Justice announced today that the Department’s Antitrust Division is reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”
Department of Justice Release from Tuesday, July 23, 2019
Interestingly, the idea of some kind of antitrust action against Amazon, Google or Facebook is one that is gaining traction among Republicans and Democrats alike. Senator Elizabeth Warren in particular has often spoken of the need for intervention.
Each of the “market-leading online platforms” have built-in defenses against traditional antitrust actions, which have traditionally looked for dominant companies where consumer prices were directly impacted by use of monopoly profits (such as in United States v. AT&T and later, v. Microsoft).
In the case of Facebook and Google, profits are hidden behind “free” products and services which allow the companies to claim that no harm comes to consumers as a result of their power. Naturally, the idea that the products and services come without cost is losing credibility in light of the many scandals and instances of harm, monetary or otherwise.
Kindergarten Colors and “Consumer Obsession” while Evil Lurks Beneath…
In the case of Amazon, it is even more complex, since, as a company famous for enormous losses rather than profit, all while using various loss leader strategies to prove that it is “consumer obsessed” and not a monopoly at all.
Indeed, Amazon’s response to the Justice Department’s press release was, through a spokesman, that Amazon accounts for “less than 4% of US retail sales” and that “small and medium-sized businesses are thriving with Amazon”. Not mentioned was the dominant 50% share of the online sales market.
By comparison the second largest online sales channel, eBay, for 2019 is estimated to reach 6.1%, while Walmart’s online platform has an approximate 4.6% share.
Rarely has the media been able (or willing) to unravel the deeply complex history of Amazon’s strategies – which can be traced all the way back to the incredibly favorable pricing of it’s stock during the dot.com bubble boom and it’s “stealth” transformation from “The World’s Largest Bookstore” into “The Everything Store” over a ten year period.
The closest definition for its business behavior is as a “monopsony”, which can be defined as holding a monopoly over suppliers or labor, not consumers.
And this is where the “hurt small businesses” comes in. Any small retailer wishing to survive, let alone make a profit, must have online sales in some form (ask Walmart if you doubt that online sales are a necessary requirement for a brick and mortar retail business in 2019) and the domination in that area – that is to say the control of the customers, by Amazon is so extreme that joining the Amazon Marketplace is the only option (other than trying to survive with 90% fewer online sales).
And the Marketplace is controlled with an iron fist by Amazon. For example, since around 2006 all communication between Amazon Marketplace sellers and their buyers is handled by an encrypted, anonymous messaging system designed to prevent sellers from obtaining any direct email addresses from buyers.
This amazingly elaborate system is a glaring indicator, hiding in plain sight, that Amazon views its “selling partners” as anything but.
Although third-party sellers accounted, for example, for 50% of paid units sold on Amazon in 2016, every customer was considered to belong 100% to Amazon and zero percent to the seller.
With fees that can total up to 50% (they use a complex exponential sliding scale which makes it impossible to quote any exact figure) the seller is doomed to have no brand value and no “good will” value as long as it agrees to cooperate on the platform. Not selling on Amazon, unless extremely well capitalized (such as a start-up with hundreds of millions of dollars), is a death sentence.
Naturally, the waters remain muddy, since examples of the precise opposite can be pointed to – if you are a manufacturer and your products are extremely cheap (you are probably in China) and you like to offer your margin to Jeff Bezos as “his opportunity” and, particularly if your products will harm an Amazon competitor that refuses to sell on Amazon, the red carpet will be laid at your feet.
3 Brands Take Over Earth, Almost No-one Notices
It’s odd, as an observer, to note that there is not a single “brand success story” that can be pointed to as having built their brand through the Amazon third-party Marketplace. Could this be more than a coincidence?
”What I am glad we never did and that we’ve avoided so far is being on Amazon”
Jen Rubio, co-founder and chief brand officer of Away
Take, for example, Away Luggage, who went from being a “direct to consumer” start-up founded in 2015 to recently reaching a valuation of over one billion dollars and who made it a point NEVER to sell on Amazon;
She added that a “deal breaker” was that Amazon does not share customer data with vendors.
”Just sticking to our guns and not going on the [Amazon] platform was important for us”
Jen Rubio, Away
In our own recent interview with a long time Amazon Marketplace seller, who insisted on not being named, “or my children’s lives would be in danger”, he stated that many more behaviors towards seller “partners” are anything but collegial.
One of many examples is the “co-mingling” policy. As with much of what goes on behind the scenes at Amazon, this is an opaque, complex concept where all products that reside in any Amazon warehouse (supplied by various sellers participating in the “Fulfillment by Amazon” program) are considered to be “co-mingled” once they arrive.
When an item is purchased from a particular seller any item from any supplier is “picked” and shipped to the buyer. If that item is somehow inferior or even counterfeit, the seller whose name is on the order is automatically blamed although there is no way to trace the item’s true origin.
Our anonymous interviewee stated that, in one case, he was put out of business and even sued as having sold a counterfeit item, even though all his inventory was purchased from the original authorized manufacturer, and he could prove it.
Why didn’t he fight the false and obviously bogus accusation? $50,000 to $100,000 in Legal fees and no chance of any remedy other than, perhaps, re-instatement with no guarantee that the same thing wouldn’t happen again 2 days later.
One could get the impression, surveying the various accounts from sellers, across many walks of life, that Amazon’s perspective is not only that it is unimportant what happens to a particular seller that runs into problems on its platform, but that the demise of any seller is a “win” and that harm to any seller is harm to a competitor, even if that entity is technically a “Marketplace Partner”.
If true, this is as disturbing as any “consumer harm” effected through higher prices, as the sellers, who are also consumers let’s not forget, are just as trapped in the platform’s private “hell” as any consumer who is forced to pay higher prices as a result of monopolistic behavior.
Stories like the one above are “out-there” by the thousands but, strangely, hard to find online. A search on Google (oh yes, one of the other companies being scrutinized by the Justice Department) for “Amazon harms sellers” would often, in the recent past, bring up nothing but links to Amazon itself and how it is harmed by “counterfeit sellers” as if all the problems on the platform are created by the “other guy”.
Interestingly, even that is beginning to change, and there are more and more articles by reputable outlets such as Forbes , The Verge and INC who are daring to take information publicly gathered, as in our case, often from anonymous sources fearing retribution, and report on it without fearing similar retribution to its own organization. It seems likely more such stories will be published in the coming days and months. And perhaps, as they say, one day, the chickens will come home to roost.
