Monopolies
The GAFA monopoly

Are GAFA monopolies?

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Google is accused by the US Department of Justice and Amazon by the European Commission of protecting their monopolies. Apple and Facebook are also in questions. Let's play the GAFA monopoly.

Before answering to the question “Are the big giant techs Google, Apple, Facebook and Amazon monopolies”, let’s first recall the definition of a monopoly. A monopoly refers to when a company and its product offerings dominate a sector or industry [1]. Monopolies are bad as it comes with higher prices for consumers, less incentive to cut costs, to innovate and invest and less choices for consumers. The European Commission is fighting against companies that try to abuse of a dominant position (when a major player tries to squeeze competitors out of the market) or against agreements between companies that restrict competition [2]. In the US, some antitrust laws are existing to protect the consumers [3]. In the past, the breakup of AT&T by President Reagan in the 1980s gave birth to the “baby bells”. On the other hand, Microsoft was never broken up by any antitrust case.

Now that the scene is set, let’s see what is reproached to Google, Amazon, Apple and Facebook (yes, I have changed the order vs. GAFA acronym to check if you are following).

Google (and Apple) in the US

The US Justice Department accused Google of illegally protecting its monopoly

In 64 pages, the US Justice Department and 11 US states accused Google of “unlawfully maintaining monopolies” in the markets of search and search advertising. Google has made some exclusionary agreements to secure the default choice of Google as the search engine. The document is citing Apple, LG, Motorola, Samsung and major wireless carriers such as
AT&T, T-Mobile and Verizon.

The time has come to stop Google’s anticompetitive conduct and restore competition

US Justice Department

In the US, the choice of search engines is very limited: Google, Bing from Microsoft and DuckDuckGo (Yahoo! is now using Bing). The search advertising business the US is representing $50 billion per year. Google is representing 88,4% of search market share in October, 2020, Bing and Yahoo are representing together 9,4% and DuckDuckGo only 1,8%.

Infographics by Serge Baccou for Digital Tribune based on StatCounter data [6]

Those figures are even getting up to 95% for Google market share of all mobile search queries, with 60% of US mobile search traffic comes from iOS devices. Google can count on the agreements made with Apple to have Google as the preset for iOS, Safari and Siri. And Google paid Apple a lot for this agrement: for the US department of Justice, this is estimated from $8 to 12 billion, which is representing between 15 and 20% of Apple’s worldwide net income. Obviously, Google can also count on its own products to literally kill any kind of competition: Android Operating System, Pixel mobiles and Chrome browser.

The lawsuit will probably last several years. My guess is that Apple will have to find another solution than just proposing Google search everywhere and will maybe start to develop its own search engine. But will than abuse of their own dominant position on the market of smartphones on the search market? I am entering into a recursive loop…

Amazon in the EU (and in the US)

Amazon is accused by the European Commission to violate the European rules of competition

The European Commission suspects that Amazon is promoting 3rd party vendors that are using its own logistics services. The Commission is also saying that Amazon is using non-public independent seller data to the benefit of Amazon’s own retail business [7] [8]. In the US, the Federal Trade Commission (FTC) is also investigating on the dual role that Amazon is playing as a merchant and a marketplace.

Some numbers to understand Amazon market share [9]:

  • Amazon has “only” 1% share of global retail
  • Amazon market share of the US retail is between 5% and 10%
  • Amazon accounts for 40% of e-commerce in the US
  • Amazon has more than 50% of US book sales
  • Amazon has 75% of e-book sales in the US

Clearly, the last examples show some situation of monopolies.

Apple

In the US, Apple has more than the half of the mobile installed base

Apple market shares can be described has followed [9]:

  • 15% of all the phones sold on Earth each year
  • 25% of all the smartphones actually in use today are iPhones
  • In the US, Apple has more than 50% of the mobile installed base
  • As said before, iOS is representing 60% of the mobile search in the US
  • And of course, Apple is also controlling enterily the iOS app store

Clearly, on some markets, Apple is having dominant positions. In March 2019, Spotify, filed a complaint about the two rules in Apple’s license agreements with developers and the associated App Store Review Guidelines and their impact on competition for music streaming services. The EU Comission has opened an investigation into Apple’s App Store rules [10].

Facebook

Facebook is representing 71.8% of all social media visits in the world

Facebook accounted for 71.8% of all social media site visits in the world in October 2020 vs. 12,3% for Pinterest, its second competitor. Twitter, at the 3rd position is credited of 8.6% [11]. Another example of a monopoly.

Infographics by Serge Baccou for Digital Tribune based on StatCounter data [11]

Conclusion

GAFA are clearly in some monopolistic situations and some investigations are done against them by antitrust authorities in both the US and in Europe. This situation has created tech giants that are now under the spotlight of public authorities and that the population is starting to question their power and wealth. It is thus more than likely that more trials and more anti-trust laws will come in the future but no one must underestimate the force of their lobbies. Still, those uncontrolled giant must be regulated. This may take a decade.

Sources

[1] Monopoly definition, Investopedia

A history of US Monopolies, Investopedia

[2] What is competition policy?, European Commission

[3] The Antitrust Laws, Federal Trade Commission (FTC)

[4] U.S. Accuses Google of Illegally Protecting Monopoly, New York Times, October, 20 2020

[5] Read the Antitrust Lawsuit Against Google, New York Times, October, 10 2020, 64 pages

[6] Search Engine Market Share in the USA, StatCounter, October, 2020

[7] Amazon, accusé d’avoir enfreint les règles européennes de concurrence, visé par deux enquêtes de Bruxelles, Le Monde, November, 10 2020 (French)

[8] Antitrust: Commission sends Statement of Objections to Amazon for the use of non-public independent seller data and opens second investigation into its e-commerce business practices, The European Commission, November, 10 2020

[9] Market definitions and tech monopolies, Benedict Evans, October, 31 2020

[10] Antitrust: Commission opens investigations into Apple’s App Store rules, The European Commission, June, 16 2020

[11] Social Media Stats Worldwide, StatCounter, October, 2020

Photo credits

Photo by BP Miller on Unsplash

Photo by Mitchell Luo on Unsplash

Photo by Xavier Wendling on Unsplash

Photo by Brett Jordan on Unsplash

This Post Has One Comment

  1. Philippe Andre

    Anti trust laws has to take into account one characteristi c of digital service: there is a tendancy fir the “winner to take it all” . These types of services bring more and more value to users as they are more used by more and more people. It is also part of the business model of Gafa where more users’ data means more business (thru advertisement for example). So, there is somehow a “conjonction” of interest between the Gafa and the users to this monopolistic or hegemonic position. Difficult equation to solve!

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