Summary: The substantial evidence catalogued here provides proof of the Internet’s cartelization, extreme concentration, winner-take-all tendencies, and mythical competition. The public data shows that the tacit Internet cartel of Google, Amazon and Facebook is 7-8 times more concentrated than the top three offline companies and that the top ten Internet economy companies are >10 times more concentrated than the top ten offline economy companies.
Public data that Google, Amazon, and Facebook have acquired ~350 potential competitors and the Internet Association overall has acquired ~900 potential competitors, indicates that the apparent cartelization of Internet companies’ investment, acquisition, and innovation processes ensure no innovative “garage startup” has a plausible competitive opportunity to seriously threaten the Internet cartel’s dominance.
Public data also ironically shows that almost all the Internet Association’s members are anti-competitively threatened by one of more of the Google, Amazon, or Facebook, winner-take-all online onslaughts.
U.S. antitrust authorities have enabled a cartelized and extremely concentrated Internet by taking their eye off the purpose of antitrust law -- protecting the process of competition, by first protecting the process of innovation by dominant online platforms.
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The notion that the business of the Internet trends competitive is a myth. After twenty years, the evidence below proves that the business of the Internet powerfully trends toward cartelization, extreme market concentration, and winner-take-all outcomes.
The Internet reality is that multiple unaccountable, winner-take-all online platforms – primarily Google, Facebook and Amazon -- are the core of a tacit Internet cartel. Together they are a de facto governing gatekeepers of aggregated consumer Internet demand for different core, end-to-end, business purposes -- Google for information, Facebook for social sharing, and Amazon for retail ecommerce.
Consider the harsh anti-competitive reality of the U.S. Internet marketplace today.
Now most every offline business and competitor seeking to reach mass market consumer demand online, increasingly must go through the Internet’s governing gatekeeper’s gates, and abide by the tacit Internet cartel members’ strategically-similar discriminatory-terms, if they want to effectively market, reach, and sell broadly to their offline customers -- online.
And if those businesses and competitors won’t submit to the Internet cartel’s demands to be their primary online distributor for their core business purpose, the Internet cartel’s anti-competitive and discriminatory gatekeeping practices, increasingly pressure them into submission on the gatekeeper’s terms.
This is the increasing harsh reality for online branding, marketing, and advertising of offline companies via the Google-Facebook duopoly/ad-cartel, just like it is for the physical distribution of offline companies’ goods and services via Amazon Prime/Marketplace’s de facto dominance.
The Evidence the Internet Cartel Has Won the Internet and Internet Competition Is the Loser
The evidence below will first prove how extremely concentrated most of the U.S. Internet economy has become. The evidence will also show how the Internet cartel coopts, copies, buys, stockpiles, or tames potential competitors of disruptive innovations way before they ever get a chance to become a credible direct competitor to the Internet cartel members.
Consider what the Internet Association (IA) tells us about the Internet economy.
The Internet Association’s tagline is “We are the unified voice of the Internet economy” and “the voice of the world’s largest Internet companies.”
The association’s 41 members comprise the largest U.S. public and private Internet companies save for Priceline. It is a surprisingly small number of companies.
When one compiles the latest public financial information from the Internet Association members that comprise the largest and the unified components of the Internet economy by annual revenues, revenue growth, employees and market capitalization, the extreme concentration of this sector becomes evident.
Comparing Google/Amazon/Facebook concentration to top 3 offline companies: The online winner-take-all platforms -- Google, Amazon, and Facebook -- comprise 61% of the Internet companies’ annual revenues, (73% of revenue growth), 62% of employees, and 60% of market value.
The top three respective Fortune 500 companies comprise 7.6% of Fortune 500 company revenues, 11.4% of employees, and 8.4% of market capitalization -- (all minus online companies’ respective shares).
Thus, comparing the market concentration of top three Internet cartel companies Google, Amazon and Facebook, with their 3 offline Fortune 500 counterparts, the 3 Internet cartel companies are relatively 8 times more concentrated by annual revenues, 5.3 times more concentrated by employees, and 7.1 times more concentrated by market value.
This contrasts winner-take-all concentration with market competition. This contrasts a market with minimal antitrust scrutiny with consistent antitrust scrutiny.
