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Apple CEO Tim Cook defended the company’s App Store commission structure in his sworn testimony before the House Antitrust Subcommittee on Wednesday. He claimed the majority of the apps pay no commission at all, with others paying either 15 or 30 percent, based on the specifics of their particular situation. He said developers were all treated equally and that Apple wouldn’t raise commissions, because it had to compete for developer interest in its platform as well.

But the documents shared by the House subcommittee as part of their investigation indicate that exceptions to Apple’s rules have been made — notably, with Amazon’s Prime Video app. In addition, Apple may have never raised commissions, but discussions weren’t off the table. It had once even considered raising commissions to 40% in particular situations.

The lawmakers had come to the hearing armed with internal Apple emails and interviews from App Store developers who argued that Apple doesn’t uniformly enforce its rules and plays favorites. But their questioning of Cook over App Store fees, combined with a format that limited execs’ ability to respond at length, initially seemed to reveal little in terms of new information about Apple’s practices.

For instance, when asked directly about how the App Store worked, Cook simply restated the store’s published rules — that is, for app developers who have to pay commissions, they pay only 15 or 30 percent. The current guidelines require 30% for apps selling digital goods or services, with a drop to 15% in year two for subscription apps. The rules also document a carve-out for “reader” apps like audiobook apps, streaming services, news publications, and other competitive products which have the option of forgoing in-app purchases.

 

Cook also squeezed in a mention about how the vast majority of App Store apps, 84%, pay nothing to Apple in commissions. It’s the remaining 16% that pay, he noted.

And when asked if Apple was the sole gatekeeper as to what gets published on the App Store, Cook agreed that it was — given that the App Store was a “feature of the iPhone, much like the Camera and the chip is.” He clarified that Apple’s control over apps only extended to native software applications, not web apps, but denied Apple treated developers unfairly.

“We treat every developer the same. We have open and transparent rules,” Cook said, in his testimony. “It’s a rigorous process, because we care so deeply about privacy and security and quality. We do look at every app before it goes on,” he added.

But emails in 2016 between Apple SVP Eddy Cue and Amazon CEO Jeff Bezos, shared here on the House Judiciary Committee’s website, indicate that Apple, in fact, appears to have negotiated a special deal with Amazon over its Amazon Prime Video app for iOS and Apple TV.  In an email dated Nov. 2016 — before the 2017 launch of the Prime Video tvOS app —  Apple agreed to take only a 15% revenue share for customers that signed up in the app using Apple’s payment mechanism. (Typically, subscription apps don’t drop from 30% to 15% until year two.)

Apple this April confirmed  it had a special program for Prime Video and a small handful of other apps, which were subscription video entertainment providers. The program allowed those companies to rent or sell movies and TV shows to customers using the payment methods the companies already had on file, as well as more deeply integrate with Siri. But Apple hadn’t said that this special program would include a reduced commission on subscriptions or any other in-app upsells, as these emails confirm were points of discussion.

This wouldn’t be the first time Apple saw its commission structure as having some room to flex.

When Cook was questioned as to whether there was anything that could stop Apple from raising commissions to, say, 50%, the CEO responded that Apple had never increased commissions since day one. He also argued, when asked if anything could stop it from doing so, that competition for developer interest would stop it from raising its cut.

“There is a competition for developers, just like there’s a competition for customers. And so the competition for developers — they write their apps for Android or Windows or Xbox or Playstation,” said Cook. “We have fierce competition on the developer side and the customer side which is essentially — it’s so competitive, I would describe it as a street fight for market share in the smartphone business,” he added.

But in internal emails from 2011, Apple did discuss raising commissions — all the way to 40% for the first year of recurring subscriptions. “I think we may be leaving money on the table if we just asked for about 30% of the first year of sub,” Cue had written at the time.

Documents from the Hearing on “Online Platforms and Market Power: Examining the Dominance of Amazon, Apple, Facebook and Google” pic.twitter.com/42o2Ye13jI

— House Judiciary Dems (@HouseJudiciary) July 29, 2020

Of course, Apple didn’t go so far as to actually make that change in the years that passed. But these emails indicate there’s more to Apple’s thinking — and its discussions around the commission structure — than the even playing field Cook testified to.

While much of today’s Congressional grilling into the anticompetitive practices of the big tech giants focused on their core businesses, Amazon’s hardware also came in for close inspection during the hours-long interrogation.

It was a small but significant exchange, because it touched on the breadth of the company’s services and how dominance in one area can mean potentially anti-competitive behavior in another part of the tech giant’s business.

