As you have undoubtedly heard, a U.S. House of Representatives committee called the CEOs of Apple, Alphabet (Google), Facebook, and Amazon to testify before them this week. Steven Goetz texted me in Telegram that it was really good TV. I was head down working on something during the day so I didn’t get a chance to tune in live, but later he sent me the link to the full hearing on YouTube. I’m sure glad I chose to watch this way because the full length of the video is 7 hours and 35 minutes, but the hearings don’t start until 2 hours into that, and there are some rather long breaks. I watched the entire video in small increments throughout the past few days.
I have made it an absolute rule to never voice a political opinion on my blog or podcast, and I’m not going to break that rule now. I’m not going to call anyone names or make fun of either side. I am going to talk to what I learned from watching the hearings. I’m going to talk about what I learned about the CEOs, their business practices, and a bit about how the objectives of these hearings.
Who Was There & Why
The four CEOs were Tim Cook of Apple, Sundar Pichai of Alphabet (Google), Mark Zuckerberg of Facebook, and Jeff Bezos of Amazon. Notably, not there were Twitter and Microsoft. In theory, the purpose of the hearings was to get the CEOs to give testimony with regard to anti-trust behavior of their companies. The committee had been collecting evidence of problems for quite some time and this was essentially the culmination of these efforts.
One of my initial thoughts in watching these four men was how incredibly poised they were in the face of such scrutiny. I know I should expect it of people in charge of billion-dollar companies, but even as they were sometimes asked unanswerable questions they kept their cool and answered respectfully. There were a few “When did you stop beating your wife” type of questions and I know if I had been in front of that committee I would have either started laughing or asked, “Can you please state a question that isn’t so idiotic?” It’s just possible that this attitude curbed further rise in my career when I was working for a company.
One of the big complaints from tech nerds has been that government representatives are too old and out of touch to understand the complexities of technology. I am disappointed when I hear people say that for a couple of reasons. The main reason I find that an unfortunate perspective is that it minimizes how many diverse subjects these people have to deal with. Would you expect them to understand the intricacies of farming equipment? What about medical procedures? How about the depths of accounting practices? Microbiology? Cryptography?
Obviously not. But technology is a pervasive thread through much of what we do these days, so it’s important that the Members of Congress have staff who supply them with good questions and at least a high-level understanding. The hearings from this week showed to me that they had heard how much we were mocking them from previous hearings because this time the Representatives had some really detailed questions that showed the staffers understood the problems at hand.
What Did We Learn?
I naïvely thought that the purpose of the questioning was for the Representatives to ask questions and listen to the answers and add those answers to the body of evidence their investigations had already revealed. I’m adorable that way. The format of the hearing, while immensely entertaining, was basically a representative reading off a list of alleged malfeasance by one of the companies and then asking the CEO if it was true, and after approximately six words of an answer, cutting them off and going on to another subject.
You would think that would have frustrated and discouraged me, but if you listen closely enough to the questions, they did bring up some really damning evidence of problems.
I’ll pick on Amazon for a moment. One of the Representatives played an audio clip of a woman describing her lucrative business selling books on Amazon and how Amazon slowly started removing books she could sell until she could sell nothing at all. She said she tried 500 times to get an explanation from Amazon, including sending emails directly to Bezos, and never got a useful explanation. Perhaps I resonated with her plight, having had Amazon shut off my affiliate account even though I did respond to their requests that I make changes but gave me no recourse. I was surprised they didn’t bring up how, overnight, Amazon dramatically reduced commission rates on their affiliate program (right after banning me), putting many publishers in financial distress.
The other thing they talked to Amazon about was how Amazon has started making equivalent products to third-party sellers, undercutting their prices, and promoting their own products to the top of the search results. The Amazon Basics brand comes to mind in this example. Of all of the claims against these companies, this seems to be the most blatant, obvious example of abuse of a powerful position.
If the purpose of the questions (which were really speeches) was to make me dislike Amazon and their practices, the Representatives achieved their objectives.
Sundar Pichai of Alphabet started out strong and poised, but after around four hours he seemed to start floundering. His answers seemed less related to the questions and he was less articulate in his answers. They asked him a lot about their ad businesses with respect to third-party ad services, and about YouTube’s connection to those ad services. I’m not as knowledgeable about that side of the business so I didn’t form any strong opinions on that.
But I did find one thing ironic, and this wasn’t the only time this happened in the hearings. They questioned him about user privacy and online tracking and made accusations that Google did nefarious things with information in users’ emails. And in the next line of questioning, the Representatives accused them of doing something wrong when they instituted privacy practices in their browser that stopped online tracking. You can’t have it both ways!
Facebook’s reputation is already pretty bad, and the line of questioning from the Representatives didn’t do anything to improve things for them. Mark Zuckerberg played it as well as was possible I think but it was hard to see Facebook in a favorable light. I did find it odd that they gave Zuckerberg a hard time about buying Instagram and WhatsApp. It seems like the time for those questions would have been back when they got anti-trust approval for the purchases, not years after the purchases.
What was interesting about the questions though was they revealed some evidence suggesting Facebook actually threatened the CEO of Instagram that if they didn’t sell, Facebook would copy their capabilities and put them out of business. Not sure that’s been proven but it did give me pause.
