[House Prints 117-8, Part I]
[From the U.S. Government Publishing Office]





 117 Congress }                                       { CP 117-8
                   COMMITTEE PRINT REPORT                    
 2d Session   }                                       {  PART I
                                                        
_______________________________________________________________________

                                     


                    INVESTIGATION OF COMPETITION IN
                            DIGITAL MARKETS

                               ----------                              

               MAJORITY STAFF REPORT AND RECOMMENDATIONS

                       SUBCOMMITTEE ON ANTITRUST,
                   COMMERCIAL, AND ADMINISTRATIVE LAW
                  OF THE COMMITTEE ON THE JUDICIARY OF
                      THE HOUSE OF REPRESENTATIVES

                                 PART I

                               ----------                              

           JERROLD NADLER, CHAIR, COMMITTEE ON THE JUDICIARY

         DAVID N. CICILLINE, CHAIR, SUBCOMMITTEE ON ANTITRUST,
                   COMMERCIAL, AND ADMINISTRATIVE LAW
                   
                   
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


                    ORIGINALLY RELEASED OCTOBER 2020
                    ADOPTED BY COMMITTEE APRIL 2021
                          PUBLISHED JULY 2022
                          
                          
                          
                          
                          
                                    


            INVESTIGATION OF COMPETITION IN DIGITAL MARKETS
                                 PART I
                                 
                                 
                                 
                                 
17 Congress }                                                {   CP 117-8
                          COMMITTEE PRINT REPORT 
 2d Session }                                                {   PART I
                                                                 
_______________________________________________________________________

                                     

 
                    INVESTIGATION OF COMPETITION IN

                            DIGITAL MARKETS

                               __________

               MAJORITY STAFF REPORT AND RECOMMENDATIONS

                       SUBCOMMITTEE ON ANTITRUST,

                   COMMERCIAL, AND ADMINISTRATIVE LAW

                  OF THE COMMITTEE ON THE JUDICIARY OF

                      THE HOUSE OF REPRESENTATIVES

                                 PART I

                               __________

           JERROLD NADLER, CHAIR, COMMITTEE ON THE JUDICIARY

         DAVID N. CICILLINE, CHAIR, SUBCOMMITTEE ON ANTITRUST,
                   COMMERCIAL, AND ADMINISTRATIVE LAW
                   

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


                    ORIGINALLY RELEASED OCTOBER 2020
                    ADOPTED BY COMMITTEE APRIL 2021
                          PUBLISHED JULY 2022
                          
                                    
                               ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 47-832          WASHINGTON : 2022      



                             MAJORITY STAFF

                 SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,


                         AND ADMINISTRATIVE LAW


                               SLADE BOND
                             Chief Counsel

          LINA KHAN                        AMANDA LEWIS
             Counsel                     Counsel on Detail

    PHILLIP BERENBROICK                MARY HELEN WIMBERLY
             Counsel                   Counsel on Detail

         ANNA LENHART                  JOSEPH VAN WYE
            Technologist              Legislative Aide

    JOSEPH EHRENKRANTZ                CATHERINE LARSEN
          Special Assistant           Special Assistant


          
    
           
                       COMMITTEE ON THE JUDICIARY


 PERRY APELBAUM                        AMY RUTKIN        JOHN DOTY
Staff Director and Chief             Chief of Staff     Senior Advisor
        Counsel
                                     JOHN WILLIAMS     DAVID GREENGRASS
   AARON HILLER                      Parliamentarian     Senior Counsel


 Deputy Chief Counsel               DANIEL SCHWARZ       ARYA HARIHARAN
                                   Director of Strategic Deputy Chief Oversight
SHADAWN REDDICK-                    Communications           Counsel
        SMITH
    Communications                   MOH SHARMA          MATTHEW ROBINSON
        Director                  Director of Member        Counsel
        
                                Services and Outreach   KAYLA HAMEDI
  JESSICA PRESLEY                  & Policy Advisor     Deputy Press Secretary
    Director of Digital
        Strategy

MADELINE STRASSER
       Chief Clerk
     
      



      
    NATHAN ADAL                BENJAMIN FEIS      ARMAN RAMNATH
      Legal Fellow             Legal Fellow       Legal Fellow

                                                 REED SHOWALTER
    KARNA ADAM                CORY GORDON         Legal Fellow
    Legal Fellow              Legal Fellow
                               
                              ETHAN GURWITZ          JOEL THOMPSON
  WILLIAM BEKKER               Legal Fellow          
                                                     Legal Fellow
      Legal Fellow

    KYLE BIGLEY                 DOMENIC POWELL       KURT WALTERS
      Legal Fellow                                   Legal Fellow
                                Legal Fellow
  MICHAEL ENSEKI-                                   KRYSTALYN WEAVER
        FRANK                                       Legal Fellow 
      Legal Fellow
      
 
                            C O N T E N T S

                                 PART I

                              ----------                              
I. INTRODUCTION..................................................     1
  A. Chairs' Foreword............................................     1
  B. Executive Summary...........................................     4
    1. Subcommittee's Investigation..............................     4
    2. Findings..................................................     5
    3. Recommendations...........................................    13

II. THE INVESTIGATION OF COMPETITION IN DIGITAL MARKETS..........    14
  A. Requests for Information and Submissions....................    14
    1. First-Party Requests for Information......................    14
    2. Process for Obtaining Responses to First-Party Requests...    18
    3. Third-Party Requests for Information......................    18
    4. Antitrust Agencies Requests for Information...............    20
  B. Hearings....................................................    21
  C. Roundtables.................................................    23
  D. Prior Investigations........................................    24

III. BACKGROUND..................................................    27
  A. Overview of Competition in Digital Markets..................    27
    1. The Role of Competition Online............................    27
    2. Market Structure..........................................    28
    3. Barriers to Entry.........................................    30
  B. Effects of Platform Market Power............................    35
    1. Innovation and Entrepreneurship...........................    35
    2. Privacy and Data Protection...............................    39
    3. The Free and Diverse Press................................    44
    4. Political and Economic Liberty............................    58

IV. MARKETS INVESTIGATED.........................................    61
  A. Online Search...............................................    61
  B. Online Commerce.............................................    68
  C. Social Networks and Social Media............................    71
    1. Social Networks Are Distinguishable from Social Media.....    73
    2. Market Concentration......................................    74
  D. Mobile App Stores...........................................    75
  E. Mobile Operating Systems....................................    82
  F. Digital Mapping.............................................    88
  G. Cloud Computing.............................................    91
  H. Voice Assistant.............................................   100
  I. Web Browsers................................................   105
  J. Digital Advertising.........................................   107

V. DOMINANT ONLINE PLATFORMS.....................................   110
  A. Facebook....................................................   110
    1. Overview..................................................   110
    2. Social Networking.........................................   111
    3. Digital Advertising.......................................   141
  B. Google......................................................   144
    1. Overview..................................................   144
    2. Search....................................................   146
    3. Digital Advertisements....................................   173
    4. Android and Google Play Store.............................   177
    5. Chrome....................................................   186
    6. Maps......................................................   193
    7. Cloud.....................................................   205
  C. Amazon......................................................   207
    1. Overview..................................................   207
    2. Amazon.com................................................   212
    3. Fulfillment and Delivery..................................   254
    4. Alexa's Internet of Things Ecosystem......................   256
    5. Amazon Web Services.......................................   265
  D. Apple.......................................................   277
    1. Overview..................................................   277
    2. iOS and the App Store.....................................   281
    3. Siri Intelligent Voice Assistant..........................   314

VI. RECOMMENDATIONS..............................................   317
  A. Restoring Competition in the Digital Economy................   318
    1. Reduce Conflicts of Interest Through Structural 
      Separations and Line of Business Restrictions..............   319
    2. Implement Rules to Prevent Discrimination, Favoritism, and 
      Self-Preferencing..........................................   322
    3. Promote Innovation Through Interoperability and Open 
      Access.....................................................   324
    4. Reduce Market Power Through Merger Presumptions...........   326
    5. Create an Even Playing Field for the Free and Diverse 
      Press......................................................   328
    6. Prohibit Abuse of Superior Bargaining Power and Require 
      Due Process................................................   329
  B. Strengthening the Antitrust Laws............................   330
    1. Restore the Antimonopoly Goals of the Antitrust Laws......   330
    2. Invigorate Merger Enforcement.............................   331
    3. Rehabilitate Monopolization Law...........................   334
    4. Additional Measures to Strengthen the Antitrust Laws......   337
  C. Strengthening Antitrust Enforcement.........................   337
    1. Congressional Oversight...................................   337
    2. Agency Enforcement........................................   339
    3. Private Enforcement.......................................   341

VII. APPENDIX: MERGERS AND ACQUISITIONS BY DOMINANT PLATFORMS....   343
  A. Amazon......................................................   344
  B. Apple.......................................................   346
  C. Facebook....................................................   349
  D. Google......................................................   351

VIII. APPENDIX: ADDITIONAL VIEWS OF MEMBERS OF JUDICIARY 
  COMMITTEE......................................................   357
  A. The Honorable Eric Swalwell.................................   358
  B. The Honorable Zoe Lofgren...................................   359
  C. The Honorable Jim Jordan....................................   362

                                PART II

                              ----------                              

IX. APPENDIX: TRANSCRIPTS OF HEARINGS IN ``ONLINE PLATFORMS AND 
  MARKET POWER'' SERIES
  A. Online Platforms and Market Power, Part 1: The Free and 
    Diverse Press................................................   367
  B. Online Platforms and Market Power, Part 2: Innovation and 
    Entrepreneurship.............................................   589
  C. Online Platforms and Market Power, Part 3: The Role of Data 
    and Privacy in Competition...................................  1204
  D. Online Platforms and Market Power, Part 4: Perspectives of 
    the Antitrust Agencies.......................................  1419

                                PART III

                              ----------                              

  E. Online Platforms and Market Power, Part 5: Competitors in 
    the Digital Economy..........................................  1573
  F. Online Platforms and Market Power, Part 6: Examining the 
    Dominance of Amazon, Apple, Facebook, and Google.............  1709
  G. Proposals to Strengthen the Antitrust Laws and Restore 
    Competition Online...........................................  2695

                            I. INTRODUCTION

                          A. Chairs' Foreword

    In June 2019, the Committee on the Judiciary initiated a 
bipartisan investigation into the state of competition online, 
spearheaded by the Subcommittee on Antitrust, Commercial, and 
Administrative Law. As part of a top-to-bottom review of the 
market, the Subcommittee examined the dominance of Amazon, 
Apple, Facebook, and Google, and their business practices to 
determine how their power affects our economy and our 
democracy. Additionally, the Subcommittee performed a review of 
existing antitrust laws, competition policies, and current 
enforcement levels to assess whether they are adequate to 
address market power and anticompetitive conduct in digital 
markets.
    Over the course of our investigation, we collected 
extensive evidence from these companies as well as from third 
parties--totaling nearly 1.3 million documents. We held seven 
hearings to review the effects of market power online--
including on the free and diverse press, innovation, and 
privacy--and a final hearing to examine potential solutions to 
concerns identified during the investigation and to inform this 
Report's recommendations.
    A year after initiating the investigation, we received 
testimony from the Chief Executive Officers of the investigated 
companies: Jeff Bezos, Tim Cook, Mark Zuckerberg, and Sundar 
Pichai. For nearly six hours, we pressed for answers about 
their business practices, including about evidence concerning 
the extent to which they have exploited, entrenched, and 
expanded their power over digital markets in anticompetitive 
and abusive ways. Their answers were often evasive and non-
responsive, raising fresh questions about whether they believe 
they are beyond the reach of democratic oversight.
    Although these four corporations differ in important ways, 
studying their business practices has revealed common problems. 
First, each platform now serves as a gatekeeper over a key 
channel of distribution. By controlling access to markets, 
these giants can pick winners and losers throughout our 
economy. They not only wield tremendous power, but they also 
abuse it by charging exorbitant fees, imposing oppressive 
contract terms, and extracting valuable data from the people 
and businesses that rely on them. Second, each platform uses 
its gatekeeper position to maintain its market power. By 
controlling the infrastructure of the digital age, they have 
surveilled other businesses to identify potential rivals, and 
have ultimately bought out, copied, or cut off their 
competitive threats. And, finally, these firms have abused 
their role as intermediaries to further entrench and expand 
their dominance. Whether through self-preferencing, predatory 
pricing, or exclusionary conduct, the dominant platforms have 
exploited their power in order to become even more dominant.
    To put it simply, companies that once were scrappy, 
underdog startups that challenged the status quo have become 
the kinds of monopolies we last saw in the era of oil barons 
and railroad tycoons. Although these firms have delivered clear 
benefits to society, the dominance of Amazon, Apple, Facebook, 
and Google has come at a price. These firms typically run the 
marketplace while also competing in it--a position that enables 
them to write one set of rules for others, while they play by 
another, or to engage in a form of their own private quasi 
regulation that is unaccountable to anyone but themselves.
    The effects of this significant and durable market power 
are costly. The Subcommittee's series of hearings produced 
significant evidence that these firms wield their dominance in 
ways that erode entrepreneurship, degrade Americans' privacy 
online, and undermine the vibrancy of the free and diverse 
press. The result is less innovation, fewer choices for 
consumers, and a weakened democracy.
    Nearly a century ago, Supreme Court Justice Louis Brandeis 
wrote: ``We must make our choice. We may have democracy, or we 
may have wealth concentrated in the hands of a few, but we 
cannot have both.'' Those words speak to us with great urgency 
today.
    Although we do not expect that all of our Members will 
agree on every finding and recommendation identified in this 
Report, we firmly believe that the totality of the evidence 
produced during this investigation demonstrates the pressing 
need for legislative action and reform. These firms have too 
much power, and that power must be reined in and subject to 
appropriate oversight and enforcement. Our economy and 
democracy are at stake.
    As a charter of economic liberty, the antitrust laws are 
the backbone of open and fair markets. When confronted by 
powerful monopolies over the past century--be it the railroad 
tycoons and oil barons or Ma Bell and Microsoft--Congress has 
acted to ensure that no dominant firm captures and holds undue 
control over our economy or our democracy. We face similar 
challenges today. Congress--not the courts, agencies, or 
private companies--enacted the antitrust laws, and Congress 
must lead the path forward to modernize them for the economy of 
today, as well as tomorrow. Our laws must be updated to ensure 
that our economy remains vibrant and open in the digital age.
    Congress must also ensure that the antitrust agencies 
aggressively and fairly enforce the law. Over the course of the 
investigation, the Subcommittee uncovered evidence that the 
antitrust agencies failed, at key occasions, to stop 
monopolists from rolling up their competitors and failed to 
protect the American people from abuses of monopoly power. 
Forceful agency action is critical.
    Lastly, Congress must revive its tradition of robust 
oversight over the antitrust laws and increased market 
concentration in our economy. In prior Congresses, the 
Subcommittee routinely examined these concerns in accordance 
with its constitutional mandate to conduct oversight and 
perform its legislative duties. As a 1950 report from the then-
named Subcommittee on the Study of Monopoly Power described its 
mandate: ``It is the province of this subcommittee to 
investigate factors which tend to eliminate competition, 
strengthen monopolies, injure small business, or promote undue 
concentration of economic power; to ascertain the facts, and to 
make recommendations based on those findings.'' \1\
---------------------------------------------------------------------------
    \1\ H. Rep. No. 82-255, at 2 (1951) (Aluminum: Report of the 
Subcomm. on Study of Monopoly Power of the H. Comm. on the Judiciary).
---------------------------------------------------------------------------
    Similarly, the Subcommittee has followed the facts before 
it to produce this Report, which is the product of a 
considerable evidentiary and oversight record. This record 
includes: 1,287,997 documents and communications; testimony 
from 38 witnesses; a hearing record that spans more than 1,800 
pages; 38 submissions from 60 antitrust experts from across the 
political spectrum; and interviews with more than 240 market 
participants, former employees of the investigated platforms, 
and other individuals totaling thousands of hours. The 
Subcommittee has also held hearings and roundtables with 
industry and government witnesses, consultations with subject-
matter experts, and a careful--and at times painstaking--review 
of large volumes of evidence provided by industry participants 
and regulators.
    In light of these efforts, we extend our deep gratitude to 
the staff of the Subcommittee and Full Committee for their 
diligent work in this regard, particularly during the COVID-19 
pandemic and other challenging circumstances over the past 
year.
    Finally, as an institutional matter, we close by noting 
that the Committee's requests for information from agencies and 
any non-public briefings were solely for the purpose of 
carrying out our constitutionally based legislative and 
oversight functions. In particular, the information requested 
was vital to informing our assessment of whether existing 
antitrust laws are adequate for tackling current competition 
problems, as well as in uncovering potential reasons for under-
enforcement. The Report is based on the documents and 
information collected during its investigation, and the 
Committee fully respects the separate and independent 
decisional processes employed by enforcement authorities with 
respect to such matters.
    Although the companies provided substantial information and 
numerous documents to the Subcommittee, they declined to 
produce certain critical information and crucial documents we 
requested. The material withheld was identified by the 
Committee as relevant to the investigation and included, 
primarily, two categories of information: (1) documents the 
companies claimed were protected by common law privileges; and 
(2) documents that were produced to antitrust authorities in 
ongoing investigations, or that related to the subject matter 
of these ongoing investigations.
    Institutionally, we reject any argument that the mere 
existence of ongoing litigation prevents or prohibits Congress 
from obtaining information relevant to its legislative and 
oversight prerogatives. We strongly disagree with the assertion 
that any requests for such materials and any compliance with 
those requests interfere with the decisional processes in 
ongoing investigations. Furthermore, while Congress is fully 
subject to constitutional protections, we cannot agree that we 
are bound by common law privileges as asserted by the 
companies. While we determined that insufficient time exists to 
pursue these additional materials during this Congress, the 
Committee expressly reserves the right to invoke other 
available options, including compulsory process, to obtain the 
requested information in the future.

                          B. Executive Summary

1. Subcommittee's Investigation
    On June 3, 2019, the House Judiciary Committee announced a 
bipartisan investigation into competition in digital 
markets,\2\ led by the Subcommittee on Antitrust, Commercial, 
and Administrative Law.\3\ The purpose of the investigation was 
to: (1) document competition problems in digital markets; (2) 
examine whether dominant firms are engaging in anticompetitive 
conduct; and (3) assess whether existing antitrust laws, 
competition policies, and current enforcement levels are 
adequate to address these issues.\4\ The Committee initiated 
the investigation in response to broad-ranging investigative 
reporting, and activity by policymakers and enforcers, that 
raised serious concerns about the platforms' incentives and 
ability to harm the competitive process.\5\
---------------------------------------------------------------------------
    \2\ Press Release, H. Comm. on the Judiciary, House Judiciary 
Committee Launches Bipartisan Investigation into Competition in Digital 
Markets (June 3, 2019), https://judiciary.house.gov/news/press-
releases/house-judiciary-committee-launches-bipartisan-investigation-
competition-digital.
    \3\ We extend our sincere thanks to Peter Karafotas, Rich Luchette, 
and Francis Grubar, in the Office of Congressman David N. Cicilline, 
for their relentless work and selfless devotion throughout the 
investigation. We would also like to recognize the following staff for 
their significant contributions during the investigation: Dick Meltzer, 
Michael Tecklenburg, Kenneth DeGraff, and Victoria Houed in the Office 
of the Speaker of the U.S. House of Representatives; Daniel Flores, 
former Minority Chief Counsel, Subcommittee on Antitrust, Commercial, 
and Administrative Law; Danny Johnson, former Minority Counsel, 
Committee on the Judiciary; Jacqui Kappler, Legislative Director, the 
Honorable Henry ``Hank'' Johnson, Jr.; Devon Ombres, Legislative 
Counsel, the Honorable Jamie Raskin; Elly Kugler, Senior Counsel, the 
Honorable Pramila Jayapal; Jennifer Chan, Legislative Director, the 
Honorable Pramila Jayapal; Stuart Styron, Senior Legislative Assistant, 
the Honorable Val Demings; Keanu Rivera, Legislative Assistant, the 
Honorable Mary Gay Scanlon; Lindsey Garber, Legislative Counsel, the 
Honorable Joe Neguse; Miya Patel, former Legislative Assistant, the 
Honorable Joe Neguse; and Natalie Knight, Legislative Counsel, the 
Honorable Lucy McBath. Staff would also like to thank Matthew Bisenius 
in the Office of Congressman F. James Sensenbrenner, as well as Garrett 
Ventry in the Office of Congressman Ken Buck, for their commitment to 
bipartisan cooperation. We also thank Hillary Marston, Legal Intern for 
the Committee on the Judiciary, for her assistance. Finally, we thank 
Clare Cho and Mari Lee at the Congressional Research Service for their 
support, as well as graphics and data visualization used within this 
Report.
    \4\ Press Release, H. Comm. on the Judiciary, House Judiciary 
Committee Launches Bipartisan Investigation into Competition in Digital 
Markets (June 3, 2019), https://judiciary.house.gov/news/press-
releases/house-judiciary-committee-launches-bipartisan-investigation-
competition-digital.
    \5\ See, e.g., Meehreen Khan, EU Targets Tech Giants over Unfair 
Business Practices, Fin. Times (Apr. 25, 2018), https://www.ft.com/
content/d7228bec-4879-11e8-8ee8-cae73aab7ccb; Adam Satariano, Google Is 
Fined $57 Million Under Europe's Data Privacy Law, N.Y. Times (Jan. 21, 
2019), https://www.nytimes.com/2019/01/21/technology/google-europe-
gdpr-fine. html; Richard Waters et al., Global Regulators' Net Tightens 
Around Big Tech, Fin. Times (June 5, 2019), https://www.ft.com/content/
973f8b36-86f0-11e9-97ea-05ac2431f453.
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    As part of the investigation, the Subcommittee held seven 
oversight hearings that provided Members of the Subcommittee 
with an opportunity to examine the state of competition in 
digital markets and the adequacy of existing antitrust laws. A 
diverse group of witnesses offered testimony on topics related 
to the effects of market power on the free and diverse press, 
on innovation, and on privacy. Other witnesses who testified 
included executives from businesses with concerns about the 
dominance of the investigated firms. The hearings also provided 
an opportunity for key executives from Facebook, Google, 
Amazon, and Apple--including the Chief Executive Officers of 
these firms--to address evidence that was uncovered during the 
investigation in a public-facing venue. After each of the 
hearings, Members of the Subcommittee submitted questions for 
the record (QFRs) to the witnesses.
    The Committee requested information from the dominant 
platforms, from market participants, from the Federal antitrust 
agencies, and from other relevant parties, for the purpose of 
obtaining information that was not otherwise publicly available 
but was important to assembling a comprehensive record. The 
Committee also sent requests for submissions to various experts 
in the field, including academics, representatives of public 
interest groups, and practicing antitrust lawyers. The 
responses to these requests were indispensable to staff's 
ability to complete this Report and its recommendations for 
congressional oversight of the antitrust agencies and 
legislative action.
    This Report is intended to provide policymakers, antitrust 
enforcers, market participants, and the public with a 
comprehensive understanding of the state of competition in the 
online marketplace. The Report also provides recommendations 
for areas of legislative activity to address the rise and abuse 
of market power in the digital economy, as well as areas that 
warrant additional congressional attention.

2. Findings
    (a) Overview. The open internet has delivered significant 
benefits to Americans and the U.S. economy. Over the past few 
decades, it has created a surge of economic opportunity, 
capital investment, and pathways for education. The COVID-19 
pandemic has underscored the importance of internet access that 
is affordable, competitive, and widely available for workers, 
families, and businesses.
    The online platforms investigated by the Subcommittee--
Amazon, Apple, Facebook, and Google--also play an important 
role in our economy and society as the underlying 
infrastructure for the exchange of communications, information, 
and goods and services. As of September 2020, the combined 
valuation of these platforms is more than $5 trillion--more 
than a third of the value of the S&P 100. As we continue to 
shift our work, commerce, and communications online, these 
firms stand to become even more interwoven into the fabric of 
our economy and our lives.
    Over the past decade, the digital economy has become highly 
concentrated and prone to monopolization. Several markets 
investigated by the Subcommittee--such as social networking, 
general online search, and online advertising--are dominated by 
just one or two firms. The companies investigated by the 
Subcommittee--Amazon, Apple, Facebook, and Google--have 
captured control over key channels of distribution and have 
come to function as gatekeepers. Just a decade into the future, 
30 percent of the world's gross economic output may lie with 
these firms, and just a handful of others.\6\
---------------------------------------------------------------------------
    \6\ Catherine Fong et al., Prime Day and the Broad Reach of 
Amazon's Ecosystem, McKinsey & Co. (Aug. 2, 2019), https://
www.mckinsey.com/business-functions/marketing-and-sales/our-insights/
prime-day-and-the-broad-reach-of-amazons-ecosystem (``This ecosystem 
strategy in particular has significant competitive implications because 
McKinsey estimates that in ten years, 30 percent of the world's gross 
economic output will be from companies that operate a network of 
interconnected businesses, such as those run by Amazon, Alibaba, 
Google, and Facebook.'').
---------------------------------------------------------------------------
    In interviews with the Subcommittee, numerous businesses 
described how dominant platforms exploit their gatekeeper power 
to dictate terms and extract concessions that no one would 
reasonably consent to in a competitive market. Market 
participants indicated that their dependence on these 
gatekeepers to access users and markets requires concessions 
and demands that carry significant economic harm, but that are 
``the cost of doing business'' given the lack of options.
    This significant and durable market power is due to several 
factors, including a high volume of acquisitions by the 
dominant platforms. Together, the firms investigated by the 
Subcommittee have acquired hundreds of companies just in the 
last ten years. In some cases, a dominant firm evidently 
acquired nascent or potential competitors to neutralize a 
competitive threat or to maintain and expand the firm's 
dominance. In other cases, a dominant firm acquired smaller 
companies to shut them down or discontinue underlying products 
entirely--transactions aptly described as ``killer 
acquisitions.'' \7\
---------------------------------------------------------------------------
    \7\ Colleen Cunningham, Florian Ederer & Song Ma, Killer 
Acquisitions 1 (Yale Sch. of Mgmt., Working Paper, Mar. 2019), https://
perma.cc/L6YL-YL8K (describing the practice of ``acquir[ing] innovative 
targets solely to discontinue the target's innovative projects and 
preempt future competition''). See also C. Scott Hemphill & Tim Wu, 
Nascent Competitors, 168 U. Pa. L. Rev. 1879, 1880 (2020), https://
perma.cc/62HH-34ZL (``A nascent competitor is a firm whose prospective 
innovation represents a serious future threat to an incumbent.'').
---------------------------------------------------------------------------
    In the overwhelming number of cases, the antitrust agencies 
did not request additional information and documentary material 
under their pre-merger review authority in the Clayton Act to 
examine whether the proposed acquisition may substantially 
lessen competition or tend to create a monopoly if allowed to 
proceed as proposed. For example, of Facebook's nearly 100 
acquisitions, the Federal Trade Commission (FTC) engaged in an 
extensive investigation of just one acquisition: Facebook's 
purchase of Instagram in 2012.
    During the investigation, the Subcommittee found evidence 
of monopolization and monopoly power. For example, the strong 
network effects associated with Facebook has tipped the market 
toward monopoly such that Facebook competes more vigorously 
among its own products--Facebook, Instagram, WhatsApp, and 
Messenger--than with actual competitors.
    As demonstrated during a series of hearings held by the 
Subcommittee and as detailed in this Report,\8\ the online 
platforms' dominance carries significant costs. It has 
diminished consumer choice, eroded innovation and 
entrepreneurship in the U.S. economy, weakened the vibrancy of 
the free and diverse press, and undermined Americans' privacy.
---------------------------------------------------------------------------
    \8\ See infra Section V.
---------------------------------------------------------------------------
    These concerns are shared by the majority of Americans. On 
September 24, 2020, Consumer Reports (CR) published a survey 
titled ``Platform Perceptions: Consumer Attitudes on 
Competition and Fairness in Online Platforms.'' \9\ Among its 
findings:
---------------------------------------------------------------------------
    \9\ Consumer. Reps., Platform Perceptions: Consumer Attitudes on 
Competition and Fairness in Online Platforms (2020), https://
advocacy.consumerreports.org/wp-content/uploads/2020/09/FINAL-CR-
survey-report.platform-perceptions-consumer-attitudes-.september-
2020.pdf.

      LEighty-five percent of Americans are concerned--
either very concerned or somewhat concerned--about the amount 
of data online platforms store about them, and eighty-one 
percent are concerned that platforms are collecting and holding 
this data in order to build out more comprehensive consumer 
profiles.
      LFifty-eight percent are not confident that they 
are getting objective and unbiased search results when using an 
online platform to shop or search for information.
      LSeventy-nine percent say Big Tech mergers and 
acquisitions unfairly undermine competition and consumer 
choice.\10\
---------------------------------------------------------------------------
    \10\ Id.
---------------------------------------------------------------------------
      LSixty percent support more government regulation 
of online platforms, including mandatory interoperability 
features, to make it easier for users to switch from one 
platform to another without losing important data or 
connections.

    (b) Facebook. Facebook has monopoly power in the market for 
social networking. Internal communications among the company's 
Chief Executive Officer, Mark Zuckerberg, and other senior 
executives indicate that Facebook acquired its competitive 
threats to maintain and expand its dominance. For example, a 
senior executive at the company described its acquisition 
strategy as a ``land grab'' to ``shore up'' Facebook's 
position,\11\ while Facebook's CEO said that Facebook ``can 
likely always just buy any competitive startups,'' \12\ and 
agreed with one of the company's senior engineers that 
Instagram was a threat to Facebook.\13\
---------------------------------------------------------------------------
    \11\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045388 (Feb. 18, 2014), https://judiciary.house.gov/
uploadedfiles/0004538800045389.pdf (``[W]e are going to spend 5-10% of 
our market cap every couple years to shore up our position . . . I hate 
the word `land grab' but I think that is the best convincing argument 
and we should own that.''). 
    \12\ Id. at FB-HJC-ACAL-00067600 (Apr. 9, 2012), https://
judiciary.house.gov/uploadedfiles/0006760000067601.pdf.
    \13\ Id.
---------------------------------------------------------------------------
    Facebook's monopoly power is firmly entrenched and unlikely 
to be eroded by competitive pressure from new entrants or 
existing firms. In 2012, the company described its network 
effects as a ``flywheel'' in an internal presentation prepared 
for Facebook at the direction of its Chief Financial 
Officer.\14\ This presentation also said that Facebook's 
network effects get ``stronger every day.'' \15\
---------------------------------------------------------------------------
    \14\ Id. at FB-HJC-ACAL-00049006 (Apr. 18, 2012) (on file with 
Comm.) (``Network effects make it very difficult to compete with us--In 
every country we've tipped we are still winning.'').
    \15\ Id.
---------------------------------------------------------------------------
    More recent documents produced during the investigation by 
Facebook show that it has tipped the social networking market 
toward a monopoly, and now considers competition within its own 
family of products to be more considerable than competition 
from any other firm. These documents include an October 2018 
memorandum by Thomas Cunningham, a senior data scientist and 
economist at Facebook,\16\ for Mr. Zuckerberg and Javier 
Olivan, Facebook's Director of Growth.\17\ Among other things, 
the Cunningham Memo found that the network effects of Facebook 
and its family of products as ``very strong'' \18\ and that 
there are strong tipping points in the social networking market 
that create competition for the market, rather than competition 
within the market.\19\
---------------------------------------------------------------------------
    \16\ Id. at FB-HJC-ACAL-00111406 (Oct. 2018) [hereinafter 
Cunningham Memo] (``Facebook has high reach and time-spent in most 
countries. User growth is tracking internet growth: global reach is 
roughly stable.'').
    \17\ Id.
    \18\ Id. at 11.
    \19\ Id. at 9.
---------------------------------------------------------------------------
    According to a former senior employee at Instagram who was 
involved in the preparation of this document for review by Mr. 
Zuckerberg and Mr. Olivan, the Cunningham Memo guided 
Facebook's growth strategy, particularly with regard to Insta-
gram.\20\ They explained:
---------------------------------------------------------------------------
    \20\ Id.

     LThe question was how do we position Facebook and 
Instagram to not compete with each other. The concern was that 
Instagram would hit a tipping point . . . . There was brutal 
in-fighting between Instagram and Facebook at the time. It was 
very tense. It was back when Kevin Systrom was still at the 
company. He wanted Instagram to grow naturally and as widely as 
possible. But Mark was clearly saying ``do not compete with 
us.'' . . . It was collusion, but within an internal monopoly. 
If you own two social media utilities, they should not be 
allowed to shore each other up. It's unclear to me why this 
should not be illegal. You can collude by acquiring a 
company.\21\
---------------------------------------------------------------------------
    \21\ Interview with Former Instagram Employee (Oct. 2, 2020).

    Facebook has also maintained its monopoly through a series 
of anticompetitive business practices. The company used its 
data advantage to create superior market intelligence to 
identify nascent competitive threats and then acquire, copy, or 
kill these firms. Once dominant, Facebook selectively enforced 
its platform policies based on whether it perceived other 
companies as competitive threats. In doing so, it advantaged 
its own services while weakening other firms.
    In the absence of competition, Facebook's quality has 
deteriorated over time, resulting in worse privacy protections 
for its users and a dramatic rise in misinformation on its 
platform.

    (c) Google. Google has a monopoly in the markets for 
general online search and search advertising. Google's 
dominance is protected by high entry barriers, including its 
click-and-query data and the extensive default positions that 
Google has obtained across most of the world's devices and 
browsers. A significant number of entities--spanning major 
public corporations, small businesses, and entrepreneurs--
depend on Google for traffic, and no alternate search engine 
serves as a substitute.
    Google maintained its monopoly over general search through 
a series of anticompetitive tactics. These include an 
aggressive campaign to undermine vertical search providers, 
which Google viewed as a significant threat. Documents show 
that Google used its search monopoly to misappropriate content 
from third parties and to boost Google's own inferior vertical 
offerings, while imposing search penalties to demote third-
party vertical providers. Since capturing a monopoly over 
general search, Google has steadily proliferated its search 
results page with ads and with Google's own content, while also 
blurring the distinction between paid ads and organic results. 
As a result of these tactics, Google appears to be siphoning 
off traffic from the rest of the web, while entities seeking to 
reach users must pay Google steadily increasing sums for ads. 
Numerous market participants analogized Google to a gatekeeper 
that is extorting users for access to its critical distribution 
channel, even as its search page shows users less relevant 
results.
    A second way Google has maintained its monopoly over 
general search has been through a series of anticompetitive 
contracts. After purchasing the Android operating system in 
2005, Google used contractual restrictions and exclusivity 
provisions to extend Google's search monopoly from desktop to 
mobile. Documents show that Google required smartphone 
manufacturers to pre-install and give default status to 
Google's own apps, impeding competitors in search as well as in 
other app markets. As search activity now migrates from mobile 
to voice, third-party interviews suggest Google is again 
looking for ways to maintain its monopoly over search access 
points through a similar set of practices.
    Since capturing the market for online search, Google has 
extended into a variety of other lines of business. Today, 
Google is ubiquitous across the digital economy, serving as the 
infrastructure for core products and services online. Through 
Chrome, Google now owns the world's most popular browser--a 
critical gateway to the internet that it has used to both 
protect and promote its other lines of business. Through Google 
Maps, Google now captures over eight percent of the market for 
navigation mapping services--a key input over which Google 
consolidated control through an anticompetitive acquisition and 
which it now leverages to advance its position in search and 
advertising. And through Google Cloud, Google has another core 
platform in which it is now heavily investing through 
acquisitions, positioning itself to dominate the ``Internet of 
Things,'' the next wave of surveillance technologies.
    Internal communications also reveal that Google exploits 
information asymmetries and closely tracks real-time data 
across markets, which--given Google's scale--provide it with 
near-perfect market intelligence. In certain instances, Google 
has covertly set up programs to more closely track its 
potential and actual competitors, including through projects 
like Android Lockbox.
    Each of its services provides Google with a trove of user 
data, reinforcing its dominance across markets and driving 
greater monetization through online ads. Through linking these 
services together, Google increasingly functions as an 
ecosystem of interlocking monopolies.

    (d) Amazon. Amazon has significant and durable market power 
in the U.S. online retail market. This conclusion is based on 
the significant record that the Subcommittee collected and 
reviewed, including testimonials from third-party sellers, 
brand manufacturers, publishers, former employees, and other 
market participants, as well as Amazon's internal documents. 
Although Amazon is frequently described as controlling about 
forty percent of U.S. online retail sales, this market share is 
likely understated, and estimates of about 50 percent or higher 
are more credible.
    As the dominant marketplace in the United States for online 
shopping, Amazon's market power is at its height in its 
dealings with third-party sellers. The platform has monopoly 
power over many small- and medium-sized businesses that do not 
have a viable alternative to Amazon for reaching online 
consumers. Amazon has 2.3 million active third-party sellers on 
its marketplace worldwide, and a recent survey estimates that 
about 37 percent of them--about 850,000 sellers--rely on Amazon 
as their sole source of income.\22\
---------------------------------------------------------------------------
    \22\ JungleScout, The State of the Amazon Seller 2020, at 4 (2020), 
https://www.
junglescout.com/wp-content/uploads/2020/02/State-of-the-Seller-
Survey.pdf.
---------------------------------------------------------------------------
    Amazon achieved its current dominant position, in part, 
through acquiring its competitors, including Diapers.com and 
Zappos. It has also acquired companies that operate in adjacent 
markets, adding customer data to its stockpile and further 
shoring up its competitive moats. This strategy has entrenched 
and expanded Amazon's market power in e-commerce, as well as in 
other markets. The company's control over and reach across its 
many business lines enable it to self-preference and 
disadvantage competitors in ways that undermine free and fair 
competition. As a result of Amazon's dominance, other 
businesses are frequently beholden to Amazon for their success.
    Amazon has engaged in extensive anticompetitive conduct in 
its treatment of third-party sellers. Publicly, Amazon 
describes third-party sellers as ``partners.'' But internal 
documents show that, behind closed doors, the company refers to 
them as ``internal competitors.'' Amazon's dual role as an 
operator of its marketplace that hosts third-party sellers, and 
a seller in that same marketplace, creates an inherent conflict 
of interest. This conflict incentivizes Amazon to exploit its 
access to competing sellers' data and information, among other 
anticompetitive conduct.
    Voice assistant ecosystems are an emerging market with a 
high propensity for lock-in and self-preferencing. Amazon has 
expanded Alexa's ecosystem quickly through acquisitions of 
complementary and competing technologies, and by selling its 
Alexa-enabled smart speakers at deep discounts. The company's 
early leadership in this market is leading to the collection of 
highly sensitive consumer data, which Amazon can use to promote 
its other business, including e-commerce and Prime Video.
    Finally, Amazon Web Services (AWS) provides critical 
infrastructure for many businesses with which Amazon competes. 
This creates the potential for a conflict of interest where 
cloud customers are forced to consider patronizing a 
competitor, as opposed to selecting the best technology for 
their business.

    (e) Apple. Apple has significant and durable market power 
in the mobile operating system market. Apple's dominance in 
this market, where it controls the iOS mobile operating system 
that runs on Apple mobile devices, has enabled it to control 
all software distribution to iOS devices. As a result, Apple 
exerts monopoly power in the mobile app store market, 
controlling access to more than 100 million iPhones and iPads 
in the U.S.
    Apple's mobile ecosystem has produced significant benefits 
to app developers and consumers. Launched in 2008, the App 
Store revolutionized software distribution on mobile devices, 
reducing barriers to entry for app developers and increasing 
the choices available to consumers. Despite this, Apple 
leverages its control of iOS and the App Store to create and 
enforce barriers to competition and discriminate against and 
exclude rivals while preferencing its own offerings. Apple also 
uses its power to exploit app developers through 
misappropriation of competitively sensitive information and to 
charge app developers supra-competitive prices within the App 
Store. Apple has maintained its dominance due to the presence 
of network effects, high barriers to entry, and high switching 
costs in the mobile operating system market.
    Apple is primarily a hardware company that derives most of 
its revenue from sales of devices and accessories. However, as 
the market for products like the iPhone has matured, Apple has 
pivoted to rely increasingly on sales of its applications and 
services, as well as collecting commissions and fees in the App 
Store. In the absence of competition, Apple's monopoly power 
over software distribution to iOS devices has resulted in harm 
to competitors and competition, reducing quality and innovation 
among app developers, and increasing prices and reducing 
choices for consumers.

    (f) Effects of Market Power. The Subcommittee also examined 
the effects of market power in digital markets on the free and 
diverse press, innovation, privacy and data, and other relevant 
matters summarized below for ease of reference.
    As part of this process, the Subcommittee received 
testimony and submissions showing that the dominance of some 
online platforms has contributed to the decline of trustworthy 
sources of news, which are essential to our democracy.\23\ In 
several submissions, news publishers raised concerns about the 
``significant and growing asymmetry of power'' between dominant 
platforms and news organizations, as well as the effect of this 
dominance on the production and availability of trustworthy 
sources of news. Other publishers said that they are 
``increasingly beholden'' to these firms, and in particular, to 
Google and Facebook.\24\ Google and Facebook have an outsized 
influence over the distribution and monetization of trustworthy 
sources of news online,\25\ undermining the quality and 
availability of high-quality sources of journalism.\26\ This 
concern is underscored by the COVID-19 pandemic, which has laid 
bare the importance of preserving a vibrant free press in both 
local and national markets.
---------------------------------------------------------------------------
    \23\ Online Platforms and Market Power, Part 1: The Free and 
Diverse Press: Hearing Before the Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, 116th Cong. 71-73 (2019) 
[hereinafter Free and Diverse Press Hearing] (statement of David 
Pitofsky, Gen. Couns., News Corp).
    \24\ Submission from Source 53, to H. Comm. on the Judiciary, 7 
(Oct. 14, 2019) (on file with Comm.). Although Apple News and Apple 
News Plus are increasingly popular news aggregators, most market 
participants that the Subcommittee received evidence from during the 
investigation do not view it as a critical intermediary for online news 
at this time. Some publishers raised competition concerns about the 
tying of payment inside Apple's news product. Others, however, did 
raise concerns about Apple News and Apple News Plus, noting that it is 
``not creating any original journalism itself'' and competes ``against 
publishers' news products . . . for subscription revenues.'' Id. at 6.
    \25\ Submission from Source 52, to H. Comm. on the Judiciary, 12 
(Oct. 30, 2019) (on file with Comm.).
    \26\ Free and Diverse Press Hearing at 20 (statement of David 
Chavern, President & CEO, News Media All.) (``In effect, a couple of 
dominant tech platforms are acting as regulators of the digital news 
industry.'').
---------------------------------------------------------------------------
    The rise of market power online has also materially 
weakened innovation and entrepreneurship in the U.S. 
economy.\27\ Some venture capitalists, for example, report that 
there is an innovation ``kill zone'' that insulates dominant 
platforms from competitive pressure simply because investors do 
not view new entrants as worthwhile investments.\28\ Other 
investors have said that they avoid funding entrepreneurs and 
other companies that compete directly or indirectly with 
dominant firms in the digital economy.\29\ In an interview with 
the Subcommittee, a prominent venture capital investor 
explained that due to these factors, there is a strong economic 
incentive for other firms to avoid head-on competition with 
dominant firms.\30\
---------------------------------------------------------------------------
    \27\ Online Platforms and Market Power, Part 2: Innovation and 
Entrepreneurship: Hearing Before the Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 116th Cong. 76 (2019) 
[hereinafter Innovation and Entrepreneurship Hearing] (statement of 
Timothy Wu, Julius Silver Prof. of Law, Columbia Law Sch.); Online 
Platforms and Market Power, Part 3: The of Role of Data and Privacy in 
Competition: Hearing Before the Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, 116th Cong. 58-60 (2019) 
[hereinafter Data and Privacy Hearing] (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.).
    \28\ Raghuram Rajan, Sai Krishna Kamepalli & Luigi Zingales, Kill 
Zone (Univ. of Chi., Becker Friedman Inst. for Econ., Working Paper No. 
2020-19, Apr. 2020), https://ssrn.com/abstract
=3555915.
    \29\ See generally U.S. Dep't of Justice Antitrust Div., Public 
Workshop on Venture Capital and Antitrust (Feb. 12, 2020) [hereinafter 
Venture Capital and Antitrust Workshop], https://www.justice.gov/atr/
page/file/1255851/download; Chi. Booth Stigler Ctr. for the Study
of Econ. & State, Stigler Cmte. on Dig. Platforms, Final Report, 9 
(2019) [herein-
after Stigler Report], https://www.chicagobooth.edu/-/media/research/
stigler/pdfs/digital-
platforms---committee-report---stigler-center.pdf.
    \30\ See Interview with Source 146 (May 28, 2020).
---------------------------------------------------------------------------
    Additionally, in the absence of adequate privacy guardrails 
in the United States, the persistent collection and misuse of 
consumer data is an indicator of market power online.\31\ 
Online platforms rarely charge consumers a monetary price--
products appear to be ``free'' but are monetized through 
people's attention or with their data.\32\ In the absence of 
genuine competitive threats, dominant firms offer fewer privacy 
protections than they otherwise would, and the quality of these 
services has deteriorated over time. As a result, consumers are 
forced to either use a service with poor privacy safeguards or 
forgo the service altogether.\33\
---------------------------------------------------------------------------
    \31\ Howard A. Shelanski, Information, Innovation, and Competition 
Policy for the Internet, 161 U. Pa. L. Rev. 1663, 1689 (2013) (``One 
measure of a platform's market power is the extent to which it can 
engage in [privacy exploitation] without some benefit to consumers that 
offsets their reduced privacy and still retain users.'').
    \32\ Data and Privacy Hearing at 60 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.); Data and 
Privacy Hearing at 54-55 (statement of Tommaso Valletti, Prof. of 
Econ., Imperial Coll. Bus. Sch.)
    \33\ Dig. Competition Expert Panel, Unlocking Digital Competition 
43 (2019) (``[T]he misuse of consumer data and harm to privacy is 
arguably an indicator of low quality caused by a lack of 
competition.'') [hereinafter Dig. Competition Expert Panel Report]; 
Dina Srinivasan, The Antitrust Case Against Facebook: A Monopolist's 
Journey Towards Pervasive Surveillance in Spite of Consumers' 
Preference for Privacy, 16 Berkeley Bus. L.J. 39, 88 (2019) 
(``Consumers effectively face a singular choice--use Facebook and 
submit to the quality and stipulations of Facebook's product or forgo 
all use of the only social network.'').
---------------------------------------------------------------------------
    Finally, the market power of the dominant platforms risks 
undermining both political and economic liberties. The 
Subcommittee encountered a prevalence of fear among market 
participants that depend on the dominant platforms, many of 
whom expressed unease that the success of their business and 
their economic livelihood depend on what they viewed as the 
platforms' unaccountable and arbitrary power. Additionally, 
courts and enforcers have found the dominant platforms to 
engage in recidivism, repeatedly violating laws and court 
orders. This pattern of behavior raises questions about whether 
these firms view themselves as above the law, or whether they 
simply treat lawbreaking as a cost of business. Lastly, the 
growth in the platforms' market power has coincided with an 
increase in their influence over the policymaking process. 
Through a combination of direct lobbying and funding think 
tanks and academics, the dominant platforms have expanded their 
sphere of influence, further shaping how they are governed and 
regulated.
3. Recommendations
    As part of the investigation of competition in digital 
markets, the Subcommittee conducted a thorough examination of 
the adequacy of current laws and enforcement levels. This 
included receiving submissions from experts on antitrust and 
competition policy who were selected on a careful, bipartisan 
basis to ensure the representation of a diverse range of views 
on these matters. The Subcommittee also received other 
submissions from leading experts--including Executive Vice 
President Margrethe Vestager of the European Commission and 
Chair Rod Sims of the Australian Competition and Consumer 
Commission--to inform this inquiry. Most recently, on October 
1, 2020, the Subcommittee held an oversight hearing on 
``Proposals to Strengthen the Antitrust Laws and Restore 
Competition Online'' to examine potential solutions to concerns 
identified during the investigation to further inform the 
Report's recommendations.
    Based on this oversight activity, Subcommittee Chair 
Cicilline requested that staff provide a menu of reforms to 
Members of the Subcommittee for purposes of potential 
legislative activity during the remainder of the 116th Congress 
and thereafter. As he noted in remarks to the American 
Antitrust Institute in June 2019:

     L[I]t is Congress' responsibility to conduct oversight of 
our antitrust laws and competition system to ensure that they 
are properly working and to enact changes when they are not. 
While I do not have any preconceived ideas about what the right 
answer is, as Chair of the Antitrust Subcommittee, I intend to 
carry out that responsibility with the sense of urgency and 
serious deliberation that it demands.\34\
---------------------------------------------------------------------------
    \34\ Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Keynote 
Address at American Antitrust Institute's 20th Annual Policy Conference 
(June 20, 2019), https://cicilline.house.gov/press-release/cicilline-
delivers-
keynote-address-american-antitrust-institute%E2%80%99s-20th-annual-
policy.

    In response to this request, the Subcommittee identified a 
broad set of reforms for further examination by the Members of 
the Subcommittee for purposes of crafting legislative responses 
to the findings of this Report. These reforms include proposals 
to: (1) address anticompetitive conduct in digital markets; (2) 
strengthen merger and monopolization enforcement; and (3) 
improve the sound administration of the antitrust laws through 
other reforms. We intend these recommendations to serve as a 
complement to vigorous antitrust enforcement. Consistent with 
the views expressed by Chair Nadler and Subcommittee Chair 
Cicilline in the Foreword to this Report, we view these 
recommendations as complements, and not substitutes, to 
forceful antitrust enforcement.
    For ease of reference, these recommendations for further 
examination are summarized below.

    (a) Restoring Competition in the Digital Economy

      LStructural separations and prohibitions of 
certain dominant platforms from operating in adjacent lines of 
business;
      LNondiscrimination requirements, prohibiting 
dominant platforms from engaging in self-preferencing, and 
requiring them to offer equal terms for equal products and 
services;
      LInteroperability and data portability, requiring 
dominant platforms to make their services compatible with 
various networks and to make content and information easily 
portable between them;
      LPresumptive prohibition against future mergers 
and acquisitions by the dominant platforms;
      LSafe harbor for news publishers in order to 
safeguard a free and diverse press; and
      LProhibitions on abuses of superior bargaining 
power, proscribing dominant platforms from engaging in 
contracting practices that derive from their dominant market 
position, and requirement of due process protections for 
individuals and businesses dependent on the dominant platforms.

    (b) Strengthening the Antitrust Laws

      LReasserting the anti-monopoly goals of the 
antitrust laws and their centrality to ensuring a healthy and 
vibrant democracy;
      LStrengthening Section 7 of the Clayton Act, 
including through restoring presumptions and bright-line rules, 
restoring the incipiency standard and protecting nascent 
competitors, and strengthening the law on vertical mergers;
      LStrengthening Section 2 of the Sherman Act, 
including by introducing a prohibition on abuse of dominance 
and clarifying prohibitions on monopoly leveraging, predatory 
pricing, denial of essential facilities, refusals to deal, 
tying, and anticompetitive self-preferencing and product 
design; and
      LTaking additional measures to strengthen overall 
enforcement, including through overriding problematic 
precedents in the case law.

    (c) Reviving Antitrust Enforcement

      LRestoring robust congressional oversight of the 
antitrust laws and their enforcement;
      LRestoring the federal antitrust agencies to full 
strength, by triggering civil penalties and other relief for 
``unfair methods of competition'' rules, requiring the Federal 
Trade Commission to engage in regular data collection on 
concentration, enhancing public transparency and accountability 
of the agencies, requiring regular merger retrospectives, 
codifying stricter prohibitions on the revolving door, and 
increasing the budgets of the FTC and the Antitrust Division of 
the U.S. Department of Justice (DOJ); and
      LStrengthening private enforcement through 
elimination of obstacles such as forced arbitration clauses, 
limits on class action formation, judicially created standards 
constraining what constitutes an antitrust injury, and unduly 
high pleading standards.

        II. THE INVESTIGATION OF COMPETITION IN DIGITAL MARKETS

              A. Requests for Information and Submissions

1. First-Party Requests for Information
    On September 13, 2019, the Committee sent bipartisan 
requests for information (RFIs) to each of the four 
investigated platforms: Alphabet,\35\ Amazon, Apple, and 
Facebook. For each company, the RFI asked for a comprehensive 
set of information about each of the company's products and 
services. In addition, the RFI asked the company to submit 
communications among high-level executives relating to various 
potentially anticompetitive acquisitions and conduct. The 
Committee requested that the platforms respond to the RFIs by 
October 14, 2019.
---------------------------------------------------------------------------
    \35\ In 2015, Google reorganized under a new name and parent 
company, Alphabet, separated various businesses, and placed Sundar 
Pichai as chief executive of Google. Larry Page, Chief Executive of 
Google, became head of Alphabet with Sergey Brin. See Conor Dougherty, 
Google to Reorganize as Alphabet to Keep Its Lead as an Innovator, N.Y. 
Times (Aug. 10, 2015), https://www.nytimes.com/2015/08/11/technology/
google-alphabet-restructuring.html.

    (a) Alphabet. The Committee's RFI to Alphabet, the parent 
company of Google, asked for information necessary to 
understand how the company operates and its role in the digital 
marketplace.\36\ For example, in Request A, the RFI asked for 
detailed financial statements and a description of Alphabet's 
relevant products and services, including Google Ads, Google 
Search, YouTube, and Waze. In addition, the RFI asked for 
information helpful for determining whether Alphabet has 
monopoly power for any of its products or services, including 
for each product or service: (i) a list of Alphabet's top ten 
competitors; and (ii) internal or external analyses of 
Alphabet's market share relative to its competitors. Request A 
also asked for copies of documents and information that 
Alphabet had submitted to any U.S. or international antitrust 
enforcement agency for antitrust investigations that took place 
in any of those agencies within the past decade.\37\
---------------------------------------------------------------------------
    \36\ Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary & Hon. F. James 
Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary to Larry Page, CEO, 
Alphabet Inc. (Sept. 13, 2019) [hereinafter Committee Request for 
Information, Alphabet], https://judiciary.house.gov/sites/democrats
.judiciary.house.gov/files/documents/alphabet%20inc.%20rfi%20-
%20signed%20(003).pdf. 
    \37\ Id. at 1-4.
---------------------------------------------------------------------------
    Request B asked for all communications from high-level 
executives, including former CEO Larry Page and current CEO 
Sundar Pichai, relating to a number of Alphabet's key 
acquisitions and potentially anticompetitive conduct, most of 
which have been widely reported in the news.\38\ The RFI asked 
for communications, including, but not limited to, discussions 
relating to the deal rationale and any competitive threat posed 
by the acquired company for the following acquisitions: Google/
Android in 2005, Google/YouTube in 2006, Google/DoubleClick in 
2007, Google/AdMob in 2009, and Google's acquisition of a 
minority stake in Vevo in 2013. Request B of the Alphabet RFI 
also requested executive communications relating to certain 
categories of potential anticompetitive conduct.\39\
---------------------------------------------------------------------------
    \38\ The Alphabet RFI defines the term ``Relevant Executives'' as 
Larry Page, Sergey Brin, Ruth Porat, David Drummond, Eric Schmidt, 
Sundar Pichai, Susan Wojcicki, Philipp Schindler, Prabhakar Raghavan, 
Thomas Kurian, Hiroshi Lockheimer, Rishi Chandra, Keith Enright, and 
Kent Walker. See id. at 4.
    \39\ Id. at 4-9.
---------------------------------------------------------------------------
    In response to this request, Alphabet produced 1,135,398 
documents, including strategy memoranda, presentations, and 
materials produced in prior investigations. Although Google 
produced a significant amount of material, the Subcommittee did 
not view this volume as a proxy for quality.

    (b) Amazon. The Committee's RFI to Amazon asked for similar 
types of information helpful for understanding the competitive 
dynamics of the digital marketplace and the company's role.\40\ 
For example, in Request A, the RFI asked for detailed financial 
statements and a description of Amazon's relevant products and 
services, including Alexa, Amazon Marketplace, Amazon Prime, 
and Amazon Web Services (AWS). In addition, the RFI asked for 
information helpful for determining whether Amazon has monopoly 
power for any of its products or services, including for each 
product or service: (i) a list of Amazon's top ten competitors; 
and (ii) internal or external analyses of Amazon's market share 
relative to its competitors. Request A also asked for copies of 
documents and information that Amazon had submitted to any U.S. 
or international antitrust enforcement agency for antitrust 
investigations that took place in any of those agencies within 
the past decade.\41\
---------------------------------------------------------------------------
    \40\ Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary & Hon. F. James 
Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary to Jeff Bezos, CEO, 
Amazon.com, Inc. (Sept. 13, 2019) [hereinafter Committee Request for 
Information, Amazon], https://judiciary.house.gov/sites/democrats
.judiciary.house.gov/files/documents/amazon%20rfi%20-%20signed.pdf.
    \41\ Id. at 1-3.
---------------------------------------------------------------------------
    Request B asked for all communications from high-level 
executives, including CEO Jeff Bezos and Jay Carney, Senior 
Vice President for Global Corporate Affairs, relating to a 
number of Amazon's key acquisitions and potentially 
anticompetitive conduct, most of which have been widely 
reported in the news.\42\ The RFI asked for communications, 
including, but not limited to, discussions relating to the deal 
rationale and any competitive threat posed by the acquired 
company for the following acquisitions: Amazon/Audible in 2008, 
Amazon/Zappos in 2009, Amazon/Quidsi (Diapers.com) in 2010,\43\ 
Amazon/Whole Foods in 2017, and Amazon/Ring in 2018. Request B 
of the Amazon RFI also requested executive communications 
relating to certain categories of potential anticompetitive 
conduct.\44\
---------------------------------------------------------------------------
    \42\ The Amazon RFI defines the term ``Relevant Executives'' as 
Jeff Bezos, Jeff Wilke, Andy Jassy, Jeff Blackburn, Dave Limp, Brian 
Olsavsky, David Zapolsky, and Jay Carney. See id. at 3.
    \43\ Amazon acquired ``Quidsi, the e-commerce company that runs 
Diapers.com'' in 2010. Claire Cain Miller, Amazon Has a Reported Deal 
to Buy Parent of Diapers.com, N.Y. Times (Nov. 7, 2010), https://
www.nytimes.com/2010/11/08/technology/08amazon.html.
    \44\ Committee Request for Information, Amazon at 3-7.
---------------------------------------------------------------------------
    In response to the Committee's requests, Amazon produced 
24,299 documents, including internal emails among the company's 
senior executives, memoranda, presentations, and other 
materials.

    (c) Apple. The Committee's RFI to Apple also asked for 
information helpful for understanding the company's role in the 
digital marketplace. For example, in Request A, the RFI asked 
for detailed financial statements and a description of Apple's 
relevant products and services, including the iPhone, App 
Store, and Apple Pay.\45\ In addition, the RFI asked for 
information helpful for determining whether Apple has monopoly 
power for any of its products or services, including for each 
product or service: (i) a list of Apple's top ten competitors; 
and (ii) internal or external analyses of Apple's market share 
relative to its competitors. Request A also asked for copies of 
documents and information that Apple had submitted to any U.S. 
or international antitrust enforcement agency for antitrust 
investigations that took place in any of those agencies within 
the past decade.\46\
---------------------------------------------------------------------------
    \45\ Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H.Comm. on the Judiciary & Hon. F. James 
Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary to Tim Cook, CEO, Apple, 
Inc. (Sept. 13, 2019) [hereinafter Committee Request for Information, 
Apple], https://judiciary.house.gov/sites/democrats.judiciary
.house.gov/files/documents/apple%20rfi%20-%20signed.pdf.
    \46\ Id. at 1-3.
---------------------------------------------------------------------------
    Request B asked for all communications from high-level 
executives, including CEO Tim Cook and Eddy Cue, Senior Vice 
President of Internet Software and Services, relating to 
potentially anticompetitive conduct, most of which has been 
widely reported in the news.\47\ The RFI asked for 
communications, including, but not limited to, discussions 
relating to certain categories of potentially anticompetitive 
conduct.\48\
---------------------------------------------------------------------------
    \47\ The Apple RFI defines the term ``Relevant Executives'' as Tim 
Cook, Katherine Adams, Eddy Cue, Philip Schiller, Johny Srouji, Dan 
Riccio, Jonathan Ive, Craig Frederighi, Luca Maestri, Jeff Williams, 
Steve Dowling, Tor Myhren, Lucas Maestri, and Jane Horvath. See id. at 
3.
    \48\ Id. at 3-6.
---------------------------------------------------------------------------
    In response to the Committee's requests, Apple produced 
2,246 documents. These documents include internal 
communications among the company's senior executives describing 
governance of the App Store, as well as the company's internal 
deliberations and strategy responding to recent controversies.

    (d) Facebook. The Committee's RFI to Facebook also asked 
for information helpful for understanding how the company 
operates and its role in the digital marketplace.\49\ For 
example, in Request A, the RFI asked for detailed financial 
statements and a description of Facebook's relevant products 
and services, including Facebook, Instagram, and WhatsApp. In 
addition, the RFI asked for information helpful for determining 
whether Facebook has monopoly power for any of its products or 
services, including for each product or service: (i) a list of 
Facebook's top ten competitors; and (ii) internal or external 
analyses of Facebook's market share relative to its 
competitors. Request A also asked for copies of documents and 
information that Facebook had submitted to any U.S. or 
international antitrust enforcement agency for antitrust 
investigations that took place in any of those agencies within 
the past decade.\50\
---------------------------------------------------------------------------
    \49\ Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary & Hon. F. James 
Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary to Mark Zuckerberg, CEO, 
Facebook, Inc. (Sept. 13, 2019) [hereinafter Committee Request for 
Information, Facebook], https://judiciary.house.gov/sites/democrats
.judiciary.house.gov/files/documents/facebook%20rfi%20-%20signed.pdf.
    \50\ See id. at 1-2.
---------------------------------------------------------------------------
    Request B asked for all communications from high-level 
executives, including Founder and CEO Mark Zuckerberg and 
Sheryl Sandberg, Chief Operating Officer, relating to a number 
of Facebook's key acquisitions and potentially anticompetitive 
conduct, most of which have been widely reported in the 
news.\51\ The RFI asked for communications, including, but not 
limited to, discussions relating to the deal rationale and any 
competitive threat posed by the acquired company for the 
following acquisitions: Facebook/Instagram in 2012, Facebook/
Onavo in 2013, and Facebook/WhatsApp in 2014. Request B of the 
Facebook RFI also requested executive communications relating 
to certain categories of potentially anticompetitive 
conduct.\52\
---------------------------------------------------------------------------
    \51\ The Facebook RFI defines the term ``Relevant Executives'' as 
Mark Zuckerberg, Sheryl Sandberg, Jennifer Newstead, Javier Olivan, 
Chris Cox, Mike Schroepfer, David Wehner, Colin Stretch, Will Cathcart, 
Adam Mosseri, Stan Chudnovsky, Fidji Simo, Chris Daniels, Erin Egan, 
and Kevin Martin. See id. at 2-3.
    \52\ See id. at 2-5.
---------------------------------------------------------------------------
    In response to the Committee's requests, Facebook produced 
41,442 documents, including documents produced in response to 
prior investigations into Facebook's acquisitions and into 
whether it had abused its dominance. Facebook also produced 
83,804 documents in connection with litigation in an ongoing 
matter. Among other items, these documents include internal 
communications among the company's senior executives describing 
Facebook's acquisition and overall competition strategy. In 
response to supplemental requests by the Subcommittee, Facebook 
produced internal market data over a multi-year period, as well 
as a memorandum prepared by a senior data scientist and 
economist at the company related to competition among 
Facebook's family of products and other social apps.
2. Process for Obtaining Responses to First-Party Requests
    After sending the RFIs, Subcommittee staff invested 
considerable time and resources in making themselves available 
for calls with the platforms to answer any questions the 
platforms had about responding to the requests, on a nearly 
weekly basis from October 2019 through March 2020. On these 
calls, staff addressed a range of issues, including clarifying 
the meaning and intent of language in the request; maintaining 
the confidentiality of sensitive business information; and, 
where appropriate, narrowing requests in an effort to balance 
the Committee's need for relevant information against the 
platforms' burden of production. Each of the investigated 
platforms failed to meet the October 14, 2019 deadline, citing 
various difficulties.
    On December 4, 2019, nearly three months after the deadline 
for submitting the RFI responses, the Committee sent a letter 
to the platforms' CEOs pointing out their failure to comply. 
The Committee stated its expectation that the platforms would 
complete production by December 18, 2019 for Request A and 
January 2, 2020 for Request B, to avoid the need to invoke 
other processes and procedures to obtain the requested 
materials.\53\
---------------------------------------------------------------------------
    \53\ See, e.g., Letter from Hon. Jerrold Nadler, Chair, H. Comm. on 
the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the 
Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary to Mark Zuckerberg, 
CEO, Facebook, Inc. (Dec. 4, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    After the platforms failed to meet the revised deadlines, 
in early February 2020, staff asked for the companies' outside 
counsel to attend in-person meetings to discuss the substantial 
gaps in production that remained, and to identify ways to 
address any obstacles the platforms identified to filling those 
gaps. Despite the Committee's best efforts to address those 
obstacles--and allowing substantial time for the platforms to 
navigate delays relating to the COVID-19 pandemic--staff again 
had to reach out to the platforms regarding the deficiency of 
their responses. On June 9, 2020, in a final effort to avoid 
resorting to issuing subpoenas to the platforms to compel the 
production of documents and information, staff requested that 
the platforms voluntarily provide information responsive to a 
reduced list of targeted requests by June 22, 2020.
3. Third-Party Requests for Information
    As part of the investigation, the Subcommittee collected a 
large amount of information from market participants, including 
customers and competitors of Amazon, Apple, Facebook, and 
Google. Staff also received information and analysis from other 
third parties, including academics, former antitrust government 
officials, public interest organizations, and trade 
associations.

    (a) Market Participants. In September, the Committee sent a 
request for information to over 80 market participants. The RFI 
asked the recipient to voluntarily provide information 
regarding the state of competition in the digital marketplace 
for various products and services, including the number and 
identity of market participants, market shares, and barriers to 
entry. These third-party RFIs also asked for a description of 
any conduct by Amazon, Apple, Facebook, or Google that raises 
competition concerns, and the impact of such conduct on the 
recipient's business. The Committee also sought to gather 
information through these RFIs regarding broader questions 
based on the recipient's experience in the digital marketplace, 
including (i) whether market participants are able to compete 
on the merits of their goods and services; (ii) the adequacy of 
antitrust enforcement relating to merger review and 
anticompetitive conduct; (iii) the adequacy of current 
antitrust law to address anticompetitive mergers and 
anticompetitive conduct; and (iv) suggestions for improving 
enforcement of antitrust law and making changes to antitrust 
law itself, statutory or otherwise.
    On January 7, 2020, the Committee sent a second round of 
RFIs to 29 market participants. These RFI recipients consisted 
of additional businesses and individuals that staff had 
identified during the first half of the investigation as likely 
to have relevant information and an interest in sharing that 
information with the Committee. These RFIs asked for similar 
information to the September RFIs and provided staff with 
additional valuable information and insights into the 
functioning and challenges of operating in the digital 
marketplace.
    Unfortunately, some market participants did not respond to 
substantive inquiries due to fear of economic retaliation. 
These market participants explained that their business and 
livelihoods rely on one or more of the digital platforms. One 
response stated, ``Unfortunately, [the CEO] is not able to be 
more public at this time out of concern for retribution to his 
business,'' adding, ``I am pretty certain we are not the only 
ones that are afraid of going public.'' \54\ Another business 
that ultimately declined to participate in the investigation 
expressed similar concerns, stating, ``We really appreciate you 
reaching out to us and are certainly considering going on the 
record with our story . . . . Given how powerful Google is and 
their past actions, we are also quite frankly worried about 
retaliation.'' \55\ Stacy Mitchell, Co-Director of the 
Institute for Local Self-Reliance, similarly testified that 
many businesses have a fear of speaking out about Amazon, 
stating, ``I spend a lot of time interviewing and talking with 
independent retailers, manufacturers of all sizes. Many of them 
are very much afraid of speaking out publicly because they fear 
retaliation.'' \56\
---------------------------------------------------------------------------
    \54\ Submission from Source 685, to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary (July 11, 2020) (on 
file with Comm.).
    \55\ Submission from Source 147, to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary (July 15, 2019) (on 
file with Comm.).
    \56\ Innovation and Entrepreneurship Hearing at 250 (statement of 
Stacy F. Mitchell, Co-Dir., Inst. for Local Self-Reliance).

    (b) Antitrust Experts. The Committee's final round of 
outreach to third parties involved sending letters on March 13, 
2020, soliciting insights and analysis from several dozen 
antitrust experts who were identified on a bipartisan basis and 
whose submissions represent a diverse range of experience and 
perspectives. In support of the investigation's objective to 
assess the adequacy of existing antitrust laws, competition 
policies, and current enforcement levels, the Committee invited 
submissions on three main topics. The first topic covered the 
adequacy of existing laws--case law and statutes--that prohibit 
monopolization and monopolistic conduct. The second topic 
similarly dealt with the adequacy of existing law, but focused 
on its sufficiency to address anticompetitive mergers and 
acquisitions, including vertical and conglomerate mergers, 
serial acquisitions, data acquisitions, and strategic 
acquisitions of potential competitors. Third, the Committee 
sought feedback on whether the institutional structure of 
antitrust enforcement is adequate to promote the robust 
enforcement of the antitrust laws, including current levels of 
appropriations to the antitrust agencies, existing agency 
---------------------------------------------------------------------------
authorities, and congressional oversight of enforcement.

    (c) Additional Outreach and Submissions. In addition to 
sending the RFIs in September and January, the Subcommittee 
engaged in extensive outreach to additional third parties based 
on public reports and non-public information gathered 
throughout the investigation, suggesting that such entities had 
relevant information.
    The Subcommittee also received submissions from numerous 
individuals and businesses throughout the course of the 
investigation. These submissions came from a wide range of 
sources and in a variety of forms. For example, an anonymous 
source sent thumb drives to the Committee's main office in the 
Rayburn House Office Building. Other examples included former 
or current employees submitting tips to the Subcommittee's 
investigation email address, or through the form for anonymous 
submissions posted on the Subcommittee's investigation website.
4. Antitrust Agencies Requests for Information
    As part of the Committee's September 2019 efforts to gather 
information, the Committee also sent requests for information 
to the Federal Trade Commission (FTC) and the Department of 
Justice (DOJ). In part, the Committee sought this information 
to carry out its function as the principal oversight authority 
for the DOJ, including its component agencies, its personnel, 
and its law enforcement activities.\57\ Similarly, the 
Committee's jurisdiction extends to the FTC's antitrust-related 
work, and to administrative practice and procedure, including 
at the FTC.\58\ The Committee's RFIs requested documents 
relating to the agencies' decisions to open or close 
investigations into potential violations of antitrust law in 
digital markets, decisions to challenge mergers or conduct in 
Federal district court or in administrative action, and 
decisions to forego litigation in favor of a settlement 
agreement.\59\ Senior officials from the FTC and the Antitrust 
Division also provided several briefings to Members of the 
Subcommittee and staff in response to the requests of the 
Subcommittee Chair and Ranking Member. These briefings served 
as an opportunity for Members to obtain information and updates 
about the current state of antitrust law and enforcement in 
digital markets.
---------------------------------------------------------------------------
    \57\ Government Oversight, H. Comm. on the Judiciary, https://
judiciary.house.gov/issues/government-oversight/.
    \58\ Rules of The House of Representatives, 116th Cong., lst Sess., 
Rule X, cl. 1(l)(2) (2019), http://clerk.house.gov/legislative/house-
rules.pdf.
    \59\ The Subcommittee recognizes that publication of these 
documents could cause competitive injury to firms that cooperated with 
prior investigations or in ongoing investigations. Where possible, this 
Report summarizes or draws conclusions from these sources without 
reproducing them.
---------------------------------------------------------------------------

                              B. Hearings

    On June 11, 2019, the Subcommittee held part one of its 
series of investigation hearings titled ``Online Platforms and 
Market Power, Part 1: The Free and Diverse Press.'' At this 
hearing, the Subcommittee heard testimony from the following 
Majority witnesses: David Chavern, President of the News Media 
Alliance; Gene Kimmelman, President and CEO of Public 
Knowledge; Sally Hubbard, Director of Enforcement Strategy at 
Open Markets Institute (OMI); and Matthew Schruers, Vice 
President for Law and Policy at Computer and Communications 
Industry Association (CCIA). The Minority witnesses were David 
Pitofsky, General Counsel for News Corp; and Kevin Riley, 
Editor of The Atlanta Journal-Constitution.\60\
---------------------------------------------------------------------------
    \60\ Free and Diverse Press Hearing, https://judiciary.house.gov/
legislation/hearings/online-platforms-and-market-power-part-1-free-and-
diverse-press.
---------------------------------------------------------------------------
    On July 16, 2019, the Subcommittee held its second hearing, 
a two-paneled hearing titled ``Online Platforms and Market 
Power, Part 2: Innovation and Entrepreneurship.'' On the first 
panel, the Subcommittee heard testimony from the following: 
Adam Cohen, Director of Economic Policy at Google; Nate Sutton, 
Associate General Counsel, Competition, at Amazon; Matt 
Perault, Head of Global Policy Development at Facebook; and 
Kyle Andeer, Vice President and Corporate Law and Chief 
Compliance Officer at Apple. On the second panel, the 
Subcommittee heard testimony from the following Majority 
witnesses: Timothy Wu, Julius Silver Professor of Law, Science 
and Technology at Columbia Law School; Fiona Scott Morton, 
Theodore Nierenberg Professor of Economics at Yale University 
School of Management; and Stacy Mitchell, Co-Director of the 
Institute for Local Self-Reliance. On the second panel, the 
Minority witnesses were Maureen Ohlhausen, Partner at Baker 
Botts and former Commissioner and Acting Chair of the Federal 
Trade Commission; Morgan Reed, Executive Director of The App 
Association; and Carl Szabo, Vice President and General Counsel 
at NetChoice.\61\
---------------------------------------------------------------------------
    \61\ Innovation and Entrepreneurship Hearing, https://
judiciary.house.gov/legislation/hearings/online-platforms-and-market-
power-part-2-innovation-and-entrepreneurship.
---------------------------------------------------------------------------
    On October 18, 2019, the Subcommittee held its third 
hearing titled ``Online Platforms and Market Power, Part 3: The 
Role of Data and Privacy in Competition.'' At this hearing, the 
Subcommittee heard testimony from the following Majority 
witnesses: The Honorable Rohit Chopra, Commissioner at the 
Federal Trade Commission; Dr. Jason Furman, Professor of the 
Practice of Economic Policy at Harvard Kennedy School and 
former Chair of the Council of Economic Advisers (CEA); and Dr. 
Tommaso Valletti, Professor of Economics and Head of the 
Department of Economics & Public Policy at Imperial College 
Business School and former Chief Competition Economist of the 
European Commission's Directorate General for Competition (DG-
Comp). The Minority witness at the hearing was Dr. Roslyn 
Layton, Visiting Scholar at the American Enterprise 
Institute.\62\
---------------------------------------------------------------------------
    \62\ Data and Privacy Hearing, https://judiciary.house.gov/
calendar/eventsingle.aspx?Event
ID=2248.
---------------------------------------------------------------------------
    On November 13, 2019, the Subcommittee held its fourth 
hearing titled ``Online Platforms and Market Power, Part 4: 
Perspectives of the Antitrust Agencies.'' At this hearing, the 
Subcommittee heard testimony from the following witnesses: The 
Honorable Makan Delrahim, Assistant Attorney General for the 
Antitrust Division at the Department of Justice; and the 
Honorable Joseph J. Simons, Chair of the Federal Trade 
Commission.\63\
---------------------------------------------------------------------------
    \63\ Online Platforms and Market Power, Part 4: Perspectives of the 
Antitrust Agencies: Hearing Before the Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, 116th Cong. 
(2019) [hereinafter Antitrust Agencies Hearing], https://
judiciary.house
.gov/calendar/eventsingle.aspx?EventID=2287.
---------------------------------------------------------------------------
    On January 17, 2020, the Subcommittee held its fifth 
hearing titled ``Field Hearing: Online Platforms and Market 
Power, Part 5: Competitors in the Digital Economy.'' At this 
hearing, which took place in the congressional district of 
Subcommittee Vice-Chair Joe Neguse (D-CO) at the University of 
Colorado School of Law, the Subcommittee heard testimony from 
the following Majority witnesses: Patrick Spence, Chief 
Executive Officer of Sonos; David Barnett, Founder and Chief 
Executive Officer of PopSockets; and Kirsten Daru, Vice 
President and General Counsel at Tile. The Minority witness at 
the hearing was David Heinemeier Hansson, Cofounder and Chief 
Technology Officer of Basecamp.\64\
---------------------------------------------------------------------------
    \64\ Online Platforms and Market Power, Part 5: Competitors in the 
Digital Economy: Hearing Before the Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 116th Cong. (2020) 
[hereinafter Competitors Hearing], https://judiciary.house.gov/
calendar/eventsingle.aspx?EventID=2386.
---------------------------------------------------------------------------
    On July 29, 2020, the Subcommittee held its sixth hearing 
titled ``Online Platforms and Market Power, Part 6: Examining 
the Dominance of Amazon, Apple, Facebook, and Google.'' At this 
hearing, the Subcommittee heard testimony from the following 
witnesses: Jeff Bezos, Chief Executive Officer at Amazon; 
Sundar Pichai, Chief Executive Officer at Alphabet and Google; 
Tim Cook, Chief Executive Officer at Apple; and Mark 
Zuckerberg, Chief Executive Officer at Facebook.\65\
---------------------------------------------------------------------------
    \65\ Online Platforms and Market Power, Part 6: Examining the 
Dominance of Amazon, Apple, Facebook, and Google: Hearing Before the 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 116th Cong. (2020) [hereinafter CEO Hearing], https://
judiciary.house.gov/calendar/eventsingle.aspx?EventID=3113.
---------------------------------------------------------------------------
    On October 1, 2020, the Subcommittee held its seventh 
hearing titled ``Proposals to Strengthen the Antitrust Laws and 
Restore Competition Online.'' The Majority witnesses at the 
hearing included: William Baer, Visiting Fellow, Brookings 
Institution, and former Associate Attorney General, Department 
of Justice; Zephyr Teachout, Associate Professor of Law, 
Fordham University School of Law; Michael Kades, Director of 
Markets and Competition Policy, Washington Center for Equitable 
Growth; Sabeel Rahman, Associate Professor of Law, Brooklyn Law 
School and President, Demos; and Sally Hubbard, Director of 
Enforcement Strategy, Open Markets Institute. The Minority 
witnesses at the hearing were Christopher Yoo, John H. Chestnut 
Professor of Law, Communication, and Information Science, 
University of Pennsylvania Carey Law School; Rachel Bovard, 
Senior Director of Policy, Conservative Partnership Institute; 
and Tad Lipsky, Antonin Scalia Law School, George Mason 
University.\66\
---------------------------------------------------------------------------
    \66\ Online Platforms and Market Power, Part 7: Proposals to 
Strengthen the Antitrust Laws and Restore Competition Online: Hearing 
Before the Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary, 116th Cong. (2020) [hereinafter Remedies 
Hearing], https://judiciary.house.gov/calendar/
eventsingle.aspx?EventID=3367.
---------------------------------------------------------------------------

                             C. Roundtables

    In addition to holding public hearings, the Subcommittee 
also held a series of bipartisan roundtables for Members of the 
Subcommittee and staff to provide Members with an opportunity 
to conduct further oversight of: (1) the state of competition 
and problems in digital markets; (2) whether dominant firms 
have engaged in anticompetitive conduct; and (3) if antitrust 
laws, competition policies, and current enforcement levels are 
adequate to address these issues. In total, the Subcommittee 
held twelve briefings and roundtables in Washington, DC; four 
roundtables in Boulder, Colorado; and a virtual roundtable with 
stakeholders from Rhode Island and elsewhere in New 
England.\67\
---------------------------------------------------------------------------
    \67\ This roundtable was originally scheduled to take place 
physically as a field hearing in Providence, Rhode Island, but was held 
virtually due to the COVID-19 pandemic.
---------------------------------------------------------------------------
    The Subcommittee hosted multiple briefings and roundtables 
with experts on the digital economy on a range of topics. 
Experts included state antitrust enforcers, former officials 
from the Antitrust Division of the DOJ and the FTC, former 
technology industry executives, small business owners, 
representatives from the news industry, entrepreneurs, 
antitrust scholars, representatives from civil society, and 
representatives from libraries.
    The briefings and roundtables covered a broad array of 
topics related to competition in the digital marketplace. These 
topics included:

      LThe effect that small algorithm changes by 
dominant platforms can have on small businesses that rely on 
the platform;
      LThe data advantages that dominant online 
platform companies have over smaller competitors and startups, 
and how those data advantages can reinforce dominance and serve 
as a barrier to entry;
      LThe effect of dominant online platform company 
power and practices on a free and diverse press, local 
newsgathering and reporting;
      LThe impact of dominant online platform company 
power and practices on investment in startups by venture 
capital firms;
      LThe fear of economic retaliation by dominant 
platforms against smaller companies that raise concerns about 
anticompetitive conduct in the digital marketplace;
      LOther features of digital markets--including, 
but not limited to, network effects, economies of scale and 
scope, and barriers to entry--that make them prone to high 
concentration and monopolization;
      LEnforcement of the antitrust laws; and
      LModernization of antitrust statutes and 
competition policy.

