We all have been played.
One of Google, Facebook, and Amazon’s greatest innovations to date may have been deceiving the U.S. government and voters with the narrative that their core Internet business models and practices were only good, innovative, pro-consumer, and worthy of no regulation, when they knew it was untrue, while at the same time lobbying that if an ISP pursued their same Internet business models and practices, that it would be anti-innovation, anti-privacy, and worthy of maximal telephone utility regulation, including a permanent, user-subsidized, price-of-zero for Google, Facebook, and Amazon’s outsized, pure profit, commercial downstream Internet traffic usage.
Can you say: “winner take all” industrial policy?
Can you say: “regulatory arbitrage” game?
Can you say: “unlevel playing field?”
After this year’s revelations of Google, Facebook, and Amazon’s many bad, unfair, and deceptive practices, it warrants revisiting if their past forceful policy positions that only ISPs are a risk to consumers, privacy, and competition, and only ISPs warrant utility-grade net neutrality, non-discrimination, and maximal privacy regulation, were self-serving, anticompetitive, and deceptive distractions from their own anti-privacy, discriminatory, paid-prioritization practices?
We have all been played like a fiddle.
They have had the audacity to design their business models around doing exactly what they say others should never be allowed do! It is telling the five FTC commissioners get the joke and don’t like it.
In their collective testimony to their Senate oversight committee this week, they said: “Given the important role that technology companies play in the American economy, it is critical that the Commission—in furthering its mission to protect consumers and promote competition—not only understand the current and developing business models, but also ensure that companies in this sector abide by the same rules of competitive markets that apply to any company.” [Bold added for emphasis.]
I believe Congress is beginning to get the joke too, given their intense bipartisan scrutiny of Google, Facebook, and Amazon over the last year and a half. See here and here for the bipartisan evidence and case respectively.
Looking ahead to the next Congress’ legislative interest in Internet platform accountability, federal data security legislation, and a permanent federal net neutrality solution in law, some baseline things are clear.
Proponents for more privacy and data security believe real consumer consent and control concerning their private data to be fundamental to any new privacy/data security legislation Congress considers.
Proponents of net neutrality consider it to be a non-discrimination principle for those with market power, to ensure Internet traffic data is treated equally not discriminatorily.
Google, Facebook, and Amazon, represent themselves to the public as neutral, non-discriminatory, platforms that fairly and honestly intermediate and protect everyone’s private, confidential, and most valuable data, so they warrant no regulation, no antitrust enforcement, and a permanent, user-subsidized, government-set, price-of-zero for their outsized, pure profit, commercial downstream Internet traffic usage.
However, the evidence catalogued below is overwhelming that Google, Facebook, and Amazon’s core business models and practices are by design predicated on discrimination, meaning they are deceptive, dominant, and discriminatory dis-intermediary data dealers, not honest brokers. They warrant closer government scrutiny.
If private data hoards are anywhere near a valuable tradeable commodity and financial asset/instrument, and if these private data hoards were treated like other exchangeable commodities or financial instruments, there would be fiduciary duties to care for that commodity, financial instrument, and insider information, in a way that did not violate the trust or the interests of those affected or in a way that cheats the trusting customer or client via unfair or deceptive self-dealing or front-running.
If being both nondiscriminatory and an effective accountable fiduciary of valuable private data in one’s care is important to Congress in how Internet traffic is intermediated, Congress needs to tune in to this massive unlevel playing field, and asymmetric discrimination, issue.
The Evidence of Google, Facebook, and Amazon’s Discrimination-Based Models
Consider the evidence of Google, Facebook and Amazon’s unfair and deceptive discriminatory use of private data entrusted to it by users, customers, and clients.
Importantly, Google, Facebook, and Amazon command effective monopoly and/or monopsony market power, vastly more market power than ISPs who command no more than a third of relevant defined markets and are FCC-regulated in the voice and cable adjacent markets to broadband.
Only Google has already copied and organized the world’s information – most everything – and commands ~90% of U.S. search and search advertising markets for accessing and monetizing its unique public and private data hoard.
Only Facebook has already organized the world’s social sharing users – most everyone – so its uncontested leadership commands a dominant share of social advertising.
