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Sonos and Tile execs warn Congress that Amazon, Google, and Apple are killing competition

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‘Bullying with a smile’

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Big Tech government hearings often devolve into predictable shouting matches, rambling tech support pleas, or a made-up internet legal doctrine. But last week, a congressional antitrust committee called in executives from Sonos, Tile, Basecamp, and PopSockets for a simple, well-defined purpose: to explain how big platform monopolies are hurting the rest of the tech ecosystem.

The “Competitors in the Digital Economy” hearing showcased testimony from Sonos CEO Patrick Spence, PopSockets founder and CEO David Barnett, Basecamp co-founder and CTO David Heinemeier Hansson, and Tile vice president and general counsel Kirsten Daru. They explained known public disputes — but in a way that emphasized, under oath, the practical cost of dealing with huge and powerful platforms. And the hearing, because it was held away from Washington at the University of Colorado Law School, was much more focused and direct than you’d expect.

Sonos recently filed a patent lawsuit against Google, for instance, alleging that the company copied its smart speaker design while undercutting it on price, betting that the cost of a lawsuit would be less than the profits of dominating the market — a practice Spence called “efficient infringement.” Sonos has fought smaller patent infringement cases before, Spence said, but noted that the problem was Google’s size and its interest in owning every market that might touch its central ad business, even if that means temporarily selling products at a loss. “Ultimately the future of competition in the United States depends on this,” said Tile’s Daru.

Basecamp, for its part, started protesting Google’s advertising practices last year. The company realized that competitors were advertising against its search results — which meant that when somebody searched for “Basecamp” on Google, they saw several sponsored listings for other companies first. It eventually took out an ad reading “Basecamp.com: We don’t want to run this ad,” calling Google’s system a “shakedown” for businesses.

“They’ve replaced the search engine with an ad engine instead,” Hansson said during the hearing. “The organic search term does not matter anymore. The only thing that matters is buying the advertising.” And since Google effectively controls the search market, it’s hard to opt out of this system. “We could lose our listing in DuckDuckGo and we wouldn’t even tell,” he said. “We lose Google and we lose our business.”

The same goes for Facebook, he noted. If a startup is uneasy about participating in targeted advertising, for example, they’ll be ignoring a huge market that their competitors will be tapping into.

Barnett complained that Amazon’s relationship with PopSockets amounted to “bullying with a smile.” He alleged that Amazon dragged its feet on addressing a flood of counterfeited products, unilaterally lowered prices on PopSockets products and demanded the company pay back the loss, and then threatened to send products back as “excess inventory” at cost to PopSockets if it didn’t comply. Older brick-and-mortar retailers are known for hardball tactics, too, but Barnett’s testimony put Amazon’s scale in stark terms: its sales from Walmart, he explained, are 1/38th the size of its Amazon orders.

And Daru, finally, offered a concrete example of how Apple can use its tightly controlled ecosystem to undercut competitors. The iPhone maker is rumored to be launching a competitor to Tile’s Bluetooth tracking tags, and according to Daru, Apple began using its permissions and security options to make Tile less usable — burying Tile support in the settings menu and suggesting that users turn it off in iOS 13. Tile is also prohibited from using the new UWB radios in the iPhone 11 and 11 Pro, she said.

“Apple is acting as a gatekeeper to applications and technologies in a way that favors its own interests,” said Daru. “You might be the best soccer team, but you’re playing against a team that owns the stadium, the ball, and the league, and can change the rules when it wants.”

Republican and Democratic lawmakers alike leaned into the framing of small businesses fighting powerful bullies. There were a few groan-worthy moments, like Rep. Ken Buck (R-CO) seeming oddly awestruck by the concept of Bluetooth tracking tags. But the representatives mostly stepped back and nudged witnesses toward explaining issues like targeted advertising and personal data collection. Daru, for instance, concisely described the nuanced problem of Apple “using privacy as a shield” with iOS settings that both protect users and give Apple outsized power.

And there was little of the sniping and conspiracy-mongering that abounds during Facebook and Google hearings — in part because the complaints were so specific and the harm was so clear. “We do not expect you will suffer retaliation for coming forward, but if you do, it will be of great interest to the committee,” said committee chairman Rep. David Cicilline (D-RI) as the hearing concluded.

Hansson called for Facebook to spin off WhatsApp and Instagram during the hearing, and Sonos has obviously sued Google for patent infringement. But mostly, the event was light on specific policy demands, even though several members of the committee asked for them. Instead, its participants laid the groundwork for future work — which the committee seemed open to continuing. “At some point, all companies will be competing against Big Tech, simply because Big Tech is bent on expanding until it does absolutely everything,” Hansson said. “Help us, Congress. You’re our only hope.”