For Maryland’s Representative Jamie Raskin, both Amazon’s best-selling Echo and the Fire TV devices became targets thanks to recent reporting on the company’s business practices and negotiations regarding both devices.

The Echo is the company’s foray into the smart home market that’s widely seen as the next major battleground in consumer technology. It’s one of the most widely adopted pieces of Amazon’s technology and has captured about 60% of the smart home market, according to Raskin.

The congressman hammered Bezos on two points about the Echo. The first was the company’s pricing scheme which had the Echo priced well below the cost to produce the device making it all but impossible for other tech companies to compete.

The Echo’s wide adoption has also led Amazon to engage in other anti-competitive behavior, Raskin asserted — some of which was outlined in previous questioning from Colorado Rep. Ken Buck citing a Wall Street Journal report that Amazon had used its investment unit focused on its Echo product and Alexa voice assistant to copy technology coming from small startup companies.

But beyond its appropriation of another company’s intellectual property, Amazon also used the Echo platform to promote its own products over competitors when customers used its voice services.

“Is Alexa trained to favor Amazon products?” Raskin asked.

Bezos responded that he wasn’t sure if Amazon had specifically trained the Alexa to default to Amazon services or to promote the company’s own brand of products, but that he wouldn’t be surprised. “It wouldn’t surprise me if Alexa sometimes does promote our own products,” the Amazon chief executive said.

Raskin also took Bezos to task for the company’s recent negotiations with WarnerMedia, the production studio, streaming service, and network giant. Specifically, he was concerned with how negotiations around the distribution of WarnerMedia’s HBO Max service on the company’s Fire TV devices included discussions around Amazon’s access to WarnerMedia productions.

“You’re not only asking for financial terms but also for content from Warner Media,” Raskin said. “Is it fair to use your gatekeeper status role in the streaming device market to promote your position as a competitor in the video streaming market with respect to content?”

Bezos responded that the negotiations were “normal commerce,” but Raskin tried to make the case that the negotiations over access to the Fire was yet another way in which the company’s leverage in one market impacted its ability to exercise unfair advantage against a competitor in a different industry. 

“You’re using your control over access to people’s living rooms essentially,” Raskin said. “You’re using that to obtain leverage in terms of getting creative content that you want. Are you essentially converting power in one domain into power in another domain where it doesn’t belong?”

The comments and line of inquiry from Raskin were part of an intense bout of questioning that seemed to hone in on the purported topic of the hearings — the anti-competitive and potentially monopolistic power wielded by four of the nation’s largest tech companies. Facebook, Apple and Alphabet were all raked over the Congressional coals in bouts of questioning, but it seemed that the most sustained criticism on anti-competitive behavior was reserved for Bezos and Amazon.

Facebook’s Mark Zuckerberg appeared less than entirely truthful at today’s House Judiciary hearing, regarding last year’s major Onavo controversy, in which his company paid teenagers to use a VPN app that reported detailed data on their internet use. Though he may not have outright lied about it, his answers were evasive and misleading enough to warrant a rushed clarification shortly afterward.

Rep. Hank Johnson (D-GA) was asking Zuckerberg to confirm a series events last year first reported by TechCrunch: A VPN app called Onavo, owned by Facebook, was kicked out of Apple’s App Store for collecting and reporting usage data while purporting to provide a protective service.

Soon afterward, Facebook quietly began paying people — 18 percent of whom were teenagers — to install the “Facebook Research” app, which did much the same thing as Onavo under a different name. TechCrunch reported this and Apple issued a ban before the end of that day; Facebook claimed to have removed it voluntarily, but this was shown not to be true.

Rep. Johnson questioned Zuckerberg along these lines, and the latter repeatedly expressed his unsureness about and lack of familiarity with these issues.

Johnson: When it became public that Facebook was using Onavo to conduct digital surveillance, your company got kicked out of Apple’s App store, isn’t that true?

Zuckerberg: Congressman, I’m not sure I’d characterize it in that way.

Johnson: I mean, Onavo did get kicked out of the app store, isn’t that true?

Zuckerberg: Congressman, we took the app out after Apple changed their policies on VPN apps.

Johnson: And it was because of the use of the surveillance tools.

Zuckerberg: Congressman, I’m not sure the policy was worded that way or that it’s exactly the right characterization of it… [The policies are explained below.]

Johnson: Let me ask you this question, after Onavo was booted out of the app store, you turned to other surveillance tools, such as Facebook Research App, correct?

Zuckerberg: Congressman, in general, yes, we do a broad variety—

Johnson: Isn’t it true, Mr. Zuckerberg, that Facebook paid teenagers to sell their privacy by installing Facebook Research App?