    Additionally, the Subcommittee held briefings that also 
allowed representatives from Google, Amazon, Facebook, and 
Apple to make their own presentations to the Subcommittee and 
to answer questions and provide details regarding their 
companies' business practices, structures, and strategies in 
the marketplace.

                        D. Prior Investigations

    The Subcommittee's current review of competition in the 
digital marketplace continues a long oversight tradition. Over 
many decades, the House Judiciary Committee and its antitrust 
subcommittee have conducted careful, fact-based inquiries into 
industrial sectors showing signs of undue concentration and 
anticompetitive conduct. As a 1951 report from the then-named 
Subcommittee on the Study of Monopoly Power described its 
mandate, ``It is the province of this subcommittee to 
investigate factors which tend to eliminate competition, 
strengthen monopolies, injure small business, or promote undue 
concentration of economic power; to ascertain the facts, and to 
make recommendations based on those findings.'' \68\
---------------------------------------------------------------------------
    \68\ H. Rep. No. 82-255, at 2 (1951) (Aluminum: Report of the 
Subcomm. on Study of Monopoly Power of the H. Comm. on the Judiciary).
---------------------------------------------------------------------------
    The Subcommittee followed the same process ``to ascertain 
the facts'' in this investigation. It has included hearings 
with industry and government witnesses, consultations with 
subject-matter experts, and a careful--and at times 
painstaking--review of large volumes of evidence provided by 
industry participants and regulators. Recognizing that 
antitrust investigations are by their nature fact-dependent, 
teams of investigators invested significant resources to study 
the structure of the relevant markets and the important firms 
in those markets.\69\
---------------------------------------------------------------------------
    \69\ See, e.g., H. Rep. No. 87-1419, at 2 (1962) (The Ocean Freight 
Industry: Report of the Antitrust Subcomm. of the H. Comm. on the 
Judiciary) [hereinafter 1962 Ocean Freight Industry Report] (describing 
how Subcommittee staff spent more than nine months examining ``tens of 
thousands of documents in the files of over 50 ocean-freight 
conferences'' and other materials).
---------------------------------------------------------------------------
    The purpose of these exercises was not to supersede the 
activities of antitrust enforcers such as the FTC and the DOJ, 
but to compile the Committee's own record about current market 
conditions; to assess how antitrust laws and principles are 
being applied in the current business environment; and to 
determine whether revised laws, or new laws, or better 
enforcement are needed to protect competition.
    While the Committee's investigations were not intended to 
interfere with the enforcement activities of antitrust 
enforcers or regulators, they often conducted inquiries into 
the same sectors and issues that the DOJ, the FTC, the Federal 
Communications Commission (FCC), and other agencies with 
authority over competition policy or enforcement were also 
examining. As Members and staff of the Committee charged with 
the ``protection of trade and commerce against unlawful 
restraints and monopolies,'' \70\ these investigators exercised 
their legislative authority to probe any aspect of antitrust 
that they deemed warranted attention.
---------------------------------------------------------------------------
    \70\ Rules of the House of Representatives, 116th Cong., lst Sess., 
Rule X, cl. 1(l)(2) (2019), http://clerk.house.gov/legislative/house-
rules.pdf.
---------------------------------------------------------------------------
    These investigations were guided by the principle that 
``[h]istory has proven that the most conducive environment for 
innovation and new product availability is a competitive 
market,'' \71\ and that a ``free competitive economy'' is an 
important American value.\72\ It was a value that had been 
formally embedded in our economy and society by the Sherman Act 
of 1890, ``the peculiarly American charter of economic 
freedom.'' \73\ In a 1958 report on the airline industry, the 
then-named Antitrust Subcommittee explained that Americans' 
social and political freedoms depended on ``opportunity for 
market access and market rivalries in a private-enterprise 
economy.'' \74\ The ``freedom of entry into any industry or 
field of endeavor,'' a 1962 Subcommittee report explained, is a 
cornerstone of U.S. antitrust policy that has ``encouraged 
extensive individual proprietorship . . . and has made our free 
enterprise system great and strong.'' \75\ A 1992 Committee 
report recommended restrictions on the monopolistic Regional 
Bell Operating Companies (RBOCs) ``[f]or the sake of the 
democratic economic and political values which depend on the 
preservation of free markets.'' \76\
---------------------------------------------------------------------------
    \71\ H. Rep. No. 102-850, at 15 (1992) (Report on Antitrust Reform 
Act of 1992, H. Comm. on the Judiciary) [hereinafter Antitrust Reform 
Act of 1992].
    \72\ H. Rep. No. 82-1217, at 1 (1951) (The Mobilization Program: 
Report of the Subcomm. on Study of Monopoly Power of the H. Comm. on 
the Judiciary).
    \73\ Id. at 2.
    \74\ H. Rep. No. 85-1328, at 1 (1958) (The Airlines Industry: 
Report of the Antitrust Subcomm. of the H. Comm. on the Judiciary) 
[hereinafter Airlines Industry Report].
    \75\ 1962 Ocean Freight Industry Report at 394.
    \76\ Antitrust Reform Act of 1992 at 10.
---------------------------------------------------------------------------
    In some cases, antitrust investigations exposed antitrust 
problems that the Committee concluded required attention from 
regulators. For example, a 1958 Antitrust Subcommittee report 
on the rapidly growing domestic airline industry exposed the 
behind-the-scenes anticompetitive campaign that incumbent air 
carriers and their advocacy group, the Air Transport 
Association of America (ATA), had been waging to prevent the 
Civil Aeronautics Board (CAB) from approving market entry by 
new air carriers (known at the time as ``nonskeds'').\77\ The 
Committee found the conduct of the ATA so egregious that it 
recommended an investigation by the DOJ Antitrust Division.\78\ 
As for international air transportation, the report concluded 
that Pan American's dominance in the market was the ``result of 
its use of devices to foreclose competition in order to secure 
and maintain control over markets in which it does business,'' 
and recommended that the CAB undertake a broad investigation of 
the company.\79\
---------------------------------------------------------------------------
    \77\ Airlines Industry Report at 268-69.
    \78\ Id. at 272.
    \79\ Id. at 278.
---------------------------------------------------------------------------
    In other cases, the Committee investigated matters that 
were currently under review by antitrust enforcers. In a 1957 
report on the broadcast television industry, which was quickly 
reshaping Americans' consumption of news and entertainment, the 
then-named Antitrust Subcommittee described the anticompetitive 
tactics CBS and NBC were using to promote their own content at 
the expense of independent content producers.\80\ According to 
the report, networks were improperly using their power as 
vertical distributors of content to extract financial 
concessions from independent competitors seeking to place their 
programming on network affiliates.\81\ There was also evidence 
that the networks were using their substantial power with 
advertisers to unfairly favor their own content.\82\ After 
praising the DOJ Antitrust Division's ``alertness to vindicate 
the competitive dictates of the antitrust laws,'' the 
Subcommittee urged the Division to press its investigation into 
this conduct with ``vigor and dispatch.'' \83\
---------------------------------------------------------------------------
    \80\ H. Rep. No. 85-607, at 143 (1957) (The Television Broadcasting 
Industry: Report of the Antitrust Subcomm. of the Comm. on the 
Judiciary).
    \81\ Id.
    \82\ Id.
    \83\ Id.
---------------------------------------------------------------------------
    In the case of the Committee's inquiry into the RBOCs' 
conduct in the aftermath of the 1984 breakup of AT&T, we 
concluded that federal courts and regulators were not 
adequately protecting competition in the telecommunications 
marketplace and that new legislation was necessary. A 1992 
Committee report reviewed the long, troubled history of 
attempts by DOJ and the FCC \84\ to check the monopolistic 
power of AT&T, culminating in the famous Modified Final 
Judgment (the MFJ) that Judge Harold Greene approved in August 
1982 to break up the company.\85\ But even after the MFJ, the 
report found, the FCC had failed to prevent the RBOCs from 
using their local monopolies to commit a number of 
anticompetitive violations, ``many eerily reminiscent of pre-
divestiture Bell System abuses.'' \86\ We were also critical of 
the DOJ's actions to water down the MFJ's procompetitive line-
of-business restrictions on the RBOCs. Describing the massive 
lobbying campaign that the RBOCs were waging to enter the 
business lines the MFJ had opened up to competitors, we 
observed, ``The thousands upon thousands of competitive 
enterprises now thriving in information service, 
telecommunications equipment, and long distance markets face 
the prospect of their future prosperity being decided by the 
self-interested designs of a monopoly with `bottleneck' control 
over the local telephone exchange on which they all depend.'' 
\87\ In light of the antitrust agencies' demonstrated failure 
to protect competition, the Committee approved legislation that 
would codify the MFJ's line-of-business restrictions into 
law.\88\
---------------------------------------------------------------------------
    \84\ Antitrust Reform Act of 1992 at 39 (``The FCC, while claiming 
boldly to be a forum where complaints about monopolistic practices 
would be received and vigorously pursued had, instead, become a 
regulatory `graveyard' for telecommunications competition policy, 
characterized by inaction and equivocation.'').
    \85\ Id. at 45.
    \86\ Id. at 51.
    \87\ Id. at 10. The report explained that the RBOCs' bottleneck, in 
antitrust terminology, functioned as an ``essential facility,'' which 
gave them ``an inherent ability and--for activities in which they are 
engaged themselves--a natural incentive to impede competition in lines 
of business dependent upon that essential facility.'' Id. at 13.
    \88\ H.R. 5096 (102nd Cong.); H.R. 3626 (103rd Cong.); see H. Rep. 
No. 103-559, pt. II, at 25 (1994) (Report on Antitrust and 
Communications Reform Act of 1994, H. Comm. on the Judiciary) (``The 
Judiciary Committee has resolved that the Government not lose its nerve 
once again and allow an industry born in monopoly to be reborn in 
monopoly.''). The procompetitive policies proposed in this legislation 
later became law, in modified form, as part of the Telecommunications 
Act of 1996. See Pub. L. No. 104-104,  151(a), 110 Stat. 56, 86-107 
(codified at 42 U.S.C. 271-276).
---------------------------------------------------------------------------
    Finally, in these prior investigations, the Committee has 
not hesitated to recommend that antitrust authorities further 
investigate suspicious conduct. After examining the conduct of 
the Air Transport Association of America, the industry group 
representing the established passenger airline carriers in the 
1950s, the Antitrust Subcommittee recommended that the 
Antitrust Division of the DOJ further investigate the ``serious 
antitrust problems'' it had identified.\89\
---------------------------------------------------------------------------
    \89\ Airlines Industry Report at 272.
---------------------------------------------------------------------------

                            III. BACKGROUND

             A. Overview of Competition in Digital Markets

1. The Role of Competition Online
    At a fundamental level, competition has been a key engine 
of economic activity in the United States,\90\ resulting in the 
``pioneering of entire industries that, in time, come to employ 
millions and generate trillions.'' \91\ This is especially true 
in the digital economy. As in other industries, competition in 
digital markets incentivizes incumbent firms and new entrants 
to build new technologies and improve business processes.\92\ 
It spurs capital investment and incentivizes firms to improve 
the quality of their offerings.\93\ In its absence, incumbent 
firms lack the incentive to invest in research and 
development.\94\ This in turn slows the rate of innovation 
across the industry.\95\ Disruptive new products or services 
are replaced with slow, incremental alterations \96\ ``designed 
to protect [incumbent firms'] existing revenue streams.'' \97\ 
Slowly but surely, venture capitalists lose the incentive to 
invest in new entrants willing to challenge the dominance of 
incumbent firms through direct competition.\98\ What we are 
left with are so-called ``kill zones''--the near-complete 
absence of competition.
---------------------------------------------------------------------------
    \90\ Innovation and Entrepreneurship Hearing at 76 (statement of 
Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. of Law).
    \91\ Id.; Roger McNamee, Co-Founder & Managing Dir., Elevation 
Partners, Remarks at Venture Capital and Antitrust Workshop 34 (Feb. 
12, 2020), https://www.justice.gov/atr/page/file/1255851/download  
(``[T]here is a case that antitrust has in fact been a major catalysis 
of growth in every wave of technology.'').
    \92\ Antitrust Agencies Hearing at 37 (statement of Makan Delrahim, 
Assistant Att'y Gen., U.S. Dep't of Justice, Antitrust Div.) 
(``Competition also promotes improvements and upgrades to the quality 
and functionality of existing offerings.''); Jeffrey A. Rosen, Deputy 
Att'y Gen., U.S. Dep't of Justice, Speech at the Free State 
Foundation's 12th Annual Telecom Policy Conference (Mar. 10, 2020), 
https://www.justice.gov/opa/speech/deputy-attorney-general-jeffrey-
rosen-speaks-free-state-foundations-12th-annual-telecom; Giulio 
Federico, Fiona Scott Morton & Carl Shapiro, Antitrust and Innovation: 
Welcoming and Protecting Disruption 1 (Nat'l Bur. of Econ. Rsch., 
Working Paper No. 26005, June 2019), https://www.nber.org/papers/
w26005.pdf.
    \93\ Innovation and Entrepreneurship Hearing at 209 (statement of 
Maureen K. Ohlhausen, Partner, Baker Botts L.L.P.) (``Antitrust law's 
focus on protecting the competitive process does not mean that it 
cannot reach many of the competitive concerns . . . [that] may include 
price effects, reductions in quality, and impacts on innovation, as 
well as the ability of a dominant player to acquire and neutralize a 
nascent competitor.''); id. at 84 (statement of Fiona Scott Morton, 
Theodore Nierenberg Prof. of Econ., Yale Sch. of Mgmt.) (``The harms 
from insufficient competition appear in prices that are higher than 
competitive prices, quality that is lower than competitive quality, and 
less innovation than consumers would benefit from in competitive 
markets.'').
    \94\ Id. at 84.
    \95\ See generally Jeffrey A. Rosen, Deputy Att'y Gen., U.S. Dep't 
of Justice, Speech at the Free State Foundation's 12th Annual Telecom 
Policy Conference (Mar. 10, 2020), https://www.justice.gov/opa/speech/
deputy-attorney-general-jeffrey-rosen-speaks-free-state-foundations-
12th-annual-telecom (referencing research by economist Kenneth Arrow).
    \96\ Data and Privacy Hearing at 60 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.).
    \97\ Innovation and Entrepreneurship Hearing at 79 (statement of 
Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. of Law).
    \98\ Id. at 84. See also Sai Krishna Kamepalli, Raghuram Rajan & 
Luigi Zingales, Kill Zone (Univ. of Chi., Becker Friedman Inst. for 
Econ., Working Paper No. 2020-19, Apr. 2020), https://ssrn.com/
abstract=3555915.
---------------------------------------------------------------------------
    The benefits of robust competition in the digital economy 
go beyond innovation and productivity. It can also spur firms 
to compete along other dimensions such as privacy and data 
protection. As a general matter, inadequate competition not 
only leads to higher prices and less innovation in many cases, 
but it can also reduce the quality of goods and services.\99\ 
Given that many digital products do not charge consumers 
directly for services, these firms often compete on 
quality.\100\ Along these lines, lack of competition can result 
in eroded privacy and data protection.\101\ Growing evidence 
indicates that a lack of competition goes hand in hand with 
just such quality degradation.\102\
---------------------------------------------------------------------------
    \99\ Data and Privacy Hearing at 54 (statement of Tommaso Valletti, 
Prof. of Econ., Imperial Coll. Bus. Sch.) (``Quality, choice, and 
innovation are also important aspects for competition and for consumer 
welfare.''); Innovation and Entrepreneurship Hearing at 207-09 
(statement of Maureen K. Ohlhausen, Partner, Baker Botts L.L.P.).
    \100\ Data and Privacy Hearing at 42 (statement of Rohit Chopra, 
Comm'r, Fed. Trade Comm'n) (``These services do have a price, and you 
are paying for them with your data.''); id. at 60 (statement of Jason 
Furman, Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.) 
(``Consumers may think they are receiving `free' products but they are 
paying a price for these products in a number of ways.'').
    \101\ Innovation and Entrepreneurship Hearing at 209 (statement of 
Maureen K. Ohlhausen, Partner, Baker Botts L.L.P.); Data and Privacy 
Hearing at 60-61 (statement of Jason Furman, Prof. of the Prac. of 
Econ. Pol'y, Harvard Kennedy Sch.); id. at 138 (George Slover, Senior 
Pol'y Couns., Consumer Reps., Justin Brookman, Dir., Privacy & Tech. 
Pol'y, Consumer Reps. & Jonathan Schwantes, Senior Pol'y Couns., 
Consumer Reps.) (``[A] dominant platform can disregard the interests of 
consumers in protecting their privacy, and design their platform to 
maximize its ability to monitor, monetize, and manipulate our personal 
interactions as consumers and as citizens.'').
    \102\ Data and Privacy Hearing at 55 (statement of Tommaso 
Valletti, Prof. of Econ., Imperial Coll. Bus. Sch.).
---------------------------------------------------------------------------
2. Market Structure
    (a) Winner-Take-All Markets. Certain features of digital 
markets-such as network effects, switching costs, the self-
reinforcing advantages of data, and increasing returns to 
scale-make them prone to winner-take-all economics.\103\ As a 
result, many technology markets ``tip'' in favor of one or two 
large companies,\104\ shifting the ``the competitive process 
from competition in the market to competition for the market.'' 
\105\ In turn, high barriers to entry may diminish the ability 
of new firms to challenge incumbent firms, further undermining 
the competitive process and protecting the dominance of 
existing firms.\106\ As the United Kingdom's Competition and 
Markets Authority explains:
---------------------------------------------------------------------------
    \103\ Id. at 59 (statement of Jason Furman, Prof. of the Prac. of 
Econ. Pol'y, Harvard Kennedy Sch.). Other anticompetitive practices in 
digital markets--such as product design, self-preferencing, and 
anticompetitive contracting, among others--may also contribute to 
barriers that impede entry by rivals or new firms. While these issues 
are also present in other markets, they are much more pronounced in 
digital markets.
    \104\ Id.
    \105\ Stigler Report at 29, 35.
    \106\ Data and Privacy Hearing at 59-60 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.).

     L[I]f potential competitors face substantial barriers to 
entry and expansion, such that the market is no longer properly 
contestable, then a high market share can translate into market 
power, giving the platform the opportunity to increase prices, 
reduce quality or leverage market power to undermine 
competition in potentially competitive markets and deny 
innovative rivals the chance to bring new services to 
market.\107\
---------------------------------------------------------------------------
    \107\ U.K. Competition & Mkts. Auth., Online Platforms and Digital 
Advertising, Market Study Final Report 10-11 (2020) [hereinafter 
Competition & Mkts. Auth. Report].

    (b) Market Concentration. Consistent with winner-take-all 
dynamics, the digital economy is highly concentrated.\108\ A 
number of key markets online--such as social media, general 
online search, and online advertising--are dominated by just 
one or two firms.\109\ In some instances, this concentration is 
the result of a high volume of acquisitions by the dominant 
digital platforms. Together, the largest technology firms have 
acquired hundreds of companies in the last ten years.\110\ 
Antitrust enforcers in the United States did not block any of 
these transactions,\111\ many of which eliminated actual or 
potential competitors.\112\ In some instances these 
acquisitions enabled the dominant firm to neutralize a 
competitive threat; in other instances, the dominant firm shut 
down or discontinued the underlying product entirely--
transactions aptly described as ``killer acquisitions.'' \113\
---------------------------------------------------------------------------
    \108\ Data and Privacy Hearing at 58 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.).
    \109\ Id. at 59; Innovation and Entrepreneurship Hearing at 78 
(statement of Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. 
of Law).
    \110\ Tim Wu & Stuart A. Thompson, The Roots of Big Tech Run 
Disturbingly Deep, N.Y. Times (June 7, 2019), https://www.nytimes.com/
interactive/2019/06/07/opinion/google-facebook-mergers-acquisitions-
antitrust.html; see Visualizing Tech Giants' Billion-Dollar 
Acquisitions, CB Insights (May 5, 2020), https://perma.cc/KJD9-HT3Z.
    \111\ Although several transactions, including Google's acquisition 
of ITA in 2010, were subject to settlements, U.S. antitrust enforcers 
did not attempt to prevent the consummation of these transactions.
    \112\ Tim Wu & Stuart A. Thompson, The Roots of Big Tech Run 
Disturbingly Deep, N.Y. Times (June 7, 2019), https://www.nytimes.com/
interactive/2019/06/07/opinion/google-facebook-mergers-acquisitions-
antitrust.html; Carl Shapiro, Antitrust in a Time of Populism, 61 
Int'l. J. Indus. Org. 714, 739-40 (2018), https://
faculty.haas.berkeley.edu/shapiro/antitrustpopulism
.pdf.
    \113\ Colleen Cunningham, Florian Ederer & Song Ma, Killer 
Acquisitions 1 (Yale Sch. of Mgmt., Working Paper, 2020), https://
ssrn.com/abstract=3241707 (describing the practice whereby ``an 
incumbent firm may acquire an innovative target and terminate the 
development of the target's innovations to preempt future 
competition''). See also C. Scott Hemphill & Tim Wu, Nascent 
Competitors, 168 U. Pa. L. Rev. 1879, 1880 (2020), https://perma.cc/
62HH-34ZL (``A nascent competitor is a firm whose prospective 
innovation represents a serious future threat to an incumbent.'').
---------------------------------------------------------------------------
    Evidence also suggests that the venture capital industry, 
which plays a critical role in funding innovative startups, 
contributes to market consolidation by encouraging startups to 
exit via a sale to an incumbent firm.\114\ As initial public 
offerings (IPOs) have become more expensive and time-consuming 
in recent decades, venture capitalists have shown a preference 
for realizing their investments through acquisitions rather 
than through public markets.\115\
---------------------------------------------------------------------------
    \114\ Mark Lemley & Andrew McCreary, Exit Strategy 24-45 (Stanford 
Law Sch., John M. Olin Program in Law & Econ., Working Paper No. 542, 
2020), https://ssrn.com/abstract=3506919.
    \115\ Id.

    (c) The Role of Online Platforms as Gatekeepers. As Amazon, 
Apple, Facebook, and Google have captured control over key 
channels of distribution, they have come to function as 
gatekeepers. A large swath of businesses across the U.S. 
economy now depend on these gatekeepers to access users and 
markets. In interviews with the Subcommittee, numerous 
businesses described how dominant platforms exploit this 
gatekeeper power to dictate terms and extract concessions that 
third parties would not consent to in a competitive 
market.\116\ According to these companies, these types of 
concessions and demands carry significant economic harm but are 
``the cost of doing business'' given the lack of options.
---------------------------------------------------------------------------
    \116\ See infra Section V.
---------------------------------------------------------------------------
    Their role as gatekeepers also gives the dominant platforms 
outsized power to control the fates of other businesses. 
Reflecting this fact, several major publicly owned firms that 
rely on the dominant platforms have noted in investor 
statements that this dependent relationship creates an inherent 
risk to their businesses.\117\ For example, Lyft, a ride-
sharing company, has cited its use of Amazon's cloud services 
and Google Maps as a potential risk to its business model.\118\ 
As Lyft stated in a filing, ``Some of our competitors or 
technology partners may take actions which disrupt the 
interoperability of our platform with their own products or 
services.'' \119\ Pinterest, a photo-sharing service, likewise 
noted in a financial filing that changes to Google's search 
algorithm may harm Pinterest. As it noted, Pinterest's 
``ability to maintain and increase the number of visitors 
directed to our service from search engines is not within our 
control. Search engines, such as Google, may modify their 
search algorithms and policies or enforce those policies in 
ways that are detrimental to us.'' \120\ In submissions and 
interviews with the Subcommittee, many companies reiterated the 
general concern that a single act or decision by one of the 
dominant platforms could wreck their businesses.
---------------------------------------------------------------------------
    \117\ Gerrit De Vynck, The Power of Google and Amazon Looms Over 
Tech IPOs, Bloomberg (July 1, 2019), https://www.bloomberg.com/news/
articles/2019-07-01/google-s-and-amazon-s-power-looms-over-procession-
of-tech-ipos (noting that 17 of 22 initial public offerings by 
technology companies cited online platforms as competitors or risks to 
their businesses).
    \118\ Id.
    \119\ Id.
    \120\ Id.
---------------------------------------------------------------------------
    Since the dominant platforms in many cases have also 
integrated into adjacent lines of business, these firms operate 
both as key intermediaries for third-party companies as well as 
direct competitors to them. Numerous entrepreneurs, small 
businesses, and major companies told the Subcommittee that the 
dominant platforms' dual role raises significant competition 
concerns.\121\ In recent years, significant reporting has 
documented how the dominant platforms can exploit this dual 
role, through data exploitation,\122\ self-preferencing,\123\ 
appropriation of key technologies,\124\ and abrupt changes to a 
platform's policies.\125\ The Subcommittee's investigation 
uncovered numerous examples of this exploitative conduct, 
suggesting that these are increasingly systemic, rather than 
isolated, business practices.
---------------------------------------------------------------------------
    \121\ See infra Section V.
    \122\ See Press Release, Eur. Comm'n, Antitrust: Commission Opens 
Investigation into Possible Anti-competitive Conduct of Amazon (July 
17, 2019), https://ec.europa.eu/commission/presscorner/detail/en/
IP_19_4291 (``Based on the Commission's preliminary fact-finding, 
Amazon appears to use competitively sensitive information--about 
marketplace sellers, their products and transactions on the 
marketplace.'').
    \123\ Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-results-
thwarting-competitors-11563897221.
    \124\ Jack Nicas & Daisuke Wakabayashi, Sonos, Squeezed by the Tech 
Giants, Sues Google, N.Y. Times (Jan. 7, 2020), https://
www.nytimes.com/2020/01/07/technology/sonos-sues-google.html.
    \125\ Reed Albergotti, Apple Says Recent Changes to Operating 
System Improve User Privacy, but Some Lawmakers See Them as an Effort 
to Edge out Its Rivals, Wash. Post (Nov. 26, 2019), https://
www.washingtonpost.com/technology/2019/11/26/apple-emphasizes-user-
privacy-lawmakers-see-it-an-effort-edge-out-its-rivals/; Jason Del Rey, 
An Amazon Revolt Could Be Brewing as the Tech Giant Exerts More Control 
over Brands, Vox: Recode (Nov. 29, 2018), https://www.vox.com/2018/11/
29/18023132/amazon-brand-policy-changes-marketplace-control-one-vendor.
---------------------------------------------------------------------------
3. Barriers to Entry
    (a) Network Effects. Digital markets tend to be 
characterized by strong network effects, making them prone to 
concentration and monopolization.\126\ There are two types of 
network effects: direct and indirect. In markets with direct 
network effects, the more people who use a product or service, 
the more valuable that product or service becomes to other 
users.\127\ By contrast, indirect network effects arise when 
greater use of a product or service forms a new type of 
standard and increases the incentive for third parties to 
invest in developing compatible technologies, which in turn 
reinforces the popularity of the original product or service 
with users.\128\
---------------------------------------------------------------------------
    \126\ Jay Shambaugh, Ryan Nunn, Audrey Breitwiser & Patrick Liu, 
Brookings Inst., The State of Competition and Dynamism: Facts About 
Concentration, Start-Ups, and Related Policies 10 (2018), https://
www.brookings.edu/wp-content/uploads/2018/06/ES_ 
THP_20180611_CompetitionFacts_20180611.pdf.
    \127\ See Luigi Zingales & Guy Rolnik, A Way To Own Your Social-
Media Data, N.Y. Times (June 30, 2017), https://www.nytimes.com/2017/
06/30/opinion/social-data-google-facebook-
europe.html.
    \128\ Maurice E. Stucke & Allen P. Grunes, Big Data and Competition 
Policy 163 (2016).
---------------------------------------------------------------------------
    Online platforms display strong network effects because 
they connect disparate market segments. For example, online 
commerce platforms like Amazon connect buyers and sellers. Just 
as with social networks, the value of Amazon Marketplace 
increases as more users--both sellers and buyers--engage with 
the platform.\129\ Similarly, the value of online platforms 
that facilitate advertising, such as Google, increases with the 
number of users, as advertisers gain access to a larger 
consumer base and therefore to a larger trove of consumer 
data.\130\
---------------------------------------------------------------------------
    \129\ Id.
    \130\ Id.
---------------------------------------------------------------------------
    Similarly, social networks like Facebook exhibit powerful 
direct network effects because they become more valuable as 
more users engage with the network--no person wants to be on a 
social network without other users.\131\ Meanwhile, once a firm 
captures a network it can become extremely difficult to 
dislodge or replace. As Mark Zuckerberg explained to then-CFO 
David Ebersman the benefits that would accrue to Facebook from 
acquiring Instagram:
---------------------------------------------------------------------------
    \131\ Stigler Report at 38.

     L[T]here are network effects around social products and a 
finite number of different social mechanics to invent. Once 
someone wins at a specific mechanic, it's difficult for others 
to supplant them without doing something different. It's 
possible someone beats Instagram by building something that is 
better to the point that they get network migration, but this 
is harder as long as Instagram keeps running as a product.\132\
---------------------------------------------------------------------------
    \132\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063222 (Feb. 27, 2012), https://judiciary.house.gov/
uploadedfiles/0006322000063223.pdf.

    Strong network effects serve as a powerful barrier to entry 
for new firms to enter a market and displace the 
incumbent.\133\ When combined with other entry barriers such as 
restrictions on consumers or businesses easily switching 
services, network effects all but ensure not just market 
concentration but durable market power.\134\
---------------------------------------------------------------------------
    \133\ See Stigler Report at 40.
    \134\ See Dig. Competition Expert Panel Report at 35.

    (b) Switching Costs. Switching costs present another 
barrier for potential market entrants. In many cases, large 
technology firms can maintain market power in part because it 
is not easy for users to switch away from the incumbent's 
technology. A market exhibits ``lock-in'' when switching costs 
are sufficiently high that users stay with an incumbent firm 
rather than switch to a firm whose product or service they 
would prefer.\135\ Over time, lock-in tends to reduce 
competition, deter market entry, and may even worsen data 
privacy.\136\
---------------------------------------------------------------------------
    \135\ Maurice E. Stucke & Allen P. Grunes, Big Data and Competition 
Policy 159 (2016).
    \136\ Id.
---------------------------------------------------------------------------
    High switching costs are a central feature of digital 
search and social media platforms, such as Google and Facebook, 
where users contribute data to the platform but may not be able 
to migrate that data to a competing platform. For example, a 
user may upload a variety of data to Facebook, including photos 
and personal information, but may not be able to easily 
download that data and move it to another social media site; 
instead, the user would have to start from scratch, re-
uploading her photos and re-entering her personal information 
to the new platform.\137\ An online seller who has generated 
hundreds of product reviews and ratings on Amazon may face a 
similar challenge when considering migrating to a different 
platform. Other significant factors that contribute to 
switching costs in digital markets include anticompetitive 
contracting terms, default settings, and product design that 
favor dominant platforms.\138\
---------------------------------------------------------------------------
    \137\ Data and Privacy Hearing at 134 (statement of Dina 
Srinivasan, Fellow, Yale Thurman Arnold Project).
    \138\ Dig. Competition Expert Panel Report at 36. Unlike the 
European Union, which provides internet users with a right to data 
portability, the U.S. does not have any law requiring online platforms 
to make data portable. Platforms like Google and Facebook are therefore 
largely uninhibited in imposing switching costs for users, hurting 
competition in the process. Allen St. John, Europe's GDPR Brings Data 
Portability to U.S. Consumers, Consumer Reps. (May 25, 2018), https://
www.consumerreports.org/privacy/gdpr-brings-data-portability-to-us-
consumers; see also Chris Dixon, The Interoperability of Social 
Networks, Bus. Insider (Nov. 10, 2010), https://
www.businessinsider.com/the-interoperability-of-social-networks-2011-2; 
Josh Constine, Friend Portability Is the Must-Have Facebook Regulation, 
TechCrunch (May 12, 2019), https://technologycrunch.com/2019/05/12/
friends-wherever.

    (c) Data. The accumulation of data can serve as another 
powerful barrier to entry for firms in the digital economy. 
Data allows companies to target advertising with scalpel-like 
precision, improve services and products through a better 
understanding of user engagement and preferences, and more 
quickly identify and exploit new business opportunities.\139\
---------------------------------------------------------------------------
    \139\ Dig. Competition Expert Panel Report at 23.
---------------------------------------------------------------------------
    Much like a network effect, data-rich accumulation is self-
reinforcing. Companies with superior access to data can use 
that data to better target users or improve product quality, 
drawing more users and, in turn, generating more data--an 
advantageous feedback loop.\140\ In short, new users and 
greater engagement bring in more data, which enables firms to 
improve user experiences and develop new products--in turn 
capturing more data.\141\ While data is non-rivalrous--meaning 
that one party's use does not prevent or diminish use by 
another--firms may nonetheless exclude rivals from using their 
data through technical restrictions and legal contracts.\142\ 
These exclusionary tactics can close off markets and shield 
incumbents from competition.\143\
---------------------------------------------------------------------------
    \140\ Maurice E. Stucke, Should We Be Concerned About Data-
opolies?, 2 Geo. L. Tech. Rev. 275, 323 (2018) (discussing the dynamics 
of data-driven network effects).
    \141\ Maurice E. Stucke & Allen P. Grunes, Big Data and Competition 
Policy 36-50 (2016); Patrick Barwise & Leo Watkins, The Evolution of 
Digital Dominance: How and Why We Got to GAFA, in Digital Dominant: The 
Power of Google, Amazon, Facebook, and Apple 21, 28-29 (2018), http://
www.lse.ac.uk/law/Assets/Documents/orla-lynskey/orla-3.pdf.
    \142\ Maurice E. Stucke & Allen P. Grunes, Big Data and Competition 
Policy 23-34 (2016).
    \143\ Id. at 34.
---------------------------------------------------------------------------
    In addition to serving as a barrier to entry, superior 
access to data can enable and exacerbate anticompetitive 
conduct in digital markets. This is particularly true when a 
dominant platform operates as both a marketplace for third-
party goods as well as a seller of its own products on that 
same marketplace.\144\ Through this dual role, a dominant 
platform can mine commercially valuable information from third-
party businesses to benefit its own competing products.\145\ 
Additionally, a dominant platform can use its market power to 
extract more data from users, undermining their privacy.\146\
---------------------------------------------------------------------------
    \144\ Jacques Cremer, Yves-Alexandre de Monjoye & Heike Scwheitzer, 
Eur. Comm'n, Competition Policy for the Digital Era 66-67 (2019) 
[hereinafter Eur. Comm'n Competition Report].
    \145\ Id. at 66.
    \146\ See Dina Srinivasan, The Antitrust Case Against Facebook: A 
Monopolist's Journey Towards Pervasive Surveillance in Spite of 
Consumers' Preference for Privacy, 16 Berkeley Bus. L.J. 39, 70 (2019); 
Data and Privacy Hearing at 132 (statement of Dina Srinivasan, Fellow, 
Yale Thurman Arnold Project).
---------------------------------------------------------------------------
    Persistent data collection can also create information 
asym-metries and grant firms access to non-public information 
that gives them a significant competitive edge. These insights 
include information on user behavior as well as on broader 
usage trends that enable the dominant platforms to track 
nascent competitive threats. In an interview with the 
Subcommittee, a senior executive at a social media company 
referred to this ability as akin to having ``a spy camera on 
the production floor'' of a competitive threat.\147\ Roger 
McNamee, the Co-Founder of Elevation Partners, has noted that 
the dominant platforms' role as digital infrastructure gives 
them both leverage and insights that other competitors lack:
---------------------------------------------------------------------------
    \147\ Interview with Source 247 (June 4, 2020).

     LEssentially, the interplay of Google's dominant position 
in . . . infrastructure elements [such as] ad tech 
infrastructure, Chrome browser, [and Nest] . . . collectively 
provide leverage over other market participants, which include 
not just startups, but also advertisers, and other would-be 
competitors. And the key thing is, it's not just about Google's 
infrastructure. When you add in Gmail, Search, Maps, apps, and 
all the other things that Google does so well . . . [t]hey 
provide further levels of user lock-in-further protective modes 
that really limit the opportunity of competitors and even, 
frankly, suppliers and advertisers, to do the things that they 
should be able to do in a freely competitive economy.\148\
---------------------------------------------------------------------------
    \148\ Roger McNamee, Co-Founder & Managing Dir., Elevation 
Partners, Remarks at Venture Capital and Antitrust Workshop 30 (Feb. 
12, 2020), https://www.justice.gov/atr/page/file/1255851/download.

    This significant data advantage also enables dominant 
platforms to identify and acquire rivals early in their 
lifecycle. Leading economists and antitrust experts have 
expressed concern that serial acquisitions of nascent 
competitors by large technology firms have stifled competition 
and innovation.\149\ This acquisition strategy exploits 
dominant firms' information advantages in order to acquire 
rapidly growing companies just before those companies become 
true threats.\150\ Lacking access to this same information or 
failing to appreciate its significance, enforcers may fail to 
identify these acquisitions as anticompetitive. This is more 
likely when the dominant platform buys a nascent threat before 
it has fully developed into a rival.
---------------------------------------------------------------------------
    \149\ See, e.g., Stigler Report at 74, 87.
    \150\ See Maurice E. Stucke, Should We Be Concerned About Data-
opolies?, 2 Geo. L. Tech. Rev. 275, 309 (2018) (discussing the growing 
concern with ``kill zone'' tactics and the chilling effect on 
``entrepreneurism and autonomy'').
---------------------------------------------------------------------------
    In a briefing before Members of the Subcommittee, Jonathan 
Sallet, former Deputy Assistant Attorney General at the 
Antitrust Division, explained that data-driven acquisitions of 
nascent or potential rivals can significantly undermine 
competition while systematically evading antitrust 
scrutiny.\151\ One reason is that upstart competitors are often 
data-rich but cash-poor, a combination that is unlikely under a 
price-centric framework to trigger antitrust scrutiny if the 
acquisition is priced below the relevant threshold for merger 
review.\152\ For example, had Microsoft sought to exploit its 
monopoly power in the market for personal computer operating 
systems by acquiring Netscape--rather than by foreclosing it--
it is unlikely that antitrust enforcers would have taken 
action. He noted that this type of acquisition can tip the 
market in favor of a dominant firm, having the same ultimate 
effect as monopolistic conduct but escaping the antitrust 
enforcement that monopolistic conduct has triggered in the 
past.\153\
---------------------------------------------------------------------------
    \151\ Briefing by Jonathan Sallet, Deputy Assistant Att'y Gen., 
U.S. Dep't of Justice, Antitrust Div. (July 11, 2020).
    \152\ Colleen Cunningham, Florian Ederer & Song Ma, Killer 
Acquisitions 53 (Yale Sch. of Mgmt., Working Paper, Apr. 2020), https:/
/ssrn.com/abstract=3241707 (finding that killer acquisitions 
``routinely avoid regulatory scrutiny'' because they 
``disproportionately occur just below [HSR] thresholds for antitrust 
scrutiny'').
    \153\ Jonathan Sallet, Competitive Edge: Five Building Blocks For 
Antitrust Success: The Forthcoming FTC Competition Report, Wash. Ctr. 
for Equitable Growth (Oct. 1, 2019), https://equitablegrowth.org/
competitive-edge-five-building-blocks-for-antitrust-success-the-
forthcoming-ftc-competition-report/.

    (d) Economies of Scale and Scope. Increasing returns to 
scale are another feature of technology markets that make them 
prone to tip towards concentration and monopolization.\154\ In 
markets with increasing returns to scale, as sales increase, 
average unit cost decreases.\155\ Because entry into these 
markets requires significant up-front costs, the market favors 
firms that are already large, making it difficult for new firms 
to enter the market and challenge large incumbents.\156\
---------------------------------------------------------------------------
    \154\ Innovation and Entrepreneurship Hearing at 81 (statement of 
Fiona Scott Morton, Theodore Nierenberg Prof. of Econ., Yale Sch. of 
Mgmt.); Dig. Competition Expert Panel Report at 32; Stigler Report at 
13; see also Jay Shambaugh, Ryan Nunn, Audrey Breitwieser & Patrick 
Liu, The Brookings Inst., The State of Competition and Dynamism: Facts 
About Concentration, Start-Ups, and Related Policies 10 (2018), https:/
/www.brookings.edu/wp-
content/uploads/2018/06/ES_THP_20180611_CompetitionFacts_20180611.pdf.
    \155\ Stigler Report at 36.
    \156\ Dig. Competition Expert Panel Report at 32.
---------------------------------------------------------------------------
    Likewise, a dominant firm that enjoys economies of scope 
can extend its reach across adjacent markets through an 
expansive ecosystem of its own products while incurring 
relatively low cost.\157\ For example, if a firm has sufficient 
technical expertise or access to consumer data, the cost of 
applying this resource into a new market is relatively low.
---------------------------------------------------------------------------
    \157\ Id.
---------------------------------------------------------------------------
    Businesses that specialize in providing information, such 
as Google, frequently benefit from increasing returns to 
scale.\158\ These businesses require high upfront fixed costs, 
but then may scale with relatively low increases in cost. For 
example, ``Google can update Google Calendar for 100 million 
users with similar fixed expenses as would be needed for only a 
fraction of such users.'' \159\ Facebook is another company 
that benefits from increasing returns to scale.\160\ Although 
building the Facebook platform required a large upfront 
investment, the platform was able to grow exponentially with 
relatively little increase in costs. With the benefit of 
increasing returns to scale, Facebook was able to grow from one 
million users in 2004, the year of its founding, to more than 
350 million users in only five years.\161\
---------------------------------------------------------------------------
    \158\ Stigler Report at 37.
    \159\ Id.
    \160\ Id.
    \161\ Id. at 36-37.
---------------------------------------------------------------------------
    Recent economic evidence indicates that economies of scale 
achieved through data collection allow platforms to get more 
out of consumers than consumers get out of platforms.\162\ In 
exchange for ``free'' services, users provide valuable social 
data--information that may also shed light on other people's 
behavior--in addition to their own personal information. For 
instance, a person's location history using Google Maps reveals 
valuable and sensitive information about others as well--such 
as traffic patterns and other data. According to Professors 
Dirk Bergemann, Alessandro Bonatti, and Tan Gan, the creation 
of this ``data externality'' means that, for firms like Google, 
Amazon, and Facebook, ``the cost of acquiring . . . individual 
data can be substantially below the value of the information to 
the platform.''\163\ In other words, notwithstanding claims 
that services such as Google's Search or Maps products or 
Facebook are ``free'' or have immeasurable economic value to 
consumers,\164\ the social data gathered through these services 
may exceed their economic value to consumers.
---------------------------------------------------------------------------
    \162\ See generally Dirk Bergemann, Alessandro Bonatti & Tan Gan, 
The Economics of Social Data (Cowles Found., Discussion Paper No. 
2203R, Sept. 2019), https://ssrn.com/abstract
=3459796.
    \163\ Id. at 4.
    \164\ See, e.g., Erik Brynjolfsson & Avinash Collis, How Should We 
Measure the Digital Economy?, Harv. Bus. Rev. (Nov.-Dec. 2019), https:/
/hbr.org/2019/11/how-should-we-measure-the-digital-economy.
---------------------------------------------------------------------------

                  B. Effects of Platform Market Power

1. Innovation and Entrepreneurship
    Competition is a critical source of innovation, business 
dynamism, entrepreneurship, and the ``launching of new 
industries.'' \165\ Vigorously contested markets have been a 
critical competitive asset for the United States over the past 
century.\166\ While large firms with significant resources may 
invest in research and development for new products and 
services, competition forces companies to ``run faster'' in 
order to offer improved products and services.\167\ Without 
competitive pressure, some level of innovation may still occur, 
but at a slower, iterative pace than would be present under 
competitive market conditions.\168\
---------------------------------------------------------------------------
    \165\ Innovation and Entrepreneurship Hearing at 76 (statement of 
Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. of Law).
    \166\ Id.
    \167\ Stigler Report at 74.
    \168\ Innovation and Entrepreneurship Hearing at 76 (statement of 
Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. of Law).
---------------------------------------------------------------------------
    In recent decades, however, there has been a sharp decline 
in new business formation as well as early-stage startup 
funding.\169\ The number of new technology firms in the digital 
economy has declined,\170\ while the entrepreneurship rate--the 
share of startups and young firms in the industry as a whole--
has also fallen significantly in this market.\171\ 
Unsurprisingly, there has also been a sharp reduction in early-
stage funding for technology startups.\172\
---------------------------------------------------------------------------
    \169\ This trend is also present in the broader U.S. economy as 
well. See, e.g., Ufuk Akcigit & Sina T. Ates, Knowledge in the Hands of 
the Best, Not the Rest: The Decline of U.S. Business Dynamism, VoxEU 
(July 4, 2019), https://voxeu.org/article/decline-us-business-dynamism.
    \170\ Ian Hathway, Ewing Marion Kauffman Found., Tech Starts: High-
Technology Business Formation and Job Creation in the United States 5 
(2013), https://www .kauffman.org/-/media/kauffman_org/research-
reports-and-covers/2013/08/bdstechnology startsreport.pdf. 
    \171\ Id.
    \172\ The number of technology startup financings fell from above 
10,000 startup financings in 2015 to just above 6,000 in 2018. In 2014, 
startups closed 4,255 deals in which they raised seed money from 
investors. By 2018, however, that figure had dropped by nearly a half, 
to 2,206. Gene Teare, Decade in Review: Trends in Seed- and Early-Stage 
Funding, TechCrunch (Mar. 13, 2019), https://technologycrunch.com/2019/
03/16/decade-in-review-trends-in-seed-and-early-stage-funding. See also 
American Technology Giants Are Making Life Tough for Startups, 
Economist (June 2, 2018), https://www.economist.com/business/2018/06/
02/american-technology-giants-are-making-life-tough-for-startups.
---------------------------------------------------------------------------
    The rates of entrepreneurship and job creation have also 
declined over this period. The entrepreneurship rate--defined 
as the ``share of startups and young firms'' in the industry as 
a whole--fell from 60 percent in 1982 to a low of 38 percent as 
of 2011.\173\ As entry slows, the average age of technology 
firms has skewed older.\174\ Job creation in the high-
technology sector has likewise slowed considerably.\175\ In 
2000, the job creation rate in the high-technology sector was 
approaching 20 percent year-over-year. Within a decade, the 
rate had halved to about 10 percent.\176\ Although the job 
creation rate in the high-technology sector has fallen 
substantially since the early 2000s, the job destruction rate 
in 2011 was roughly unchanged from 2000.\177\ As a result, in 
2011 the rate of job destruction in the high-technology sector 
was higher than the rate of job creation, a reversal from the 
year 2000, when the job-creation rate far outpaced the job-
destruction rate.\178\
---------------------------------------------------------------------------
    \173\ John Haltiwanger et al., Ewing Marion Kauffman Found., 
Declining Business Dynamism in the U.S. High-Technology Sector 8 
(2014).
    \174\ Id.
    \175\ Id.
    \176\ Id. at 4.
    \177\ Id. at 5.
    \178\ Id. at 4.
---------------------------------------------------------------------------
    In line with this trend, there is mounting evidence that 
the dominance of online platforms has materially weakened 
innovation and entrepreneurship in the U.S. economy.\179\ Some 
venture capitalists, for example, report that they avoid 
funding entrepreneurs and other companies that compete directly 
with dominant firms in the digital economy.\180\
---------------------------------------------------------------------------
    \179\ Innovation and Entrepreneurship Hearing at 76 (statement of 
Tim Wu, Julius Silver Prof. of Law, Columbia Univ. Sch. of Law); Data 
and Privacy Hearing at 58-60 (statement of Jason Furman, Prof. of the 
Prac. of Econ. Pol'y, Harvard Kennedy Sch.).
    \180\ See generally Venture Capital and Antitrust Workshop; Stigler 
Report at 9.
---------------------------------------------------------------------------
    Often referred to as an innovation ``kill zone,'' this 
trend may insulate powerful incumbent firms from competitive 
pressure simply because venture capitalists do not view new 
entrants as good investments.\181\ Albert Wenger, the managing 
partner of Union Square Ventures, commented that the ``scale of 
these companies and their impact on what can be funded, and 
what can succeed, is massive.'' \182\ Paul Arnold, an early-
stage investor and founder of Switch Ventures, commented at the 
Justice Department's recent workshop on the intersection 
between venture capital and antitrust law that he considers 
markets dominated by large platforms to be kill zones.\183\ He 
explained:
---------------------------------------------------------------------------
    \181\ Raghuram Rajan, Sai Krishna Kamepalli & Luigi Zingales, Kill 
Zone (Univ. of Chi., Becker Friedman Inst. for Econ., Working Paper No. 
2020-19, Apr. 2020).
    \182\ Asher Schechter, Google and Facebook's ``Kill Zone'': ``We've 
Taken the Focus Off of Rewarding Genius and Innovation to Rewarding 
Capital and Scale,'' ProMarket (May 25, 2018),
                                                                        
         Continued
https://promarket.org/2018/05/25/google-facebooks-kill-zone-weve-taken-
focus-off-rewarding-
genius-innovation-rewarding-capital-scale/. 
    \183\ Venture Capital and Antitrust Workshop at 24 (statement of 
Paul Arnold, Founder & Partner, Switch Partners).

     L[T]here's an incredibly, concentrated market share 
because of the economies of scale or because of network 
effects, it's a really hard barrier to overcome. And sometimes 
there's an answer and often, that will kill things. And I think 
that that's my view, that's my, sort of, lived experience as a 
venture investor, but I think it's a common view of a lot of 
venture investors.\184\
---------------------------------------------------------------------------
    \184\ Id.

In the same vein, Mr. Arnold said in a submission to the 
---------------------------------------------------------------------------
Subcommittee that:

     LVenture capitalists are less likely to fund startups that 
compete against monopolies' core products . . . . As a startup 
investor, I see this often. For example, I will meet yet 
another founder who wants to disrupt Microsoft's LinkedIn. They 
will have a clever plan to build a better professional social 
network. I always pass on the investment. It is nearly 
impossible to overcome the monopoly LinkedIn enjoys. It is but 
one example of an innovation kill zone.\185\
---------------------------------------------------------------------------
    \185\ Submission from Paul Arnold, General Partner, Switch 
Ventures, to H. Comm. on the Judiciary, 2 (Sept. 3, 2020) (on file with 
Comm.).

    For example, the entrenched power of firms with weak 
privacy protections has created a kill zone around the market 
for products that enhance privacy online.\186\ To the extent 
that a firm successfully offers a service to give people tools 
to control their privacy, ``Google or Facebook are going to 
want to pull that back as fast as they possibly can. They don't 
want you aggressively limiting their extremely valuable 
information collection.'' \187\
---------------------------------------------------------------------------
    \186\ Venture Capital and Antitrust Workshop at 24 (Paul Arnold, 
Founder & Partner, Switch Partners).
    \187\ Id.
---------------------------------------------------------------------------
    Other prominent venture capitalists, such as Roger McNamee, 
the Co-Founder of Elevation Partners, have commented that these 
trends harm more than just startups. The advantages of dominant 
firms online--access to competitively significant sources of 
data, network effects, intellectual property, and excess 
capital--are ``a barrier to a wide range of activities, not 
just startups, but actually a lot of other market 
participants.'' \188\
---------------------------------------------------------------------------
    \188\ Id. at 29 (statement of Roger McNamee, Cofounder & Managing 
Dir., Elevation Partners).
---------------------------------------------------------------------------
    Merger activity may be another contributor to reduced 
venture capital investment of startups. In a recent study, 
several leading economists and researchers at the University of 
Chicago--Raghuram G. Rajan, Luigi Zingales, and Sai Krishna 
Kamepalli--found that major acquisitions by larger firms in 
sectors of the digital economy led to significantly less 
investment in startups in this same sector.\189\ As they note, 
in the wake of an acquisition by Facebook or Google, 
investments in startups in the same space ``drop by over 40% 
and the number of deals falls by over 20% in the three years 
following an acquisition.'' \190\
---------------------------------------------------------------------------
    \189\ Raghuram Rajan, Sai Krishna Kamepalli & Luigi Zingales, Kill 
Zone (Univ. of Chi., Becker Friedman Inst. for Econ., Working Paper No. 
2020-19, Apr. 2020).
    \190\ Id.
---------------------------------------------------------------------------
    The threat of entry from a large platform has had 
significant effects on other firms' incentives to 
innovate,\191\ while the actual entry of the larger online 
platform can result in less innovation and an additional 
increase in prices.\192\ During the investigation, a prominent 
venture capital investor in the cloud marketplace explained 
that this power imbalance creates a strong economic incentive 
for other firms to avoid head-on competition. As he noted:
---------------------------------------------------------------------------
    \191\ See Wen Wen & Feng Zhu, Threat of Platform-Owner Entry and 
Complementor Responses: Evidence from the Mobile App Market, 40 
Strategic Mgmt. J. 1336 (2019); Feng Zhu & Qihong Liu, Competing with 
Complementors: An Empirical Look at Amazon.com, 39 Strategic Mgmt. J. 
2618 (2018).
    \192\ Id.

     LI think of Amazon as the sun. It is useful but also 
dangerous. If you're far enough away you can bask. If you get 
too close you'll get incinerated. So, you have to be far enough 
from Amazon and be doing something that they wouldn't do. If 
you're a net consumer of Amazon's infrastructure, like Uber, 
then you're okay. As long as Amazon doesn't want to get into 
ridesharing. But it's hard to predict what Amazon wants to get 
into. If they were going to stop at retail and computing, 
you're safe. But you can't know.\193\
---------------------------------------------------------------------------
    \193\ Interview with Source 146 (May 28, 2020).

As discussed in this Report, other behavior by dominant firms--
such as cloning the products of new entrants--may also 
undermine the likelihood that new entrants will be able to 
compete directly or that early adopters will switch to a new 
entrant's product, lowering the valuation of these companies as 
well as their profitability.\194\
---------------------------------------------------------------------------
    \194\ Raghuram Rajan, Sai Krishna Kamepalli & Luigi Zingales, Kill 
Zone (Univ. of Chi., Becker Friedman Inst. for Econ., Working Paper No. 
2020-19, Apr. 2020).
---------------------------------------------------------------------------
    In July 2019, the Subcommittee held a hearing to examine 
the effects of market power on innovation and entrepreneurship. 
There, a panel of experts noted that the lack of competitive 
pressure in the U.S. economy has reduced innovation and 
business formation, while also allowing dominant firms to 
control innovation.\195\ Professor Tim Wu of Columbia Law 
School, a pioneer in internet policy, said that there is:
---------------------------------------------------------------------------
    \195\ Innovation and Entrepreneurship Hearing at 81 (statement of 
Fiona Scott Morton, Theodore Nierenberg Prof. of Econ., Yale Sch. of 
Mgmt.).

     L[N]o question as to whether there were barriers to entry 
and whether the tech economies have, in fact, become a very 
difficult place for people to get started . . . the decline in 
the number of startups, almost unthinkable in the United 
States, which has always had a comparative advantage in being 
the place where startups will get their start.\196\
---------------------------------------------------------------------------
    \196\ Id. at 74 (statement of Tim Wu, Julius Silver Prof. of Law, 
Columbia Univ. Sch. of Law).

Professor Fiona Scott Morton of the Yale University School of 
Management reinforced this concept in her testimony, noting 
that insufficient competition has given dominant firms the 
ability to channel innovation in the direction they prefer 
``rather than being creatively spread across directions chosen 
by entrants.'' \197\
---------------------------------------------------------------------------
    \197\ Id. at 81 (statement of Fiona Scott Morton, Theodore 
Nierenberg Prof. of Econ., Yale Sch. of Mgmt.); Data and Privacy 
Hearing at 60 (statement of Jason Furman, Prof. of the Prac. of Econ. 
Pol'y, Harvard Kennedy Sch.) (``[M]ajor platforms have reduced 
incentives to innovate and incumbents have distorted incentives to make 
more incremental improvements that can be incorporated into the 
dominant platforms rather than more paradigmatic changes that could 
challenge these platforms.'').
---------------------------------------------------------------------------
    In addition to innovation harms in the digital marketplace, 
Stacy Mitchell, the Co-Director of the Institute for Local Self 
Reliance, explained that entrepreneurism among locally owned 
businesses has also suffered as a result of this power. As she 
noted, ``Local businesses are disappearing and, with them, a 
pathway to the middle class. Producers are struggling to invest 
in new products and grow their companies. New business 
formation is down to historic lows.'' \198\
---------------------------------------------------------------------------
    \198\ Innovation and Entrepreneurship Hearing at 187 (statement of 
Stacy F. Mitchell, Co-Dir., Inst. for Local Self-Reliance).
---------------------------------------------------------------------------
    At the Subcommittee's field hearing, senior executives 
representing different businesses across the economic spectrum 
offered similar testimony about the effects of market power on 
innovation and entrepreneurship. Patrick Spence, the CEO of 
Sonos, testified that the lack of fair competition diminishes 
innovation, particularly for firms that cannot afford to sell 
products at a loss.\199\ He explained:
---------------------------------------------------------------------------
    \199\ Competitors Hearing at 7 (statement of Patrick Spence, CEO, 
Sonos, Inc.).

     LThese companies have gone so far as demanding that we 
suppress our inventions in order to work with them. The most 
recent example of this is Google's refusal to allow us to use 
multiple voice assistants on our product simultaneously . . . . 
I think the whole spirit of trying to encourage small 
companies, encourage new innovations and new startups is at 
risk, given how dominant these companies are.\200\
---------------------------------------------------------------------------
    \200\ Id. at 8.

    Furthermore, the ability of a dominant firm to extract 
economic concessions from smaller companies that rely on it to 
reach the market can also depress innovation. David Barnett, 
the CEO and Founder of PopSockets, testified at the field 
hearing that Amazon required his company ``to pay almost two 
million in marketing dollars in order to remove illegal product 
from the Amazon marketplace.'' \201\ In response to questions 
from Representative Ken Buck (R-CO) on the effect of this 
policy on innovation, Mr. Barnett testified that this money 
could have been used to double the number of employees 
dedicated to developing innovative products at the 
company.\202\
---------------------------------------------------------------------------
    \201\ Id. at 20 (statement of David Barnett, Founder & CEO, 
PopSockets LLC).
    \202\ Id. at 57.
---------------------------------------------------------------------------
2. Privacy and Data Protection
    The persistent collection and misuse of consumer data is an 
indicator of market power in the digital economy.\203\ 
Traditionally, market power has been defined as the ability to 
raise prices without a loss to demand, such as fewer sales or 
customers.\204\ Scholars and market participants have noted 
that even as online platforms rarely charge consumers a 
monetary price--products appear to be ``free'' but are 
monetized through people's attention or with their data \205\--
traditional assessments of market power are more difficult to 
apply to digital markets.\206\
---------------------------------------------------------------------------
    \203\ Howard A. Shelanski, Information, Innovation, and Competition 
Policy for the Internet, 161 U. Pa. L. Rev. 1663, 1689 (2013) (``One 
measure of a platform's market power is the extent to which it can 
engage in [privacy exploitation] without some benefit to consumers that 
offsets their reduced privacy and still retain users.'').
    \204\ W. Kip Viscusi et al., Economics of Regulation and Antitrust 
164 (3d ed. 2000).
    \205\ Data and Privacy Hearing at 60 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.); id. at 55 
(statement of Tommaso Valletti, Prof. of Econ., Imperial Coll. Bus. 
Sch.).
    \206\ Howard A. Shelanski, Information, Innovation, and Competition 
Policy for the Internet, 161 U. Pa. L. Rev. 1663, 1687 (2013) (``While 
increased competition, at least on its own, will not always cause firms 
to better use or protect customer information, any competitive effects 
analysis that misses these two nonprice dimensions of platform market 
performance will be incomplete and could be biased toward 
underenforcement.'').
---------------------------------------------------------------------------
    The best evidence of platform market power therefore is not 
prices charged but rather the degree to which platforms have 
eroded consumer privacy without prompting a response from the 
market.\207\ As scholars have noted, a platform's ability to 
maintain strong networks while degrading user privacy can 
reasonably be considered equivalent to a monopolist's decision 
to increase prices or reduce product quality.\208\ A firm's 
dominance can enable it to abuse consumers' privacy without 
losing customers.\209\ In the absence of genuine competitive 
threats, a firm offers fewer privacy protections than it 
otherwise would. In the process, it extracts more data, further 
entrenching its dominance.\210\ When paired with the tendency 
toward winner-take-all outcomes, consumers are forced to either 
use a service with poor privacy safeguards or forgo the service 
altogether.\211\ As the United Kingdom's Competition and 
Markets Authority observes, ``The collection and use of 
personal data by Google and Facebook for personalised 
advertising, in many cases with no or limited controls 
available to consumers, is another indication that these 
platforms do not face a strong enough competitive constraint.'' 
\212\
---------------------------------------------------------------------------
    \207\ See, e.g., Makan Delrahim, Assistant Att'y Gen., U.S. Dep't 
of Justice, Antitrust Div., Remarks for the Antitrust New Frontiers 
Conference (June 11, 2019), https://www.justice.gov/opa/speech/
assistant-attorney-general-makan-delrahim-delivers-remarks-antitrust-
new-frontiers (``It is well-settled, however, that competition has 
price and non-price dimensions.''); Maurice E. Stucke & Ariel Ezrachi, 
When Competition Fails to Optimize Quality: A Look at Search Engines, 
18 Yale J.L. & Tech. 70, 103 (2016); Eleonora Ocello & Cristina 
Sjoodin, Eur. Comm'n, Competition Merger Brief: Microsoft/LinkedIn: Big 
Data and Conglomerate Effects in Tech Markets 5 (2017), http://
ec.europa.eu/competition/publications/cmb/2017/kdal17001 enn.pdf.
    \208\ Dina Srinivasan, The Antitrust Case Against Facebook: A 
Monopolist's Journey Towards Pervasive Surveillance in Spite of 
Consumers' Preference for Privacy, 16 Berkeley Bus. L.J. 39, 44 (2019) 
(``Facebook is a monopolist, and what Facebook extracts overtly from 
consumers today, from a quality perspective, is a direct function of 
Facebook's monopoly power.''); see also Katharine Kemp, Concealed Data 
Practices and Competition Law: Why Privacy Matters (Univ. of N.S.W., 
Fac. of Law, Research Paper No. 19-53, 2019), https://papers.ssrn.com/
sol3/papers
.cfm?abstract_id=3432769; OECD, Big Data: Bringing Competition Policy 
to the Digital Era (2016), https://one.oecd.org/document/DAF/
COMP(2016)14/en/pdf.
    \209\ Data and Privacy Hearing at 55 (statement of Tommaso 
Valletti, Prof. of Econ., Imperial Coll. Bus. Sch.); Dig. Competition 
Expert Panel Report at 42-45.
    \210\ David N. Cicilline & Terrell McSweeny, Competition Is at the 
Heart of Facebook's Privacy Problem, Wired (Apr. 24, 2018), https://
www.wired.com/story/competition-is-at-the-heart-of-facebooks-privacy-
problem.
    \211\ Dig. Competition Expert Panel Report at 43 (``[T]he misuse of 
consumer data and harm to privacy is arguably an indicator of low 
quality caused by a lack of competition.''); Dina Srinivasan, The 
Antitrust Case Against Facebook: A Monopolist's Journey Towards 
Pervasive Surveillance in Spite of Consumers' Preference for Privacy, 
16 Berkeley Bus. L.J. 39, 40 (2019) (``Consumers effectively face a 
singular choice-use Facebook and submit to the quality and stipulations 
of Facebook's product or forgo all use of the only social network.'').
    \212\ Competition & Mkts. Auth. Report at 318.
---------------------------------------------------------------------------
    Given the increasingly critical role platforms play in 
mediating access to everyday goods and services, users are also 
far more likely to surrender more information than to cease 
using the service entirely.\213\ Without adequate competition, 
firms are able to collect more data than a competitive market 
would allow,\214\ further entrenching their market power while 
diminishing privacy in the process.\215\
---------------------------------------------------------------------------
    \213\ Giuseppe Colangelo & Mariateresa Maggiolino, Data Protection 
in Attention Markets: Protecting Privacy through Competition?, 8 J. of 
Eur. Competition L. & Prac. 363, 365 (2017).
    \214\ Data and Privacy Hearing at 135 (statement of Dina 
Srinivasan, Fellow, Yale Thurman Arnold Project); Innovation and 
Entrepreneurship Hearing at 82 (statement of Fiona Scott Morton, 
Theodore Nierenberg Prof. of Econ., Yale Sch. of Mgmt.).
    \215\ Data and Privacy Hearing at 59 (statement of Jason Furman, 
Prof. of the Prac. of Econ. Pol'y, Harvard Kennedy Sch.); id. at 55 
(statement of Tommaso Valletti, Prof. of Econ., Imperial Coll. Bus. 
Sch.); Dig. Competition Expert Panel Report at 4 (``It can be harder 
for new companies to enter or scale up.''); Giuseppe Colangelo & 
Mariateresa Maggiolino, Data Protection in Attention Markets: 
Protecting Privacy Through Competition?, 8 J. of Eur. Competition L. & 
Prac. 363, 365 (2017) (``Similarly, in such a market, a dominant firm 
could abuse its power to exclude a rival producing privacy-friendly 
goods that consumer would otherwise prefer.''); Stigler Report at 67 
(``When facing a zero-money price, and when quality is difficult to 
observe, consumers
                                                                        
         Continued
are not receiving salient signals about the social value of their 
consumption because the price they believe they face does not reflect 
the economics of the transaction, and they are ignorant of those 
numbers.'').
---------------------------------------------------------------------------
    Because persistent data collection online is often 
concealed,\216\ it is more difficult to compare privacy costs 
across different products and services.\217\ Consumers are 
largely unaware of firms' data collection practices, which are 
presented in dense and lengthy disclosures.\218\ The use of 
manipulative design interfaces has also become a pervasive tool 
``to increase the likelihood of users consenting to tracking.'' 
\219\ These behavioral nudges--referred to as dark patterns--
are commonly used in online tracking and advertising markets to 
enhance a firm's market power and ``maximize a company's 
ability to extract revenue from its users.'' \220\ And in e-
commerce, Jamie Luguri and Lior Strahilevitz observe that dark 
patterns ``are harming consumers by convincing them to 
surrender cash or personal data in deals that do not reflect 
consumers' actual preferences and may not serve their 
interests. There appears to be a substantial market failure 
where dark patterns are concerned--what is good for ecommerce 
profits is bad for consumers.'' \221\
---------------------------------------------------------------------------
    \216\ Data and Privacy Hearing at 54-55 (statement of Tommaso 
Valletti, Prof. of Econ., Imperial Coll. Bus. Sch.).
    \217\ Maurice E. Stucke, Should We Be Concerned About Data-
opolies?, 2 Geo. L. Tech. Rev. 275, 311 (2018).
    \218\ See, e.g., Paul Hitlin & Lee Rainie, Facebook Algorithms and 
Personal Data, Pew Rsch. Ctr. (Jan. 16. 2019), https://
www.pewinternet.org/2019/01/16/facebook-algorithms-and-
personal-data/. See Austl. Competition & Consumer Comm'n, Digital 
Platforms Inquiry Final Report 11 (2019) [hereinafter Austl. 
Competition & Consumer Comm'n Report]; Ryan Calo & Alex Rosenblat, The 
Taking Economy: Uber, Information, and Power, 117 Colum. L. Rev. 1623 
(2017); Dina Srinivasan, The Antitrust Case Against Facebook: A 
Monopolist's Journey Towards Pervasive Surveillance in Spite of 
Consumers' Preference for Privacy, 16 Berkeley Bus. L.J. 39, 41 (2019) 
(``[A]ccepting Facebook's policies in order to use its service means 
accepting broad-scale commercial surveillance.'').
    \219\ Arvind Narayanan, Arunesh Mathur, Marshini Chetty & Mihir 
Kshirsagar, Dark Patterns: Past, Present, and Future, 18(2) ACM Queue 
67, 77 (2020), https://queue.acm.org/detail.cfm
?id=3400901.
    \220\ Id.; Norwegian Consumer Council, Deceived by Design (2018), 
https://fil
.forbrukerradet.no/wp-content/uploads/2018/06/2018-06-27-deceived-by-
design-final.pdf (describing the use of ``dark patterns'').
    \221\ Jamie Luguri & Lior Strahilevitz, Shining a Light on Dark 
Patterns 29 (Univ. of Chi. Law Sch. Pub. Law Working Paper, Paper No. 
719, 2019), https://papers.ssrn.com/sol3/papers.cfm
?abstract_id=3431205.
---------------------------------------------------------------------------
    More recently, as remote work became commonplace during the 
COVID-19 pandemic, Google attempted to manipulate users into 
using its Google Meet videoconferencing tool instead of upstart 
competitor Zoom. As Zoom emerged as the market leader during 
the early stages of the pandemic, Google introduced a new 
widget for Meet inside Gmail. A similar message could be found 
inside Google Calendar, which prompted users to ``Add Google 
Meet video conferencing'' to their appointments. ``For people 
with the Zoom Video Communications Inc. extension on their 
Chrome browsers, the prompt sits directly above the option to: 
`Make it a Zoom Meeting.' '' \222\
---------------------------------------------------------------------------
    \222\ Mark Bergen, Google Really Wants You to Try Its New Video 
Tool, Bloomberg (May 19, 2020), https://www.bloomberg.com/news/
newsletters/2020-05-19/google-really-wants-you-to-try-its-new-video-
tool.
---------------------------------------------------------------------------
    To the extent that consumers are aware of data collection 
practices, it is often in the wake of scandals involving large-
scale data breaches or privacy incidents such as Cambridge 
Analytica.\223\ As Dina Srinivasan notes, ``Today, nuances in 
privacy terms are relegated to investigative journalists to 
discover and explain. When the media does report on them--as 
they did around Google's practice of letting employees and 
contractors read Gmail users' emails--consumers often switch to 
a competitor that offers a better product or service.'' \224\ 
The opacity of data collection and use contributes to consumer 
confusion and the misperception that consumers do not care 
about their privacy--the so-called privacy paradox--simply 
because they use services that have become essential.\225\
---------------------------------------------------------------------------
    \223\ Dig. Competition Expert Panel Report at 45; David N. 
Cicilline & Terrell McSweeny, Competition Is at the Heart of Facebook's 
Privacy Problem, Wired (Apr. 24, 2018), https://www.wired.com/story/
competition-is-at-the-heart-of-facebooks-privacy-problem.
    \224\ Data and Privacy Hearing at 135 (statement of Dina 
Srinivasan, Fellow, Yale Thurman Arnold Project).
    \225\ Brooke Auxier et al., Americans and Privacy: Concerned, 
Confused and Feeling Lack of Control Over Their Personal Information, 
Pew Rsch. Ctr. (Nov. 15 2019), https://www
.pewresearch.org/internet/2019/11/15/americans-and-privacy-concerned-
confused-and-feeling-lack-of-control-over-their-personal-information/; 
Daniel J. Solove, The Myth of the Privacy Paradox, 89 Geo. Wash. L. 
Rev. 1 (2021).
---------------------------------------------------------------------------
    While insufficient competition can lead to reduced quality 
in many markets, the loss of quality due to monopolization--and 
in turn, privacy and data protection--is even more pronounced 
in digital markets because product quality is often the 
``relevant locus of competition.'' \226\ Without transparency 
or effective choice, dominant firms may impose terms of service 
with weak privacy protections that are designed to restrict 
consumer choice,\227\ creating a race to the bottom.\228\ As 
David Heinemeier Hansson, the Co-Founder and Chief Technology 
Officer of Basecamp,\229\ explained in his testimony before the 
Subcommittee:
---------------------------------------------------------------------------
    \226\ Data and Privacy Hearing at 54 (statement of Tommaso 
Valletti, Prof. of Econ., Imperial Coll. Bus. Sch.).
    \227\ Id.
    \228\ Competitors Hearing at 36 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp); Dig. Competition 
Expert Panel Report at 6 (``[W]ell-functioning competitive digital 
markets have the potential to develop new solutions and increased 
choice for consumers, where privacy and quality of service can be 
differentiating factors.''); Howard A. Shelanski, Information, 
Innovation, and Competition Policy for the Internet, 161 U. Pa. L. Rev. 
1663, 1691 (2013) (``Competition, however, may drive platforms to adopt 
and adhere to stronger privacy policies, making it worthwhile for a 
platform to advertise such policies to consumers in order to 
differentiate itself from its competitors.'').
    \229\ Basecamp is an internet software firm based in Chicago, 
Illinois, that sells project-management and team-collaboration tools. 
Competitors Hearing at 27 (statement of David Heinemeier Hansson, 
Cofounder & Chief Tech. Officer, Basecamp).

     LWhen businesses do not have to account for the negative 
externalities they cause, it's a race to the bottom. The 
industrial-scale exploitation of privacy online is much the 
same. Facebook and Google have built comprehensive dossiers on 
almost everyone, and they can sell incredibly targeted 
advertisement on that basis. When Facebook knows you're 
pregnant, or worse, thinks it knows when you're pregnant, they 
can target ads for baby clothes or strollers with striking 
efficiency. But doing so represents an inherent violation of 
the receiver's privacy. Every ad targeted using personal 
information gathered without explicit, informed consent is at 
some level a violation of privacy. And Facebook and Google are 
profiting immensely by selling these violations to advertisers. 
Advertisers who may well feel that purchasing these violations 
go against their ethics, but see no choice to compete without 
participating.\230\
---------------------------------------------------------------------------
    \230\ Id. at 36.

    In addition to creating a race to the bottom, this same 
dynamic can also prevent new firms from offering products with 
strong privacy protections or reduce the incentive of new 
entrants or rivals to compete directly.\231\ Roger McNamee, the 
Co-Founder and Managing Director of Elevation Partners, has 
also explained that to the extent there is direct competition 
between a firm with a privacy-centric business model, such as 
DuckDuckGo's search engine, they can ``still have trouble 
applying different business models once they're not compatible 
with the business models that have made the Internet platforms 
so successful.'' \232\
---------------------------------------------------------------------------
    \231\ Data and Privacy Hearing at 134-35 (statement of Dina 
Srinivasan, Fellow, Yale Thurman Arnold Project); Venture Capital and 
Antitrust Workshop at 24 (Paul Arnold, Founder & Partner, Switch 
Partners).
    \232\ Venture Capital and Antitrust Workshop at 30 (statement of 
Roger McNamee, Co-Founder & Managing Dir., Elevation Partners).
---------------------------------------------------------------------------
    Conversely, without adequate safeguards in place, measures 
that appear to improve privacy for consumers may also have 
anticompetitive effects. Kirsten Daru, Chief Privacy Officer 
and General Counsel of Tile, told the Subcommittee: ``Apple has 
used the concept of privacy as a shield by making changes in 
the name of privacy that at the same time give it a competitive 
advantage.'' \233\ In particular, she testified at the 
Subcommittee's field hearing:
---------------------------------------------------------------------------
    \233\ Competitors Hearing at 85 (response to Questions for the 
Record of Kirsten Daru, Chief Priv. Officer & Gen. Couns., Tile, Inc.).

     LApple has attempted to justify its own collection of 
sensitive information and disparate treatment of competitors 
because FindMy is ``part of the OS,'' as well as due to a need 
for enhanced consumer privacy. But the changes don't 
meaningfully improve or enhance privacy of third-party app 
developers.\234\
---------------------------------------------------------------------------
    \234\ Id. at 43 (statement of Kirsten Daru, Chief Priv. Officer & 
Gen. Couns., Tile, Inc.).