Comparing the top 10 companies’ concentration levels online vs. offline: The top ten largest Internet Association companies by revenue -- Amazon, Google, Microsoft, Facebook, Paypal, Netflix, Expedia, eBay, SalesForce, and Uber -- comprise 93% of the Internet companies’ annual revenues, (93% of revenue growth), 88% of employees, and 93% of market value.
The top 10 respective Fortune 500 companies comprise 7.9% of Fortune 500 company revenues, 21% of employees, and 9% of market capitalization -- (all minus online companies’ respective shares).
Thus, comparing the market concentration of top 10 Internet Association companies with their top 10 offline Fortune 500 counterparts, the top 10 online companies are relatively 11.8 times more concentrated by annual revenues, 4.2 times more concentrated by employees, and 10.3 times more concentrated by market value.
When the Internet economy’s biggest companies are economically ~10 times more concentrated than their biggest offline company counterparts, it is powerful evidence of a cartelized winner-take-all market dynamic that has won the Internet and the process of Internet competition is the biggest loser.
Anyone who doubts this extreme relative market concentration can easily replicate this analysis by simply doing the math themselves using publicly available company financial data and the Fortune 500 data.
Three general groups could greatly benefit from confirming the harsh reality of the simple math behind this obvious extreme concentration of the U.S. Internet marketplace.
First, it would stiffen the backbones of government authorities, especially the DOJ, FTC, FCC, and EU competition authorities for them to add up this extreme concentration problem themselves.
Second, if the Google gaggle of paid academics and antitrust experts that trumpet that Internet competition is “a click away” did this simple math, it might prompt them to come up with another vacuous antitrust immunity slogan.
Third, those newly concerned with antitrust and market concentration of 3-4+ competitor markets in the offline economy could benefit from the perspective and prioritization that comes from learning that the U.S. companies in the “Internet economy” are roughly 10 times more concentrated than the companies in the offline economy.
More Internet Association related evidence of the Internet cartel
The Internet cartel has masterfully distracted antitrust enforcement authorities largely away from protecting competition as a process and being a fair referee that ensures a fair fight, towards largely protecting companies that are monopolizing markets by presuming monopolies are legal and not lasting because innovators will always upend any “temporary” monopoly if antitrust authorities are just patient enough to wait.
Sadly, Internet-related antitrust has become corrupted to be more about protecting innovation as a process that protecting competition as a process, and predictably that yields winner-take-all outcomes boasting of innovation, and not a healthy process of competition in the marketplace.
The fatal flaw in Internet-related antitrust thinking is ignoring that innovation can spawn from competition from competitors, if the process of competition enables potential innovative competitors the opportunity to challenge the Internet cartel.
Hiding in plain sight is how the Internet cartel has effectively gamed the investment, acquisitions, and innovation processes to ensure that no potential competitor ultimately can seriously threaten the Internet cartel’s supremacy.
Please consider this evidence.
Think about how less concentrated and more competitive the Internet cartel and Internet economy would be if Google, Amazon, and Facebook had not acquired 345 companies/potential competitors, and the Internet Association companies’ overall had not acquired at least 893 companies/potential competitors: Google 206 companies; Amazon 77; Facebook 62; Microsoft 203; eBay 53; Twitter 54; Salesforce 48; IAC 28; Expedia 15; LinkedIn 17; PayPal 12, Airbnb 12; Uber 4; and Yahoo 114. (Note: Yahoo was a member of the Internet Association before it was acquired by Verizon in 2017.)
Importantly, the Internet cartel has been allowed to buy what turned out to be substantial competitors. Google acquired: YouTube, DoubleClick, AdMob and Admeld. Facebook acquired: Instagram, WhatsApp, and Occulus. Amazon acquired: Zappos, Twitch, and Souq.com.
IA has 41 members of which 23 are publicly traded and 18 are privately held. The 23 public companies’ revenues comprise 95% of revenues and market value and 97% of employees.
Interestingly, Amazon’s CEO Jeff Bezos was one of the four founding investors in Google in 1998.
The two largest private companies in IA are Uber and Airbnb; and both Google and Amazon are early investors in both, giving them access to inside information that creates a huge asymmetry in competitive intelligence between the 2 of the 3 winner-take-all Internet cartel platforms and the two most likely winner-take-all wannabes i.e. potential online competitive platforms to Google, Amazon and Facebook.