Zuckerberg: Congressman, I’m not familiar with that, but I think it’s a general practice that companies use to, uh, have different surveys and understand data from how people are using different products and what their preferences are.

Johnson: Facebook Research app got thrown out of the App Store too, isn’t that true?

Zuckerberg: Congressman, I’m not familiar with that.

Of course, the idea that Zuckerberg was not familiar with events that made headlines, took down Facebook’s internal apps for days, and prompted an angry letter to him from a senator is absurd. (After all, Facebook responded.)

Perhaps intuiting that this particular claim of ignorance was a bridge too far (and perhaps in response to some frantic off-screen action in the CEO’s barnlike virtual testimony HQ), Zuckerberg took the opportunity to backpedal a few minutes later:

In response to Congressman Johnson’s question, before I said that I wasn’t familiar with the Facebook research app when I wasn’t familiar with that name for it. I just want to be clear that I do recall we used an app for research and it’s since been discontinued.

Of course, although Zuckerberg may plausibly have been unsure about the name, it’s not to be believed that he was not familiar with the events of that time, as they were both highly publicized and very costly for Facebook. Naturally he would also have been refreshed on them during preparation for this testimony.

That Zuckerberg is unfamiliar with the exact wording of Apple’s rules is possible, even probable, but it was no secret that the rules were changed basically in response to reports of Facebook’s Onavo shenanigans. Here is what Apple said at the time:

We work hard to protect user privacy and data security throughout the Apple ecosystem. With the latest update to our guidelines, we made it explicitly clear that apps should not collect information about which other apps are installed on a user’s device for the purposes of analytics or advertising/marketing and must make it clear what user data will be collected and how it will be used.

Later, when TechCrunch showed that Facebook had been using an enterprise deployment tool to essentially sideload spyware onto teenagers’ phones, Apple said this:

We designed our Enterprise Developer Program solely for the internal distribution of apps within an organization. Facebook has been using their membership to distribute a data-collecting app to consumers, which is a clear breach of their agreement with Apple. Any developer using their enterprise certificates to distribute apps to consumers will have their certificates revoked, which is what we did in this case to protect our users and their data.

So Facebook was the reason, implicitly first, then later explicitly, for these App Store lockdowns. Rep. Johnson put the whole thing quite plainly at the end of his questions.

Johnson: You tried one thing and then you got caught, made some apologies, then you did it all over again. [long pause]… Isn’t that true?

Zuckerberg: Congressman, I respectfully disagree with that characterization.

You can watch the full hearing here:

U.S. tech giants face antitrust scrutiny, Spotify has a mixed quarter and at-home fitness startup Tempo raises funding. This is your Daily Crunch for July 29, 2020.

The big story: Tech CEOs face Congress

Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Google’s Sundar Pichai all appeared remotely this afternoon before the House Judiciary Antitrust Subcommittee.

Different representatives seemed to focused on very different issues: Republicans repeatedly returned to the question of whether the large tech platforms are suppressing conservative viewpoints, while Democrats seemed more concerned about potentially anticompetitive behavior.

For example, citing newly revealed emails sent by Zuckerberg to other Facebook executives, Rep. Jerry Nadler declared, “Facebook saw Instagram as a powerful threat that could siphon business away from Facebook so rather than compete with it, Facebook bought it.” And Rep. Val Demings (like Nadler, a Democrat) suggested that Google was responsible for “effectively destroying anonymity on the internet.”

The tech giants

Spotify users are streaming again, but ad revenues still suffer due to COVID crisis — In its latest earnings report, Spotify said it grew its active monthly users by 29%, reaching 299 million.

Google One now offers free phone backups up to 15GB on Android and iOS — Google One is Google’s subscription program for buying additional storage and live support, and it’s getting an update.

Samsung reportedly considering a Google deal that would deprioritize Bixby — That’s according to Reuters.

Startups, funding and venture capital

Mirror competitor Tempo raises a $60M Series B — The news comes almost exactly a month after Mirror, one of the San Francisco-based company’s chief competitors, was acquired by fitness brand Lululemon for $500 million.

Remitly raises $85M at a $1.5B valuation, says money transfer business has surged — CEO Matt Oppenheimer told us that customer growth has increased by 200% compared to a year ago.

LA’s consumer goods rental service, Joymode, sells to the NYC retail investment firm, XRC Labs — Joymode’s founder Joe Fernandez will continue on as an advisor to the startup as it moves to pivot its business to focus on retail partnerships.

Advice and analysis from Extra Crunch

How to time your Series A fundraise — At our Early Stage event last week, Emergence Capital’s Jake Saper said that finding the right time to fundraise requires a micro- and macro-level strategy.