    Ram Shriram, a prominent investor who is a founding board 
member of Google, noted that ``[p]rivacy does impact how you 
think about dominance, for example, in a market because Google 
and Apple both eliminated third-party cookies, which then makes 
your data a little more private. But it ironically will hurt 
the young companies that are trying to build digital 
advertising businesses while improving user privacy.'' \235\
---------------------------------------------------------------------------
    \235\ Venture Capital and Antitrust Workshop at 36 (Ram Shriram, 
Managing Partner, Sherpalo Ventures LLC).
---------------------------------------------------------------------------
    The Subcommittee held several hearings during the 
investigation that examined the role of competition and privacy 
online.
    In September 2016, the Subcommittee held a hearing on the 
role of data and privacy in competition. There, FTC 
Commissioner Rohit Chopra testified that dominant firms have 
the ability to impose ``complex and draconian'' terms of 
service that can change suddenly ``to collect and use data more 
expansively and more intensely.'' \236\ As he noted, this 
behavior is the equivalent of a price hike that would be 
difficult to impose unilaterally in a competitive 
marketplace.\237\ Without sufficient competition, however, 
``companies can focus on blocking new entrants and limiting 
choice to protect their dominance and pricing power.'' \238\ 
Tommaso Valletti, the former Chief Competition Economist for 
the European Commission, noted that it is ``self-evident that 
data is key to digital platforms, and that some applications 
imply real-time knowledge of consumer behaviour as well as 
cross linkages across apps that only very few digital players 
have access to.'' \239\ And finally, Jason Furman, the former 
Chair of the Council of Economic Advisers and an author of the 
``Unlocking Digital Competition'' report, said that ``the 
misuse of consumer data and harm to privacy is arguably an 
indicator of low quality caused by a lack of competition.'' 
\240\
---------------------------------------------------------------------------
    \236\ Data and Privacy Hearing at 42 (statement of Rohit Chopra, 
Comm'r, Fed. Trade Comm'n).
    \237\ Id.
    \238\ Id.
    \239\ Id. at 52 (statement of Tommaso Valletti, Prof. of Econ., 
Imperial Coll. Bus. Sch.).
    \240\ Dig. Competition Expert Panel Report at 43.
---------------------------------------------------------------------------
    At the Subcommittee's oversight hearing in November 2019, 
Makan Delrahim, the Assistant Attorney General of the Justice 
Department's Antitrust Division, testified that because privacy 
is a dimension of quality, protecting competition ``can have an 
impact on privacy and data protection.'' \241\ And finally, 
Maureen Ohlhausen, the former Acting Chair of the FTC, echoed 
this point at the Subcommittee's hearing on innovation and 
entrepreneurship, noting that quality reductions online could 
``include factors such as reduced features, restricted consumer 
choice, or lessened control over privacy.'' \242\
---------------------------------------------------------------------------
    \241\ Antitrust Agencies Hearing at 44 (statement of Makan 
Delrahim, Assistant Att'y Gen., U.S. Dep't of Justice, Antitrust Div.).
    \242\ Innovation and Entrepreneurship Hearing at 209 n.14 
(statement of Maureen K. Ohlhausen, Partner, Baker Botts, L.L.P.).
---------------------------------------------------------------------------
    Leading international antitrust enforcers offered similar 
testimony before the Subcommittee. Margrethe Vestager, the 
European Union's Competition Commissioner, testified that due 
to the Commission's finding that data protection is an 
important dimension of competition that could be undermined by 
certain merger activity, the Commission ``has . . . integrated, 
where appropriate, data protection as a quality parameter for 
the assessment of merger cases.'' \243\ Similarly, Rod Sims, 
the Chair of the Australian Competition and Consumer 
Commission, told the Subcommittee that the ACCC's ``Digital 
Platforms Inquiry'' report recommends ``[u]pdating Australia's 
merger law to incorporate . . . the nature and significance of 
assets, including data and technology, acquired through a 
merger.'' \244\
---------------------------------------------------------------------------
    \243\ Data and Privacy Hearing at 171 (statement of Margrethe 
Vestager, Eur. Comm'r for Competition).
    \244\ Id. at 129 (statement of Rod Sims, Chair, Austl. Competition 
& Consumer Comm'n).
---------------------------------------------------------------------------
3. The Free and Diverse Press
    A free and diverse press is essential to a vibrant 
democracy. Whether exposing corruption in government, informing 
citizens, or holding power to account, independent journalism 
sustains our democracy by facilitating public discourse.
    Since 2006, newspaper advertising revenue, which is 
critical for funding high-quality journalism, fell by over 50 
percent.\245\ Despite significant growth in online traffic 
among the nation's leading newspapers,\246\ print and digital 
newsrooms across the country are laying off reporters or 
folding altogether.\247\ As a result, communities throughout 
the United States are increasingly going without sources for 
local news. The emergence of platform gatekeepers--and the 
market power wielded by these firms--has contributed to the 
decline of trustworthy sources of news.\248\
---------------------------------------------------------------------------
    \245\ Noah Smith, Opinion, Goodbye, Newspapers. Hello, Bad 
Government, Bloomberg (June 1, 2018), https://www.bloomberg.com/
opinion/articles/2018-06-01/goodbye-newspapers-hello-bad-government.
    \246\ Free and Diverse Press Hearing at 19 (statement of David 
Chavern, President & CEO, News Media All.).
    \247\ Douglas McLennan & Jack Miles, Opinion, A Once Unimaginable 
Scenario: No More Newspapers, Wash. Post: The Worldpost (Mar. 21, 
2018), https://www.washingtonpost.com/news/theworldpost/wp/2018/03/21/
newspapers/?utm_term=.c1b57c9efcd7.
    \248\ Free and Diverse Press Hearing at 72-73 (statement of David 
Pitofsky, Gen. Couns., News Corp).

    (a) Journalism in Decline. Since 2006, the news industry 
has been in economic freefall, primarily due to a massive 
decrease in advertising revenue. Both print and broadcast news 
organizations rely heavily on advertising revenue to support 
their operations, and as the market has shifted to digital 
platforms, news organizations have seen the value of their 
advertising space plummet steeply.\249\ For newspapers, 
advertising has declined from $49 billion in 2006 to $16.5 
billion in 2017.\250\ This decrease has been felt by national 
and local news sources alike. As total annual advertising 
revenues have fallen over 62 percent across the industry since 
2008, one major national newspaper told the Subcommittee that 
its annual advertising revenue has fallen 48 percent over that 
period.\251\ Additionally, ethnic news outlets have suffered 
from the shift from broadcast and print ads to digital 
ads.\252\ Regarding television and radio broadcast news, the 
National Association of Broadcasters told the Subcommittee, 
``[T]his year, the U.S. advertising revenue of a single 
company--Google--are projected to exceed the combined ad 
revenue of all TV and radio stations in the country by over $8 
billion.'' \253\
---------------------------------------------------------------------------
    \249\ eMarketer estimates that Google's and Facebook's U.S. ad 
revenues will be $39.58 billion and $31.43 billion, respectively, in 
2020. eMarketer, Google Ad Revenues to Drop for the First Time (June 
23, 2020), https://www.emarketer.com/content/google-ad-revenues-drop-
first-time. According to BIA, local TV and radio station ad revenues 
(counting both their OTA and much more limited digital revenues) will 
total $31.3 billion this year. See BIA Revises Local Radio Advertising 
Estimates Down to $12.8B in 2020 Due to Pandemic, BIA Advisory Servs. 
(June 25, 2020), http://www.biakelsey.com/bia-revises-local-radio-
advertising-estimates-12-8-b-2020-due-pandemic-transition-digital-
accelerating/; BIA Lowers 2020 Local Television Station Advertising 
Revenue Forecast to $18.5B, BIA Advisory Servs. (May 21, 2020), http://
www.biakelsey.com/bia-lowers-2020-local-television-station-advertising-
revenue-forecast-18-5b/.
    \250\ Michael Barthel, Despite Subscription Surges for Largest U.S. 
Newspapers, Circulation and Revenue Fall for Industry Overall, Pew 
Rsch. Ctr.: FactTank (June 1, 2017), https://www .pewresearch.org/fact-
tank/2017/06/01/circulation-and-revenue-fall-for-newspaper-industry; 
Newspapers Fact Sheet, Pew Rsch. Ctr. (June 13, 2018), https://
www.journalism.org/fact-sheet/newspapers.
    \251\ Submission from Source 220, to H. Comm. on the Judiciary, 7 
(Oct. 14, 2019) (on file with Comm.).
    \252\ See Penelope Muse Abernathy, Univ. N.C. Sch. of Media & 
Journalism, News Deserts and Ghost Newspapers: Will Local News Survive 
45 (2020), https://www.usnews
deserts.com/wp-content/uploads/2020/06/
2020_News_Deserts_and_Ghost_Newspapers
.pdf.
    \253\ Submission from Nat'l Ass'n of Broads., to H. Comm. on the 
Judiciary, 2 (Oct. 14, 2019), http://www.nab.org/documents/newsRoom/
pdfs/09220_HJC_Local_Journalism_At_Risk _Submission.pdf.
---------------------------------------------------------------------------
    While the decline of advertising revenue has most severely 
affected local news publishers, prominent digital publishers 
have also been affected. In January 2019, Buzzfeed announced 
layoffs of 220 employees, about 15 percent of its workforce, 
due to advertising losses.\254\ Jonah Peretti, the Chief 
Executive Officer of BuzzFeed, commented prior to the layoffs 
that consolidation of digital publishers into a single large 
digital media company may be the only path forward for 
profitability, suggesting that publishers' lack of bargaining 
power in negotiations with online platforms is the central 
obstacle to long-term survival.\255\
---------------------------------------------------------------------------
    \254\ Oliver Darcy & Tom Kludt, Media Industry Loses About 1,000 
Jobs as Layoffs Hit News Organizations, CNN (Jan. 24, 2019), https://
edition.cnn.com/2019/01/24/media/media-layoffs-buzzfeed-huffpost-
gannett/index.html; Edmund Lee, Founder's Big Idea to Revive BuzzFeed's 
Fortunes? A Merger with Rivals, N.Y. Times (Nov. 19, 2018), https://
www.nytimes.com/2018/11/19/business/media/buzzfeed-jonah-peretti-
mergers.html.
    \255\ Edmund Lee, Founder's Big Idea to Revive BuzzFeed's Fortunes? 
A Merger with Rivals, N.Y. Times (Nov. 19, 2018), https://
www.nytimes.com/2018/11/19/business/media/buzzfeed-jonah-peretti-
mergers.html.
---------------------------------------------------------------------------
    Despite a recent boost in the number of digital 
subscriptions and the level of online traffic for the top 
newspapers in the United States, these increases did not offset 
losses in online advertising or circulation in the industry 
overall.\256\ As one news publisher told the Subcommittee, 
``For the vast majority of news publishers, digital 
subscription revenues remain a minor revenue stream and do not 
appear to be on a path to replace the decline in print 
subscriptions.'' \257\ Over the past two decades, hundreds of 
local news publishers have been acquired or gone bankrupt.\258\ 
In some cases, private equity firms and hedge funds have 
purchased major regional chains and newspapers, resulting in 
mass layoffs of journalists and increased debt burdens for 
publishers.\259\
---------------------------------------------------------------------------
    \256\ Michael Barthel, Despite Subscription Surges for Largest U.S. 
Newspapers, Circulation and Revenue Fall for Industry Overall, Pew 
Rsch. Ctr.: FactTank (June 1, 2017), https://www.pewresearch.org/fact-
tank/2017/06/01/circulation-and-revenue-fall-for-newspaper-industry/; 
Newspapers Fact Sheet, Pew Rsch. Ctr. (July 9, 2019), https://
www.journalism.org/fact-sheet/newspapers; David Chavern, Opinion, 
Protect the News From Google and Facebook, Wall St. J. (Feb. 25, 2018), 
https://www.wsj.com/articles/protect-the-news-from-google-and-facebook-
1519594942.
    \257\ Submission from Source 220, to H. Comm. on the Judiciary, 7 
(Oct. 14, 2019) (on file with Comm.).
    \258\ Penelope Muse Abernathy, Univ. N.C. Sch. of Media & 
Journalism, The Expanding News Desert 33 (2018), https://www.cislm.org/
wp-content/uploads/2018/10/The-Expanding-News-Desert-10_14-Web.pdf.
    \259\ Alex Shephard, Finance Is Killing the News, New Republic 
(Apr. 18, 2018), https://newrepublic.com/article/148022/finance-
killing-news.
---------------------------------------------------------------------------
    In recent years, news consumption has largely shifted to a 
model of content aggregation, through which platforms 
consolidate content from multiple news sources.\260\ In 
submissions to the Subcommittee and public statements, 
publishers across the spectrum say they have little choice but 
to participate in content aggregation, particularly those run 
by dominant platforms because the aggregators' ``use of news 
publishers' content does send substantial traffic to news 
publishers.'' \261\ But this can also prevent traffic from 
flowing to newspapers. As some publishers have noted, news 
aggregators package and present content to users using 
attention-grabbing quotes from high points of stories, which 
can make it unnecessary for the user to click through to the 
publisher's website.\262\ As these publishers noted, this 
dynamic forces news organizations to effectively compete with 
their own content, lowering the potential revenue from user 
traffic to news organizations' websites.\263\
---------------------------------------------------------------------------
    \260\ Lesley Chiou & Catherine Tucker, Content Aggregation by 
Platforms: The Case of the News Media (Nat'l Bureau of Econ. Rsch., 
Working Paper No. 21404, 2015), https://www.nber.org/papers/w21404.pdf.
    \261\ News Media All., How Google Abuses Its Position as a Market 
Dominant Platform to Strong-Arm News Publishers and Hurt Journalism 2 
(2020), http://www
.newsmediaalliance.org/wp-content/uploads/2020/06/Final-Alliance-White-
Paper-June-18-2020.pdf.
    \262\ Id. at 12.
    \263\ Id. at 12-14.
---------------------------------------------------------------------------
    As a result of falling revenues, newspapers and broadcast 
stations are steadily losing the ability to financially support 
their newsrooms, which are costly to maintain but provide 
immense value to their communities.\264\ A robust local 
newsroom requires the financial freedom to support in-depth, 
sometimes years-long reporting, as well as the ability to hire 
and retain journalists with expertise in fundamentally local 
issues, such as coverage of state government.\265\
---------------------------------------------------------------------------
    \264\ Submission from the Nat'l Ass'n of Broads., to H. Comm. on 
the Judiciary, 9 (Sept. 2, 2020), http://www.nab.org/documents/
newsRoom/pdfs/09220_HJC_Local_Journalism_At _Risk_Submission.pdf.
    \265\ Free and Diverse Press Hearing at 83-84 (statement of Kevin 
Riley, Ed., The Atlanta Journal-Constitution).
---------------------------------------------------------------------------
    The societal value of local news is significant. As noted 
by the National Association of Broadcasters, local broadcast 
stations provide on-the-air programming which is ``rooted in 
localism and the public interest,'' offering content which 
``[is] still free to the public and accessible to all 
Americans.'' \266\ Kevin Riley, the editor of The Atlanta 
Journal-Constitution, similarly testified before the 
Subcommittee that ``it would be impossible to even put a cost 
estimate on the work'' of local journalists.\267\
---------------------------------------------------------------------------
    \266\ Submission from the Nat'l Ass'n of Broads., to H. Comm. on 
the Judiciary, 1 (Sept. 2, 2020), http://www.nab.org/documents/
newsRoom/pdfs/09220_HJC_Local_Journalism_At _Risk_Submission.pdf.
    \267\ Free and Diverse Press Hearing at 82 (statement of Kevin 
Riley, Ed., The Atlanta Journal-Constitution).
---------------------------------------------------------------------------
    The COVID-19 pandemic has particularly highlighted the 
importance of local news sources. Despite taking major revenue 
losses,\268\ local journalists have provided valuable reporting 
on the transmission of the novel coronavirus, particularly for 
underserved and vulnerable communities.\269\ For example, PBS 
New Mexico provided an in-depth focus on the effects of the 
coronavirus on Native Americans ``dealing with scarce resources 
as they respond to novel coronavirus outbreaks on tribal 
lands.'' \270\ Apart from serving their communities, local news 
stories bring national attention to these critical issues.\271\ 
In addition to news coverage, the National Association of 
Broadcasters aired public-service announcements in response to 
the pandemic ``more than 765,000 times for an estimated ad 
value of more than $156,500,000,'' a number which ``do[es] not 
include the likely much greater number of other coronavirus-
related PSAs'' aired by local television and radio stations 
across the United States.\272\
---------------------------------------------------------------------------
    \268\ Sara Fischer & Margaret Harding McGill, Coronavirus Sends 
Local News into Crisis, Axios (Mar. 21, 2020), https://www.axios.com/
coronavirus-local-news-853e96fa-51aa-43cc-a990-eb48cc896b17.html.
    \269\ Mark Glaser, 6 Ways Local News Makes a Crucial Impact 
Covering COVID-19, Knight Found. (Apr. 20, 2020), https://
knightfoundation.org/articles/6-ways-local-news-makes-a-
crucial-impact-covering-covid-19/.
    \270\ COVID-19 Response from Native Tribes, NMPBS (Mar. 30, 2020), 
https://www
.newmexicopbs.org/productions/newmexicoinfocus/covid-19-response-from-
native-tribes/.
    \271\ See, e.g., Bill Chappell, Coronavirus Cases Spike in Navajo 
Nation, Where Water Service Is Often Scarce, NPR (Mar. 26, 2020), 
https://www.npr.org/sections/coronavirus-live-updates/2020/03/26/
822037719/coronavirus-cases-spike-in-navajo-nation-where-water-service-
is-often-scarce.
    \272\ Submission from the Nat'l Ass'n of Broads., to H. Comm. on 
the Judiciary, 2 (Sept. 2, 2020), http://www.nab.org/documents/
newsRoom/pdfs/09220_HJC_Local_Journalism_At _Risk_Submission.pdf.
---------------------------------------------------------------------------
    To run a new operation, broadcast stations must be able to 
sustain ``the basic costs of running a station, including 
engineering, sales, [and] programming'' costs, and must make 
significant capital expenditures in equipment, such as 
satellite trucks.\273\ These expenses must be satisfied before 
broadcast stations can invest in improvements to keep pace with 
changing technologies, ``including ultra-high definition 
programming, better emergency alerting, mobile services, 
interactivity, hyper-local content and more.'' \274\
---------------------------------------------------------------------------
    \273\ Id. at 4, 7 n.16.
    \274\ Id. at 7.
---------------------------------------------------------------------------
    The costs of news production add up. From 2003 to 2013, 
these costs ``accounted for nearly 24 percent of TV stations' 
total expenses (and nearly 26 percent of the total expenses of 
ABC/CBS/Fox/NBC stations).'' \275\ In light of the expenses 
associated with producing high-quality journalism, declining 
revenue has major implications for the maintenance--let alone 
enrichment--of quality news production.
---------------------------------------------------------------------------
    \275\ Id. at 4 (citing NAB Television Financial Reports 2004-2019).
---------------------------------------------------------------------------
    Budget cuts have also led to a dramatic number of newsroom 
job losses. This decline has been primarily driven by a 
reduction in newspaper employees, who have seen employment fall 
by half over a recent eight-year period, from 71,000 in 2008 to 
35,000 in 2019.\276\ In 2019 alone, 7,800 media industry 
employees were laid off.\277\ The Bureau of Labor Statistics 
estimates that the total employment of reporters, 
correspondents, and broadcast news analysts will continue to 
decline by about 11 percent between 2019 and 2029.\278\
---------------------------------------------------------------------------
    \276\ Elizabeth Grieco, U.S. Newspapers Have Shed Half of Their 
Newsroom Employees Since 2008, Pew Rsch. Ctr.: FactTank (Apr. 20, 
2020), https://www.pewresearch.org/fact-tank/2020/04/20/u-s-newsroom-
employment-has-dropped-by-a-quarter-since-2008/.
    \277\ Benjamin Goggin, 7,800 People Lost Their Media Jobs in a 2019 
Landslide, Bus. Insider (Dec. 10, 2019), https://
www.businessinsider.com/2019-media-layoffs-job-cuts-at-buzzfeed-huff
post-vice-details-2019-2#spin-media-group-29-jobs-september-and-
january-18.
    \278\ Occupational Outlook Handbook: Reporters, Correspondents, and 
Broadcast News Analysts, U.S. Dep't of Labor: Bureau of Labor Stats., 
https://www.bls.gov/ooh/media-and-
communication/reporters-correspondents-and-broadcast-news-analysts.htm 
(last modified Apr. 12, 2019).
---------------------------------------------------------------------------
    Researchers at the University of North Carolina School of 
Media and Journalism found that the United States has lost 
nearly 1,800 newspapers since 2004 either to closure or merger, 
70 percent of which were in metropolitan areas.\279\ As a 
result, the majority of counties in America no longer have more 
than one publisher of local news, and 200 are without any 
paper.\280\ At the Subcommittee's hearing on online platforms' 
effects on a free and diverse press, Mr. Riley described this 
new media landscape as characterized by digital platform 
dominance and disappearing local newspapers:
---------------------------------------------------------------------------
    \279\ Penelope Muse Abernathy, Univ. N.C. Sch. of Media & 
Journalism, The Expanding News Desert 10-11 (2018), https://
www.cislm.org/wp-content/uploads/2018/10/The-Expanding-News-Desert-
10_14-Web.pdf.
    \280\ Id. at 8, 10.

     LWe produce journalism that is distinguished by its depth, 
accuracy and originality. That costs money and is expensive, 
but if the system works correctly, it also makes money that the 
paper uses to investigate and develop the next story or cover 
the next local event. If others repackage our journalism and 
make money off it, yet none of that money makes its way back to 
the local paper, then it makes breaking that next story or 
exposing the next scandal more challenging. If that cycle 
continues indefinitely, quality local journalism will slowly 
wither and eventually cease to exist.\281\
---------------------------------------------------------------------------
    \281\ Free and Diverse Press Hearing at 83 (statement of Kevin 
Riley, Ed., The Atlanta Journal-Constitution).

    This cycle has a profoundly negative effect on American 
democracy and civic life. Communities without quality local 
news coverage have lower rates of voter turnout.\282\ 
Government corruption may go unchecked, leaving communities 
vulnerable to serious mismanagement.\283\ Relatedly, these 
communities see local government spending increase.\284\ Towns 
without robust local news coverage also exhibit lower levels of 
social cohesion, undermining a sense of belonging in a 
community.\285\ As fewer publishers operate in local markets, 
local news is supplanted by aggregation of national coverage, 
reducing residents' knowledge of local happenings and events, 
and generally leaving them less connected to their 
communities.\286\
---------------------------------------------------------------------------
    \282\ Matthew Gentzkow et al., The Effects of Newspaper Entry and 
Exit on Electoral Politics, 101 Am. Econ. Rev. 2980, 2980 (2011) (``We 
find that newspapers have a robust positive effect on political 
participation, with one additional newspaper increasing both 
presidential and congressional turnout by approximately 0.3 percentage 
points.'' (italics removed)).
    \283\ Mary Ellen Klas, Less Local News Means Less Democracy, Nieman 
Reps. (Sept. 20, 2019), https://niemanreports.org/articles/less-local-
news-means-less-democracy/.
    \284\ Noah Smith, Opinion, Goodbye Newspapers. Hello, Bad 
Government, Bloomberg (June 1, 2018), https://www.bloomberg.com/
opinion/articles/2018-06-01/goodbye-newspapers-hello-bad-government 
(``[T]he authors show that without local newspapers, local governments 
tend to engage in more inefficient or dubious financing 
arrangements.'').
    \285\ Amy Mitchell et al., Civic Engagement Strongly Tied to Local 
News Habits, Pew Rsch. Ctr. (Nov. 3, 2016), https://www.journalism.org/
2016/11/03/civic-engagement-strongly-tied-to-local-news-habits.
    \286\ Danny Hayes & Jennifer L. Lawless, As Local News Goes, So 
Goes Citizen Engagement: Media, Knowledge, and Participation in U.S. 
House Elections, 77 J. Pol. 447, 447 (2014).
---------------------------------------------------------------------------
    Compounding this problem, the gap created by the loss of 
trustworthy and credible news sources has been increasingly 
filled by false and misleading information. Once communities 
lack a local newspaper source, people tend to get their local 
news from social media. As local news dies, it is filled by 
unchecked information, some of which can spread quickly and can 
have severe consequences.

    (b) The Effect of Market Power on Journalism. During the 
Subcommittee's investigation, news publishers raised concerns 
about the ``significant and growing asymmetry of power'' 
between dominant online platforms and news publishers, as well 
as the effect of this dominance on the production and 
availability of trustworthy sources of news. In interviews, 
submissions, and testimony before the Subcommittee, publishers 
with distinct business models and distribution strategies said 
they are ``increasingly beholden'' to these firms, and in 
particular, Google and Facebook.\287\ As a result, several 
dominant firms have an outsized influence over the distribution 
and monetization of trustworthy sources of news online,\288\ 
undermining the availability of high-quality sources of 
journalism.\289\
---------------------------------------------------------------------------
    \287\ Submission from Source 220, to H. Comm. on the Judiciary, 7 
(Oct. 14, 2019) (on file with Comm.). Although Apple News and Apple 
News Plus are increasingly popular news aggregators, most market 
participants interviewed by the Subcommittee do not view Apple as a 
critical intermediary for online news at this time, although some 
publishers raised concerns about the tying of payments inside Apple's 
news product.
    \288\ Submission from Source 955, to H. Comm. on the Judiciary, 12 
(Oct. 30, 2019) (on file with Comm.).
    \289\ Free and Diverse Press Hearing at 20 (statement of David 
Chavern, President & CEO, News Media All.) (``In effect, a couple of 
dominant tech platforms are acting as regulators of the digital news 
industry.'').
---------------------------------------------------------------------------
    (i) Distribution of News Online. Several dominant platforms 
function as intermediaries to news online. Due to their 
outsized role as digital gateways to news, a change to one of 
these firms' algorithms can significantly affect the online 
referrals to news publishers,\290\ directly affecting their 
advertising revenue.\291\ One news publisher stated in its 
submission to the Subcommittee that it and other news 
organizations ``depend on a few big tech platforms to help them 
distribute their journalism to consumers.'' \292\
---------------------------------------------------------------------------
    \290\ See, e.g., Submission from Source 140, to H. Comm. on the 
Judiciary, 2 (Oct. 15, 2019) (on file with Comm.) (``Facebook's 
decision, announced in June 2016, to make significant changes to its 
algorithm to [favor] content from friends and family, which was made 
without notice, consultation or warning to the market, and which led to 
significant disruption for a range of businesses.'').
    \291\ Submission from Source 114, to H. Comm. on the Judiciary, 12 
(Oct. 2, 2019) (on file with Comm.); Data and Privacy Hearing at 127 
(statement of Rod Sims, Chair, Austl. Competition & Consumer Comm'n).
    \292\ Submission from Source 220, to H. Comm. on the Judiciary, 3 
(Mar. 10, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    In submissions to the Subcommittee, several news publishers 
noted that the dominance of Google and Facebook allows them to 
``pick winners'' online by adjusting visibility and 
traffic.\293\ For example, an update to Google's search 
algorithm in June 2019 decreased a major news publisher's 
online traffic ``by close to 50%'' even as their referrals from 
other sources--such as their home page and apps--grew during 
the same period.\294\ As they noted, a ``smaller business would 
have been crushed'' by this decline.\295\
---------------------------------------------------------------------------
    \293\ Submission from Source 955, to H. Comm. on the Judiciary, 12 
(Oct. 15, 2019) (on file with Comm.).
    \294\ Id. at 17.
    \295\ Id.
---------------------------------------------------------------------------
    Similarly, news organizations were negatively affected 
when, in January 2018, Facebook adjusted its News Feed 
algorithm to prioritize content based on audience 
engagement.\296\ According to an internet analytics firm, these 
changes significantly affected the visibility of news content 
on Facebook, resulting in a 33 percent decrease in referral 
traffic from Facebook to news publishers' sites.\297\ As one 
publisher noted in its submission to the Subcommittee, this 
change ``was made without notice, consultation or warning to 
the market, [leading] to significant disruption for a range of 
businesses.'' \298\ Nicholas Thompson, the Editor-in-Chief of 
Wired magazine, and Wired contributing editor Fred Vogelstein 
described the relationship between publishers and Facebook as 
being ``sharecroppers on Facebook's massive industrial farm,'' 
writing that:
---------------------------------------------------------------------------
    \296\ Adam Mosseri, Bringing People Closer Together, Facebook: 
Newsroom (Jan. 11, 2018), https://newsroom.fb.com/news/2018/01/news-
feed-fyi-bringing-people-closer-together.
    \297\ How Much Have Facebook Algorithm Changes Impacted 
Publishers?, Marketing Charts (Apr. 4, 2019), https://
www.marketingcharts.com/digital/social-media-107974.
    \298\ Submission from Source 140, to H. Comm. on the Judiciary, 2 
(Oct. 15, 2019) (on file with Comm.).

     LEven at the best of times, meetings between Facebook and 
media executives can feel like unhappy family gatherings. The 
two sides are inextricably bound together, but they don't like 
each other all that much . . . . And then there's the simple, 
deep fear and mistrust that Facebook inspires. Every publisher 
knows that, at best, they are sharecroppers on Facebook's 
massive industrial farm. The social network is roughly 200 
times more valuable than the Times. And journalists know that 
the man who owns the farm has the leverage. If Facebook wanted 
to, it could quietly turn any number of dials that would harm a 
publisher--by manipulating its traffic, its ad network, or its 
readers.\299\
---------------------------------------------------------------------------
    \299\ Nicholas Thompson & Fred Vogelstein, Inside the Two Years 
That Shook Facebook--and the World, Wired (Feb. 12, 2018), https://
www.wired.com/story/inside-facebook-mark-zuckerberg-2-years-of-hell/ 
(emphasis added).

    The Subcommittee has also received evidence that the 
dominance of several online platforms has created a significant 
imbalance of bargaining power. In several submissions, news 
publishers note that dominant firms can impose unilateral terms 
on publishers, such as take-it-or-leave-it revenue sharing 
agreements.\300\ A prominent publisher described this 
relationship as platforms having a ``finger on the scales'' 
with the ability to suppress publishers that do not ``appease 
platforms' business terms.'' \301\
---------------------------------------------------------------------------
    \300\ See, e.g., Submission from Source 140, to H. Comm. on the 
Judiciary, 2 (Oct. 15, 2019) (on file with Comm.) (describing ``Apple's 
decision to tie all payments made through iOS apps to its own payment 
system, which takes a 30 percent share of any contributions and 
subscriptions made to news [publishers] through news apps downloaded 
from the Apple store'').
    \301\ Submission from Source 114, to H. Comm. on the Judiciary, 12 
(Oct. 2, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    During the Subcommittee's hearing on the effects of market 
power on journalism,\302\ several witnesses also testified 
about the lack of equal bargaining power between news 
publishers and dominant platforms.\303\ At the Subcommittee's 
hearing on market power and the free and diverse press, Sally 
Hubbard, Director of Enforcement Strategy at the Open Markets 
Institute, testified that the lack of competition online has 
led to diminished bargaining power among news publishers. 
Consequently, in response to changing terms and algorithmic 
treatment by platforms, ``publishers have little choice but to 
adapt and accommodate regardless of how the changes may 
negatively affect their own profitability.'' \304\ David 
Chavern, President of the News Media Alliance, similarly 
testified that publishers have a ``collective action problem,'' 
stating that ``no news organization on its own can stand up to 
the platforms. The risk of demotion or exclusion from the 
platforms is simply too great.'' \305\
---------------------------------------------------------------------------
    \302\ Free and Diverse Press Hearing.
    \303\ Data and Privacy Hearing at 125 (statement of Rod Sims, 
Chair, Austl. Competition & Consumer Comm'n) (testifying that the power 
of dominant platforms ``creates an imbalance of bargaining power 
between digital platforms and news media businesses, meaning that 
agreements they reach are likely much different to those that would be 
reached in a competitive market'').
    \304\ Free and Diverse Press Hearing at 45 (statement of Sally 
Hubbard, Dir. of Enf't Strategy, Open Mkts. Inst.).
    \305\ Id. at 22 (statement of David Chavern, President, News Media 
All.).
---------------------------------------------------------------------------
    In June 2020, the News Media Alliance published a white 
paper examining the relationship between news publishers and 
Google based on interviews with its members over the course of 
more than a year.\306\ As it notes, ``Google has exercised 
control over news publishers to force them into several 
relationships that benefit Google at the publishers' expense.'' 
\307\ In the context of Google's placement of news on 
accelerated mobile pages (AMP)--a format for displaying web 
pages on mobile devices--publishers raised concerns that 
``Google effectively gave news publishers little choice but to 
adopt it,'' requiring the creation of parallel websites ``that 
are hosted, stored and served from Google's servers rather than 
their own.'' \308\
---------------------------------------------------------------------------
    \306\ News Media All., How Google Abuses Its Position as a Market 
Dominant Platform to Strong-Arm News Publishers and Hurt Journalism 
(2020), http://www
.newsmediaalliance.org/wp-content/uploads/2020/06/Final-Alliance-White-
Paper-June-18-2020
.pdf.
    \307\ Id. at 1.
    \308\ Id. at 5.
---------------------------------------------------------------------------
    While this format has benefits in terms of loading 
information quickly on mobile devices, publishers argue that 
these benefits ``could have been achieved through means that 
did not so significantly increase Google's power over 
publishers or so favor its ability to collect data to foster 
its market domination.'' \309\ And when a publisher attempts to 
avoid this cost by moving its content behind a paywall, its 
rise in subscriptions was offset by declines in traffic from 
Google and other platforms.\310\ Referring to this tradeoff as 
a ``Hobson's choice,'' the News Media Alliance explained:
---------------------------------------------------------------------------
    \309\ Id. at 7.
    \310\ Id. at 6.

     LNewspapers such as The Wall Street Journal employ a 
highly customized paywall on their websites, significantly 
varying the number of free articles that a user is permitted to 
read before being asked to subscribe to the newspaper. This 
flexibility is highly beneficial, allowing them to maximize 
engagement and increase subscriptions. For AMP articles, 
however, Google restricts the paywall options. Unless 
publishers rebuild their paywall options and their meters for 
AMP, they can only provide all of their content for free or 
none of their content for free. The only other option is to use 
Subscribe with Google, which has many benefits for Google and 
downsides for news publishers.\311\ Accordingly, unless they 
invest in building another and separate paywall, news 
publishers who do not want to use Subscribe with Google have a 
de facto all-or-nothing choice regarding the imposition of a 
paywall, which lowers subscriber conversion rates.\312\
---------------------------------------------------------------------------
    \311\ Id. at 8 n.14 (``These include the following: (1) Google gets 
the subscriber data; (2) the user must use Google Wallet or Google Pay, 
instead of providing its credit card to the news publisher and 
establishing a direct relationship with the publisher; and (3) Google 
takes a 5-15% cut. See Nushin Rashidian, George Civeris & Pete Brown, 
Platforms and Publishers: The End of an Era, Colum. Journalism Rev. 
(Nov. 22, 2019), https://www.cjr.org/tow_center_reports/
platforms-and-publishers-end-of-an-era.php.'').
    \312\ Id. at 8.

Google has responded to this concern by noting that AMP does 
not prevent publishers from placing ads on AMP pages, but 
restricting the number of ads ``leads to improved page load 
times, increased site traffic, superior ad engagement, and thus 
typically increases advertising revenue overall.'' \313\ Google 
also said in its responses to Subcommittee Chair David N. 
Cicilline's questions for the record that it ``does not 
privilege publishers who use AMP over publishers that adopt 
non-Google technical solutions that would also guarantee fast-
loading pages.'' \314\
---------------------------------------------------------------------------
    \313\ Submission from Google Austl. Pty. Ltd., to Austl. 
Competition & Consumer Comm'n, 45-46 (Feb. 18, 2019), https://
www.accc.gov.au/system/files/Google%20%28February%202019 %29.PDF. But 
see Austl. Competition & Consumer Comm'n Report at 240 (``[T]here is a 
broader issue about the extent to which Google, by way of AMP, retains 
users within its ecosystem and reduces monetisation opportunities for 
media businesses outside of AMP. That is, rather than directing users 
to the websites of media businesses, AMP's design encourages users to 
stay within the Google ecosystem. As a result, media businesses are 
less likely to monetise content on their own properties, either through 
advertising or subscription revenue.'').
    \314\ Innovation and Entrepreneurship Hearing at 422 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
---------------------------------------------------------------------------
    Finally, because news is often accessed online through 
channels other than the original publication--including search 
results, voice assistants, social platforms, or news 
aggregators--journalism has increasingly become ``atomized'' or 
removed from its source and placed alongside other 
content.\315\ In the context of audio news, one market 
participant noted that aggregating different news sources can 
create a bad experience for users.\316\ The aggregation of 
different news sources without editorial oversight can also 
cause reputational harm to news publishers, such as when highly 
credible reporting appears alongside an opinion-based news 
source.\317\
---------------------------------------------------------------------------
    \315\ Austl. Competition & Consumer Comm'n at 297 (describing 
atomization as ``the process by which news is `decoupled from its 
source' and consumed on a `story-by-story basis' ''); Free and Diverse 
Press Hearing at 20 (statement of David Chavern, President, News Media 
All.) (``These tech giants use secret, unpredictable algorithms to 
determine how and even whether content is delivered to readers. They 
scrape news organizations' content and use it to their own ends, 
without permission or remuneration for the companies that generated the 
content in the first place. They also suppress news organizations' 
brands, control their data, and refuse to recognize and support quality 
journalism.'').
    \316\ Submission from Source 114, to H. Comm. on the Judiciary, 12 
(Oct. 2, 2019) (on file with Comm.).
    \317\ Interview with Source 114 (Oct. 2, 2019).
---------------------------------------------------------------------------
    Indirectly, the atomization of news may increase the 
likelihood that people are exposed to disinformation or 
untrustworthy sources of news online. When online news is 
disintermediated from its source, people generally have more 
difficulty discerning the credibility of reporting online. This 
process may also ``foster ambivalence about the quality and 
nature of content that garners users' attention,'' particularly 
among young people.\318\
---------------------------------------------------------------------------
    \318\ Submission from Source 140, to H. Comm. on the Judiciary, 2 
(Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    For example, during the Subcommittee's sixth hearing, 
Subcommittee Chair Cicilline presented Facebook CEO Mark 
Zuckerberg with evidence of a Breitbart video that claimed that 
``you don't need a mask and hydroxychloroquine is a cure for 
COVID.'' \319\ As he noted, within the first five hours of this 
video being posted, it had nearly ``20 million views and over 
100,000 comments before Facebook acted to remove it.'' \320\ 
Mr. Zuckerberg responded that ``a lot of people shared that, 
and we did take it down because it violate[d] our policies.'' 
\321\ In response, Chair Cicilline asked if ``20 million people 
saw it over the period of five hours . . . doesn't that 
suggest, Mr. Zuckerberg, that your platform is so big that, 
even with the right policies in place, you can't contain deadly 
content?'' \322\ Mr. Zuckerberg responded by claiming that 
Facebook has a ``relatively good track record of finding and 
taking down lots of false content.'' \323\
---------------------------------------------------------------------------
    \319\ CEO Hearing at 143 (statement of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
    \320\ Id.
    \321\ Id. (statement of Mark Zuckerberg, CEO, Facebook, Inc.).
    \322\ Id. at 143-44 (statement of Rep. David N. Cicilline (D-RI), 
Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. 
on the Judiciary).
    \323\ Id. at 144 (statement of Mark Zuckerberg, CEO, Facebook, 
Inc.).
---------------------------------------------------------------------------
    Moreover, because there is not meaningful competition, 
dominant firms face little financial consequence when 
misinformation and propaganda are promoted online.\324\ 
Platforms that are dependent on online advertising have an 
incentive to prioritize content that is addictive or 
exploitative to increase engagement on the platform.\325\ And 
the reliance on platforms by advertisers has generally 
diminished their ability to push for improvements in content 
standards. As a news publisher explained in a submission to the 
Subcommittee:
---------------------------------------------------------------------------
    \324\ Free and Diverse Press Hearing at 45 (statement of Sally 
Hubbard, Dir. of Enf't Strategy, Open Mkts. Inst.); Charlie Warzel, 
Opinion, Facebook Can't Be Reformed, N.Y. Times (July 1, 2020), https:/
/www.nytimes.com/2020/07/01/opinion/facebook-zuckerberg.html.
    \325\ Conversely, the decline of trustworthy sources of news due to 
rising market power and declining ad revenue has also contributed to 
this harm. Competition & Mkts. Auth. Report at 9 (``[C]oncerns relating 
to online platforms funded by digital advertising can lead to wider 
social, political and cultural harm through the decline of 
authoritative and reliable news media, the resultant spread of `fake 
news' and the decline of the local press which is often a significant 
force in sustaining communities.'').

     LAs advertisers have become more reliant on dominant 
search and social platforms to reach potential consumers, they 
have lost any leverage to demand change in the policies or 
practices of the platforms. In the era of newspapers, 
television, radio, or indeed direct sales of digital 
advertising online, there was a connection between advertising 
and the content it funds, creating a high degree of 
accountability for both parties in that transaction. This 
maintained high content standards, and enabled advertisers to 
demand or pursue change from publishers whose content standards 
fell. While many high-quality publishers continue to operate 
stringent policies in relation to the digital advertising that 
they permit to appear within their services, in a world of 
programmatic audience trading that self-regulated compact 
between advertisers and platform does not exist.\326\
---------------------------------------------------------------------------
    \326\ Submission from Source 140, to H. Comm. on the Judiciary, 5 
(Oct. 15, 2019) (on file with Comm.).

    During the Subcommittee's sixth hearing, Representative 
Jamie Raskin (D-MD) raised this concern. As he noted, in July 
2020, Facebook faced an advertiser boycott by hundreds of 
companies.\327\ This effort was spearheaded by the Stop Hate 
for Profit campaign, a coalition of civil rights groups 
organizing in protest of ``the rapid spread of hate messages 
online, the presence of boogaloo and other right-wing extremist 
groups trying to infiltrate and disrupt Black Lives Matter 
protests and the fact that alt-right racists and anti-Semitic 
content flourishes on Facebook.'' \328\
---------------------------------------------------------------------------
    \327\ CEO Hearing at 57 (statement of Rep. Jamie Raskin (D-MD), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
    \328\ Id. Stop Hate for Profit was established by the Anti-
Defamation League, the NAACP, Color of Change, and other civil rights 
groups in the wake of the May 2020 police killing of George Floyd, an 
unarmed Black man, in Minneapolis and the ensuing national protests. 
Shirin Ghaffary & Rebecca Heilweil, Why Facebook Is ``The Front Line in 
Fighting Hate Today,'' Vox: Recode (July 15, 2020), https://
www.vox.com/recode/2020/7/15/21325728/facebook-stop-hate-for-profit-
campaign-jonathan-greenblatt-anti-defamation-league.
---------------------------------------------------------------------------
    As a result of this campaign, more than a thousand major 
companies--including Disney, Coca-Cola, and General Motors--
announced that they would pull $7 billion in advertisements on 
Facebook as part of the Stop Hate for Profit boycott.\329\ But, 
as Representative Raskin pointed out during the hearing, 
Facebook does not ``seem to be that moved by their campaign.'' 
\330\
---------------------------------------------------------------------------
    \329\ Steven Levy, Facebook Has More to Learn from the Ad Boycott, 
Wired (Aug. 6, 2020), https://www.wired.com/story/rashad-robinson-
facebook-ad-boycott/.
    \330\ CEO Hearing at 57 (statement of Rep. Jamie Raskin (D-MD), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
---------------------------------------------------------------------------
    Representative Pramila Jayapal (D-WA) also noted during the 
hearing that Mr. Zuckerberg reportedly told Facebook's 
employees at an internal meeting that the company is ``not 
gonna change our policies or approach on anything because of a 
threat to a small percent of our revenue, or to any percent of 
our revenue.'' \331\ During that meeting, Mr. Zuckerberg 
reportedly acknowledged that the boycott ``hurts us 
reputationally,'' but said that the company was insulated from 
threats by large advertisers due to advertising revenue from 
small businesses.\332\ In response to this report, Ms. Jayapal 
asked Mr. Zuckerberg whether Facebook is ``so big that you 
don't care how you're impacted by a major boycott of 1,100 
advertisers?'' \333\ Mr. Zuckerberg responded that ``[o]f 
course we care. But we're also not going to set our content 
policies because of advertisers. I think that that would be the 
wrong thing for us to do.'' \334\
---------------------------------------------------------------------------
    \331\ Id. (statement of Mark Zuckerberg, CEO, Facebook, Inc.).
    \332\ Id.
    \333\ Id. at 216 (question of Rep. Pramila Jayapal (D-WA), Subcomm. 
on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary).
    \334\ Id. (statement of Mark Zuckerberg, CEO, Facebook, Inc.).
---------------------------------------------------------------------------
    Since then, the civil rights groups have said that, 
although Facebook made some changes in response to the 
boycott--such as the creation of a position within the company 
dedicated to overseeing civil rights and algorithmic bias--it 
ultimately has not made meaningful changes at scale, and it 
``lags competitors in working systematically to address hate 
and bigotry on their platform.'' \335\
---------------------------------------------------------------------------
    \335\ Statement from Stop Hate for Profit on July 2020 Ad Pause 
Success and #StopHateFor Profit Campaign, Stop Hate for Profit (July 
30, 2020), https://www.stophateforprofit.org/.
---------------------------------------------------------------------------
    The group organized further action in September 2020, when 
it called for companies and public figures to stop posting on 
Instagram beginning September 16th.\336\ This protest, aimed 
again at Facebook's treatment of hate groups, was spurred by 
the police shooting of Jacob Blake in Kenosha, Wisconsin.\337\ 
In the aftermath, Facebook failed to remove a group promoting 
the coalescence of an armed militia in the streets of Kenosha, 
despite numerous users reporting the page.\338\ Mr. Zuckerberg 
called this failure an ``operational mistake.'' \339\
---------------------------------------------------------------------------
    \336\ Donie O'Sullivan, Group That Led Facebook Boycott Is Back 
With New Action, CNN Bus. (Sept. 14, 2020), https://www.cnn.com/2020/
09/14/tech/facebook-boycott-return/index.html.
    \337\ Id.
    \338\ Brian Fung, Facebook CEO Admits ``Operational Mistake'' in 
Failure to Remove Kenosha Militia Page, CNN Bus. (Sept. 4, 2020), 
https://www.cnn.com/2020/08/28/tech/zuckerberg-
kenosha-page/index.html.
    \339\ Id.
---------------------------------------------------------------------------
    (ii) Monetization. The rise of market power online has 
severely affected the monetization of news, diminishing the 
ability of publishers to deliver valuable reporting.\340\
---------------------------------------------------------------------------
    \340\ See, e.g., Austl. Competition & Consumer Comm'n Report at 7; 
David Chavern, Opinion, Protect the News from Google and Facebook, Wall 
St. J. (Feb. 25, 2018), https://www.wsj.com/articles/protect-the-news-
from-google-and-facebook-1519594942; supra Section III.C.3(b)(i).
---------------------------------------------------------------------------
    The digital advertising market is highly concentrated, with 
Google and Facebook controlling the majority of the online 
advertising market in the United States,\341\ capturing nearly 
all of its growth in recent years.\342\ Although Amazon has 
grown its digital advertising business to become the third 
largest competitor in the market,\343\ it still accounts for a 
relatively small percentage.\344\
---------------------------------------------------------------------------
    \341\ See, e.g., Hamza Shaban, Digital Advertising to Surpass Print 
and TV for the First Time, Report Says, Wash. Post: Tech. (Feb. 20, 
2019), https://www.washingtonpost.com/technology/2019/02/20/digital-
advertising-surpass-print-tv-first-time-report-says/.
    \342\ Sarah Sluis, Digital Ad Market Soars to $88 Billion, Facebook 
and Google Contribute 90% of Growth, Ad Exchanger (May 10, 2018), 
https://adexchanger.com/online-advertising/
digital-ad-market-soars-to-88-billion-facebook-and-google-contribute-
90-of-growth.
    \343\ Jean Baptiste Su, Amazon Is Now the #3 Digital Ad Platform in 
the U.S. Behind Google and Facebook, Says eMarketer, Forbes (Sept. 20, 
2018), https://www.forbes.com/sites/jeanbaptiste/2018/09/20/amazon-is-
now-the-3-digital-ad-platform-in-the-u-s-behind-google-and-facebook-
says-emarketer/#333342de3926.
    \344\ Id.
---------------------------------------------------------------------------
    News publishers have raised concerns that this significant 
level of concentration in the online advertising market--
commonly referred to as the digital ad duopoly--has harmed the 
quality and availability of journalism.\345\ They note that, as 
a result of this dominance, there has been a significant 
decline in advertising revenue to news publishers,\346\ 
undermining publishers' ability to deliver valuable reporting, 
and ``siphon[ing] revenue away from news organizations.'' \347\
---------------------------------------------------------------------------
    \345\ See, e.g., Shannon Bond, Google and Facebook Build Digital Ad 
Duopoly, Fin. Times (Mar. 14, 2017), https://www.ft.com/content/
30c81d12-08c8-11e7-97d1-5e720a26771b; John Diaz, Opinion, How Google 
and Facebook Suppress the News, S.F. Chron. (Apr. 5, 2019), https://
www.sfchronicle.com/opinion/diaz/article/How-Google-and-Facebook-
suppress-the-news-13745431.php.
    \346\ Data and Privacy Hearing at 126 (statement of Rod Sims, 
Chair, Austl. Competition & Consumer Comm'n); Free and Diverse Press 
Hearing at 73 (statement of David Pitofsky, Gen. Couns., News Corp).
    \347\ Free and Diverse Press Hearing at 20 (statement of David 
Chavern, President, News Media All.).
---------------------------------------------------------------------------
    Jason Kint, the CEO of Digital Content Next, a trade 
association that represents both digital and traditional news 
publishers, notes that there is ``a clear correlation between 
layoffs and buyouts with the growth in market share for the 
duopoly--Google and Facebook.'' \348\ David Chavern, the 
President and CEO of the News Media Alliance, has likewise said 
that ``[t]he problem is that today's internet distribution 
systems distort the flow of economic value derived from good 
reporting.'' \349\ The effects of this revenue decline are most 
severe at the local level, where the decimation of local news 
sources is giving rise to local news deserts.\350\
---------------------------------------------------------------------------
    \348\ Daniel Funke, What's Behind the Recent Media Bloodbath? The 
Dominance of Google and Facebook, Poynter (June 14, 2017), https://
www.poynter.org/business-work/2017/whats-
behind-the-recent-media-bloodbath-the-dominance-of-google-and-facebook.
    \349\ David Chavern, Opinion, How Antitrust Undermines Press 
Freedom, Wall St. J. (July 9, 2017), https://www.wsj.com/articles/how-
antitrust-undermines-press-freedom-1499638532.
    \350\ Penelope Muse Abernathy, Univ. N.C. Sch. of Media & 
Journalism, The Expanding News Desert 33 (2018), https://www.cislm.org/
wp-content/uploads/2018/10/The-Expanding-News-Desert-10_14-Web.pdf.
---------------------------------------------------------------------------
    Other news publishers have expressed concerns about the 
dual role of platforms as both intermediaries and platforms for 
people's attention.\351\ By keeping people inside a ``walled 
garden,'' platforms can monetize their attention through ads, 
creating a strong economic incentive to minimize outbound 
referrals that lead to a decline in users' attention and 
engagement. In turn, this diminishes the incentives of 
publishers to invest in high-quality journalism.\352\ David 
Pitofsky, the General Counsel of News Corp, described this as a 
free-riding problem in his testimony before the Subcommittee, 
explaining that platforms:
---------------------------------------------------------------------------
    \351\ Submission from Source 140, to H. Comm. on the Judiciary, 11 
(Oct. 15, 2019) (on file with Comm.); Submission from Source 114, to H. 
Comm. on the Judiciary, 13 (Oct. 2, 2019) (on file with Comm.).
    \352\ Competition & Mkts. Auth. Report at 319.

     L[D]eploy our highly engaging news content to target our 
audiences, then turn around and sell that audience engagement 
to the same advertisers news publishers are trying to serve. 
Dominant platforms take the overwhelming majority of 
advertising revenue without making any investment in the 
production of the news, all while foreswearing any 
responsibility for its quality and accuracy. As a result, one 
of the pillars of the news industry's business model, 
advertising revenue, is crumbling.\353\
---------------------------------------------------------------------------
    \353\ Free and Diverse Press Hearing at 72 (statement of David 
Pitofsky, Gen. Couns., News Corp).

    (c) International Scrutiny. Several of the concerns 
regarding the distribution and monetization of news through 
platform intermediaries were raised as part of a comprehensive 
inquiry by the Australian Competition and Consumer Commission 
(ACCC). Over the span of several years, the Commission 
collected evidence from more than a hundred market participants 
and organizations as part of its review. Following its 
publication of a Preliminary Report in December 2018 and an 
Issues Paper in February 2018, the ACCC issued an extensive 
Final Report spanning more than 600 pages and including 
submissions from more than 100 market participants.\354\
---------------------------------------------------------------------------
    \354\ Press Release, Austl. Competition & Consumer Comm'n, 
Holistic, Dynamic Reforms Needed to Address Dominance of Digital 
Platforms (July 26, 2019), https://www.accc.gov.au/media-release/
holistic-dynamic-reforms-needed-to-address-dominance-of-digital-
platforms.
---------------------------------------------------------------------------
    Among its findings, the ACCC concluded that Facebook and 
Google have significant and durable market power over the 
distribution of news online.\355\ As the ACCC noted, ``Google 
and Facebook are the gateways to online news media for many 
consumers,'' accounting for a significant amount of referral 
traffic to news publishers' websites.\356\ As a result, news 
publishers are reliant on these platforms for reaching people 
online, which affects publishers' ability to monetize 
journalism, particularly on formats such as Google's 
Accelerated Mobile Pages (AMP).\357\
---------------------------------------------------------------------------
    \355\ Austl. Competition & Consumer Comm'n Report at 226.
    \356\ Id. at 296.
    \357\ Id. at 206, 247 (concluding that AMP is a ``must have'' 
product for publishers).
---------------------------------------------------------------------------
    The ACCC made 23 recommendations to address concerns across 
a broad range of issues, including antitrust, privacy, and 
consumer protection.\358\ Within the context of addressing the 
effects of market power on the news industry--particularly as 
it relates to the imbalance of bargaining power between 
platforms and publishers--the Commission recommended developing 
``a code of conduct to govern the relationship between media 
businesses and digital platforms [which] seeks, among other 
things, to address this imbalance.'' \359\
---------------------------------------------------------------------------
    \358\ Press Release, Austl. Competition & Consumer Comm'n, ACCC 
Commences Inquiry into Digital Platforms (Dec. 4, 2017), https://
www.accc.gov.au/media-release/accc-commences-
inquiry-into-digital-platforms.
    \359\ Austl. Competition & Consumer Comm'n Report at 245.
---------------------------------------------------------------------------
    On July 31, 2020, the Commission released a draft code to 
address a ``fundamental bargaining power imbalance'' between 
news publishers and dominant platforms that has led to ``news 
media businesses accepting less favourable terms for the 
inclusion of news on digital platform services than they would 
otherwise agree to in response to a request by the Australian 
government.'' \360\
---------------------------------------------------------------------------
    \360\ Draft News Media Bargaining Code, Austl. Competition & 
Consumer Comm'n, https://www.accc.gov.au/focus-areas/digital-platforms/
draft-news-media-bargaining-code (last visited Sept. 27, 2020).
---------------------------------------------------------------------------
    Under this code, Facebook, Google, and other platforms with 
significant bargaining power designated by Australia's 
Treasurer must negotiate with covered news publishers ``in good 
faith over all issues relevant to news on digital platform 
services.'' \361\ News publishers may negotiate either 
individually or collectively over a three-month period, 
allowing local and rural publishers ``to negotiate from a 
stronger position than negotiating individually.'' \362\
---------------------------------------------------------------------------
    \361\ Austl. Competition & Consumer Comm'n, Q&As: Draft News Media 
and Digital Platforms Mandatory Bargaining Code 7 (July 2020), https://
www.accc.gov.au/system/files/DPB%20-
%20Draft%20news%20media%20and%20digital%20platforms%20mandatory%20 
bargaining%20code%20Q%26As.pdf.
    \362\ Id. at 6.
---------------------------------------------------------------------------
    If publishers are unable to reach an agreement during the 
mediated negotiation period, they may bring the dispute to 
compulsory arbitration. As part of this process, the arbitrator 
must consider the parties' final offers covering: (1) the 
benefits of news content to the platform; (2) the costs of 
producing news by the publisher; and (3) whether a payment 
model would unduly burden the commercial interests of the 
platform.\363\ The arbitrator must choose one of the parties' 
proposals, encouraging both parties to make reasonable 
offers.\364\
---------------------------------------------------------------------------
    \363\ Id. at 9.
    \364\ Id.
---------------------------------------------------------------------------
    Facebook and Google have responded to the draft code by 
warning that they may no longer display news on their 
respective platforms in Australia. Despite an ``unprecedented 
surge in audiences for news websites and TV news,'' \365\ 
Google claims that the draft code does not reflect the ``more 
than $200 million in value that Google provides to publishers 
each year by sending people to their websites.'' \366\ Facebook 
described the draft code as ``unprecedented in its reach,'' 
notwithstanding similar proposals in other countries, including 
France,\367\ as well as the United States.\368\
---------------------------------------------------------------------------
    \365\ Amanda Meade, News Corp to Suspend Print Editions of 60 Local 
Newspapers as Advertising Revenue Slumps, Guardian (Mar. 31, 2020), 
https://www.theguardian.com/media/2020/apr/01/news-corp-to-suspend-
print-editions-of-60-local-newspapers-as-advertising-revenue-slumps.
    \366\ Update to Our Open Letter to Australians, Google, https://
about.google/google-in-
australia/an-open-letter/ (last visited Oct. 5, 2020).
    \367\ Natasha Lomas, France's Competition Watchdog Orders Google to 
Pay for News Reuse, TechCrunch (Apr. 9, 2020), https://techcrunch.com/
2020/04/09/frances-competition-watchdog-orders-google-to-pay-for-news-
reuse/.
    \368\ Ashley Cullins, National Association of Broadcasters Warns 
Congress Tech Giants Could Kill Local Journalism, Hollywood Rep. (Sept. 
3, 2020), https://www.hollywoodreporter
.com/thr-esq/national-association-of-broadcasters-warns-congress-tech-
giants-could-kill-local-journalism.
---------------------------------------------------------------------------
    In response to Google's threat to boycott journalism in 
Australia, ACCC Chair Rod Sims said that Google's statement 
contained ``misinformation'' about the draft code, asserting 
that the draft code responds to ``a significant bargaining 
power imbalance between Australian news media businesses and 
Google and Facebook.'' \369\ Australia's Treasurer, Josh 
Frydenberg, similarly said that the country would not ``respond 
to coercion or heavy-handed threats wherever they come from.'' 
\370\
---------------------------------------------------------------------------
    \369\ Naaman Zhou, Google's Open Letter to Australians About News 
Code Contains ``Misinformation,'' ACCC Says, Guardian (Aug. 17, 2020), 
https://www.theguardian.com/technology/2020/aug/17/google-open-letter-
australia-news-media-bargaining-code-free-services-risk-contains
-misinformation-accc-says.
    \370\ Jamie Smyth & Alex Barker, Battle Lines Drawn as Australia 
Takes on Big Tech Over Paying for News, Fin. Times (Sept. 2, 2020), 
https://www.ft.com/content/0834d986-eece-4e66-ac55-f62e1331f7f7.
---------------------------------------------------------------------------
4. Political and Economic Liberty
    During the investigation, the Subcommittee examined the 
effects of market power on political and economic liberty. 
Concerns about the democratic effects of private monopolies 
trace back to the foundational antitrust statutes, where 
lawmakers worried that monopolies were ``a menace to republican 
institutions themselves.'' \371\ The Subcommittee's examination 
of these matters follows a long tradition of congressional 
attention to this issue.\372\
---------------------------------------------------------------------------
    \371\ 21 Cong. Rec. 3146 (1890) (statement of Sen. George F. Hoar).
    \372\ Id. at 2459 (statement of Sen. John Sherman); see also 95 
Cong. Rec. 11,486 (1949) (statement of Rep. Emanuel Celler) 
(``[B]usiness concentration is politically dangerous, leading 
inevitably to increasing Government control.''); 96 Cong. Rec. 16,452 
(1950) (statement of Sen. Estes Kefauver) (``[T]he history of what has 
taken place in other nations where mergers and concentrations have 
placed economic control in the hands of a very few people is too clear 
to pass over easily. A point is eventually reached, and we are rapidly 
reaching that point in this country, where the public steps in to take 
over when concentration and monopoly gain too much power. The taking 
over by the public through its government always follows one or two 
methods and has one or two political results. It either results in a 
Fascist state or the nationalization of industries and thereafter a 
Socialist or Communist state.'').
---------------------------------------------------------------------------
    Based on interviews and submissions from market 
participants, along with other evidence examined by the 
Subcommittee, there are several ways in which the market power 
of the dominant platforms affects political and economic power.
    First, the Subcommittee encountered a prevalence of fear 
among market participants who depend on the dominant platforms. 
Repeatedly, market participants expressed deep concern that 
speaking about the dominant platforms' business practices--even 
confidentially without attribution--would lead a platform to 
retaliate against them, with severe financial repercussions. 
The source of this fear was twofold. Some firms were so 
dependent on the platform that even potentially risking 
retaliation caused alarm. Others had previously seen a platform 
retaliate against someone for raising public concerns about 
their business practices and wanted to avoid the same fate.
    Several market participants told the Subcommittee that they 
``live in fear'' of the platforms. One said, ``It would be 
commercial suicide to be in Amazon's crosshairs . . . . If 
Amazon saw us criticizing, I have no doubt they would remove 
our access and destroy our business.'' \373\ Another told the 
Subcommittee, ``Given how powerful Google is and their past 
actions, we are also quite frankly worried about retaliation.'' 
\374\ An attorney representing app developers said they ``fear 
retaliation by Apple'' and are ``worried that their private 
communications are being monitored, so they won't speak out 
against abusive and discriminatory behavior.'' \375\
---------------------------------------------------------------------------
    \373\ Interview with Source 636 (Mar. 11, 2020).
    \374\ Submission from Source 147, to H. Comm. on the Judiciary (on 
file with Comm.).
    \375\ Submission from Source 88, to H. Comm. on the Judiciary (on 
file with Comm.).
---------------------------------------------------------------------------
    Market participants also expressed unease about the success 
of their business and their economic livelihood depending on 
the decision-making of the platforms. A single tweak of an 
algorithm, intentional or not, could cause significant costs if 
not financial disaster--with little recourse. Market 
participants routinely characterized the platforms as having 
arbitrary and unaccountable power--the same forms of undue 
power that antitrust laws were designed to prevent. As Senator 
John Sherman (R-OH) explained, antitrust was essential to 
preserve liberty ``at the foundation of the equality of all 
rights and privileges'' because concentrations of power outside 
of democratic institutions were a ``kingly prerogative, 
inconsistent with our form of government.'' \376\
---------------------------------------------------------------------------
    \376\ 21 Cong. Rec. 2457 (1890) (statement of Sen. John Sherman).
---------------------------------------------------------------------------
    Additionally, courts and regulators have found that several 
of the dominant platforms have engaged in recidivism. For 
example, Facebook settled charges brought in 2012 by the 
Federal Trade Commission (FTC) that it had ``deceived consumers 
by telling them they could keep their information on Facebook 
private, and then repeatedly allowing it to be shared and made 
public.'' \377\ As part of this settlement, Facebook agreed to 
abide by an administrative order requiring that Facebook not 
misrepresent its privacy protections.\378\ Seven years later, 
the FTC concluded that Facebook had almost immediately begun 
violating that order following its adoption.\379\ Ruling on the 
FTC's subsequent settlement with Facebook, District Court Judge 
Timothy Kelley wrote that ``the unscrupulous way in which the 
United States alleges Facebook violated both the law and the 
administrative order is stunning.'' \380\ The FTC has similarly 
sanctioned Google on several occasions for privacy 
violations.\381\ In 2010, Apple settled charges it had entered 
into no-poach agreements with six other technology 
companies.\382\ Two years later, Apple was found liable for 
orchestrating a price-fixing conspiracy.\383\ In that case, the 
presiding judge stated that the record ``demonstrated a blatant 
and aggressive disregard'' by Apple ``for the requirements of 
the law,'' noting that the conduct ``included Apple lawyers and 
its highest level executives.'' \384\
---------------------------------------------------------------------------
    \377\ Press Release, Federal Trade Comm'n, Facebook Settles FTC 
Charges that It Deceived Consumers by Failing to Keep Privacy Promises 
(Nov. 29, 2011), https://www.ftc.gov/news-events/press-releases/2011/
11/facebook-settles-ftc-charges-it-deceived-consumers-failing-keep 
(proposed settlement). 
    \378\ Id.
    \379\ United States v. Facebook, Inc., 456 F. Supp. 3d 115, 119 
(D.D.C. 2020) (``The United States now alleges that Facebook violated 
the 2012 Order by `subvert[ing] users privacy choices to serve its own 
business interests' in several ways, starting almost immediately after 
agreeing to comply with the 2012 Order.'').
    \380\ Id. at 117.
    \381\ Press Release, Federal Trade Comm'n, Google and YouTube Will 
Pay Record $170 Million for Alleged Violations of Children's Privacy 
Law (Sept. 4, 2019), https://www.ftc.gov/news-events/press-releases/
2019/09/google-youtube-will-pay-record-170-million-alleged-violations.
    \382\ Press Release, Dep't of Justice, Justice Department Requires 
Six High Tech Companies to Stop Entering into Anticompetitive Employee 
Solicitation Agreements (Sept. 24, 2010), https://www.justice.gov/opa/
pr/justice-department-requires-six-high-tech-companies-stop-
entering-anticompetitive-employee.
    \383\ United States v. Apple, Inc., 952 F. Supp. 2d 638, 644 
(S.D.N.Y. 2013), aff'd, 791 F.3d 290 (2d Cir. 2015).
    \384\ Aug. 27, 2013 Hr'g Tr. at 17:1-6, United States v. Apple, 
Inc., 952 F. Supp. 2d 638 (S.D.N.Y. 2013) (No. 12-cv-2826). During the 
investigation, the Subcommittee also encountered instances in which the 
platforms did not appear fully committed to telling lawmakers the 
truth, including one incident in which members of the Subcommittee were 
forced to question whether Amazon had committed perjury. Letter from 
Hon. Jerrold Nadler, Chair, H. Comm. on the Judiciary, et al., to Jeff 
Bezos, CEO, Amazon.com, Inc. (May 1, 2020), https://
judiciary.house.gov/uploadedfiles/2020-05-
01_letter_to_amazon_ceo_bezos.pdf.
---------------------------------------------------------------------------
    Lastly, the growth in the platforms' market power has 
coincided with an increase in their influence over the 
policymaking process. Over the past decade, the dominant online 
platforms have significantly increased their lobbying 
activity,\385\ which tends to create a feedback loop for large 
companies. More money spent on lobbying may deliver higher 
equity returns and market share,\386\ which, in turn, may spur 
more lobbying.
---------------------------------------------------------------------------
    \385\ See, e.g., Spencer Soper et al., Amazon's Jeff Bezos Can't 
Beat Washington, so He's Joining It: The Influence Game, Bloomberg 
(Feb. 14, 2018), https://www.bloomberg.com/graphics/2018-amazon-
lobbying/. This is a trend for the industry. The total reported 
lobbying expenditures by digital platforms increased from $1,190,000 a 
year in 1998, to $74,285,000 in 2019 as the industry consolidated and 
gained market power. Lobbying Spending Database, Ctr. for Responsive 
Pol., https://www.opensecrets.org/lobby/
top.php?indexType=i&showYear=2019 (last visited Sept. 27, 2020).
    \386\ See J.H. Kim, Corporate Lobbying Revisited, 10 Bus. & Pol. 1 
(2008) (analyzing lobbying's effect on equity returns); Brian Shaffer 
et al., Firm Level Performance Implications of Nonmarket Actions, 39 
Bus. & Soc. 126 (2000) (analyzing lobbying's effect on market share).
---------------------------------------------------------------------------
    Outside of traditionally reported and regulated lobbying, 
firms with market power and dispensable income fund think tanks 
and nonprofit advocacy groups to steer policy discussion. For 
example, Facebook, Google, and Amazon reportedly donated 
significant amounts to the American Enterprise Institute (AEI), 
which, in turn, has argued that antitrust critiques of the big 
platforms are ``astonishingly weak.'' \387\ More recently, 
Google and Amazon have contributed significant funding to the 
Global Antitrust Institute at the George Mason University's 
Antonin Scalia Law School, which advocates against antitrust 
scrutiny of the dominant platforms.\388\ By funding academics 
and advocacy groups, the dominant platforms can expand their 
sphere of influence, further shaping how they are governed and 
regulated.
---------------------------------------------------------------------------
    \387\ Andrew Perez & Tim Zelina, Facebook, Google, Amazon Are 
Ramping up Their Secretive Influence Campaigns in D.C., Fast Co. (Oct. 
31, 2019), https://www.fastcompany.com/9042
4503/facebook-google-amazon-are-ramping-up-their-secretive-influence-
campaigns-in-dc.
    \388\ Daisuke Wakabayashi, Big Tech Funds a Think Tank Pushing for 
Fewer Rules. For Big Tech., N.Y. Times (July 24, 2020), https://
www.nytimes.com/2020/07/24/technology/global-antitrust-institute-
google-amazon-qualcomm.html.
---------------------------------------------------------------------------
    At several hearings, Members of the Subcommittee noted that 
the outsized political influence of dominant firms has adverse 
effects on the democratic process. At the Subcommittee's field 
hearing in Colorado, Representative Ken Buck (R-CO) asked each 
of the witnesses about this issue.\389\ As Representative Buck 
noted, the dominant platforms are generally well represented in 
the policymaking process:
---------------------------------------------------------------------------
    \389\ Competitors Hearing at 57 (question of Rep. Ken Buck (R-CO), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm 
on the Judiciary).

     LPart of what we are dealing with here is the reality that 
[dominant firms] walk into our offices and they tell us their 
side of the story and we very rarely hear the other side of the 
story, and somehow part of this solution has to be that public 
policymakers elected, appointed, have to have access to that 
kind of information. So I thank you for being here and I also 
would encourage you to make sure that, you know, we are 
accessible. We are trying our best to make sure that we 
continue to create the environment for your kinds of 
companies.\390\
---------------------------------------------------------------------------
    \390\ Id.

