- Getty/Carsten Koall/Michael Kovac/Business Insider composite
- Sonos, Tile, Basecamp and PopSockets appeared in Boulder, Colorado to testify before Congress today.
- The four tech companies sell a diverse range of products, like speakers, tracking devices, software and phone accessories. But they all alleged that Big Tech firms had ‘bullied’ them into abiding by their rules.
- “Big Tech is bent on expanding until it does absolutely everything, Basecamp CTO David Heinemeier Hansson said, quipping, “Help us Congress, you’re our only hope.”
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Google, Amazon, Facebook and Apple were the subjects of scathing criticism by smaller tech companies during a Congressional hearing on Friday.
An assortment of tech firms that sell everything from speakers to phone accessories accused the tech giants of bullying business tactics.
“There’s such a dominant power that exists with these companies that when Google or Apple asks for something … you have no choice but to provide that to those companies,” Patrick Spence, the CEO of wireless speaker company Sonos, told lawmakers.
Sonos, Tile, Basecamp, and PopSockets all appeared Friday at a hearing by the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. Speaking at so-called “field hearing” that took place at the University of Colorado Law School in Boulder, Colo., the executives called for Congress to implement tougher regulation of Big Tech.
The executives told similar stories about how the larger tech companies had used their dominance in one market to cripple competition in its emerging products and tilt the field in their favors for its other product lines.
“At some point, all companies will be competing against Big Tech simply because Big Tech is bent on expanding until it does absolutely everything,” Basecamp CTO David Heinemeier Hansson added, and quipped, “Help us Congress, you’re our only hope.”
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Here’s how Apple, Google and Amazon use their size to bully smaller tech firms, according to the executives who testified:
Apple’s strict rules on the App Store make it difficult for smaller companies to innovate, and drains their resources, they said. Meanwhile, Apple develops and boosts its own alternative products.
Tile makes stamp-sized Bluetooth trackers that help customers find their keys, wallets or phones. In some ways, the product competes with Apple’s built-in Find My iPhone feature. According to Tile General Counsel Kristin Daru, the company has faced a series of stringent and arbitrary regulations from Apple that have drained its resources.
“Apple is acting as a gatekeeper to applications and technologies in a way that favors its own interests,” Daru said. “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.”
Basecamp CTO David Heinemeier Hansson added that the company’s App Store tax gives Apple a 30% margin advantage over every competitor. “It is outrageous that that rate has stayed the same,” Hansson said.
Daru went on to list examples of the ways in which Apple had allegedly exploited the App Store in its favor: the Find My iPhone app is embedded into iOS while Tile can be installed – or deleted. Find My iPhone’s settings are clear but Tile’s are buried, thanks to iOS 13’s updates, Daru said.
Apple sent a statement to Business Insider after the trial, to say that it was updating its features to allow Tile (and other apps) to automatically enable its full functionality at the time of an app installation.
“We continually work with developers and take their feedback on how to help protect user privacy while also providing the tools developers need to make the best app experiences,” a spokesperson said. “We’re currently working with developers interested in enabling the “Always Allow” functionality to enable that feature at the time of set up in a future software update.”
Google leverages its dominance in search to pressure companies to help boost its other businesses, executives said.
- REUTERS/Brandon Wade/File Photo
Earlier this month, Sonos sued Google, alleging that the tech giant infringed on five of its patents.
But Sonos CEO Patrick Spence’s testimony against Google went far beyond that.
The advantages Google has in marketing its own products “are like nothing we’ve ever seen before,” Spence said. For instance, Spence alleged that Google had pressured Sonos to only allow its speakers to sync up with Google Assistant, rather than also offer it on Amazon’s competing voice assistant Alexa.
“Looking at leveraging market dominance to dominate another category has to be thought through. Is that the spirit of the kind of world we want to live in?” he later added.
Threats of retaliation were also of ongoing concern to the testifying companies.
“We could lose our listing in DuckDuckGo and we wouldn’t even tell. We lose Google and we lose our business,” PopSockets CEO David Barnett said.
Basecamp CTO David Heinemeier Hansson also had concerns on his company’s presence on the search engine. Google makes up more than 40% of Basecamp’s traffic, per Reuters, but it allowed competitors to buy ads on Benchmark’s trademark and block consumers from reaching the site, Hansson said. The company could only compete by similarly buying ads on Google search.
“Sonos has made misleading statements about our history of working together. Our technology and devices were designed independently. We deny their claims vigorously, and will be defending against them,” Google told Business Insider in a statement.
“For trademarked terms like the name of a business, our policy balances the interest of both users and advertisers. Like other platforms, we allow competitors to bid on trademarked terms because it offers users more choice when they are searching. However, if a trademark owner files a complaint, we will block competitors from using their business name in the actual ad text,” Google said.
Amazon hosts counterfeits and ‘bullies’ its third party sellers, according to PopSockets CEO Barnett
- Chip Somodevilla / Getty Images
PopSockets, which makes phone accessories, accused Amazon of failing to remove counterfeit products and pressuring it to lower its prices. If it failed to do so, Amazon said it would source the same accessories from third-party sellers, PopSockets CEO David Barnett alleged.
Barnett said Amazon had a host of such tactics to “bully” businesses, and described informing Amazon about 1000 fake products every day, with no recourse. At the same time, Barnett said that Amazon was lowering the prices it was charging consumers, and then demanding payment from PopSockets for its lost marginal profits.
PopSockets has had a tense relationship with the online marketplace for years. The company eventually stopped selling on Amazon, as a result of counterfeits and aggressive pricing tactics, Barnett said.
He ultimately suggested that Congress break up Amazon into two bodies: one that runs the marketplace, and the other that sells on it.
“We sought to continue working with PopSockets as a vendor to ensure that we could provide competitive prices, availability, broad selection and fast delivery for those products to our customers. Like any brand, however, PopSockets is free to choose which retailers it supplies and chose to stop selling directly through Amazon,” an Amazon spokesperson told Business Insider.
“Even so, we’ve continued to work with PopSockets to address our shared concerns about counterfeit, and continue to have a relationship with PopSockets through Merch by Amazon, which enables other sellers to create customized PopSockets for sale,” Amazon said.
Facebook violates privacy to fuel a ‘devastatingly effective’ ad machine. “No single company should have access to that much data,” Basecamp’s David Heinemeier Hansson said
- Drew Angerer/Getty Images
Complaints about Facebook were the most sparse out of the small tech company testimonies, and largely addressed data-privacy concerns rather than anticompetitive behavior.
Facebook has a “devastatingly effective” ad machine, Basecamp’s David Heinemeier Hansson said. “But when you think about why everyone is unable to compete, it’s because it’s all based on a fundamental violation of privacy.”
And when asked to respond to any concerns regarding Facebook’s attempted launch of Libra, and the potential that it would turn into a huge bank, Hansson said that would be a “catastrophe.”
“No single company should have access to this much data,” Hansson said. “We already have problems dealing with the problems they’ve created.”
Facebook declined to comment.