Investment in AI startups slips to three-year low — A new report from CB Insights shows historically strong but declining investing rates for AI startups.

Where is voice tech going? — One of the biggest stories in emerging technology is the growth of different types of voice assistants.

(Reminder: Extra Crunch is our subscription membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

Walmart launches its own voice assistant, ‘Ask Sam,’ initially for employee use — The tool allows Walmart employees to look up prices, access store maps, find products, view sales information, check email and more.

The Hummer EV is shaping up to be GM’s electric answer to the Ford Bronco and Tesla Cybertruck — GM just released its first look at the vehicle, which was announced pre-COVID, at the Super Bowl.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

Last year, Apple href="https://techcrunch.com/2018/12/05/apple-puts-third-party-screen-time-apps-on-notice/"> removed a number of screen time and parental control apps from its App Store, shortly after the company had released its own first-party screen time solution with the launch of iOS 12. At today’s antitrust hearing, Apple CEO Tim Cook was questioned about the move, given the anti-competitive implications.

Shortly after Apple debuted its own Screen Time feature set, several third-party app makers suddenly saw their own screen time solutions come under increased App Store review. Many apps also saw their app updates rejected or their apps removed entirely. The impacted developers had used a range of methods to track screen time, as there was no official means to do so. This had included the use of background location, VPNs, and MDM-based solutions, and sometimes a combination of methods.

Apple defended its decision at the time, saying the removals had put users’ privacy and security at risk, given that they required access to a device’s location, app use, email accounts, camera permissions, and more.

But lawmakers questioned Apple’s decision to suddenly seem to care about the user privacy threats coming from these apps — many of which had been on the market for years.

Rep. Lucy McBath (GA-D) began the line of questioning by reading an email from a mother who wrote to Apple about her disappointment over the apps’ removals, saying that Apple’s move was “reducing consumer access to much-needed services to keep children safe and protect their mental health and well-being.” She then asked why Apple had removed apps from competitors shortly after releasing its own screen time solution.

Cook responded much as Apple did last year, by saying the company was concerned about the “privacy and security of kids,” and that the technology the apps used was problematic.

“The technology that was being used at that time was called MDM, and it had the ability to sort of take over the kid’s screen, and a third party could could see it,” Cook said. “So we were worried about their safety.”

That’s perhaps not the most accurate description of how MDM works, as it describes MDM as some sneaky remote control tool. In reality, MDM technology has legitimate uses in the mobile ecosystem and continues to be used today. However, it was designed for enterprise use — like managing a fleet of employee devices, for example, not consumer phones. MDM tools can access a device’s location, control app use, email, and set various permissions, among other things that a corporate entity may want to do as part of their efforts in securing employee devices.

In a way, that’s why it made sense for parents who wanted to similarly control and lockdown their children’s iPhones. Though not a consumer technology, the app developers had seen a hole in the market and had found a way to fill it using the tools at their disposal. That’s how the market works.

Apple’s argument, isn’t wrong, though. The way the apps used MDM was a privacy risk. But rather than banning the apps outright, it should have offered them an alternative. That is, instead of just booting out its competition, it should have also built a developer API for its iOS Screen Time solution in addition to the consumer-facing product.

Such an API could have allowed developers to build apps that could tap into Apple’s own screen time features and parental controls. Apple could have given the apps a deadline to make the transition instead of ending their businesses. This wouldn’t have harmed the developers or their end users, and would have addressed the privacy concerns associated with the third-party apps.

“The timing of the removals seem very coincidental,” McBath pointed out. “If Apple wasn’t attempting to harm competitors in order to help its own app, why did Phil Schiller, who runs the App Store, promote the Screen Time app to customers who complained about the removal of rival parental control apps?,” she asked.

Cook replied that there are today over 30 screen time apps in the App Store so there is “vibrant competition for parental controls out there.”

But McBath noted that some banned apps were allowed back into the App Store six months later, without any significant privacy changes.

“Six month is truly an eternity for small businesses to be shut down. Even worse, if all the while a larger competitor is actually taking away customers,” she said.

Tim Cook wasn’t given a chance to respond further to this line of questioning as the McBath moved on to question Apple’s refusal to allow Random House a way to sell e-books in its own app outside of Apple’s iBooks.

Cook deflected that question, saying “there are many reasons why the app might not initially go through the App store,” noting it could have been a technical problem.

Last year, Apple href="https://techcrunch.com/2018/12/05/apple-puts-third-party-screen-time-apps-on-notice/"> removed a number of screen time and parental control apps from its App Store, shortly after the company had released its own first-party screen time solution with the launch of iOS 12. At today’s antitrust hearing, Apple CEO Tim Cook was questioned about the move, given the anti-competitive implications.