Only Amazon has already organized the world’s available products and services – most anything – and command >90% of U.S. online ecommerce buying power because 95m American households are Amazon Prime subscribers.
Google
Google’s walled-garden business model is inherently discriminatory in its use of users’ private data.
Start with Google search and see that consumers do not actually choose which sites/apps are best.
Its search head, Mr. Amit Singhal, described Google search as “the biggest kingmaker on this earth” to the UK Telegraph, because over 30% of people click on the Google-algorithmic-determined, top-ranked result and ~50% click on the top two results that Google’s algorithm chooses.
Google SVP Jonathan Rosenberg on Google’s blog explained this rank discrimination power: “We won’t (and shouldn’t) try to stop the faceless scribes of drivel, but we can move them to the back of the arena.”
In 2017, the EU convicted Google for abusing its search dominance by ensuring Google, not consumers, chose what comparison shopping websites are best. This occurred after Google promised on its website for over a decade that: “We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank.” That was proven untrue and still is, Google’s shopping results in fact are sold to the highest bidder.
Consider Google’s dominant Chrome browser which is effectively a virtual network Google completely controls. Last year, Google-Chrome increased how it throttled and blocked advertising display traffic by 15-40% on its dominant virtual browsing network to create a faster lane for some websites over others per Android Headlines. In 2017, Ad Age reported “Google Chrome will automatically block annoying ads." What Google unilaterally determines are “annoying” ads are also a competitor’s revenue stream.
In 2018, Google went further in discriminatorily abusing its Chrome browser dominance to discriminate against its advertising competitors by more broadly blocking and throttling competitors’ ads over Chrome browser, as a self-appointed industry-wide ad blocker policeman that tellingly does not block any Google ads.
How did Android become the dominant licensable operating system? Non-neutrally via raw awesome non-transparent, discrimination market power.
By not letting consumers fully decide what apps are on their device, and by forcing smartphone manufacturers and carriers to pre-install over a dozen of Google’s apps in tying contracts, Google has ensured that Google, not the consumer, effectively chooses the most used websites and apps on their smartphones. (See here about the Android contracts and here about how it is anti-consumer.)
In 2017, the International Business Times reported: “Google Triangle App will Save Data by Cutting Background Data Usage, Closing Idle Apps.” How is it neutral for Google to decide to block and throttle a consumer’s chosen open apps without a consumer’s knowledge?
Finally, let’s not forget Google’s blocking, throttling, and paid prioritization trifecta in 2015-2016 which the media dubbed “Mobilegeddon,” where its Accelerated Mobile Pages (AMP) Project created a de facto Internet wide Google “paid prioritization” “fast lane” for websites to reach consumers.
Google forced a huge change in most all users’ mobile access to the web’s content to increase and accelerate Google’s mobile ad revenue potential by forcing all websites to pay for costly mobile upgrades to their websites so that Google could more easily search, index and monetize them – or else.
If sites did not pay to upgrade their websites to Google’s AMP expectations, Google would demote a website’s search ranking so that effectively it would not be found by consumers.
Not surprising, most all websites paid for this prioritization and Google AMP’s “fast lane” so that their smaller businesses would not be competitively disadvantaged by Google’s non-neutral network practices.
A surprisingly high number of Google search users, especially on mobile devices, are not aware that the top Google “search” results are non-neutral, paid-prioritized ads, not the objective unbiased search results Google routinely represents and promises.
In addition, users are unaware that Google has routinely unfairly, deceptively, and discriminatorily, over-collected users’ private data for its own commercial purposes, over 17 times over the last 15 years.
The EU has found Google guilty of abusing its dominance in multiple markets, in search in non-neutrally discriminating against competitors in favoring Google-owned offerings over competitors’ offerings, and the EU fined Google $2.7b for that abuse of dominance. Now competitors charge that Google is still anticompetitively discriminating despite the big EU sanction and fine.
The EU also fined Google another $5b in another antitrust case for Android and Google Play abusing its dominance to discriminate in favor of Google Search and over a dozen top Google Apps.
