Is it possible to compete with Facebook, Google, Amazon, or Apple? How fair is the market’s environment?
In his book, Scott Galloway harshly criticizes the Four’s efforts to eliminate their competition, creating a landscape of big tech monopolies. While large, powerful companies always have a competitive edge, he argues that the Four wield their size and power unfairly to purposefully eliminate competitors from the market.
Read more to learn how the Four purchase competitors, force competitors out of business, and engage in other questionable tactics.
Elimination of Competition
Galloway explains that big tech monopolies try to eliminate competition in three ways: by purchasing competitors; by forcing competitors out of business; and by engaging in underhanded tactics such as breaking promises, borrowing, and stealing.
The Four are so massive and have so much capital that they can simply acquire any competitor that poses a threat to them, at prices smaller companies could never afford. A striking example of this is Facebook’s purchase of WhatsApp, a five-year-old instant messenger company with only 50 employees, for $20 billion.
(Shortform note: While the WhatsApp acquisition is notable for the high purchase price, Big Tech does dozens of smaller deals to acquire competitors every year. These acquisitions often escape notice because financial markets and antitrust laws only require companies to report their largest deals. Regulators say that this tactic of purchasing smaller companies allows Big Tech to eliminate potential competitors before they have a chance to grow and present a real threat.)
Forcing Competitors Out of Business
The Four can also afford to lose money in the process of forcing their competitors out of business, argues Galloway. For example, Amazon sustained a net loss of $5 billion on shipping fees in 2015 to incrementally reduce shipping times, but this was still a win for the company because other retailers didn’t have the capital to compete. Customers looking for lightning-fast shipping times took their business to Amazon.
In addition, the Four use their money and power to prevent competitors from entering the market in the first place by constructing infrastructure so massive that smaller companies can’t compete. For example, Amazon owns a vast network of warehouses and delivery vehicles, Google has server farms, and Facebook laid cable across the Atlantic.
|Predatory Pricing and Barriers to Entry|
Lowering prices and sustaining losses to win over customers can be aspects of healthy competition, but setting prices low in an effort to eliminate competitors is considered predatory pricing, which is generally illegal. Similarly, while barriers to entry are legal, they can lead to an illegal monopoly. Indeed, the House Judiciary Subcommittee on Antitrust found in 2020 that the high cost of building Amazon’s extensive logistics network would make it extremely difficult for any new delivery company to enter the market and effectively compete with Amazon.
In the same report, lawmakers also noted another method Amazon employs to force competitors out of business: first weakening them by undercutting prices, and then purchasing them. The Everything Store describes Amazon’s use of this tactic with e-commerce competitors Zappos and Diapers.com, which sell shoes and childcare products, respectively. Amazon cut prices on shoes and childcare products until these companies were bleeding money. Once they were weak and devalued, Amazon swooped in to acquire them.
Breaking Promises, Borrowing, and Stealing
Galloway says that the Four have managed to grow quickly in part by engaging in questionable tactics such as breaking promises, as well as borrowing and even stealing ideas from other companies or from users themselves.
For example, both Facebook and Google promised not to share information across their various products (such as from Facebook to Instagram, from WhatsApp to Facebook, from Gmail to Google, and so on), but they went back on their promises.
(Shortform note: One insidious effect of Facebook and Google breaking this type of promise is that users are often unaware that it’s happening. For example, after promising to operate WhatsApp as a standalone product upon its acquisition in 2014, Facebook began accessing WhatsApp user information and metadata in 2016. At the time, Facebook allowed users to opt out of some of this data sharing but gave them only 30 days to do so. Users who missed this window—or who’ve joined WhatsApp since then—have had their data shared with Facebook since 2016.)
According to Galloway, the Four have also borrowed and stolen ideas from other companies and from users:
- Facebook has stolen many features from Snapchat.
- Facebook gets users to generate its content, then it sells the content to advertisers, who then sell products to users. In short, users do the work to sell products to themselves.
- Third-party sellers can offer their products on Amazon, but if their product does well, Amazon makes its own version of the product. Unable to compete with Amazon, the original seller then goes out of business.
- Apple plays dirty against smaller competitors, such as Spotify. In 2016, Apple denied an update to the iOS Spotify app to promote its own music streaming app. Apple also imposes a 30% fee on Spotify when users sign up for Spotify on the app store.
|Big Tech’s Intellectual Property Violations|
Those who follow Big Tech have long noted tech companies’ proclivity for borrowing and stealing ideas from other companies. But to what extent are these actions considered illegal?
Under intellectual property law (which governs patents, copyrights, trademarks, and trade secrets), companies can borrow ideas from each other, but the way in which they execute these ideas is legally protected. For example, Google and Sonos can make similar Bluetooth speakers, but as the US International Trade Commission ruled in 2022, Google is prohibited from using the technology Sonos created for “multi-room audio,” which allows speakers in multiple rooms to synchronize to play music at the desired volume.
Critics of Big Tech argue that, even when government agencies and competing tech companies have the resources to challenge Big Tech’s intellectual property theft, large tech companies often see any legal judgments they’re required to pay as simply a cost of doing business. It’s less expensive for them to steal technology and risk paying for patent infringement than it is for them to license the technology from smaller companies in the first place. This has the added benefit, from Big Tech’s perspective, of limiting the growth of—and thus preventing threats from—smaller competitors.
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Here's what you'll find in our full The Four summary:
- A hard look at the success of Amazon, Apple, Facebook, and Google
- How The Four have had a profound and negative impact on our society
- How to make it in the cutthroat economy created by The Four