Shortly after Apple debuted its own Screen Time feature set, several third-party app makers suddenly saw their own screen time solutions come under increased App Store review. Many apps also saw their app updates rejected or their apps removed entirely. The impacted developers had used a range of methods to track screen time, as there was no official means to do so. This had included the use of background location, VPNs, and MDM-based solutions, and sometimes a combination of methods.

Apple defended its decision at the time, saying the removals had put users’ privacy and security at risk, given that they required access to a device’s location, app use, email accounts, camera permissions, and more.

But lawmakers questioned Apple’s decision to suddenly seem to care about the user privacy threats coming from these apps — many of which had been on the market for years.

Rep. Lucy McBath (GA-D) began the line of questioning by reading an email from a mother who wrote to Apple about her disappointment over the apps’ removals, saying that Apple’s move was “reducing consumer access to much-needed services to keep children safe and protect their mental health and well-being.” She then asked why Apple had removed apps from competitors shortly after releasing its own screen time solution.

Cook responded much as Apple did last year, by saying the company was concerned about the “privacy and security of kids,” and that the technology the apps used was problematic.

“The technology that was being used at that time was called MDM, and it had the ability to sort of take over the kid’s screen, and a third party could could see it,” Cook said. “So we were worried about their safety.”

That’s perhaps not the most accurate description of how MDM works, as it describes MDM as some sneaky remote control tool. In reality, MDM technology has legitimate uses in the mobile ecosystem and continues to be used today. However, it was designed for enterprise use — like managing a fleet of employee devices, for example, not consumer phones. MDM tools can access a device’s location, control app use, email, and set various permissions, among other things that a corporate entity may want to do as part of their efforts in securing employee devices.

In a way, that’s why it made sense for parents who wanted to similarly control and lockdown their children’s iPhones. Though not a consumer technology, the app developers had seen a hole in the market and had found a way to fill it using the tools at their disposal. That’s how the market works.

Apple’s argument, isn’t wrong, though. The way the apps used MDM was a privacy risk. But rather than banning the apps outright, it should have offered them an alternative. That is, instead of just booting out its competition, it should have also built a developer API for its iOS Screen Time solution in addition to the consumer-facing product.

Such an API could have allowed developers to build apps that could tap into Apple’s own screen time features and parental controls. Apple could have given the apps a deadline to make the transition instead of ending their businesses. This wouldn’t have harmed the developers or their end users, and would have addressed the privacy concerns associated with the third-party apps.

“The timing of the removals seem very coincidental,” McBath pointed out. “If Apple wasn’t attempting to harm competitors in order to help its own app, why did Phil Schiller, who runs the App Store, promote the Screen Time app to customers who complained about the removal of rival parental control apps?,” she asked.

Cook replied that there are today over 30 screen time apps in the App Store so there is “vibrant competition for parental controls out there.”

But McBath noted that some banned apps were allowed back into the App Store six months later, without any significant privacy changes.

“Six month is truly an eternity for small businesses to be shut down. Even worse, if all the while a larger competitor is actually taking away customers,” she said.

Tim Cook wasn’t given a chance to respond further to this line of questioning as the McBath moved on to question Apple’s refusal to allow Random House a way to sell e-books in its own app outside of Apple’s iBooks.

Cook deflected that question, saying “there are many reasons why the app might not initially go through the App store,” noting it could have been a technical problem.

Steel construction has begun on the nearly 3-million-square-foot factory that will mass produce Ultium battery  packs, the cornerstone of General Motors’ strategy to bring 20 electric vehicles to market by 2023.

The Ultium Cells LLC battery cell manufacturing facility in Lordstown, Ohio is part of a joint venture between GM and LG Chem that was announced in December. At the time, the two companies committed to invest up $2.3 billion into the new joint venture as well as establish a battery cell assembly plant on a greenfield manufacturing site in the Lordstown area of Northeast Ohio that will create more than 1,100 new jobs. The factory will be able produce 30 gigawatts hours of capacity annually. To put that into perspective, Tesla’s factory in Sparks, Nevada, which is part of a partnership with Panasonic, has a 35 GW hour capacity.

The batteries will be used in a broad range of products across its Cadillac, Buick, Chevrolet and GMC brands as well as the Cruise Origin autonomous shuttle that was revealed in January. The Cadillac Lyriq EV flagship and an all-electric GMC Hummer, which will be revealed this fall and go into production in the fourth quarter of 2021, will use the Ultium battery system. GM plans to reveal the Lyriq at a virtual event August 6.