A lot of the questions to Zuckerberg were about the wording in internal emails that Congress had revealed. My own biases might be showing here, but much of their questioning was about specific words that were used to try to increase market share for Facebook. Isn’t it the job of a CEO to try to gain market share? I can see that if they’re using their existing market dominance to crush competitors by forcing them to sell, that would be problematic but the focus often wavered from that point.
If I were a betting woman, I’d see Facebook as getting the title of “Most Likely to be Broken Up” after listening to the hearings.
I’ve been accused of being an Apple apologist and perhaps that is sometimes a correct characterization. I do wear my “EVER so slight Apple bias” on my sleeve, and I’m more likely to give them slack than other companies.
Tim Cook did not get roasted nearly as much as the other CEOs and I’m not sure why. He kept his cool throughout, being stone-faced as he gave deliberate if vague answers during the six words he was able to squeeze in after each question. I exaggerate a bit of course, and as the time wore on I noticed even the Congress Critters started to lose energy and sometimes even let the CEO being questioned finish a whole sentence!
Tim was asked extensively about the percentage cut that Apple takes from developers. Each time they brought it up, Tim managed to squeeze in that only 16% of apps pay any kind of cut to Apple, so 84% of the apps are being subsidized by that 16%. I think that’s an important thing to remember when people point at 30% being too high of a price. Maybe 30% is too high but it’s part of the equation of what it costs to support all developers with tools when only 16% are paying you anything.
When asked whether Apple could someday make their cut 50%, Tim explained that there is fierce competition for developers, pointing to opportunities with Android, Windows, and Xbox. It’s a double-edged sword for developers. On the one hand, they absolutely do have a choice, but if they really want to make money, it appears that the best game in town is the App Store.
I have a lot of thoughts about the App Store and I had Tom Merritt come on the NosillaCast a little while ago to talk through all of this so if you want to listen to all of my opinions on this, there’s a link in the shownotes right to our discussion.
There were some questions where I think Tim Cook was at best disingenuous with his answers. At one point he was asked, in the context of the 30% fee, whether all developers are treated the same. Tim said that they are treated the same if they meet the criteria. I think that was weasely because we know that Amazon is paying 15% when smaller companies are paying 30%. Perhaps meeting the same criteria means “as long as your company name is Amazon”?
But there was one really troubling part of the questioning that Tim Cook couldn’t answer. One Representative asked whether Apple has to go through the same rules for its apps as any developer, and Tim said yes. The Representative pointed out that the App Store Review Guidelines says that developers should not submit copycat apps but that it also says that Apple can copy developers apps. He went on to ask Mr. Cook, “Why one rule for developers and the opposite rule for Apple?” And Mr. Cook responded with “I’m not familiar with that rule but I can follow up with your office about that.”
My first thought was that the Representative must be wrong, that this sounds crazy. But he wasn’t wrong.
In Section 4.1 of the App Store Review Guidelines it says:
Come up with your own ideas. We know you have them, so make yours come to life. Don’t simply copy the latest popular app on the App Store, or make some minor changes to another app’s name or UI and pass it off as your own. In addition to risking an intellectual property infringement claim, it makes the App Store harder to navigate and just isn’t fair to your fellow developers.
That makes sense and there’s probably not anyone hearing this that would think this was a bad thing. But here’s the language from the Apple Developer Agreement Section 11 that brings together what the Representative was talking about:
11 Apple Independent Development. Nothing in this Agreement will impair Apple’s right to develop, acquire, license, market, promote or distribute products, software or technologies that perform the same or similar functions as, or otherwise compete with, any other products, software or technologies that you may develop, produce, market, or distribute.
The same exact language is in the Apple Developer Program License Agreement Section 14.4 dated June 22, 2020. I am completely floored by this and nothing in my apologist’s brain can excuse Apple for this.
Moving on, at another point they asked Tim a question that contradicted an earlier one. Remember how they were asking whether they treat all developers the same? Later in the questioning, they brought up a couple of companies who used to have in-person services, and so had zero cost to be in the App Store. These companies have now been forced to go online because of the pandemic, so they charge a subscription fee, and Apple is asking for their cut of the subscription fees.
The Representative suggested to Mr. Cook that this was profiting just because of the virus. It seems to me that if they didn’t charge the developers that had changed their model to include subscription fees, they’d be accused of not charging developers the same. Apple is really in a lose-lose situation with that one.
Even if Apple just decided to cut their margins and go to 20% (and 10% for the subsequent years of a subscription), that wouldn’t solve any of the other problems.
It seems to me that the only solution this committee would be happy with overall is if Apple allowed developers to put their apps on iOS without going through the App Store. I can picture Apple saying, “Ok fine. But users will have to sign an agreement that states that they can’t get any support from us ever again if they do that.” Can you imagine someone being able to call Apple and complain about their battery life and Apple having to diagnose some dodgy app? Not gonna happen.
I want to drop in one funny thing. Mark Zuckerberg does not have a very expressive face, and he speaks without blinking very much. This robotic-looking image has earned him jokes about his resemblance to Commander Data from Star Trek – The Next Generation. During the hearings, I couldn’t help but notice that this combined with the dropped frames in his feed caused the video of him to look like a very bad deep fake.
I captured a short sequence that illustrates the deep fake look, and comically he’s talking about AI right where I captured it.
The Subcommittee Chairman ended the sessions with: “These companies as exist today have monopoly power. Some need to be broken up, all need to be properly regulated and held accountable.” I’ll be on the edge of my seat awaiting their recommendations.