Overall, Google owns parts of seven (17%) IA members: Uber, Airbnb, Snap, HomeAway, Survey Monkey, Thumbtack, and Ten-X; and Amazon’s CEO Bezos owns parts of three IA members: Uber, Airbnb, and Twitter.
Consider the feeder pipeline of potential competition to these winner-take-all gatekeepers. Potential competitive innovation companies are called “unicorns” i.e. startups valued over $1b.
Of the top 50 “unicorns” today, Google and Amazon own parts of 42% of them, i.e. Google has ownership stakes in 19 of the 50, Amazon’s Bezos has ownership stakes in 4 of the 50 and 2 overlap, Uber and Airbnb.
Google is the apparent U.S. Keiretsu King with 28 Internet-related companies it is invested in via Google Capital and 291 Internet-related companies via Google Ventures.
Now one can see how the fabled garage entrepreneur that is supposedly the next Google, Facebook, or Amazon, is not likely to sneak up on them or grow up to be a potential competitor that can seriously threaten to disrupt their core dominances.
This tentpole antitrust assumption that Internet/tech companies deserve special de facto exemptions from traditional antitrust enforcement because they reside in fast-moving markets that are relatively more innovative than other markets, apparently stands upon an unstable bed of sand that can’t bear the weight of this heroic grand assumption.
Now we have proof that the Internet economy is much more concentrated than the offline economy; and that the Internet cartel concentration is real and Internet competition is largely a myth.
Now we also have proof that the supposition that market forces are sufficient to enable the next innovative garage startup to upend and neutralize Google, Amazon and Facebook’s core dominances is an intentionally deceptive myth. Is it possible? Yes. Is it likely enough to enable antitrust enforcers to give winner-take-all platforms a continuous, un-skeptical, antitrust benefit of the doubt? No.
Additional evidence of the Internet cartel
It is telling that 3 of the 4 original founders of the Internet Association were Google, Amazon, Facebook, and eBay. 37 more companies have been added.
If we do a competitive assessment of the Internet cartel winner-take-all platforms Google, Amazon, and Facebook and their 38 associates, it is not hard to discern that 18 of the companies are threatened by Google’s winner-take-all path, 13 are threatened by Amazon’s winner-take-all path, 4 are threatened by Facebook’s winner-take-all path, and 6 are unlucky enough to be threatened by 2 or all 3.
Note: there is a saying in poker, if you look around the table and can’t spot the sucker, it’s you. Apparently, most Internet Association members don’t play poker.
Two members of the Internet Association, Google and Intuit, were sanctioned by the DOJ in 2010, for illegal cartel behavior, along with Adobe, Apple, Intel, and Pixar, for “entering into agreements that restrained competition between them for highly skilled employees.” … A special “agreement between Google and Intuit, prevented Google from directly soliciting Intuit employees.” The civil settlement for this illegal cartel collusion was for $415m.
Several IA members have had, or currently have, serious antitrust concerns about Google, Amazon and Facebook’s anti-competitive behaviors.
Microsoft: Most public and well-known was Microsoft’s opposition to Google on antitrust grounds in opposing the Google-Yahoo ad agreement, Google-DoubleClick, Google-ITA Google-Admob, and advancing a Microsoft-Yahoo alternative, etc., and as leaders of FairSearch in the U.S. and in Europe, challenging Google’s search discrimination.
Tellingly, Google apparently knocked Microsoft out of the digital advertising business, by apparently getting Facebook to stop using Microsoft-Bing search on Facebook. This eventually resulted in the #2 and #4 Internet Association members by revenue dropping all of their many serious competitive and antitrust regulatory disputes against the other in an new global “entente” agreement.
Yelp has been a consistent antitrust complainant against Google with the FTC and the EU charging Google scraped Yelp’s reviews without authorization and represented them to users as Google’s.
Expedia and Trip Advisor opposed Google’s ITA acquisition on antitrust grounds in 2010 and secured a Consent Decree from the DOJ until 2016. It is very telling that the Internet segment that may be the most competitive currently, is travel, where the DOJ threatened an antitrust suit and then reached a court-supervised settlement to ensure Google could not act anticompetitively. What a concept. Antitrust enforcement can protect the process of competition.