During the Subcommittee's sixth hearing, Subcommittee Chair 
David N. Cicilline (D-RI) noted the democratic stakes of the 
Subcommittee's work. He said, ``Because concentrated economic 
power also leads to concentrated political power, this 
investigation also goes to the heart of whether we, as a 
people, govern ourselves, or whether we let ourselves be 
governed by private monopolies.'' \391\
---------------------------------------------------------------------------
    \391\ CEO Hearing at 7 (statement of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin Law of the H. 
Comm. on the Judiciary).
---------------------------------------------------------------------------

                        IV. MARKETS INVESTIGATED

                            A. Online Search

    Online search engines enable users to retrieve webpages and 
information stored on the internet. After a user enters a query 
into the search engine, the search provider returns a list of 
webpages and information that are relevant to the search term 
entered.
    There are two types of search engines: horizontal and 
vertical. Horizontal search engines are designed to retrieve a 
comprehensive list of general search results. Vertical search 
engines are designed to retrieve a narrower category of 
content, such as photo images (e.g., Dreamstime) or travel 
(e.g., Expedia). The majority of general search engines 
monetize the service through selling ad placements rather than 
charging search users a monetary price. The overwhelmingly 
dominant provider of general online search is Google, which 
captures around 81 percent of all general search queries in the 
U.S. on desktop and 94 percent on mobile. Other search 
providers include Bing, which captures six percent of the 
market, Yahoo (three percent), and DuckDuckGo (one 
percent).\392\
---------------------------------------------------------------------------
    \392\ Search Engine Market Share United States of America: Sept. 
2019-Sept. 2020, Stat
Counter, http://gs.statcounter.com/search-engine-market-share/all/
united-states-of-america (last visited Oct. 3, 2020).
---------------------------------------------------------------------------

          Desktop and Mobile Search Market Share \393\
---------------------------------------------------------------------------

    \393\ Prepared by the Subcommittee based on Desktop & Mobile Search 
Engine Market Share United States of America, January 2009-September 
2020, StatCounter, https://gs.statcounter .com/search-engine-market-
share/desktop-mobile/united-states-of-america/#monthly-200901-202009 
(last visited Oct. 3, 2020). The ``Other'' category includes AOL, Ask 
Jeeves, DuckDuckGo, MSN, Webcrawler, Windows Live, AVG Search, Baidu, 
Comcast, Babylon, Dogpile, Earthlink, Norton Safe Search, and YANDEX 
RU. Id.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Online search comprises three distinct activities. First, 
an engine must ``crawl'' the Internet by using an automated bot 
to collect copies of all of the webpages it can find. Once a 
crawler has recorded all of this material, it must be collated 
and organized into an ``index,'' or a map of the Internet that 
can be searched in real-time. Indexing organizes the 
information into the formats and databases required for the 
querying function. When a user enters a query into the search 
engine, the engine draws from the index to pull a list of 
responsive websites, ordered in terms of relevance. The 
relevance, in turn, is determined by the search algorithm 
applied by the search engine. A search engine can function only 
if it has access to an index, and an index can exist only once 
web pages have been crawled and collated into a 
repository.\394\ Indexing has high fixed costs and requires 
significant server storage and compute power.\395\ The ability 
to invest heavily in computing power and storage yields a 
significant advantage.\396\
---------------------------------------------------------------------------
    \394\ Submission from Source 531, to H. Comm. on the Judiciary, 
Source 531-000017 (Nov. 21, 2011) (on file with Comm.). According to 
one market participant, ``[t]he greatest challenges in building a 
search index are finding the URLs for documents stored on the Web and 
then being able to parse the best URLs and documents to include in the 
index. Overcoming these challenges requires massive amounts of data on 
user interactions with websites to discover new URLs and then filter 
down to the 5% of known URLs [the search engine] uses to determine 
which documents to index, and how frequently these documents should be 
refreshed.'' Id.
    \395\ Id. at Source 531-000016 to -000019.
    \396\ Submission from Source 209, to H. Comm. on the Judiciary, 
Source 209-000537 to -000538 (Aug. 24, 2009) (on file with Comm.) 
(``Comprehensiveness, freshness, and responsiveness are all directly 
related to the amount of computing power and storage capacity brought 
to bear on the problem of crawling and indexing the web. It would 
therefore be implausible to attribute Google's massive search advantage 
to superior technology. Rather, the main driver of search performance 
is scale. Scale is driven primarily by the level of financial 
investment in search infrastructure.'').
---------------------------------------------------------------------------
    Several online search features tilt the market towards the 
dominant incumbent and make entry by new market participants 
difficult. First, web crawling is costly and strongly favors 
first-movers.\397\ In a submission to the Subcommittee, one 
expert described how Google's early efforts have locked in its 
dominance.\398\ In particular, Google was the first company to 
crawl the entirety of the Internet, a feat motivated in part 
due to its PageRank algorithm, which used links between pages 
to identify the most relevant webpages for specific topics and 
queries. Unlike most search engine algorithms at the time, the 
quality of PageRank results improved with more webpages, 
incentivizing Google to crawl a greater portion of the web.
---------------------------------------------------------------------------
    \397\ See, e.g., Submission from Source 534, to H. Comm. on the 
Judiciary, 1 (Oct. 14, 2019) (on file with Comm.) (``[The Company] does 
not own its own search index and is not planning to invest into 
building an own index because of the high investment costs.''); Case 
AT.39740, Google Search (Shopping), Eur. Comm'n Decision C(2017) 4444, 
para. 304 (June 27, 2017), https://ec.europa.eu/competition/antitrust/
cases/dec_docs/39740/39740_14996_3.pdf (``Bing and Google each spend 
hundreds of millions of dollars a year crawling and indexing the deep 
Web. It costs so much that even big companies like Yahoo and Ask are 
giving up general crawling and indexing. Therefore, it seems silly to 
compete on crawling and, besides, we do not have the money to do 
so.'').
    \398\ Submission from Zack Maril, to H. Comm. on the Judiciary 
(Sept. 30, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    The web has grown exponentially over the last two 
decades,\399\ which means the cost of crawling the entire 
Internet has increased too, despite advances in crawling 
technology. Today several major webpage owners block all but a 
select few crawlers, in part because being constantly crawled 
by a large number of bots can hike costs for owners and lead 
their webpages to crash. The one crawler that nearly all 
webpages will allow is Google's ``Googlebot,'' as disappearing 
from Google's index would lead most webpages to suffer dramatic 
drops in traffic and revenue.\400\ Any new search engine 
crawler, by contrast, would likely be blocked by major webpage 
owners unless that search engine was driving significant 
traffic to webpages--which a search engine cannot do until it 
has crawled enough webpages.\401\
---------------------------------------------------------------------------
    \399\ Total Number of Websites, Internet Live Stats, https://
www.internetlivestats.com/total-number-of-websites (last visited Oct. 
3, 2020) (showing that, in 2000, the internet had around 17,000,000 
websites; today, it has more than 1.8 billion).
    \400\ Submission from Zack Maril, to H. Comm. on the Judiciary 
(Sept. 30, 2019) (on file with Comm.); see also Submission from Source 
481, to H. Comm on the Judiciary (Feb. 20, 2020) (on file with Comm.); 
Innovation and Entrepreneurship Hearing at 340 (statement of Megan 
Gray, Gen. Couns. & Pol'y Advoc., DuckDuckGo).
    \401\ Submission from Zack Maril, to H. Comm. on the Judiciary 
(Sept. 30, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    The high cost of maintaining a fresh index and the decision 
by many large webpages to block most crawlers significantly 
limits new search engine entrants. In 2018, Findx--a privacy-
oriented search engine that had attempted to build its own 
index--shut down its crawler, citing the impossibility of 
building a comprehensive search index when many large websites 
only permit crawlers from Google and Bing.\402\ Today the only 
English-language search engines that maintain their own 
comprehensive webpage index are Google and Bing.\403\ Other 
search engines--including Yahoo and DuckDuckGo--must purchase 
access to the index from Google and/or Bing through syndication 
agreements that provide syndicated search engines with access 
to search results and search advertising.\404\ While Yahoo 
previously maintained an independent index, it entered a deal 
with Microsoft in 2009 to integrate search technologies--a move 
driven by the two firms' belief that combining was necessary to 
provide a real alternative to Google.\405\
---------------------------------------------------------------------------
    \402\ Game over, Findx (Sept. 21, 2019), https://web.archive.org/
web/20190921180535/https://privacore.github.io (``Many large websites 
like LinkedIn, Yelp, Quora, Github, Facebook and others only allow 
certain specific crawlers like Google and Bing to include their 
webpages in a search engine index . . . . That meant that the Findx 
search index was incomplete and was not able to return results that 
were likely both relevant and good quality. When you compare any 
independent search engine's results to Google for example, they have no 
chance to be as relevant or complete because many large websites refuse 
to allow any other search engine to include their pages.''); Submission 
from Source 407, to H. Comm. on the Judiciary, Source 407-000024 (Nov. 
21, 2011) (on file with Comm.); Competition & Mkts. Auth. Report at 91.
    \403\ Competition & Mkts. Auth. Report at 89.
    \404\ Innovation and Entrepreneurship Hearing at 341 (statement of 
Megan Gray, Gen. Couns. & Pol'y Advoc., DuckDuckGo) (noting that 
alternatives to serving ads through Google or Microsoft, such as only 
showing product ads from Amazon or travel ads from Booking.com, are 
``not sufficiently lucrative to cover the costs of purchasing organic 
links,'' which means ``an aspiring search engine start-up today (and in 
the foreseeable future) cannot avoid the need to sign a search 
syndication contract'').
    \405\ Submission from Source 209, to H. Comm. on the Judiciary, 
Source 209-0000346 (Aug. 24, 2009) (on file with Comm.).
---------------------------------------------------------------------------
    A second major competitive advantage enjoyed by search 
engine incumbents is their access to voluminous click-and-query 
data. This data, which tracks what users searched for and how 
they interacted with the search results, benefits search 
engines in several key ways.\406\ First, search engines rely on 
click-and-query data to guide their search index's upkeep, as 
this data helps identify which webpages are most relevant and 
should be most regularly updated in the index.\407\ Second, 
click-and-query data is used to refine the search algorithm and 
the relevance of search results, as past user interactions 
improve the algorithm's ability to predict future 
interactions.\408\ In particular, data on ``tail'' (or rare) 
queries enable a search engine to offer relevant results across 
a higher set of potential queries--improving the overall 
quality of the search engine--and Google's internal documents 
show that the company recognizes its long-tail advantage.\409\ 
And third, increased query scale increases advertiser 
engagement rates, given that more user queries generally 
translate to more advertisement clicks, generating greater 
revenue for advertisers.\410\
---------------------------------------------------------------------------
    \406\ Competition & Mkts. Auth. Report at 11-12.
    \407\ Submission from Source 26, to H. Comm. on the Judiciary, 
Source 26-000016 (Nov. 21, 2011) (on file with Comm.) (``Queries are a 
critical component of the user data necessary to identify and rank URLs 
and documents for inclusion in a search index. Fewer queries mean fewer 
opportunities to identify relevant URLs and documents, which ultimately 
means a smaller usable search index.''); id. at Source 26-000026 (Nov. 
21, 2011) (``Index freshness also is an important factor in the quality 
of a search engine's result . . . . A [] survey found that a lack of 
freshness was a significant driver of dissatisfaction among users 
searching in the Entertainment and News categories.'').
    \408\ Submission from Source 531, to H. Comm. on the Judiciary, 
Source 531-000015 (``The more user queries the search engine handles, 
the more data it obtains to improve the relevance of the search results 
it serves.''); id. at Source 531-000060 (``The secret to successful 
algorithmic search matching algorithms is user feedback . . . . 
Ultimately this feedback helps the engine improve core relevance and 
other experience factors--driving higher engagement.''); Innovation and 
Entrepreneurship Hearing at 341 (statement of Megan Gray, Gen. Couns. & 
Pol'y Advoc., DuckDuckGo) (``Another barrier facing a start-up search 
engine is that it needs data, such as the most commonly clicked links 
for a particular query, in order to produce a useful ranking of organic 
links, i.e., what organic link is first, second, etc.''); Submission 
from Source 209, to H. Comm. on the Judiciary, Source 209-0000346 to -
0000352 (Aug. 24, 2009) (on file with Comm.) (``Increased search 
traffic brings more indications of user intent, facilitating more 
experimentation and allowing a search platform to generate more 
relevant natural and paid search results.''); see also Di He et al., 
Scale Effects in Web Search, in Web and Internet Economics 294, 294-310 
(Nikhil R. Devanur & Pinyan Lu eds., 2017).
    \409\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-03815864 (Apr. 23, 2010) (``Google leads competitors . . . . Our 
long-tail precision is why users continue to come to Google. Users may 
try the bells and whistles of Bing and other competitors, but Google 
still produces the results. As soon as this ceases to be the case, our 
business is in jeopardy.''); Competition & Mkts. Auth. Report app. I, 
at 15 (``[A]round 1% of Google `tail' search events are for queries 
which are seen by Bing,'' whereas ``31% of Bing `tail' search events 
are for queries which are seen by Google.'' Furthermore, ``0.8% of 
Google's `tail' distinct queries are seen by Bing, whereas 30% of 
Bing's `tail' distinct queries are seen by Google.''); see also 
Submission from Source 209, to H. Comm. on the Judiciary, Source 209-
0000532 (Feb. 17, 2011) (on file with
                                                                        
         Continued
Comm.) (``[W]ithout strong tail performance, a horizontal search engine 
cannot compete against Google.''); id. at Source 209-0000535 to -
0000536 (``[P]oor search engine performance in the tail means overall 
weak search engine performance.'').
    \410\ See, e.g., Submission from Source 531, to H. Comm. on the 
Judiciary, Source 531-000056 (July 11, 2011) (on file with Comm.) 
(stating that query scale increases advertiser engagement, since at 
scale the platform ``makes better matches, has higher value 
generation'').
---------------------------------------------------------------------------
    Overall there are significant advantages to scale in click-
and-query data, though the marginal benefit of additional data 
on tail queries is higher than the marginal benefit of 
additional data on ``head'' (or relatively common) 
queries.\411\ Some market participants also stated that the 
benefits of scale diminish once a search engine reaches a 
certain size.\412\ The benefits of scale create a feedback 
loop, where access to greater click-and-query data improves 
search quality, which drives more usage and generates 
additional click-and-query data.
---------------------------------------------------------------------------
    \411\ See Competition & Mkts. Auth. Report app. I, at 18.
    \412\ Submission from Source 531, to H. Comm. on the Judiciary, 
Source 531-000874 (May 5, 2011) (on file with Comm.) (``As a platform 
gains more and more scale, the associated benefits begin to taper off 
such that eventually additional scale provides only modest returns.''); 
id. at Source 531-000025 (Nov. 21, 2011) (on file with Comm.) (``Above 
30 billion documents, user satisfaction improves rapidly with increased 
index size; above 90 billion documents, it still continues to improve 
albeit at a slower rate.'').
---------------------------------------------------------------------------
    A third barrier to competition in general online search is 
that Google has established extensive default positions across 
both browsers and mobile devices. Among desktop browsers, 
Google enjoys default placement in Chrome (which captures 51 
percent of the U.S. market), Safari (31 percent), and Firefox 
(5 percent)--or 87 percent of the browser market.\413\ 
Meanwhile, Microsoft's Edge, which captures four percent of the 
desktop browser market, sets Bing as its search default, 
leaving little opening for independent search engines.\414\ In 
mobile, Google Search is primarily the default on Android and 
on Apple's iOS mobile operating system--together, Android and 
iOS account for over 99 percent of smartphones in the United 
States.\415\ This default position provides Google with a 
significant advantage over other search engines, given users' 
tendency to stick with the default choice presented. Moreover, 
market participants identified several ways Google dissuades 
even those users who do attempt to switch default search 
engines on Chrome.\416\
---------------------------------------------------------------------------
    \413\ Innovation and Entrepreneurship Hearing at 342 (statement of 
Megan Gray, Gen. Couns. & Pol'y Advoc., DuckDuckGo).
    \414\ Id.
    \415\ Mobile Operating System Market Share in United States of 
America--September 2020, StatCounter, https://gs.statcounter.com/os-
market-share/mobile/united-states-of-america (last visited Oct. 3, 
2020).
    \416\ Submission from Source 534, to H. Comm. on the Judiciary, 1 
(Oct. 14, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Google won itself default placement across the mobile and 
desktop ecosystem through both integration and contractual 
arrangements. By owning Android, the world's most popular 
mobile operating system, Google ensured that Google Search 
remained dominant even as mobile replaced desktop as the 
critical entry point to the Internet. Documents submitted to 
the Subcommittee show that, at certain key moments, Google 
conditioned access to the Google Play Store on making Google 
Search the default search engine, a requirement that gave 
Google a significant advantage over competing search 
engines.\417\ Through revenue-sharing agreements amounting to 
billions of dollars in annual payments, Google also established 
default positions on Apple's Safari browser (on both desktop 
and mobile) and Mozilla's Firefox.\418\
---------------------------------------------------------------------------
    \417\ See infra Section V.
    \418\ Innovation and Entrepreneurship Hearing at 595 (response to 
Questions for the Record of Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
---------------------------------------------------------------------------
    In public statements, Google has downplayed the 
significance of default placement, claiming that ``competition 
is just a click away.'' \419\ However, Google's internal 
documents show that when Google was still jostling for search 
market share, Google executives closely tracked search defaults 
on Microsoft's Internet Explorer and expressed concern that 
non-Google defaults could impede Google Search.\420\ In an 
internal presentation about Internet Explorer's default search 
selection, Google recommended that users be given an initial 
opportunity to select a search engine and that browsers 
minimize the steps required to change the default search 
engine.\421\ These discussions--along with the steep sums 
Google pays Apple and various browsers for default search 
placement--further highlight the competitive significance of 
default positions.
---------------------------------------------------------------------------
    \419\ See, e.g., Adam Kovacevich, Google's Approach to Competition, 
Google Pub. Pol'y Blog (May 8, 2009), https://
publicpolicy.googleblog.com/2009/05/googles-approach-to-competition
.html.
    \420\ See, e.g., Submission from Google, to H. Comm. on the 
Judiciary, GOOG-HJC-01196214 (May 31, 2005) (on file with Comm.).
    \421\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01680749 (Feb. 16, 2006) (on file with Comm.) (identifying several 
recommendations, including, ``[f]ewest clicks required to change 
default, which promotes search innovation by facilitating the user's 
ability to switch'').
---------------------------------------------------------------------------
    Independent search engines told the Subcommittee that 
because they are not set as the default search engine on 
popular browsers, they face significant business challenges. As 
a result, DuckDuckGo said it was compelled to invest in browser 
technology, including creating its own browser for Android and 
iOS and various browser extensions.\422\ It noted, however, 
that ``the same default placement challenges exist in the 
browser market, just one level up--with the device makers 
requiring millions or billions of dollars to become a default 
browser on a device.'' \423\
---------------------------------------------------------------------------
    \422\ Innovation and Entrepreneurship Hearing at 343 (statement of 
Megan Gray, Gen. Couns. & Pol'y Advoc., DuckDuckGo).
    \423\ Id. at 343-44.
---------------------------------------------------------------------------
    A fourth challenge facing upstart search engines is the 
growing number of features and services that a general search 
provider must offer to be competitive with Google. Through the 
mid-2000s, a general search engine could compete through 
providing organic links alone. Since Google and Bing now 
incorporate information boxes and various specialized services 
directly onto their general search results page, a market 
entrant would similarly need to provide a broader set of search 
features and services. One market participant told the 
Subcommittee that this set of ``mandatory high-quality search 
features'' includes maps, local business answers, news, images, 
videos, definitions, and ``quick answers.'' \424\ Delivering 
this variety of features requires access to various sources of 
data, raising the overall costs of entry.
---------------------------------------------------------------------------
    \424\ Id. at 339.
---------------------------------------------------------------------------
    Vertical search providers differ from horizontal search 
engines in several ways. By offering specialized search focused 
on a particular topic or activity, they fulfill a separate role 
and require distinct tools and expertise. The necessary inputs 
vary by search vertical. Flight search, for example, requires 
access to flight software and data, whereas certain local 
search providers rely on user-generated content such as 
reviews. Many vertical providers use structured data feeds that 
pull from third-party databases, rather than from a general 
index.
    A significant challenge for vertical providers is reaching 
users. Although they serve distinct needs, most vertical search 
providers still depend on horizontal search engines--and 
specifically on Google--to reach users.\425\ In submissions to 
the Subcommittee, even some of the largest and most well-known 
verticals stated that they depend on Google for up to 80-95 
percent of their traffic.\426\ Since Google now also provides 
vertical search services, it has the incentive and ability to 
use its dominance in horizontal search to disfavor vertical 
providers that compete with its own vertical search services. 
Internal documents from Google show that it has used its 
dominance in general search to closely track traffic to 
competing verticals, demanding that certain verticals permit 
Google to scrape their user-generated content and demote 
several verticals. Several market participants told the 
Subcommittee that Google's preferential treatment of its own 
verticals, as well as its direct listing of information in the 
``OneBox'' that appears at the top of Google search results, 
has the net effect of diverting traffic from competing 
verticals and jeopardizing the health and viability of their 
business.\427\
---------------------------------------------------------------------------
    \425\ Submission from Source 564, to H. Comm. on the Judiciary, 5 
(Nov. 12, 2019) (on file with Comm.) (``The most important source of 
traffic for local search services are general search websites.'').
    \426\ Id.; Submission from Source 115, to H. Comm. on the 
Judiciary, 19 (Dec. 27, 2019) (on file with Comm.); Submission from 
Source 887, to H. Comm. on the Judiciary, 3 (Oct. 28, 2019) (on file 
with Comm.); Submission from Foundem, to H. Comm. on the Judiciary, 9 
(Dec. 12, 2016) (on file with Comm.).
    \427\ Submission from Source 564, to H. Comm. on the Judiciary, 5 
(Nov. 12, 2019) (on file with Comm.); Submission from Source 115, to H. 
Comm. on the Judiciary, 19 (Dec. 27, 2019) (on file with Comm.); 
Submission from Source 887, to H. Comm. on the Judiciary, 3 (Oct. 28, 
2019) (on file with Comm.); Submission from Foundem, to H. Comm. on the 
Judiciary, 9 (Dec. 12, 2016) (on file with Comm.).
---------------------------------------------------------------------------
    Google's internal documents and submissions from third-
party market participants suggest that verticals are both a 
complement to horizontal search as well as a competitive threat 
to it. One market participant explained that, while vertical 
search providers can increase demand for horizontal search 
engines in the short-term, they can divert traffic from 
horizontal search providers in the long-term, as the growing 
popularity of a vertical may lead users to navigate to it 
directly.\428\ Diverting traffic from general search providers, 
in turn, would deprive them of both advertiser revenue as well 
as valuable click-and-query data. Given these dynamics, a 
dominant horizontal search provider that also enters vertical 
search faces a significant conflict of interest that can skew 
search results to the detriment of third-party businesses and 
users alike.
---------------------------------------------------------------------------
    \428\ Submission from Source 407, to H. Comm. on the Judiciary, 
Source 407-000071 (Nov. 12, 2019) (on file with Comm.).
---------------------------------------------------------------------------

                           B. Online Commerce

    Online commerce, also known as e-commerce, is the activity 
of buying or selling products or services using the 
Internet.\429\ E-commerce transactions take place through a 
variety of channels, including online marketplaces like Amazon 
Marketplace, where a wide variety of brands and products from 
different sellers are sold in one place, or a business's 
direct-to-consumer website like Nike.com. In 2019, the U.S. 
Census Bureau estimated e-commerce retail sales to be about 
$600 billion,\430\ compared to just under $33 billion in 
2001.\431\ As the COVID-19 pandemic pushes more American 
shoppers online, e-commerce growth has exploded.\432\ This is 
particularly true for online marketplaces, where sales for 
essential items like groceries, masks, and electronics for home 
offices increased sharply in the wake of the pandemic.\433\
---------------------------------------------------------------------------
    \429\ Press Release, U.S. Dep't of Commerce, U.S. Census Bureau, 
Retail E-Commerce Sales in Fourth Quarter 2001 Were $10.0 Billion, up 
13.1 Percent from Fourth Quarter 2000, Census Bureau Reports (Feb. 20, 
2002), https://www2.census.gov/retail/releases/historical/ecomm/
01q4.pdf (defining e-commerce as ``sales of goods and services where an 
order is placed by the buyer or price and terms of sale are negotiated 
over an Internet, extranet, Electronic Data Interchange (EDI) network, 
electronic mail, or other comparable online system'' and noting that 
``[p]ayment may or may not be made online'').
    \430\ Press Release, U.S. Dep't of Commerce, U.S. Census Bureau, 
Quarterly Retail E-Commerce Sales 4th Quarter 2019 (Feb. 19, 2020), 
https://www2.census.gov/retail/releases/
historical/ecomm/19q4.pdf.
    \431\ Press Release, U.S. Dep't of Commerce, U.S. Census Bureau, 
Retail E-Commerce Sales in Fourth Quarter 2001 Were $10.0 Billion, up 
13.1 Percent from Fourth Quarter 2000, Census Bureau Reports (Feb. 20, 
2002), https://www2.census.gov/retail/releases/historical/ecomm/
01q4.pdf.
    \432\ Gayle Kesten, As Online Prices Increase, Consumers' 
Purchasing Power Declines, Adobe: Retail (July 13, 2020), https://
blog.adobe.com/en/2020/07/13/as-online-prices-increase-consumers-
purchasing-power-declines.html (``[T]otal online spending of $73 
billion in June marked a 76.2 percent increase year-over-year.''); see 
also Andrew Lipsman, Emarketer, US Ecommerce by Category 2020: How the 
Pandemic is Reshaping the Product Category Landscape (July 22, 2020), 
https://www.emarketer.com/content/us-ecommerce-by-category-2020 (``US 
ecommerce sales will surge 18.0% to $709.78 billion, while brick-and-
mortar retail sales will experience a historically significant decline 
of 14.0% to $4.184 trillion.'').
    \433\ Feedvisor, 2020 Q4 Trends and Projections: The Digital 
Revolution of Retail and E-Marketplaces 2-3, 5 (2020) (showing that 
Grocery and Gourmet sales on Amazon and Walmart were up 91 percent and 
46 percent over the months of March and April 2020, respectively, 
compared to February); see also Giselle Abramovich, How COVID-19 Is 
Impacting Online Shopping Behavior, Adobe: COVID-19 (Mar. 26, 2020), 
https://blog.adobe.com/en/2020/03/26/how-covid-19-is-impacting-online-
shopping-behavior.html (reporting that, after the COVID-19 outbreak, 
``purchases for cold, cough & flu products increased 198%, while online 
purchases for pain relievers increased 152%'').
---------------------------------------------------------------------------
    An online marketplace's most basic function is to serve as 
a platform that connects buyers and sellers. Marketplaces 
include product listings from a variety of sellers. Some online 
marketplaces, such as Amazon and eBay, aim to be fully 
integrated, multi-category e-commerce sites. Other 
marketplaces, however, operate as vertical, single-category 
sites, such as Newegg.com, for computer hardware and consumer 
electronics. The primary customers of e-commerce marketplaces 
are customers looking to buy an item or service online, and 
businesses looking to sell goods or services to customers 
online. Because of this, a successful marketplace must be 
attractive to consumers and third-party sellers.
    The consumer-facing side of the marketplace allows users to 
search for and purchase products. Most online marketplaces 
offer features that enable users to compare competing products 
based on details like their price, popularity, and customer 
satisfaction reviews. Amazon is by far the largest 
marketplace.\434\ Other marketplaces that are popular with 
consumers include eBay, Walmart, and Wayfair.\435\
---------------------------------------------------------------------------
    \434\ See, e.g., Andrew Lipsman, Emarketer, Top 10 US Ecommerce 
Companies 2020 (Mar. 10, 2020), https://www.emarketer.com/content/top-
10-us-ecommerce-companies-2020 (forecasting Amazon's e-commerce market 
share for 2020 at 38.7 percent, compared to second-place Walmart at 5.3 
percent and third-place eBay at 4.7 percent); see also Submission from 
Amazon, to H. Comm. on the Judiciary, AMAZON_HJC_00061156 (Oct. 30, 
2019) (on file with Comm.) (showing that Amazon.com was about five 
times larger than eBay in 2018, its next closest marketplace competitor 
at the time).
    \435\ Andrew Lipsman, Emarketer, Top 10 US Ecommerce Companies 2020 
(Mar. 10, 2020), https://www.emarketer.com/content/top-10-us-ecommerce-
companies-2020.
---------------------------------------------------------------------------
    Online marketplaces also serve third-party sellers. Third-
party sellers have needs that are distinct from consumers 
visiting the marketplace to make a purchase. The seller-facing 
side of the business consists of providing third-party sellers 
with a platform to list their products for consumers to 
purchase. Often, the marketplace will supply vendors with 
services such as inventory tracking and pricing 
recommendations. Online marketplaces usually offer additional 
paid services to third-party sellers such as advertising and 
fulfillment services, consisting of warehousing, packing, and 
shipping.
    The businesses that own and operate e-commerce marketplaces 
may host only independent, third-party seller listings, or list 
their own items for sale alongside third-party sellers. Amazon 
Marketplace is an example of the latter, in that customers view 
Amazon Retail offers for its own private-label brands, such as 
AmazonBasics,\436\ alongside independent, third-party seller 
offers. Amazon Retail also acts as a reseller of brand-name 
items, purchasing items like Levi's jeans from a wholesaler, 
and then reselling them on the marketplace. In these 
circumstances, third-party sellers are both customers and 
competitors of online marketplaces.
---------------------------------------------------------------------------
    \436\ Submission from Amazon, to H. Comm. on the Judiciary, 1 (Oct. 
14, 2019) (on file with Comm.) (``AmazonBasics is an Amazon private 
brand that launched in 2009. The brand offers a number of products, 
including electronics accessories, luggage, and office products.'').
---------------------------------------------------------------------------
    Marketplace operators benefit financially from the sale of 
services to third-party sellers and consumers.\437\ On the 
seller-facing side of their business, marketplaces usually take 
a cut of third-party sales and charge fees for sales-related 
services like fulfillment, payment, and advertising. If the 
marketplace operators also sell products on their own 
platforms, they make money like a typical retailer from the 
difference between the wholesale and retail price. Marketplaces 
may also make money from fees paid by customers to participate 
in membership programs. For example, Amazon offers Amazon Prime 
for $119 per year as a paid membership program that provides 
customers with benefits such as unlimited free shipping on 
eligible items and digital streaming video.\438\ Other revenue 
sources for marketplaces may include credit card and gift card 
services that are tied to the platform.\439\
---------------------------------------------------------------------------
    \437\ See, e.g., Amazon.com, Inc., Quarterly Report (Form 10-Q) 18 
(July 31, 2020), http://d18rn0p25nwr6d.cloudfront.net/CIK-0001018724/
a77b5839-99b8-4851-8f37-0b012f9292b9.pdf (showing net sales for third-
party seller services increased from $23 billion in the first six 
months of 2019 to $32 billion in the first six months of 2020).
    \438\ Submission from Amazon, to H. Comm. on the Judiciary, 1-2 
(Oct. 14, 2019) (on file with Comm.).
    \439\ See, e.g., Amazon.com, Inc., Annual Report (Form 10-K) 23, 47 
(Jan. 31, 2017), https://www.sec.gov/Archives/edgar/data/1018724/
000101872417000011/amzn-20161231x10k.htm.
---------------------------------------------------------------------------
    A few large companies dominate the e-commerce industry, and 
Amazon is the clear leader among them. The market research 
company eMarketer estimates that Amazon is about eight times 
larger than eBay and Walmart in terms of market share.\440\ 
Other metrics further demonstrate Amazon's role as a gatekeeper 
for e-commerce. Amazon is the most-visited website globally for 
e-commerce and shopping,\441\ and recent analyses suggest that 
over 60 percent of all online product searches in the U.S. 
begin on Amazon.com.\442\
---------------------------------------------------------------------------
    \440\ Andrew Lipsman, Emarketer, Top 10 US Ecommerce Companies 2020 
(Mar. 10, 2020), https://www.emarketer.com/content/top-10-us-ecommerce-
companies-2020.
    \441\ Worldwide E-Commerce and Shopping Category Performance, 
SimilarWeb (July 2020), https://pro.similarweb.com/#/industry/overview/
E-commerce_and_Shopping/999/1m/?web Source=Total (showing that Amazon 
had 2.6 billion visits compared to 940.8 million for eBay in July 
2020).
    \442\ Lucy Koch, Emarketer, Looking for a New Product? You Probably 
Searched Amazon (Mar. 31, 2019), https://www.emarketer.com/content/
looking-for-a-new-product-you-probably-searched-amazon (citing 
FeedVisor, The 2019 Amazon Consumer Behavior Report 14 (2019)); see 
also Wunderman Thompson Commerce, The Future Shopper Report 2020, at 11 
(2020) (on file with Comm.).
---------------------------------------------------------------------------
    Amazon's dominance in e-commerce extends to its role as a 
marketplace operator and its relationship with sellers. Because 
of its size and scale, no other marketplace comes close to 
providing sellers with access to such a large pool of buyers, 
as well as sales-related services. There are over 112 million 
Prime members in the United States--about 44 percent of the 
adult population. The number of Prime members has doubled since 
reaching 50 million members in 2015, with Amazon projecting 
additional growth.\443\ Amazon.com has 2.3 million active 
sellers on its marketplace worldwide.\444\ In comparison, 
Amazon's closest e-commerce competitor, Walmart, has roughly 
54,000 sellers on its marketplace.\445\ In general, the more 
sellers a platform has, the more buyers it can attract and vice 
versa.\446\ According to a competing online marketplace, 
sellers feel forced to be on Amazon because that is where the 
buyers are.\447\
---------------------------------------------------------------------------
    \443\ Press Release, Consumer Intel. Rsch. Partners, LLC, U.S. 
Amazon Prime Members--Slow, Steady Growth (Jan. 16, 2020), https://
files.constantcontact.com/150f9af2201/9f9e47b4-0d66-4366-ad76-
552ae3daa4f0.pdf; see Todd Bishop, Amazon Tops 150M Paid Prime 
Subscribers Globally After Record Quarter for Membership Program, 
GeekWire (Jan. 30, 2020), https://www.geekwire.com/2020/breaking-
amazon-tops-150m-paid-prime-members-globally-record-quarter/; Parkev 
Tatevosian, Will Amazon Prime Reach 200 Million Members by the End of 
2020?, Motley Fool (July 18, 2020), https://www.fool.com/investing/
2020/07/18/will-amazon-prime-reach-200-million-members-by-the.aspx 
(noting a 29 percent increase in Amazon's revenue in the second quarter 
of 2020 versus the same quarter in 2019, primarily as a result of 
COVID-19).
    \444\ Number of Sellers on Amazon Marketplace, Marketplace Pulse, 
https://www.market placepulse.com/amazon/number-of-sellers (last 
visited Oct. 3, 2020).
    \445\ Walmart's Fulfillment Service for Sellers Not Seeing 
Adoption, Marketplace Pulse (Sept. 1, 2020), https://
www.marketplacepulse.com/articles/walmarts-fulfillment-service-for-
sellers-not-seeing-adoption.
    \446\ Stigler Report at 38 (describing indirect, multi-sided 
network effects in e-commerce, noting that ``in ecommerce platforms, 
which intermediate trade between sellers and buyers, a buyer does not 
directly benefit from the presence of other buyers but does benefit 
from the presence of more sellers--who are in turn attracted by the 
presence of the buyers'').
    \447\ Submission from Source 718, to H. Comm. on the Judiciary, 5 
(Oct. 14, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    If current trends continue, no company is likely to pose a 
threat to Amazon's dominance in the near or distant future. 
Although some alternatives to Amazon have experienced growth 
during the pandemic, there is still a massive gap between the 
market leader and its competitors.\448\ Several factors 
privilege Amazon as the dominant e-commerce marketplace, and 
also make entry or expansion by a challenger unlikely. While 
some of these barriers to entry are inherent to e-commerce--
such as economies of scale and network effects--others result 
from Amazon's anticompetitive conduct. As discussed elsewhere 
in the Report, Amazon's acquisition strategy and many of its 
business practices were successfully designed to protect and 
expand its market power. An Amazon executive referred to some 
of these tactics as the company's ``Big Moats,'' and suggested 
``doubl[ing] down'' on them in a business strategy 
document.\449\ Similarly, in 2018, an investment analyst report 
expressed skepticism about Walmart's ability to challenge 
Amazon, commenting, ``[W]e are concerned Amazon's Prime 
membership program is fortifying an impenetrable moat around 
its customers.'' \450\
---------------------------------------------------------------------------
    \448\ Andrew Lipsman, Emarketer, Top 10 US Ecommerce Companies 2020 
(Mar. 10, 2020), https://www.emarketer.com/content/top-10-us-ecommerce-
companies-2020 (illustrating that, although Walmart's increased share 
of the U.S. retail e-commerce market will allow it to overtake eBay for 
second place, it will remain a distant second to Amazon).
    \449\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON_HJC_00068510 (Sept. 8, 2010) (on file with Comm.).
    \450\ See Lydia Ramsey Pflanzer, Walmart's Talks with an Insurance 
Giant Could Be Part of an Assault on Amazon Prime, Bus. Insider (Apr. 
3, 2018), https://www.businessinsider.com/
morgan-stanley-why-walmart-could-bid-on-humana-2018-4.
---------------------------------------------------------------------------

                  C. Social Networks and Social Media

    Social media products and services include social 
networking, messaging, and media platforms designed to engage 
people by facilitating sharing, creating, and communicating 
content and information online.\451\ Although the boundaries of 
the social media market are imprecise,\452\ social media 
platforms generally allow users on their networks to interact 
with people or groups they know, display content through linear 
feeds, or otherwise add socially layered functionality for 
services online, usually through a mobile app. In response to 
the Committee's requests for information, several market 
participants said they view social media as driven by networks, 
while many social media products and services include common 
functionalities, such as public profiles, curated feeds, 
followers, messaging, and other use cases.\453\ Others focus on 
certain aspects of public and private communications.\454\
---------------------------------------------------------------------------
    \451\ Competition & Mkts. Auth. Report at 53.
    \452\ Jan H. Kietzmann, Kristopher Hermkens, Ian P. McCarthy & 
Bruno S. Silvestre, Social Media? Get Serious! Understanding the 
Functional Building Blocks of Social Media, 54 Bus. Horizons 241 
(2011), http://summit.sfu.ca/system/files/iritems1/18103/
2011_social_media _bh.pdf.
    \453\ Submission from Source 247, to H. Comm. on the Judiciary, 
Source 247-0000000006 (Oct. 23, 2019) (on file with Comm.); Competition 
& Mkts. Auth. Report at 53.
    \454\ Submission from Source 471, to H. Comm. on the Judiciary, 4 
(Oct. 15, 2019) (on file with Comm.) (``[T]here are a number of other 
competitors who focus on different or additional aspects of public and 
private communication. For example, some competitors focus on sharing 
and expression though images and other media (e.g., Instagram, YouTube, 
and Pinterest). Some companies focus more on private communications 
(e.g., WhatsApp, Snap (for the most part), Facebook, Signal, and 
Telegram). Other companies focus on communications about specific 
topics (e.g., Discord for gaming and Slack for workplace 
communications).'').
---------------------------------------------------------------------------
    A principal feature of social media platforms is that they 
typically offer their services for a zero monetary price to the 
platform's users.\455\ The platform develops a service it hopes 
will attract a critical mass of users to then attract 
advertisers to the platform.\456\ Some social media companies 
offer additional services to users for a price or allow users 
to pay for additional functionality. For example, LinkedIn 
Premium provides users with an option to pay for additional 
features, such as their network and in-app messaging 
insights.\457\
---------------------------------------------------------------------------
    \455\ Submission from Source 164, to H. Comm. on the Judiciary, 
Source 164-000015 (Oct. 28, 2019) (on file with Comm.) (describing how 
online advertising requires building an ad product, a sales team to 
sell that product, and the engineering and product capacity to target 
and measure the effectiveness of those ads).
    \456\ Fiona M. Scott Morton & David C. Dinielli, Omidyar Network, 
Roadmap for an Antitrust Case Against Facebook 3 (2020) [hereinafter 
Omidyar Network Report], https://www.omidyar.com/wp-content/uploads/
2020/06/Roadmap-for-an-Antitrust-Case-Against-Facebook.pdf.
    \457\ LinkedIn Premium, https://premium.linkedin.com/ (last visited 
Oct. 3, 2020).
---------------------------------------------------------------------------
    Social media platforms with a larger network of users are 
more likely to attract users and advertisers.\458\ In a 
briefing to Subcommittee members and staff, Brad Smith, the 
President of Microsoft, described this value:
---------------------------------------------------------------------------
    \458\ Production from Facebook, to H. Comm. on the Judiciary, 
FB_HJC_ACAL_00059100 (Apr. 6, 2012) (on file with Comm.) (``Advertising 
is a scale thing, it wasn't until we reached 350 million users did we 
become interesting to big brands.'').

     LYou don't always need to have a proven business model to 
attract capital. You just need an idea that will get a lot of 
users. And then people assume you'll find a way to turn that 
usage into a business model that will produce revenue. That's 
been very important for the US. It distinguishes us and allows 
venture funding. There's something magical about 100 million 
active monthly users (MAU) in the United States. At that level 
a company becomes a force unto themselves. If you see a company 
acquire another company that's in the same product market and 
is on the path to reach 100 million MAU, that's more likely to 
raise a competitive concern. Historically, I think regulators 
were slow to notice that issue.\459\
---------------------------------------------------------------------------
    \459\ Briefing with Brad Smith, President, Microsoft, in 
Washington, D.C. (June 23, 2020).

    As another market participant describes it, ``attracting a 
critical mass of users is essential to delivering a viable 
social network, as there is no reason for users to start using 
a social network if there is no one there with whom they can 
connect.'' \460\
---------------------------------------------------------------------------
    \460\ Submission from Source 164, to H. Comm. on the Judiciary, 
Source 164-000014 (Oct. 28, 2019) (on file with Comm.). But see 
Bundeskartellamt [Federal Cartel Office], Case Summary: Facebook, 
Exploitative Business Terms Pursuant to Section 19(1) GWB for 
Inadequate Data Processing 5 (Feb. 15, 2019), https://
www.bundeskartellamt.de/SharedDocs/Ent scheidung/EN/Fallberichte/
Missbrauchsaufsicht/2019/B6-22-16.pdf?_blob=publicationFile &v=4 (``At 
least as far as the services affected in this case are concerned, it is 
not sufficient to have a `critical mass' of users or technical, 
financial and personal expertise in order to be able to enter 
neighbouring markets and be as successful as on the original market. As 
the example of Google+ has shown, a service cannot expect to have the 
same reach when providing a different type of service, due to strong 
direct network effects.'').
---------------------------------------------------------------------------
    Social media companies may also focus on attracting 
particular types or groups of consumers to differentiate 
themselves from larger companies.\461\ Many of the top-ranking 
apps on iOS are complementary to popular social media 
applications. For example, Dazz Cam, a vintage-inspired photo-
editing app used with TikTok, was popular in the U.S. in 
2020.\462\ Similarly, Lens is a popular iOS app that allows 
users to browse, like, and comment on photos and videos on 
Instagram using the Apple Watch.\463\
---------------------------------------------------------------------------
    \461\ Competition & Mkts. Auth. Report at 115.
    \462\ Michelle Santiago Cortes, These Are the TikTok Editing Apps 
You've Been Seeing on Your ``For You'' Page, Refinery29 (Mar. 25, 
2020), https://www.refinery29.com/en-us/tik-tok-editing-apps.
    \463\ Zac Hall, Lens Is a Modern and Feature-Packed Instagram App 
for Apple Watch that Works Without the iPhone, 9to5Mac (Apr. 24, 2019), 
https://9to5mac.com/2019/04/24/lens-instagram-for-apple-watch/.
---------------------------------------------------------------------------
     Due to network effects in the social media market, new 
entrants may choose to begin as a complement by relying on the 
incumbent platform's application programming interfaces (APIs), 
such as Facebook's Open Graph or Twitter's search API.\464\ 
However, because incumbent platforms control access to these 
APIs and can foreclose access to a complementary app that is 
successful or gaining users,\465\ some market participants view 
relying on these platforms to reach users as a constant 
business risk.\466\ One market participant noted that, in 
addition to harming its business, these actions also ``restrict 
users' ability to multi-home and increase barriers to entry, 
including network effects and switching costs.'' \467\
---------------------------------------------------------------------------
    \464\ Omidyar Network Report at 22.
    \465\ Id. at 22-25; Submission from Source 471, to H. Comm. on the 
Judiciary, 8 (Oct. 15, 2019) (on file with Comm.) (``In or around 2010, 
[Source 471] restricted the access of our API by some
                                                                        
         Continued
third-party developers because we had significant concerns regarding 
some third-partydevelopers use of [Source 471]'s private data. In order 
to protect private data, [Source 471] determined such changes were 
necessary to ensure that these data were not used improperly.'').
    \466\ Submission from Source 164, to H. Comm. on the Judiciary, 
Source 164-00023 (Oct. 28, 2019) (on file with Comm.); Submission from 
Source 471, to H. Comm. on the Judiciary, 10 (Oct. 15, 2019) (on file 
with Comm.) (``[Our company's] business would be affected if other 
social networking networks were to disallow cross-posting . . . to 
their platforms or discontinue APIs central to the functionality of our 
products or services.'').
    \467\ Submission from Source 471, to H. Comm. on the Judiciary, 10 
(Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Given Facebook's dominance, the primary way for new 
entrants to compete is to attract a subgroup or niche.\468\ One 
market participant explained, ``competitors may be limited to 
niche strategies that do not challenge the incumbent directly. 
For example, Facebook (including Instagram) is by far the most 
popular social networking platform. Although there are several 
competitors, such as LinkedIn, and fast-growing new entrants, 
such as TikTok, most or all employ niche strategies to varying 
degrees, and most have far less user engagement, attention, and 
data and a smaller share of advertising revenue than 
Facebook.'' \469\
---------------------------------------------------------------------------
    \468\ Omidyar Network Report at 16.
    \469\ Submission from Source 407, to H. Comm. on the Judiciary, 4 
(Nov. 1, 2019); Competition & Mkts. Auth. Report at 55 
(``Differentiation can incentivise consumers to access multiple 
platforms, allowing for the co-existence of platforms.'').
---------------------------------------------------------------------------
1. Social Networks Are Distinguishable from Social Media
    While a broad view of the social media market is useful for 
considering the wider landscape for social data and online 
advertising,\470\ it is important to focus on the actual use, 
demand, and substitutability of social products when examining 
competition among social platforms online.\471\ The critical 
distinction between social networking and social media markets 
is how people use the platform. As Germany's Federal Cartel 
Office (Bundeskartellamt) and the United Kingdom's Competition 
and Markets Authority (CMA) have noted, the specific demand for 
social networks ``is fundamentally different from the demand 
for other social media.'' \472\
---------------------------------------------------------------------------
    \470\ Submission from Source 164, to H. Comm. on the Judiciary, 
Source-32-000014 (Oct. 28, 2019) (on file with Comm.) (discussing how 
they see ``social media sites'' as competitors for ads even though they 
don't think they are in that market).
    \471\ See United States v. Microsoft Corp., 253 F.3d 34, 51-52 
(D.C. Cir. 2001) (``[T]he relevant market must include all products 
`reasonably interchangeable by consumers for the same purposes.' '') 
(quoting United States v. E.I. du Pont de Nemours, 351 U.S. 377, 395 
(1956)); see also Competition & Mkts. Auth. Report at 117-18 (``[T]he 
closeness of competition between different platforms depends on the 
degree to which consumers consider them substitutes, rather than the 
extent to which they share common functionalities.'').
    \472\ Competition & Mkts. Auth. Report at 54 (citing 
Bundeskartellamt, Feb. 6, 2019, B6-22/16, para. 249, https://
www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Entscheidun gen/
Missbrauchsaufsicht/2019/B6-22-16.pdf?_blob=publicationFile&v=5).
---------------------------------------------------------------------------
    Social network platforms facilitate their users finding, 
interacting, and networking with other people they already know 
online, and by providing a ``rich social experience'' through 
features on their products.\473\ People regularly use social 
network platforms to exchange ``experiences, opinions and 
contents among specific contacts which the users define based 
on identity.'' \474\
---------------------------------------------------------------------------
    \473\ Id.
    \474\ Id.
---------------------------------------------------------------------------
    In contrast, social media platforms principally facilitate 
the distribution and consumption of content. Much of the 
content on YouTube, for example, can be enjoyed by users with a 
wide range of relationships to the person posting, including by 
strangers.\475\ Similarly, TikTok describes itself as a 
``global platform for users to express their ideas by sharing 
videos with a broader community.'' \476\ In light of this 
distinction, the CMA concluded that YouTube is focused on 
offering content and does not compete with Facebook, 
facilitating communication and sharing content among groups of 
friends who choose each other and enjoy content in large part 
because of those relationships.\477\
---------------------------------------------------------------------------
    \475\ Omidyar Network Report at 6.
    \476\ Letter from Michael Beckerman, Vice President, Head of U.S. 
Pub. Pol'y, TikTok, to Hon. David N. Cicilline, Chair, Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
Hon. F. James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Hon. 
Jerrold Nadler, Chair, H. Comm. on the Judiciary & Hon. Jim Jordan, 
Ranking Member, H. Comm. on the Judiciary 1 (July 29, 2020), https://
docs.house.gov/meetings/JU/JU05/20200729/110883/HHRG-116-JU05-20200729-
SD005.pdf.
    \477\ Omidyar Network Report at 6.
---------------------------------------------------------------------------
    In sum, social networking sites have a robust social graph, 
whereas content-centric sites do not.\478\ Although users can 
share videos or stream events on Facebook and YouTube in 
similar ways, there is a fundamental difference between sharing 
a video among a person's social network on Facebook, Instagram, 
or WhatsApp--such as a child's first steps--and broadcasting it 
publicly on YouTube. While people may spend significant time on 
both YouTube and Facebook,\479\ these firms provide distinct 
services to their users, and including both in the same market 
would be inconsistent with how users engage with each platform.
---------------------------------------------------------------------------
    \478\ Thomas Cunningham, Possible End States for the Family of Apps 
(2018) (on file with Comm.) (discussing social networking platforms 
with comparable and orthogonal social graphs).
    \479\ Average Time Spent Daily on Social Media (Latest 2020 Data), 
Broadband Search, https://www.broadbandsearch.net/blog/average-daily-
time-on-social-media#post-navigation-4 (last visited Oct. 3, 2020).
---------------------------------------------------------------------------
2. Market Concentration
    Social platforms that are within a broad definition of 
social media include YouTube, Facebook and its family of 
products--Instagram, Messenger, and WhatsApp--as well as 
TikTok, Twitter, LinkedIn, Pinterest, Reddit, and Tumblr.\480\ 
According to Facebook's internal market data, YouTube and 
Facebook's family of products were by far the most popular 
social media sites by Monthly Active Persons (MAP) as of 
December 2019.\481\
---------------------------------------------------------------------------
    \480\ Competition & Mkts. Auth. Report at 115 n.140 (indicating 
that there are several other smaller firms that conform to this 
definition of social media but lack a significant user base).
    \481\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-00086585 (Jan. 2020) (on file with Comm.).
---------------------------------------------------------------------------

   Social Media Companies by Monthly Active Persons (MAP) in 
                         Millions \482\
---------------------------------------------------------------------------

    \482\ Prepared by the Subcommittee based on the Submission from 
Facebook, to H. Comm. on the Judiciary, FB-HJC-00086585 (Jan. 2020) (on 
file with Comm.) (metrics collected by Facebook, Inc.).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The social network marketplace is highly concentrated. 
Facebook (1.8 billion users) and its family of products--
WhatsApp (2.0 billion users) and Instagram (1.4 billion 
users)--have significantly more users and time spent on its 
platform than its closest competitors, Snapchat (443 million 
users) or Twitter (582 million users).\483\ TikTok is growing 
quickly and is often referenced as evidence that the social 
media landscape is competitive.\484\ Although it meets the 
broad definition of social media as a social app for 
distributing and consuming video content, TikTok is not a 
social network.
---------------------------------------------------------------------------
    \483\ Thomas Cunningham, Possible End States for the Family of Apps 
(2018) (on file with Comm.) (discussing social networking platforms 
with comparable and orthogonal social graphs).
    \484\ See Alex Sherman, TikTok Reveals Detailed User Numbers for 
the First Time, CNBC (Aug. 24, 2020), https://www.cnbc.com/2020/08/24/
tiktok-reveals-us-global-user-growth-numbers-for-first-time.html.
---------------------------------------------------------------------------

                          D. Mobile App Stores

    Mobile application stores (app stores) are digital stores 
that enable software developers to distribute software 
applications (apps) to mobile device users.\485\ A mobile app 
is a standardized piece of software optimized for use on a 
mobile device. Users can install this software to access 
digital content or services, share content, play games, or make 
transactions for physical goods and services.
  
  
---------------------------------------------------------------------------
    \485\ See, e.g., Submission from Apple, to H. Comm. on the 
Judiciary, HJC_APPLE_000003 (Oct. 14, 2019) (on file with Comm.); 
Letter from Exec. at Source 736, to Members of the Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
4 (Oct. 31, 2019) (on file with Comm.); Brics Competition, Innovation, 
Law & Pol'y Ctr., Digital Era Competition: A Brics View 347 (2019), 
http://bricscompetition.org/upload/iblock/6a1/brics%20book%20full.pdf.
---------------------------------------------------------------------------

Apps are configured to run on a device's operating system as ``native 
apps.'' These apps may be pre-installed on a mobile device as a 
component of the operating system or by the device manufacturer, 
downloaded from an app store, or loaded directly from the web using a 
browser--a process referred to as sideloading. Software developers 
upload apps and updates to app stores, and mobile device users can then 
install apps by downloading them from the app store to their device.
    App stores include free and paid apps that charge a fee. In 
addition to allowing users to install apps, app stores enable 
users to search, browse, and find reviews for apps, as well as 
remove apps from their devices.\486\ The leading app stores 
also offer tools and services to support developers building 
apps for the app store.\487\ App stores have rules that govern 
the types of apps permitted in the app store, conduct of app 
developers, how users pay for apps, the distribution of revenue 
between the app and the app store, and other details regarding 
the relationship between the app store operator and the app 
developers that distribute apps through the store.\488\
---------------------------------------------------------------------------
    \486\ Neth. Auth. for Consumers & Mkts., Market Study into Mobile 
App Stores 20 (2019), https://www.acm.nl/sites/default/files/documents/
market-study-into-mobile-app-stores
.pdf [hereinafter Neth. Auth. for Consumers & Mkts. Study].
    \487\ Id.
    \488\ See Apple App Store Review Guidelines, Apple, https://
developer.apple.com/app-store/
review/guidelines/#legal (last visited Oct. 3, 2020); Apple Developer 
Program License Agreement, Apple, https://developer.apple.com/services-
account/agreement/XV2A27GUJ6/content/pdf (last visited Oct. 3, 2020); 
Google Play Developer Policy Center, Google, https://play.google
.com/about/developer-content-policy/ (last visited Oct. 3, 2020); 
Google Play Developer Distribution Agreement, Google, https://
play.google.com/intl/ALL_us/about/developer-distribution-agreement.html 
(last visited Oct. 3, 2020).
---------------------------------------------------------------------------
    App stores provide mobile device users with a sense of 
trust and security that the apps they install from an app store 
have been reviewed, will not harm the user's mobile device, 
will function as intended, and will not violate user 
privacy.\489\ App stores also reduce customer acquisition costs 
for app developers by allowing developers to reach an 
extraordinarily large consumer base--every mobile device user 
in the U.S. is addressable by developing for the Apple App 
Store and the Google Play Store. By reducing the costs of app 
developers, app stores help make software applications more 
affordable for consumers.\490\
---------------------------------------------------------------------------
    \489\ See CEO Hearing at 397 (response to Questions for the Record 
of Tim Cook, CEO, Apple, Inc.); see also John Bergmayer, Pub. 
Knowledge, Tending the Garden: How to Ensure that App Stores Put Users 
First 1, 5, 18 (2020), https://www.publicknowledge.org/wp-
content/uploads/2020/06/Tending_the_Garden.pdf.
    \490\ Submission from Apple, to H. Comm. on the Judiciary, 
HJC_APPLE_000003 (Oct. 14, 2019) (on file with Comm.); Neth. Auth. for 
Consumers & Mkts. Study at 108.
---------------------------------------------------------------------------
    Deloitte has explained that app stores provide developers 
with various benefits, including providing a consistent 
interface and experience for users on a mobile operating 
system, a secure platform for apps, storage systems for hosting 
apps and managing downloads and updates, and billing and 
payment management systems that can reduce overhead for 
developers.\491\ Apple and Google also provide developers with 
software-development tools to create, test, and publish apps; 
technical support and analytics tools; and tutorials.\492\
---------------------------------------------------------------------------
    \491\ Deloitte, The App Economy in the United States 8 (2018), 
https://www.ftc.gov/
system/files/documents/public_comments/2018/08/ftc-2018-0048-d-0121-
155299.pdf.
    \492\ Neth. Auth. for Consumers & Mkts. Study at 29.
---------------------------------------------------------------------------
    The mobile operating system on a device determines which 
app stores the user can access. The provider of the mobile 
operating system determines which app stores may be pre-
installed on devices running the operating system, and whether 
and how additional app stores may be installed. As discussed 
elsewhere in the Report, both Apple and Google have durable and 
persistent market power in the mobile operating system market; 
iOS and Android run on more than 99 percent of mobile devices 
in the U.S. and globally.\493\ There are high switching costs 
in the mobile operating system market and high barriers to 
entry. Due to their dominance in the mobile operating system 
market, Apple and Google have the power to dictate the terms 
and extent of competition for distributing software on mobile 
devices running their respective mobile operating systems.\494\
---------------------------------------------------------------------------
    \493\ Id. at 15.
    \494\ See Data and Privacy Hearing at 155 (statement of Maurice E. 
Stucke, Prof. of Law, Univ. of Tenn., & Ariel Ezrachi, Slaughter & May 
Prof. of Competition Law, Univ. of Oxford, Fellow, Pembroke Coll., 
Dir., Oxford Ctr. for Competition Law & Pol'y).
---------------------------------------------------------------------------
    The Google Play Store is the primary app store installed on 
all Android devices. The Apple App Store is the only app store 
available on iOS devices.\495\ Apps are not interoperable 
between operating systems--native apps developed for iOS only 
work on iOS devices, and native apps developed for Android only 
work on Android devices.\496\ The App Store and the Play Store 
do not compete against one another. Android users cannot access 
the Apple App Store, and iOS users cannot access the Google 
Play Store, so the dominance of the Play Store is not 
constrained by the App Store and vice versa.\497\
---------------------------------------------------------------------------
    \495\ Neth. Auth. for Consumers & Mkts. Study at 4, 21.
    \496\ See Interview with Source 407 (Sept. 10, 2020); Interview 
with Source 143 (Aug. 27, 2020); Neth. Auth. for Consumers & Mkts. 
Study at 51-52, 67, 73.
    \497\ See Press Release, Eur. Comm'n, Antitrust: Commission Fines 
Google =4.34 Billion for Illegal Practices Regarding Android Mobile 
Devices to Strengthen Dominance of Google's Search Engine (July 18, 
2018), https://ec.europa.eu/commission/presscorner/detail/en/
IP_18_4581; Letter from Exec. at Source 181, to Members of the Subcomm. 
on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 4 (Oct. 31, 2019) (on file with Comm.); Submission from 
Source 301, to H. Comm. on the Judiciary, 5, 7 (Oct. 15, 2019) (on file 
with Comm.).
---------------------------------------------------------------------------
    Statista reports that in the first quarter of 2020 there 
were approximately 2.56 million apps available in the Google 
Play Store and 1.847 million apps available in Apple's App 
Store.\498\ Apple's App Store is the only means to distribute 
software on iOS devices.\499\ The Google Play Store is the 
dominant app store on Android devices; however, Google does 
permit users to sideload alternative app stores. Some Android 
device partners, such as Samsung, pre-install their own app 
stores on their devices.\500\ Leading alternative Android app 
stores include Amazon's Appstore, Aptoide, F-Droid, and the 
Samsung Galaxy Store.\501\ App developers who want to reach the 
entire addressable market of U.S. or global smartphone users 
must have an app in both the App Store and the Play Store.\502\ 
Apple and Google also determine the terms and conditions app 
developers must agree to in order to distribute software 
through the App Store and Play Store, respectively. As a 
result, app developers and industry observers agree that Apple 
and Google control the app distribution market on mobile 
devices.\503\
---------------------------------------------------------------------------
    \498\ Number of Apps Available in Leading App Stores as of 1st 
Quarter 2020, Statista, https://www.statista.com/statistics/276623/
number-of-apps-available-in-leading-app-stores/ (last visited Oct. 5, 
2020).
    \499\ Neth. Auth. for Consumers & Mkts. Study at 50; Interview with 
Source 766 (July 2, 2020).
    \500\ Neth. Auth. for Consumers & Mkts. Study at 50. See also Press 
Release, Eur. Comm'n, Antitrust: Commission Fines Google =4.34 Billion 
for Illegal Practices Regarding Android Mobile Devices to Strengthen 
Dominance of Google's Search Engine (July 18, 2018), https://
ec.europa.eu/commission/presscorner/detail/en/IP_18_4581 (explaining 
that worldwide, excluding China, ``the Play Store accounts for more 
than 90% apps downloaded on Android devices'').
    \501\ Joe Hindy, 10 Best Third Party App Stores for Android and 
Other Options Too, Android Auth. (Aug. 28, 2020), https://
www.androidauthority.com/best-app-stores-936652/.
    \502\ Neth. Auth. for Consumers & Mkts. Study at 15.
    \503\ See, e.g., Interview with Source 143 (Aug. 27, 2020); 
Submission from Facebook, to H. Comm. on the Judiciary, FB-HJC-ACAL-
00045377 (Feb. 14, 2014) (on file with Comm.) (demonstrating that 
Facebook COO Sheryl Sandberg explained to Facebook's Board of Directors 
that Apple's and Google's positions as dominant mobile operating system 
and app store operators posed a ``significant strategic threat'' to 
Facebook's business and adding another popular mobile app to Facebook's 
suite of apps ``would make it more difficult for operating system 
providers to exclude the Company's mobile applications from mobile 
platforms''); Letter from Exec. at Source 181, to Members of the 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 4 (Oct. 31, 2019) (on file with Comm.); Kara Swisher, Is It 
Finally Hammer Time for Apple and Its App Store, N.Y. Times (June 19, 
2020), https://www.nytimes.com/2020/06/19/opinion/apple-app-store-
hey.html?referringSource=articleShare.
---------------------------------------------------------------------------
    There is no method for a third-party app store to challenge 
the App Store on iOS devices. Apple CEO Tim Cook told the 
Subcommittee that Apple has no plans to open iOS to alternative 
app stores.\504\ For a third-party app store to successfully 
challenge the Play Store, consumers must be able to install the 
app store, and the store must have popular apps that users 
want. As with mobile operating systems, network effects create 
momentum so that as more consumers install software from the 
app store, more developers will build apps for the app store, 
increasing the value of the app store for users and attracting 
more consumers. Once users have migrated to a large platform--
such as an operating system and its app store, it is difficult 
for smaller competitors to attract users and app 
developers.\505\
---------------------------------------------------------------------------
    \504\ CEO Hearing at 397 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \505\ Data and Privacy Hearing at 145 (statement of Maurice E. 
Stucke, Prof. of Law, Univ. of Tenn., & Ariel Ezrachi, Slaughter & May 
Prof. of Competition Law, Univ. of Oxford, Fellow, Pembroke Coll., 
Dir., Oxford Ctr. for Competition Law & Pol'y).
---------------------------------------------------------------------------
    The United Kingdom's Competition and Markets Authority 
observed that ``almost all mobile app downloads are made 
through the App Store, on iOS devices, or Google Play, on 
Android devices.'' \506\ Alternatives app distribution methods 
such as third-party app stores, gaming platforms, or 
sideloading are often irrelevant to the mobile applications 
market, not always practical options for users, have 
significant disadvantages compared to the pre-installed app 
stores, and offer only limited functionality.\507\
---------------------------------------------------------------------------
    \506\ Competition & Mkts. Auth. Report at 29; see also Press 
Release, Japan Fair Trade Comm'n, Report Regarding Trade Practices on 
Digital Platforms: Business-to-Business Transactions on Online Retail 
Platform and App Store 24-25 (Oct. 2019), https://www.jftc.go.jp/en/
pressreleases/yearly-2019/October/191031Report.pdf (explaining that 
consumers rely on pre-installed app stores to install apps, so 
developers believe they ``have no choice but to use the app store 
services'' to reach consumers).
    \507\ See Submission from Facebook, to H. Comm. on the Judiciary, 
FB-HJC-ACAL-00068877 (Feb. 21, 2012) (on file with Comm.) (``Native 
apps will dominate over mobile-web for a long time (maybe forever) and 
we cannot prop up HTML-5 / are not strong enough to lead a shift--The 
mobile OS makers have a strong incentive in native apps performing 
better / working better than the web? so theory / what is possible 
aside, native apps will work better & be better experiences than the 
mobile web.''); Neth. Auth. for Consumers & Mkts. Study at 42-51, 69.
---------------------------------------------------------------------------
    Websites and web apps are not competitively significant 
alternatives to the dominant app stores on iOS and Android 
devices for distributing software to mobile devices. Apps 
provide a deeper, richer user experience and can provide 
additional functionality by accessing features within the 
mobile device's hardware and operating system, such as a camera 
or location services.\508\ Web apps and browsers are also 
reliant on the device being connected to the internet. Native 
apps can continue to work even when a device loses access to 
the internet.\509\ Apple's App Store Review Guidelines 
differentiate apps from websites, explaining that apps 
submitted to the App store ``should include features, content 
and [a user interface] that elevate [the app] beyond a 
repackaged website.'' \510\ Curation and centralized review of 
apps is an advantage touted by app store operators. Apple CEO 
Tim Cook explained to the Subcommittee that on iOS devices, 
Apple's control of software installation through the App Store 
ensures downloaded apps ``meet our high standards for privacy, 
performance, and security,'' which is important for maintaining 
user trust.\511\ Additionally, distributing software via app 
stores lowers customer acquisition costs for software 
developers.\512\
---------------------------------------------------------------------------
    \508\ See Letter from Exec. at Source 181, to Members of the 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 1 (Oct. 31, 2019) (on file with Comm.); Neth. Auth. for 
Consumers & Mkts. Study at 59, 81.
    \509\ See Interview with Source 88 (May 12, 2020).
    \510\ App Store Review Guidelines, Apple Sec. 4.2, https://
developer.apple.com/app-store/review/guidelines/#design (last visited 
Oct. 4, 2020).
    \511\ CEO Hearing at 397 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \512\ See Submission from Apple, to H. Comm. on the Judiciary, 
HJC_APPLE_000003 (Oct. 14, 2019) (on file with Comm.); Neth. Auth. for 
Consumers & Mkts. Study at 102.
---------------------------------------------------------------------------
    Consumers do access content on their mobile devices via the 
open internet. However, mobile apps are the primary way users 
access content and services on mobile devices and have become 
integral in Americans' daily lives for basic communication, 
business transactions, entertainment, and news. In the U.S., 
nearly 90 percent of the time users spend online on mobile 
devices occurs in apps.\513\ Software distribution via web apps 
or through a website accessible on a browser is not a 
competitively significant alternative to distributing apps 
through the dominant app store on a mobile device and does not 
discipline the market power of the dominant app stores 
controlled by Apple and Google.
---------------------------------------------------------------------------
    \513\ Comscore, 2019 Report Global State of Mobile 7 (2019); see 
also Letter from Exec. at Source 181, to Members of the Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
1 (Oct. 31, 2019) (on file with Comm.); Submission from Source 301, to 
H. Comm. on the Judiciary, 7 (Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Similarly, the ability for consumers to sideload apps--
installing apps without using an app store--does not discipline 
the dominance of Apple and Google in the mobile app store 
market. Apple does not permit users to sideload apps on iOS 
devices, and few consumers have the technical savvy to 
``jailbreak'' an iOS device to sideload apps.\514\ Google does 
permit sideloading on Android devices, but developers find 
that, given the option, consumers prefer to install apps from 
app stores, and few opt for sideloading.\515\ Google has 
created significant friction for sideloading apps to Android 
devices. One developer explained to the Subcommittee that 
sideloading entails a complicated twenty-step process, and 
users encounter multiple security warnings designed to 
discourage sideloading.\516\ Additionally, software developers 
that have left the Play Store to distribute software to Android 
users via sideloading have experienced precipitous declines in 
downloads and revenue and report problems updating their 
apps.\517\ Thus, the option for sideloading apps on mobile 
devices does not discipline the market power of dominant app 
stores.
---------------------------------------------------------------------------
    \514\ Neth. Auth. for Consumers & Mkts. Study at 45-46; Submission 
from Source 736, to H. Comm. on the Judiciary, Source 736-00000166 
(July 1, 2019).
    \515\ Interview with Source 59 (May 13, 2020).
    \516\ Interview with Source 83 (June 30, 2020).
    \517\ See Neth. Auth. for Consumers & Mkts. Study at 48; John 
Bergmayer, Pub. Knowledge, Tending the Garden: How to Ensure that App 
Stores Put Users First 44 (2020), https://www.publicknowledge.org/wp-
content/uploads/2020/06/Tending_the_Garden.pdf; Interview with Source 
83 (June 30, 2020).
---------------------------------------------------------------------------
    There are no competitive constraints on the power Apple and 
Google have over the software distribution marketplace on their 
mobile ecosystems. The core benefit of mobile app stores--
centralizing and curating software distribution--also gives 
Apple and Google control over which apps users discover and can 
install.\518\ As the gateways to the primary way users access 
content and services on mobile devices, the App Store and the 
Play Store can extract revenue from and exercise control over 
everything users do on their devices.\519\ This dominance 
enables Apple and Google to establish terms and conditions app 
developers have to comply with, leaving developers with the 
choice of complying or losing access to consumers. The terms 
and conditions app stores impose include requirements regarding 
app functionality, content, interactions with consumers, 
collection, and distribution of revenue between the app and app 
store.\520\
---------------------------------------------------------------------------
    \518\ See John Bergmayer, Pub. Knowledge, Tending the Garden: How 
to Ensure that App Stores Put Users First 19 (2020), https://
www.publicknowledge.org/wp-content/uploads/2020/06/
Tending_the_Garden.pdf.
    \519\ See id. at 7, 19.
    \520\ See Neth. Auth. for Consumers & Mkts. Study at 3, 15.
---------------------------------------------------------------------------
    Mobile app stores charge app developers commissions on 
sales of paid apps through the app store. Apple and Google, 
along with other mobile app stores on Android devices, charge a 
30 percent commission when users install the app.\521\ Apple 
established its 30 percent commission on paid apps in 2009 with 
the introduction of the App Store, and that rate has become the 
industry standard.\522\
---------------------------------------------------------------------------
    \521\ See Analysis Grp., Apple's App Store and Other Digital 
Marketplaces: A Comparison of Commission Rates 4-6 (2020), https://
www.analysisgroup.com/globalassets/insights/publishing/
apples_app_store_and_other_digital_marketplaces_a_comparison_of_
commission_rates.pdf.
    \522\ See id. at 4.
---------------------------------------------------------------------------
    Apple and Google have both developed mechanisms for 
collecting payments from users for purchases within 
applications--these transactions are called in-app purchases 
(IAP). Apple and Google both charge developers a standard 30 
percent for IAP.\523\ In collecting IAP, Apple and Google 
collect user personal and payment information, process the 
payment, and then remit the payment to the app developer, minus 
a processing fee or commission.\524\ Developers selling digital 
content through their apps on iOS and Android devices are 
required to use the app store operator's IAP.\525\ For 
subscription services, like news apps or streaming media, the 
commission is 15 percent for the second year and 
thereafter.\526\ IAP systems provide mobile device users with 
convenience by allowing consumers to make transactions in their 
apps and only enter their payment details a single time, and 
they protect user privacy by limiting sharing of sensitive 
financial information.\527\ However, developers have noted that 
the lack of competition in pricing by app stores, particularly 
given the scale the App Store and Play Store have achieved 
since introducing their standard commission rates for paid apps 
and in-app purchases, demonstrates the lack of competition in 
the software distribution market on both the iOS and Android 
ecosystems.\528\ Developers have also said that the 30 percent 
commissions charged by app stores have led them to increase 
prices for consumers and diminished innovation by software 
developers.\529\
---------------------------------------------------------------------------
    \523\ See Neth. Auth. for Consumers & Mkts. Study at 23, 29, 86, 
89.
    \524\ See, e.g., Letter from Exec. at Source 181, to Members of the 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 3, 5-6 (Oct. 31, 2019) (on file with Comm.); Submission from 
Source 736, to H. Comm. on the Judiciary, Source 736-00000009 (on file 
with Comm.); Submission from Source 304, to H. Comm. on the Judiciary, 
7-8 (Sept. 3, 2020); see also Reed Albergotti & Tony Romm, Tinder and 
Fortnite criticize Apple for Its ``App Store Monopoly,'' Wash. Post 
(June 16, 2020), https://www.washingtonpost.com/technology/2020/06/16/
apple-antitrust-european-commission/.
    \525\ See Neth. Auth. for Consumers & Mkts. Study at 29.
    \526\ Id. at 29.
    \527\ Id. at 7.
    \528\ See Interview with Source 83 (June 30, 2020); Competitors 
Hearing at 33 (statement of David Heinemeier Hansson, Cofounder & Chief 
Tech. Officer, Basecamp).
    \529\ See Letter from Exec. at Source 181, to Members of the 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 9-10 (Oct. 31, 2019) (on file with Comm.) (internal 
citations omitted); Submission from Source 736, to H. Comm. on the 
Judiciary, Source 736-00000236 (Oct. 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Apple and Google also develop and distribute apps that 
directly compete against third-party developers in their app 
stores.\530\ This dynamic, coupled with the fact that App Store 
and Play Store are dominant distribution channels and can exert 
gatekeeper power over their platforms, has the potential to 
distort competition, lead to discrimination and higher entry 
barriers for third-party developers, and result in the app 
store operator self-preferencing its own apps, harming 
consumers and competition.\531\
---------------------------------------------------------------------------
    \530\ Press Release, Japan Fair Trade Comm'n, Report Regarding 
Trade Practices on Digital Platforms: Business-to-Business Transactions 
on Online Retail Platform and App Store 21 (Oct. 2019), https://
www.jftc.go.jp/en/pressreleases/yearly-2019/October/191031Report.pdf.
    \531\ See, e.g., Neth. Auth. for Consumers & Mkts. Study at 22, 31-
32, 69, 89-90, 95-99.
---------------------------------------------------------------------------
    New app stores face high barriers to entry. It is unlikely 
that a third strong mobile app ecosystem can emerge. To offer a 
new mobile app store that is compelling to consumers, the app 
store must have a built-in customer base to attract developers 
to build apps for the store and must have popular apps to 
attract customers. Before the introduction of the App Store, 
third-party apps were not a central component of the user 
experience on mobile devices. New entrants, such as Apple, 
could disrupt the mobile device and operating system market by 
offering superior handset design, user interface, and first-
party applications. Now, third-party apps are critical to the 
success of any mobile ecosystem. Millions of apps are developed 
for iOS and Android, and leading device manufacturers have 
built their device ecosystems around those operating systems. 
As a result, it is unlikely that a new mobile operating system 
entrant can disrupt the current market dynamics.\532\ Because 
of the control that Apple and Google exert over software 
distribution on their mobile ecosystems and the unlikelihood of 
entry by a new competitive mobile operating system, it is 
unlikely that a new, competitive app store will be able to 
successfully challenge the existing, dominant app store 
operators.
---------------------------------------------------------------------------
    \532\ Dig. Competition Expert Panel Report at 29-30.
---------------------------------------------------------------------------

                      E. Mobile Operating Systems

    A mobile operating system (OS) provides a mobile device 
with its underlying functionality, such as user interface, 
motion commands, and button controls, and it facilitates the 
operation of the device's features, such as the microphone, 
camera, and GPS. The mobile OS is the interface between the 
mobile device hardware, such as the smartphone handset or 
tablet, and the applications that run on the device, like email 
or streaming apps. The mobile OS is pre-installed on mobile 
devices; an alternative mobile OS cannot be installed or 
substituted. The characteristics of the mobile OS determine 
aspects of the mobile device's performance and functionality, 
including the app stores and apps that can run on the device. 
The mobile OS also determines which company's ecosystem of 
products and services the device is integrated with.\533\
---------------------------------------------------------------------------
    \533\ See Steven Bohm, Fabian Adam & Wendy Colleen Farrell, Impact 
of the Mobile Operating System on Smartphone Buying Decisions: A 
Conjoint-Based Empirical Analysis, in Mobile Web and Intelligent 
Information Systems 198, 198-210 (Muhammad Younas, Irfan Awan & Massimo 
Mecella eds., 2015), https://doi.org/10.1007/978-3-319-23144-0_18.
---------------------------------------------------------------------------
    Google's Android and Apple's iOS are the two dominant 
mobile operating systems.\534\ Combined, they run on more than 
99 percent of all smartphones in the world.\535\ The third-
largest mobile operating system is KaiOS, which runs on feature 
phones (i.e., non-smartphone mobile devices).\536\ Apple's 
mobile devices run on Apple's proprietary iOS operating system, 
while other leading handset manufacturers, such as Samsung, LG, 
and Motorola, run on Android.\537\ iOS is not available on non-
Apple devices.
---------------------------------------------------------------------------
    \534\ See GSMA Intel., Global Mobile Trends 2020: New Decade, New 
Industry?, 6, 26 (2019), https://data.gsmaintelligence.com/api-web/v2/
research-file-download?id=47743151& file=2863-071119-GMT-2019.pdf.
    \535\ Neth. Auth. for Consumers & Mkts. Study at 15; see also Dig. 
Competition Expert Panel Report at 29 (``However market shares are 
measured, Google (Android) and Apple (iOS) have a global duopoly over 
mobile phone operating systems.''); Michael Muchmore, Android vs. iOS: 
Which Mobile OS Is Best?, PCMag (Aug. 11, 2020), https://www.pcmag.com/
comparisons/
android-vs-ios-which-mobile-os-is-best (``[W]e're locked in a duopoly 
when it comes to mobile operating system choice.'').
    \536\ A Short History of KaiOS, KaiOS, https://
developer.kaiostech.com/introduction/history (last visited Oct. 4, 
2020); Stephen Shankland, Mozilla Helps Modernize Feature Phones 
Powered by Firefox Tech, CNET (Mar. 11, 2020), https://www.cnet.com/
news/mozilla-helps-modernize-feature-phones-powered-by-firefox-tech/.
    \537\ See Submission from Apple, to H. Comm. on the Judiciary, 
HJC_APPLE_000021 (Oct. 14, 2019) (on file with Comm.) (``Many 
smartphone brands around the world compete with iPhone on the basis of 
price, performance, features, and design. These smartphones generally 
incorporate Google's Android operating system.'').