GM broke ground at the factory site in May and has since poured the concrete footings for the facility. Steel construction will continue into fall 2020, according to GM.

GM has used LG Chem as a lithium-ion and electronics supplier for at least a decade. The companies began working together in 2009. The relationship deepened as GM developed and then launched the Chevy Bolt EV.

This latest joint venture marks a step change for GM and a means to accelerating its EV plans, which could even involve spinning out the operations into a separate company.

“We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value, so I would say nothing is off the table,” GM Chairman and CEO Mary Barra said during an earnings call Wednesday.

GM reported Wednesday a $758 million loss in the second quarter on $16.78 billion in revenue. The loss and the 53% year-over-year drop in revenue was caused mostly by COVID-19-related factory shutdowns in the U.S. However, the results still managed to beat analysts expectations.

The past week, I’ve spent ample time looking to revamp my home audio setup. I think my only qualification is that my next setup is as dumb as possible.

In the past five years, my setup has gone from a fairly middling wired 2.1 speaker setup to a confusing menagerie of connected smart speakers. I’ve likely gone through at least five Google Assistant-laden speakers including the Google Home Max, a couple connected Sonos speakers, three HomePods, a Facebook Portal+, non-smart speakers connected via Chromecast Audio and god knows how many Alexa-integrated speakers. All in all, I can firmly say I have made some very bad audio decisions in my recent life.

I’ve had a lot of frustrations with my current setup, but they’re really issues with the entire smart speaker market:

• Good audio hardware should be timeless, and devices that need frequent firmware updates, have proprietary support for a certain operating system or can lose integration support quickly fly in the face of that.
• Home entertainment integrations with these speakers are just awful, even among products built by the same company. Repeatedly connecting my stereo HomePods to my Apple TV has been maddening.
• Smart assistants are much less ambitious than they were years ago and the ceiling of innovation already seems to have come down significantly. Third party integrations have sunk far below expectations and it’s pretty uncertain that these voice interfaces have as bright a future as these tech companies once hoped.
• These assistants were once going to be the operating systems of the home, but the smart home experiment largely feels like a failure and it’s growing clearer that the dream of a Jarvis-like system that plays nicely with all of your internet-connected devices was totally naive.

All in all, it’s time for me to move on and invest some cash in a setup that will sound good for decades.

Now, many of you will say that my true error was a lack of commitment to one ecosystem, which is undoubtedly spot-on and yet I don’t think any of the players had precisely what I wanted hence the wildly piecemeal approach. Dumping more funds into a robust Sonos setup probably would have been the wisest commitment, but I have commitment issues and I think part of it was a desire to see what was out there.

In quarantine, I’ve gotten ample time to spend with my home audio system and the destructive weave on non-compatible hardware is all too much. I don’t want my speakers to have their own operating systems or for one speaker to play nice with my music streaming platform of choice, but not the other. I want something that can last.

After doing half-commits to several ecosystems, I feel I’ve seen and heard it all and now I’m shopping for some good old-fashioned dumb wired surround sound speakers to integrate with a slightly smarter AV receiver. God willing, I will have strength to not buy whatever cool audio gadgets come out next year and can stay strong. If you have some good tips on a nice setup, please help me out.

At the House Antitrust Subcommittee hearings this afternoon, Facebook CEO Mark Zuckerberg was directly questioned about his company’s strategy of copying competitors’ app and features, and even threatening to do so as a negotiation tactic amid M&A discussions. In his response, Zuckerberg was forced to admit the obvious: that Facebook, he said, has “certainly adapted features that others have led in.”

However, he denied any characterization claiming Facebook used such tactics in an anti-competitive way — for example, to pressure a company to sell to Facebook instead of trying to compete with it.

In one particular line of questioning between Rep. Pramila Jayapal (D-WA) and Facebook’s CEO, she asked specifically about the company’s billion-dollar acquisition of Instagram in 2012. The M&A deal had been already been brought up repeatedly throughout the hearing as an example of Facebook buying its way into expanded market power.

Jayapal led into the questions around Instagram by first painting a picture of a company where execs agreed that copying from other apps was a viable business strategy.

She specifically referenced emails from 2012 between Zuckerberg and Facebook COO Sheryl Sandberg where the CEO had written that by moving faster, Facebook could “prevent our competitors from getting footholds.” Sandberg had responded that “it is hard not to agree it that is better to do more and move faster, especially if that means you don’t have competitors build products that takes some of our users.” A PM had also chimed in that they would love to see Facebook being “even more aggressive and nimble” in copying competitors, Jayapal noted.

The emails had hinted at the birth of Facebook’s strategy around copying its competition, as they detailed meetings between a high-level Facebook employee and the Renren founders as well as Robin Li from China’s Baidu.

