Late Tuesday night, a US congressional subcommittee investigating the major tech companies for anti-competitive practices released its much-anticipated report(new window). The document, over 400 pages long, describes an internet that is highly centralized around gigantic platforms that abuse their monopoly power to the detriment of internet users.
This report by the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law is significant because it is the first time a US legislative body has formally acknowledged that Big Tech monopolies are harmful and called for specific reforms. The lawmakers confirmed what we have long argued(new window) about these companies’ anti-competitive practices: They make the internet less private, more expensive, and less free.
What is most encouraging about this report is that its findings have received bipartisan support, even though the creation of the report was led by Democratic members of a judiciary subcommittee. This issue has offered a rare patch of common ground in polarized Washington.
The report recommends a major overhaul of US antitrust laws to specifically combat the unfair practices of Google, Apple, Facebook, and Amazon. We will explain some of these recommendations below and how they relate to the Proton community and access to privacy.
Because of our position as a competitor and as a privacy-focused alternative to some of the existing Big Tech companies, antitrust investigators in both the US and the European Union have requested that we provide information about how anti-competitive practices affect Proton and online privacy. We were not legally required to respond to the US requests, but we responded to the subcommittee because this is a matter of vital public interest that will affect the future of the internet.
Indeed, we were encouraged to find that our submission was frequently cited throughout the report, suggesting that the subcommittee took a close look at the information we submitted in creating what is perhaps the most comprehensive report ever produced on digital antitrust issues. We hope it will lay the foundation for future legislative or regulatory change.
Key findings from the subcommittee’s report
The report is too big to summarize exhaustively here, so we will focus on the areas that impact internet access, innovation, freedom, and privacy.
Self-preferencing and walled gardens
One of the big advantages of holding a monopoly position in any market is that you can use your dominance to further consolidate your monopoly. While Google, Apple, Facebook, and Amazon often do this by buying up potential rivals and expanding their market share, they also use a number of techniques that are unique to the new digital economy.
For example, Google, Apple and Amazon use their control over search listings they control to preference their own products in those listings. Google and Apple also design their software so that their apps are the default, and in some cases these defaults can’t even be changed. They also bundle and network their products and services in ways that make it extremely difficult for users to switch to another provider.
Worse, the report finds that Apple, Google, and Amazon engage in “tying,” in which access to a service is conditioned upon the purchase of another. Apple does this by requiring developers to use its in-app payment platform in order to access the App Store. When a company with monopoly power engages in tying, this is already illegal under US law. The report recommends clarifying and enforcing this regulation.
A 30% ‘tax’ on privacy-focused competitors
Google and Apple require developers who offer paid services to offer those services within the app via in-app payments. Those payments are subject to a 30% fee. There is no possibility to refer users to alternative means of purchasing those services. This is a far greater percentage than these companies would be able to charge in a competitive marketplace, and we have proposed allowing other payment processors to compete for in-app payments.
However, the size of the tax is not our primary concern. As the congressional report notes, Big Tech companies use their massive advertising revenues to offer free products to consumers, gaining enormous market share by undercutting competitors who rely on alternative business models, such as the freemium model used by Proton. At the same time, they are extracting a large fee from those very same competitors.
Often, this harms companies like ours, which charge consumers for premium features instead of spying on you and abusing your personal information for profit. Because we must pay a large portion of our revenue to our direct competitors, this slows down product development and harms our community.
Censorship and the threat of delisting
Perhaps the most cynical aspect of Big Tech’s abuse of power is the way they enforce all their other policies against developers on their platforms using the threat of delisting.
“Because of the severe financial repercussions associated with suspension or delisting, many Amazon third-party sellers live in fear of the company,” the report states. The exact same is true of Apple and Google, which run their app stores essentially as protection rackets, in which developers must follow the companies’ terms or essentially be put out of business through delisting.
Delisting means removal from the app store, and suspension typically involves blocking the developer from shipping software updates to existing app users — including security updates. This is an unacceptable violation of basic ethical principles. But it is all the more troubling because of what Apple has historically considered to be a violation of its rules.
For example, one feature of Proton VPN is the ability to unblock censored websites, and we submitted an updated description of our app that referenced this feature. Apple refused to accept the update, and we were forced to either comply or be removed from the App Store.
Steps toward a better internet
What is particularly clear from this report is that existing antitrust safeguards are not effective at constraining the anti-competitive practices of the Big Tech giants. Recognizing that digital platforms are fundamentally different is the first step toward creating the conditions for a free and open online marketplace. This report clearly makes the case that 19th century antitrust laws are inadequate for the 21st century.
It is encouraging that this reality is now recognized on both sides of the Atlantic. Drafting new legislation is no doubt a long and complex process, but the acknowledgement of the need for new legislation is a critical first step. In the coming years, we look forward to engaging with policymakers in both Europe and the US to work toward an internet that better serves and protects people.
UPDATE Jan. 26, 2021: The European Union is working on new legislation, the Digital Markets Act (DMA), to prevent Big Tech’s worst abuses and make the internet more competitive.
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