             Mobile OS Market Share Worldwide \538\
---------------------------------------------------------------------------

    \538\ Prepared by the Subcommittee based on Felix Richter, The 
Smartphone Market: The Smartphone Duopoly, Statista (July 27, 2020), 
https://www.statista.com/chart/3268/smartphone-os-market-share/ (citing 
Mobile Operating System Market Share Worldwide, StatCounter 
GlobalStats) (StatCounter ``calculates the data based on more than 1.7 
billion page views per month worldwide. StatCounter defines a mobile 
device as a pocket-sized computing device. As a result, tablets are not 
included . . . . Nokia devices (including some S40 devices) had been 
grouped largely under Symbian OS.'').
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Over the past decade, once-strong competitors have exited 
the mobile OS market, and Google and Apple have built dominant 
positions that are durable and persistent.\539\ While there are 
other mobile OSs--such as Tizen, Sailfish OS, and Ubuntu 
Touch--those OSs make up less than 1 percent of the global 
mobile OS market.\540\
---------------------------------------------------------------------------
    \539\ See Felix Richter, The Smartphone Market: The Smartphone 
Duopoly, Statista (July 27, 2020), https://www.statista.com/chart/3268/
smartphone-os-market-share/ (citing Mobile Operating System Market 
Share Worldwide, StatCounter GlobalStats) (``Having started out as a 
multi-platform market, the smartphone landscape has effectively turned 
into a duopoly in recent years, after Apple's iOS and Google's Android 
crowded out any other platform including Microsoft's Windows Phone, 
BlackBerry OS and Samsung's mobile operating system called Bada.''); 
Data and Privacy Hearing at 147 (statement of Maurice E. Stucke, Prof. 
of Law, Univ. of Tenn, & Ariel Ezrachi, Slaughter & May Prof. of 
Competition Law, Univ. of Oxford, Fellow, Pembroke Coll., Dir., Oxford 
Ctr. for Competition Law & Pol'y) (``The mobile operating system market 
went from multiple competitors in 2010 (with Google and Apple 
collectively accounting for 39 percent of unit sales), to a duopoly 
eight years later.''); Matthew Feld, Microsoft Is Finally Killing Off 
the Windows Phone, Telegraph (Oct. 9, 2017), https://
www.telegraph.co.uk/technology/2017/10/09/microsoft-finally-killing-
windows-phone/; Arjun Kharpal, TCL Launches New $549 Smartphone Under 
BlackBerry's Banner, Featuring Android Software, CNBC (Feb. 25, 2017), 
https://www.cnbc.com/2017/02/25/blackberry-keyone-launch-physical-
keyboard-android-specs-price.html); Jack Schofield, Can I Buy a Phone 
that Doesn't Use Anything from Google or Apple?, Guardian (July 4, 
2019), https://www.theguardian.com/technology/askjack/2019/jul/04/can-
i-buy-a-phone-that-does-not-use-anything-from-google-or-apple.
    \540\ See, e.g., Simon O'Dea, Market Share of Mobile Operating 
Systems in the United States from January 2012 to December 2019, 
Statista (Feb. 27, 2020), https://www.statista.com/statistics/272700/
market-share-held-by-mobile-operating-systems-in-the-us-since-2009/.
---------------------------------------------------------------------------

            Market Share of Mobile Operating Systems
                       in the U.S. \541\
---------------------------------------------------------------------------

    \541\ Prepared by the Subcommittee based on Simon O'Dea, Market 
Share of Mobile Operating Systems in the United States from January 
2012 to December 2019, Statista (Feb. 27, 2020), https://
www.statista.com/statistics/272700/market-share-held-by-mobile-
operating-systems-in-the-us-since-2009/ (citing Mobile Operating System 
Market Share in United States of America, StatCounter).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Although Google Android and Apple iOS both have dominant 
positions in the mobile OS market, high switching costs and a 
lack of on-device competition mean that neither firm's market 
power is disciplined by the presence of the other. The European 
Commission's investigation into Google's Android platform found 
that, because iOS is not available on non-Apple devices, it 
cannot constrain Google's dominance in the mobile OS 
market.\542\ Conversely, Android is not available on Apple 
devices and does not constrain Apple's dominant position and 
conduct on Apple mobile devices. An investment research firm 
recently noted that switching costs were high for Apple users 
because iOS is not available on non-Apple devices.\543\
---------------------------------------------------------------------------
    \542\ Press Release, Eur. Comm'n, Antitrust: Commission Fines 
Google =4.34 Billion for Illegal Practices Regarding Android Mobile 
Devices to Strengthen Dominance of Google's Search Engine (July 18, 
2018), https://ec.europa.eu/commission/presscorner/detail/en/
IP_18_4581.
    \543\ Morningstar Equity Analyst Report: Apple Inc 1 (Aug. 6, 2020) 
(on file with
Comm.).
---------------------------------------------------------------------------
    There are significant barriers to switching between the 
dominant mobile operating systems. As a general matter, 
consumers rarely switch mobile operating systems. SellCell's 
2019 survey found that more than 90 percent of users with 
iPhones tend to stick with Apple when they replace their 
current device.\544\ In 2018, Consumer Intelligence Research 
Partners reported that more than 85
  
  
---------------------------------------------------------------------------
    \544\ iPhone vs. Android--Cell Phone Brand Loyalty Survey 2019, 
SellCell (Aug. 20, 2019), https://www.sellcell.com/blog/iphone-vs-
android-cell-phone-brand-loyalty-survey-2019/; see also Morningstar 
Equity Analyst Report: Apple Inc 2 (Aug. 6, 2020) (on file with Comm.) 
(``Recent survey data shows that iPhone customers are not even 
contemplating switching brands today. In a December 2018 survey by 
Kantar, 90% of U.S.-based iPhone users said they planned to remain 
loyal to future Apple devices.'').
---------------------------------------------------------------------------
percent of iOS users who purchased a new device purchased 
another iOS device, and more than 90 percent of Android users 
who bought a new device purchased a new Android device.\545\ A 
2017 study from Morgan Stanley found that 92 percent of iPhone 
owners intending to buy a new mobile device planned to buy 
another iPhone.\546\ Mobile carriers--a main retail 
distribution channel for mobile devices--agreed that it is rare 
for customers to switch from one mobile OS because, once 
customers are used to the mobile OS, they generally do not 
switch.\547\ App developers also said in interviews with the 
Subcommittee that they observed minimal customer switching 
between iOS and Android.\548\
---------------------------------------------------------------------------
    \545\ Press Release, Consumer Intel. Rsch. Partners, LLC, Mobile 
Operating System Loyalty: High and Steady (Mar. 8, 2018), http://
files.constantcontact.com/150f9af2201/4bca9a19-a8b0-46bd-95bd-
85740ff3fb5d.pdf.
    \546\ Martin Armstrong, Most iPhone Users Never Look Back, Statista 
(May 22, 2017), https://www.statista.com/chart/9496/most-iphone-users-
never-look-back/.
    \547\ Interview with Source 72 (June 23, 2020).
    \548\ Interview with Source 83 (June 30, 2020).
---------------------------------------------------------------------------
    In addition to the cost of buying a new mobile device, 
consumers encounter other costs to switch to a new operating 
system. Android and iOS have different operating concepts, user 
interface designs, and setting and configuration options. As a 
result, instead of switching operating systems, ``users pick 
one, learn it, invest in apps and storage, and stick with it.'' 
\549\
---------------------------------------------------------------------------
    \549\ Press Release, Consumer Intel. Rsch. Partners, LLC, Mobile 
Operating System Loyalty: High and Steady (Mar. 8, 2018), http://
files.constantcontact.com/150f9af2201/4bca9a19-a8b0-46bd-95bd-
85740ff3fb5d.pdf.
---------------------------------------------------------------------------
    Other barriers to switching include the loss of 
compatibility with other smart devices designed to work in 
conjunction with the mobile device and its OS, the hassle of 
porting data from one OS to another, re-installing apps and 
configuring settings, and learning an unfamiliar user 
interface.\550\ Apple's cofounder and former CEO Steve Jobs 
advocated for this approach, noting that Apple should ``[t]ie 
all of our products together, so we further lock customers into 
our ecosystem.'' \551\ Recently, Morningstar observed that 
people using Apple's other products such as the Apple Watch and 
AirPods ``lose significant functionality when paired with a 
smartphone other than the iPhone,'' locking iPhone users into 
the iOS ecosystem.\552\ Competition regulators in the 
Netherlands explained that this strategy creates ``path 
dependency'' for consumers. Although mobile devices have a 
limited lifespan, and consumers might be expected to ``break 
the lock-in cycle'' when it is time to upgrade to a new device, 
consumers often have software, data and files, and other 
hardware and accessories that are only compatible with one 
product ecosystem, making it unlikely that they switch to a 
non-compatible mobile device.\553\
---------------------------------------------------------------------------
    \550\ See Neth. Auth. for Consumers & Mkts. Study at 55-56; Press 
Release, Eur. Comm'n, Antitrust: Commission Fines Google =4.34 Billion 
for Illegal Practices Regarding Android Mobile Devices to Strengthen 
Dominance of Google's Search Engine (July 18, 2018), https://
ec.europa.eu/commission/presscorner/detail/en/IP_18_4581; see also 
iPhone vs. Android--Cell Phone Brand Loyalty Survey 2019, SellCell 
(Aug. 20, 2019), https://www.sellcell.com/blog/iphone-vs-android-cell-
phone-brand-loyalty-survey-2019/ (finding ``21% of iPhone users might 
be tempted to switch if they weren't too tied into the Apple Ecosystem 
or it wasn't so much hassle changing operating system from iOS to 
Android'' and ``13% of Samsung users might be tempted to switch if they 
weren't too tied into the Google/Android Ecosystem or it wasn't so much 
hassle changing operating system'').
    \551\ Don Reisinger, Steve Jobs Wanted to ``Further Lock 
Customers'' into Apple's ``Ecosystem,'' CNET (Apr. 2, 2014), https://
www.cnet.com/news/steve-jobs-wanted-to-further-lock-customers-into-
apples-ecosystem/.
    \552\ Morningstar Equity Analyst Report: Apple Inc 2 (Aug. 6, 2020) 
(on file with Comm.).
    \553\ Neth. Auth. for Consumers & Mkts. Study at 21, 55-56.
---------------------------------------------------------------------------
    There are significant entry barriers in the mobile 
operating system market. One former mobile OS competitor 
observed that its experience showed that it was doubtful that a 
new, competitive mobile OS will emerge in the U.S.\554\ Another 
former mobile OS provider explained that it exited the market 
after concluding ``the market for mobile operating systems was 
too established for a new entry.'' \555\ To compete, a new OS 
must offer a superior product packaged in an attractive 
handset, as well as a fully realized suite of apps and 
compatible devices comparable to what Apple and Google (and 
Google's hardware partners) currently offer. Industry experts 
have testified before the Subcommittee that the ``reality is 
that it would be very difficult for a new mobile phone 
operating system today'' to compete with Apple and Google, 
``even if it offered better features.'' \556\ Investment 
analysts agree, noting it is likely Android and iOS ``will 
continue to power nearly every smartphone around the world in 
the long run.'' \557\
---------------------------------------------------------------------------
    \554\ Interview with Source 407 (Sept. 10, 2020).
    \555\ Submission from Source 385, to H. Comm. on the Judiciary, 2 
(Sept. 18, 2020) (on file with Comm.).
    \556\ Data and Privacy Hearing at 148 (statement of Maurice E. 
Stucke, Prof. of Law, Univ. of Tenn., & Ariel Ezrachi, Slaughter & May 
Prof. of Competition Law, Univ. of Oxford, Fellow, Pembroke Coll., 
Dir., Oxford Ctr. for Competition Law & Pol'y); see also Richard 
Trenholm, Elegant Ubuntu Touch OS Impresses for Phones and Tablets 
(Hands-On), CNET (Feb. 28, 2013), https://www.cnet.com/reviews/ubuntu-
touch-preview/; Adrian Covert, The Ubuntu Smartphone (Which No One Will 
Use) Is a Glimpse of the Future, CNN Bus. (Jan. 2, 2013), https://
money.cnn.com/2013/01/02/technology/mobile/ubuntu-smartphone-linux/ 
(explaining success in the mobile market required more than merely 
building a superior OS to Android or iOS; it also requires a robust app 
ecosystem).
    \557\ Morningstar Equity Analyst Report: Apple Inc 3 (Aug. 6, 2020) 
(on file with Comm.).
---------------------------------------------------------------------------
    The mobile OS market is also characterized by strong 
network effects. In short, a new mobile OS must have a 
sufficiently large user base to attract app developers to build 
apps to run on the OS. An OS with an insufficient number of 
users and developers is unlikely to receive support from mobile 
device manufacturers that will install the OS on their devices, 
or mobile network operators that will support those devices on 
their networks.\558\
---------------------------------------------------------------------------
    \558\ Interview with Source 407 (Sept. 10, 2020).
---------------------------------------------------------------------------
    The most important factor that developers consider before 
building apps for an OS is the install base of the OS--how many 
users have devices running the OS that can install the app. 
Developers will not build apps for an OS with few users.\559\ 
This reinforces the power of dominant mobile operating systems. 
The more consumers use the OS, the more developers will build 
apps for the OS, increasing the value of the OS for users and 
attracting more consumers.\560\ Consumers are unlikely to 
purchase a device with an OS that cannot run the most popular 
apps and lacks a robust app ecosystem comparable to what is 
offered by iOS and Android. Due to the dominance of Apple and 
Google in the mobile OS and app store markets, ``there is 
little incentive for app developers to go to the trouble and 
expense of ensuring their apps work on any smaller rival 
operating systems,'' because the user base would be too 
small.\561\
---------------------------------------------------------------------------
    \559\ Id.
    \560\ Morningstar Equity Analyst Report: Apple Inc 3 (Aug. 1, 2020) 
(on file with Comm.).
    \561\ Dig. Competition Expert Panel Report at 29.
---------------------------------------------------------------------------
    Additionally, the third-party app ecosystem advantages of 
iOS and Android make new market entry unlikely. The U.K.'s 
Competition and Markets Authority explained that, before the 
iPhone, third-party apps were not part of the mobile 
experience. As a result, new entrants like Apple could enter 
the market and compete by offering a superior product. But now, 
there are ``millions of apps that have been written for Apple's 
iOS and Google's Android, making it hard for a new entrant 
mobile operating system to offer a competitive and attractive 
product.'' \562\ The European Commission (E.C.) has similarly 
observed that strong network effects have created high entry 
barriers in the mobile OS market.\563\
---------------------------------------------------------------------------
    \562\ Id. at 40.
    \563\ See Press Release, Eur. Comm'n, Antitrust: Commission Fines 
Google =4.34 Billion for Illegal Practices Regarding Android Mobile 
Devices to Strengthen Dominance of Google's Search Engine (July 18, 
2018), https://ec.europa.eu/commission/presscorner/detail/en/
IP_18_4581.
---------------------------------------------------------------------------
    Over the past decade, several large technology companies 
have attempted and failed to leverage their large user bases to 
compete against Apple and Google in the mobile OS market.\564\ 
Facebook and Amazon both tried to enter the market with 
variants of Google's Android OS. Both companies quickly exited 
the market because consumers were mostly accessing Facebook and 
Amazon content through apps on iOS and Android devices.\565\ 
Technology reviewers also expressed disappointment that 
Amazon's Fire Phone did not offer the same extensive library of 
apps and services as iOS or Android devices.\566\
---------------------------------------------------------------------------
    \564\ See GSMA Intel., Global Mobile Trends 2020: New Decade, New 
Industry? 26 (2019), https://data.gsmaintelligence.com/api-web/v2/
research-file-download?id=47743151&
file=2863-071119-GMT-2019.pdf; Interview with Source 83 (June 30, 
2020).
    \565\ See Ryan Mac, What Amazon Can Learn from the Failed Facebook 
Phone, Forbes (June 17, 2014), https://www.forbes.com/sites/ryanmac/
2014/06/17/what-amazon-can-learn-from-the-failed-facebook-phone/
#7f7d402f47de; Roger Cheng, Here's Why the Facebook Phone Flopped, CNET 
(May 8, 2013), https://www.cnet.com/news/heres-why-the-facebook-phone-
flopped/; Marcus Wohlsen, The Amazon Fire Phone Was Always Going to 
Fail, Wired (Jan. 6, 2015), https://www.wired.com/2015/01/amazon-fire-
phone-always-going-fail/; Austin Carr, The Inside Story of Jeff Bezos' 
Fire Phone Debacle, Fast Co. (Jan. 6, 2015), https://www.fastcompany 
.com/3039887/under-fire.
    \566\ See Austin Carr, The Inside Story of Jeff Bezos' Fire Phone 
Debacle, Fast Co. (Jan. 6, 2015), https://www.fastcompany.com/3039887/
under-fire.
---------------------------------------------------------------------------
    Companies like Mozilla and Alibaba have also attempted to 
enter the mobile OS market. Mozilla unveiled its Firefox OS in 
2013 and exited the market altogether by 2016.\567\ In 2012, 
Chinese tech giant Alibaba developed a mobile OS called Aliyun 
for the Chinese market. However, Acer, Alibaba's hardware 
partner, abruptly canceled its collaboration with Alibaba 
before the launch of Acer's device running the OS.\568\
---------------------------------------------------------------------------
    \567\ See J. Sullivan, Firefox OS: Looking Ahead, Mozilla Blog 
(Jan. 6, 2014), https://blog.mozilla.org/blog/2014/01/06/firefox-os-
looking-ahead/; Ingrid Lunden, Mozilla Will Stop Developing and Selling 
Firefox OS Smartphones, TechCrunch (Dec. 8, 2015), https://
techcrunch.com/2015/12/08/mozilla-will-stop-developing-and-selling-
firefox-os-smartphones/; Chris Hoffman, Mozilla Is Stopping All 
Commercial Development on Firefox OS, PC World (Sept. 28, 2016), 
https://www.pcworld.com/article/3124563/mozilla-is-stopping-all-
commercial-development-on-firefox-os.html.
    \568\ See Don Reisinger, Acer Taps Alibaba's Aliyun OS for New 
Smartphone, CNET (Sept. 12, 2012), https://www.cnet.com/news/acer-taps-
alibabas-aliyun-os-for-new-smartphone/; Edward Moyer, Alibaba: Google 
Just Plain Wrong About Our OS, CNET (Sept. 15, 2012), https://
www.cnet.com/news/alibaba-google-just-plain-wrong-about-our-os/; Roger 
Cheng, Alibaba: Google Forces Acer to Drop Our New Mobile OS, CNET 
(Sept. 13, 2012), https://www.cnet.com/news/alibaba-google-forced-acer-
to-drop-our-new-mobile-os/; T.C. Sottek, Acer Cancels Phone Launch with 
Alibaba, Allegedly in Response to Threats from Google, Verge (Sept. 13, 
2012), https://www.theverge.com/2012/9/13/3328690/acer-google-alibaba-
phone; Dieter Bohn, Google Explains Why It Stopped Acer's Aliyun 
Smartphone Launch (Updated), Verge (Sept. 14, 2012), https://
www.theverge.com/2012/9/14/3335204/google-statement-acer-smartphone-
launch-aliyun-android; Jon Brodkin, Google Blocked Acer's Rival Phone 
to Prevent Android ``Fragmentation,'' ARS Technica (Sept. 14, 2012), 
https://arstechnica.com/gadgets/2012/09/google-blocked-acers-rival-
phone-to-prevent-android-fragmentation/.
---------------------------------------------------------------------------
    Over the past decade, once-competitive mobile operating 
systems like Nokia, BlackBerry, and Microsoft struggled to 
survive as Apple and Google grew more dominant, eventually 
exiting the marketplace altogether. BlackBerry--once a leading 
mobile OS developer--now licenses the BlackBerry name to TCL to 
market TCL's smartphones. TCL's BlackBerry phones run on 
Android.\569\ In the last quarter of 2016, Windows devices 
accounted for less than half of 1 percent of new smartphone 
sales.\570\ In 2017, Microsoft abandoned its mobile OS 
business, and by that time, more than 99 percent of all new 
smartphones were running on iOS or Android, and market 
observers expressed no confidence that new competition would 
emerge.\571\ One key factor leading to Microsoft's withdrawal 
from the mobile marketplace was that developers were reluctant 
to develop apps for a third mobile operating system when 
already building apps for iOS and Android.\572\ These market 
dynamics remain in place today.
---------------------------------------------------------------------------
    \569\ See Arjun Kharpal, TCL Launches New $549 Smartphone Under 
BlackBerry's Banner, Featuring Android Software, CNBC (Feb. 27, 2017), 
https://www.cnbc.com/2017/02/25/blackberry-keyone-launch-physical-
keyboard-android-specs-price.html.
    \570\ See Press Release, Gartner, Gartner Says Worldwide Sales of 
Smartphones Grew 7 Percent in the Fourth Quarter of 2016 (Feb. 15, 
2017), https://www.gartner.com/en/newsroom/press-releases/2017-02-15-
gartner-says-worldwide-sales-of-smartphones-grew-7-percent-in-the-
fourth-quarter-of-2016).
    \571\ Tom Warren, Windows Phone Dies Today, Verge (July 11, 2017), 
https://www .theverge.com/2017/7/11/15952654/microsoft-windows-phone-
end-of-support; see also Press Release, Gartner, Gartner Says Worldwide 
Sales of Smartphones Grew 7 Percent in the Fourth Quarter of 2016 (Feb. 
15, 2017), https://www.gartner.com/en/newsroom/press-releases/2017-02-
15-gartner-says-worldwide-sales-of-smartphones-grew-7-percent-in-the-
fourth-quarter-of-2016; James Vincent, 99.6 Percent of New Smartphones 
Run on Android or iOS, Verge (Feb. 16, 2017), https://www.theverge.com/
2017/2/16/14634656/android-ios-market-share-blackberry-2016.
    \572\ Dig. Competition Expert Panel Report at 40.
---------------------------------------------------------------------------

                           F. Digital Mapping

    Digital mapping provides users with virtual maps of the 
physical world. There are two sets of customers for mapping 
services: consumers, who use map products for navigation, and 
businesses, who use underlying mapping libraries and design 
tools to produce customized maps. With the proliferation of 
smart devices, digital mapping has become a critical resource 
for users and businesses alike.
    The essential input for both types of services is a 
digital-map database. Mapping data can be gathered in a few 
ways, including through the collection of imagery from 
satellites and streets, the tracking of global positioning 
system (GPS) traces, and the collation of public domain mapping 
data. Building a digital map database is costly and time-
intensive, requiring significant investment in mapping 
technologies and data collection.\573\ The leading provider of 
digital mapping data is Google. Smaller providers include HERE 
and TomTom, as well as open-source providers like OpenStreetMap 
(OSM).\574\ Waze, which developed navigable maps by relying on 
driver-generated live maps and crowd-sourced updates, was an 
additional mapping provider purchased by Google in June 2013.
---------------------------------------------------------------------------
    \573\ Innovation and Entrepreneurship Hearing at 589 (response to 
Questions for the Record by Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.); Submission from Google, to H. Comm. on the Judiciary, 
GOOG-HJC-04208423 (June 2013) (on file with Comm.) (showing that, prior 
to being acquired by Google, a Waze presentation stated, ``There are 
very few companies in the world that are making navigable maps, and the 
process is very expensive.''); Submission from Source 531, to H. Comm. 
on the Judiciary, Source 531-000628 (on file with Comm.).
    \574\ Submission from Source 531, to H. Comm. on the Judiciary, 
Source 531-000628 (on file with Comm.).
---------------------------------------------------------------------------
    Consumer-facing providers of mapping services license map 
databases and layer search and traffic technologies atop of the 
map data. Consumers use these search and traffic tools either 
through a standalone turn-by-turn navigation service that 
licenses the underlying data--like MapQuest or Bing Maps--or 
through a vertically integrated provider, like Google Maps, 
Waze, or Apple Maps.\575\ The dominant providers of consumer 
mapping applications are Google Maps and Google-owned Waze, 
followed by Apple Maps and MapQuest.\576\ Google and Apple set 
their mapping products as the default options on Android and 
iOS products--their respective devices--which also enables them 
to maintain and expand their market position.
---------------------------------------------------------------------------
    \575\ Although Apple Maps licensed U.S. mapping data from TomTom 
upon launching in 2012, in 2015, it began developing its own map 
database by deploying cars with cameras and sensors to collect images 
and mapping data that it could combine with anonymized iPhone data to 
create an independent underlying base map. Lauren Goode, The Biggest 
Apple Maps Change Is One You Can't See, Wired (Jan. 31, 2020), https://
www.wired.com/story/apple-maps-redesign/.
    \576\ Submission from Source 572, to H. Comm. on the Judiciary, 1 
(Oct. 29, 2019) (on file with Comm.) (``For vehicle navigation, and 
excluding OEM-provided in-console automotive systems, Google's Waze and 
Google Maps are currently the most used consumer apps by a wide 
margin.''); Submission from Source 333, to H. Comm. on the Judiciary, 2 
(Oct. 21, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    These providers of consumer mapping services generally do 
not charge users a monetary fee. Instead, they monetize maps 
through selling location-based advertisements or by subsidizing 
consumer-facing mapping with enterprise contracts or other 
lines of business. Although data on the value of the consumer-
facing digital mapping industry is not publicly available, 
analysts have estimated that Google Maps earned Google around 
$2.95 billion in revenue last year and that the standalone 
product is worth up to $60 billion.\577\
---------------------------------------------------------------------------
    \577\ Daniel Schaal, Google Maps Poised to Be an $11 Billion 
Business in 4 Years, Skift (Aug. 30, 2019), https://skift.com/2019/08/
30/google-maps-poised-to-be-an-11-billion-business-in-4-years/; Ross 
Sandler, Barclays, Alphabet Inc.: Steady Compounder, With Plenty of 
Innovation Ahead 20 (Mar. 28, 2017) (on file with Comm.).
---------------------------------------------------------------------------
    Business-facing providers serve map design tools and 
mapping libraries required to produce customized maps. The 
leading providers of business-to-business mapping software are 
Google, HERE, Mapbox, and TomTom, followed by Apple Maps, Bing, 
ESRI, Comtech, and Telenav.\578\ Some of these providers 
operate in more specialized markets. For example, HERE and 
TomTom primarily serve automotive customers, while ESRI 
provides desktop GIS software used by governments and spatial 
analysts.\579\
---------------------------------------------------------------------------
    \578\ Submission from Source 572, to H. Comm. on the Judiciary, 1 
(Oct. 29, 2019) (on file with Comm.).
    \579\ Id.
---------------------------------------------------------------------------
    Market participants cite several factors that privilege 
dominant digital map incumbents and impede entry. First is the 
capacity of dominant firms to invest heavily in creating 
mapping databases and technology without needing to turn a 
profit. For example, prior to its acquisition by Google, Waze 
executives observed that Google Maps had ``disrupted the 
market'' primarily through ``financial disruption,'' namely 
that it had ``unlimited funds'' and was giving away Google Maps 
to users for free.\580\ Startups seeking to enter this market--
yet lacking the financial cushion that permits them to incur 
losses while developing the product--will be at a relative 
disadvantage.
---------------------------------------------------------------------------
    \580\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04209630 (Nov. 2012) (on file with Comm.).
---------------------------------------------------------------------------
    Another factor is that incumbents that are integrated can 
collect relevant map and location data from across 
complementary lines of business, feeding this data back into 
mapping. For example, one market participant noted that Google 
``collects an unparalleled amount of data used in digital 
mapping from users of its dominant search engine and Android 
smartphone OS.'' \581\ Another market participant stated that 
Google's dominant position in search and advertising 
incentivizes businesses to closely monitor and maintain the 
accuracy of their information in Google's systems, ``leading to 
a dynamic by which Google enjoys a free, crowdsource effort to 
improve and maintain their data's quality,'' thereby improving 
the quality of Google Maps.\582\ Firms without concurrent 
positions in web search and the smartphone market are 
comparatively disadvantaged.
---------------------------------------------------------------------------
    \581\ Submission from Source 531, to H. Comm. on the Judiciary, 
Source 531-000624 (on file with Comm.). Google made a similar 
observation in July 2013. In a letter responding to the FTC's request 
for information relating to its acquisition of Waze, Google wrote, 
``Apple has access to as much or more US GPS traffic data than Google 
does, with tens of millions of Apple iOS users potentially providing 
Apple with real-time traffic speed and flow information throughout the 
country.'' Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04211078 (July 24, 2013) (on file with Comm.).
    \582\ Submission from Source 572, to H. Comm. on the Judiciary, 3 
(Oct. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    A third factor is the superior distribution that integrated 
firms in maps-adjacent lines of business can provide their own 
mapping product at the expense of third-party mapping products. 
Google gives Google Maps default placement on its Android 
devices, while Apple does the same with Apple Maps on iOS 
devices. Together, Android and iOS account for 99 percent of 
the smartphone operating systems in the United States.\583\
---------------------------------------------------------------------------
    \583\ Neth. Auth. for Consumers & Mkts. Study at 15.
---------------------------------------------------------------------------
    Market participants explained that the default placement of 
Google Maps on Android devices also disadvantages third-party 
mapping providers technologically. If a developer chooses a 
third-party mapping provider when building an app, downloading 
that app on Android would involve downloading both the app 
features and the mapping functionality. Choosing to develop the 
app with Google Maps, by contrast, would reduce the app's file 
size on Android, as Google Maps is already on the device.
    Lastly, incumbents benefited from a lack of prohibitions on 
collecting location data--an advantage that startups today lack 
given the passage of new data restrictions that limit the 
development of digital mapping technology. Notably, many of 
these rules came into existence following public outrage 
prompted by Google Street View. By the time these rules were 
implemented, Google had already mapped out most of the planet.
    Except for Apple's independent mapping database, there has 
been no recent entry in the market for underlying mapping data. 
Similarly, the list of leading providers of consumer mapping 
services and business-to-business services has mostly been 
unchanged since 2013.

                           G. Cloud Computing

    Cloud computing refers to the service that enables remote 
storage and software programs on demand through the internet. 
Prior to cloud computing, data was stored locally on a 
computer's hard drive, in a local server room, or in a remote 
data center where companies managed all of the information 
technology (I.T.) services.\584\ Today, companies can 
essentially rent ``network access to a shared pool of 
configurable computing resources . . . [including] networks, 
servers, storage, applications and services.'' \585\ As a 
result of the convenience and cost savings associated with the 
ability to scale up or down on demand, cloud computing has 
grown into one of the technology sector's largest and most 
lucrative businesses.\586\ It has enabled the growth of 
enterprise businesses such as Netflix, Airbnb, Lyft, Slack, and 
the Weather Channel, as well as new startups that are not yet 
household names.
---------------------------------------------------------------------------
    \584\ See generally Heidi M. Peters, Cong. Rsch. Serv., R45847, The 
Department of Defense's Jedi Cloud Program (2019).
    \585\ See Nat'l Inst. of Standards & Tech., The NIST Definition of 
Cloud Computing 2 (2011), https://nvlpubs.nist.gov/nistpubs/Legacy/SP/
nistspecialpublication800-145.pdf.
    \586\ Gartner, Market Share Analysis: Iaas and IUS, Worldwide (July 
5, 2019); Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON_HJC_00219352 (on file with Comm.).
---------------------------------------------------------------------------
    Cloud computing is a critical input to many of the digital 
markets the Subcommittee investigated, providing infrastructure 
for online commerce, social media and networking, digital 
advertising, voice assistants, and digital mapping--
technologies that benefit from dynamic storage and 
computational power. In a future with smart homes, autonomous 
vehicles, and artificial intelligence applications in nearly 
every sector from agriculture to healthcare, understanding the 
dynamics of the cloud market becomes critical. These ground-
breaking technologies work because they can access and analyze 
massive amounts of data in real time. Companies looking to 
innovate in these spaces will struggle to rely solely on 
traditional I.T. and will likely turn to public cloud vendors. 
The testimony of Morgan Reed on behalf of ACT, the App 
Association, illustrates how important ``continuous cloud 
access [is] to create custom software solutions that adapt 
quickly and rival the products and services of larger SaaS 
companies.'' \587\
---------------------------------------------------------------------------
    \587\ Innovation and Entrepreneurship Hearing at 240 (statement of 
Morgan Reed, President, ACT | The App Ass'n).
---------------------------------------------------------------------------
    Cloud computing service models vary by vendor, and new 
models are being developed continually. The Subcommittee's 
investigation focused on the dynamics between the three models 
most referenced and defined by the National Institute of 
Standards and Technology.

                 Cloud Computing Services \588\
---------------------------------------------------------------------------

    \588\ Prepared by the Subcommittee based on data from the National 
Institute of Standards and Technology.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    In the Software as a Service (SaaS) model, the user 
accesses applications from various client devices ``through 
either a thin client interface, such as a web browser, or a 
program interface.'' \589\ Common examples include Google Docs, 
Slack, and Mailchimp. In the Platform as a Service (PaaS) 
model, the user, most often a cloud application developer, 
builds new applications by accessing programming languages, 
libraries, services, and tools supported by the cloud 
provider.\590\ Common PaaS tools include AWS Elastic Beanstalk, 
Google App Engine, and Salesforce's Heroku. In the 
Infrastructure as a Service (IaaS) model, the user, most often 
an engineer, can deploy and run software, which can include 
operating systems and applications while the cloud provider 
provisions fundamental computing resources including 
processing, storage, and network applications.\591\ Common IaaS 
tools include Amazon Elastic Compute Cloud (EC2), Google 
Compute Engine, and Microsoft Azure.\592\
---------------------------------------------------------------------------
    \589\ Nat'l Inst. of Standards & Tech., The NIST Definition of 
Cloud Computing 2 (2011), https://nvlpubs.nist.gov/nistpubs/Legacy/SP/
nistspecialpublication800-145.pdf.
    \590\ Id.
    \591\ Id. at 3.
    \592\ Heidi M. Peters, Cong. Rsch. Serv., R45847, The Department of 
Defense's Jedi Cloud Program 1 (2019).
---------------------------------------------------------------------------
    SaaS, PaaS, and IaaS can be deployed through several 
different models.\593\ The Subcommittee focused primarily on 
the market for public cloud services in which the cloud 
provider provisions infrastructure for open use by the general 
public. The infrastructure resides on the premises of the cloud 
provider.\594\
---------------------------------------------------------------------------
    \593\ Nat'l Inst. of Standards & Tech., The NIST Definition of 
Cloud Computing 3 (2011), https://nvlpubs.nist.gov/nistpubs/Legacy/SP/
nistspecialpublication800-145.pdf.
    \594\ Id.
---------------------------------------------------------------------------
    To review market dynamics, the Subcommittee examined two 
types of cloud service providers. The first type is 
infrastructure providers. Amazon Web Services (AWS), Microsoft 
Azure, and Google Cloud Platform (GCP) are the most common 
domestic infrastructure providers. They offer customers IaaS, 
PaaS, and SaaS offerings through their customer consoles or 
portals, but are distinct in their ability to offer IaaS at 
scale. This Report refers to them as infrastructure providers. 
They also operate online marketplaces for third-party software 
vendors to list cloud offerings that integrate with their 
infrastructure services.
    The second type is third-party software vendors, sometimes 
referred to as Independent Software Vendors (ISVs). Companies 
such as Salesforce, MariaDB, and The Apache Foundation provide 
operating systems, databases, security, and applications. 
Third-party software can be delivered as a packaged software or 
managed service. When a third party provides packaged software, 
it can be installed onto a customer's existing cloud 
infrastructure. The packaged software can be listed on the 
infrastructure provider's marketplace or through a third-party 
vendor's website.
    When third-party software is sold as a managed service, the 
customer pays a subscription based on the number of services 
used, and the third-party software vendor manages all the 
underlying infrastructure.\595\ In this scenario, the software 
has become a cloud offering sold ``as-a-service.'' The 
underlying infrastructure can be owned and managed by the 
third-party software vendor or the third-party software vendor 
may have contracts with an infrastructure provider, and in some 
cases, the software vendor uses a combination of owned and 
rented servers. For example, Salesforce's Heroku--a PaaS 
product--is built using AWS IaaS offerings.\596\ When a company 
purchases a Heroku license, Salesforce's use of AWS is included 
in the price. In the case that a PaaS or SaaS offering uses its 
own infrastructure, it is likely it will need to be able to 
integrate with products managed by the infrastructure providers 
as it grows and, to expand to new regions, it will need to 
contract with infrastructure providers.\597\
---------------------------------------------------------------------------
    \595\ Id.
    \596\ See, e.g., Kelly Cochran, Simplify Your Customer Engagement 
with AWS and Salesforce Heroku, AWS Partner Network (APN) Blog (June 9, 
2017), https://aws.amazon.com/blogs/apn/simplify-your-customer-
engagement-with-aws-and-salesforce-heroku/.
    \597\ Mark Innes, Salesforce Is Live on AWS Cloud Infrastructure in 
Australia, Salesforce Blog (Oct. 17, 2017), https://www.salesforce.com/
au/blog/2017/10/salesforce-is-live-on-aws-cloud-infrastructure-in-
australia.html. For example, for many years Salesforce.com's CRM ran on 
self-managed infrastructure but when the company expanded to Australia 
in 2007, they entered into a contract with AWS.
---------------------------------------------------------------------------
    In 2018, public cloud services, including IaaS, PaaS, SaaS, 
and management services, accounted for $182.4 billion of the 
overall $3.7 trillion I.T. infrastructure spending worldwide--
less than one percent.\598\ Despite being a small fraction of 
I.T. spending, Gartner projects the market size of the cloud 
services industry to increase at nearly three times the rate of 
overall I.T. services through 2022, to reach $331 billion.\599\ 
AWS is the market leader, capturing approximately 24 percent of 
the U.S. spending on cloud computing in 2018.\600\
---------------------------------------------------------------------------
    \598\ Letter from David Zapolsky, Gen. Couns., Amazon.com, Inc., to 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, 6 (July 26, 2019) (on file 
with Comm.).
    \599\ Press Release, Gartner, Gartner Says Global IT Spending to 
Reach $3.7 Trillion in 2018 (July 29, 2019), https://www.gartner.com/
en/newsroom/press-releases/2019-07-29-gartner-says-worldwide-iaas-
public-cloud-services-market-grew-31point3-percent-in-2018.
    \600\ Letter from David Zapolsky, Gen. Couns., Amazon.com, Inc., to 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, 6 (July 26, 2019) (on file 
with Comm.).
---------------------------------------------------------------------------
    Amazon--the leading cloud platform--is dominant in the 
cloud market due to the concentration of the IaaS market.\601\ 
According to Gartner, ``the worldwide IaaS market grew 31.3% in 
2018 to total $32.4 billion, up from $24.7 billion in 2017.'' 
\602\ As seen in the chart below, AWS is the unquestioned 
leader in the cloud computing infrastructure market, with 
triple the market share of Microsoft. Alibaba, Google, and 
Microsoft are growing at the fastest rates--rates double that 
of Amazon. Gartner expects the IaaS worldwide public cloud 
service revenue to grow faster than any other set of services, 
and to be worth $76.6 billion in 2022.\603\
---------------------------------------------------------------------------
    \601\ Submission from Source 170, to H. Comm. on the Judiciary, 6 
(Nov. 21, 2011) (on file with Comm.).
    \602\ Press Release, Gartner, Gartner Forecasts Worldwide Public 
Cloud Revenue to Grow 17.5 Percent in 2019 (Apr. 2, 2019), https://
www.gartner.com/en/newsroom/press-releases/2019-07-29-gartner-says-
worldwide-iaas-public-cloud-services-market-grew-31point3-percent-in-
2018.
    \603\ Id.

          IaaS Worldwide Public Cloud Services Revenue
                (Millions of U.S. Dollars) \604\
---------------------------------------------------------------------------

    \604\ Prepared by the Subcommittee based on Press Release, Gartner, 
Gartner Forecasts Worldwide Public Cloud Revenue to Grow 17.5 Percent 
in 2019 (Apr. 2, 2019), https://www
.gartner.com/en/newsroom/press-releases/2019-07-29-gartner-says-
worldwide-iaas-public-cloud-services-market-grew-31point3-percent-in-
2018.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Industry reports suggest that the cloud computing market is 
consolidating around three providers domestically--AWS, 
Microsoft Azure, and Google Cloud Platform.\605\
---------------------------------------------------------------------------
    \605\ Submission from Amazon, to H. Comm. on the Judiciary, AMAZON-
HJC-00219350 (July 5, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Market leaders benefit from early-mover advantage coupled 
with network effects and high switching costs that lock-in 
customers.
  
  

AWS pioneered cloud computing, launching officially in March 2006 with 
Simple Storage Service (S3) and Elastic Compute Cloud (EC2), two 
fundamental IaaS offerings.\606\ Microsoft announced Azure in October 
2008 along with core services that made up the ``Azure Services 
Platform.'' \607\ Google's first public cloud service, App Engine, a 
PaaS offering, was released in 2008.\608\ Google's Compute Engine, an 
AWS Elastic Compute Cloud and Microsoft Azure Virtual Machines 
competitor, went live as a preview in June 2012.\609\
---------------------------------------------------------------------------
    \606\ What's New, Amazon (Oct. 4, 2006), https://aws.amazon.com/
about-aws/whats-new/
2006/.
    \607\ Press Release, Microsoft, Microsoft Unveils Windows Azure at 
Professional Developers Conference (Oct. 27, 2008), https://
news.microsoft.com/2008/10/27/microsoft-unveils-windows-azure-at-
professional-developers-conference/#IP8XlBTCMpvORgaV.97.
    \608\ Paul McDonald, Introducing Google App Engine + Our New Blog, 
Google Dev. Blog (Apr. 7, 2008), http://googleappengine.blogspot.com/
2008/04/introducing-google-app-engine-our-new
.html. 
    \609\ Ryan Lawler, Google Launches Computer Engine to Take on 
Amazon Web Services, TechCrunch (June 28, 2012), https://
techcrunch.com/2012/06/28/google-compute-engine/.
---------------------------------------------------------------------------
    A 2010 Google strategy document predicted that the cloud 
computing market would concentrate. An internal document, 
titled ``Where Industry is Headed in 5 Years,'' stated that 
there would be some concentration in the market within five 
years, with cloudservice providers consisting of Google, 
Amazon, Microsoft, and a hybrid of Cisco and VMWare.\610\ 
According to this document, each company would offer cloud-
based apps and other tools.\611\ Later, in a 2018 strategy 
document, Google emphasized the importance of first-mover 
advantage in the space, writing ``AWS and Azure have had more 
years to gain customers, and cloud customers typically grow 
[in] scale over time; in contrast'' reiterating the tendency 
for cloud customers to choose a single vendor as their primary 
cloud service provider.\612\ In a roundtable held by 
Subcommittee Chair Cicilline, Mark Tracy, the CEO of 
Cloudacronomics, described these concerns:
---------------------------------------------------------------------------
    \610\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01777633 (on file with Comm.).
    \611\ Id.
    \612\ Id. at GOOG-HJC-04167638 to -04167666 (June 3, 2019).

     LWe pull down terabytes of data, and they have to upload 
it to the cloud to improve farmers practices. The two cloud 
providers are AWS and Azure. Since so many businesses and so 
much value can be extracted by improving health and data, this 
concentration of cloud services is a concern.\613\
---------------------------------------------------------------------------
    \613\ Roundtable Discussion of Mar. 17, 2020, Before the Subcomm. 
on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 116th Cong. (2020) (statement of Mark Tracy, CEO, 
Cloudacronomics) (on file with Comm.).

    As seen in the figure below, IaaS prices have decreased 
over time, with the three dominant U.S. providers able to price 
their services at less than $30/GB RAM according to a 2018 RBC 
Capital Markets report.\614\ Market participants reference 
economies of scale and a focus on increasing revenue from PaaS 
and SaaS offerings, as opposed to IaaS offerings, as an 
explanation for this trend. IaaS vendors benefit from economies 
of scale both with regards to the size of the data centers and 
the ability to operate multiple data centers across the globe. 
To enter the market and reach the economies of scale needed to 
compete with the incumbents, infrastructure providers must 
invest significant capital and be able to offer competitive 
prices to lure customers.
---------------------------------------------------------------------------
    \614\ Submission from Amazon, to H. Comm. on the Judiciary, AMAZON-
HJ-00183326 (Dec. 4, 2018) (on file with Comm.) (showing a 2018 RBC 
Capital Markets Report which analyzed the cost of IaaS across five 
usage scenarios--Standard, High Compute, High Memory, High Storage, and 
High Input/Output (I/O)--and three workload sizes--small, medium and 
large--to create 15 cases).
---------------------------------------------------------------------------

   Average Monthly Costs Per GB RAM Across 15 Use Cases \615\
---------------------------------------------------------------------------

    \615\ Prepared by the Subcommittee based on the Submission from 
Amazon, to H. Comm. on the Judiciary, AMAZON-HJC-00183326 (Dec. 4, 
2018) (on file with Comm.) (2018 RBC Capital Markets Report which 
analyzed the cost of IaaS across five usage scenarios--Standard, High 
Compute, High Memory, High Storage, and High Input/Output (I/O)--and 
three workload sizes--small, medium and large--to create 15 cases).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The ``cloud'' is a system of cables connected to a wide 
network of data centers--all underground, underwater, or in 
large industrial buildings. Building data centers in dozens of 
regions worldwide costs billions of dollars.\616\ Market 
participants described the investment as ``bigger than building 
a cellular network'' and only ``for countries and major 
companies.'' \617\
---------------------------------------------------------------------------
    \616\ Submission from Source 170, to H. Comm. on the Judiciary, 8 
(Nov. 21, 2011) (on file with Comm.).
    \617\ Interview with Source 144 (April 17, 2020).
---------------------------------------------------------------------------
    Two additional inputs that can provide a barrier to 
becoming a leading infrastructure provider are compliance 
certifications and reputation. Federal Risk and Authorization 
Management Program (FedRAMP) authorization is required for any 
service that holds U.S. federal data.\618\ The FedRAMP 
authorization process can be resource intensive and time 
consuming as vendors have to undergo a process of technical and 
security reviews and audits.\619\
---------------------------------------------------------------------------
    \618\ Off. of Mgmt. & Budget, Exec. Off. of the President, Security 
Authorization of Information Systems in Cloud Computing Environments 
(2011), https://www.fedramp.gov/assets/resources/documents/
FedRAMP_Policy_Memo.pdf.
    \619\ Get Authorized: Joint Authorization Board, FedRAMP, https://
www.fedramp.gov/jab-
authorization/ (last visited Sept. 26, 2020).
---------------------------------------------------------------------------
    When customers choose to use cloud computing, they must 
trust that their data will be secure and available to access 
quickly. The leading cloud infrastructure providers are major 
technology companies that handle massive amounts of data and 
run large technical operations before offering managed 
services. Market participants said in interviews with the 
Subcommittee that a smaller company attempting to enter the 
IaaS market to contest these firms must convince large 
customers that they can provide a reliable service that is 
compliant with industry-specific regulations.\620\
---------------------------------------------------------------------------
    \620\ Interview with Source 407 (Sept. 10, 2020).
---------------------------------------------------------------------------
    Market participants and industry reports highlight that 
IaaS offerings have become commoditized. To compete, 
infrastructure providers must offer a range of PaaS and SaaS 
services to attract users and developers to their 
platform.\621\ First-party PaaS and SaaS offerings are made 
available in the infrastructure provider's console. As of this 
Report, AWS, Azure, and GCP all list over 100 first-party cloud 
offerings.\622\ Each cloud infrastructure provider has taken 
its own approach to building its platform, but all involve 
acquisitions, in-house software development, and the use of 
open-source software. Google and Azure have also relied on 
their company's existing products--Microsoft leveraging its 
Office 360 Suite and Google leveraging its collection of 
APIs.\623\
---------------------------------------------------------------------------
    \621\ Submission from Source 264, to H. Comm. on the Judiciary, 58 
(Nov. 21, 2011) (on file with Comm.).
    \622\ AWS Marketplace, Amazon, https://aws.amazon.com/marketplace 
(last visited Oct. 4 2020); Find Solutions to Support Innovation, 
Microsoft Azure, https://azure.microsoft.com/en-us/marketplace/ (last 
visited Oct. 4, 2020); Google Cloud Platform, https://console
.cloud.google.com/marketplace (last visited Oct. 4, 2020).
    \623\ Submission from Source 170, to H. Comm. on the Judiciary 
(Nov. 21, 2011) (on file with Comm.); Submission from Google, to H. 
Comm. on the Judiciary, GOOG-HJC-02456801 (2010) (on file with Comm.).
---------------------------------------------------------------------------
    In the case that a new entrant can overcome this entry 
barrier, it must also invest substantial resources to overcome 
network effects within the market. Infrastructure providers 
benefit from network effects--the more customers on a platform, 
the more third parties build services that integrate well with 
that platform leading to more services to attract customers. 
Amazon, Microsoft, and Google all have hundreds of products 
listed in their third-party marketplace, while Amazon lists 
9,250.\624\ In interviews with the Subcommittee, third-party 
software vendors said that they had little choice but to 
integrate their products with the incumbents, most notably, 
AWS.
---------------------------------------------------------------------------
    \624\ AWS Marketplace, Amazon, https://aws.amazon.com/marketplace 
(last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    Cloud infrastructure providers also need to ensure that the 
knowledge and expertise of their platform's technology are 
available to their customers. To achieve this, cloud 
infrastructure providers launch partner networks that include 
consulting firms trained to help enterprise customers move to 
the public cloud, such as AWS Partner Network (APN) Consulting 
Partners \625\ and Microsoft Solution Providers.\626\ Cloud 
infrastructure providers also offer trainings and exams to 
certify members of the workforce as proficient in various uses 
of their technology. Additionally, infrastructure providers 
have programs to support third-party software vendors working 
to integrate with the infrastructure provider's cloud.
---------------------------------------------------------------------------
    \625\ Partners, Amazon, https://aws.amazon.com/partners/ (last 
visited Sept. 26, 2020).
    \626\ Solution Providers, Microsoft, https://www.microsoft.com/en-
us/solution-providers/home (last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    Many market participants interviewed by the Subcommittee 
believe that surpassing the incumbents in the market will be 
challenging because of the potential for vendor lock-in. Other 
evidence reviewed by the Subcommittee bolsters this concern, 
suggesting that lock-in exists because switching costs for 
cloud computing customers are high.\627\
---------------------------------------------------------------------------
    \627\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04215099 (Dec. 31, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    The Subcommittee has identified several common techniques 
infrastructure providers use to initially lock-in customers, 
including contract terms, free tier offerings, and egress fees. 
The first is long-term contracts. In several responses to the 
Committee's requests for information, third parties explained 
they have contracts lasting from three to five years with the 
infrastructure providers.
    Another common technique is using free tier products, where 
each cloud platform offers a free tier of services ranging from 
always free to trial offers.\628\ Market participants suggest 
that while the free tier products vary slightly among the major 
firms, they are relatively similar. When a customer's free 
trial expires, it is faced with switching to another provider 
or starting to pay for service. Switching requires an 
investment of time and resources to adapt to the new service 
provider, as well as possibly paying egress fees to the prior 
vendor. As a result, customers may decline to switch at the 
conclusion of free trials.
---------------------------------------------------------------------------
    \628\ See, e.g., AWS Free Tier, Amazon, https://aws.amazon.com/
free/ (last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    Whether a customer begins using cloud on free tier products 
or not, once they have substantially built and migrated to a 
platform, they face high switching costs in the form of fees to 
move the data, along with the technical and labor costs 
associated with switching the data. When a company moves data 
into the cloud from hard drives or private servers, they are 
often charged ingress fees, which are generally low or 
free.\629\ When a company, however, chooses to move data to 
another infrastructure provider, they are charged an egress 
fee. Egress fees vary slightly by company and region.
---------------------------------------------------------------------------
    \629\ All Network Pricing, Google Cloud, https://cloud.google.com/
vpc/network-pricing (last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    Market participants explain that egress fees are often not 
transparent and are sometimes charged even when data is not 
leaving the data center.\630\ One market participant said that 
these fees ``can create significant financial barriers to 
migrating away from particular cloud storage providers.'' \631\
---------------------------------------------------------------------------
    \630\ Interview with Source 465 (May 27, 2020).
    \631\ Submission from Source 264, to H. Comm. on the Judiciary, 6 
(Nov. 21, 2011) (on file with Comm.).
---------------------------------------------------------------------------
    Additionally, when a customer decides to move any of its 
operations to a different infrastructure provider, it often 
must overcome technical design challenges. Several market 
participants spoke to the challenges of finding cloud 
developers that know the underlying technology of multiple 
cloud infrastructures as a barrier to both switching, either 
from one cloud to another or to set up multi-cloud operations. 
As one third party describes, ``businesses often have to 
calibrate a complex set of technical frameworks, settings, and 
customized interfaces to adapt their business to the 
potentially unique way the cloud storage provider has chosen to 
operate their service.'' \632\ For example, in an investor 
statement in 2020, Snap explained:
---------------------------------------------------------------------------
    \632\ Id. at 5.

     L[T]he vast majority of our computing [runs] on Google 
Cloud and AWS, and our systems are not fully redundant on the 
two platforms. Any transition of the cloud services currently 
provided by either Google Cloud or AWS to the other platform or 
to another cloud provider would be difficult to implement and 
will cause us to incur significant time and expense.\633\
---------------------------------------------------------------------------
    \633\ Snap Inc., Annual Report (Form 10-K) 11 (Dec. 31, 2019), 
http://d18rn0p25nwr6d .cloudfront.net/CIK-0001564408/0cfebc98-816e-
44ac-8351-5067b4f88f0c.pdf.

    When asked about lock-in, many market participants 
discussed how in response to the rise of a few dominant 
platforms in the cloud market, new strategies have emerged to 
increase portability between vendors and allow customers to use 
multiple clouds. Market participants note, however, that today 
interoperability is a challenge, and it is unclear how 
cooperative dominant cloud infrastructure providers will be in 
supporting partnerships and standards to facilitate these 
strategies. Given the current trends toward concentration in 
the cloud infrastructure market, further scrutiny of the role 
standards play toward decreasing switching costs and enabling 
portability and interoperability is warranted.
    Finally, the Subcommittee interviewed market participants 
about related competition concerns facing third-party software 
vendors. Many third-party software vendors compete with first-
party products listed in the infrastructure provider's console. 
Market participants explain that these competitive offerings 
are often the first products customers see because they are 
displayed within the customer's existing console in a format 
that makes it easier for users to add to their existing cloud 
stack, seamlessly including the product in their billing and 
licenses and with minimal technical set-up.\634\
---------------------------------------------------------------------------
    \634\ Getting Started, Amazon Web Servs., https://
docs.aws.amazon.com/awsaccount
billing/latest/aboutv2/billing-getting-started.html (last visited Oct. 
4, 2020).
---------------------------------------------------------------------------
    As a result, it is difficult for customers to compare 
prices and features included in the offerings when they are not 
listed side-by-side. Although third-party vendors can sell 
their service directly to consumers through their own websites, 
many smaller cloud vendors use the marketplaces of the dominant 
infrastructure providers to reach customers, which require fees 
and are subject to competition concerns that are similar to 
other marketplaces examined by the Subcommittee during the 
investigation. Market participants have raised concerns that 
cloud infrastructure providers can preference their own 
offerings, or offer these products with exceedingly steep 
discounts, making it difficult for third-party software vendors 
with fewer products to compete.\635\
---------------------------------------------------------------------------
    \635\ Submission from Source 170, to H. Comm. on the Judiciary, 7 
(Oct. 18, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Significantly, because the leading infrastructure providers 
have access to competitively significant data in the 
marketplace, they have insight into usage metrics regarding any 
managed service that runs on their infrastructure.\636\ Market 
participants told the Subcommittee that they have concerns that 
this data can be used by infrastructure providers to make 
decisions regarding which types of software to acquire or 
replicate to offer through their first-party console.\637\
---------------------------------------------------------------------------
    \636\ Innovation and Entrepreneurship Hearing at 488 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC), id. at 540-41 (response to Questions for the Record of Nate 
Sutton, Assoc. Gen. Couns., Competition, Amazon.com, Inc.).
    \637\ See Alistair Barr, Amazon Finds Startup Investments in the 
``Cloud,'' Reuters (Nov. 9, 2011), http://www.reuters.com/article/
amazon-cloud-idUSN1E7A727Q20111109.
---------------------------------------------------------------------------

                           H. Voice Assistant

    Voice assistants act as a user interface that enables 
exchanges between computing devices through a person's 
voice.\638\ Today users can ask their electronic devices to 
play the morning news or start a conference call.\639\ When 
combined with smart speakers, voice assistants can become a 
gateway to the internet, and can also be used to connect other 
``smart'' devices, such as lighting, thermostats, security 
monitors, and even kitchen appliances.\640\ While voice 
assistants began as mobile phone apps, they have become 
integrated into other devices, including cars and homes.\641\
---------------------------------------------------------------------------
    \638\ Submission from Source 301, to H. Comm. on the Judiciary, 
Source 301-00000080, at 2 (Oct. 15, 2019) (on file with Comm.). 
    \639\ Submission from Source 918, to H. Comm. on the Judiciary, 2 
(Nov. 4, 2019) (on file with Comm.).
    \640\ Id. at Source 918-0002029.
    \641\ Submission from Source 711, to H. Comm. on the Judiciary, 
Source 711-00000080, at 13 (Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    There are two types of voice assistants on the market: 
general and specialized. General voice assistants--such as 
Siri, Alexa, and Google Assistant--can respond to queries and 
interact with a range of applications. Specialized voice 
assistants focus on a specific vertical--such as healthcare or 
banking--where there is a limited vocabulary universe and more 
specific responses.\642\ For example, Snips, a privacy-centric 
voice assistant owned by Sonos, specializes in commands for 
playing music on smart speakers.\643\
---------------------------------------------------------------------------
    \642\ Id.
    \643\ Thomas Ricker, Sonos Buys Snips, a Privacy-Focused Voice 
Assistant, Verge (Nov. 21, 2019), https://www.theverge.com/2019/11/21/
20975607/sonos-buys-snips-ai-voice-assistant-
privacy.
---------------------------------------------------------------------------
    Today, voice assistants interact with humans by receiving 
specific requests and sending feedback through a voice 
response. The first step is to deliver the ``wake word''--such 
as ``hey, Siri'' on iPhones--designed to activate the system. 
Once activated, a voice assistant can execute a command, which 
triggers a voice application.\644\
---------------------------------------------------------------------------
    \644\ Hyunji Chung, Jungheum Park & Sangjin Lee, Digital Forensic 
Approaches for Amazon Alexa Ecosystem, 22 Digit. Investigations S15 
(2017), https://dfrws.org/wp-content/uploads/2019/06/
paper_digital_forensic_approaches_for_amazon_alexa_ecosystem.pdf.
---------------------------------------------------------------------------

                Voice Assistant Ecosystem \645\
---------------------------------------------------------------------------

    \645\ Prepared by the Subcommittee based on Hyunji Chung, Jungheum 
Park & Sangjin Lee, Digital Forensic Approaches for Amazon Alexa 
Ecosystem, 22 Digit. Investigations S15 (2017), https://dfrws.org/wp-
content/uploads/2019/06/paper_digital_forensic_approaches_for_ 
amazon_alexa_ecosystem.pdf.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Although there are multiple types of voice assistants 
within the ecosystem, the Subcommittee focused primarily on 
voice assistant platform vendors and third-party hardware 
manufacturers, including smart speaker manufacturers and 
internet of Things (IoT) compatible device manufacturers. The 
business model for these two groups varies. A voice assistant 
platform vendor can monetize its platform by using its 
ecosystem to drive revenue to complementary lines of business 
such as e-commerce, search, or entertainment.\646\ It can also 
charge voice-application developers to be the recommended 
application for a specific command.\647\ As they become widely 
adopted, stores on voice assistant platforms--such as the 
``Alexa Skills Store''--can offer premium content and collect 
revenue share on payments.\648\ Third-party hardware 
manufacturers generate income by selling hardware, and in some 
cases, by offering subscription services such as home 
monitoring.\649\
---------------------------------------------------------------------------
    \646\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04257931 (Mar. 9, 2017) (on file with Comm.).
    \647\ Id.
    \648\ Id.
    \649\ Alison DeNisco Rayome, How to Monetize Your IoT Project, 
TechRepublic (June 20, 2018), https://www.techrepublic.com/article/6-
steps-to-monetizing-your-iot-project/.
---------------------------------------------------------------------------
    Voice assistants have grown in popularity over recent years 
due to technological advancements in natural language 
processing. Although the market is nascent, market participants 
and industry experts view voice-enabled devices as an 
opportunity to lock consumers into information ecosystems. The 
smartphone and smart speaker are the two main portals for voice 
assistants. Apple and Google lead in the smartphone market, and 
Amazon leads in the smart speaker market.\650\ According to one 
consulting firm, of the 1.1 billion shipments of virtual 
assistants in 2019, Apple's Siri (35
  
  
---------------------------------------------------------------------------
    \650\ Submission from Source 918, to H. Comm. on the Judiciary, 
Source 918-0002763 (Nov. 4, 2019) (on file with Comm.).
---------------------------------------------------------------------------

percent) has the highest market share globally, followed by Google 
Assistant (9 percent) and Amazon Alexa (4 percent).\651\ Although a 
significant share of shipments is attributed to Microsoft Cortana (22 
percent) because of the popularity of Windows PCs globally, Cortana is 
generally not considered a voice assistant platform.\652\
---------------------------------------------------------------------------
    \651\ Press Release, Futuresource Consulting, Virtual Assistants to 
Exceed 2.5 Billion Shipments in 2023 (Dec. 18, 2019), https://
www.futuresource-consulting.com/press-release/
consumer-electronics-press/virtual-assistants-to-exceed-25-billion-
shipments-in-2023/.
    \652\ Id.; Mary Jo Foley, Microsoft CEO Nadella Makes It Official: 
Cortana Is an App, not a Standalone Assistant, ZDNet (Jan. 18, 2019), 
https://www.zdnet.com/article/microsoft-ceo-nadella-makes-it-official-
cortana-is-an-app-not-a-standalone-assistant/.
---------------------------------------------------------------------------
    Market participants emphasize that smart speakers represent 
an essential ``hub'' or gateway for smart homes and are driving 
voice-assistant adoption.\653\ Smart speakers are estimated to 
currently have 35 percent U.S. household penetration, which is 
predicted to grow to 75 percent by 2025.\654\ As of January 
2019, Amazon had a significant lead in the U.S. market at 61.1 
percent, followed by Google at 23.8 percent, Apple at 2.7 
percent, and Sonos at 2.2 percent.\655\
---------------------------------------------------------------------------
    \653\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04258666 (Jan. 28, 2019) (on file with Comm.) (``Speakers are still 
going to be very important. [Company] cited stats that suggested that 
only 20 percent of their `smart home' customers are new to the 
category. And it's fair to say that many/most of these existing smart 
home customers started with sound.'').
    \654\ See generally Submission from Source 918, to H. Comm. on the 
Judiciary (Nov. 4, 2019) (on file with Comm.).
    \655\ Id. at 7.
---------------------------------------------------------------------------
    A voice assistant platform vendor can expand its ecosystem 
by adding IoT devices and voice applications. Both IoT devices 
and voice applications can be first-party--owned by the voice 
assistant platform vendor--or third-party, if the vendor has 
set up services to allow for manufacturers to create voice 
assistant-enabled devices. Amazon's Alexa ecosystem, measured 
in terms of compatible IoT devices and voice applications, is 
the largest of the three primary ecosystems. In 2017, voice 
assistants made their first serious moves beyond smart speakers 
into other product categories.\656\ The voice assistant-
compatible device market is vast and includes kitchen 
appliances, security cameras, and even trash cans.\657\
---------------------------------------------------------------------------
    \656\ Submission from Source 918, to H. Comm. on the Judiciary, 
Source 918-0002024 (Nov. 4, 2019) (on file with Comm.).
    \657\ See, e.g., Christopher Mims, All Ears: Always-On Listening 
Devices Could Soon Be Everywhere, Wall St. J. (July 12, 2018), https://
www.wsj.com/articles/all-ears-always-on-listening-devices-could-soon-
be-everywhere-1531411250.
---------------------------------------------------------------------------
    Market participants suggest there are several barriers to 
entry to compete with general voice assistant platforms. These 
include overcoming the network effects early entrants have 
benefited from, including financial investment in hardware, 
software, and infrastructure, and the ability to sell voice 
assistant-enabled devices at a discount.
    Like many platform-based businesses, the voice assistant 
market benefits from network effects. The more users on a 
platform, the more third-party devices and applications become 
available, which attracts more users to the platform.\658\ 
These network effects for voice assistant platforms are 
amplified by machine learning and artificial intelligence (AI). 
Improvements in Natural Language Processing (NLP) and AI are 
expected to improve the quality of voice assistants and 
contribute to wider adoption.\659\ Voice assistant technology 
improves at a faster rate when there are more users providing 
the voice samples needed to train AI. In testimony to the 
Subcommittee, Professors Maurice Stucke and Ariel Ezrachi 
describe this as ``Learning-by-Doing.'' As they note:
---------------------------------------------------------------------------
    \658\ Submission from Source 918, to H. Comm. on the Judiciary, 
Source 918-0002025, at 12 (Oct. 15, 2019) (on file with Comm.).
    \659\ Submission from Source 711, to H. Comm. on the Judiciary, 
Source 711-00000080, at 12 (Oct. 15, 2019) (on file with Comm.).

     LLearning-by-doing network effect is not limited to online 
searches, but will be present in any environment in which 
algorithms evolve and adapt based on experience, such [as], for 
example, the development of voice recognition or other 
instances based on machine learning.\660\
---------------------------------------------------------------------------
    \660\ Data and Privacy Hearing at 146-47 (statement of Maurice E. 
Stucke, Prof. of Law, Univ. of Tenn., & Ariel Ezrachi, Slaughter & May 
Prof. of Competition Law, Univ. of Oxford, Fellow, Pembroke Coll., 
Dir., Oxford Ctr. for Competition Law & Pol'y).

The scale of users generating data is arguably the most 
important asset in terms of AI.\661\ The incumbents have access 
to large data sets that--when combined with machine learning 
and AI--position them to benefit from economies of scope in the 
smart home.\662\
---------------------------------------------------------------------------
    \661\ Submission from Source 918, to H. Comm. on the Judiciary, 
Source 918-0002763, at 12 (Oct. 15, 2019) (on file with Comm.).
    \662\ Submission from Source 918, to H. Comm. on the Judiciary, 37 
(Sept. 1, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Competing as a voice assistant platform also requires 
significant financial resources. A firm must make significant 
investments to design and train a voice assistant, as well as 
to acquire the physical infrastructure: hardware and cloud 
computing. Additionally, incumbents have also acquired various 
firms that specialize in voice recognition and natural language 
processing, a functionality that is used in their voice 
assistants. For example, both Apple and Amazon acquired 
companies to develop their core voice recognition technologies, 
and every incumbent has continually invested in AI startups to 
improve their voice assistant ecosystem.\663\
---------------------------------------------------------------------------
    \663\ See, e.g., How Big Tech Is Battling to Own the $49B Voice 
Market, CB Insights (Feb. 13, 2019), https://www.cbinsights.com/
research/facebook-amazon-microsoft-google-apple-voice/.
---------------------------------------------------------------------------
    Currently, voice assistant software is built on cloud 
computing infrastructure. In the case of Amazon Alexa and 
Google Assistant, the voice assistant platforms also own the 
underlying cloud infrastructure, AWS and GCP, respectively. 
Market participants note that advancements in voice assistant 
ecosystems are beginning to rely on edge computing technology, 
which brings the computation and data storage closer to the 
device and is a technology in which the incumbent cloud market 
leaders have a head start.\664\
---------------------------------------------------------------------------
    \664\ Future Today Inst., 2020 Tech Trends Report (2020), https://
futuretoday
institute.com/2020-tech-trends/.
---------------------------------------------------------------------------
    Market participants have also raised concerns about 
incumbent firms offering voice-enabled hardware--specifically 
hubs such as smart speakers--to both collect large amounts of 
personal user data and strengthen other lines of business. At 
the Subcommittee's field hearing, Sonos CEO Patrick Spence 
explained:

     LGoogle and Amazon have flooded the market with 
dramatically price-subsidized products. Indeed, they make no 
pretense of the fact that the products themselves are money 
losers and they routinely give them away at steep discounts, 
even for free. It is difficult to predict the impact that voice 
assistants will have on search and e-commerce, but voice 
activated speakers have the potential to dramatically alter the 
way that consumers interact with the internet. We believe that 
Google and Amazon have been willing to forgo profits in smart 
speakers for this reason, in addition to their ability to 
monetize the valuable household data that these products vacuum 
up. And if voice purchasing and voice search do become the next 
big thing, they will own the market because their strategy is 
succeeding. Those two companies now control roughly 85% of the 
U.S. smart speaker market . . . . It's not because their 
hardware businesses are profitable in and of themselves.\665\
---------------------------------------------------------------------------
    \665\ Competitors Hearing at 11 (statement of Patrick Spence, CEO, 
Sonos, Inc.).

    As the voice assistant market expands, it may be difficult 
for users to switch between platforms. Because voice assistant 
platforms are not always interoperable, users would incur costs 
to purchase one or more new devices. Moreover, voice assistant 
technology is designed to learn its user's preferences over 
time. These preferences range from settings like billing 
information and default services for responding to music 
commands to more advanced learning like past voice commands and 
shopping history. As a voice assistant improves its 
``understanding'' of its user, it may increase the costs 
associated with switching to another platform. As one market 
participant noted in a submission to the Subcommittee, ``the 
user may become more dependent on that particular voice 
assistant and be far less likely to use a rival voice assistant 
that has not yet `caught up' with the user's preferences.'' 
\666\
---------------------------------------------------------------------------
    \666\ Submission from Source 711, to H. Comm. on the Judiciary, 
Source 711-00000080, at 20 (Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    The design of most voice assistants--specifically on 
screenless devices--amplifies the ability of voice assistant 
platforms to favor their services as a default or as a response 
with limited choice.\667\ This dynamic makes it easier for 
popular voice assistants to favor their first-party services.
---------------------------------------------------------------------------
    \667\ Id. at 17.
---------------------------------------------------------------------------
    There is also a significant potential for misuse of data to 
harm competition or consumers. Similar to other platforms, such 
as cloud and operating systems, voice assistant platforms 
collect and store users' interactions with the voice 
assistant.\668\ During the investigation, several companies 
shared concerns that voice assistant platforms would be able to 
use this vantage to glean competitive insights from third-party 
voice applications or smart appliances that are performing 
well. As a result, platforms could use that data to acquire 
competitive threats or integrate their features into the 
company's product.
---------------------------------------------------------------------------
    \668\ Innovation and Entrepreneurship Hearing at 481-82 (response 
to Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
---------------------------------------------------------------------------
    Privacy and data experts have also commented that the smart 
home ecosystem has access to some of the most sensitive data 
that can be collected.\669\ Voice assistant platforms not only 
record voice interactions, but also receive information about 
the skills used--``whether a light is on or off. Or, if a 
customer links Alexa to a third-party calendar skill, Alexa may 
receive information about the events on the customer's 
calendar.'' \670\ This raises significant concerns regarding 
whether a person has provided consent to data collection. Voice 
assistants not only collect information on the primary user, 
but also people in their environment, including children.
---------------------------------------------------------------------------
    \669\ See generally Shoshana Zuboff, The Age of Surveillance 
Capitalism (2019).
    \670\ Innovation and Entrepreneurship Hearing at 536 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Finally, leaders in the voice assistant ecosystem set the 
rules for third parties. To make a voice assistant enabled 
device, market participants must comply with voice assistant 
platform vendor specifications. As Mr. Spence of Sonos noted in 
his testimony before the Subcommittee:

     LTo gain access to their platforms and integrate with 
their services, these companies issue all manner of take-it-or-
leave-it demands, from early and technically detailed access to 
our product roadmaps, to proprietary business data, including 
sales forecasts, to waivers of essential contractual 
rights.\671\
---------------------------------------------------------------------------
    \671\ Competitors Hearing at 12 (statement of Patrick Spence, CEO, 
Sonos, Inc.).

    The Subcommittee also heard from multiple voice assistant 
developers that have struggled to gain access to key 
functionality needed to build their applications, such as the 
unprocessed user commands.\672\ While still developing, the 
voice assistant market shows early signs of market 
concentration.
---------------------------------------------------------------------------
    \672\ Submission from Source 301, to H. Comm. on the Judiciary, 
Source 301-00000080, at 23 (Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------

                            I. Web Browsers

    A web browser is software that retrieves and displays pages 
from the internet. People often use browsers to navigate to and 
spend time on websites and to search the web. Most other 
activities online, whether it is on a mobile phone or a 
television screen, are made possible through a browser.\673\
---------------------------------------------------------------------------
    \673\ Submission from Source 385, to H. Comm. on the Judiciary, 3 
(Oct. 11, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Behind every browser is a ``browser engine,'' also known as 
a layout engine or rendering engine. A browser engine is the 
central software component of a web browser, transforming 
content hosted on web servers into a graphic depiction that 
people can interact with. Browsers interpret control codes 
within web pages, which indicate the structure of the data, 
such as the beginning and end of an item, and the way to 
present it to the user, such as headings, paragraphs, lists, or 
embedded images. The browser engine takes this code to ``draw 
the web page'' on the user's screen and notes which parts of it 
are interactive. The non-engine components of the browser 
typically include the menus, toolbars, and other user-facing 
features, which are layered on top of the engine.\674\
---------------------------------------------------------------------------
    \674\ Id. at 4.
---------------------------------------------------------------------------
    Browsers abide by standards to ensure that anyone can 
properly use features within a website on any browser. For 
example, standards such as CSS and XML help ensure that a 
website functions the same in every browser.\675\ Web browser 
standards organizations include the World Wide Web Consortium 
(W3C), Web Hypertext Application Technology Working Group 
(WHATWG), and Internet Engineering Task Force (IETF). Through 
these organizations, stakeholders work in partnership to ensure 
that browser engines and web pages are interoperable.\676\ W3C 
has become one of the most important organizations for browser 
standards. W3C standards undergo a rigorous review process 
prior to implementation.\677\
---------------------------------------------------------------------------
    \675\ Standards, W3C, https://www.w3.org/standards/ (last visited 
Sept. 26, 2020).
    \676\ Submission from Source 993, to H. Comm. on the Judiciary 
(Oct. 11, 2019) (on file with Comm.).
    \677\ Process for 2020, W3C, https://www.w3.org/wiki/Process2020 
(last visited Sept. 26, 2020).
---------------------------------------------------------------------------
    Browser vendors monetize their access to users, usually 
through search royalties. For example, whenever someone types a 
search query into the search bar on Firefox, Google records 
that action, and the Mozilla corporation receives a 
royalty.\678\ Browsers also bring in ad revenues. For example, 
Brave sells advertisers the option to run desktop notification 
ads to users who choose to see ads.\679\
---------------------------------------------------------------------------
    \678\ Innovation and Entrepreneurship Hearing at 437 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \679\ Expand Your Business with Brave Ads, Brave, https://
brave.com/brave-ads-waitlist/ (last visited Sept. 26, 2020).
---------------------------------------------------------------------------
    The browser market is highly concentrated. Google's Chrome 
and Apple's Safari control roughly 80 percent of the browser 
market.\680\ As of August 2020, Chrome is the leader in the 
U.S. desktop browser market (58.6 percent), followed by Safari 
(15.8 percent), Edge (8.76 percent), Firefox (7.6 percent), and 
Internet Explorer (5.36 percent).\681\ On mobile devices, 
Safari (55.5 percent) and Chrome (37.4 percent) have 
significant leads on their rivals, such as Samsung Internet 
(5.01 percent), Firefox (0.77 percent), and Opera (0.44 
percent).\682\ Additionally, the browser market has 
concentrated around three browser engines: Gecko, WebKit, and 
Blink, used in Firefox, Apple's Safari, and Google's Chrome, 
respectively.\683\
---------------------------------------------------------------------------
    \680\ U.S. Browser Market Share, StatCounter, https://
gs.statcounter.com/browser-market-share/all/united-states-of-america 
(last visited Sept. 26, 2020).
    \681\ U.S. Desktop Market Share, StatCounter, https://
gs.statcounter.com/browser-market-share/desktop/united-states-of-
america (last visited Sept. 26, 2020).
    \682\ U.S. Mobile Market Share, StatCounter, https://
gs.statcounter.com/browser-market-share/mobile/united-states-of-america 
(last visited Sept. 26, 2020).
    \683\ Submission from Source 993, to H. Comm. on the Judiciary, 5 
(Oct. 11, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Google's hold on the browser market extends beyond Chrome. 
Google releases the code base used to make the Chrome browser 
as the free, open-source project Chromium.\684\ Chromium is 
used in Microsoft's Edge browser, Amazon's Silk browser, Opera, 
and other browsers that are often referred to as ``Chromium-
based.'' \685\ Similarly, Apple extends its power by mandating 
that all browser applications on the iPhone use Apple's browser 
engine, WebKit.\686\
---------------------------------------------------------------------------
    \684\ The Chromium Projects, https://www.chromium.org/ (last 
visited Sept. 26, 2020).
    \685\ Submission from Source 993, to H. Comm. on the Judiciary, 3 
(Oct. 11, 2019) (on file with Comm.).
    \686\ Innovation and Entrepreneurship Hearing at 584-85 (response 
to Questions for the Record of Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
---------------------------------------------------------------------------
    Browser competition has also led to the creation of a 
browser extension submarket. A browser extension adds 
additional features to a web browser, including user interface 
modifications and ad-blocking. They can also provide for niche 
browser customization and experimentation of new functionality 
before it is implemented into the main browser 
functionality.\687\ Popular add-ons include ad blockers, 
LastPass, and Grammarly.\688\
---------------------------------------------------------------------------
    \687\ Interview with Source 27 (June 29, 2020).
    \688\ Tyler Lacoma, The Best Google Chrome Extensions, Dig. Trends 
(Apr. 4, 2020), https://www.digitaltrends.com/computing/best-google-
chrome-extensions/.
---------------------------------------------------------------------------
    Competition in this market is important to promoting 
innovation online. In a submission to the Subcommittee, a 
market participant explained:

     LCompeting browser engines push each other for innovations 
in raw performance in several respects, including faster 
rendering, greater reliability, and a number of other technical 
improvements; this competition is qualitatively different from, 
and greater than, competition over just the browser 
product.\689\
---------------------------------------------------------------------------
    \689\ Submission from Source 993, to H. Comm. on the Judiciary, 5 
(Oct. 11, 2019) (on file with Comm.).

    Browser diversity is also important for ensuring an open 
internet and reduces the risk that web developers will build 
sites optimized for the leading engine as opposed to web 
standards.\690\ Moreover, as developers work on advancing 
browser engine technology, they create technologies that can 
improve the overall internet ecosystem. For example, Rust is a 
programming language that Mozilla engineers developed while 
writing the Servo layout technology for browser engines.\691\ 
Developers use Rust for other applications today, including 
gaming, operating systems, and other new software 
applications.\692\ There is a general concern that, without 
vibrant competition, this form of innovation will suffer, 
discouraging the development of new browser engine 
technology.\693\
---------------------------------------------------------------------------
    \690\ Id.
    \691\ Rust Language, Mozilla Rsch., https://research.mozilla.org/
rust/ (last visited Sept. 26, 2020).
    \692\ Id.
    \693\ Interview with Source 481 (July 2, 2020).
---------------------------------------------------------------------------
    Browsers protect their dominance through default settings, 
which create a barrier to entry.\694\ Defaults exist in both 
desktop and mobile markets. Although users can set different 
browsers more easily for desktop computers than on mobile 
devices, ``settings can impact the stickiness over time,'' such 
as when a software update overrides a user's preference, 
requiring them to take ``complex steps to restore their browser 
choice.'' \695\ In some cases, consumers are unable to delete 
the preloaded browser. For example, on Apple iOS devices and 
Facebook's Oculus, users are unable to delete the preloaded 
browser. Some popular mobile applications can preset webpage 
links to a predetermined browser, such as the Apple Mail App 
(Safari) and the Search widget on an Android device 
(Chrome).\696\
---------------------------------------------------------------------------
    \694\ Submission from Source 993, to H. Comm. on the Judiciary, 10-
11 (Oct. 11, 2019) (on file with Comm.); Submission from Source 269, to 
H. Comm. on the Judiciary, 2-3 (July 23, 2019) (on file with Comm.).
    \695\ Submission from Source 993, to H. Comm. on the Judiciary, 10 
(Oct. 11, 2019) (on file with Comm.).
    \696\ Id. at 5; Submission from Source 269, to H. Comm. on the 
Judiciary, 2 (July 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------

                         J. Digital Advertising

    There are two principal forms of digital advertising: 
search advertising and display advertising. Search advertising 
refers to digital ads on desktop or mobile search engines, such 
as the Google.com homepage, displayed via ``search ad tech'' 
alongside search engine results. Search advertising is often 
bought and sold via real-time bidding (RTB) auctions among 
advertisers, where advertisers set the prices they are willing 
to pay for a specific keyword in a query.\697\ Display 
advertising refers to the delivery of digital ad content to ad 
space on websites and mobile apps, which is referred to as 
``inventory.'' Like search advertising, buying and selling 
display ads often involves real-time bidding.\698\
---------------------------------------------------------------------------
    \697\ Submission from Source 465, to H. Comm. on the Judiciary, 6 
(June 3, 2019) (on file with Comm.).
    \698\ Id.
---------------------------------------------------------------------------
    Within display advertising, there are two separate ``ad 
tech'' markets that the Subcommittee reviewed during the 
investigation: first-party and third-party. ``First-party'' 
platforms refer to companies such as Facebook, Twitter, and 
Snap, which sell ad space on their own platforms directly to 
advertisers. Google also uses first-party ad tech to sell 
display ads on its own properties, most notably YouTube. Third-
party display ad tech platforms are run by intermediary vendors 
and facilitate the transaction between third-party advertisers, 
such as the local dry cleaner or a Fortune 500 company, and 
third-party publishers, such as The Washington Post or a 
blog.\699\ Third-party ad tech providers include Google, Flash-
talking, Sizmek (owned by Amazon), and the Trade Desk, among 
others.\700\
---------------------------------------------------------------------------
    \699\ Id. at 5.
    \700\ Competition & Mkts. Auth. Report at 266.
---------------------------------------------------------------------------
    Software in display ads is programmatic, meaning that 
specialized software automates the buying and selling of 
digital ads. Market participants explain that this automated 
approach provides greater liquidity, better return-on-
investment metrics, more precise ad targeting, and lower 
transaction costs. One major drawback, however, is that this 
process lacks transparency.\701\ Google, specifically, ``does 
not disclose to the publishers on the other ends of these 
trades what their space ultimately sold for and how much Google 
keeps as its share.'' \702\ As another market participant told 
the Subcommittee, Google could make the process ``more 
transparent,'' but given Google's financial stake in 
maintaining secrecy, ``there is no incentive to.'' \703\
---------------------------------------------------------------------------
    \701\ Dina Srinivasan, Why Google Dominates Advertising Markets, 24 
Stan. Tech. L. Rev. 55, 63-64 (2020).
    \702\ Id. at 64.
    \703\ Interview with Source 004 (Apr. 23, 2020).

