How Each Big Tech Company May Be Targeted by Regulators

Now that success is attracting a different kind of spotlight. In Washington, Brussels and beyond, regulators and lawmakers are investigating whether the four technology companies have used their size and wealth to quash competition and expand their dominance.

The four firms are lumped together so often that they have become known as Big Tech. Their business models differ, as do the antitrust arguments against them. But those grievances have one thing in common: fear that too much power is in the hands of too few companies.

The attorney general of New York, Letitia James, said Friday that the attorneys general in eight states — she and three other Democrats, plus four Republicans — and the District of Columbia had begun an antitrust investigation of Facebook.

On Monday, a separate bipartisan group led by eight attorneys general is expected to announce an investigation of Google, according to two people familiar with the plan, who spoke on the condition of anonymity before the official announcement.

And in Washington on Thursday, the House antitrust subcommittee is scheduled to hold its third hearing on the impact of competition on data and privacy.

Here is the case against Big Tech — and what Big Tech has said in response.

Over the years, politicians and regulators have floated the idea of breaking up of Amazon. That included spinning off its hugely profitable cloud computing business or rolling back its acquisition of Whole Foods.

But much of the recent scrutiny of Amazon in Europe and Washington centers on whether the company improperly favors its own products over those of third-party sellers, which depend on sales from the e-commerce giant. Regulators are also looking at whether sellers need to use certain Amazon services, like ads and its fulfillment network, to sell their products.

When Amazon began, it was mostly structured like a traditional retailer, buying products from brands and manufacturers at a wholesale price and selling the items to consumers.

Amazon has expanded what’s available on its site by having third-party merchants sell products directly to customers. By 2015, more than half the sales on Amazon — 51 percent — were made by these outside sellers. Last year, that grew to 58 percent.

One line of antitrust questioning looks at the products that Amazon sells under its own brands, like AmazonBasics for batteries or Mama Bear for diapers and wipes. Amazon has more than 140 private labels, according to TJI Research.

Lawmakers have asked if Amazon takes advantage of data it collects from sellers to develop its own offerings. They have also questioned whether Amazon’s products get preferential promotion on its site.

Amazon has told Congress that it uses aggregated data like overall sales, not information “related specifically to individual sellers,” and that private-label products make up about 1 percent of total sales.

Italy’s antitrust authority is looking into whether Amazon gives better visibility and search rankings to sellers that ship products through its vast fulfillment network, which sellers pay to use. Lawmakers in Washington have asked similar questions.

Amazon counters that products sold via its logistics network do well in its algorithms because it provides a better and more reliable shipping experience for customers.

Amazon also faces questions about its growing advertising business, which had more than $10 billion in revenue this past year. Much of that came from product ads that show up high as sponsored listings in search results.

At a House hearing in July, Representative Val B. Demings, a Democrat from Florida, asked a lawyer for Amazon what prevented it “from using ads as another way to charge a toll for using its platforms.”

The lawyer, Nate Sutton, who used to work at the antitrust division of the Justice Department, responded that the ads were “an optional service” and that the large majority of products sold on Amazon were not sold through advertisements.

Apple: The power of the App Store

Scrutiny of Apple focuses on how the company controls its App Store. Credit: Emma Howells/The New York Times

Apple’s critics have homed in on its control of the App Store, the digital marketplace for apps on iPhones, iPads and Mac computers. The App Store has become a crucial way for digital businesses to reach customers, and Apple exerts strict control over which companies can appear in the store and how.

Apple says it has the right to “curate” the App Store to ensure high quality and to rid the store of fraud. As a result, Apple’s store generally includes fewer fraudulent apps than Google’s.

But while Apple is the App Store’s sole referee, it is also one of the biggest competitors on it. Apple has bet its future on getting customers to spend more on its apps and services, and that relies in part on people opting for them over the apps of rivals.

Some app developers have accused Apple of abusing its control of the App Store to harm competitors and benefit itself. Spotify has filed such a complaint with European regulators, and makers of parental-control apps have complained to regulators in Europe, Russia and the United States about Apple’s restriction of their apps after the release of its own competing service.

Apple has said that it faces fierce competition and that it doesn’t favor its own products in the App Store; and that it isn’t a monopoly because it doesn’t have a majority share in most markets.

Facebook: Consolidation of social media

Jessica Chou for The New York Times

For years, venture capitalists and tech strategists across Silicon Valley have admired Mark Zuckerberg’s foresight.

While many industry experts wondered during Facebook’s early years whether it would turn out to be the next MySpace, Mr. Zuckerberg was always searching for an edge to stave off any threats of digital irrelevance for his company.

His efforts have worked — perhaps too well. The Federal Trade Commission is investigating what some have called Facebook’s “program of serial defensive acquisitions,” a method of maintaining the company’s dominance in social networking.

Regulators could claim the acquisitions were a violation of the Sherman and Clayton Antitrust Acts — two laws that have been foundational in the past century of federal antitrust prosecutions.

That could include some of Facebook’s largest acquisitions, like Instagram, the photo-sharing network that it bought for $1 billion in 2012. At the time, it was an enormous sum for a smartphone app. Just two years later, Facebook spent $19 billion for WhatsApp, the global messaging application used by more than a billion people.

Competitors believe that long before Facebook bought either of those companies, Mr. Zuckerberg kept a close eye on start-ups that could pose a threat to his company. Facebook has acquired more than 70 companies over roughly 15 years.

For investigators, one other eyebrow-raising acquisition was Facebook’s purchase of Onavo, a mobile analytics company, in 2013.

Onavo’s apps were marketed as free products that allowed consumers to manage and compress their data and download rates, a cost savings for people who live in countries where unlimited data plans aren’t common. But the service also gave Facebook insight into what new competitors were doing.

Facebook walked away from at least one acquisition late last year, the social video app Houseparty, for fear of attracting antitrust scrutiny from regulators in Washington, according to two people familiar with the matter.

It has also taken steps to improve its user data policies as a result of a previous Federal Trade Commission investigation into Facebook’s privacy practices. The social network reached a settlement with the agency in July, paying $5 billion in fines and agreeing to some concessions involving improved oversight of the company.

Facebook has made the case that it faces stiff competition both at home and abroad, pointing to fast-rising competitors like Apple in the United States and WeChat in China. Further, as it testified before Congress in the summer, the company claims that the barriers to starting a would-be challenger to its business are lower than ever. Start-ups like Snapchat, TikTok and others have sprung up quickly over the past 10 years, snapping up early adopters and teenagers, a youthful demographic that Facebook — and its advertisers — value immensely.

Google: What appears in search results

How Google, which sells everything from smartphones to business services, presents search results could be an area of interest for regulators. Credit: Damien Maloney for The New York Times