The employee had learned of the overall culture of cloning products quickly in the Chinese app market.  Renren had built its own version of Pinterest and Tumblr, the emails said, as well as games, a music product and more. And Tencent QQ had then just released a messaging app similar to the walkie-talkie app Voxer in the U.S. It was pointed out that maybe it was easier to move quickly because these companies were “just copying other people,” the email suggested.

Zuckerberg had forwarded the email to Sandberg, noting “you’ll probably find this interesting and agree.” And she did.

Under questioning, Zuckerberg declined to say how many companies Facebook had copied since the 2012 email exchange, bristling that he didn’t agree with the premise of the question.

“Our job is to make sure that we build the best services for people to connect with all the people they care about. And a lot of that is done by innovating and by building new things…,” he began, before being cut off.

Jayapal then asked if Facebook had ever threatened to clone a product from another company while attempting to acquire it.

“Not that I recall,” Zuckerberg said.

However, it seems Facebook had threatened to use its “Facebook Camera” app against Instagram ahead of the latter’s acquisition, Jayapal noted. In a chat with Instagram co-founder Kevin Systrom, Zuckerberg said Facebook was developing its own photo strategy, and how we engage now will also determine how much we’re partners versus competitors down the line, she explained. In an email chain, Zuckerberg had told Systrom that “at some point, you’ll need to figure out how you actually want to work with us.”

The Instagram founder had also confided in an investor that he felt Zuckerberg’s comments were a threat, Jayapal said, and was concerned that Facebook would go into “destroy mode” if he didn’t sell Instagram.

Zuckerberg didn’t deny the conversation, but disagreed again with the characterization, saying it was clear that this was a space the two companies would compete in.

Jayapal asked also if a similar tactic was used against Snapchat in its attempts to acquire the company.

“I don’t remember those specific conversations,” Zuckerberg responded. “But that was also an area where was very clear that we were going to be building something,” he said.

Jayapal concluded her time by stating that she did believe Facebook was a monopoly because of this and other behavior.

“I think the question again here is when the dominant platform threatens as potential rivals, that should not be a normal business practice. Facebook is a case study, in my opinion, in monopoly power because your company harvests and monetizes our data, and then your company uses that data to spy on competitors, and to copy acquire and kill rivals,” she said.

 

At today’s House Judiciary Committee hearing, Amazon CEO Jeff Bezos bungled attempts to assuage concerns that the company poaches ideas from its competitors, taking sustained fire from Rep. Pramila Jayapal (D-WA) and others. Faced with testimony from employees that there is “nobody enforcing” policies, resulting in “a candy shop” of seller data, Bezos admitted to what amounts to ignorance or complicity.

Jayapal’s interrogation was one of precious few substantive exchanges in a hearing dominated by tiresome grandstanding and uninformed or irrelevant lines of questions.

Amazon has been dogged for years with well-substantiated allegations that it uses its bird’s-eye position in online retail, much of which passes through its platform, to spot new products and categories and enter them using that inside information — often taking huge losses to undercut the existing players in the market.

Jayapal — who represents the district in which the company is headquartered and has gone head to head with the company numerous times — began by asking straight out whether Amazon does this (Wording of questions and answers has only been slightly edited for clarity.):

Jayapal: Does Amazon have access and use third party seller data when making business decisions?

Bezos: I can’t answer that question yes or no. I can tell you we have a policy against using seller-specific data to aid our private label business but I can’t guarantee you that that policy has never been violated.

In response, Jayapal cited a recent WSJ report citing multiple instances where Amazon had done just that:

Jayapal: You’re probably aware that an April 2020 report in the Wall Street Journal revealed that your company does access data on third party sellers both by reviewing data on popular individual products and sellers and making tiny categories that allowed your company to categorically access detailed seller information in a supposedly aggregate category do you deny that report?

Bezos: I’m familiar with the Wall Street Journal article you’re talking about. We continue to look into that very carefully, I’m not yet satisfied we’ve gotten to the bottom of it. It’s not as easy to do it as you think because some of the sources in the article are anonymous.

Jayapal: I’ll take that as a you’re not denying that.

Her next move was a damning quote from a former employee that Bezos seemed at a loss to counter.

Jayapal: A former Amazon employee and third party sales an recruitment told this committee, quote, “there’s a rule but there’s nobody enforcing or spot checking. They just say don’t help yourself to the data. It’s a candy shop, everyone can have access to anything they want.” Do category managers have access to non public data about third party products and businesses?