                    The Ad-Tech Suite \704\
---------------------------------------------------------------------------

    \704\ Prepared by the Subcommittee based on Dina Srinivasan, Why 
Google Dominates Advertising Markets, 24 Stan. Tech. L. Rev. 55, 77 
(2020).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Ad exchanges refer to the ``ad trafficking system that 
connects advertisers looking to buy inventory with publishers 
selling inventory.'' \705\ Sales on ad exchanges occur 
primarily through: (1) open real-time bidding auctions; (2) 
closed real-time bidding auctions; or (3) programmatic direct 
deals.\706\
---------------------------------------------------------------------------
    \705\ Submission from Source 465, to H. Comm. on the Judiciary, 9 
(June 3, 2019) (on file with Comm.).
    \706\ Id.
---------------------------------------------------------------------------
    Sell-side software includes publisher ad servers.\707\ The 
primary function of a publisher ad server is to fill ad space 
on a publisher's website that is personalized to the interests 
of a specific website viewer.\708\ Sell-side software also 
includes ad networks, which aggregate ad inventory from many 
different publishers and divide that inventory based on user 
characteristics--such as age or location. Ad networks sell the 
pool of inventory through ad exchanges or demand-side platforms 
(DSPs).\709\
---------------------------------------------------------------------------
    \707\ Competition & Mkts. Auth. Report at 263.
    \708\ Submission from Source 465, to H. Comm. on the Judiciary, 8 
(June 3, 2019) (on file with Comm.).
    \709\ Id. at 9.
---------------------------------------------------------------------------
    Buy-side software includes advertiser ad servers--software 
that stores, maintains, and delivers digital ads to the 
available inventory. Ad servers facilitate the programmatic 
process that makes instantaneous decisions about which ads to 
display on which websites to which users and helps display the 
ad on that site. Ad servers collect and report data, such as ad 
impressions and clicks, for advertisers to monitor ad 
performance and track conversion metrics.\710\ Buy-side 
software also includes demand-side platforms--software that 
allows advertisers to buy advertising inventory from a range of 
publishers. Demand-side platforms use data to create targeted 
ad audiences and engage in purchasing and bidding.\711\
---------------------------------------------------------------------------
    \710\ Competition & Mkts. Auth. Report at 263.
    \711\ Submission from Source 888, to H. Comm. on the Judiciary, 8 
(June 3, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    The ad tech suite also includes analytics tools that allow 
advertisers and publishers to measure ad campaign efficiency, 
including consumers' interactions with an ad. Similarly, data 
management platforms (DMPs) aggregate and store consumer data 
from various sources and process the data for analysis. 
Advertisers and publishers use data management platforms to 
track, partition, and target consumer audiences across 
websites.\712\
---------------------------------------------------------------------------
    \712\ Id. at 10.
---------------------------------------------------------------------------
    Over the last decade, the digital advertising market has 
experienced double-digit year-over-year growth. The market, 
however, has become increasingly concentrated since the advent 
of programmatic trading. In 2017, Business Insider reported 
that Google and Facebook accounted for 99 percent of year-over-
year growth in U.S. digital advertising revenue.\713\ Today, 
advertisers and publishers alike have few options when deciding 
how to buy and sell online ad space.\714\
---------------------------------------------------------------------------
    \713\ Alex Heath, Facebook and Google Completely Dominate the 
Digital Ad Industry, Bus. Insider (Apr. 26, 2017), https://
www.businessinsider.com/facebook-and-google-dominate-ad-
industry-with-a-combined-99-of-growth-2017-4.
    \714\ Dina Srinivasan, Why Google Dominates Advertising Markets, 24 
Stan. Tech. L. Rev. 55, 59 (2020).
---------------------------------------------------------------------------
    Market participants suggest this concentration likely 
exists in part due to high barriers to entry. Google and 
Facebook both have a significant lead in the market due to 
their significant collection of behavioral data online, which 
can be used in targeted advertising. Additionally, Google and 
Facebook do not provide access to this unique data in open data 
exchanges. Advertisers' only access to this information is 
indirect--through engagement with Google and Facebook's ad 
tech.\715\
---------------------------------------------------------------------------
    \715\ Id. at 93.
---------------------------------------------------------------------------
    Amazon's advertising business is starting to obtain a 
portion of the U.S. year-over-year digital advertising revenue 
growth.\716\ Amazon has been able to enter the market because 
it has its own trove of user data--namely, competitively 
significant first-party data related to retail searches and 
purchases. Moreover, Amazon's 50 percent penetration across 
U.S. households and its reach with high-income customers are 
likely to help drive its ad revenue growth.\717\ While Amazon 
can leverage its ecosystem to overcome some of the barriers to 
entry in ad tech, the recent U.K. Competition and Markets 
Authority report found that, as of today, Amazon's ad tech 
likely only has advantages in the retail sector.\718\
---------------------------------------------------------------------------
    \716\ Kiri Masters, What's Driving Amazon's $10 Billion Advertising 
Business, Forbes (July 26, 2019), https://www.forbes.com/sites/
kirimasters/2019/07/26/whats-driving-amazons-10bn-
advertising-business/#4cc9c84aa043.
    \717\ Id.
    \718\ Competition & Mkts. Auth. Report at 282.
---------------------------------------------------------------------------

                      V. DOMINANT ONLINE PLATFORMS

                              A. Facebook

1. Overview
    Founded in 2004 by Mark Zuckerberg, Eduardo Saverin, Chris 
Hughes, and Dustin Moskowitz,\719\ Facebook is the largest 
social networking platform in the world. Its business operates 
around five primary product offerings, including: (1) Facebook, 
a social network platform; (2) Instagram, a social network app 
for photos and videos; (3) Messenger, a cross-platform 
messaging app for Facebook users; (4) WhatsApp, a cross-
platform messaging app; and (5) Oculus, a virtual reality 
gaming system.
---------------------------------------------------------------------------
    \719\ Steven Levy, Facebook: The Inside Story 65-69 (2020).
---------------------------------------------------------------------------
    Facebook reported in July 2020 that its platform includes 
1.79 billion daily active users (DAUs),\720\ 2.7 billion 
monthly active users (MAUs),\721\ and an average revenue per 
user (ARPU) of $7.05.\722\ Last year, Facebook's businesses 
collected about $70 billion in revenue--a 27 percent increase 
from the prior year--earning about $24 billion in income from 
its operations.\723\ Facebook reported that its family of 
products--including Facebook, Instagram, Messenger, and 
WhatsApp--includes 2.47 billion daily active people (DAP),\724\ 
3.14 billion monthly active people (MAP), and a family average 
revenue per person (ARPP) of $6.10.\725\
---------------------------------------------------------------------------
    \720\ Facebook, Inc., Quarterly Report (Form 10-Q) 29 (July 31, 
2020), https://investor
.fb.com/financials/sec-filings-details/default.aspx?FilingId=14302237.
    \721\ Id. at 30.
    \722\ Id. at 32.
    \723\ Id. at 35. See generally Howard A. Shelanski & J. Gregory 
Sidak, Antitrust Divestiture in Network Industries, 68 U. Chi. L. Rev. 
1, 6 (2001) (``High profit margins might appear to be the benign and 
necessary recovery of legitimate investment returns in a Schumpeterian 
framework, but they might represent exploitation of customer lock-in 
and monopoly power when viewed through the lens of network 
economics.'').
    \724\ Facebook, Inc., Quarterly Report (Form 10-Q) 25 (July 31, 
2020), https://investor
.fb.com/financials/sec-filings-details/default.aspx?FilingId=14302237.
    \725\ Id. at 35.
---------------------------------------------------------------------------
    In addition to the Subcommittee's investigation of 
Facebook's monopoly power, state and federal antitrust 
authorities are investigating Facebook for potential violations 
of the U.S. antitrust laws. In July 2019, Facebook disclosed 
that the Federal Trade Commission (FTC) had opened an antitrust 
investigation of Facebook in June 2019.\726\ Facebook also 
disclosed that in July 2019 the Department of Justice announced 
that it would begin an antitrust review of market-leading 
online platforms.\727\ In September 2019, New York Attorney 
General Letitia James announced that she joined with eight 
other attorneys general to lead a multistate investigation of 
Facebook.\728\ In October 2019, Attorney General James reported 
that the investigation into Facebook had grown to include 47 
attorneys general.\729\
---------------------------------------------------------------------------
    \726\ Facebook, Inc., Quarterly Report (Form 10-Q) 42 (July 24, 
2019), https://investor
.fb.com/financials/sec-filings-details/default.aspx?FilingId=13550646.
    \727\ Id. at 53.
    \728\ Press Release, N.Y. Att'y Gen., AG James Investigating 
Facebook for Possible Antitrust Violations (Sept. 6, 2009), https://
ag.ny.gov/press-release/2019/ag-james-investigating-facebook-possible-
antitrust-violations.
    \729\ Press Release, N.Y. Att'y Gen., Attorney General James Gives 
Update On Facebook Antitrust Investigation (Oct. 22, 2019), https://
ag.ny.gov/press-release/2019/attorney-general-james-gives-update-
facebook-antitrust-investigation.
---------------------------------------------------------------------------
2. Social Networking
    (a) Market Power. Facebook has monopoly power in the market 
for social networking.\730\ According to internal documents 
produced by Facebook to the Committee, it has high reach, time-
spent, and significantly more users than its rivals in this 
market. Despite significant changes in the market--such as the 
advent of mobile devices, applications, and operating systems--
Facebook has held an unassailable position in the social 
network market for nearly a decade, demonstrating its monopoly 
power.\731\
---------------------------------------------------------------------------
    \730\ Facebook has argued to other antitrust enforcement bodies 
that limiting the product market to social networks at the exclusion of 
other markets, such as user attention, ``would be artificial and would 
not reflect the competitive realities,'' and that ``competitive 
pressures to which Facebook reacts are global in nature.'' See, e.g., 
Submission from Facebook, to H. Comm. on the Judiciary, FB-HJC-ACAL-
00012074 (2016) (on file with Comm.) (White Paper on Relevant Markets 
and Lack of Dominance for Federal Cartel Office).
    \731\ Omidyar Network Report.
---------------------------------------------------------------------------
    Facebook's monopoly power is firmly entrenched and unlikely 
to be eroded by competitive pressure from new entrants or 
existing firms. Documents produced during the investigation by 
Facebook, including communications among its senior executives 
on market strategy, as well as a memorandum by a senior data 
scientist and economist at Facebook,\732\ support the 
conclusion that Facebook's monopoly is insulated from 
competitive threats. The social network market has high entry 
barriers--including strong network effects, high switching 
costs, and Facebook's significant data advantage--that 
discourage direct competition by other firms to offer new 
products and services.\733\ Facebook has also maintained and 
expanded its dominance through a series of acquisitions of 
companies it viewed as competitive threats, and selectively 
excluded competitors from using its platform to insulate itself 
from competitive pressure. Together, these factors have tipped 
the social networking market toward a monopoly.\734\
---------------------------------------------------------------------------
    \732\ Cunningham Memo at 16 (``Facebook has high reach and time-
spent in most countries. User growth is tracking internet growth: 
global reach is roughly stable.'').
    \733\ Instead of competing directly with Facebook, such as Google 
attempted but failed to do with Google+, other social platforms provide 
niche products with social graphs that are orthogonal to Facebook's 
graph. See id. at 4 (``LinkedIn[ ] and Nextdoor coexist in the US with 
similar userbases but orthogonal graphs: Facebook connects friends and 
family, LinkedIn connects coworkers, Nextdoor connects neighbors.'').
    \734\ See Bundeskartellamt, Case Summary: Facebook, Exploitative 
Business Terms Pursuant to Section 19(1) GWB for Inadequate Data 
Processing 6 (2019) (``The facts that competitors can be seen to exit 
the market and that there is a downward trend in the user-based market 
shares of the remaining competitors strongly indicate a market tipping 
process which will result in Facebook.com becoming a monopolist.''), 
https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/
Fallberichte/Missbrauchsaufsicht/2019/B6-22-16.pdf?_blob=
publicationFile&v=4.
---------------------------------------------------------------------------
    Several antitrust enforcement agencies have examined 
Facebook's monopoly in recent years and reached similar 
conclusions. In July 2020, the United Kingdom's Competition and 
Markets Authority (CMA) found that Facebook is dominant in the 
markets for social networks and digital display ads, and that 
its market power ``derives in large part from strong network 
effects stemming from its large network of connected users and 
the limited interoperability it allows to other social media 
platforms.'' \735\ In July 2019, Germany's Federal Cartel 
Office (Bundeskartellamt) found that ``Facebook is the dominant 
company in the market for social networks,'' and that in 
Germany's social network market, ``Facebook achieves a user-
based market share of more than 90%.'' \736\ And in June 2019, 
the Australian Competition & Consumer Commission (ACCC) found 
that ``Facebook has substantial market power in a number of 
markets and that this market power is unlikely to erode in the 
short to medium terms.'' \737\
---------------------------------------------------------------------------
    \735\ Competition & Mkts. Auth. Report at 26.
    \736\ In addition to Facebook's high market share, the 
Bundeskartellamt also found that Facebook has market power based on 
other measures, including its ``access to competitively relevant data, 
economies of scale based on network effects, the behaviour of users who 
can use several different services or only one service and the power of 
innovation-driven competitive pressure.'' Press Release, 
Bundeskartellamt, Bundeskartellamt Prohibits Facebook from Combining 
User Data from Different Sources 4 (Feb. 7, 2019), https://
www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/
2019/07_02_2019_Facebook_FAQs.pdf? _ _blob=publicationFile&v=6. The 
Bundeskartellamt also noted that, in terms of assessing market share by 
time spent on the network, ``the Facebook group would have a combined 
market share far beyond the market dominance threshold pursuant to 
Section 18(4) GWB, even if YouTube, Snapchat, Twitter, WhatsApp, and 
Instagram were included in the relevant market.'' Id. at 6.
    \737\ Austl. Competition & Consumer Comm'n Report at 9; see also 
id. at 78 (adopting a broader view on Facebook's product market to 
include Twitter and Snapchat).
---------------------------------------------------------------------------
    Facebook's responses to the Committee's requests for 
information claimed that it competes in a ``rapidly evolving 
and dynamic marketplace in which competition is vigorous,'' 
citing Twitter, Snapchat, Pinterest, and TikTok as examples of 
competition Facebook faces for ``every product and service'' 
that it offers.\738\ According to Facebook, its users ``have 
many choices and can leave Facebook if they're not happy,'' 
\739\ allowing people to quickly abandon it. The ability of 
users to ``explore the myriad other options available . . . 
creates strong competition for every product and service 
Facebook offers, as well as pressure to develop new products to 
attract and retain users.'' \740\
---------------------------------------------------------------------------
    \738\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-APP0004 (Oct. 14, 2019); Innovation and Entrepreneurship 
Hearing at 17 (statement of Matt Perault, Dir. of Pub. Pol'y, Facebook, 
Inc.).
    \739\ Innovation and Entrepreneurship Hearing at 567 (response to 
Questions for the Record of Matt Perault, Dir. of Pub. Pol'y, Facebook, 
Inc.).
    \740\ Id.
---------------------------------------------------------------------------
    In response to other antitrust inquiries, Facebook said 
that it competes for users' attention broadly.\741\ In a 2016 
white paper prepared in response to an investigation by 
Germany's Federal Cartel Office, Facebook stated that it 
``faces intense competition for user attention and engagement 
at every level,'' listing companies as diverse as Candy Crush 
and Clash of the Clans--popular mobile gaming apps--along with 
YouTube, Twitter, Pinterest, Snapchat and others as competitors 
for users' attention.\742\ Facebook similarly submitted to the 
ACCC that, if the company does not compete vigorously, users 
will go to other ``platforms, websites, apps, and other 
services--not just social media services--that compete for 
their attention.'' \743\ In an interview conducted by the 
Subcommittee, a former employee explained that, as a product 
manager at Facebook, ``your only job is to get an extra minute. 
It's immoral. They don't ask where it's coming from. They can 
monetize a minute of activity at a certain rate. So the only 
metric is getting another minute.'' \744\
---------------------------------------------------------------------------
    \741\ See, e.g., Submission from Facebook, to H. Comm. on the 
Judiciary, FB-HJC-ACAL-00012074 (2016) (on file with Comm.).
    \742\ Id.
    \743\ Facebook, Facebook's Response to the Digital Platforms 
Inquiry for Australian Competition and Consumer Commission 25 (Sept. 
12, 2019), https://fbnewsroomus.files
.wordpress.com/2019/09/facebook-submission-to-treasury-on-digital-
platforms-inquiry.pdf.
    \744\ Interview with Former Instagram Employee (Oct. 2, 2020).
---------------------------------------------------------------------------
    Facebook describes a diverse list of other firms as 
competitive substitutes for Facebook, including Microsoft's 
Bing, a search engine; Yelp, a publisher of crowd-sourced 
business reviews; and BuzzFeed, a digital news publisher.\745\ 
According to Facebook, these firms exert competitive pressure 
on Facebook in the market for users' attention.\746\ Most 
recently, in response to an inquiry by the United Kingdom's 
Competition and Markets Authority, Facebook calculated its 
market share as ``time captured by Facebook as a percentage of 
total user time spent on the internet, including social media, 
dating, news and search platforms.'' \747\ Based on these 
measures, Facebook concluded that it lacks monopoly power.
---------------------------------------------------------------------------
    \745\ Id.
    \746\ Id.
    \747\ Competition & Mkts. Auth. Report at 121 n.152.
---------------------------------------------------------------------------
    Facebook's position that it lacks monopoly power and 
competes in a dynamic market is not supported by the documents 
it produced to the Committee during the investigation. Instead, 
Facebook's internal business metrics show that Facebook wields 
monopoly power. In response to a supplemental information 
request by the Subcommittee,\748\ Facebook produced industry 
updates prepared in the ordinary course of business by 
Facebook's Market Strategy team.\749\ It has described these 
reports as both ``internal competitive metrics'' and as a 
``competitive survey regularly prepared for Facebook's 
management team [that] tracks a variable set of competitors not 
by specific products or features, but by the degree of user 
attention and engagement that they command in terms of monthly 
active users (`MAU') and daily active users (`DAU').'' \750\
---------------------------------------------------------------------------
    \748\ The Subcommittee made a supplemental request after 
identifying Facebook's industry updates during the review of documents 
produced in response to the Committee's September 2019 request for 
information.
    \749\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-000025 (Mar. 5, 2020) (on file with Comm.).
    \750\ Id. at FB-HJC-ACAL-00012074, FB-HJC-ACAL-00012090 (2016) (on 
file with Comm.).
---------------------------------------------------------------------------
    Facebook's industry updates were shared internally with 
senior executives, including Mark Zuckerberg, Facebook's 
CEO.\751\ Facebook used data collected through Onavo, a virtual 
private network (VPN) app, to provide detailed competitive 
insights into the usage and engagement of other firms.\752\ 
Facebook also relied on this data in response to inquiries by 
the European Commission and the Bundeskartellamt,\753\ as well 
as to prepare detailed internal reports on market 
strategy.\754\
---------------------------------------------------------------------------
    \751\ Id. at FB-HJC-ACAL-00054944 (Apr. 27, 2012) (on file with 
Comm.).
    \752\ Although it does not include data from users of Apple's 
iMessage, which is relevant for purposes of usage on WhatsApp and 
Messenger, Facebook's documents note that iMessage's growth is limited 
by the adoption of iPhones, whereas Facebook's products can be used 
across different devices. See generally Cunningham Memo at 15.
    \753\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00012090 (2016) (on file with Comm.).
    \754\ Cunningham Memo at 9 (citing data from MINT, another name 
used for Onavo within Facebook, Inc.).

    (i) Usage and Reach. Facebook has monopoly power in the 
social networking market. Based on its internal documents, 
Facebook and its family of products--Facebook, Instagram, 
Messenger, and WhatsApp--control a significant share of users 
and have high reach in the social networking market.\755\ 
Facebook's family of products includes three of the seven most 
popular mobile apps in the United States by monthly active 
persons, reach, and percentage of daily and monthly active 
persons.\756\
---------------------------------------------------------------------------
    \755\ Id. at 2; see also id. at 16 (``Facebook has high reach and 
time-spent in most countries. User growth is tracking internet growth: 
global reach is roughly stable.'').
    \756\ Submission from Facebook, to Comm. on the Judiciary, 38 (Jan. 
2020) (on file with Comm.) (Monthly Update for December 2019, based on 
Facebook's internal calibrations of App Annie data). According to 
Facebook, the monthly active persons (MAP) metric is ``based on the 
activity of users who visited at least one of Facebook, Instagram, 
Messenger, and WhatsApp (collectively, our `Family' of products) during 
the applicable period of measurement.'' Facebook, Inc., Quarterly 
Report (Form 10-Q) 4 (Apr. 30, 2020), http://
d18rn0p25nwr6d.cloudfront.net/CIK-0001326801/5fc46b22-5cb5-4014-bcb7-
7edc64f2d963.pdf.
---------------------------------------------------------------------------
    As a standalone product, the Facebook app had the third 
highest reach of all mobile apps,\757\ with 200.3 million users 
in the United States, reaching 74 percent of smartphone users 
as of December 2019.\758\ Facebook Messenger had the fourth 
highest reach, with 183.6 million monthly active persons, 
reaching 54.1 percent of U.S. smartphone users.\759\ Finally, 
Instagram had the sixth highest reach, with 119.2 million 
users, reaching 35.3 percent of smartphone users.\760\ In 
contrast, Snapchat, the mobile app with the seventh highest 
reach, had 106.5 million users in the United States, reaching 
31.4 percent of smartphone users.\761\
---------------------------------------------------------------------------
    \757\ Interview with Former Instagram Employee (Oct. 2, 2020) 
(``Reach is closer to market penetration [than usage and engagement]. 
It applies to the number of internet users we think are in that 
country, how many use a Facebook Family app and have taken one 
meaningful action. What people forget is that Facebook believes its 
total addressable market being anyone that has access to the 
internet.'').
    \758\ Submission from Facebook, to H. Comm. on the Judiciary, 38 
(Jan. 2020) (on file with Comm.) (Monthly Update for December 2019); 
Submission from Facebook, to H. Comm. on the Judiciary, 32 (Oct. 2019) 
(on file with Comm.) (Monthly Update for September 2019, based on 
Facebook's internal calibrations of App Annie data).
    \759\ Id.
    \760\ Id.
    \761\ Id.
---------------------------------------------------------------------------
    Facebook's maintenance of these high market shares over a 
long time period demonstrates its monopoly power.\762\ From 
September 2017 to September 2018, Facebook reached more than 75 
percent of users internationally with at or near 100 percent 
market penetration in nine of the twenty most populous 
countries in the world.\763\ In the United States, Facebook 
alone reached more than 75 percent of internet users during 
this period, while Messenger and Instagram both achieved 
significant reach as well.\764\ According to a white paper 
prepared by a senior data scientist and economist at Facebook, 
the Facebook app has high reach in most countries, and its 
growth is in line with that of the internet, whereas Instagram 
and WhatsApp are still growing ``very rapidly.'' \765\ For 
Instagram, ``there appear to be no countries in which growth 
has hit a ceiling.'' \766\
---------------------------------------------------------------------------
    \762\ See generally Omidyar Network Report at 11.
    \763\ Cunningham Memo at 2.
    \764\ Id.
    \765\ Id. at 12.
    \766\ Id. at 16 (emphasis added).
---------------------------------------------------------------------------
    Facebook's family of products are more immersive of users' 
attention.\767\ According to Facebook's internal market data, 
its users spend significantly more time on its family of 
products than on competing services. For example, social media 
users spent more time on Facebook (48.6 minutes) than on 
Snapchat (21 minutes) or Twitter (21.6 minutes) in 2018.\768\
---------------------------------------------------------------------------
    \767\ Id. (``Facebook has high reach and time-spent in most 
countries. User growth is tracking internet growth: global reach is 
roughly stable.'').
    \768\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00086798 (Aug. 22, 2020) (on file with Comm.) (Monthly Update 
for August 2018).
---------------------------------------------------------------------------
    Since at least 2012, Facebook's documents show that 
Facebook believed it controlled a high share of the social 
networking market.\769\ In a presentation prepared for Sheryl 
Sandberg, Facebook's Chief Operating Officer, to deliver at a 
large telecommunications firm, Facebook said that it controlled 
``95% of all social media'' in the United States in terms of 
monthly minutes of use--as compared to Twitter, Tumblr, 
Myspace, and all other social media--and noted that the 
``industry consolidates as it matures.'' \770\
---------------------------------------------------------------------------
    \769\ Id. at FB-HJC-ACAL-00057113, https://judiciary.house.gov/
uploadedfiles/00057113_
picture.pdf; id. at FB-HJC-ACAL-00049006 (Jan. 28, 2012) (on file with 
Comm.).
    \770\ Id. at FB-HJC-ACAL-00057113, https://judiciary.house.gov/
uploadedfiles/00057113_ picture.pdf.
---------------------------------------------------------------------------

              Facebook Investor Presentation \771\
---------------------------------------------------------------------------

    \771\ Prepared by Subcommittee staff based on id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    A 2012 investor presentation prepared for Facebook 
described it as having an ``enduring competitive advantage'' 
similar to other historically dominant firms.\772\ According to 
this document, which was reviewed and edited by Facebook's 
Chief Financial Officer to present to investors,\773\ Facebook 
had nearly 100 percent market penetration among 25-34 year-olds 
in the United States.\774\ It also had more than 85 percent 
penetration in certain countries.\775\ As noted in the 
presentation, ``In every country we've tipped, we have 
maintained that penetration.'' \776\ This point was underscored 
by a suggestion in the presentation that within a decade, it 
would be doubtful that entrepreneurs could compete with 
Facebook.\777\
---------------------------------------------------------------------------
    \772\ Id. at FB-HJC-ACAL-00049006 (Apr. 30, 2012) (on file with 
Comm.).
    \773\ Id. at FB-HJC-ACAL-00064320 (Apr. 18, 2012).
    \774\ Id. at FB-HJC-ACAL-00049006 (Apr. 30, 2012) (on file with 
Comm.).
    \775\ Id.
    \776\ Id.
    \777\ Id. (``Imagine 10 years from now . . . [a] [l]ocal TV show 
asking an entrepreneur how he can hope to compete with Facebook.'').
---------------------------------------------------------------------------
    At the Subcommittee's sixth hearing, Subcommittee Vice 
Chair Joe Neguse (D-CO) asked Mr. Zuckerberg about Facebook's 
monopoly power.\778\ As Mr. Neguse noted, based on this 
evidence, ``most folks would concede Facebook was a monopoly as 
early as 2012.'' \779\ Since then, he added that Facebook's 
strategy has been to ``protect what I describe as a monopoly'' 
by acquiring, copying, or eliminating its competitors.\780\ Mr. 
Zuckerberg responded by characterizing the social networking 
market as ``a very large space.'' \781\ However, Facebook did 
not corroborate this claim through the evidence it produced 
during the investigation.
---------------------------------------------------------------------------
    \778\ CEO Hearing at 85 (question of Rep. Joe Neguse (D-CO), Vice 
Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm 
on the Judiciary).
    \779\ Id. at 86.
    \780\ Id.
    \781\ Id. (statement of Mark Zuckerberg, CEO, Facebook, Inc.).
---------------------------------------------------------------------------
    Lastly, after reviewing relevant market data and documents 
provided during the investigation, the Subcommittee found that 
there are distinct, relevant markets for social networking and 
social media. Facebook proposes that online services with 
social functions, such as YouTube, are social networks that 
compete in the same product market as Facebook and its other 
products for user attention.\782\ For example, in a white paper 
submission, Facebook compares its News Feed, which includes a 
stream of posts and videos uploaded by users, as similar to the 
content feed that users encounter on YouTube.\783\ However, 
longstanding antitrust doctrine describes relevant product 
markets as those that are ``reasonably interchangeable by 
consumers for the same purposes.'' \784\ Although YouTube is a 
dominant social app, it is primarily used to consume video 
content online. It does not provide the core functionality of 
Facebook or its family of products, such as Pages, Marketplace, 
or limited sharing within a person's network.
---------------------------------------------------------------------------
    \782\ Facebook, Facebook's Response to the CMA's Interim Report 13-
14 (Feb. 14, 2020), https://assets.publishing.service.gov.uk/media/
5e8c827ae90e070774c61fdb/Facebook_response 
_to_interim_report_with_cover_letter.pdf.
    \783\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00012074 (2016) (on file with Comm.).
    \784\ See United States v. Microsoft Corp., 253 F.3d 34, 51-52 
(D.C. Cir. 2001); see also Competition & Mkts. Auth. Report at 117-18 
(``[T]he closeness of competition between different platforms depends 
on the degree to which consumers consider them substitutes, rather than 
the extent to which they share common functionalities.'').
---------------------------------------------------------------------------
    The United Kingdom's Competition and Markets Authority 
reached a similar conclusion, finding that YouTube is primarily 
a market for consuming video content rather than a market for 
communication.\785\ As it noted, ``consumers use YouTube for 
particularly distinctive reasons . . . . YouTube does not 
currently appear to provide a strong competitive constraint on 
Facebook, despite its comparable reach and levels of consumer 
engagement.'' \786\ Internal documents produced to the United 
Kingdom bolstered this finding, indicating ``that the most 
common reasons consumers in the UK access YouTube are for 
entertainment and to view `how-to' videos on the platform.'' 
\787\
---------------------------------------------------------------------------
    \785\ Competition & Mkts. Auth. Report at 120 (``[T]here are 
particularly important differences between YouTube, which most 
consumers use for video streaming, and platforms such as those of 
Facebook, which focus more on consumer needs related to social 
networking.'').
    \786\ Id. at 126, 128.
    \787\ Id. at 127.

    (ii) Barriers to Entry. Facebook's persistently high market 
share is not contestable due to high barriers to entry that 
discourage competition. These barriers to entry include its 
strong network effects, high switching costs for consumers, and 
data advantages.
    (1) Network Effects. Facebook's significant reach among 
users, and high levels of engagement, create very strong 
network effects.\788\
---------------------------------------------------------------------------
    \788\ See United States v. Microsoft Corp., 84 F. Supp. 2d 9, 20 
(D.D.C. 1999) (``A positive network effect is a phenomenon by which the 
attractiveness of a product increases with the number of people using 
it.''). The corollary is that, when fewer people use the product, it 
becomes less attractive, which can tip the market in favor of another 
firm if there are low entry barriers. Dig. Competition Expert Panel 
Report at 35.
---------------------------------------------------------------------------
    As a result, Facebook has tipped the market in its 
favor,\789\ primarily facing competitive pressure from within 
its own family of products--such as through Instagram competing 
with Facebook or WhatsApp competing with Messenger--rather than 
actual competition from other firms in the market.\790\ This 
finding is supported by Facebook's documents and internal 
analysis. These include a memorandum on Facebook's family of 
products prepared in October 2018 by Thomas Cunningham, a 
senior data scientist and economist,\791\ as well as 
communications among senior executives.\792\
---------------------------------------------------------------------------
    \789\ See generally Omidyar Network Report at 18.
    \790\ See, e.g., Cunningham Memo at 7 (``Messenger and WhatsApp 
clearly compete for time-spent.''). While Facebook's overall 
penetration and network effects are high in the United States and 
across many other large countries, Facebook appears to have 
intermediate reach in some countries due to differing levels of 
adoption among users of certain ages. Id. at 12 (``In Japan and South 
Korea Facebook has significantly higher penetration among youth than 
among elderly. The role of an intergenerational social network is 
partly filled by other apps (LINE and Kakao).'').
    \791\ The Subcommittee requested the 2018 memorandum prepared by 
Tom Cunningham on July 1, 2020 in response to earlier reporting about 
the memorandum. See Alex Heath, Facebook Secret Research Warned of 
``Tipping Point'' Threat to Core App, Information (July 23, 2020), 
https://www.theinformation.com/articles/facebook-secret-research-
warned-of-tipping-point-threat-to-core-app. The Subcommittee 
appreciates that Facebook cooperated with this supplemental request.
    \792\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063222 (Feb. 27, 2012), https://judiciary.house.gov/
uploadedfiles/0006322000063223.pdf.
---------------------------------------------------------------------------
    Mr. Cunningham's 2018 memorandum on ``Possible End States 
for the Family of Apps'' is an analysis of user trends among 
Facebook's products and other competitors.\793\ It is based on 
the company's Onavo data from September 2017 to September 
2018.\794\ It was prepared for review by Facebook's senior 
executives, including Mr. Zuckerberg and Mr. Olivan, Facebook's 
Director of Growth.\795\ The Subcommittee's staff interviewed a 
former senior employee at the company who attended meetings 
preparing the document for presentation to Mr. Zuckerberg and 
Mr. Olivan. The former employee noted that ``this specific 
working group--and Tom Cunningham's work in particular--was 
guiding Mark's views'' on the company's growth strategy.\796\ 
The former employee explained the purpose of the Cunningham 
Memo:
---------------------------------------------------------------------------
    \793\ Cunningham Memo at 1, 3.
    \794\ During this period, Facebook referred to data derived from 
Onavo as MINT data.
    \795\ Interview with Former Instagram Employee (Oct. 2, 2020).
    \796\ Id.

     LThe question was how do we position Facebook and 
Instagram to not compete with each other. The concern was that 
Instagram would hit a tipping point . . . . There was brutal 
in-fighting between Instagram and Facebook at the time. It was 
very tense. It was back when Kevin Systrom was still at the 
company. He wanted Instagram to grow naturally and as widely as 
possible. But Mark was clearly saying ``do not compete with 
us.'' . . . It was collusion, but within an internal monopoly. 
If you own two social media utilities, they should not be 
allowed to shore each other up. It's unclear to me why this 
should not be illegal. You can collude by acquiring competitors 
and forbidding competition.\797\
---------------------------------------------------------------------------
    \797\ Id.

    The Cunningham Memo characterized the network effects of 
Facebook, WhatsApp, and Messenger as ``very strong.'' \798\ The 
memorandum notes that social apps have tipping points such that 
``either everyone uses them, or no-one uses them.'' \799\ 
Importantly, it distinguishes between apps with a social graph 
that are used for broadcast sharing and messaging--Facebook, 
Instagram, Messenger, WhatsApp, and Snapchat--and social apps 
for music or video consumption, such as YouTube or 
Spotify.\800\ In contrast, non-social apps ``can exist along a 
continuum of adoption.'' \801\
---------------------------------------------------------------------------
    \798\ Cunningham Memo at 11.
    \799\ Id. at 9.
    \800\ To underscore this point, the Cunningham Memo does not 
characterize YouTube as a direct competitor, noting that YouTube would 
only be a danger if it ``becomes more social.'' Id. at 16.
    \801\ Id. at 9.
---------------------------------------------------------------------------
    Network effects and tipping points are particularly strong 
in messaging apps. Because WhatsApp and other regional 
messaging apps have bimodal distribution of reach in 
countries--an all-or-nothing reach at above 90 percent or below 
10 percent--messaging tends toward consolidation and market 
tipping.\802\ Most countries have a single messaging app or 
protocol because they cannot support multiple messaging 
apps.\803\ As a result of this dynamic, there are ``tradeoffs 
in time-spent between Messenger and WhatsApp,'' \804\ 
demonstrating ``very strong tipping points.'' \805\
---------------------------------------------------------------------------
    \802\ Id. at 10; see also id. at 14 (``Most countries have a single 
messaging app with 70%+ daily reach. The most common app is WhatsApp. 
Others include Messenger, LINE, and Kakotalk.'').
    \803\ Id. at 3.
    \804\ Id.
    \805\ Id. at 12 (``WhatsApp does very well when it is the market-
leader (in many Latin American countries WhatsApp has nearly 90% daily 
reach and users spend 60 minutes/day), this suggests that it would be 
worth a substantial investment to try to push WhatsApp over its tipping 
point in other countries.''). An exception to this trend appears to be 
where a messaging app exists as part of a social network--such as 
messaging services on Snapchat--but these apps operate with reduced 
reach. Another exception is in markets with high penetration by Apple's 
iPhone, but this growth is limited by adoption of iPhones since 
iMessage is its native app. Id. at 15.
---------------------------------------------------------------------------
    Facebook already has high reach in many countries,\806\ 
including the United States, so a primary concern addressed in 
Mr. Cunningham's ``Possible End States'' memorandum is whether 
cross-app sharing among Facebook's family of products poses a 
competitive threat to its flagship product, the Facebook 
app.\807\ While the Cunningham Memo concluded that it is 
unclear whether Instagram and Facebook can coexist, it is much 
less concerned with Facebook's user loss due to cannibalization 
by Instagram than with market tipping (i.e., Instagram tipping 
the market in its favor and Facebook rapidly losing value due 
to network effects). It notes:
---------------------------------------------------------------------------
    \806\ Id. at 16 (``Facebook has high reach and time-spent in most 
countries. User growth is tracking internet growth: global reach is 
roughly stable. DAP is showing weakness in developed countries and 
especially teens.'').
    \807\ The Cunningham Memo refers to Facebook's flagship product as 
``Facebook-Blue'' or ``Blue'' as a reference to the app's color. Id. at 
15. There is overlap and cross-use among Facebook's products in the 
United States. While 40 percent of Instagram users' friends are also 
their friends on Facebook, only 12 percent of Facebook users' friends 
are ``reciprocal follows'' on Instagram. Id. at 9.

     LThe most important concern should be network effects, not 
within-user cannibalization. We have reviewed many studies 
which estimate cannibalization among apps for individual users, 
all of which find positive incrementality across the family: 
i.e. when a user increases their use of one app, they tend to 
decrease their use of other apps, but the total family effect 
is positive. This should not be surprising--it is unlikely that 
any of our apps are perfect substitutes for an individual user. 
However a serious concern is network effects: when you use an 
app less, that makes it less appealing to other people, and at 
certain times and places those effects could be very 
large.\808\
---------------------------------------------------------------------------
    \808\ Id. at 9.

    As a result of this dynamic, even though there may be 
several social apps that exist in an ecosystem, they are 
unlikely to gain traction among users once a firm has tipped 
the market in its favor or is otherwise dominant. As the study 
notes, while mobile phone users tend to use five different 
social maps in a month, they only use ``1.5 messaging apps and 
1 social app, out of 10 total apps per day.'' \809\
---------------------------------------------------------------------------
    \809\ Id. at 6. A recent investor report similarly noted that 
although ``many users access more than one social network per day, it 
does not appear to be at the cost of declining users or user 
engagements within the Facebook ecosystem.'' Morningstar Equity Analyst 
Report: Facebook Inc 3 (Aug. 3, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    Facebook's executives--including Mr. Zuckerberg--have 
extensively discussed the role of network effects and tipping 
points as part of the company's acquisition strategy and 
overall competitive outlook. For example, Mr. Zuckerberg told 
the company's Chief Financial Officer in 2012 that network 
effects and winner-take-all markets were a motivating factor in 
acquiring competitive threats like Instagram. He said:

     L[T]here are network effects around social products and a 
finite number of different social mechanics to invent. Once 
someone wins at a specific mechanic, it's difficult for others 
to supplant them without doing something different. It's 
possible someone beats Instagram by building something that is 
better to the point that they get network migration, but this 
is harder as long as Instagram keeps running as a product . . . 
one way of looking at this is that what we're really buying is 
time. Even if some new competitors springs [sic] up, buying 
Instagram now . . . will give us a year or more to integrate 
their dynamics before anyone can get close to their scale 
again. Within that time, if we incorporate the social mechanics 
they were using, those new products won't get much traction 
since we'll already have their mechanics deployed at 
scale.\810\
---------------------------------------------------------------------------
    \810\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063222 (Feb. 28, 2012), https://judiciary.house.gov/
uploadedfiles/0006322000063223.pdf.

    Mr. Zuckerberg also stressed the competitive significance 
of having a first-mover advantage in terms of network effects 
prior to acquiring WhatsApp.\811\ In the context of market 
strategies for Messenger competing with WhatsApp, Mr. 
Zuckerberg told the company's growth and product management 
teams that ``being first is how you build a brand and a network 
effect.'' \812\ He also told them that Facebook has ``an 
opportunity to do this at scale, but that opportunity won't 
last forever. I doubt we have even a year before WhatsApp 
starts moving in this direction.'' \813\
---------------------------------------------------------------------------
    \811\ Id. at FB-HJC-ACAL-00046826 to -00046834 (Dec. 13, 2013) (on 
file with Comm.).
    \812\ Id.
    \813\ Id.
---------------------------------------------------------------------------
    In 2012, the company described its network effects as a 
``flywheel'' in an internal presentation prepared for Facebook 
at the direction of its Chief Financial Officer.\814\ This 
presentation also said that Facebook's network effects get 
``stronger every day.'' \815\ Around that time, prominent 
investors similarly noted that the social networking market had 
``extreme network effects,'' making it ``increasingly hard to 
see a materially successful new entrant, even with all of 
Google's resources.'' \816\
---------------------------------------------------------------------------
    \814\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00049006 (Apr. 18, 2012) (on file with Comm.) (``Network 
effects make it very difficult to compete with us--In every country 
we've tipped we are still winning.'').
    \815\ Id.
    \816\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00086834 to -00086838 (Apr. 3, 2012) (on file with Comm.) 
(Citi Summary of Investment Outlook). Comscore noted in 2012 that 
``Facebook has proven to be a dominant global force in social 
networking that shows no immediate signs of slowing down.'' According 
to Comscore, Facebook was the ``third largest web property in the world 
. . . and accounted for approximately 3 in every 4 minutes spent on 
social networking sites and 1 in every 7 minutes spent online around 
the world.'' FB-HJC-ACAL-00051905 (Mar. 12, 2012) (Comscore 2012 
Report).
---------------------------------------------------------------------------
    (2) Switching Costs. In addition to the competitive 
insulation resulting from strong network effects, Facebook is 
also unlikely to face direct competition from other firms or 
new entrants due to the high costs for users to switch from 
Facebook to a competing social network.\817\
---------------------------------------------------------------------------
    \817\ Omidyar Network Report at 11 (``A very significant reason 
that Facebook has market power is that a user cannot change platforms 
and expect to be able to stay in contact with her friends. Because 
Facebook has a near monopoly, the vast majority of the people with whom 
they want to exchange feeds are likely on Facebook already. The 
switching cost for any one user is therefore enormous.'').
---------------------------------------------------------------------------
    Other social network platforms are not interoperable with 
Facebook. Facebook users invest significant time building their 
networks on Facebook. This investment includes uploading and 
curating photos; engaging with their friends, other users, and 
businesses; and otherwise interacting with their social 
graph.\818\ To switch to another platform, Facebook users have 
to rebuild their social graph elsewhere. In the process, they 
lose access to their data--including photos, posts, and other 
content--along with other elements of their social graph.\819\ 
They also have to learn how to use a new service and rebuild 
their network.\820\ As a result, Facebook's users are 
effectively ``locked in'' to its platform.\821\
---------------------------------------------------------------------------
    \818\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045349 (Feb. 15, 2014) (on file with Comm.).
    \819\ See, e.g., Nicole Nguyen, If You Created a Spotify Account 
with Facebook, It Is Forever Tied to Facebook, BuzzFeed (Oct. 3, 2018), 
https://www.buzzfeednews.com/article/nicolenguyen/disconnect-facebook-
account-from-spotify.
    \820\ See, e.g., Danny Crichton, Why No One Really Quits Google or 
Facebook, TechCrunch (Feb. 4, 2019), https://techcrunch.com/2019/02/04/
why-no-one-really-quits-google-or-facebook/ (``I have 2,000 contacts on 
Facebook Messenger--am I just supposed to text them all to use Signal 
from now on? Am I supposed to completely relearn a new photos app, when 
I am habituated to the taps required from years of practice on 
Instagram?''); United States v. Microsoft Corp., 84 F. Supp. 2d 9, 15 
(D.D.C. 1999) (noting that switching costs include ``the effort of 
learning to use the new system, the cost of acquiring a new set of 
compatible applications, and the work of replacing files and documents 
that were associated with the old applications'').
    \821\ See generally Austl. Competition & Consumer Comm'n Report at 
99; Dig. Competition Expert Panel Report at 42.
---------------------------------------------------------------------------
    Facebook's internal documents and communications reveal 
that Facebook employees recognize that high switching costs 
insulate Facebook from competition. In 2014, Facebook's Chief 
Financial Officer told the company's director of growth that 
investors like this quality about Facebook and ``the idea is 
that after you have invested hours and hours in your friend 
graph or interest graph or follower graph, you are less likely 
to leave for a new or different service that offers similar 
functionality.'' \822\ Similarly, an internal survey prepared 
for Facebook's senior management team about Google+ explained 
that ``[p]eople who are big fans of G+ are having a hard time 
convincing their friends to participate because . . . switching 
costs would be high due to friend density on Facebook.'' \823\ 
And in 2012, the company indicated that people's significant 
time investment on Facebook building their identity and 
connections on the platform increased the company's 
``stickiness.'' \824\
---------------------------------------------------------------------------
    \822\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045349 (Feb. 15, 2014) (on file with Comm.).
    \823\ Id. at FB-HJC-ACAL-00048755 to -00048757 (Dec. 14, 2011).
    \824\ Id. at FB-HJC-ACAL-00049006 (Apr. 18, 2012).
---------------------------------------------------------------------------
    In contrast to its public statements, Facebook has not done 
enough to facilitate data portability for its consumers. 
Facebook offers a tool called ``Download Your Information,'' 
which provides users with a limited ability to download their 
data and upload it elsewhere. But in practice, this tool is 
unusable for switching purposes given that it allows users to 
do little other than move their photos from Facebook to Google 
Photos. Another barrier for switching associated with this tool 
is that Facebook's users can only download their data in PDF or 
.zip format. The result is that, while Facebook publicly claims 
to support data portability,\825\ its users seldom leave 
Facebook due to the challenges of migrating their data. An 
interview with a former employee at the company reinforces this 
conclusion. As the former employee noted, this tool is behind a 
series of menus, explaining:
---------------------------------------------------------------------------
    \825\ See, e.g., Data Transfer Project, https://
datatransferproject.dev/ (last visited Sept. 28, 2020).

     LIf you hide something behind more than one menu, no one 
sees it and they know it. Then they advertise features that 
they don't expect anyone to find or use. They say: ``It's data 
portable, you can send it to Google drive?'' But who cares? 
They've just done it to generate talking points. They are not 
allowing you to export your social graph, which is actually 
valuable.\826\
---------------------------------------------------------------------------
    \826\ Interview with Former Instagram Employee (Oct. 2, 2020).

    Leaving Facebook may create additional costs in other key 
respects. Switching from Facebook may degrade a person's other 
social apps that integrate with Facebook's Platform APIs. For 
example, Spotify users who signed up with Facebook ``can't 
disconnect it.'' \827\ To leave Facebook, they must set up a 
new account on Spotify.\828\ In the process, they lose access 
to their playlists, listening history, social graph of other 
friends on Spotify, and their other data on the app.\829\
---------------------------------------------------------------------------
    \827\ Facebook Login Help, Spotify, https://support.spotify.com/us/
article/using-spotify-with-facebook/ (last visited Oct. 5, 2020).
    \828\ Id.
    \829\ Spotify users can manually attempt to recreate playlists or 
request that Spotify transfer their data, but this is not intuitive. 
Samantha Cole, How to Unlink Spotify from Your Facebook Account, Vice 
(Dec. 21, 2018), https://www.vice.com/en_us/article/wj3anm/how-to-
unlink-spotify-from-your-facebook-account.
---------------------------------------------------------------------------
    People who leave Facebook may also lose access to popular 
features on Facebook that, due to its scale and network 
effects, are not available on other social apps (e.g., events, 
marketplace, and groups).\830\ For example, a church may 
actively maintain a Facebook page for its parishioners and not 
on other social apps. Furthermore, some Facebook users who 
believe they are switching from the company's platform may 
nevertheless continue using its family of products, such as 
Instagram or WhatsApp.\831\ As the United Kingdom's Competition 
and Markets Authority noted, this reinforces Facebook's market 
power.\832\
---------------------------------------------------------------------------
    \830\ See Cunningham Memo at 3.
    \831\ See, e.g., Tiffany Hsu, For Many Facebook Users, a ``Last 
Straw'' that Led Them to Quit, N.Y. Times (Mar. 21, 2018), https://
www.nytimes.com/2018/03/21/technology/users-abandon-facebook.html 
(``The Cambridge Analytica scandal led her to remove the Facebook app 
from her phone . . . . But she is keeping the messaging function open 
for professional purposes and will continue using Instagram.'').
    \832\ Competition & Mkts. Auth. Report at 179, 256.
---------------------------------------------------------------------------
    In response to the concern about switching costs, Facebook 
replied that its users have meaningful choices and alternatives 
to Facebook.\833\ Additionally, Facebook notes that its users 
have been able to download their data since 2010.\834\ The 
company describes its users' ability to download their data as 
a ``robust portability tool.'' \835\ However, in March 2019, 
Mr. Zuckerberg explained that a Facebook user's ability to 
download their data is not ``[t]rue data portability.'' \836\ 
Instead, he said its users should be able to sign in to other 
services in ``the way people use our platform to sign into an 
app.'' \837\
---------------------------------------------------------------------------
    \833\ Innovation and Entrepreneurship Hearing at 567 (response to 
Questions for the Record of Matt Perault, Dir. of Pub. Pol'y, Facebook, 
Inc.).
    \834\ Erin Egan, Facebook, Charting a Way Forward: Data Portability 
and Privacy 6 (2019), https://about.fb.com/wp-content/uploads/2020/02/
data-portability-privacy-white-paper
.pdf.
    \835\ Id.
    \836\ Mark Zuckerberg, The Internet Needs New Rules, Wash. Post 
(Mar. 29, 2019), https://www.washingtonpost.com/opinions/mark-
zuckerberg-the-internet-needs-new-rules-lets-start-in-these-four-areas/
2019/03/29/9e6f0504-521a-11e9-a3f7-78b7525a8d5f_story.html.
    \837\ Id.
---------------------------------------------------------------------------
    Currently, Facebook's users lack the ability to port their 
social networks to a different platform. To switch social 
networking platforms, a Facebook user can import their contacts 
from their mobile devices, such as email addresses or phone 
numbers, to build a network on a different platform. But 
importing contacts is not a substitute for a person's social 
graph and, as the CMA concluded, this method is likely limited 
to a person's close friends.\838\ In recognition of this, 
Javier Olivan, Facebook's Director of Growth, told the 
company's senior management team that information from a 
person's address book on their mobile device is ``incomplete'' 
because people typically only store limited information in 
their contacts (e.g., a person's first name, last name, and 
their phone number).\839\ In contrast, Facebook users ``have a 
much richer profile--which creates a much richer experience (we 
have data that shows how . . . profile pictures make for 
better/more functional [user interfaces]).'' \840\
---------------------------------------------------------------------------
    \838\ Competition & Mkts. Auth. Report at 137.
    \839\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045364 (Feb. 4, 2014) (on file with Comm.).
    \840\ Id.
---------------------------------------------------------------------------
    (3) Access to Data. Facebook has a significant data 
advantage in the social networking market. While data may be 
non-rivalrous--meaning users can provide the same piece of data 
to more than one platform--it creates another entry barrier, 
reinforcing Facebook's monopoly power.
    The Subcommittee conducted interviews with market 
participants that described Facebook as having nearly perfect 
market intelligence. Facebook's data dominance creates self-
reinforcing advantages through two types of ``feedback loops.'' 
\841\ First, by virtue of its significant number of users, 
Facebook has access to and collects more user data than its 
competitors.\842\ And second, Facebook uses this data to create 
a more targeted user experience, which in turn attracts more 
users and leads those users to spend more time on the 
platform.\843\ In contrast, smaller platforms with less access 
to data must compete by providing a different user experience 
with less targeting capacity. Facebook's data advantage is thus 
compounded over time, cementing Facebook's market position and 
making it even more difficult for new platforms to provide a 
competitive user experience.
---------------------------------------------------------------------------
    \841\ Dig. Competition Expert Panel Report at 33.
    \842\ Competition & Mkts. Auth. Report at 143-44.
    \843\ Id.
---------------------------------------------------------------------------
    Facebook's data advantages also provide a monetization 
feedback loop. Revenue generated through targeted advertising 
to existing users can be reinvested into the platform, thereby 
attracting more users. Facebook's ability to provide targeted 
advertising is highly valuable to advertisers and allows 
Facebook to monetize its service. Meanwhile, smaller entrants 
are less attractive to advertisers since ``no de novo entrant 
[has] access to anywhere near the volume or quality of data'' 
as Facebook.\844\ As with its user feedback loop, Facebook's 
monetization feedback loop creates a runaway virtuous circle 
that serves as a powerful barrier to entry.
---------------------------------------------------------------------------
    \844\ Omidyar Network Report at 18.
---------------------------------------------------------------------------
    Facebook's data also enables it to act as a gatekeeper 
because Facebook can exclude other firms from accessing its 
users' data.\845\ Beginning in 2010, Facebook's Open Graph 
provided other companies with the ability to scale through its 
user base by interconnecting with Facebook's platform. Some 
companies benefited immensely from this relationship, 
experiencing significant user growth from Open Graph and in-app 
signups through Facebook Connect, now called Facebook 
Login.\846\ Around that time, investors commented that Open 
Graph gave some companies ``monstrous growth,'' referring to it 
as ``steroids for startups.'' \847\ For example, documents 
produced by Facebook indicate that it was the top referrer of 
traffic to Spotify, driving seven million people ``to install 
Spotify in the month after [Facebook] launched Open Graph.'' 
\848\ At one point, nearly all of Spotify's growth originated 
from Facebook, while Pinterest ``grew to 10 million users 
faster than any standalone site in the history of the 
Internet.'' \849\
---------------------------------------------------------------------------
    \845\ See, e.g., Maurice Stucke & Allen Grunes, Big Data and 
Competition Policy 46 (2017).
    \846\ Also referred to as Facebook Login, Facebook Connect allowed 
its users to connect their Facebook identity--their profile, friends, 
and other data--to other social apps through Facebook's APIs. The 
company explained in 2008 that, ``[w]ith Facebook Connect, users can 
bring their real identity information with them wherever they go on the 
Web, including: basic profile information, profile picture, name, 
friends, photos, events, groups, and more.'' Dave Morin, Announcing 
Facebook Connect, Facebook (Mar. 9, 2008), https://developers.facebook
.com/blog/post/2008/05/09/announcing-facebook-connect/.
    \847\ Ben Popper, Startup Steroids: Pinterest Feels the Burn of 
Facebook's Open Graph, Verge (May 3, 2012), https://www.theverge.com/
2012/5/3/2993999/pinterest-burn-facebook-open-graph-startup-steroids.
    \848\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00049471 (on file with Comm.) (Script of Keynote for Mobile 
World Congress).
    \849\ Id.
---------------------------------------------------------------------------
    Conversely, interconnecting with the Facebook Platform also 
gave the company the ability to prioritize access to its social 
graph--effectively picking winners and losers online.\850\ 
These tools also gave Facebook advanced data insights into 
other companies' growth and usage trends. For example, a daily 
report on metrics for Facebook Login included daily and monthly 
active users for companies interconnecting with Facebook, 
referral traffic, and daily clicks, among other metrics. As 
this report noted, 8.3 million distinct sites used Facebook 
Connect on a monthly basis in March 2012.\851\ Facebook was 
also able to exclude others from accessing this data.\852\ As 
the United Kingdom's Competition and Markets Authority 
observed, ``the inability of smaller platforms and publishers 
to access user data creates a significant barrier to entry.'' 
\853\
---------------------------------------------------------------------------
    \850\ See, e.g., Maurice Stucke & Allen Grunes, Big Data and 
Competition Policy 46 (2017).
    \851\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
FTC-CID-00364078 to -00364147 (Mar. 24, 2012) (on file with Comm.) 
(email on Daily Metrics Report).
    \852\ See Stigler Report at 43.
    \853\ Competition & Mkts. Auth. Report at 15.

---------------------------------------------------------------------------
    (b) Relevant Acquisitions

    (i) Overview. Since its founding in 2004, Facebook has 
acquired at least 63 companies.\854\ The majority of these 
acquisitions have involved software firms, such as Instagram, 
WhatsApp, Face.com, Atlas, LiveWire, and Onavo.\855\ Facebook 
has also acquired several virtual reality and hardware 
companies, such as Oculus.\856\ More recently, the company has 
acquired several niche social apps,\857\ a blockchain 
platform,\858\ Oculus game developers,\859\ and a prominent 
GIF-making and sharing company.\860\
---------------------------------------------------------------------------
    \854\ See Aoife White, Facebook Told by U.K. Watchdog to Monitor 
Giphy Independence, Bloomberg (Aug. 10, 2020), https://
www.bloomberg.com/news/articles/2020-08-10/facebook-told-by-u-k-
watchdog-to-monitor-giphy-independence.
    \855\ Id.; Berkeley, The Acquisition Takeover by the 5 Tech Giants, 
http://people. ischool.berkeley.edu/#neha01mittal/infoviz/dashboard/ 
(last visited Sept. 28, 2020).
    \856\ See, e.g., Josh Constine, Facebook's $2 Billion Acquisition 
of Oculus Closes, Now Official, TechCrunch (July 21, 2014), https://
techcrunch.com/2014/07/21/facebooks-acquisition-of-oculus-closes-now-
official/.
    \857\ See, e.g., Jacob Kastrenakes, Facebook Is Shutting Down a 
Teen App It Bought Eight Months Ago, Verge (July 2, 2018), https://
www.theverge.com/2018/7/2/17528896/facebook-tbh-moves-hello-shut-down-
low-usage.
    \858\ Stan Schroeder, Facebook Acquires Team Behind Blockchain 
Startup Chainspace, Mashable (Dec. 5, 2019), https://mashable.com/
article/facebook-acquires-blockchain-team-chainspace/.
    \859\ Dean Takahashi, Facebook Acquires Lone Echo VR Game Maker 
Ready at Dawn, Venture Beat (June 22, 2020), https://venturebeat.com/
2020/06/22/facebook-acquires-lone-echo-vr-game-maker-ready-at-dawn/; 
Lucas Matney, Facebook Acquires the VR Game Studio Behind One of the 
Rift's Best Titles, TechCrunch (Feb. 25, 2020), https://techcrunch.com/
2020/02/25/facebook-acquires-the-vr-game-studio-behind-one-of-the-
rifts-best-games/.
    \860\ Chaim Gartenberg, Facebook Is Buying Giphy and Integrating It 
with Instagram, Verge (May 15, 2020), https://www.theverge.com/2020/5/
15/21259965/facebook-giphy-gif-acquisition
-buy-instagram-integration-cost.
---------------------------------------------------------------------------
    Facebook's internal documents indicate that the company 
acquired firms it viewed as competitive threats to protect and 
expand its dominance in the social networking market. As 
discussed earlier in this Report, Facebook's senior executives 
described the company's mergers and acquisitions strategy in 
2014 as a ``land grab'' to ``shore up our position.'' \861\ In 
2012, Mr. Zuckerberg told Facebook's former Chief Financial 
Officer that the purpose of acquiring nascent competitors like 
Instagram was to neutralize competitive threats and to maintain 
Facebook's position. Documents show that when Facebook acquired 
WhatsApp, Mr. Zuckerberg and other senior executives, as well 
as data scientists, viewed WhatsApp as a potential threat to 
Facebook Messenger, as well as an opportunity to further 
entrench Facebook's dominance. Facebook used critical 
acquisitions to increase the adoption of its social graph and 
expand its reach in markets. Finally, Facebook's serial 
acquisitions reflect the company's interest in purchasing firms 
that had the potential to develop into rivals before they could 
fully mature into strong competitive threats.\862\
---------------------------------------------------------------------------
    \861\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045388 (Feb. 18, 2014), https://judiciary.house.gov/
uploadedfiles/0004538800045389.pdf (``[W]e are going to spend 5-10% of 
our market cap every couple years to shore up our position . . . . I 
hate the word `land grab' but I think that is the best convincing 
argument and we should own that.''). Mr. Wehner is currently Facebook's 
Chief Financial Officer. He replaced David Ebersman, Facebook's former 
Chief Financial Officer, in June 2014. David Cohen, Facebook CFO David 
Ebersman Leaving Company; David Wehner to Assume Post June 1, AdWeek 
(Apr. 23, 2014), https://www.adweek.com/digital/cfo-david-ebersman-
leaving-david-wehner/.
    \862\ Austl. Competition & Consumer Comm'n Report at 81 (``While 
any of these acquisitions may not have amounted to a substantial 
lessening of competition, there appears to be a pattern of Facebook 
acquiring businesses in related markets which may or may not evolve 
into potential competitors, which has the effect of entrenching its 
market power.'').

    (ii) Instagram. Instagram was founded in February 2010 by 
Kevin Systrom and Mike Krieger.\863\ Originally launched as 
Burbn, a location-sharing social app,\864\ the company released 
Instagram as a photo-sharing app for Apple iPhones in October 
2010,\865\ and released its app in the Google Play Store on 
April 3, 2012.\866\
---------------------------------------------------------------------------
    \863\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00087590 (July 19, 2011) (on file with Comm.) (Valuation of 
Burbn, Inc. as of May 31, 2011).
    \864\ Id.
    \865\ MG Siegler, Instagram Launches with the Hope of Igniting 
Communication Through Images, TechCrunch (Oct. 6, 2010), https://
techcrunch.com/2010/10/06/instagram-launch/. The company received 
$500,000 in seed funding in March 2010 from Baseline Ventures and 
Andreessen Horowitz. It later received $7 million in another round of 
financing in December 2010 primarily from Benchmark Capital and 
Baseline Ventures. Submission from Facebook, to H. Comm. on the 
Judiciary, FB-HJC-ACAL-00101426 (Dec. 5, 2011) (on file with Comm.) 
(Instagram Financial History and Projections).
    \866\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00106124 (Apr. 13, 2012) (on file with Comm.) (Instagram Chat 
Log); see also Matt Burns, Instagram's User Count Now at 40 Million, 
Saw 10 Million New Users in Last 10 Days, TechCrunch (Apr. 13, 2012), 
https://techcrunch.com/2012/04/13/instagrams-user-count-now-at-40-
million-saw-10-million-new-users-in-last-10-days/.
---------------------------------------------------------------------------
    On April 9, 2012, Facebook proposed its acquisition of 
Instagram for approximately $1 billion.\867\ Facebook formally 
acquired Instagram in August 2012.\868\ The Federal Trade 
Commission (FTC) opened an investigation into the acquisition 
but closed it in August 2012 without taking action.\869\ 
According to the FTC, ``Upon further review of this matter, it 
now appears that no further action is warranted by the 
Commission at this time.'' \870\ The letter added that the 
FTC's closing of the investigation ``is not to be construed as 
a determination that a violation may not have occurred . . . . 
The Commission reserves the right to take such further action 
as the public interest may require.'' \871\
---------------------------------------------------------------------------
    \867\ The transaction's value was approximately $300 million in 
cash and roughly $700 million in shares of Facebook at the time of the 
transaction. Due to changes in the company's value following the launch 
of its IPO, the final transaction value was worth about $300 million in 
cash and $460 million in Facebook stock. See Facebook, Inc., Quarterly 
Report (Form 10-Q) 9 (Sept. 30, 2012), https://www.sec.gov/Archives/
edgar/data/1326801/000132680112000006/fb-9302012x10q.htm.
    \868\ Facebook, Inc., Annual Report (Form 10-K) 5 (Dec. 31, 2012), 
https://www.sec.gov/
Archives/edgar/data/1326801/000132680113000003/fb-12312012x10k.htm.
    \869\ Letter from April Tabor, Acting Sec'y, Fed. Trade Comm'n, to 
Thomas Barnett, Covington & Burling LLP (Aug. 22, 2012), https://
www.ftc.gov/sites/default/files/documents/closing_
letters/facebook-inc./instagram-inc./120822barnettfacebookcltr.pdf.
    \870\ Id.
    \871\ Id.
---------------------------------------------------------------------------
    In the context of reports that Facebook was planning to 
integrate Whatsapp, Instagram, and Facebook Messenger,\872\ and 
concerns about the company's motives for doing so,\873\ a 
former employee of Instagram explained the ease with which 
Facebook and Instagram came together--and could potentially be 
pulled apart. They explained:
---------------------------------------------------------------------------
    \872\ See, e.g., Mike Isaac, Zuckerberg Plans to Integrate 
WhatsApp, Instagram and Facebook Messenger, N.Y. Times (Jan. 25, 2019), 
https://www.nytimes.com/2019/01/25/technology/facebook-instagram-
whatsapp-messenger.html.
    \873\ See, e.g., Makena Kelly, Facebook's Messaging Merger Leaves 
Lawmakers Questioning the Company's Power, Verge (Jan. 28, 2019), 
https://www.theverge.com/2019/1/28/18200658/facebook-messenger-
instagram-whatsapp-google-congress-markey-blumenthal-schatz-william-
barr-doj-ftc.

     LWhy can't Facebook fork the backend of the product? 
Facebook makes an odd argument that they use the same system. 
But you can just copy and paste code, make a copy of the 
system, and give it to the new company. If you can put them 
together, you can pull them apart. Facebook can always pull out 
the data that Instagram would not need. They spent the last 
year pushing the two products together, it just simply doesn't 
make sense that they can't work back to where they were in 
2019. It's not like building a skyscraper and then suddenly 
needing to knock the building down again. They can just roll 
back the changes they've been making over the past year and 
you'd have two different apps again. It's not about the 
pipeline. It's an intangible object. You can just copy and 
paste. Right now, they have a switch inside the app. They could 
just change something from true to false and it would work. 
It's not building a skyscraper; it's turning something on and 
off.\874\
---------------------------------------------------------------------------
    \874\ Email from Former Instagram Employee (Oct. 4, 2020).

    According to Facebook's internal documents, Facebook 
acquired Instagram to neutralize a nascent competitive threat. 
In 2012, Mark Zuckerberg wrote to several Facebook executives 
citing concerns that Instagram posed a risk to Facebook. In 
February 2012, he said to David Ebersman, Facebook's Chief 
Financial Officer, that he had ``been thinking about . . . how 
much [Facebook] should be willing to pay to acquire mobile app 
companies like Instagram . . . that are building networks that 
are competitive with our own.'' \875\ Mr. Zuckerberg told Mr. 
Ebersman that these ``businesses are nascent but the networks 
are established, the brands are already meaningful and if they 
grow to a large scale they could be very disruptive to us.'' 
\876\
---------------------------------------------------------------------------
    \875\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063220 to -00063223 (Feb. 27, 2012) (on file with Comm.).
    \876\ Id.
---------------------------------------------------------------------------
    In response, Mr. Ebersman asked Mr. Zuckerberg whether the 
goals of the acquisition would be to: (1) neutralize a 
potential competitor; (2) acquire talent; or (3) integrate 
Instagram's product with Facebook's to improve its 
service.\877\ Mr. Zuckerberg replied that a purpose of the 
transaction would be to neutralize Instagram, saying that the 
goals of the deal were ``a combination of (1) and (3).'' He 
explained:
---------------------------------------------------------------------------
    \877\ Id.

     LOne thing that may make (1) more reasonable here is that 
there are network effects around social products and a finite 
number of different social mechanics to invent. Once someone 
wins at a specific mechanic, it's difficult for others to 
supplant them without doing something different. It's possible 
someone beats Instagram by building something that is better to 
the point that they get network migration, but this is harder 
as long as Instagram keeps running as a product.\878\
---------------------------------------------------------------------------
    \878\ Id.

    Mr. Zuckerberg wrote that acquiring Instagram would allow 
Facebook to integrate the product to improve its service. But, 
he added, that ``in reality we already know these companies' 
social dynamics and will integrate them over the next 12-24 
months anyway.'' \879\ He explained:
---------------------------------------------------------------------------
    \879\ Id.

     LBy a combination of (1) and (3), one way of looking at 
this is that what we're really buying is time. Even if some new 
competitors springs [sic] up, buying Instagram, Path, 
Foursquare, etc. [sic] now will give us a year or more to 
integrate their dynamics before anyone can get close to their 
scale again. Within that time, if we incorporate the social 
mechanics they were using, those new products won't get much 
traction since we'll already have their mechanics deployed at 
scale.\880\
---------------------------------------------------------------------------
    \880\ Id. (emphasis added).

    In March 2012, Mr. Zuckerberg told Mike Schroepfer, 
Facebook's Chief Technology Officer,\881\ that acquiring 
Instagram would provide the company with ``[i]nsurance'' for 
Facebook's main product.\882\ Mr. Schroepfer agreed, responding 
that ``not losing strategic position in photos is worth a lot 
of money.'' \883\ He added that the ``biggest risk'' would be 
if Facebook were to ``kill'' Instagram ``by not investing in 
the company and thereby opening a window for a new entrant.'' 
\884\
---------------------------------------------------------------------------
    \881\ Mr. Schroepfer was Facebook's Vice President of Engineering 
at the time of the Instagram acquisition. He was elevated to Chief 
Technology Officer in March 2013. See Tomio Geron, Facebook Names Mike 
Schroepfer CTO, Forbes (Mar. 15, 2013), https://www.forbes.com/sites/
tomiogeron/2013/03/15/facebook-names-mike-schroepfer-cto/#1a88880b20e3.
    \882\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063184 to -00063185 (Mar. 9, 2012), https://
judiciary.house.gov/uploadedfiles/0006318000063197.pdf. These documents 
are consistent with reporting. Following the acquisition, Gregor 
Hochmuth, an Instagram engineer, was reportedly told by employees on 
the Facebook Camera team that ``our job was to kill you guys.'' 
Following the acquisition, Instagram's employees were also reportedly 
told by Facebook's growth team ``Instagram wouldn't get any help adding 
users unless they could determine, through data, that the product 
wasn't competitive with Facebook.'' Sarah Frier, No Filter 90 (2020).
    \883\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00063180, https://judiciary.house.gov/uploadedfiles/0006318 
000063197.pdf.
    \884\ Id. at FB-HJC-ACAL-00063184 to -00063185, https://
judiciary.house.gov/uploadedfiles/0006318 000063197.pdf.
---------------------------------------------------------------------------
    In a message to another Facebook employee on April 5, 2012, 
Mr. Zuckerberg said that ``Instagram can hurt us meaningfully 
without becoming a huge business.'' \885\ In contrast, he did 
not view other smaller firms, such as Pinterest and Foursquare, 
as comparable competitive threats.\886\ As he noted, if these 
companies ``become big we'll just regret not doing them . . . . 
Or we can buy them then, or build them along the way.'' \887\ 
In an all-hands meeting the following day, Mr. Zuckerberg 
responded to a question about Instagram's rapid growth by 
saying that ``we need to dig ourselves out of a hole.'' \888\ 
He also told employees at the company that Instagram is 
``growing really quickly'' and that it would be ``tough to 
dislodge them.'' \889\
---------------------------------------------------------------------------
    \885\ Id. at FB-HJC-ACAL-00063319, https://judiciary.house.gov/
uploadedfiles/00063316 00063321.pdf.
    \886\ Id. at FB-HJC-ACAL-00063319 to -00063320 (Apr. 5, 2012), 
https://judiciary.house.gov/uploaded files/0006331600063321.pdf.
    \887\ Id.
    \888\ Id. at FB-HJC-ACAL-00047340 (Apr. 6, 2012) (on file with 
Comm.).
    \889\ Id.
---------------------------------------------------------------------------
    Following the announcement of the transaction, Mr. 
Zuckerberg said internally that Facebook ``can likely always 
just buy any competitive startups,'' and agreed with one of the 
company's senior engineers that Instagram was a ``threat'' to 
Facebook.\890\ Mr. Zuckerberg concluded that ``[o]ne thing 
about startups though is you can often acquire them.'' \891\
---------------------------------------------------------------------------
    \890\ Id. at FB-HJC-ACAL-00067600 (Apr. 9, 2012), https://
judiciary.house.gov/uploaded files/0006760000067601.pdf.
    \891\ Id. at FB-HJC-ACAL-00063341 (Apr. 9, 2012), https://
judiciary.house.gov/uploaded files/0006334000063341.pdf.
---------------------------------------------------------------------------
    At the Subcommittee's sixth hearing, Judiciary Committee 
Chair Jerrold Nadler (D-NY) asked Mr. Zuckerberg about his 
characterization of Instagram as a competitive threat prior to 
the acquisition.\892\ In response, Mr. Zuckerberg said that 
Facebook has always viewed Instagram as ``both a competitor and 
as a complement to our services.'' \893\ He added that at the 
time of the transaction, Instagram was a competitor in mobile 
photos and camera apps.\894\
---------------------------------------------------------------------------
    \892\ CEO Hearing at 43 (question of Rep. Jerrold Nadler (D-NY), 
Chair, H. Comm. on the Judiciary).
    \893\ Id. at 44 (statement of Mark Zuckerberg, CEO, Facebook, 
Inc.).
    \894\ Id.
---------------------------------------------------------------------------
    Chair Nadler also asked that if this ``was an illegal 
merger at the time of the transaction, why shouldn't Instagram 
now be broken off into a separate company?'' \895\ In response, 
Mr. Zuckerberg said that ``with hindsight, it probably looks 
obvious that Instagram would have reached the scale that it has 
today.'' \896\ But he elaborated:
---------------------------------------------------------------------------
    \895\ Id. at 45 (question of Rep. Jerrold Nadler (D-NY), Chair, H. 
Comm. on the Judiciary).
    \896\ Id. at 46 (statement of Mark Zuckerberg, CEO, Facebook, 
Inc.).

     LIt was not a guarantee that Instagram was going to 
succeed. The acquisition has done wildly well, largely because 
not just of the founders' talent but because we invested 
heavily in building up the infrastructure and promoting it and 
working on security and working on a lot of things around this, 
and I think that this has been an American success story.\897\
---------------------------------------------------------------------------
    \897\ Id.

This response, however, is not consistent with many of the 
documents Facebook provided to the Subcommittee.\898\
---------------------------------------------------------------------------
    \898\ Id. (statement of the Rep. Jerrold Nadler (D-NY), Chair, H. 
Comm. on the Judiciary) (``Facebook, by Mr. Zuckerberg's own admission 
and by the documents we have from the time, Facebook saw Instagram as a 
threat that could potentially syphon business away from Facebook. And 
so, rather than compete with it, Facebook bought it. This is exactly 
the type of anticompetitive acquisition that the antitrust laws were 
designed to prevent. This should never have happened in the first 
place. It should never have been permitted to happen, and it cannot 
happen again.'').
---------------------------------------------------------------------------
    Instagram was growing significantly at the time of the 
transaction. In December 2011, with only 13 employees, 
Instagram already had 14 million users.\899\ Instagram's 
internal financial history and projections noted that it did 
not plan to charge for its app or for downloading filters due 
to its ``rapid user growth'' and ``implied network value.'' 
\900\ Instagram's internal market projections showed the 
company growing to nearly 20 million users by January 2012 with 
a 22 percent monthly growth rate.\901\ By March 31, 2012, 
Instagram had 30.2 million users and a 17 percent user growth 
rate.\902\ After releasing its app in the Google Play Store on 
April 3, 2012, Instagram added ten million users within ten 
days,\903\ growing to nearly 50 million users by April 30, 
2012,\904\ and 100 million users by the time the acquisition 
closed in August 2012.\905\
---------------------------------------------------------------------------
    \899\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00101426 (Dec. 5, 2011) (on file with Comm.) (Instagram 
Financial History and Projections).
    \900\ Id.
    \901\ Id. at FB-HJC-ACAL-00101473 (Dec. 5, 2011) (Instagram 
Budget).
    \902\ Id. at FB-HJC-ACAL-0110268 (2012) (Instagram Growth and 
Projections).
    \903\ Id. at FB-HJC-ACAL-00106124 (Apr. 13, 2012) (Instagram Chat 
Log).
    \904\ Id. at FB-HJC-ACAL-00106131 (Apr. 30, 2012).
    \905\ Facebook, Inc., Annual Report (Form 10-K) 5 (Dec. 31, 2012), 
https://www.sec.gov/
Archives/edgar/data/1326801/000132680113000003/fb-12312012x10k.htm.
---------------------------------------------------------------------------
    Instagram's growth also appeared to be sustainable. In an 
email between senior executives at both companies on April 16, 
2012, Instagram's head of business operations said that 
Instagram had not had difficulties with scaling or cloud 
storage availability, noting that ``[s]caling has been really 
easy'' despite the need to ``keep adding machine capacity.'' 
\906\ They also noted that user uptake on Android devices 
exceeded the company's expectations, but did not raise concerns 
about their ability to scale in response to this demand.\907\
---------------------------------------------------------------------------
    \906\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00110279 (Apr. 16, 2012) (on file with Comm.) (Instagram's 
Growth Projections); see generally Sarah Frier, No Filter (2020) 
(``Every hour, Instagram seemed to grow faster. D'Angelo eventually 
helped the company transition to renting server space from Amazon Web 
Services instead of buying their own.'').
    \907\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00110279 (Apr. 16, 2012) (on file with Comm.) (Instagram's 
Growth Projections).
---------------------------------------------------------------------------
    Facebook's support of Instagram's growth after acquiring it 
is overstated. Before acquiring Instagram, Mr. Zuckerberg said 
that Facebook should ``invest a few more engineers in it'' but 
let Instagram ``run relatively independently.'' \908\ Prior to 
being acquired, Instagram's internal projections showed the 
company gaining nearly 88 million users by January 2013,\909\ 
and that its growth trajectory would not be significantly 
affected by the transaction.\910\
---------------------------------------------------------------------------
    \908\ Id. at FB-HJC-ACAL-00063184 to -00063185 (Mar. 9, 2012), 
https://judiciary
.house.gov/uploadedfiles/0006318000063197.pdf.
    \909\ Id. at FB-HJC-ACAL-0110268 (2012) (on file with Comm.) 
(Instagram's Growth Projections).
    \910\ Id.

    (iii) WhatsApp
    (1) Overview. WhatsApp was founded in February 2009 by Jan 
Koum and Brian Acton.\911\ Originally designed to allow users 
to provide temporary updates to their contacts,\912\ WhatsApp 
is a cross-platform messaging and calling service.\913\ Unlike 
traditional text and multimedia messages sent over a cellular 
network at the time, WhatsApp messages and calls do not require 
a cellular connection, and are transmitted by an internet 
connection.\914\ A main distinction between Facebook Messenger 
and WhatsApp is the network that people are able to communicate 
with on each messaging service. A Facebook user can only send 
messages to other Facebook users on the Messenger app, whereas 
a WhatsApp user can send messages to other people based on 
contacts on their mobile device.\915\
---------------------------------------------------------------------------
    \911\ Steven Levy, Facebook: The Inside Story 317-18 (2020).
    \912\ Id. at 319.
    \913\ Letter from Reginald Brown & Jon Yarowsky to H. Comm. on the 
Judiciary (Oct. 14, 2019), FB-AJC-ACAL-APP00003.
    \914\ Id. Although WhatsApp originally charged a subscription fee 
after the first year of use, it removed fees in January 2016. See 
Making WhatsApp Free and More Useful, WhatsApp (Jan. 18, 2016), https:/
/blog.whatsapp.com/making-whats-app-free-and-more-useful.
    \915\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00042171 (2014) (on file with Comm.).
---------------------------------------------------------------------------
    Until 2016, WhatsApp monetized its service through 
subscriptions for a nominal fee after the first year of 
use.\916\ Around that time, WhatsApp was the only messaging app 
that competed using this business model.\917\ Importantly, 
WhatsApp's founders strongly opposed an advertisement-based 
business model. In June 2012, they wrote that ``when 
advertising is involved you the user are the product,'' 
explaining:
---------------------------------------------------------------------------
    \916\ Steven Levy, Facebook: The Inside Story 320 (2020) (`` `We 
were building a communication service,' says Acton. `You pay forty 
bucks a month to Verizon for their service, I figured a dollar a year 
was enough for a messaging service.' '').
    \917\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00042157 (2014) (on file with Comm.) (``To the best of 
WhatsApp's knowledge, Threema is the only other provider that has 
adopted a model based on usage fees. In contrast to WhatsApp's 
subscription model, users of Threema pay a one-time fee for a life-time 
service.'').

     LAdvertising isn't just the disruption of aesthetics, the 
insults to your intelligence and the interruption of your train 
of thought. At every company that sells ads, a significant 
portion of their engineering team spends their day tuning data 
mining, writing better code to collect all your personal data, 
upgrading the servers that hold all the data and making sure 
it's all being logged and collated and sliced and packaged and 
shipped out.\918\
---------------------------------------------------------------------------
    \918\ Why We Don't Sell Ads, WhatsApp (June 18, 2012), https://
blog.whatsapp.com/why-we-don-t-sell-ads (``Advertising has us chasing 
cars and clothes, working jobs we hate so we can buy shit we don't 
need.'').

