Tech Giants vs the Government: A Deep-Dive Into Antitrust Lawsuits
Antitrust laws in the US and the European Union regulate the way companies can do business in these regions. They are broad category laws that are meant to keep all the companies operating in an honest manner. The main goal of antitrust laws is to level the playing field in the free market and preventing companies from having too much power.
When companies, especially tech companies that have massive amounts of user data achieve market dominance, it is obvious that they would try to use it to their advantage and kill any kind of competition by offering free products, acquiring small companies that might have the potential to become their competition in the future, or by strong-arming competitors.
Tech giants like Microsoft, Google, Apple, and Amazon continue to face lawsuits for violation of antitrust laws across the world because lawmakers, competitors, and consumer groups believe that they have too much power and they are actively harming their users.
The Microsoft Lawsuit With Netscape Navigator That Started The Debate On Monopoly Laws
In the early 1990s, Microsoft became one of the first tech companies to be embroiled with an antitrust lawsuit by the US government. A time when the internet was still new and developing, Microsoft declared war against Netscape Navigator, an internet browser, to make sure Internet Explorer was used by most people.
To do that, Microsoft started offering its browser software, Internet Explorer for free with Windows. The Justice Department that was leading the case against Microsoft argued that the company was using Window’s dominance in the OS market to unfairly favour its own products.
While the judge initially ruled for Microsoft to be split up for violating antitrust laws, the ruling was later overturned when Microsoft agreed to lift some barriers over third-party software in Windows.
The antitrust lawsuit against Microsoft didn’t just change the fate of the company, but the entire tech industry as a whole. Tech giants like Apple and Google are where they are today because Microsoft was forced by the government to take a step down. If it weren’t for that lawsuit, Microsoft might still be the biggest company in the world and we would have still been using Internet Explorer, which now only owns 8% of the total market share for internet browsers.
Will The Google Antitrust Lawsuit Push The Tech Giant To Make Fairer Search Algorithms?
The subsidiary of Alphabet, Google has been facing serious antitrust scrutiny by governments around the world. And all that is for a very good reason — 90% of the search queries are handled through Google’s search engine, and Android, Google’s mobile operating system, is used by over 85% of the users globally.
The clear market dominance, which is increasing at an alarming rate is a big concern for governments. Google was investigated by the Federal Trade Commission (FTC) in 2013, but the case was unanimously closed. It was announced in February 2019, that the antitrust case against Google would be reopened and this time, it will be investigated by the Justice Department.
While in the US, investigations are still underway, European Commission (EC) already levied a $1.7 billion fine on the tech giant for taking advantage of its dominance in the online advertising market and restricting its competitors in the search results.
This would be the third consecutive year that Google has faced antitrust rulings in the European Union (EU). In 2018, Google was fined $5.1 billion for forcing device makers to pre-install Google’s apps on Android. In 2017, the EU fined Google $2.7 billion for abusing its search engine dominance, showcasing their intent to move toward stricter monopoly laws.
It is expected that the US Justice Department will take clues from the EU’s case and thoroughly investigate the Google antitrust lawsuit this year.
Apple Tackles Yet Another Lawsuit To Fight Over Its AppStore Monopoly
In 2008, the European Commission investigated an antitrust case against Apple for charging a higher fee for the same iTunes songs in the UK, which wasn’t the case in the other countries of the EU. After investigation, EC found out that Apple did not have any specific agreements with record labels in the UK that justified the higher pricing. As a result, Apple had to agree to cut pricing for iTunes songs in the UK.
Since then, the lawsuits against Apple seem to be piling up rather quickly. In 2010, we witnessed Apple getting sued over a civil antitrust case that was filed against them and five major publishing houses for eBook price-fixing. Apple wanted to get into the eBooks market, but at that time, Amazon was selling eBooks for as low as $9.99. Apple could only make a profit and compete against Amazon if the eBook prices were higher — so the company partnered with the publishing houses to do just that.
The five publishing houses decided that they would only allow Amazon to sell their eBooks if they could set their own retail prices. Up until now, Amazon was buying books at wholesale prices and setting a retail price on its own, which is why it was able to keep the prices extremely low,
Apple’s liability, in this case, was for knowingly conspiring with publishers to raise the price of eBooks which ultimately affected the customers. As a result, the company was asked to pay $450 million in settlement.
In March 2019, Spotify filed a complaint against Apple in both the US and with the EC claiming that Apple’s App Store charges high commission fees that puts other companies at a disadvantage. According to the app companies, apart from charging $99 annual developer fee to sell their apps on Apple’s marketplace, AppStore, developers also have to pay 30% of their commissions to Apple that they earn through paid apps and in-app purchases.
For developer companies, that means, they have no other choice but to pay everything Apple is charging if they want to sell their apps to iPhone users since there is no other alternative to AppStore.
The US Supreme Court ruled that Apple will definitely face an antitrust lawsuit for using its market dominance to inflate prices in the App Stores artificially. EU is also officially investigating this app store monopoly case against Apple, and if the iPhone maker loses this antitrust lawsuit, then they could be fined for hundreds of millions of dollars.
Amazon Is Currently Being Investigated By The Federal Trade Commission and the European Commission
Amazon is the retailing giant, which accounts for over 50% of the US online sales, and the situation in other countries is pretty similar. Since Amazon is both a retailer and a marketplace for third-party vendors, the e-commerce giant has faced scrutiny for using its market dominance to always stay a step ahead of smaller vendors by collecting a huge amount of sales data that it has access to.
The FTC is already investigating Amazon after receiving complaints about the company weeding out the competition. Germany is also investigating Amazon after receiving numerous complaints from sellers about the company’s shady business practices. There have also been recent probes against Amazon by the Austrian and Italian authorities.
It has been reported that the EC is examining whether Amazon is taking advantage of the seller data on its platform, and the investigation is in the advanced stages. In 2017, the EU ordered Amazon to pay €250m (£222m) in back taxes to Luxemburg due to illegal state aid.
When a country offers illegal state aid to a specific company, they end up opening majority of their offices in those regions, which in turn hurts the other EU territories as they don’t get enough business or employment opportunities from large enterprises
Large tech companies have been facing such lawsuits for the past 20 years now, and they will continue to do so because technology is one of the most powerful and impactful sectors in the world. FTC the watchdog of US antitrust laws and the EC, the regulatory agency of European Union are keeping a close eye on the activities of tech giants.
Tech giants have spent truckloads of money lobbying lawmakers and regulators. They also have a huge army of lawyers covering their business processes. Even after they are fined, these tech companies always appeal against those decisions. As a result, the lawsuits and cross-lawsuits go on for years, and the general public never comes to know if those companies were really fined or not.
All we can do is hope that these government agencies can at least keep the large tech companies in check.