Bezos: Uh, here’s what I can tell you. We do have certain safeguards in place. we train people on the policy, we expect people to follow that policy the same we would with any others. It’s a voluntary policy [in that having such a policy is voluntary, not that it is voluntary to follow that policy, he clarified]. If we found that someone violated it, we would take action against them.

Jayapal: Well, there’s numerous reports and the committee has conducted interviews with former employees that confirm that there are employees that do have access to that data and are using it. If you thought you were actually enforcing these rules, do you think that that’s working? There’s credible reporting that has documented breaches of these rules you’ve put into place, and this committee has interviewed employees that say that these breaches typically occur.

After confirming that “aggregate” data could be on as little as a single seller under Amazon’s policy, she then began a lengthy presentation of why this was obviously a serious concern for competition:

Jayapal: Interviews with former employees have made it clear that that aggregate data essentially allows access to highly detailed data in those product categories – there’s the example of Fortem, a small business that had no direct competitors, except for Amazon Warehouse Deals, a resale clearance account that only sold 17 units. An Amazon employee accessed a detailed sales report on Fortem’s product with information on how much the company spent on advertising per unit and the cost to ship each trunk. And then Amazon launched its own competing products in October 2019. That’s a major loophole. And I go back to the general counsel’s statement to this committee very clearly that there was no access to this data, that Amazon does not use that data for its own benefit. And I’m now hearing you say, well you’re not so sure that’s going on.

…You have access to the entirety of sellers pricing and inventory information, past, present and future, and you dictate the participation of third party sellers on your platform. So you can set the rules of the game for your competitors but not actually follow those rules yourself. Do you think that’s fair to the mom and pop third party bus that are trying to sell on your platform?

Bezos: I appreciate that question and I like it a lot, because I really wanted a chance to address that. I’m very proud of what we’ve done for third party sellers on this platform…

Sensing Bezos was bloviating and/or playing for time, Jayapal cut him off to make her final point:

Jayapal: So you might allow third party sellers onto your platform, but if you’re continuously monitoring the data to make sure that they’re never gonna get big enough that they can compete with you, that is actually the concern that the committee has. The whole goal of this committee’s work is to make sure there are more Amazons, more Apples, more companies that get to innovate and small businesses that get to thrive. That is why we need to regulate these marketplaces, so that no company has a platform so dominant that it is essentially a monopoly.

Rep. Jayapal’s questions seemed to open the season on Bezos. Representative Mary Scanlon (D-PA) soon highlighted Amazon’s willingness to lose hundreds of millions of dollars to kneecap the competing Diapers.com:

Scanlon: The price war against Diapers.com worked, and within a few months it was struggling, and so Amazon bought it. After buying your leading competitor here, Amazon cut promotions like Amazon.mom and the steep discounts it used to lure customers away from Diapers.com, and then increase the prices of diapers for new moms and dads. Mr. Bezos, did you personally sign off on the plan to raise prices after Amazon eliminated its competition?

Bezos: I don’t remember that at all.  What I remember is that we matched competitors’ prices and I believe we followed diapers.com. This was 11 years ago so you’re asking a lot of my memory.

Then the Chairman, Rep. David Ciccilline (D-RI), took the opportunity to get some more direct answers on Rep. Jayapal’s line of questions.

Cicilline: Isn’t it an inherent conflict of interest for Amazon to produce and sell products on its platform that compete directly with third party sellers, particularly when you, Amazon, set the rules of the game?

Bezos: Thank you… no, I don’t believe it is. We have… the consumer is ultimately the one making the decisions about what to buy, what price to buy it at, who to buy it from.

Cicilline: That’s not the question, Mr. Bezos. The question is is there an inherent conflict of interest. …You said you can’t guarantee that the policy of not sharing third party sellers data with Amazon’s own line hasn’t been violated, you can’t be certain. Can you please explain that to me? Can you list examples of when that policy has been violated? Shouldn’t third parties know for sure that data isn’t being shared with your own line of competitors?

Bezos: What think is important to understand is we have a policy against using the individual seller data to compete with our private label products.

Cicilline: You couldn’t assure Ms. Jayapal that that policy isn’t violated routinely!

Bezos: Well, I mean, we are investigating that. I do not want to go beyond what I know right now, but we are as a result of that Wall Street Journal article, we are looking at that very carefully.

The Committee’s questioning of Google’s Sundar Pichai, Facebook’s Mark Zuckerberg, and Apple’s Tim Cook was nowhere near this level, but the Amazon portions were effective — if only to see one of the world’s richest and most powerful people stumbling over his words, unable or unwilling to answer basic questions. Bezos has little experience with these hearings and it showed — no doubt this has been as informative for him as it has been for Congress.