WhatsApp also maintained robust privacy policies. In its June 
2012 privacy policy, WhatsApp stated that it does not collect 
names, emails, location data, or the contents of messages sent 
through WhatsApp.\919\ According to its policy, ``WhatsApp is 
currently ad-free and we hope to keep it that way forever.'' 
\920\
---------------------------------------------------------------------------
    \919\ Privacy Notice, WhatsApp (July 7, 2012), https://
www.whatsapp.com/legal?doc=privacy-policy&version=20120707. 
    \920\ Id.
---------------------------------------------------------------------------
    (2) Acquisition Review. On February 19, 2014, Facebook 
announced its proposed acquisition of WhatsApp for 
approximately $16 billion at the time of the announcement.\921\ 
Following the transaction, WhatsApp's cofounder wrote that the 
company would ``remain autonomous and operate independently'' 
from Facebook, and that ``nothing'' will change for users 
because there ``would have been no partnership between our two 
companies if we had to compromise on the core principles that 
will always define our company, our vision and our product.'' 
\922\ Mr. Zuckerberg said that ``[w]e are absolutely not going 
to change plans around WhatsApp and the way it uses user 
data.'' \923\
---------------------------------------------------------------------------
    \921\ The transaction included $4 billion in cash and approximately 
$12 billion of Facebook shares. Facebook to Acquire WhatsApp, Facebook 
(Feb. 19, 2014), https://about.fb.com/news/2014/02/facebook-to-acquire-
whatsapp/. The final value of WhatsApp exceeded $21 billion due to 
changes in the value of Facebook's stock during the transaction and due 
to the addition of granting $3 billion in Facebook shares following the 
closing of the transaction. Sarah Frier, Facebook $22 Billion WhatsApp 
Deal Buys $10 Million in Sales, Bloomberg (Oct. 29, 2014), https://
www.bloomberg.com/news/articles/2014-10-28/facebook-s-22-billion-
whatsapp-deal-buys-10-million-in-sales.
    \922\ Facebook, WhatsApp (Feb. 19, 2014), https://
blog.whatsapp.com/facebook (``Here's what will change for you, our 
users: Nothing.'').
    \923\ Jessica Guynn, Mark Zuckerberg: WhatsApp Worth Even More than 
$19 Billion, L.A. Times (Feb. 24, 2014), https://www.latimes.com/
business/la-xpm-2014-feb-24-la-fi-tn-mark-zuckerberg-whatsapp-worth-
even-more-than-19-billion-20140224-story.html.
---------------------------------------------------------------------------
    The Federal Trade Commission opened an initial 
investigation into the proposed transaction on March 13, 2014. 
On April 10, 2014, the FTC's Director of the Bureau of Consumer 
Protection sent a letter advising the companies that WhatsApp 
``must continue to honor'' its privacy data security 
commitments to its users, and that ``a failure to keep promises 
made about privacy constitutes a deceptive practice under 
section 5 of the FTC Act.'' \924\ The Commission did not 
initiate a full-phase investigation into the acquisition.
---------------------------------------------------------------------------
    \924\ Letter from Jessica Rich, Dir., Bureau of Consumer Prot., 
Fed. Trade Comm'n, to Erin Egan, Chief Priv. Officer, Facebook, Inc., & 
Anne Hoge, Gen. Couns., WhatsApp, 1-2 (Apr. 10, 2014), https://
www.ftc.gov/system/files/documents/public_statements/297701/
140410facebook whatappltr.pdf.
---------------------------------------------------------------------------
    In September 2014, the European Commission initiated a 
review of Facebook's proposed acquisition of WhatsApp.\925\ At 
the time of the transaction, Facebook calculated that the 
combined share of Facebook Messenger and WhatsApp in February 
2014 was approximately 36 percent of the European Economic Area 
(EEA) market.\926\ In a filing in support of the transaction, 
Facebook told the European Commission that multi-homing--the 
use of multiple apps with similar features--was a key 
characteristic of the messaging market, saying that 
``approximately 70% of consumers use at least two, and 43% use 
at least three, communications apps in parallel.'' \927\ 
Facebook characterized the WhatsApp product market as being 
distinct from the social networking market because WhatsApp 
``does not offer social features,'' and represented that it had 
``no plans to make changes to WhatsApp's current strategy'' 
after closing the proposed acquisition.\928\
---------------------------------------------------------------------------
    \925\ Facebook gave notice of the proposed transaction to the 
European Commission on August 29, 2014. Press Release, Eur. Comm'n, 
Mergers: Commission Approves Acquisition of WhatsApp by Facebook (Oct. 
3, 2014), https://ec.europa.eu/commission/presscorner/detail/en/IP_14_
1088.
    \926\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00042161 (on file with Comm.).
    \927\ Id. at FB-HJC-ACAL-00042160.
    \928\ Id. at FB-HJC-ACAL-00042173.
---------------------------------------------------------------------------
    On October 3, 2014, the European Commission approved the 
proposed transaction, finding that ``Facebook Messenger and 
WhatsApp are not close competitors and that consumers would 
continue to have a wide choice of alternative consumer 
communications apps after the transaction.'' \929\ Although the 
European Commission noted that the messaging apps are 
characterized by network effects, it concluded that Facebook 
would ``continue to face sufficient competition after the 
merger.'' \930\ The Commission acknowledged that there is 
overlap between social networking and messaging apps. As it 
noted, the distinction between these apps is ``becoming blurred 
and each of these services adopts traditional functionalities 
of the other.'' \931\ However, the Commission concluded that 
social networking services generally provide more social 
features than messaging apps--such as commenting on or 
``liking'' other users' posts and photos--whereas messaging 
apps had more limited functionality that is focused on real-
time communication.\932\
---------------------------------------------------------------------------
    \929\ Press Release, Eur. Comm'n, Mergers: Commission Approves 
Acquisition of WhatsApp by Facebook (Oct. 3, 2014), https://
ec.europa.eu/commission/presscorner/detail/en/IP_14_1088.
    \930\ Id.
    \931\ Case COMP/M.7217, Facebook/WhatsApp, Eur. Comm'n Decision 
C(2014) 7239, para. 52 (Oct. 3, 2014), https://ec.europa.eu/
competition/mergers/cases/decisions/m7217_20141003_20310
_3962132_EN.pdf.
    \932\ Id. para. 54.
---------------------------------------------------------------------------
    In 2016, the European Commission fined Facebook after it 
concluded that Facebook provided ``incorrect or misleading 
information'' during the Commission's review of the 
transaction.\933\ In its Statement of Objections to Facebook, 
the Commission concluded that Facebook provided misleading 
evidence on whether the company could match its users' accounts 
with those of WhatsApp's users.\934\ In August 2016, WhatsApp 
had updated its policies to allow the linking of Facebook user 
identities with WhatsApp user phone numbers.\935\ As discussed 
below, Facebook intended to create this functionality at the 
time of the transaction.\936\
---------------------------------------------------------------------------
    \933\ Press Release, Eur. Comm'n, Mergers: Commission Fines 
Facebook =110 Million for Providing Misleading Information About 
WhatsApp Takeover (May 18, 2017), https://ec.europa.eu/commission/
presscorner/detail/en/IP_17_1369.
    \934\ Id.
    \935\ Id.
    \936\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045364 (Feb. 4, 2014) (on file with Comm.).
---------------------------------------------------------------------------
    Documents obtained by the Subcommittee indicate that 
Facebook acquired WhatsApp to expand its dominance. Prior to 
acquiring WhatsApp, Facebook viewed the acquisition as 
providing an opportunity to expand its reach in countries with 
intermediate levels of penetration.\937\ Facebook's internal 
documents at the time of the transaction reveal that WhatsApp 
had already tipped markets in its favor where it had high 
penetration.\938\
---------------------------------------------------------------------------
    \937\ Id.
    \938\ See, e.g., id.
---------------------------------------------------------------------------
    In an internal email to Facebook's management team, 
Facebook Director of Growth Javier Olivan wrote that WhatsApp 
had higher levels of reach and usage than Facebook in countries 
that it had penetrated. For example, based on Facebook's 
internal data, WhatsApp reached 99.9 percent of the smartphone 
population in Spain, or as Mr. Olivan described it, ``literally 
everyone.'' \939\ By purchasing WhatsApp, Mr. Olivan suggested 
that they could ``grow Facebook even further'' by exposing new 
users to Facebook.\940\ Additionally, by bundling free services 
with WhatsApp and Facebook's other services, the transaction 
could serve as another mechanism to expand Facebook's reach 
among WhatsApp users.\941\ Mr. Zuckerberg responded 
supportively, saying that ``I really agree with this 
analysis.'' \942\
---------------------------------------------------------------------------
    \939\ Id.
    \940\ Id.
    \941\ Id.
    \942\ Id. at FB-HJC-ACAL-00045363.
---------------------------------------------------------------------------
    In an email to David Ebersman, Facebook's Chief Financial 
Officer, Mr. Olivan wrote that WhatsApp's ``reach amongst 
smartphone users is actually bigger than ours . . . . [W]e have 
close to 100% overlap, our user-base being a subset of 
theirs.'' \943\ He explained that, ``in markets where they do 
well, they literally reach 100% of smartphone users--which is a 
big part of the population.'' \944\ In the company's internal 
documents describing the transaction rationale, there was a 
heavy emphasis on WhatsApp's growth and usage--450 million 
users, a clear path to a billion users, and adding one million 
new users every day with no marketing--and expanding Facebook's 
social graph to phones.\945\ Prior to the acquisition, Mr. 
Zuckerberg had requested a list of all mobile apps with more 
than 100 million daily and monthly active users globally.\946\ 
Facebook's data showed that WhatsApp had the second most daily 
active users and fourth most monthly active users of any 
freestanding mobile app.\947\
---------------------------------------------------------------------------
    \943\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045388 (Feb. 18, 2014), https://judiciary.house.gov/
uploadedfiles/0004538800045389.pdf.
    \944\ Id.
    \945\ Id. at FB-HJC-ACAL-00045379 to -00045387 (Feb. 19, 2014) (on 
file with Comm.).
    \946\ Id.
    \947\ Id.
---------------------------------------------------------------------------
    Finally, a week after announcing the transaction, David 
Wehner, then-Vice President of Corporate Finance and Business 
Planning at Facebook, said to Mr. Ebersman that ``we are going 
to spend 5-10% of our market cap every couple years to shore up 
our position.'' \948\ Mr. Wehner said that ``I hate the word 
`land grab' but I think that is the best convincing argument 
and we should own that.'' \949\
---------------------------------------------------------------------------
    \948\ Id. at FB-HJC-ACAL-00045388 (Feb. 18, 2014), https://
judiciary.house.gov/uploaded files/0004538800045389.pdf.
    \949\ Id.
---------------------------------------------------------------------------
    Other documents indicate that Facebook viewed WhatsApp as a 
maverick competitor. In December 2013, Mr. Zuckerberg sent an 
email to Facebook's management team on competitive issues 
facing the company. In this email, he called attention to a 
feature that WhatsApp had implemented on its platform, and 
warned that Facebook should move quickly:

     LI want to call out two competitive near term issues we 
face. The first is WhatsApp adding a feature like this for 
public figures . . . . If the space is going to move in this 
direction, being the leader and establishing the brand and 
network effects matters a lot. This alone should encourage us 
to consider this soon . . . . When the world shifts like this, 
being first is how you build a brand and network effect. We 
have an opportunity to do this at scale, but that opportunity 
won't last forever. I doubt we even have a year before WhatsApp 
starts moving in this direction.\950\
---------------------------------------------------------------------------
    \950\ Id. at FB-HJC-ACAL-00046826 to -00046834 (Dec. 13, 2013) (on 
file with Comm.).

    Facebook's documents also indicate that the company 
monitored WhatsApp closely to determine whether it was a threat 
to the Messenger app. Prior to consummating the merger, 
Facebook's data scientists used Onavo data to model WhatsApp's 
engagement and reach to determine whether it was ``killing 
Facebook Messenger,'' \951\ as well as how its usage trends 
compared to Snap-
chat.\952\
---------------------------------------------------------------------------
    \951\ Id. at FB-HJC-ACAL-00014564 to -00014574 (Mar. 27, 2014).
    \952\ Id. at FB-HJC-ACAL-00014575.
---------------------------------------------------------------------------
    (c) Conduct. In addition to protecting and expanding its 
dominance by acquiring firms that Facebook identified as 
competitive threats over the past decade, Facebook abused its 
monopoly power to harm competition in the social networking 
market. Facebook used its data advantage to create superior 
market intelligence to identify nascent competitive threats and 
then acquire, copy, or kill these firms. Once dominant, 
Facebook selectively enforced its platform policies based on 
whether it perceived other companies as competitive threats. In 
doing so, it advantaged its own services while weakening other 
firms.

    (i) Facebook's Use of Non-Public Data to Identify 
Competitive Threats. Prior to Facebook's acquisition of 
Instagram, Facebook used internal data to track the growth of 
Instagram and other popular apps. While this data was probative 
for companies that interconnected with Facebook through Open 
Graph, it was incomplete for studying mobile app usage trends 
across the entire mobile ecosystem. In April 2012, Facebook's 
Director of Growth Javier Olivan emailed Mr. Zuckerberg and 
Facebook Chief Product Officer Chris Cox about improving 
Facebook's ``competitive research.'' \953\ He said that 
``getting our data in great shape is going to require effort.'' 
\954\ Although the company had made ``some good progress'' 
using data from Comscore, a data analytics and measurement 
firm, Mr. Olivan said that, with a significant investment, 
Facebook could build its own custom panel for mobile data that 
would ``allow us to get 10 better at understanding'' 
the mobile ecosystem:
---------------------------------------------------------------------------
    \953\ Id. at FB-HJC-ACAL-00068928 (Apr. 3, 2012).
    \954\ Id.

     LI keep seeing the same suspects (instagram, pinterest, . 
. . [sic] both on our competitive radar/platform strategy as 
wins . . . . I think having the exact data about their users 
[sic] engagement, value they derive from [Facebook] . . . would 
help us make more bold decisions on whether they are friends or 
foes. Back to your thread about ``copying'' vs. ``innovating'' 
we could also use this info to inspire our next moves.\955\
---------------------------------------------------------------------------
    \955\ Id.

Mr. Zuckerberg responded: ``Yeah, let's do it. We can find some 
time periodically during my weekly reviews to go over this 
stuff.'' \956\
---------------------------------------------------------------------------
    \956\ Id. at FB-HJC-ACAL-00068929.
---------------------------------------------------------------------------
    A year later, on October 14, 2013, Facebook acquired Onavo, 
a virtual private network (VPN), for $115 million and other 
consideration.\957\ In an email to Facebook's board, Facebook's 
Vice President and Deputy General Counsel said the purpose of 
the acquisition was to ``enhance our analytics related to 
cross-app user engagement data, as well as user behavior and 
market trends, and also to improve advertising effectiveness 
through demand data and audience targeting in the long term.'' 
\958\ Importantly, Facebook planned to place the incoming Onavo 
employees, including its cofounder, Guy Rosen, under Facebook's 
Growth team reporting to Javier Olivan.\959\
---------------------------------------------------------------------------
    \957\ Hayley Tsukayama, Facebook Acquires Israeli Start-up Onavo to 
Bolster Data Compression and Mobile Tech, Wash. Post (Oct. 14, 2013), 
https://blogs.wsj.com/digits/2013/10/14/facebook-deal-gives-it-office-
in-israel/.
    \958\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00072168 (Oct. 9, 2013) (on file with Comm.).
    \959\ Id.
---------------------------------------------------------------------------
    Facebook's acquisition of Onavo provided the company with 
the ability to track potential competitors through non-public, 
real-time data about engagement, usage, and how much time 
people spend on apps. Following this acquisition, Facebook used 
Onavo data as an ``early bird warning system,'' \960\ 
identifying fast-growing apps that could potentially threaten 
Facebook's market position or enable it to protect and expand 
its dominance. For instance, days prior to Facebook's 
acquisition of WhatsApp in 2014, Facebook senior executives 
provided Mark Zuckerberg with a list of all mobile apps with 
greater than 90 million monthly active users--WhatsApp, one of 
the only top mobile apps not owned at the time by either 
Facebook or Google, was fourth on the list.\961\
---------------------------------------------------------------------------
    \960\ Betsy Morris & Deepa Seetharaman, The New Copycats: How 
Facebook Squashes Competition from Startups, Wall St. J. (Aug. 9, 
2017), https://www.wsj.com/articles/the-new-copycats-how-facebook-
squashes-competition-from-startups-1502293444.
    \961\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00045412 to -00045414 (Feb. 16, 2014), https://
judiciary.house.gov/uploadedfiles/0004541200045414.pdf.
---------------------------------------------------------------------------
    In August 2018, Apple removed Onavo from its app store 
following reporting that Facebook was using the app to track 
users and other apps.\962\ An Apple spokesperson said the 
company intended to make ``it explicitly clear that apps should 
not collect information about which other apps are installed on 
a user's device for the purposes of analytics or advertising/
marketing and must make it clear what user data will be 
collected and how it will be used.'' \963\ In January 2019, 
Apple removed Facebook's functional successor to Onavo, the 
Facebook Research app, following reports by TechCrunch that 
Facebook paid ``teenagers and adults to download the Research 
app and give it root access to network traffic in what may be a 
violation of Apple policy so the social network can decrypt and 
analyze their phone activity.'' \964\
---------------------------------------------------------------------------
    \962\ Deepa Seetharaman, Facebook Removes Data-Security App from 
Apple Store, Wall St. J. (Aug. 22, 2018), https://www.wsj.com/articles/
facebook-to-remove-data-security-app-from-apple-store-1534975340.
    \963\ Taylor Hatmaker, Apple Removed Facebook's Onavo from the App 
Store for Gatherine App Data, TechCrunch (Aug. 22, 2018), https://
techcrunch.com/2018/08/22/apple-facebook-
onavo/.
    \964\ Josh Constine, Facebook Pays Teens to Install VPN that Spies 
on Them, TechCrunch (Jan. 29, 2019), https://techcrunch.com/2019/01/29/
facebook-project-atlas/; Josh Constine, Apple Bans Facebook's Research 
App that Paid Users for Data, TechCrunch (Jan. 30, 2019), https://
techcrunch.com/2019/01/30/apple-bans-facebook-vpn/.
---------------------------------------------------------------------------
    Most recently, Facebook acquired Giphy, a platform for 
sharing GIFs online and through messaging apps, for $400 
million in May 2020.\965\ As several reporters have noted, this 
transaction would give Facebook competitive insights into other 
messaging apps. One commenter said, ``While you may 
successfully block trackers like the Facebook ad pixel 
following you around online, or even delete your Facebook 
account, the majority of us wouldn't suspect we're being 
monitored when we're sending funny images to friends.'' \966\
---------------------------------------------------------------------------
    \965\ Kurt Wagner & Sarah Frier, Facebook Buys Animated Image 
Library Giphy for $400 Million, Bloomberg (May 15, 2020), https://
www.bloomberg.com/news/articles/2020-05-15/facebook-buys-animated-
image-library-giphy-to-boost-messaging; see, e.g., Vivek Karuturi 
(@VivekxK), Twitter (May 15, 2020, 11:43 a.m.), https://twitter.com/
VivekxK/status/12613212 01210626048.
    \966\ Owen Williams, How Facebook Could Use Giphy to Collect Your 
Data, Onezero (May 15, 2020), https://onezero.medium.com/how-facebook-
could-use-giphy-to-collect-your-data-70824 aa2647b.

    (ii) Facebook's Strategy to Acquire, Copy, or Kill 
Competitors. Facebook's internal documents indicate that once 
it identified a competitive threat, it attempted to buy or 
crush them by cloning their product features or foreclosing 
them from Facebook's social graph. Facebook took these steps to 
harm competitors and insulate Facebook from competition, not 
just to grow or offer better products and services.
    In a March 2012 email to other senior executives at 
Facebook, Mr. Zuckerberg wrote that cloning other apps could 
help Facebook move faster by ``building out more of the social 
use cases ourselves and prevent our competitors from getting 
footholds.'' \967\ Other senior employees at Facebook agreed 
with this strategy. Sheryl Sandberg, Facebook's Chief Operating 
Officer, said that ``it is better to do more and move faster, 
especially if that means you don't have competitors build 
products that takes some of our users.'' Sam Lessin, Facebook's 
Product Management Director, added, ``I would love to be far 
more aggressive and nimble in copying competitors . . . . Let's 
`copy' (aka super-set) Pinterest!'' \968\ Another senior 
executive responded, ``I've been thinking about why we haven't 
moved faster on Roger and Snap . . . I'm increasingly concerned 
as I watch startups siphon our graph and create awesome new 
experiences faster than we can.'' \969\
---------------------------------------------------------------------------
    \967\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00053511 to -00053516 (Mar. 30, 2012) (on file with Comm.).
    \968\ Id.
    \969\ Id. at FB-HJC-ACAL-00067549 (Apr. 3, 2012).
---------------------------------------------------------------------------
    Prior to its acquisition of Instagram in 2012, Facebook's 
senior executives had identified Instagram as a growing threat. 
Mr. Zuckerberg told employees at an internal meeting that the 
``bad news is that [Instagram is] growing really quickly, they 
have a lot of momentum, and it's going to be tough to dislodge 
them.'' \970\ One engineer wrote in an internal company chat 
that ``Instagram is eating our lunch. We should've owned this 
space but we're already losing quite badly.'' \971\ In 
response, another engineer asked, ``Isn't that why we're 
building an Instagram clone?'' referencing Facebook's 
development of Facebook Camera, a standalone photo app.\972\
---------------------------------------------------------------------------
    \970\ Id. at FB-HJC-ACAL-00047340 (Apr. 6, 2012).
    \971\ Id. at FB-HJC-ACAL-00063367 (Jan. 26, 2012), https://
judiciary.house.gov/uploaded files/0006336700063373.pdf.
    \972\ Josh Constine, FB Launches Facebook Camera--An Instagram-
Style Photo Filtering, Sharing, Viewing iOS App, TechCrunch (May 24, 
2012), https://techcrunch.com/2012/05/24/facebook-camera/.
---------------------------------------------------------------------------
    During negotiations to acquire Instagram, Mr. Zuckerberg 
referenced Facebook's development of a similar app to Kevin 
Systrom, Instagram's Chief Executive Officer.\973\ In messages 
between Mr. Zuckerberg and Mr. Systrom, Mr. Systrom said that 
it was difficult to evaluate the transaction independently of 
reports that Facebook was developing a similar product. He told 
Mr. Zuckerberg that he ``wouldn't feel nearly as strongly 
[about the acquisition] if independently you weren't building a 
mobile photos app that makes people choose which engine to 
use.'' \974\ Similarly, Mr. Zuckerberg suggested that refusing 
to enter into a partnership with Facebook, including an 
acquisition, would have consequences for Instagram, referencing 
the product Facebook was developing at the time:
---------------------------------------------------------------------------
    \973\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00091648 to -00091650 (Mar. 20, 2012) (on file with Comm.).
    \974\ Id.

     LAt some point soon, you'll need to figure out how you 
actually want to work with us. This can be an acquisition, 
through a close relationship with Open Graph, through an arms 
length relationship using our traditional APIs, or perhaps not 
at all . . . . Of course, at the same time we're developing our 
own photos strategy, so how we engage now will determine how 
much we're partners vs. competitors down the line--and I'd like 
to make sure we decide that thoughtfully as well.\975\
---------------------------------------------------------------------------
    \975\ Id.

    In an earlier conversation with Matt Cohler, an Instagram 
investor and former senior Facebook adviser, Mr. Systrom asked 
whether Mr. Zuckerberg would ``go into destroy mode if I say 
no'' to being acquired, saying that the companies ``have 
overlap in features.'' \976\ Mr. Cohler responded ``probably'' 
and that Mr. Zuckerberg would ``conclude that it's best to 
crush [I]nstagram.'' \977\
---------------------------------------------------------------------------
    \976\ Id. at FB-AJC-ACAL-0010438 (Feb. 13, 2012), https://
judiciary.house.gov/uploaded files/0010143800101441.pdf.
    \977\ Id.
---------------------------------------------------------------------------
    Facebook's approach towards rival social networking app 
Snapchat is another case study in how Facebook enters ``destroy 
mode'' when its market position is threatened. In 2013, as the 
company was growing rapidly, Snapchat cofounder Evan Spiegel 
turned down an offer from Mr. Zuckerberg to acquire the company 
for $3 billion.\978\ Thereafter, Instagram--owned by Facebook--
introduced the Instagram Stories feature, which allows users to 
post content that is available for only 24 hours, and which was 
``nearly identical to the central feed in Snapchat, which [was] 
also called Stories.'' \979\
---------------------------------------------------------------------------
    \978\ Evelyn Rusli & Douglas MacMillan, Messaging Service Snapchat 
Spurned $3 Billion Facebook Bid, Wall St. J. (Nov. 13, 2013), https://
www.wsj.com/articles/messaging-service-snapchat-spurned-facebook-bid-
1384376628.
    \979\ Casey Newton, Instagram's New Stories Are a Near-Perfect Copy 
of Snapchat Stories, Verge (Aug. 2, 2016), https://www.theverge.com/
2016/8/2/12348354/instagram-stories-
announced-snapchat-kevin-systrom-interview.
---------------------------------------------------------------------------
    Less than a year after its introduction, Instagram Stories 
had more daily active users (200 million) than Snapchat Stories 
(161 million).\980\ By 2018, Instagram Stories had doubled the 
number of Snapchat Stories daily users.\981\ When discussing 
Instagram's decision to clone the Snapchat feature, Instagram 
VP of Product Kevin Weil remarked: ``This is the way the tech 
industry works.'' \982\
---------------------------------------------------------------------------
    \980\ Kaya Yurieff, Instagram's Snapchat Clone Is More Popular than 
Snapchat, CNN Bus. (Apr. 13, 2017), https://money.cnn.com/2017/04/13/
technology/instagram-stories-snapchat/index .html.
    \981\ Id.
    \982\ Josh Constine, Instagram on Copying Snapchat: ``This Is the 
Way the Tech Industry Works,'' TechCrunch (May 16, 2017), https://
techcrunch.com/2017/05/16/to-clone-or-not-to-clone/.
---------------------------------------------------------------------------
    In another example, Facebook executives approached 
Houseparty, a social networking app,\983\ about a potential 
acquisition. Houseparty's founders turned down Facebook's 
offer, and released the product they referred to as ``the 
internet's living room.'' \984\ Shortly thereafter, Facebook 
announced that its Messenger app would become a ``virtual 
living room.'' \985\ Houseparty's active user base fell by half 
between 2017 and 2018.\986\
---------------------------------------------------------------------------
    \983\ Betsy Morris & Deepa Seetharaman, The New Copycats: How 
Facebook Squashes Competition from Startups, Wall St. J. (Aug. 9, 
2017), https://www.wsj.com/articles/the-new-copycats-how-facebook-
squashes-competition-from-startups-1502293444.
    \984\ Id.
    \985\ Id.
    \986\ Mansoor Iqbal, Houseparty Revenue and Usage Statistics 
(2020), Bus. of Apps (June 23, 2020), https://www.businessofapps.com/
data/houseparty-statistics/.
---------------------------------------------------------------------------
    At the Subcommittee's sixth hearing, Representative Henry 
C. ``Hank'' Johnson, Jr. (D-GA) asked Mr. Zuckerberg about 
Facebook's use of data to identify competitive threats. 
Representative Johnson noted that ``over nearly a decade, Mr. 
Zuckerberg, you led a sustained effort to surveil smaller 
competitors to benefit Facebook . . . . These were steps taken 
to abuse data, to harm competitors, and to shield Facebook from 
competition.'' \987\ He asked Mr. Zuckerberg whether Facebook 
used Onavo data to purchase WhatsApp. Mr. Zuckerberg responded:
---------------------------------------------------------------------------
    \987\ CEO Hearing at 147 (question of Rep. Henry C. ``Hank'' 
Johnson, Jr. (D-GA), Chair, Subcomm. on Courts & Intell. Prop., H. 
Comm. on the Judiciary).

     LI think every company engages in research to understand 
what their customers are enjoying so they can learn and make 
their products better. And that's what we were trying to do. 
That is what our analytics team was doing. And I think, in 
general, that allowed us to make our services better for people 
to be able to connect in a whole lot of different ways, which 
is our goal . . . . [Onavo] was one of the signals that we had 
about WhatsApp's trajectory, but we didn't need it. Without a 
doubt, it was pretty clear that WhatsApp was a great 
product.\988\
---------------------------------------------------------------------------
    \988\ Id. at 148 (statement of Mark Zuckerberg, CEO, Facebook, 
Inc.).

    (iii) Facebook Weaponized Access to Its Platform. Internal 
communications by Facebook's senior executives and interviews 
with former employees at the company indicate that Facebook 
selectively enforced its platform policies based on whether it 
perceived other companies as competitive threats.
    Facebook developed the Facebook Platform to connect other 
applications to Facebook's social graph. In an interview in 
2007, Mr. Zuckerberg described the goals of the Facebook 
Platform as making ``Facebook into something of an operating 
system so you can run full applications.'' \989\ A year later, 
in an email to senior executives at Facebook, Mr. Zuckerberg 
described Facebook Platform as key to the company's long term 
success:
---------------------------------------------------------------------------
    \989\ David Kirkpatrick, Facebook's Plan to Hook up the World, CNN 
Money (May 29, 2007), https://money.cnn.com/2007/05/24/technology/
facebook.fortune/.

     LPlatform is key to our strategy because we believe that 
there will be a lot of different social applications and ways 
that people communicate and share information, and we believe 
we can't develop all of them ourselves. Therefore, even though 
it's a challenge for us to get this right, it's important for 
us to focus on it because the company that defines this social 
platform will be in the best position to offer the most good 
ways for people to communicate and succeed in the long 
term.\990\
---------------------------------------------------------------------------
    \990\ Submission from Facebook, to H. Comm. on the Judiciary, 
FB_FTC_CID_00072185-88 (Feb. 14, 2008) (on file with Comm.).

Over the next few years, Facebook recognized that access to its 
social graph provided other applications with a tool for 
significant growth. In exchange, Facebook hosted content that 
kept users engaged on its social graph, and considered other 
ways to monetize this relationship, such as through revenue 
sharing or advertisements.
    By 2012, however, Facebook's senior executives realized 
that apps could use the Facebook Platform to build products 
that were competitive with Facebook and ``siphon our users.'' 
\991\ Mike Vernal, Facebook's Vice President of Product and 
Engineer, described this dynamic to Doug Purdy, Facebook's 
Director of Product Management:
---------------------------------------------------------------------------
    \991\ Id. at FB_FTC_CID_00072020-23 (Feb. 14, 2013).

     LWhen we started Facebook Platform, we were small and 
wanted to make sure we were an essential part of the fabric of 
the Internet. We've done that--we're now the biggest service on 
earth. When we were small, apps helped drive our ubiquity. Now 
that we are big, (many) apps are looking to siphon off our 
users to competitive services. We need to be more thoughtful 
about what integrations we allow and we need to make sure that 
we have sustainable, long-term value exchanges.\992\
---------------------------------------------------------------------------
    \992\ Id. (emphasis added).

    In another conversation between Sam Lessin, Facebook's 
Director of Product Engagement, and other executives, 
Facebook's senior employees agreed that competitive apps used 
Facebook Platform to ``steal our engagement'' and ``could be 
viewed as replacing Facebook functionality,'' adding that they 
planned to raise this concern with Mr. Zuckerberg.\993\ Mr. 
Lessin raised these concerns with Mr. Zuckerberg in October 
2012. In response, Mr. Zuckerberg agreed with this conclusion:
---------------------------------------------------------------------------
    \993\ Id. at FB_FTC_CID_0008058182 (Sept. 15, 2012).

     LReading your responses, I do think you are right . . . . 
I would be more comfortable with competition if I thought we 
knew better how to leverage our scale asset (and if scale 
weren't becoming cheaper and cheaper to achieve every day). 
What I think is that we should effectively not be helping our 
competitors more/much more than how they could get help from 
elsewhere in the market. They can acquire users in ways other 
than us so obviously we shouldn't be failing to take their 
money when they will just give it to someone else and get the 
same outcome. I do, however, again think that we want as much 
control here as we can get. I agree we shouldn't help our 
competitors whenever possible. I think the right solution here 
is to just be a lot stricter about enforcing our policies and 
identifying companies as competitors.\994\
---------------------------------------------------------------------------
    \994\ Id. at FB_FTC_CID_00491746-63 (Oct. 27, 2012) (emphasis 
added); see also Elena Botella, Facebook Earns $132.80 from Your Data 
per Year, Slate (Nov. 15, 2019), https://slate.com/technology/2019/11/
facebook-six4three-pikinis-lawsuit-emails-data.html.

Recognizing that some social apps had grown too popular and 
could compete with Facebook's family of products, Facebook cut 
off their access to Facebook's social graph.\995\
---------------------------------------------------------------------------
    \995\ Olivia Solon & Cyrus Farivar, Mark Zuckerberg Leveraged 
Facebook User Data to Fight Rivals and Help Friends, Leaked Documents 
Show, NBC News (Apr. 16, 2019), https://www.nbcnews.com/tech/social-
media/mark-zuckerberg-leveraged-facebook-user-data-fight-rivals-help-
friends-n994706.
---------------------------------------------------------------------------
    In 2013, Facebook claimed that the short-form video app 
Vine, a video-sharing app that Twitter acquired in 2012, 
``replicated Facebook's core News Feed functionality.'' \996\ 
In response, Facebook cut off Vine's access to Facebook 
APIs.\997\ In doing so, ``Facebook was able to degrade 
consumers' experience of Vine and reduce the platform's 
competitive threat.'' \998\ Twitter shut down Vine in 
2016.\999\
---------------------------------------------------------------------------
    \996\ Innovation and Entrepreneurship Hearing at 569 (response to 
Questions for the Record of Matt Perault, Dir. of Pub. Pol'y, Facebook, 
Inc.).
    \997\ Rachel Kraus, Mark Zuckerberg Gave the Order to Kneecap Vine, 
Emails Show, Mashable (Dec. 5, 2018), https://mashable.com/article/
mark-zuckerberg-helped-thwart-vine/.
    \998\ Competition & Mkts. Auth. Report at 141.
    \999\ Casey Newton, Why Vine Died, Verge (Oct. 28, 2016), https://
www.theverge.com/2016/10/28/13456208/why-vine-died-twitter-shutdown.
---------------------------------------------------------------------------
    Facebook's actions in the wake of the Cambridge Analytica 
scandal raise concerns about pretextual anticompetitive 
enforcement in the name of privacy. In 2019, Facebook cut off 
marketing firm Stackla's access to its APIs ``due to data 
scraping, which violates [Facebook's] policies.'' \1000\ Damien 
Mahoney, the Chief Executive Officer of Stackla, denied these 
allegations.\1001\ In an interview with the Subcommittee, Mr. 
Mahoney explained the economic harm of the company's 
foreclosure from the Facebook Platform:
---------------------------------------------------------------------------
    \1000\ Innovation and Entrepreneurship Hearing at 19 (statement of 
Matt Perault, Dir. of Pub. Pol'y, Facebook, Inc.).
    \1001\ Rob Price, Facebook Is Reviewing Hundreds of Its Official 
``Facebook Marketing Partners'' over Instagram Data-Scraping Issues, 
Bus. Insider (Aug. 23, 2019), https://www.business
insider.com/facebook-review-all-marketing-partners-instagram-data-
scraping-2019-8.

     LWhat we went through with Facebook was company altering, 
and if not for the resolve of our team and board, would have 
destroyed it. We had to lay off half our team. We made huge 
investments in the company in the previous 12 months, having 
raised $4m to increase our sales capacity by 160% and other 
functions in the business, then this occurred. It was a 
critical blow that almost forced us to close the doors. We were 
approaching 75 employees and 30% growth after 8 long years of 
toil. Now we have 26 employees, declining revenue and ongoing 
collateral damage that we continue to sink time and money into. 
While we try and stabilize, and get the company back to a 
position of growth, it's a long way off as we continue, to this 
very day, [to] deal with the after-effects. The fact this all 
resulted from a single erroneous and factually incorrect news 
article, combined with zero consultation from Facebook prior to 
their damaging actions, remains baffling and completely 
unfair.\1002\
---------------------------------------------------------------------------
    \1002\ Interview with Damien Mahoney, CEO, Stackla (Apr. 14, 2020).

    Around that time, Facebook became aware of MessageMe, a 
fast-growing app that used Facebook graph data to support its 
``Find Friends'' feature. Recognizing that MessageMe could 
compete with Facebook Messenger, Facebook's then-director of 
platform partnerships cut off the app's access to Facebook's 
Graph API.\1003\
---------------------------------------------------------------------------
    \1003\ Olivia Solon & Cyrus Farivar, Mark Zuckerberg Leveraged 
Facebook User Data to Fight Rivals and Help Friends, Leaked Documents 
Show, NBC News (Apr. 16, 2019), https://www.nbcnews.com/tech/social-
media/mark-zuckerberg-leveraged-facebook-user-data-fight-rivals-help-
friends-n994706.
---------------------------------------------------------------------------
    In a submission to the Subcommittee, a former Facebook 
employee who handled platform management at the company said 
that Facebook unevenly enforced its platform policies based on 
the degree of another firm's competition with Facebook and 
whether it could extract concessions from other firms. 
According to this former employee, Facebook was primarily 
concerned with whether a company was ``a competitive threat,'' 
and it ``was biasing its enforcement actions against [firms] 
they saw as competitors.'' \1004\ In a submission to the 
Subcommittee, the former Facebook employee provided an example:
---------------------------------------------------------------------------
    \1004\ Interview with Former Facebook Employee (Jan. 14, 2020).

     L[I]n one Facebook Messages conversation involving the 
CEO, Mr. Zuckerberg, and various executives in mid-2012, Mr. 
Zuckerberg expressed concern about an app called Ark that was 
accessing large amounts of user data in a way that could enable 
showing user content to people who didn't have permission to 
see the content. An investigation was conducted, and it was 
determined that Ark was violating Facebook's platform policies 
regarding the use of data from friends of Facebook users. 
Ultimately, leadership decided to terminate Ark's access to 
Facebook's APIs and ban Ark from the platform for six months. 
This was a harsh punishment relative to other developers 
conducting similar activity--indeed, Mr. Zuckerberg had been 
informed on the thread that ``tons'' of other apps were 
acquiring data the same way and there was not further 
investigation or action taken against those apps. Other apps 
that had been accused of violating data policies similarly had 
been treated much more leniently. It seemed clear that 
leadership imposed the more severe punishment against Ark 
because Mr. Zuckerberg viewed Ark as competitive with Facebook, 
as Facebook was exploring an acquisition of Ark at the same 
time as it was being investigated for policy violations.\1005\
---------------------------------------------------------------------------
    \1005\ Submission from Former Facebook Employee, to H. Comm. on the 
Judiciary, 2 (Apr. 2, 2020) (on file with Comm.).

    In contrast to punishing rivals, according to the former 
employee and other market participants interviewed by the 
Subcommittee, Facebook used ``whitelists'' to give preferential 
treatment to friends of the company.\1006\ For example, in a 
report published by NBC, Facebook gave Amazon extended API 
access because Amazon was spending money on advertising and 
partnering with Facebook on the launch of its Fire smartphone. 
Facebook's Director of Business Development asked, ``Remind me, 
why did we allow them to do this? Do we receive any cut of 
purchases?'' In response, a Facebook employee who worked with 
Facebook's ``strategic partners'' responded, ``No, but Amazon 
is an advertiser and supporting this with advertisement . . . 
and working with us on deeper integrations for the Fire.'' 
\1007\
---------------------------------------------------------------------------
    \1006\ Id.
    \1007\ Olivia Solon & Cyrus Farivar, Mark Zuckerberg Leveraged 
Facebook User Data to Fight Rivals and Help Friends, Leaked Documents 
Show, NBC News (Apr. 16, 2019), https://www
.nbcnews.com/tech/social-media/mark-zuckerberg-leveraged-facebook-user-
data-fight-rivals-help-friends-n994706.
---------------------------------------------------------------------------
    In response to these concerns, Facebook told the 
Subcommittee that it ``does not restrict access to its Platform 
APIs simply because an app competes with a Facebook product or 
service; but Facebook will restrict apps that violate its 
policies.'' \1008\ This is, however, inconsistent with the 
company's internal communications and other evidence examined 
by the Subcommittee during the investigation.
---------------------------------------------------------------------------
    \1008\ Innovation and Entrepreneurship Hearing at 569 (response to 
Questions for the Record of Matt Perault, Dir. of Pub. Pol'y, Facebook, 
Inc.).
---------------------------------------------------------------------------
3. Digital Advertising
    (a) Overview. Facebook monetizes its platform through the 
sales of digital advertising.\1009\ Facebook garnered over $70 
billion in revenue in 2019, a nearly 27 percent increase from 
2018.\1010\ It generates this revenue predominately from 
selling advertisement placements.
---------------------------------------------------------------------------
    \1009\ Transcript of Mark Zuckerberg's Senate Hearing, Wash. Post 
(Apr. 10, 2018), https://www.washingtonpost.com/news/the-switch/wp/
2018/04/10/transcript-of-mark-zuckerbergs-
senate-hearing(`` `Senator, we run ads,' Zuckerberg replied.'').
    \1010\ Id.
---------------------------------------------------------------------------
    Facebook has monopoly power in online advertising in the 
social networking market.\1011\ Notwithstanding Google's 
dominance, Facebook also has a significant share of revenue and 
growth in online advertising with many market participants 
referring to them as duopolies in this broad market. Some 
market participants interviewed by the Subcommittee consider 
Facebook ``unavoidable'' or ``must have'' due to the reach and 
scale of its platform. In particular, some businesses consider 
Facebook's identity product--its ability to persistently track 
users' online and offline conduct to serve tailored ads--as a 
unique feature.\1012\ For example, at the Subcommittee's fifth 
hearing, David Heinemeier Hansson, the Chief Technology Officer 
and Cofounder of Basecamp, testified that the nature of 
Facebook's targeted advertising makes it difficult to replace, 
saying:
---------------------------------------------------------------------------
    \1011\ Competition & Mkts. Auth. Report at 211.
    \1012\ Competitors Hearing at 36 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp).

     LAt Basecamp, we ultimately ended up swearing off the use 
of targeted advertisement based on the exploitation of personal 
data. Facebook's record of protecting people's privacy, and 
gathering their consent in the exploitation of their data for 
advertisement purposes, is atrocious, and we decided that we 
wanted no part of it. But choosing to opt out of targeted 
advertisement on the internet is like competing with one arm 
behind your back. It is very clear why most companies feel 
compelled to do this kind of advertisement, even if it's a 
violation of their ethics. If their competitors are doing it, 
they're at a significant disadvantage if they don't. And the 
same is true for us. We have undoubtedly given up growth to 
competitors because we've refrained from pursuing targeted 
ads.\1013\
---------------------------------------------------------------------------
    \1013\ Id.

    Facebook's advantages in terms of access to data and its 
reach contribute to its ability to earn higher revenue per user 
than other firms in the social networking market.\1014\ 
Facebook reported an average revenue per user (ARPU) of $7.05 
worldwide and $36.49 in the United States and Canada in July 
2020.\1015\ It has also averaged significant annual growth--26 
percent on average over the past five years.\1016\ In contrast, 
its closest competitor, Snap, reported in July 2020 that its 
ARPU ``remained flat'' at $1.91 worldwide and $3.48 in North 
America.\1017\ A recent investment report underscored this 
point, noting that Facebook enjoys a significant economic moat 
illustrated by the inability of Snap and other firms to 
meaningfully challenge its dominance.\1018\ As a result, entry 
or success by other firms is unlikely:
---------------------------------------------------------------------------
    \1014\ Competition & Mkts. Auth. Report at 211.
    \1015\ Facebook, Facebook Q2 2020 Results (July 31, 2020), https://
s21.q4cdn.com/399680738/files/doc_financials/2020/q2/Q2-2020-FB-
Earnings-Presentation.pdf.
    \1016\ Morningstar Equity Analyst Report: Facebook Inc 2 (Aug. 3, 
2020) (on file with Comm.) (``The value of such data and advertisers' 
willingness to use it is demonstrated by the 26% average annual growth 
of Facebook's average ad revenue per user, or ARPU, during the past 
five years, which we view as indicative of the price that advertisers 
pay Facebook for ad placement. During the same period, Facebook's 
monthly average users have grown 12% annually.'').
    \1017\ Snap, Inc., Quarterly Report (Form 10-Q) 25, 27 (June 30, 
2020), https://d18rn0p 25nwr6d.cloudfront.net/CIK-0001564408/9aacfdca-
55a1-4928-9a31-c2462d2386c0.pdf.
    \1018\ Morningstar Equity Analyst Report: Facebook Inc 1-2 (Aug. 3, 
2020) (on file with Comm.).

     LWith more users and usage time than any other social 
network, Facebook provides the largest audience and the most 
valuable data for social network online advertising. Facebook's 
ad revenue per user is growing, demonstrating the value that 
advertisers see in working with the firm . . . . Facebook has 
also expanded its user base in the growing mobile market, which 
positively affected the network effect as it became more 
valuable to advertisers, and resulted in more ad revenue 
growth. The main drivers behind growth in online advertising 
have been growths in the mobile ad market and the video ad 
format. Most Facebook users are now accessing Facebook and its 
apps via mobile devices.\1019\
---------------------------------------------------------------------------
    \1019\ Id.

    Facebook's internal documents reinforce this finding. In a 
presentation prepared to deliver to investors ahead of the 
company's initial public offering, Facebook characterized its 
advertising product as having a significant advantage over the 
industry average in accuracy and narrowly targeted campaigns 
due to its reach, engagement, and using people's ``real 
identity--people as their real selves.'' \1020\ In comparison 
to television broadcasters, the company noted that in the 
United States, ``everyday on Facebook is like the season finale 
of American [I]dol--the most popular show on TV--times two.'' 
\1021\
---------------------------------------------------------------------------
    \1020\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00054106 (Apr. 9, 2012) (on file with Comm.).
    \1021\ Id.
---------------------------------------------------------------------------
    These findings are also consistent with those of 
Australian,\1022\ British,\1023\ French,\1024\ and German 
antitrust authorities, which conducted an extensive examination 
of Facebook's market power in the social networking market and 
in digital advertising. For example, the United Kingdom's 
Competition and Markets Authority (CMA) found in July 2020 that 
Facebook and Instagram generated over half of display 
advertising revenues in 2019 in the United Kingdom, which it 
found to be a relevant market.\1025\ In contrast to other firms 
in the same market, Facebook's lead was significantly larger 
than its closes competitor, YouTube, which ``earned between 5 
and 10%.'' \1026\ In June 2019, the Australian Competition and 
Consumer Commission (ACCC) found that Facebook has 
``substantial market power in the supply of display advertising 
in Australia.'' \1027\ Similar to the CMA's findings, the ACCC 
concluded that the share of the display advertising market 
controlled by Facebook and Instagram is significant--more than 
half--and growing, while the rest of the market is highly 
fragmented.\1028\
---------------------------------------------------------------------------
    \1022\ Competition & Mkts. Auth. Report at 9.
    \1023\ Id. at 11-12, 211.
    \1024\ French Autorite de la Concurrence & Bundeskartellamt, 
Competition Law and Data (2016), https://www.bundeskartellamt.de/
SharedDocs/Publikation/DE/Berichte/Big%20
Data%20Papier.pdf;jsessionid=D86CD9D13899F2590F84E82092187858.2_cid362?_
 _blob=
publicationFile&v=2.
    \1025\ Competition & Mkts. Auth. Report at 10.
    \1026\ Id.
    \1027\ Austl. Competition & Consumer Comm'n Report at 97.
    \1028\ Id.

    (b) Relevant Acquisitions. On February 27, 2013, Facebook 
executed an agreement to purchase Atlas, an advertiser-side 
platform to manage and measure ad performance, from Microsoft 
for $100 million.\1029\ At the time of the transaction, Atlas 
captured data to track conversions--when a specific action is 
taken in response to an ad, such as making a purchase--through 
clicks and impressions.\1030\ In other words, if someone saw a 
BestBuy ad, Atlas enabled serving the ad, recording the user 
seeing the ad via a browser identifier, and recorded the 
impression as well as if the person clicked on the ad. Later, 
if the same user bought the item from BestBuy.com, Atlas 
recognized the user through their browser and would record the 
conversion if the user purchased the item advertised.
---------------------------------------------------------------------------
    \1029\ Submission from Facebook, to H. Comm. on the Judiciary, FB-
HJC-ACAL-00043659 (Mar. 2013) (on file with Comm.).
    \1030\ Id.
---------------------------------------------------------------------------
    Prior to the acquisition, Amin Zoufonoun, Facebook's Vice 
President for Corporate Development, described the ``primary 
thesis'' of the acquisition to Sheryl Sandberg as giving 
Facebook ``immediate scale to retarget, provide premium 
insights, do look-alike modeling, prove and measure efficacy of 
[Facebook] as a marketing medium, [and] enhance custom 
audiences and associated revenue.'' \1031\ Facebook's primary 
strategic rationale for integrating Atlas into its ad product 
was to improve its ability to measure ad performance and use 
identity-based targeting through Facebook Identity--its unique 
identifier for Facebook users across all browsers and devices--
to serve highly targeted ads.\1032\ Facebook described the 
value of Facebook Identity as its ability to ``target people 
across browsers and devices'' and to ``activate offline data to 
enrich online targeting,'' among other features.\1033\ The 
company believed that its ``unique data'' and ``unique reach 
and engagement (across devices and platforms)'' would boost its 
value to advertisers.\1034\
---------------------------------------------------------------------------
    \1031\ Id. at FB-HJC-ACAL-00043509 (Oct. 18, 2012) (internal 
punctuation omitted).
    \1032\ Id. at FB-HJC-ACAL-00043660.
    \1033\ Id. at FB-HJC-ACAL-00043680 (emphasis in original).
    \1034\ Id. at FB-HJC-ACAL-00043705.

     LFacebook also noted in its summary of the deal at the 
time of the transaction that the major opportunities of the 
transaction were: (1) to become the ``buy-side desktop tool 
that media planners fire up first thing in the day''; and (2) 
to acquire ``a deep installed base of pixels which we can 
immediately turn on to power conversion tracking and 
attribution of ads across offerings.'' \1035\
---------------------------------------------------------------------------
    \1035\ Id. at FB-HJC-ACAL-00043710.

    Absent the transaction, Facebook raised concerns that 
Google's ``lead in this market may become insurmountable'' and 
limit Facebook's ads in other ways.\1036\ The company also 
raised concerns that Facebook's Custom Audiences tool would not 
be able ``to scale beyond click-oriented advertisers.'' \1037\ 
Among other potential risks of the deal, such as rebuilding the 
product on Facebook's ad stack, the company identified 
``[m]anaging perceptions around privacy'' as an area of 
concern.\1038\
---------------------------------------------------------------------------
    \1036\ Id. at FB-HJC-ACAL-00043660.
    \1037\ Id. at FB-HJC-ACAL-00043697.
    \1038\ Id. at FB-HJC-ACAL-00043658.
---------------------------------------------------------------------------

                               B. Google

1. Overview
    Google was launched in 1998 as a general online search 
engine.\1039\ Founded by Larry Page and Sergey Brin, the 
corporation got its start by serving users web results in 
response to online queries. Google's key innovation was its 
PageRank algorithm, which ranked the relevance of a webpage by 
assessing how many other webpages linked to it.\1040\ In 
contrast with the technology used by rival search engines, 
PageRank enabled Google to improve the quality of its search 
results even as the web rapidly grew. While Google had entered 
a crowded field, by 2000 it had become the world's largest 
search engine.\1041\ Later that year, Google launched AdWords, 
an online advertising service that let businesses purchase 
keywords advertising to appear on Google's search results 
page--an offering that would evolve to become the heart of 
Google's business model.\1042\
---------------------------------------------------------------------------
    \1039\ Google Inc., Registration Statement (Form S-1) 1 (Apr. 29, 
2004), https://www.sec.gov/Archives/edgar/data/1288776/
000119312504073639/ds1.htm.
    \1040\ Id. at 65 (``PageRank is a query-independent technique for 
determining the importance of web pages by looking at the link 
structure of the web.'').
    \1041\ Press Release, Google, Google Launches World's Largest 
Search Engine (June 26, 2000), http://googlepress.blogspot.com/2000/06/
google-launches-worlds-largest-search.html (stating that Google had 
indexed over 1 billion webpages).
    \1042\ Press Release, Google, Google Launches Self-Service 
Advertising Program (Oct. 23, 2000), http://googlepress.blogspot.com/
2000/10/google-launches-self-service.html.
---------------------------------------------------------------------------
    Today, Google is ubiquitous across the digital economy, 
serving as the infrastructure for core products and services 
online. It has grown and maintained its search engine 
dominance, such that ``Googling'' something is now synonymous 
with online search itself. The company is now also the largest 
provider of digital advertising; a leading web browser; a 
dominant mobile operating system; and a major provider of 
digital mapping, email, cloud computing, and voice assistant 
services, alongside dozens of other offerings. Nine of Google's 
products--Android, Chrome, Gmail, Google Search, Google Drive, 
Google Maps, Google Photos, Google Play Store, and YouTube--
have more than a billion users each.\1043\ Each of these 
services provides Google with a trove of user data, reinforcing 
its dominance across markets and driving greater monetization 
through online ads.
---------------------------------------------------------------------------
    \1043\ Harry McCracken, How Google Photos Joined the Billion-User 
Club, Fast Co. (July 24, 2019), https://www.fastcompany.com/90380618/
how-google-photos-joined-the-billion-user-club.
---------------------------------------------------------------------------
    In several markets, Google established its position through 
acquisition, buying up successful technologies that other 
businesses had developed. In a span of 20 years, Google 
purchased well over 260 companies--a figure that likely 
understates the full breadth of Google's acquisitions, given 
that many of the firm's purchases have gone unreported.\1044\ 
Documents collected by the Subcommittee reveal that executives 
recognized as early as 2006 that Google's ``tremendous cash 
resources'' could be deployed to help execute Google's 
``strategic plan.'' \1045\
---------------------------------------------------------------------------
    \1044\ See infra Appendix; Leena Rao, Google Spent Nearly $2 
Billion on 79 Acquisitions in 2011, TechCrunch (Jan. 27, 2012), https:/
/techcrunch.com/2012/01/27/google-spent-nearly-2-billion-on-79-
acquisitions-in-2011/ (``As of Q3, Google had spent over $1.4 billion 
on 55 acquisitions for the year. Google ended 2011 spending $1.9 
billion (including cash and stock) on completing 79 acquisitions during 
the entirety of the year.'').
    \1045\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04232284, at 2 (Sept. 25, 2006) (on file with Comm.) (stating that 
Google viewed transactions as falling into three categories: (1) bolt-
on; (2) outside existing efforts; and (3) around existing efforts).
---------------------------------------------------------------------------
    Google is now one of the world's largest corporations. For 
2019, Google reported total revenues of $160.7 billion--up 45 
percent from 2017--and more than $33 billion in net 
income.\1046\ Although Google has diversified its offerings, it 
generates the vast majority of its money through digital ads, 
which accounted for over 83 percent of Google's revenues in 
2019.\1047\ Search advertising, in particular, is critical to 
Google, accounting for approximately 61 percent of its total 
sales.\1048\ In recent months Google reported a drop in ad 
revenue due to pandemic-related cuts in spending, though the 
company partly made up for the decline through revenue growth 
in Google Cloud, Google Play, and YouTube.\1049\ Google has 
enjoyed strong and steady profits, with profit margins greater 
than 20 percent for nine out of the last 10 years, close to 
three times larger than the average for a U.S. firm.\1050\ 
Financial analysts predict that Google is well positioned to 
maintain its dominance, noting that ``Alphabet has established 
unusually deep competitive moats around its business.'' \1051\
---------------------------------------------------------------------------
    \1046\ Alphabet Inc., Annual Report (Form 10-K) 26-30 (Feb. 3, 
2020), https://www.sec.gov/Archives/edgar/data/1652044/
000165204420000008/goog10-k2019.htm.
    \1047\ Id. at 30.
    \1048\ Id.
    \1049\ Alphabet Inc., Quarterly Report (Form 10-Q) (June 30, 2020), 
https://abc.xyz/
investor/static/pdf/20200731_alphabet_10Q.pdf?cache=f16f989; Alphabet 
Q2 Earnings Call, Alphabet (July 30, 2020), https://abc.xyz/investor/
static/pdf/2020_Q2_Earnings_
Transcript.pdf?cache=6bfce23.
    \1050\ See Alphabet Inc., Annual Reports (Form 10-K) (2016-2019); 
Google Inc., Annual Reports (Form 10-K) (2009-2016).
    \1051\ Marc S.F. Mahaney, Royal Bank of Can., Digging for Buried 
Treasure--The Google Maps Opportunity 2 (2019) (on file with Comm.) 
[hereinafter Royal Bank of Canada Report].
---------------------------------------------------------------------------
    In 2015, Google underwent a reorganization, introducing 
Alphabet as a parent company under which Google would reside as 
a wholly owned subsidiary.\1052\ Alphabet also houses the 
company's non-search ventures, such as Calico, the biotech 
company focused on longevity, and Waymo, which develops self-
driving cars.\1053\ In December 2019, Page and Brin stepped 
down from their management roles at Alphabet, though they 
remain on the board and together control approximately 51.3 
percent of the voting power.\1054\ Sundar Pichai now serves as 
the CEO of both Google and Alphabet.\1055\
---------------------------------------------------------------------------
    \1052\ Letter from Larry Page, CEO, Alphabet Inc., & Sundar Pichai, 
CEO, Google LLC, to Shareholders (2015), https://abc.xyz/investor/
founders-letters/2015/index.html#2015-larry-
alphabet-letter.
    \1053\ Id.
    \1054\ Alphabet Inc., Quarterly Report (Form 10-Q) 60 (June 30, 
2020), https://abc.xyz/investor/static/pdf/
20200731_alphabet_10Q.pdf?cache=f16f989 (``The concentration of our 
stock ownership limits our stockholders' ability to influence corporate 
matters. Through their stock ownership, Larry and Sergey have 
significant influence over all matters requiring stockholder approval, 
including the election of directors and significant corporate 
transactions, such as a merger or other sale of our company or our 
assets, for the foreseeable future.'').
    \1055\ Letter from Larry Page, CEO, Alphabet Inc., & Sundar Pichai, 
CEO, Google LLC, to Shareholders (2015), https://abc.xyz/investor/
founders-letters/2015/index.html#2015-larry-
alphabet-letter.
---------------------------------------------------------------------------
    For years Google has been the subject of antitrust 
investigations and enforcement actions around the world. From 
2011 to 2013, the Federal Trade Commission investigated 
Google's role in search and advertising markets, culminating in 
a staff recommendation to file a complaint against Google--
although the Commission ultimately decided not to do so. At 
various points over the last decade, Mississippi, Missouri, and 
Texas have each separately investigated Google for antitrust 
violations, and, in September 2019, attorneys general from 50 
U.S. states and territories announced that they were opening a 
fresh antitrust inquiry into the search and advertising 
giant.\1056\ The Department of Justice has also been 
investigating Google since the summer of 2019, and recent news 
reports state that a lawsuit may be imminent.\1057\ These 
ongoing U.S. investigations follow multiple antitrust inquiries 
worldwide, as well as antitrust-related penalties levied on 
Google by the European Commission, France, India, and 
Russia.\1058\
---------------------------------------------------------------------------
    \1056\ Tony Romm, 50 U.S. States and Territories Announce Broad 
Antitrust Investigation of Google, Wash. Post (Sept. 9, 2019), https://
www.washingtonpost.com/technology/2019/09/09/states-us-territories-
announce-broad-antitrust-investigation-google/.
    \1057\ Alphabet Inc., Quarterly Report (Form 10-Q) 27 (July 30, 
2020), https://abc.xyz/
investor/static/pdf/20200731_alphabet_10Q.pdf?cache=f16f989; Leah 
Nylen, Trump Administration to Launch Antitrust Suit Against Google as 
Soon as Next Week, Politico (Oct. 2, 2020), https://www.politico.com/
news/2020/10/02/trump-doj-google-antitrust-lawsuit-425617.
    \1058\ Aditya Kalra & Aditi Shah, Exclusive: Google Faces Antitrust 
Case in India Over Payments App--Sources, Reuters (May 27, 2020), 
https://www.reuters.com/article/us-india-google-antitrust-exclusive/
exclusive-google-faces-antitrust-case-in-india-over-pagos-app-sources-
idUSK
BN2331G3; Thomas Grove, Russia Fines Google $6.75 Million in Antitrust 
Case, Wall St. J. (Aug. 11, 2016), https://www.wsj.com/articles/russia-
fines-google-6-75-million-in-antitrust-case-1470920410; Charles Riley & 
Ivana Kottasova, Europe Hits Google with a Third, $1.7 Billion 
Antitrust Fine, CNN (Mar. 20, 2019), https://www.cnn.com/2019/03/20/
tech/google-eu-antitrust/index.html; Natasha Lomas, France Slaps Google 
with $166M Antitrust Fine for Opaque and Inconsistent Ad Rules, 
TechCrunch (Dec. 20, 2019), https://techcrunch.com/2019/12/20/france-
slaps-google-with-166m-antitrust-fine-for-opaque-and-inconsistent-ad-
rules/.
---------------------------------------------------------------------------
2. Search
    (a) Market Power. Google overwhelmingly dominates the 
market for general online search. Publicly available data 
suggests the firm captures over 87 percent of U.S. search and 
over 92 percent of queries worldwide.\1059\ Despite notable 
changes in the market--such as the switch from desktop to 
mobile--Google has maintained this dominance for more than a 
decade, a period during which its lead over its most 
significant competitors has only increased.\1060\ Over that 
time, Google benefited from economies of scale and the self-
reinforcing advantages of data, as well as from aggressive 
business tactics that Google wielded at key moments to thwart 
competition. The combined result is that Google now enjoys 
durable monopoly power in the market for general online search.
---------------------------------------------------------------------------
    \1059\ Search Engine Market Share Worldwide, StatCounter, https://
gs.statcounter.com/search-engine-market-share (last visited Sept. 29, 
2020).
    \1060\ Enforcers and courts have found that Google dominates the 
market for online search in various cases stretching back over a 
decade. See, e.g., Press Release, U.S. Dep't of Justice, Yahoo! Inc. 
and Google Inc. Abandon Their Advertising Agreement (Nov. 5, 2008), 
https://www.justice.gov/archive/opa/pr/2008/November/08-at-981.html 
(``The Department's investigation revealed that Internet search 
advertising and Internet search syndication are each relevant antitrust 
markets and that Google is by far the largest provider of such 
services, with shares of more than 70 percent in both markets.''); 
Press Release, U.S. Dep't of Justice, Statement of the Department of 
Justice Antitrust Division on Its Decision to Close Its Investigation 
of the Internet Search and Paid Search Advertising Agreement Between 
Microsoft Corporation and Yahoo! Inc. (Feb. 18, 2010), https://
www.justice.gov/opa/pr/statement-department-justice-antitrust-division-
its-decision-close-its-investigation-internet (``The proposed 
transaction will combine the back-end search and paid search 
advertising technology of both parties. U.S. market participants 
express support for the transaction and believe that combining the 
parties' technology would be likely to increase competition by creating 
a more viable competitive alternative to Google, the firm that now 
dominates these markets.''); Author's Guild v. Google Inc., 770 F. 
Supp. 2d 666, 683 (S.D.N.Y. 2011) (recognizing ``Google's market power 
in the online search market'').
---------------------------------------------------------------------------
    Several factors render Google's power in online search 
generally immune to competition or threat of entry. General 
online search strongly favors scale due to: (1) the high fixed 
costs of servers needed for crawling and indexing the entire 
web; and (2) the self-reinforcing advantages of click-and-query 
data, which let a search engine constantly improve the 
relevance of search results. Even an upstart that was able to 
secure the necessary capital to invest heavily in computing 
infrastructure would find itself at a considerable disadvantage 
given that Google's search algorithm has been refined through 
trillions upon trillions of queries.\1061\ Meanwhile, steps 
that website owners take to block non-Google crawlers have 
rendered the task of creating an independent comprehensive 
index extremely challenging, if not effectively impossible.
---------------------------------------------------------------------------
    \1061\ See Innovation and Entrepreneurship Hearing at 396 (response 
to Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC) (``Google Search responds to trillions of user queries from around 
the world every year.''); see also Maurice E. Stucke & Allen P. Grunes, 
Big Data and Competition Policy para. 12.10 (2016) (``Entry barriers 
into the search engine market are already high. Microsoft reportedly 
invested in 2010 `more than $4.5 billion into developing its algorithm 
and building the physical capacity necessary to operate Bing.' '').
---------------------------------------------------------------------------
    Even search engines that choose to syndicate their search 
results rather than create their own index and algorithm face 
major obstacles. This is primarily because Google--through both 
integration and contractual agreements--has established itself 
as the default search provider on 87 percent of desktop 
browsers and the vast majority of mobile devices. Specifically, 
Google used its search dominance to promote the use of its 
Chrome browser on laptops, personal computers, and 
workstations, which sets Google Search as its default. For 
mobile devices, Google imposed a set of restrictive contractual 
terms effectively requiring manufacturers of devices that used 
its Android operating system to pre-install both Chrome and 
Google Search. Additionally, Google pays Apple an undisclosed 
amount, estimated to be $12 billion per year, to secure the 
search default across iOS devices.\1062\ In general, users tend 
to stick with the default presented.\1063\ Moreover, Google 
takes steps to hamper and dissuade even those users that do 
attempt to switch search engines on Chrome.\1064\ With these 
factors combined, Google's conduct significantly impedes other 
search providers from reaching users at scale--and further 
expands and entrenches Google's dominance.
---------------------------------------------------------------------------
    \1062\ Lisa Marie Segarra, Google to Pay Apple $12 Billion to 
Remain Safari's Default Search Engine in 2019: Report, Fortune (Sept. 
29, 2018), https://fortune.com/2018/09/29/google-apple-safari-search-
engine/.
    \1063\ Competition & Mkts. Auth. Report at 194.
    \1064\ See, e.g., Submission from Source 481, to H. Comm. on the 
Judiciary (Jan. 30, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    In submissions to the Committee, Google states that Google 
Search ``operates in a highly competitive environment,'' facing 
a ``vast array of competitors'' in general online search, 
including Bing, DuckDuckGo, and Yahoo.\1065\ Google also claims 
that, for any given search query, Google competes against a 
``wide range of companies'' including Amazon, eBay, Kayak, and 
Yelp.\1066\ Google argues that this broader set of competitors 
means that public estimates of its share of general online 
search ``do not capture the full extent of Google's competition 
in search.'' \1067\
---------------------------------------------------------------------------
    \1065\ Submission from Google, to H. Comm. on the Judiciary, A-11 
(Nov. 22, 2019) (on file with Comm.).
    \1066\ Id.; see also Innovation and Entrepreneurship Hearing at 401 
(statement of Adam Cohen, Dir. of Econ. Pol'y, Google LLC). Although 
the specialized search providers that Google lists as competitors may, 
in some instances, compete with Google for queries, ``[t]he competition 
between Google and vertical search engines'' is ``to some extent 
asymmetrical. From a user's point of view, a generalist search engine 
that fully covers a given vertical can be a complete substitute for the 
vertical search engine, while the reverse is not generally true. 
Consequently, Google imposes more significant competitive constraints 
on a vertical search engine than vice versa.'' Submission from Source 
209, to H. Comm. on the Judiciary, Source 209-0000540 (Feb. 17, 2011) 
(on file with Comm.).
    \1067\ Submission from Google, to H. Comm. on the Judiciary, A-11 
(Nov. 22, 2019) (on file with Comm.). In certain regards, Google's 
argument echoes the claim Microsoft made when it contested the district 
court's decision to exclude ``middleware'' from its definition of the 
relevant market. The court found that, although it was true that 
middleware could ``usurp the operating system's platform function and 
might eventually take over other operating system functions,'' it was 
also true that no middleware product ``could now, or would soon, expose 
enough APIs to serve as a platform for popular applications, much less 
take over all operating system functions.'' United States v. Microsoft 
Corp., 253 F.3d 34, 53-54 (D.C. Cir. 2001). Similarly, although certain 
vertical search providers could under certain circumstances ``usurp'' 
the horizontal provider's platform function, no vertical provider does 
or would soon serve this function.
---------------------------------------------------------------------------
    Despite these statements, Google failed to provide the 
Subcommittee with contemporary market share data that would 
corroborate its claims. In response to the Committee's written 
request for market share data, combined with several follow-ups 
from the Subcommittee, Google stated that the company ``doesn't 
maintain information in the normal course of business about 
market share in its products.'' \1068\ After the Subcommittee 
identified communications where Google executives had discussed 
regularly tracking search market share data and further 
developing internal tools for doing so, Google told the 
Subcommittee that this data is either no longer collected or no 
longer used for examining site traffic.\1069\ It added, 
``[W]hile Google may have examined certain `shares' of usage, 
clicks, queries, or traffic in limited and incomplete data sets 
over time, we do not believe any of this constitutes `market 
share' analysis.'' \1070\
---------------------------------------------------------------------------
    \1068\ Meeting with Google (Feb. 10, 2020).
    \1069\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01967913 (Jan. 27, 2007) (on file with Comm.) (``Each quarter we 
gather comprehensive search and market share data even though we [do] 
NOT share it with the board anymore. I am pleased to say that we've 
finally turned the corner on getting decent data of our own rather than 
ComScore . . . . Next steps include further work on internal sources 
such as the toolbar and AFC referrals which we believe will give us 
more data to model and help us adjust for the biases of external 
sources.''); id. at GOOG-HJC-01529590 (Oct. 11, 2011) (listing 
``internal US search share metrics'' for Q2 2011); Email from Google to 
Staff of the H. Comm on the Judiciary (Apr. 16, 2020) (on file with 
Comm.).
    \1070\ Email from Google to Staff of the H. Comm. on the Judiciary 
(Apr. 16, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    Market share information that Google did provide from over 
a decade ago reveals that Google viewed itself as a leader in 
general search as early as 2007. One slide deck tracking search 
query volume and revenues stated that ``[c]ontinued leadership 
in search underpins the whole business.'' \1071\ In 2009, a top 
executive circulated market share analysis documenting that 
Google captured 71.5 percent of general search in the United 
States, followed by Yahoo with 17 percent, and Bing with 7.5 
percent.\1072\ And in 2010, one Google employee observed, 
``Google leads competitors. This is our bread-and-butter. Our 
long-tail precision is why users continue to come to Google. 
Users may try the bells and whistles of Bing and other 
competitors, but Google still produces the best results.'' 
\1073\ Noting that Bing was ``making clear, significant 
progress'' on ``bringing the two search engines closer to 
parity,'' the employee stated it was ``critical to redouble our 
efforts to maintain our lead.'' \1074\
---------------------------------------------------------------------------
    \1071\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04231168, at 2 (on file with Comm.).
    \1072\ Id. at GOOG-HJC-01207063 (Oct. 27, 2009) (attachment to 
email from Marissa Mayer).
    \1073\ Id. at GOOG-HJC-03815864 (Apr. 23, 2010).
    \1074\ Id.
---------------------------------------------------------------------------
    The Subcommittee has not seen any compelling evidence to 
suggest that Google's dominance over the last decade has 
diminished; to the contrary, there is compelling evidence that 
Google has only strengthened and solidified what was already a 
leading market position. For example, in 2009, Microsoft and 
Yahoo--Google's closest competitors--entered an agreement to 
integrate their search platforms, an effort to team up to 
tackle Google's dominance.\1075\ A decade later, the two 
collectively have a lower share of the general search market 
than they did at the time of their deal, whereas Google's share 
has increased.\1076\ As of 2016, Google employees were 
calculating that Bing had suffered a 30 percent year-over-year 
decline in query volume and that Bing's revenue per million 
impressions (RPM) was ``70-77% lower'' than Google's own U.S. 
search RPM.\1077\ More recently, the United Kingdom's 
Competition and Markets Authority found that Google's index of 
the web is anywhere from three to five times the size of 
Bing's.\1078\ Furthermore, the fact that no new general search 
entrant over the last decade has ever accounted for more than 
one percent of all U.S. searches in any given year further 
confirms that Google's monopoly power is durable and its lead 
insurmountable.\1079\
---------------------------------------------------------------------------
    \1075\ Submission from Source 209, to H. Comm. on the Judiciary, 
Source 209-0000346, at 351-52 (Aug. 24, 2009) (on file with Comm.).
    \1076\ Search Engine Market Share Worldwide, StatCounter, https://
gs.statcounter.com/search-engine-market-share (last visited Sept. 29, 
2020).
    \1077\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04259758 to -04259759 (Apr. 20, 2016) (on file with Comm.).
    \1078\ Competition & Mkts. Auth. Report at 89.
    \1079\ Submission from Source 115, to H. Comm. on the Judiciary, 6 
(Oct. 22, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Google's claim that it ``operates in a highly competitive 
environment'' is also at odds with the lived reality of market 
participants. Numerous companies--spanning major public 
corporations, small businesses, and upstart entrepreneurs--told 
the Subcommittee that they overwhelmingly depend on Google for 
traffic and that no alternate search engine even remotely 
approaches serving as a substitute. For example, J&J Smith, a 
printer repair shop based in Rhode Island, stated, ``Google is 
our lifeblood.'' \1080\ Foundem, a UK-based comparison shopping 
search provider, has noted that Google's ``overwhelming global 
dominance'' of horizontal search creates for most websites an 
``uncomfortable but unavoidable reliance on Google.'' \1081\ 
Many other companies described their dependence on Google in 
similar terms.
---------------------------------------------------------------------------
    \1080\ Interview with J&J Smith (Aug. 24, 2020).
    \1081\ Submission from Foundem, to H. Comm. on the Judiciary, 4 
(Jan. 21, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    Furthermore, some of the same specialized search providers 
that Google identifies as competitors stated that their own 
businesses heavily rely on Google, in some cases for up to 80 
percent of traffic on both desktop and mobile devices.\1082\ 
One specialized search provider wrote that Google's business 
practices ``have a very material effect on [our] business, but 
due to Google's monopoly power in search, there is nowhere else 
for [us] to turn for additional search traffic. The company is 
beholden to how Google decides to structure its search results 
page and algorithm.'' \1083\ Another told the Subcommittee, 
``From [our] perspective, there are no adequate substitutes for 
Google,'' \1084\ and, ``[T]hanks to its monopoly in general 
internet search, Google has become the gatekeeper for vertical 
search rivals.'' \1085\ One specialized search provider said 
that 97.6 percent of its traffic comes from Google; another 
said that Google accounted for such an outsized share of 
traffic that ``we don't even track non-Google sources.'' \1086\
---------------------------------------------------------------------------
    \1082\ Submission from Source 564, to H. Comm. on the Judiciary, 5 
(Nov. 13, 2019) (on file with Comm.); Submission from Source 3, to H. 
Comm. on the Judiciary, 34 (Nov. 22, 2019) (on file with Comm.).
    \1083\ Submission from Source 887, to H. Comm. on the Judiciary, 4 
(Oct. 28, 2019) (on file with Comm.).
    \1084\ Submission from Source 626, to H. Comm. on the Judiciary, 2 
(Oct. 15, 2019) (on file with Comm.).
    \1085\ Submission from Source 972, to H. Comm. on the Judiciary, 10 
(Dec. 9, 2019) (on file with Comm.).
    \1086\ Interview with Source 147 (June 26, 2019).
---------------------------------------------------------------------------
    At the Subcommittee's field hearing in January 2020, David 
Heinemeier Hansson, Cofounder and Chief Technology Officer of 
Basecamp, testified that Google increasingly functions as ``the 
front door of the internet.'' \1087\ He noted, ``[Google is] 
the start page for millions. It's a form of navigation around 
the internet. People these days rarely bother to remember the 
specific internet address of a company they want to do business 
with, they just google it.'' \1088\ Commenting on the stark 
asymmetry in the general search market, Hansson stated that 
Yahoo, Bing, and DuckDuckGo all ``could drop [Basecamp] from 
their listings tomorrow and we'd barely notice,'' but ``[w]e 
lose our listing in Google and we may go out of business.'' 
\1089\
---------------------------------------------------------------------------
    \1087\ Competitors Hearing at 28 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp).
    \1088\ Id.
    \1089\ Id.
---------------------------------------------------------------------------
    Google obtained default placement across the mobile and 
desktop ecosystem through both integration and contractual 
arrangements. Through owning Android, the world's dominant 
mobile operating system, Google was able to ensure that Google 
Search remained dominant even as mobile replaced desktop as the 
critical entry point to the internet. As discussed elsewhere in 
the Report, documents submitted to the Subcommittee show that, 
at certain key moments, Google conditioned access to the Google 
Play Store on exclusively pre-installing Google Search, a 
requirement that gave Google a significant advantage over 
competing search engines. Through revenue-sharing agreements 
amounting to billions of dollars in annual payments, Google 
also established default positions on Apple's Safari browser 
(on both desktop and mobile) and on Mozilla's Firefox.\1090\
---------------------------------------------------------------------------
    \1090\ Innovation and Entrepreneurship Hearing at 595 (response to 
Questions for the Record by Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
---------------------------------------------------------------------------
    In public statements, Google has downplayed the 
significance of default placement, claiming that ``competition 
is just a click away.'' \1091\ However, Google's internal 
documents show that, at a time when Google was still jostling 
for search market share, Google executives closely tracked 
search defaults on Microsoft's Internet Explorer and expressed 
concern that non-Google defaults could impede Google 
Search.\1092\ In an internal presentation about Internet 
Explorer's default search selection, Google recommended that 
users be given an initial opportunity to select a search engine 
and that browsers minimize the steps required to change the 
default search provider.\1093\ These discussions, as well as 
the steep sums Google pays Apple and various browsers for 
default search placement, further highlight the competitive 
significance of default positions.
---------------------------------------------------------------------------
    \1091\ See, e.g., Adam Kovacevich, Google's Approach to 
Competition, Google Pub. Pol'y Blog (May 8, 2009), https://
publicpolicy.googleblog.com/2009/05/googles-approach-to-competition 
.html.
    \1092\ See, e.g., Submission from Google, to H. Comm. on the 
Judiciary, GOOG-HJC-01196214 (May 3, 2005) (on file with Comm.).
    \1093\ Id. at GOOG-HJC-01680749 (2006) (identifying several 
recommendations, including ``[f]ewest clicks required to change 
default, which promotes search innovation by facilitating the user's 
ability to switch'').
---------------------------------------------------------------------------
    Independent search engines told the Subcommittee that the 
lack of defaults available to them creates significant business 
challenges. DuckDuckGo said this lack of options compelled it 
to invest in browser technology, including the creation of its 
own browser for Android and iOS and various browser 
extensions.\1094\ It noted, however, that ``the same default 
placement challenges exist in the browser market, just one 
level up--with the device makers requiring millions or billions 
of dollars to become a default browser on a device.'' \1095\
---------------------------------------------------------------------------
    \1094\ Innovation and Entrepreneurship Hearing at 343 (statement of 
Megan Gray, Gen. Couns. & Pol'y Advoc., DuckDuckGo). 
    \1095\ Id. at 5.
---------------------------------------------------------------------------
    Lastly, the Subcommittee's findings are consistent with 
conclusions reached by several enforcement bodies that recently 
have investigated Google's market dominance. For example, in 
July 2020, the United Kingdom's Competition and Markets 
Authority found that ``Google has significant market power in 
the general search sector,'' a position maintained through 
``three key barriers to entry: economies of scale in developing 
a web index; access to click-and-query data at scale; and 
Google's extensive default positions.'' \1096\ In July 2019, 
the Australian Competition and Consumer Commission (ACCC) found 
that Google has ``substantial market power in supplying general 
search services'' and that it is ``likely to retain its 
dominant share of the market at least in the short- to medium-
term.'' \1097\ And in two separate enforcement actions in 2017 
and 2018, the European Commission found that Google possessed 
market power in the market for online general search.\1098\ 
While each of these enforcers focused on their respective 
national and regional markets, Google has failed to identify 
any factors that would compel the Subcommittee to reach a 
different conclusion for the U.S. market.
---------------------------------------------------------------------------
    \1096\ Competition & Mkts. Auth. Report at 73.
    \1097\ Austl. Competition & Consumer Comm'n Report at 58.
    \1098\ Case AT.39740, Google Search (Shopping), Eur. Comm'n 
Decision C(2017) 4444, para. 271 (June 27, 2017), https://ec.europa.eu/
competition/antitrust/cases/dec_docs/39740/39740_
14996_3.pdf [hereinafter Google Search (Shopping) Comm'n Decision] 
(``The Commission concludes that Google holds a dominant position in 
each national market for general search services since 2008, apart from 
in the Czech Republic, where Google holds a dominant position since 
2011.''); Case AT.40099, Google Android, Eur. Comm'n Decision C(2018) 
4761, para. 439 (July 18, 2018), https://ec.europa.eu/competition/
antitrust/cases/dec_docs/40099/40099_9993_3.pdf [hereinafter Google 
Android Comm'n Decision] (``[T]he Commission concludes that Google 
holds a dominant position in the following relevant markets since 2011: 
. . . (3) each national market for general search services in the 
EEA.'').