Google’s whole model is non-transparently mining everyone’s private data comprehensively and largely without their meaningful consent, in order to discriminatorily favor its ~200 products and services over competitors.
Facebook
Facebook’s Instant articles service that makes only some news faster for publishers who pay more is a clear form of “paid prioritization” that delivers content to Facebook’s world-leading network of 2.4b social users non-neutrally via a Facebook instant “fast lane” that puts smaller publishers at a relative commercial disadvantage to larger publishers, a market dynamic which net neutrality supporters supposedly oppose.
Facebook in supporting net neutrality, supposedly opposes discrimination too. However, Pro Publica in 2016 exposed that Facebook had been illegally discriminating against minorities systematically for years in targeting advertising by ethnicity/race for housing, in violation of The Fair Housing Act of 1964 and the Civil Rights Act of 1968.
Last year, Pro Publica exposed that “Facebook’s Secret Censorship Rules Protect White Men from Hate Speech But Not Black Children.” It appears the world’s largest social network that connects more people around the globe than any other, has a network with an inherent discrimination problem.
In 2013, Facebook bought Onavo, a virtual network provider (VPN) which is like an omni-tracking virtual ISP for Facebooks’ users, because Onavo had a market-leading, mobile analytical capability that tracked and compared user usage of Facebook’s apps vs. Facebook competitors’ apps.
How Onavo works is when a person using Facebook-Onavo apps and opens another app or website, Onavo discriminatorily redirects the Internet traffic to Facebook’s servers so that Facebook can collect users’ private usage patterns with competitive apps so Facebook can secretly aggregate big amounts of data to compare itself to competitors without the users’ or competitors knowledge -- for anticompetitive gain.
Tellingly, this past summer Apple removed Facebook Onavo’s traffic discrimination and spyware app from Apple’s app store for violating users’ privacy.
Amazon
“Amazon has a patent to keep you from comparison shopping while you are in their stores” per the Washington Post.
Hypocritically, Amazon which purportedly opposes network discrimination in supporting strong network neutrality, is also for blocking a consumer’s WiFi signal in a specific commercial place from doing what is specifically in the consumer’s best interest, i.e. comparison shopping to find the best price. Tellingly, in 2015, the FCC ruled it was illegal to block WiFi traffic for commercial advantage like Amazon’s patent envisions.
We also learned from Consumer Watchdog that Amazon is involved in deceptive pricing, in displaying fraudulently high list prices so Amazon’s prices can imply more savings.
Now it is more clear why Amazon would want a patent to block consumers in their stores from accessing the Internet to comparison shop to check if Amazon’s displayed prices and savings are true or not.
Making this an even more severe Amazon unfair and deceptive practice problem is that a 2017 survey of Amazon Prime subscribers indicated that 99% of them do not check other site’s prices per ILSR’s “Amazon Stranglehold” report.
That same ILSR report also documented that Amazon uses its dominant Amazon Prime subscribership of then 80m U.S. subscribers to force retailers to join their Marketplace, where Amazon treats them non-neutrally and anti-competitively in multiple ways by collecting most of their most valuable and sensitive commercial data and insider knowledge, and using that business confidential data to unfairly and deceptively force reallocation of Amazon Marketplace customers’ revenue streams to Amazon’s store register.
Amazon’s real special sauce market power is hidden inherent discrimination based on its extreme asymmetric information advantage of being America’s leading ecommerce merchant and the dominant merchant platform.
Just like Google is the search leader for the world’s information, Amazon is the de facto niche search leader for most of the products and services one could want to buy, >560m, several times more than the next site, Walmart.
Given its monopsony demand of >90% ecommerce buying power via Amazon Prime’s 95m U.S. subscribers, most every merchant practically must sell via Amazon Marketplace to reach online demand, which empowers Marketplace to generate 50% of Amazon’s revenues.
Amazon can unilaterally private label the same product or service of a competitor and rank its offering higher than its competitors’ and the resultant forced revenue transfer is as easy as taking candy from a baby, with no one watching or around to hear the baby’s screams.
In addition, Amazon’s walled garden model can and does extract higher fees for fulfilment and delivery to rank higher to gain sales and to shift competitors’ margins to Amazon’s.