Uber: After Google invested in Uber and got their General Counsel on Uber’s board, Google learned that the Uber was entering the autonomous car business that Google’s Waymo was then leading, Google sued Uber for theft of its autonomous driving trade secrets. One winner-take-all platform teaching a wannabe winner-take-all upstart an apparent lesson in cartel reality.
Snap: Currently, Snap is reportedly contemplating antitrust action against Facebook for predatory self-dealing on Facebook to favor Instagram over Snap -- per The Information.
Google-Facebook Ad Cartel: The IA relevant activity that involves the most cartel-like behavior is the overwhelming evidence that Google and Facebook have jointly cartelized the digital advertising market in jointly commanding 96% of the revenue growth in that fastest-growing global advertising market.
Concerning cartelization of U.S. Internet user sign-in/authentication for ~160,000 of the top websites, 53.1% sign in with Facebook, 44.8% sign in with Google, and 2.1% with “other” -- per Loginradius.
Concerning Internet traffic dominance, Google and Facebook provide 80% of referral traffic to websites, per Parse Ly.
Concerning the cartelization of apps, of the 22 Android apps downloaded over a billion times, 17 are Google’s, 4 are Facebook’s, and 1 is Samsung, the number one manufacturer of Google Android phones.
Conclusion
Internet competition is increasingly a myth, because what matters is not that other websites may be just a click away, but whether any viable online or offline competitive alternative or substitute exists.
While I agree “big is not bad,” beyond-big is bad, because beyond-big is a winner-take-all worst outcome, because “winner-take-all” means unaccountable to competition or government.
If “beyond-big” had a dictionary definition, one would be: “the tacit Internet cartel of Google, Amazon, and Facebook.”
The tacit Internet cartel has won the Internet and Internet competition has lost.
Apparently, U.S. antitrust authorities lost their way in the Internet space by taking their eye off the ball of first protecting competition as a process, to first protecting innovation as a process -- with no congressional authority, standards, or objective basis/data to justify such special Internet antitrust non-enforcement.
The most serious antitrust problems facing U.S. authorities today are obviously Internet-related given the evidence above.
Forewarned is forearmed.
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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google’s privacy problems.
Online Winner-Take-All Platforms Antitrust Series
Part i: Why Did Google & Facebook Stop Competing with Each Other? [8-3-16]
Part ii: Google’s Information is Power, Info-poly Power [9-18-16]
Part iii: What No Bids for Twitter Tell Us about Google-Facebook & Online Advertising [10-21-16]
Part iv: Five Worst Google Antitrust Decisions [11-4-16]
Part 1: America’s Indefensible Media Concentration Double Standard [12-5-16]
Part 2: The Google-Facebook Online Ad Cartel is the Biggest Competition Problem [1-12-17]
Part 3: Twitter & Snap Evidence Confirm Goobook Ad Cartel Crushing Competition [2-15-17]
Part 4: Look What’s Happened Since the FTC Stopped Google Antitrust Enforcement [3-13-17]
Part 5: Google Antitrust Implications of Makan Delrahim as DOJ Antitrust Chief [3-28-17]
Part 6: Trump Administration Implications for Google Antitrust in EU, US & Markets [4-7-17]
Part 7: 6 Reasons Trump DOJ Will Take Lead from FTC in Google Antitrust Enforcement [4-13-17]
Part 8: Google-Russia Antitrust Deal Has Big Implications for EU Cases, Trump DOJ [4-19-17]
Part 9: Google Takeaways from Trump Antitrust Chief’s Senate Confirmation Hearing [5-11-17]
Part 10: New Evidence Google Facebook Ad Cartel Crushing Competition Market Failing [5-18-17]
Part 11: Alphabet-Google Big Takeaways from Trump Antitrust Chief’s Senate Answers [6-1-17]
Part 12: Trump Administration Lets Last Google Government Guardian Go – Michelle Lee [6-9-17]
Part 13: The Internet Association Proves Extreme US Internet Market Concentration [6-15-17]
Part 14: Why Amazon-WholeFoods Will Attract Serious Antitrust Scrutiny [6-16-17]
Part 15: Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]
Part 16: The Trump DOJ “Slam Dunk” Antitrust Case Against Alphabet-Google [6-28-17]
Part 17: How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]
Part 18: How Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]
Part 19: Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-9-17]
