Smaller companies testify against Big Tech’s ‘monopoly power’

by Emily Birnbaum - 01/17/20 2:41 PM ET

A handful of small companies on Friday violated long-standing tech industry norms by testifying publicly against the world’s largest tech firms, alleging for the congressional record that Google, Apple, Amazon and Facebook have hamstrung and harmed their businesses for years.

Executives with companies that rely on Big Tech — like Sonos, a smart speaker company, and Popsockets, which used to rely on Amazon to sell their mobile device accessories — alleged the digital marketplace is inherently unequal as long as the largest companies are allowed to ruthlessly pursue profit at the expense of smaller businesses.

Many small-to medium-sized businesses around the world rely on Amazon, Google and Apple to sell and promote their products. But now, amid growing government scrutiny of Big Tech’s unprecedented size and power, those companies are going public with their stories of mistreatment and exploitation by their larger-than-life business partners.

“It is apparent that the dominant platforms are increasingly using their gatekeeper power in abusive and coercive ways,” said Rep. David Cicilline (D-R.I.), the chairman of the House Judiciary antitrust subcommittee, which held the hearing on Big Tech in Colorado on Friday.

“It is far too common to hear horror stories from startups and other small businesses about how a dominant platform’s abrupt changes have destroyed their business,” he added.

The hearing featured four tech executives who said their companies have suffered due to an unequal partnership with one of the four Big Tech firms.

Patrick Spence, the CEO of Sonos, alleged that Google stole his company’s intellectual property and wielded its dominant market position to crush Sonos’s core product as Google entered the smart speaker market. David Barnett, the founder and CEO of Popsockets — the company that creates removable grips for smart phones — discussed his firm’s fractured relationship with Amazon, Popsockets’ top customer until a series of disputes led Popsockets to break off its relationship with the online retail giant.

David Heinemeier Hansson, the co-founder and chief technology officer of Basecamp, took Google to task for requiring companies to buy their way to the top of its powerful search results. And Kirsten Daru, the vice president and general counsel of Tile, discussed her concerns that Apple knocked her company out of the market when it created a product to directly compete with Tile’s trackers.

“Help us, Congress,” Hansson said. “You’re our only hope.”

Spence told the small group of lawmakers that innovation by small businesses is “endangered.”

“I’m concerned that the market conditions that allowed us to innovate and thrive over the past two decades are being endangered by the rise of a small group of companies with unprecedented power,” Spence said.

The House Judiciary antitrust subcommittee has spent months collecting documents and testimony from small-to medium-sized businesses as it investigates Big Tech’s market dominance. So far, the small group of antitrust staffers have amassed millions of documents and continue to negotiate with the largest companies to obtain information to bolster their probe.

Cicilline, who has promised the investigation will wrap up within the next few months, told reporters last week that he plans to haul in the top tech CEOs to discuss how their companies operate. He already met privately with Facebook CEO Mark Zuckerberg last year.

The hearing on Friday was markedly bipartisan, as Cicilline and subcommittee Vice Chairman Joseph Neguse (D-Colo.) mostly saw eye-to-eye with Rep. Ken Buck (R-Colo.). So far, House Judiciary’s antitrust investigation has touted equal participation by Republicans and Democrats on the committee, including the chairman and ranking member of the full panel.

Buck said he is in favor of “small government” and noted he’s “concerned about government interfering in the marketplace.” But he added that he felt the companies are merely asking to “compete fairly” with the larger players.

Google, Amazon and Apple in statements vehemently denied the allegations from companies like Tile and Popsockets, claiming their stories are misleading or overblown.

Google spokesman Jose Castaneda said the allegations from Sonos, which is suing Google in two federal court systems for intellectual property theft, are “misleading.” Sonos is alleging that Google infringed on five of their patents.

“Our technology and devices were designed independently,” Castaneda said. “We deny their claims vigorously, and will be defending against them.”

During the hearing, Spence said Google and Amazon are engaged in “predatory pricing” as they sell their smart speakers for very low prices that companies like his cannot afford.

And Amazon, responding to Barnett’s claims, called Popsockets a “valued retail vendor.” At the hearing, Barnett alleged Amazon took more than a year to address concerns that Popsockets was finding up to 1,000 fake versions of its products on Amazon’s online marketplace per day. And he said there is a “power asymmetry” when Amazon partners with smaller retailers.

“Popsockets has been a valued retail vendor at Amazon and also supplies its products directly to other major retailers,” Amazon said in a statement. “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.”

Apple, meanwhile, defended the software updates that have harmed Tile as an effort to create more privacy for users who use the iPhone.

“Apple has not built a business model around knowing a customer’s location or the location of their device,” the company said in a statement. Tile’s representative at the hearing said Apple “exploited its market power” when it created Find My, an app that helps people find lost items, like Tile’s core product.

Tile’s Daru said Apple has implemented software updates that harmed Tile’s ability to function on iOS, pointing out Apple owns the hardware and software that Tile relies on.

“It’s like playing a soccer game: You might be the best team in the league, but you’re playing against a team that owns the field, the ball, the stadium and the entire league,” Daru said. “They can change the rules of the game in their own favor at any time.”

Facebook declined to comment.

By the end of the hearing, each of the executives argued the government should step in to take on Apple, Google, Amazon and Facebook.

“It would be great if the government at some level stepped in and said, ‘Massive companies that are systematically violating intellectual property rights of small players are targets for the government,'” Barnett said.

Hansson, of Basecamp, said the internet has been “colonized by a handful of big tech companies.” He said it’s time for Congress to intervene.

The House Judiciary antitrust subcommittee is expected to publish a report about digital marketplace concerns, accompanied by tech antitrust legislation, in the first half of 2020.

Tags David Cicilline Ken Buck Mark Zuckerberg