Now via Amazon advertising, Amazon can discriminate and extract yet more money and margin from competitors by effectively forcing them to buy ads just to maintain the same revenue generating opportunity they had before Amazon-advertising.
Just this week, Recode reports Amazon is unilaterally forcing some Amazon Marketplace sellers off of Marketplace and onto Amazon’s own store, thus preventing the third party sellers from choosing who they resell through.
Can you say unfair and deceptive “winner-take-all” monopsony model?
Amazon’s standard practices are quintessential monopolistic unfair and deceptive practices that the FTC either does not have the authority to address or correct. Or is it that the FTC and DOJ are unwilling to question the popular “innovation” of digitizing and masking monopolistic digital self-dealing and front-running ecommerce practices, that if done in offline commodities, and financial instruments exchanges, would warrant prosecution for “cornering markets.”
Conclusion
The evidence is overwhelming that Google, Facebook, and Amazon operate their dominant Internet-incumbent, network business models for monetizing access to their information, social sharing, and ecommerce networks respectively in a highly discriminatory, non-neutral, and privacy-hostile manner, all while they have been the strongest advocates for imposing the strongest possible network neutrality, utility regulation to prevent ISPs from doing what they have long done purposefully by design.
Simply, Google, Facebook, and Amazon command “winner-take-all” business models because they have snookered government policymakers into perceiving their unlevel-playing-field construct, regulatory-arbitrage business models, and discriminatory data dealing business practices to be “innovations” and pro-competitive, not the unfair and deceptive anticompetitive practices that they evidently are.
They have totally played us all. When will we ever learn?
The big question for the next Congress is will they let them play us all -- yet again?
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 Internet competition and policy consultancy for Fortune 500 companies, some of which are Internet platform competitors, and he is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified before the Senate and House antitrust subcommittees on Google. Eight different Congressional subcommittees have sought Cleland's expert testimony and when he worked as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in his field.
***
Precursor LLC Research on Asymmetric Accountability Harms:
Part 1: The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]
Part 2: Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]
Part 3: Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]
Part 4: How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]
Part 5: Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]
Part 6: Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]
Part 7: How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]
Part 8: Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]
Part 9: The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]
Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]
Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17]
Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]
Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]
Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]
Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]
Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]
Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]
Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]
Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]
Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]
Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]
Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]
Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]
Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]
Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]
Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]
Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]
Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]
Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]
Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]
Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]
Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]
Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]
Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]
Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]
Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]
Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]
Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18]
Part 39: Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit [7-20-18]
Part 40: Case Study of Google Serial Over-collection of Private Data for FTC Hearings [7-30-18]
Part 41: The Unfair and Deceptive Online-Offline Playing Field – FTC Hearing Filing [8-7-18]
Part 42: What Most Stunts FTC Antitrust and Consumer Protection Law and Enforcement? [8-21-18]
Part 43: Why New U.S. Privacy Data Protection Law Will Preempt State Privacy Laws [8-27-18]
Part 44: What’s the FTC Hearing before their Hearings on the Unlevel Playing Field? [9-6-18]
Part 45: Google Facebook & Amazon’s Anticompetitive Nontransparent Exchange of Ideas [9-12-18]
Part 46: The Unlevel Playing Field of Asymmetric Competition Expectations [9-17-18]
Part 47: How EU Amazon Antitrust Probe Spotlights Amazon as an Unlevel Playing Field [9-26-18]
Part 48: Google Facebook Amazon’s Non-Neutral, Neutrality Nonsense Harms Competition [10-2-18]
Part 49: FTC-DOJ Signal Privacy Is a New Antitrust Risk for Google Facebook [10-9-18]
Part 50: Google+’s Market Exit Spotlights Google + Facebook Cartel Market Allocation [10-16-18]
Part 51: Google Facebook Amazon’s Civil Liability Immunity = A Culture of Un-Ethics? [10-23-18]
Part 52: Google Facebook & Amazon’s Efficient Vortex Traps [10-31-18]
Part 53: The Bipartisan Politics Case for More Google Facebook Amazon Accountability [11-8-18]
Part 54: The Bipartisan Case for Modernizing Net Neutrality & Online Privacy Policy [11-15-18]