---------------------------------------------------------------------------
    (b) Conduct

    (i) Google Leverages Dominance Through Data 
Misappropriation and Self-Preferencing. When Google launched in 
1998, the search listings it delivered were ``ten blue links,'' 
or a set of organic results that guided users off Google's 
webpage to locate relevant information. In the years since, 
Google, as well as Bing, has evolved to displaying blue links 
alongside a variety of Google's own content, as well as 
``information boxes'' that list responses directly on the 
search results page.
    While this model may, in certain instances, provide users 
with direct information more quickly, documents collected by 
the Subcommittee show that Google built some of these features 
through aggressive tactics that exploited its search dominance. 
Google's conduct helped maintain its monopoly in online search 
and search advertising while dissuading investment in nascent 
competitors, undermining innovation, and harming users and 
businesses alike.
    According to internal documents, Google executives 
recognized as early as 2005 that specialized--or ``vertical''--
search engines could pose a threat to Google's long-term 
dominance. That year, one program manager wrote:

     L[W]hat is the real threat if we don't execute on 
verticals?
     (a) L[L]oss of traffic from google.com because folks 
search elsewhere for some queries[;]
     (b) Lrelated revenue loss for high spend verticals like 
travel[;]
     (c) Lmissing [opportunity] if someone else creates the 
platform to build verticals[;] [and]
     (d) Lif one of our big competitors builds a constellation 
of high quality verticals, we are hurt badly[.]\1099\
---------------------------------------------------------------------------
    \1099\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04137557 (Nov. 29, 2005) (on file with Comm.).

    Google's apprehension about vertical search providers 
persisted. For example, a 2006 strategy memo identifying 
challenges asked, ``How do we deal with the problem of 
`proliferating verticals?' '' \1100\ Another message noted, 
``Vertical search is of tremendous strategic importance to 
Google. Otherwise, the risk is that Google is the go-to place 
for finding information only in the cases where there is 
sufficiently low monetization potential that no niche vertical 
search competitor has filled the space with a better 
alternative.'' \1101\ In short, Google executives feared that 
vertical search providers would build direct relationships with 
users, thereby bypassing Google Search and diverting traffic, 
valuable data, and ad revenue. While vertical search providers 
were complements to Google in the short term, Google recognized 
their potential for disintermediating Google and therefore 
viewed them as a major competitive threat. The fact that 
several of these verticals specialized in commercial queries 
that were among the most valuable for Google further raised the 
stakes.\1102\
---------------------------------------------------------------------------
    \1100\ Id. at GOOG-HJC-01099230 (Oct. 20, 2006).
    \1101\ Id. at GOOG-HJC-03815865 (Apr. 23, 2010).
    \1102\ Id. at GOOG-HJC-04276684 to -04276687 (Sept. 21, 2012).
---------------------------------------------------------------------------
    Documents show that Google developed a multi-pronged 
strategy to thwart the threat. Two of these tactics included: 
(1) misappropriating third-party content; and (2) privileging 
Google's own services while demoting those of third parties. 
Through these practices, Google exploited its dominance to 
weaken potential rivals and boost its search advertising 
revenue.

    (1) Misappropriating Third-Party Content. In the years 
following 2005, Google invested in building out its own 
vertical services. Documents reveal that Google partly did so 
through lifting content directly from third-party providers to 
bootstrap Google's own vertical services. In the process, 
Google leveraged its search dominance--demanding that third 
parties permit Google to take their content, or else be removed 
from Google's search results entirely.
    For example, after identifying local search as a 
``particularly important'' vertical to develop, Google built 
Google Local, which licensed content from local providers, 
including Yelp.\1103\ In 2010, Google rolled out a service 
directly competing with Yelp, even as Google continued to 
license Yelp's content--prompting Yelp's CEO to request that 
Google immediately remove Yelp's proprietary content from 
Google's own service.\1104\ At a time when Google Local was 
failing to gain momentum, Google told Yelp that the only way to 
have its content removed from Google's competing product was to 
be removed from Google's general results entirely.\1105\ Yelp 
relied so heavily on Google for user traffic that the company 
could not afford to be delisted--a fact that Google likely 
knew.\1106\ In short, Google weaponized its search dominance, 
demanding that Yelp surrender valuable content to Google's 
competing product or else risk heavy losses in traffic and 
revenue.
---------------------------------------------------------------------------
    \1103\ Id. at GOOG-HJC-03665122 to -03665126 (Apr. 24, 2007) 
(internal Google discussion noting the strength of Yelp's local 
product) (``[T]here is nothing else `yelp like' in our current 
lineup,'' and also noting that ``[Yelp's CEO] just contacted the 
account manager here and asked that their contract be revised so that 
they could cancel it immediately if we launch reviews, that doesn't 
mean that they would do it, but clearly this is a big deal to them.'').
    \1104\ Id. at GOOG-HJC-03249494 (Aug. 10, 2010) (``Given that this 
App directly competes with the Yelp App and offers little value to Yelp 
we cannot allow Google to continue leveraging our content in this way. 
We've communicated to Patrick and Carter that your team needs to remove 
our content within the next week. Since you already communicated to me 
that it would be un-Googley to not remove our content when requested, 
I'm confident your team will do the right thing.'').
    \1105\ See, e.g., id. at GOOG-HJC-03255279 (Oct. 28, 2010) (``[I] 
want to tell you that my feelings are really hurt by the `local is a 
failure' stuff that Nikesh has been lobbing around.''); id. at GOOG-
HJC-03790807 to -03790808 (Apr. 24, 2007) (``[W]e are still waiting to 
be removed from Places (while remaining in organic and local merge 
results), which you initially agreed to (but more recently pulled away 
from).''); id. at GOOG-HJC-01234494 (Aug. 10, 2011) (``I was surprised 
to find that by opting out of Google's local product, Yelp was 
automatically opted out of portions of Google's search results. Carter 
Maslan and John Hanke last year said they couldn't/wouldn't remove Yelp 
content from Google's local product because local was powered by the 
same index as web search, sounds like this was never really the 
case.''); id. at GOOG-HJC-012344946 (``To be able to reference Yelp's 
content in the parts of search results we discussed, our local service 
needs to be at least aware of the existence of Yelp pages. Since we 
stopped using any crawled Yelp pages for our local services in response 
to your request, this currently isn't possible. That said, I think that 
the approach we discussed, with Google making limited use of Yelp data 
in the ways you described, is a constructive way to get a comprehensive 
view for our users.'').
    \1106\ See, e.g., id. at GOOG-HJC-03664462 (Apr. 23, 2007) (``78% 
of their uniques come from google. [I]f they are acquired, [I] would 
assume that they wouldn't turn us off.'').
---------------------------------------------------------------------------
    Evidence gathered by the Subcommittee identifies additional 
instances in which Google has intercepted traffic from third-
party websites by forcibly scraping their content and placing 
it directly on Google's own site. For example, a submission 
from entrepreneur Brian Warner described how he built a 
database from scratch and developed it into a sustainable and 
growing business--only to watch Google lift his content and 
sink his traffic.\1107\ Warner, the founder of Celebrity Net 
Worth, told the Subcommittee that, in 2012, the content he had 
initially developed as a side project had such high demand that 
Warner was able to quit his day job and hire 12 staff members. 
In 2014, Google contacted Warner to ask if he would provide 
Google with an API that would display his webpage's content in 
an ``answer box'' that would appear directly on Google's search 
results page. Warner declined, observing that handing over his 
company's ``most valuable asset'' would ``cause a catastrophic 
drop in traffic.'' \1108\ Within two years, Google began 
populating its answer boxes with Celebrity Net Worth's content 
anyway--displaying net worth results for each of the 25,000+ 
celebrities from Warner's database directly on Google's search 
results page.\1109\
---------------------------------------------------------------------------
    \1107\ See generally Innovation and Entrepreneurship Hearing at 
354-60 (statement of Brian Warner, Founder, Celebrity Net Worth).
    \1108\ Id. at 357.
    \1109\ Id. Because Warner had added several conjured celebrities to 
his site to gauge whether Google was scraping his content or lifting it 
from elsewhere, he was able to determine that Google was sourcing its 
answers directly from Celebrity Net Worth.
---------------------------------------------------------------------------
    Combined with changes that pushed Warner's webpage from the 
top of organic listings to the middle of the second page, 
Google's scraping caused traffic to Celebrity Net Worth to drop 
by 50 percent overnight.\1110\ Warner wrote, ``With the flip of 
a switch, Google turned our original content into its own 
content. And with that move, Google would keep the searcher 
within its walled garden indefinitely. That is far more 
valuable to Google than taking a small cut of our AdSense 
revenue.'' \1111\ Today, Celebrity Net Worth's traffic is down 
80 percent from 2014, and--due to the resulting drop in 
revenue--Warner has had to lay off half of his staff.\1112\
---------------------------------------------------------------------------
    \1110\ Id. at 358.
    \1111\ Id.
    \1112\ Id.
---------------------------------------------------------------------------
    In a submission to the Subcommittee, lyrics site Genius 
described similar misappropriation by Google. Genius noted that 
it has invested ``a decade and millions of dollars'' developing 
a lyrics repository that relies on user-generated content as 
well as partnerships with songwriters.\1113\ For years, 
however, Google has copied lyrics from Genius's website and 
displayed them in information boxes that it places at the top 
of its search results page.\1114\ Although Genius shared with 
Google evidence showing that the platform was scraping lyrics 
directly from Genius, Google for two years ``did nothing to 
address the issue.'' \1115\ It was only after The Wall Street 
Journal published Genius's claims that Google responded, taking 
steps to remove the evidence that Google had copied the lyrics 
but leaving the lyrics in place.\1116\ Google later announced 
that it would attribute lyrics placed in the information box to 
the underlying content provider. ``This would be encouraging,'' 
Genius wrote, ``except for the fact that all of the lyrics we 
flagged for Google as featuring our watermark--and thus clearly 
copied from Genius--are currently attributed to another 
company.'' \1117\
---------------------------------------------------------------------------
    \1113\ Id. at 306 (statement of Ben Gross, Chief Strategy Officer, 
Genius).
    \1114\ Id. at 307.
    \1115\ Id.
    \1116\ Id.
    \1117\ Id.
---------------------------------------------------------------------------
    At the Subcommittee's hearing on July 29, 2020, multiple 
members questioned Mr. Pichai about Google's misappropriation 
of third-party content. Subcommittee Chair David N. Cicilline 
(D-RI) recounted Google's scraping of Celebrity Net Worth, 
asking, ``[W]hy does Google steal content from honest 
businesses?'' \1118\ Mr. Pichai responded that he ``disagree[d] 
with that categorization.'' Representative Ken Buck (R-CO) 
followed up by noting that Genius seemed to have collected 
clear evidence of Google's misappropriation:
---------------------------------------------------------------------------
    \1118\ CEO Hearing at 72 (question of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm on the Judiciary).

     LWhen Genius suspected this corporate theft was occurring, 
the company incorporated a digital watermark in its lyrics that 
spelled out red-handed in Morse code. Google's lyric boxes 
contained the watermark showing that your company stole what 
you couldn't or didn't want to produce yourself. After Google 
executives stated that they were investigating this problematic 
behavior, Genius created another experiment to determine the 
scope of the misappropriation. It turns out that, out of 271 
songs where the watermark was applied, 43 percent showed clear 
evidence of matching. Your company, which advertises itself as 
a doorway to freedom, took advantage of this small company, all 
but extinguishing Genius' freedom to compete.\1119\
---------------------------------------------------------------------------
    \1119\ Id. at 79 (statement of Rep. Ken Buck (R-CO), Member, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary).

    Mr. Pichai responded that Google ``license[s] content from 
other companies,'' and that this issue was ``a dispute between 
Genius and other companies in terms of where the source of the 
content is.'' \1120\ In its response to Questions for the 
Record from the Subcommittee, Google also stated that it now 
gives webpage owners the ability to exclude certain content 
from appearing in information boxes on Google's search results 
page.\1121\ However, multiple webpage publishers stated that, 
in practice, this option fails to mitigate the harm, given that 
Google will continue to source and display content from others, 
thereby still intercepting traffic and displacing organic 
listings. One publisher described Google's claim to give 
webpage owners more control as ``an empty offering.'' \1122\
---------------------------------------------------------------------------
    \1120\ Id.
    \1121\ Innovation and Entrepreneurship Hearing at 403 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1122\ Interview with Source 489 (Sept. 19, 2020).
---------------------------------------------------------------------------
    In an interview with the Subcommittee, one webpage owner 
stated that he felt deceived by Google's decision to use its 
crawling advantages to misappropriate third-party content. The 
webpage owner said:

     LA major violation occurred when Google used robotic 
information scraped by its crawler to create content of its own 
which is displayed in the search result page. We never would 
have created sitemaps for Google if those were the terms. 
Google wouldn't have had sitemaps from every website on earth 
feeding it content if those were the terms from the beginning. 
They would have been forced to create a new system in order to 
convince sites to comply or a new search service would have 
been born that had different options.\1123\
---------------------------------------------------------------------------
    \1123\ Id.

    Google's practice of misappropriating third-party content 
to bootstrap its own rival search services and to keep users on 
Google's own webpage is further evidence of its monopoly power 
and an example of how Google has abused that power. Google 
seized value from third-party businesses without their consent. 
These businesses had no effective choice but to allow Google's 
misappropriation to continue, given Google's search dominance. 
In this way, Google leveraged its search dominance to 
misappropriate third-party content, free-riding on others' 
---------------------------------------------------------------------------
investments and innovations.

    (2) Self-Preferencing. Evidence shows that once Google 
built out its vertical offerings, it introduced various changes 
that had the effect of privileging Google's own inferior 
services while demoting competitors' offerings. This conduct 
has undermined the vertical search providers that Google viewed 
as a threat. It has also boosted Google's ad revenue by keeping 
users on Google's domains for longer and by compelling demoted 
firms to pay Google more ad fees to reach users.
    In 2007, Google introduced ``Universal Search,'' which 
presented users with search results that integrated Google's 
various specialized search services, including Google Images, 
Google Local, and Google News.\1124\ Universal Search was 
designed to improve users' search experience, as well as to 
increase traffic to Google's own offerings--even when those 
offerings weren't the best or most relevant for users.\1125\ 
Google's documents suggest that shortly after launching 
Universal Search, traffic to Google's own vertical services 
increased.\1126\ Even early in its conception, Google 
executives were exploring how Universal Search could be used to 
show a ``results page promo'' to ``bootstrap traffic'' to 
Google's other products.\1127\
---------------------------------------------------------------------------
    \1124\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01230600 (Dec. 8, 2004) (on file with Comm.) (``Googlers have long 
argued for some type of `universal' search that integrates all of 
Google's indices, including those that contain different media, like 
Images, and those that contain structured data, like Local and 
Froogle.''); id. at GOOG-HJC-03815864 to -03815865 (Apr. 23, 2010) 
(noting that Universal Search marked a shift to ``increase our ability 
to provide new types of media in search results'').
    \1125\ Id. at GOOG-HJC-02734893 (Dec. 15, 2006) (introducing 
Universal Search to help solve the problem that ``Google search user 
experience has been internally and externally perceived as stagnant for 
the last 7 years'').
    \1126\ Id. at GOOG-HJC-03804474 (May 23, 2007) (on file with Comm.) 
(noting ``large increases in absolute coverage for all five purposes, 
including a 4.5% increase in News and 4% increase in Local Search'').
    \1127\ Id. at GOOG-HJC-01230599 (Dec. 8, 2004) (on file with Comm.) 
(``Including some of Urs ideas around promoting the Labs property on 
the Google.com results pages for some subset of users (`New! Try your 
search on the next version of Google'). Urs main concern was that Lab 
gets limited traffic, and the set of users is not representative of 
Google's user base. He didn't mind the idea of a Labs launch in 
principle, but he suggested we show a results page promo for some small 
percentage of users to bootstrap traffic to the property with a more 
diverse set of users.'').
---------------------------------------------------------------------------
    When Google launched Universal Search, it gave prominent 
placement to Google's vertical content over superior, more 
relevant competitors' products. Google's documents show that 
Google adjusted its search algorithm to automatically elevate 
the ranking of some of Google's services above those offered by 
rivals.\1128\ These perks are generally not available to 
competing verticals, placing them at an instant 
disadvantage.\1129\ Given that the likelihood that a user will 
click on a listing sharply declines with each drop in 
placement, traffic to rivals demoted by Google has fallen 
significantly.\1130\ The effect is magnified on mobile search, 
where the small screen means fewer results are displayed on the 
first page of results.\1131\
---------------------------------------------------------------------------
    \1128\ See, e.g., id. at GOOG-HJC-01081099 (Oct. 11, 2007) (``We 
added a `cooccurring sites' signal to bias ourselves towards triggering 
when a local-oriented aggregator site (i.e. Citysearch) shows up in the 
web results.'').
    \1129\ Submission from Source 564, to H. Comm. on the Judiciary, 9 
(Nov. 13, 2020) (on file with Comm.).
    \1130\ Matt Southern, Over 25% of People Click the First Google 
Search Result, Search Engine J. (July 14, 2020), https://
www.searchenginejournal.com/google-first-page-clicks/374516/#close.
    \1131\ Why Page 2 of Google Search Results Is the Best Place to 
Hide a Dead Body, Dig. Synopsis (Oct. 29, 2019), https://
digitalsynopsis.com/tools/google-serp-design/ (stating that the first 
organic result on the first search engine results page receives around 
32.5 percent of overall click-based traffic, the second result receives 
around 17.6 percent, and the seventh receives 3.5 percent).
---------------------------------------------------------------------------
    In a submission to the Subcommittee, one vertical search 
provider described the practical effects of Google's 
discriminatory treatment:

     LWhen the Local OneBox appears on the page, links to [the 
company's] website with highly relevant [results] get pushed 
down the page into the lower section for organic search 
results. This demotion puts [the company] at a competitive 
disadvantage relative to Google's local search results and 
jeopardizes the health of [our] business--and this problem is 
further exacerbated in the growing mobile context where links 
to [our] website may be pushed off the small screen or the 
first page of search results altogether. In evaluating options 
to reduce this harm, [the company] has reached out to Google to 
explore whether [we] or [our] providers' listings on [our] 
website could be included in Google's local search results, but 
Google has either refused outright or taken no steps to allow 
such inclusion.\1132\
---------------------------------------------------------------------------
    \1132\ Submission from Source 887, to H. Comm. on the Judiciary, 4 
(Oct. 28, 2019) (on file with Comm.).

    A submission from another vertical search provider stated 
that once Google began automatically placing its own competing 
service at the top of its search results page, the vertical 
provider's organic search traffic fell by approximately 20 
percent.\1133\ The vertical provider observed that Google's 
service is worse for users--showing higher prices and fewer 
choices than Google's competitors.\1134\ However, Google 
continues to give its service top placement, occupying close to 
100 percent of the above-the-fold mobile search results page 
and around 25 percent of desktop.\1135\
---------------------------------------------------------------------------
    \1133\ Submission from Source 925, to H. Comm on the Judiciary, 11 
(Nov. 4, 2019) (on file with Comm.).
    \1134\ Id.
    \1135\ Id. at 9.
---------------------------------------------------------------------------
    Additional market participants echoed the view that 
Google's self-preferencing comes at the expense of users. One 
search provider stated that Google prohibits it from displaying 
live prices on Google's results page, even as Google's own 
competing service is permitted to do so. Stating that there was 
no procompetitive justification for this differential 
treatment, the firm also noted that Google's limits on rival 
vertical search providers likely prevent consumers from seeing 
the cheapest or best-valued prices.\1136\
---------------------------------------------------------------------------
    \1136\ Submission from Source 3, to H. Comm. on the Judiciary, 32 
(Oct. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    In addition to placing its vertical offerings at the top of 
the search results page, Google has also actively demoted 
certain rivals through imposing algorithmic penalties. For 
example, in 2007 and in 2011, Google launched an algorithm that 
demoted sites that Google considered ``low quality.''\1137\ 
Among the websites especially hit were comparison shopping 
providers, which enable users to compare product offers from 
multiple merchant websites.\1138\ In a submission to the 
Subcommittee, one publisher stated that Google's algorithmic 
penalty caused search leads and revenues to its website to fall 
by 85 percent.\1139\ Kelkoo, previously a leading comparison 
shopping site, explained that Google's demotion set off a 
``cyclic trend'' whereby a reduction in traffic leads to fewer 
consumers, which leads to fewer listings and less revenue, 
which leads to reduced investment--which, in turn, contributes 
to a further decline in traffic, a ``network effect in 
reverse.'' \1140\
---------------------------------------------------------------------------
    \1137\ Amit Singhal & Matt Cutts, Finding More High-Quality Sites 
in Search, Google: Off. Blog (Feb. 24, 2011), https://
googleblog.blogspot.com/2011/02/finding-more-high-quality-sites-in.html 
(defining ``low-quality sites'' as those that are ``low-value add for 
users'' and ``copy content from other websites or sites that are just 
not very useful'' and defining ``high-quality sites'' as ``sites with 
original content and information such as research, in-depth reports, 
thoughtful analysis and so on'').
    \1138\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00090248 to -00090249 (Jan 27, 2011) (on file with Comm.).
    \1139\ Submission from Kelkoo, to H. Comm. on the Judiciary, 
Kelkoo-0032 (Nov. 4, 2019) (on file with Comm.).
    \1140\ Id. at Kelkoo-0006, Kelkoo-0044.
---------------------------------------------------------------------------
    In external messaging, Google justified the algorithmic 
penalties it imposed on third-party sites as a response to 
users' desire to see fewer ``low quality'' sites in their 
search results.\1141\ However, Google did not subject its own 
vertical sites to the same algorithmic demotion, even though 
Google's vertical services aggregated and copied content from 
around the web--just like the third-party sites that Google had 
demoted.\1142\ Indeed, Google's documents reveal that employees 
knew Google's own vertical sites would likely fit the demotion 
criteria that Google applied to other sites. When one employee 
suggested that Google index its comparison shopping site, 
Froogle, another responded that it was unlikely Froogle would 
get crawled ``without special treatment,'' noting, ``We'd 
probably have to provide a lot of special treatment to this 
content in order to have it be crawled, indexed, and rank 
well.'' \1143\
---------------------------------------------------------------------------
    \1141\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00632668 (on file with Comm.).
    \1142\ Id. at GOOG-HJC-02507422 (Apr. 4, 2006) (on file with Comm.) 
(``Keep in mind that, as we discussed, most of the information that is 
on pages that we create is aggregated from various sources, and those 
sources often have that material online already. Because of this, the 
search quality team has some concerns as to if/when this Google-created 
content will be indexed. And once it is indexed, it is unlikely to 
appear high in the search results.'').
    \1143\ Id.
---------------------------------------------------------------------------
    Despite the fact that Google's own comparison shopping 
service was of such low quality that Google's product team 
couldn't even get it indexed, Google continued to give Froogle 
top placement on its search results page, listing its results 
in the OneBox, a display box that Google populates with 
information on its search results page.\1144\ Bill Brougher, a 
product manager, acknowledged that Google was privileging low-
quality content, writing:
---------------------------------------------------------------------------
    \1144\ Id.

     LOur algorithms specifically look for pages like 
[Froogle's] to either demote or remove from our index, and 
there are active projects to improve the integration into web 
search. The bigger problem these projects have is to improve 
their own result quality. For instance with Froogle, the onebox 
trigger is now very good and relevant, but the three results we 
show from Froogle in that onebox generally rate very low in our 
search quality evaluation. It is often the same with 
Local.\1145\
---------------------------------------------------------------------------
    \1145\ Id.; see also id. at GOOG-HJC-03201904 (Mar. 22, 2006) (on 
file with Comm.) (``Generally we like to have the destination page in 
the index, not the aggregated pages. So if our local pages are lists of 
links to other pages, its [sic] more important that we have the other 
pages in the index. In addition, our pages would probably not rank well 
because of this.'').

Another Google team member replied: ``Yes, you're right that 
the Onebox result items often stink.'' \1146\ A few years 
later, a Google employee again acknowledged that, if Google 
ranked its own content according to the same criteria that it 
applied to competitors, ``it will never rank.'' \1147\
---------------------------------------------------------------------------
    \1146\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-02507420 (Apr. 5, 2006) (on file with Comm.).
    \1147\ Id. at GOOG-HJC-01069289 (May 6, 2009) (on file with Comm.) 
(``From a principal perspective it would be good if we could actually 
just crawl our product pages and then have the rank organically. 
Problem is that today if we crawl it will never rank.'').
---------------------------------------------------------------------------
    In an interview with the Subcommittee, one vertical site 
stated that Google had not only demoted the firm, but had in at 
least one instance removed it from Google's index 
entirely.\1148\ The search provider stated that, after Google 
purchased its rival, Google demoted the provider in search 
rankings while vaulting those of its rival.\1149\ The search 
provider observed that Google's demotions sometimes followed 
favorable press that highlighted the search provider's 
popularity with users. ``There was an article that came out in 
the press that painted [us] in a positive light and quoted an 
executive noting that [we are] the top result when a user 
searches [for a particular search term]. The next day, Google 
de-indexed [us] for [that search term].'' \1150\
---------------------------------------------------------------------------
    \1148\ Interview with Source 147 (June 2019).
    \1149\ Id.
    \1150\ Id.
---------------------------------------------------------------------------
    In July, The Wall Street Journal reported that Google also 
gives preferential treatment to YouTube.\1151\ Tests conducted 
by the Journal found that searching Google for videos delivered 
YouTube in results much more prominently than competing video 
providers, even when competitor videos had more engagement. 
Reflecting interviews with those familiar with the matter, the 
piece stated that Google engineers:
---------------------------------------------------------------------------
    \1151\ Sam Schechner, Kristen Grind & John West, Searching for 
Video? Google Pushes YouTube over Rivals, Wall St. J. (July 14, 2020), 
https://www.wsj.com/articles/google-steers-users-to-youtube-over-
rivals-11594745232.

     L[M]ade changes that effectively preference YouTube over 
other video sources. Google executives in recent years made 
decisions to prioritize YouTube on the first page of search 
results, in part to drive traffic to YouTube rather than to 
competitors, and also to give YouTube more leverage in business 
deals with content providers seeking traffic for their 
videos.\1152\
---------------------------------------------------------------------------
    \1152\ Id.

    In response to Questions for the Record from Subcommittee 
Chair David N. Cicilline (D-RI), the company denied that Google 
Search is designed to favor YouTube. Although Google stated 
that it disagreed with the methodology used by the Journal, 
Google did not provide the Subcommittee with any data or 
internal reports that would support its claim.\1153\
---------------------------------------------------------------------------
    \1153\ Innovation and Entrepreneurship Hearing at 408 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
---------------------------------------------------------------------------
    Numerous market participants noted that Google's favoring 
of its own sites and demoting those of third parties have 
effectively increased their cost of distribution. Since demoted 
sites can generally only recover traffic through advertising on 
Google, the platform ``essentially requires competitors to pay 
for their websites to appear above Google's own links,'' 
according to one market participant.\1154\ Another business 
recalled that, in 2016, Google demoted one of its vertical 
offerings, citing a policy of diversifying content.\1155\ The 
firm stated that, once it was penalized in organic rankings, it 
``could not get an appropriate customer service response for 
months'' and ultimately ``had to increase [marketing spend on 
Google] to regain lost traffic--a win-win for Google but a loss 
for [our business] and its users.'' \1156\
---------------------------------------------------------------------------
    \1154\ Submission from Source 3, to H. Comm. on the Judiciary, 32 
(Oct. 29, 2019) (on file with Comm.).
    \1155\ Submission from Source 972, to H. Comm. on the Judiciary, 9 
(Dec. 9, 2019) (on file with Comm.).
    \1156\ Id.
---------------------------------------------------------------------------
    Meanwhile, Google's own competing vertical ``is always 
listed at the top'' of search results.\1157\ The incident 
highlights how demoting rivals can enrich Google in two ways: 
first, through diverting greater traffic and business to its 
own products; and second, through earning ad revenues from the 
penalized sites that are subsequently scrambling to recover 
their search placement. When demoting firms that Google views 
as actual or potential competitive threats, Google is 
effectively raising rivals' costs.
---------------------------------------------------------------------------
    \1157\ Id.
---------------------------------------------------------------------------
    Another firm noted that demoted vertical providers that go 
on to buy ads on Google not only feed revenue to a potential or 
actual competitor in specialized search, but also risk handing 
Google more commercially sensitive information. The market 
participant wrote:

     LGoogle thus deceptively siphons internet traffic away 
from its vertical competitors in online travel and forces them 
to pay more for [search engine monetization] and [] Ads in 
order to get meaningful placement on Google's [search engine 
results page]. Importantly, Google also requires its vertical 
competitors to provide their inventory feed to populate the 
ads, allowing Google to appropriate vertical service providers' 
valuable inventory data.\1158\
---------------------------------------------------------------------------
    \1158\ Submission from Source 115, to H. Comm. on the Judiciary, 16 
(Oct. 22, 2019) (on file with Comm.).

    A significant number of the website publishers that the 
Subcommittee interviewed noted the outsized effect that a 
single algorithmic change by Google can have on their business. 
Brian Warner, Celebrity Net Worth founder, stated, ``All 
website owners live in constant fear of Google's algorithm 
updates. Without explanation or recourse, Google can deliver a 
fatal blow to a website's search ranking visibility.'' \1159\ 
Foundem, the UK-based comparison shopping site, wrote, ``An 
unjustified Google search penalty, whether imposed 
anticompetitively or in error, has the power to cause grave and 
irreparable harm to virtually any online business.'' \1160\
---------------------------------------------------------------------------
    \1159\ Submission from Celebrity Net Worth, to H. Comm. on the 
Judiciary, 10 (Oct. 14, 2019) (on file with Comm.).
    \1160\ Submission from Foundem, to H. Comm. on the Judiciary, 42 
(Oct. 22, 2019) (on file with Comm.). Foundem was the lead complainant 
in the European Commission's antitrust investigation and case on Google 
Shopping.

    (3) Threatening Innovation and the Open Internet. Through 
misappropriating third-party content and giving preferential 
treatment to its own vertical sites, Google abused its 
gatekeeper power over online search to coerce vertical websites 
to surrender valuable data and to leverage its search dominance 
into adjacent markets. Google's conduct both thwarted 
competition and diminished the incentive of vertical providers 
to invest in new and innovative offerings.
    In an interview with the Subcommittee, one market 
participant observed that Google's conduct has sapped 
investment, as ``investors don't want to invest in companies 
that are producing content that relies on Google traffic,'' 
resulting in ``less capital invested in companies reliant on 
traffic from Google.'' \1161\ The website noted that Google's 
business practices have also skewed the website's own 
investment decisions, leading it to allocate the vast majority 
of its revenue to creating ``news-like temporary content'' 
rather than ``evergreen content.'' \1162\ It added, ``If we 
could trust that Google was not engaging in unfair search 
practices, we would be producing different content.'' \1163\
---------------------------------------------------------------------------
    \1161\ Interview with Source 507 (July 10, 2019).
    \1162\ Id.
    \1163\ Id.
---------------------------------------------------------------------------
    A vertical provider, meanwhile, said that Google's conduct 
had held the firm's growth ``at bay'' and risks reducing 
innovation over the long term, as providers whose growth is 
capped by Google may be more reluctant to invest and 
expand.\1164\ It added:
---------------------------------------------------------------------------
    \1164\ Submission from Source 564, to H. Comm. on the Judiciary, 4 
(Nov. 13, 2019) (on file with Comm.).

     LCompetitors are not the only ones who have a reduced 
incentive to innovate as a result of Google's conduct. The 
anticompetitive effects reduce Google's own incentives to 
improve the quality of its services, because it does not need 
to compete on the merits with rival services.\1165\
---------------------------------------------------------------------------
    \1165\ Id.

To illustrate this point, Yelp offers a contrast between its 
own efforts to maintain high-quality user reviews and Google's 
efforts. It states that, of the approximately 150 million user 
reviews submitted to Yelp since 2005, Yelp has displayed only 
72 percent of them to users, while flagging 21 percent as ``not 
recommended.'' \1166\ Yelp cites investment research noting 
that Google, by contrast, does not invest in curating its 
reviews: ``25% of Google's reviews have zero characters and are 
simply Netflix-style one-click star ratings from which the user 
can derive few, if any, insights about the trustworthiness of 
the submission.'' \1167\
---------------------------------------------------------------------------
    \1166\ PiperJaffray, Introducing Review Growth for Yelp vs. Google 
Plus (Apr. 16, 2014) (on file with Comm.).
    \1167\ Id.
---------------------------------------------------------------------------
    Several market participants told the Subcommittee that 
Google's business practices in online search have already 
foreclosed opportunity. In a submission, Celebrity Net Worth 
founder Brian Warner wrote:

     LIt is my view that Google has removed essentially all of 
the oxygen from the open internet ecosystem. There is no longer 
any incentive or even basic opportunity to innovate as I did 
back in 2008. If someone came to me with an idea for a website 
or a web service today, I would tell them to run. Run as far 
away from the web as possible. Launch a lawn care business or a 
dog grooming business--something Google can't take away as soon 
as he or she is thriving.\1168\
---------------------------------------------------------------------------
    \1168\ Innovation and Entrepreneurship Hearing at 359 (statement 
from Brian Warner, Founder, Celebrity Net Worth).

    More broadly, market participants expressed concern that 
Google has evolved from a ``turnstile'' to the rest of the web 
to a ``walled garden'' that increasingly keeps users within its 
sites.\1169\ Many observers have noted that when Google filed 
its initial public offering, Google cofounder Larry Page 
identified the company's mission as the following: ``We want 
you to come to Google and quickly find what you want. We want 
you to get you out of Google and to the right place as fast as 
possible.'' \1170\ In recent years, however, studies have shown 
that more than half of all queries on Google either terminate 
on Google or result in a click to Google's own properties--a 
share that is growing over time.\1171\ In July, The Markup 
published results showing that Google allocated 41 percent of 
the first search results page on mobile devices to Google's own 
content.\1172\
---------------------------------------------------------------------------
    \1169\ See, e.g., Submission from Source 972, to H. Comm. on the 
Judiciary, 9 (Dec. 9, 2019) (on file with Comm.) (``As opposed to 
cataloguing the internet and sending travelers to the most relevant 
websites, Google is instead creating a walled garden, using its place 
at the top of the internet funnel to ensure that the majority of users 
transact on Google's own pages and products.'').
    \1170\ Google Inc., Registration Statement (Form S-1) app. B at B-6 
(2004), https://www
.sec.gov/Archives/edgar/data/1288776/000119312504139655/ds1a.htm.
    \1171\ Rand Fishkin, Less than Half of All Google Searches Now 
Result in a Click, Sparktoro (Aug. 13, 2019), https://sparktoro.com/
blog/less-than-half-of-google-searches-now-result-in-a-click/.
    \1172\ Adrianne Jeffries & Leon Yin, Google's Top Search Result? 
Surprise! It's Google, Markup (July 28, 2020), https://themarkup.org/
google-the-giant/2020/07/28/google-search-results-
prioritize-google-products-over-competitors.
---------------------------------------------------------------------------
    On several occasions over the course of the investigation, 
Subcommittee Chair David N. Cicilline (D-RI) asked Google about 
this trend.\1173\ At the Subcommittee's July 16, 2019 hearing, 
Google's Director of Economic Policy, Adam Cohen, stated that 
Google's goal is ``to provide users information as quickly and 
efficiently as possible,'' adding that he was ``not familiar'' 
with studies showing that a majority of queries now terminate 
on Google.\1174\ In its July 26, 2019 response to a follow-up 
letter from Chair Cicilline, Google wrote that it strives to 
``give users the most relevant, highest quality information as 
quickly as possible,'' a goal that Google claims is 
``[c]onsistent with Mr. Page's comments in 2004.'' \1175\ When 
asked whether it was true that less than 50 percent of all 
searches on Google resulted in clicks to non-Google websites, 
Google responded that it ``has long sent large amounts of 
traffic to other sites.'' \1176\ In response to the 
Subcommittee's request for query metrics that would document 
the underlying trends, however, Google did not produce the 
relevant data.\1177\
---------------------------------------------------------------------------
    \1173\ See, e.g., Innovation and Entrepreneurship Hearing at 433-
435 (response to Questions for the Record of Adam Cohen, Dir. of Econ. 
Pol'y, Google LLC); CEO Hearing at 337 (response to Questions for the 
Record from Sundar Pichai, CEO, Alphabet Inc.).
    \1174\ Innovation and Entrepreneurship Hearing at 433-35 (response 
to Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC); id. at 437 (statement of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1175\ Letter from Kent Walker, Senior Vice President, Glob. Affs. 
& Chief Legal Officer, Google, to Hon. David N. Cicilline, Chair, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 1 (July 26, 2019).
    \1176\ Id. at 2.
    \1177\ In a September 2020 response to Chair Cicilline on this same 
question, Google disputed Fishkin's analysis of the data. Google wrote: 
``The fact that a user does not click on a link on a Google Search 
results page does not mean that the user has been `kept' on Google 
properties. Searches on Google may result in zero website clicks for 
many reasons, which is not discernable without directly asking the user 
why they did not click a link.'' CEO Hearing at 338 (response to 
Questions for the Record of Sundar Pichai, CEO, Alphabet Inc.).
---------------------------------------------------------------------------
    Several enforcement bodies have examined these business 
practices. Between 2011 and 2013, the Federal Trade Commission 
pursued an inquiry into Google's data misappropriation and 
self-preferencing, among other conduct. Staff at the Bureau of 
Competition concluded that ``the natural and probable effect'' 
of Google's misappropriation was ``to diminish the incentives 
of vertical websites to invest in, and to develop, new and 
innovative content.'' \1178\ On Google's self-preferencing, 
staff concluded that Google's conduct had ``resulted in 
anticompetitive effects,'' \1179\ but that Google had offered 
``strong procompetitive justifications.'' \1180\ In 2017, the 
European Commission concluded that Google's self-preferencing 
in comparison shopping services constituted an illegal abuse of 
dominance and ordered Google to implement a remedy of ``equal 
treatment.'' \1181\ The European Commission stated that Google 
had not ``provided verifiable evidence to prove that its 
conduct is indispensable'' to any procompetitive effects.\1182\
---------------------------------------------------------------------------
    \1178\ Memorandum from Staff, Fed. Trade Comm'n, to the Commission 
iii (Aug. 8, 2012), in The FTC Report on Google's Business Practices, 
Wall St. J. (Mar. 24, 2015), http://graphics.wsj.com/google-ftc-report/
 
    \1179\ Id. at 80.
    \1180\ Id. at 86.
    \1181\ Google Search (Shopping) Comm'n Decision para. 671.
    \1182\ Summary of Google Search (Shopping) Comm'n Decision, 2018 
O.J. (C 9) 11, 13, para. 26 (Jan. 12, 2018), https://eur-lex.europa.eu/
legal-content/EN/TXT/PDF/?uri=CELEX:52018XC 0112(01)&from=EN.

    (ii) Google Increased Prices for Market Access and Degraded 
Search Quality. In 2000, Google launched AdWords, which allowed 
advertisers to pay for keyword-based ads that would appear to 
the right of Google's search results.\1183\ In the years since, 
Google has changed the display of the ads on its search engine 
results page in several ways, most notably by (1) increasing 
the number of ads placed above organic search results, and (2) 
blurring the distinction between how ads and organic listings 
are presented on Google's search results page. These changes 
have effectively raised the price that businesses must pay to 
access users through Google. Market participants told the 
Subcommittee that Google's conduct has undermined competition, 
misled consumers, and degraded the overall quality of Google's 
search results--all while enabling Google to further exploit 
its monopoly over general online search.
---------------------------------------------------------------------------
    \1183\ Press Release, Google, Google Launches Self-Service 
Advertising Program (Oct. 23, 2000), http://googlepress.blogspot.com/
2000/10/google-launches-self-service.html.
---------------------------------------------------------------------------
    Google's clear dominance in online search also gives it 
significant control over the search advertising market. 
Publicly available data suggests Google captured around 73 
percent of the search advertising market in 2019.\1184\ 
Submissions from market participants show that many firms spend 
the vast majority of their ad budgets on Google. For example, 
one major vertical provider spent significantly more than half 
of its total ad spend on Google each year from 2016 to 2019, 
with the second top provider receiving less than 15 
percent.\1185\ Public reporting suggests that, as of 2019, 
Google had increased the price of search ads by about five 
percent per year, exceeding the U.S. inflation rate at that 
time of 1.6 percent.\1186\
---------------------------------------------------------------------------
    \1184\ Submission from Source 115, to H. Comm. on the Judiciary, 6 
(Oct. 22, 2019) (on file with Comm.) (citing Megan Graham, Amazon Is 
Eating into Google's Most Important Business: Search Advertising, CNBC 
(Oct. 15, 2019), https://www.cnbc.com/2019/10/15/amazon-is-
eating-into-googles-dominance-in-search-ads.html).
    \1185\ Submission from Source 3, to H. Comm. on the Judiciary, 8 
(Oct. 29, 2019) (on file with Comm.).
    \1186\ Alistair Barr & Garrit De Vynck, Airlines, Hotels and Other 
Brands Are Tired of Paying Google for Their Own Names, Bloomberg (Mar. 
9, 2019); see also Mark Irvine, Average Cost per Click by Country: 
Where in the World Are the Highest CPCs?, Wordstream Blog (Nov. 8, 
2018), https://www.wordstream.com/blog/ws/2015/07/06/average-cost-per-
click (showing that the cost-per-click that Google charges search 
advertisers in the United States is notably higher than the rate it 
charges in countries where Google faces more competition).
---------------------------------------------------------------------------
    Several market participants told the Subcommittee that 
their ad spend on Google has increased in large part because 
Google has made it more difficult for businesses to obtain 
organic traffic. Partly, this follows from Google's 
preferencing of its own products, which compels demoted firms 
to pay Google for ad placement as a way to regain visibility. 
Another notable factor has been Google's decision to increase 
the number of ads posted above organic search results.
    Prior to 2016, Google's design of its search results page 
placed eight ads to the right of organic search listings and 
three ads above them.\1187\ Google's internal communications 
show that, as of 2011, the rate of user engagement with right-
hand side ads was declining.\1188\ Since Google made money from 
search ads only when users clicked on them, less user 
engagement meant those ads were becoming less valuable to 
Google. In February 2011, Sridhar Ramaswamy, senior vice 
president of ads at Google, noted that ``users are no longer 
looking at the [right-hand side ads],'' and stated that Google 
either needed to ``retrain people to look there by putting 
really good stuff there,'' or ``live with the fact that users 
are going to stop looking there.'' \1189\ By August 2011, a 
team at Google known as ``Project Manhattan'' was working on a 
redesign of Google's desktop search results page that focused 
on reducing or eliminating right-hand side ads.\1190\
---------------------------------------------------------------------------
    \1187\ Dr. Peter J. Meyers, Four Ads on Top: The Wait Is Over, Moz 
(Feb. 19, 2016), https://moz.com/blog/four-ads-on-top-the-wait-is-over.
    \1188\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-02981172 to -02981173 (Aug. 12, 2011) (on file with Comm.) (``RHS 
CTR has been steadily dropping over time to today's level. For the best 
ads on the RHS, some indication that CTR is lower than quality would 
suggest it should be.''); id. at GOOG-HJC-02983169 to -02983193 (Aug. 
12, 2011) (stating that RHS is 16.5 percent of search revenue, 26 
percent of queries have a RHS ad, and``[o]pportunity is accelerating 
due to declining RHS CTR'').
    \1189\ Id. at GOOG-HJC-02983830 (Feb. 16, 2011).
    \1190\ Id. at GOOG-HJC-00482674 to -00482676 (Aug. 18, 2011).
---------------------------------------------------------------------------
    In 2016, Google rolled out the redesigned page, which 
eliminated the right-hand side ads while adding a fourth ad 
above organic listings and three at the bottom of the 
page.\1191\ The practical effect of adding a fourth ad at the 
top of the search results page was to push organic listings 
further down, requiring users to scroll down further before 
reaching a non-paid result. According to Bloomberg, when Google 
tested the addition of a fourth ad, some employees objected on 
the grounds that the fourth ad would be of lower quality than 
the first organic result, but Google altered the search results 
page anyway.\1192\
---------------------------------------------------------------------------
    \1191\ Matt McGee, Confirmed: Google to Stop Showing Ads on Right 
Side of Desktop Search Results Worldwide, Search Engine Land (Feb. 19, 
2016), https://searchengineland.com/google-no-ads-right-side-of-
desktop-search-results-242997.
    \1192\ Gerrit De Vynck, Google Search Upgrades Make It Harder for 
Websites to Win Traffic, Bloomberg (July 13, 2020), https://
www.bloomberg.com/news/articles/2020-07-13/how-google-search-changes-
make-it-more-expensive-to-win-traffic.
---------------------------------------------------------------------------
    Google's decision to monetize a fourth ad at the expense of 
an organic listing fits a broader pattern of steps taken by 
Google to rank search results based on what is best for Google, 
rather than what is best for search users--be it preferencing 
its own vertical sites or allocating more space for ads. 
Several market participants noted that Google could afford to 
make these changes only once it had achieved a dominant 
position in the market for general search and search 
advertising.\1193\ Now that Google is ``unconstrained by 
competitors,'' one market participant noted, it ``consistently 
reserves the top of the [search engine results page] for its 
own vertical products or advertisements paid for through search 
engine marketing, pushing its rivals' organic results to the 
bottom, regardless of how relevant or useful they might be.'' 
\1194\
---------------------------------------------------------------------------
    \1193\ See, e.g., Submission from Source 972, to H. Comm. on the 
Judiciary, 14 (Dec. 9, 2019) (on file with Comm.); Submission from 
Source 115, to H. Comm. on the Judiciary, 10 (Oct. 22, 2019) (on file 
with Comm.); Submission from Source 3, to H. Comm. on the Judiciary, 34 
(Oct. 29, 2019) (on file with Comm.); Competitors Hearing at 28 
(statement of David Heinemeier Hansson, Cofounder & Chief Tech. 
Officer, Basecamp).
    \1194\ Submission from Source 972, to H. Comm. on the Judiciary, 14 
(Dec. 9, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Internal data shown by one market participant to the 
Subcommittee demonstrates that ``organic search listings have 
been pushed down over time, and `click-throughs' (clicking to 
visit a site) on the first organic results have decreased by 
two-thirds over the past 3 years.'' \1195\ The market 
participant's analysis also shows that the first organic 
listing on mobile now appears on the bottom of the third search 
results screen, which ``effectively forces advertising 
customers to bid for a paid advertisement listing if they want 
their service or product to meaningfully reach consumers in a 
mobile search.'' \1196\
---------------------------------------------------------------------------
    \1195\ Submission from Source 3, to H. Comm. on the Judiciary, 33 
(Oct. 29, 2019) (on file with Comm.).
    \1196\ Id.
---------------------------------------------------------------------------

          Google Search on Desktop Ad Placement \1197\
---------------------------------------------------------------------------

    \1197\ Prepared by the Subcommittee.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
    
              Google Search on Mobile Phone \1198\
---------------------------------------------------------------------------

    \1198\ Prepared by the Subcommittee.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
                Google Search on Desktop \1199\
---------------------------------------------------------------------------

    \1199\ Prepared by the Subcommittee.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  
    
              Google Search on Mobile Phone \1200\
---------------------------------------------------------------------------

    \1200\ Prepared by the Subcommittee.
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  
    

    One result of these changes is that users click less on 
organic search results. As Google has reduced the share of top 
real estate that it devotes to organic listings, studies show 
that organic click-through as a share of all click-through plus 
zero-click searches has fallen.\1201\ According to an analysis 
by Rand Fishkin, the trend is especially pronounced in mobile, 
where organic click-through rates fell by more than 30 percent 
between January 2016 and June 2019, while paid click-through 
rates over that same period more than tripled.\1202\
---------------------------------------------------------------------------
    \1201\ Rand Fishkin, Less than Half of Google Searches Now Result 
in a Click, Sparktoro (Aug. 13, 2019), https://sparktoro.com/blog/less-
than-half-of-google-searches-now-result-in-a-click/.
    \1202\ Id. (showing organic fell from 41.1 percent in January 2016 
to 26.68 percent in June 2019, a period over which paid click-through 
rates increased from 3.29 percent to 11.38 percent).
---------------------------------------------------------------------------
    For businesses that depend on Google to reach users, these 
trends amount to a toll hike, as traffic that firms could 
previously draw through organic listings is now increasingly 
pay-for-play. Instead of competing for users by offering high-
quality webpages and services that should lead to better 
organic search listings, these businesses must now compete for 
users based on how much money they pay Google. Several market 
participants analogized Google to a gatekeeper that is 
extorting users for access to its critical distribution 
channel.
    At the Subcommittee's January 2020 field hearing in 
Colorado, David Heinemeier Hansson, chief technology officer 
and cofounder of Basecamp, testified that Google's decision to 
increase the number of ads listed above organic search results 
has hurt search users.\1203\ Expanding on his criticism, 
Hansson stated that Google's decision to sell ad placement 
against a company's brand name is another way that Google 
extracts revenue from dependent businesses.
---------------------------------------------------------------------------
    \1203\ Competitors Hearing at 62 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp) (``Today, if a 
consumer goes to Google on their mobile device and search [sic] for 
Basecamp, the first thing that they will find is whoever bought that 
trademark term, which is usually one of our competitors. Ergo, 
consumers are not finding what they are looking for . . . . They are 
being presented with an ad and that is the tollbooth that [Google is] 
erecting.'').
---------------------------------------------------------------------------
    Hansson said, ``Google uses this monopoly to extort 
businesses like ours to pay for the privilege that consumers 
who search for our trademarked brand name can find us because 
if we don't they will sell our brand name as misdirection to 
our competitors.'' \1204\ He noted that, while Google purports 
to recognize trademark law by prohibiting the use of trademark 
terms in ad copy, Google ``puts the onus of enforcement on 
victims and does nothing to stop repeat offenders, unless, of 
course, the trademark terms are belonging to Google itself.'' 
\1205\ Hansson added, ``You will find no competitor ads for any 
of Google's own important properties.'' \1206\
---------------------------------------------------------------------------
    \1204\ Id. at 23.
    \1205\ Id.
    \1206\ Id.
---------------------------------------------------------------------------

                      Basecamp's Ad \1207\
---------------------------------------------------------------------------

    \1207\ Jason Fried (@jasonfried), Twitter (Sept. 3, 2019, 4:39 
p.m.), https://twitter.com/jasonfried/status/
1168986962704982016?lang=en.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Other market participants generally echoed these views in 
submissions to the Subcommittee. One wrote that Google 
``effectively forces its advertising customers to pay for the 
ability to reach consumers who are searching specifically for 
the customer's brand.'' \1208\ The business added, ``Facing no 
remotely comparable advertising and search engine alternative, 
Google has the ability to charge potentially inflated prices 
for its advertising services by
 
---------------------------------------------------------------------------
    \1208\ Submission from Source 3, to H. Comm. on the Judiciary, 32 
(Oct. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
forcing customers to increase their bids in order to receive a 
more favorable position.'' \1209\
---------------------------------------------------------------------------
    \1209\ Id.
---------------------------------------------------------------------------
    A second factor that several third parties cited as 
contributing to both higher ad prices and the degradation of 
search for users is Google's effort over the years to blur the 
distinction between organic listings and paid ads.

       Google's Ad Shading and Labeling: 2007-2013 \1210\
---------------------------------------------------------------------------

    \1210\ Ginny Marvin, A Visual History of Google Ad Labeling in 
Search Results, Search Engine Land (Jan. 28, 2020), https://
searchengineland.com/search-ad-labeling-history-google-bing-254332.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The diagram above depicts Google's practice, between 2007 
and 2013, of labeling its paid ads with a shaded background. As 
shown below, in 2013, Google abandoned the shaded background 
and instead inserted a small yellow square that states ``Ad.'' 
Since 2016, Google has made various changes that make ads more 
subtle, culminating in a label that renders the overall 
appearance of paid ads much more similar to organic listings. 
Market participants have noted that Google also neglects to 
label some paid ads entirely, particularly those that appear in 
Google's vertical search offerings, such as listings for hotels 
that appear alongside maps.\1211\
---------------------------------------------------------------------------
    \1211\ Google Hotel Ads, Google, https://ads.google.com/hotels/ 
(last visited Oct. 5, 2020) (offering paid listings to hotels, but 
neglecting to designate these listings as ``ads'' on the search results 
page).

       Google's Ad Shading and Labeling: 2013-2019 \1212\
---------------------------------------------------------------------------

    \1212\ Ginny Marvin, A Visual History of Google Ad Labeling in 
Search Results, Search Engine Land (Jan. 28, 2020), https://
searchengineland.com/search-ad-labeling-history-google-bing-254332.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    The natural result of Google's decision to blur the 
distinction between paid ads and organic listings is that users 
click on more ads and fewer organic search results. This 
misleading practice has likely contributed to the growth of 
paid click-through rates on Google. One study found that over 
59 percent of consumers were not aware of the difference 
between organic results and paid ads on Google, and about 34 
percent of those who did recognize paid ads said they would 
deliberately avoid clicking on them.\1213\ The Federal Trade 
Commission (FTC) has recognized that search engines that fail 
to ``prominently distinguish'' paid ads from organic listings 
could be liable for deceiving consumers under Section 5 of the 
FTC Act.\1214\
---------------------------------------------------------------------------
    \1213\ Mark Jones, Two-Thirds of People Don't Know the Difference 
Between Google Paid and Organic Search Results, Marketing Tech News 
(Sept. 6, 2018), https://marketingtechnews
.net/news/2018/sep/06/two-thirds-people-dont-know-difference-between-
google-paid-and-organic
-search-results/.
    \1214\ Letter from Mary K. Engle, Assoc. Dir. for Advert. Pracs., 
Fed. Trade Comm'n (June 24, 2013), https://www.ftc.gov/sites/default/
files/attachments/press-releases/ftc-consumer-protec-
tion-staff-updates-agencys-guidance-search-engine-industryon-need-
distinguish/130625search
enginegeneralletter.pdf.
---------------------------------------------------------------------------
    Making ads less conspicuous makes it more likely that users 
will unwittingly click on them. Market participants note that, 
like Google's decision to increase the number and prominence of 
paid ads, Google's decision to blur the distinction between 
paid listings
 
and organic results deceives consumers and compels businesses 
to purchase ads from Google in order to be located by 
users.\1215\
---------------------------------------------------------------------------
    \1215\ Submission from Source 115, to H. Comm. on the Judiciary, 
10-12 (Oct. 22, 2019) (on file with Comm.); Submission from Source 972, 
to H. Comm. on the Judiciary, 21 (Dec. 9, 2019) (on file with Comm.); 
Submission from Source 3, to H. Comm. on the Judiciary (Oct. 29, 2019) 
(on file with Comm.).
---------------------------------------------------------------------------
    In submissions and interviews with the Subcommittee, 
businesses noted that higher advertising costs come at the 
expense of investments in innovation and consumer 
benefits.\1216\ One vertical search provider stated:
---------------------------------------------------------------------------
    \1216\ Submission from Source 3, to H. Comm. on the Judiciary, 32 
(Oct. 29, 2019) (on file with Comm.).

     LIf the search market were fair, the internet would have 
four times more content on it, dramatically improving the web 
for consumers. Google's gatekeeper power allows it to show more 
advertisements for search queries with higher commercial intent 
. . . . The harm to consumers is not necessarily a lack of 
content, but a lack of quality content (requiring money to 
produce).\1217\
---------------------------------------------------------------------------
    \1217\ Interview with Source 507 (July 10, 2019).

    At the Subcommittee's January 2020 field hearing, Hansson 
testified that Google's conduct, which harms business customers 
---------------------------------------------------------------------------
and users alike, is enabled by its dominance:

     LGoogle's monopoly on internet search must be broken up 
for the sake of a fair marketplace. Google would never be able 
to get away with such a user-hostile design as showing a full-
page ad for something other than what you were searching for, 
if it had real competition. They would never have been able to 
establish their monopoly if this had been the design from the 
get-go. These are the monopoly spoils of complete 
domination.\1218\
---------------------------------------------------------------------------
    \1218\ Competitors Hearing at 32 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp).

    At the Subcommittee's sixth hearing, Subcommittee Chair 
David N. Cicilline (D-RI) noted that Google's search results 
page now features more ads and more of Google's own sites and 
asked Google CEO Sundar Pichai whether this trend highlights a 
misalignment of Google's incentives.\1219\ He asked, ``Isn't 
there a fundamental conflict of interest between serving users 
who want to access the best and most relevant information and 
Google's business model, which incentivizes Google to sell ads 
and keep users on Google's own sites?'' \1220\ In response, Mr. 
Pichai stated that Google has ``always focused on providing 
users the most relevant information,'' and stated that Google 
shows ads ``only for a small subset of queries where the intent 
from users is highly commercial.'' \1221\ However, Mr. Pichai 
did not explain why the percentage of queries for which Google 
shows ads would implicate whether or not Google's business 
model compromises the integrity of its search results. Google 
also failed to produce data that would enable the Subcommittee 
to make an independent assessment of Mr. Pichai's assertion.
---------------------------------------------------------------------------
    \1219\ CEO Hearing at 72 (question of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm on the Judiciary); Submission from Google, to H. Comm. on the 
Judiciary, GOOG-HJC-01099375 (Mar. 30, 2012) (on file with Comm.); 
Sergey Brin & Larry Page, The Anatomy of a Large-Scale Hypertextual 
Search Engine, Stanford Univ. InfoLab, http://infolab.stanford.edu/
#backrub/google.html (last visited Oct. 4, 2020) (expressing 
reservations about an ad-based business model, noting that ``the goals 
of the advertising business model do not always correspond to providing 
quality search to users,'' and given the conflicting motives that a 
search engine might face between serving users the most relevant 
information and selling more ads, arguing that ``advertising funded 
search engines will be inherently biased towards the advertisers and 
away from the needs of the consumers'').
    \1220\ CEO Hearing at 72 (question of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
    \1221\ Id. (statement of Sundar Pichai, CEO, Alphabet Inc.); 
Submission from Google, to H. Comm. on the Judiciary, GOOG-HJC-01099375 
(Mar. 30, 2012) (on file with Comm.).
---------------------------------------------------------------------------
3. Digital Advertisements
    (a) Overview and Dominance. Google makes the vast majority 
of its revenue by selling advertising placement across the 
internet. In 2019, Google's ad revenue accounted for 
approximately 83.3 percent of Alphabet's overall sales.\1222\ 
Google is a prominent player in both search advertising and 
digital display advertising, and it captures over 50 percent of 
the market across the ad tech stack, or the set of 
intermediaries that advertisers and publishers must use to buy, 
sell, and place ads. Specifically, Google runs the leading ad 
exchange, while also running buy-side and sell-side 
intermediary platforms' trade on the exchange.\1223\
---------------------------------------------------------------------------
    \1222\ Alphabet Inc., Annual Report (Form 10-K) 10 (Feb. 3, 2020), 
https://www.sec.gov/
Archives/edgar/data/1652044/000165204420000008/goog10-k2019.htm.
    \1223\ Competition & Mkts. Auth. Report at 10.
---------------------------------------------------------------------------
    Internationally, antitrust enforcers are currently 
investigating Google's dominance in digital advertising, 
including the United Kingdom's Competition and Markets 
Authority (CMA),\1224\ and the Australian Competition and 
Consumer Commission (ACCC).\1225\ In July 2020, the CMA 
concluded that Google has ``significant market power'' in 
search advertising and its market power had enabled it to 
charge prices 30-40 percent higher than those set by 
Bing.\1226\ In September 2020, the Senate Judiciary Committee 
held a hearing on the effects of Google's dominance in digital 
ads, where members expressed bipartisan concern that Google's 
market power across the ad tech stack was enabling 
anticompetitive conduct and harming publishers and advertisers 
alike.\1227\ Lastly, public reports note that both the Justice 
Department and several state attorneys general are 
investigating Google's market power and conduct in digital ads, 
with reports that a lawsuit may be imminent.\1228\ In light of 
the extensive attention already given to this issue, a 
comprehensive examination of the digital advertising market is 
beyond the scope of this Report.
---------------------------------------------------------------------------
    \1224\ Id.
    \1225\ See generally Austl. Competition & Consumer Comm'n Report.
    \1226\ Competition & Mkts. Auth. Report at 211.
    \1227\ Stacking the Tech: Has Google Harmed Competition in Online 
Advertising?: Hearing Before the S. Subcomm. on Antitrust and Consumer 
Rights of the S. Comm. on the Judiciary, 116th Cong. (2019), https://
www.judiciary.senate.gov/meetings/stacking-the-tech-has-google-harmed-
competition-in-online-advertising.
    \1228\ Sara Forden & David McLaughlin, DOJ Scrutinizes Google 
Advertising, Search in Antitrust Probe, Bloomberg (Aug. 8, 2019), 
https://www.bloomberg.com/news/articles/2019-08-08/doj-scrutinizes-
google-advertising-search-in-antitrust-probe.
---------------------------------------------------------------------------
    Market participants and Google's documents suggest that 
Google is likely to maintain its lead in search and display 
advertising due to high entry barriers. Most critically, as 
other sections of this Report found, Google can mine its 
ecosystem--including Search, Chrome, Android, and Maps--to 
combine a unique set of user data points and build troves of 
online behavioral data that drive its ad business. Furthermore, 
its dominance across markets increasingly enables Google to set 
the terms of commerce. One third party described:

     LGoogle is now not only a seller and broker of digital 
advertising across the Internet, but they now also control 
significant portions of the web browsers, operating systems, 
and platforms upon which these digital ads are delivered. This 
gives Google the ability to single-handedly shift an entire 
ecosystem in nearly any direction they decide, based simply on 
their scale. Google can then use its dominance to demand a 
higher share of ad revenues from buyers and sellers, and there 
is little leverage available to counteract this position in a 
negotiation.\1229\
---------------------------------------------------------------------------
    \1229\ Submission from Source 688, to H. Comm. on the Judiciary, 2 
(Oct. 24, 2019) (on file with Comm.).

    One key factor that market participants and industry 
experts cite when accounting for why Google is likely to 
maintain its dominance in digital ads is its conflict of 
interest. With a sizable share in the ad exchange market and 
the ad intermediary market, and as a leading supplier of ad 
space, Google simultaneously acts on behalf of publishers and 
advertisers, while also trading for itself--a set of 
conflicting interests that market participants say enable 
Google to favor itself and create significant information 
asymmetries from which Google benefits.\1230\ At the 
Subcommittee's sixth hearing, Representative Pramila Jayapal 
(D-WA) questioned Google CEO Sundar Pichai about this conflict 
of interest:
---------------------------------------------------------------------------
    \1230\ Dina Srinivasan, Why Google Dominates Advertising Markets, 
24 Stan. Tech. L. Rev. 55, 63-64 (2020).

     LSo, [Google is] running the marketplace, it's acting on 
the buy side, and it's acting on the sell side at the same 
time, which is a major conflict of interest. It allows you to 
set rates very low as a buyer of ad space from newspapers, 
depriving them of their ad revenue, and then also to sell high 
to small businesses who are very dependent on advertising on 
your platform. It sounds a bit like a stock market, except, 
unlike a stock market, there's no regulation on your ad 
exchange market.\1231\
---------------------------------------------------------------------------
    \1231\ CEO Hearing at 169 (Rep. Pramila Jayapal (D-WA), Member, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm on the 
Judiciary).

Mr. Pichai responded by citing the sums that Google has paid to 
publishers, describing it as a ``low-margin business'' for 
Google that it pursues ``because we want to help support 
publishers.'' \1232\ Google's overall margins have averaged 
over 20 percent for nine of the last ten years.\1233\
---------------------------------------------------------------------------
    \1232\ Id. at 170.
    \1233\ Data compiled by the Congressional Research Service (on file 
with Comm.).

    (b) Merger Activity. Google came to control a sizable 
market share across the ad tech stack through acquisitions. 
Google acquired DoubleClick in 2007 for $3.1 billion.\1234\ At 
the time of the acquisition, The New York Times described 
DoubleClick as a ``Nasdaq-like exchange for online ads,'' and 
Google's own early description of DoubleClick describes it as 
``a stock exchange,'' such as ``the NYSE.'' \1235\ Google 
purchased DoubleClick to enter the display advertising market, 
a segment that Google's internal documents calculated at around 
$4.3 billion in 2006--and an area where Google at the time 
noted it ``has no meaningful presence.'' \1236\ A presentation 
from July 2006 included a slide titled ``Build a Self-
Reinforcing Online Ads Ecosystem,'' which noted that acquiring 
DoubleClick or Atlas could create these ``self-reinforcing 
benefits'' for Google's ecosystem.\1237\ The slide asked, 
``[I]s there some framework we have to demonstrate the 
synergies/inter-relationships from owning all these pieces?'' 
\1238\ Nine months later, Google announced its bid to buy 
DoubleClick.
---------------------------------------------------------------------------
    \1234\ Louise Story & Miguel Helft, Google Buys DoubleClick for 
$3.1 Billion, N.Y. Times (Apr. 14, 2007), https://www.nytimes.com/2007/
04/14/technology/14DoubleClick.html.
    \1235\ Id. See also The DoubleClick Ad Exchange, Google, https://
static.googleusercontent
.com/media/www.google.com/en//adexchange/AdExchangeOverview.pdf (last 
visited Oct. 4, 2020).
    \1236\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04189346 (July 26, 2006) (on file with Comm.).
    \1237\ Id. at GOOG-HJC-04189347.
    \1238\ Id.
---------------------------------------------------------------------------
    When reviewing the deal, the Federal Trade Commission 
assessed both horizontal and non-horizontal theories of harm 
and noted that, prior to announcing the acquisition, Google had 
been planning to enter the market and compete against 
DoubleClick directly.\1239\ Ultimately the Commission concluded 
that the display advertising market was highly competitive, and 
therefore the loss of Google's potential entry would not be 
competitively significant.\1240\ Examining the potential 
effects of the deal on privacy, the FTC said it found no 
evidence that competition between Google and DoubleClick 
affected their respective privacy policies.\1241\ In December 
2007, the FTC approved the acquisition.\1242\
---------------------------------------------------------------------------
    \1239\ Press Release, Fed. Trade Comm'n, Federal Trade Commission 
Closes Google/DoubleClick Investigation (Dec. 20, 2007), https://
www.ftc.gov/news-events/press-releases/2007/12/federal-trade-
commission-closes-googledoubleclick-investigation.
    \1240\ Id.
    \1241\ Id.
    \1242\ Id.
---------------------------------------------------------------------------
    In 2010, Google acquired AdMob, the leading mobile ad 
network at the time. In the FTC's approval of the merger, it 
stated that ``the combination of the two leading mobile 
advertising networks raised serious antitrust issues,'' but 
that these concerns were ``overshadowed by recent developments 
in the market, most notably a move by Apple Computer Inc.--the 
maker of the iPhone--to launch its own competing mobile ad 
network.'' \1243\ The Commission's assumption that Apple would 
continue to build its presence in the mobile ad market prompted 
it to approve the deal.\1244\ In the coming years, however, 
Apple's product never fully took off and, in 2016, Apple 
abandoned the effort completely.\1245\
---------------------------------------------------------------------------
    \1243\ Press Release, Fed. Trade Comm'n, FTC Closes Its 
Investigation of Google AdMob Deal (May 21, 2010), https://www.ftc.gov/
news-events/press-releases/2010/05/ftc-closes-its-investigation-google-
admob-deal.
    \1244\ Id.
    \1245\ About the iAd App Network Shutdown, Apple: Dev. (Dec. 31, 
2016), https://developer.apple.com/support/iad/.
---------------------------------------------------------------------------
    In 2011, Google also acquired AdMeld, a leading supply-side 
platform.\1246\ The Justice Department's Antitrust Division 
investigated the acquisition and concluded that the deal was 
``unlikely to cause consumer harm.'' \1247\
---------------------------------------------------------------------------
    \1246\ Press Release, Fed. Trade Comm'n, FTC Closes Its 
Investigation of Google AdMob Deal (May 21, 2010), https://www.ftc.gov/
news-events/press-releases/2010/05/ftc-closes-its-investigation-google-
admob-deal.
    \1247\ Press Release, U.S. Dep't of Justice, Statement of the 
Department of Justice's Antitrust Division on Its Decision to Close Its 
Investigation of Google Inc.'s Acquisition of Admeld Inc. (Dec. 2, 
2011), https://www.justice.gov/opa/pr/statement-department-justices-
antitrust-division-its-decision-close-its-investigation-google.

---------------------------------------------------------------------------
    (c) Conduct

    (i) Combination of Data. When Google purchased DoubleClick, 
it told Congress and the FTC that it would not combine the data 
collected on internet users via DoubleClick with the data 
collected throughout Google's ecosystem.\1248\ In 2016, 
however, Google reversed this commitment and subsequently 
combined DoubleClick data with personal information collected 
through other Google services--effectively combining 
information from a user's personal identity with their location 
on Google Maps, information from Gmail, and their search 
history, along with information from numerous other Google 
products. At the Subcommittee's sixth hearing, Representative 
Val Demings (D-FL) asked Mr. Pichai about his direct 
involvement in the decision to renege on Google's commitment to 
lawmakers:
---------------------------------------------------------------------------
    \1248\ Dina Srinivasan, Why Google Dominates Advertising Markets, 
24 Stan. Tech. L. Rev. 55, 92-93 (2020).

     LWhen Google proposed the merger[,] alarm bells were 
raised about the access to data Google would have, specifically 
the ability to connect to users' personal identity with their 
browsing activity. Google, however, committed to Congress and 
to the antitrust enforcers that the deal would not reduce user 
privacy. Google's chief legal adviser testified before the 
Senate Antitrust Subcommittee that Google wouldn't be able to 
merge this data even if it wanted to, given contractual 
restrictions. But in June of 2016, Google went ahead and merged 
its data anyway, effectively destroying anonymity on the 
internet . . . . Did you sign off on this decision to combine 
the sets of data with--that Google had told Congress would be 
kept separate? \1249\
---------------------------------------------------------------------------
    \1249\ CEO Hearing at 105 (question of Rep. Val Demings (D-FL), 
Member, Subcomm. on Antitrust, Commercial and Admin Law of the H. Comm. 
on the Judiciary).

    Mr. Pichai confirmed that he approved the deal, claiming 
that, ``Today [we] make it very easy for users to be in control 
of their data.'' \1250\ Representative Demings also noted that, 
at the time of the transaction, DoubleClick executives had 
noted that Google's founders were concerned that combining the 
data in this way--through a cross-site cookie--would lead to a 
privacy backlash. She stated:
---------------------------------------------------------------------------
    \1250\ Id. at 106.

     LSo, in 2007, Google's founders feared making this change 
because they knew it would upset their users, but in 2016, 
Google didn't seem to care. Mr. Pichai, isn't it true that what 
changed between 2007 and 2016 is that Google gained enormous 
market power. So. While Google had to care about user privacy 
in 2007. It no longer had to in 2016? Would you agree that what 
changed was Google gained enormous market power? \1251\
---------------------------------------------------------------------------
    \1251\ Id.

    She closed by noting she was concerned that Google's 
``bait-and-switch'' was ``part of a broader pattern where 
Google buys up companies for the purposes of surveilling 
Americans, and because of Google's dominance users have no 
choice but to surrender.'' \1252\ In recent months, Google's 
reversal on this commitment has become salient for enforcers 
now assessing Google's bid to purchase FitBit.\1253\
---------------------------------------------------------------------------
    \1252\ Id.
    \1253\ Id. at 368 (response to Questions for the Record of Sundar 
Pichai, CEO, Alphabet, Inc.).

    (ii) Other Areas of Concern. While a comprehensive 
examination of this market is beyond the scope of this Report, 
the Subcommittee heard from numerous market participants about 
a set of alleged practices by Google that invite investigation. 
---------------------------------------------------------------------------
These include:

      LDepriving advertisers and publishers of key 
market and pricing information and maintaining market opacity;
      LLeveraging its market power in search 
advertising to compel advertisers to use Google's products in 
the display market;
      LLeveraging control over YouTube to foreclose 
competition in digital video ad serving, in part by excluding 
rival ad servers from having access to YouTube;
      LInhibiting interoperability between Google's ad 
platforms and non-Google ad platforms; and
      LUsing its search dominance to impose standards 
like AMP that, by further depriving publishers of user data, 
benefit Google's ad business.
4. Android and Google Play Store

    (a) Android

    (i) Overview. Android is a dominant mobile operating 
system, running on approximately 75 percent of the world's 
mobile devices.\1254\ In the United States, the only 
alternative to Android is Apple's iOS. Android captures about 
47 percent of the U.S. mobile operating system market, and 
Apple captures about 52 percent of it.\1255\
---------------------------------------------------------------------------
    \1254\ Felix Richter, The Smartphone Market: The Smartphone 
Duopoly, Statista (July 27, 2020), https://www.statista.com/chart/3268/
smartphone-os-market-share/ (citing Mobile Operating System Market 
Share Worldwide, Statcounter GlobalStats).
    \1255\ S. O'Dea, Market Share of Mobile Operating Systems in the 
United States from January 2012 to December 2019, Statista (Feb. 27, 
2020), https://www.statista.com/statistics/272700/market-share-held-by-
mobile-operating-systems-in-the-us-since-2009/ (citing Mobile Operating 
System Market Share in United States of America, Statcounter 
GlobalStats).
---------------------------------------------------------------------------
    Google acquired Android in July 2005 for an estimated $50 
million.\1256\ Since then, Google has purchased a set of 
technologies to strengthen its mobile ecosystem, including both 
software and hardware.\1257\ Notably, Google purchased Motorola 
Mobility in 2011 for $12.5 billion, the largest acquisition in 
Google's history.\1258\
---------------------------------------------------------------------------
    \1256\ Farhad Manjoo, A Murky Road Ahead for Android, Despite 
Market Dominance, N.Y. Times (May 27, 2015), https://www.nytimes.com/
2015/05/28/technology/personaltech/a-murky-road-ahead-for-android-
despite-market-dominance.html.
    \1257\ See infra Appendix.
    \1258\ Google Buys Motorola Mobility for $12.5B, Says ``Android 
Will Stay Open,'' TechCrunch (Aug. 15, 2011), https://techcrunch.com/
2011/08/15/breaking-google-buys-motorola-for-12-5-billion/ (reporting 
that Google purchased Motorola primarily to protect the Android 
ecosystem from patent litigation). In 2014, Google sold Motorola to 
Lenovo. Facts About Google's Acquisition of Motorola, Google, https://
www.google.com/press/motorola/ (last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    Google describes Android as ``a free, open-source mobile 
operating system'' that is available to anyone to download and 
modify on a royalty-free basis.\1259\ Indeed, Android is unique 
in that Google does not generally monetize its operating system 
by selling proprietary hardware or demanding licensing fees. In 
practice, however, smartphone manufacturers that seek to use 
Android must sign Google's licensing agreements, as Google 
limits the functionality of non-licensed usage. Only through 
Google's licensing agreements can smartphone manufacturers 
access Google's proprietary apps, such as Gmail, YouTube, 
Chrome, Google Maps, and Google Play Store.\1260\ In return, 
Google requires that certain apps must be pre-installed and 
must receive prominent placement on mobile devices.\1261\ 
Device manufacturers must also enter an agreement that prevents 
them from customizing Android,\1262\ and from building an 
Android fork that would make the version of Android running on 
a device incompatible with apps built for the Android 
ecosystem.\1263\
---------------------------------------------------------------------------
    \1259\ Submission from Google, to H. Comm. on the Judiciary, A-6 
(Nov. 22, 2019) (on file with Comm.). Android is managed by the Open 
Handset Alliance, a group of more than eighty hardware, software, and 
mobile network operators, including Samsung, LG, HTC, and Lenovo. See 
Members, Open Handset All., https://www.openhandsetalliance.com/
oha_members.html (last visited Oct. 4, 2020); Licenses, Android Open 
Source Project, https://source.android.com/setup/start/licenses (last 
visited Oct. 4, 2020) (stating that the Android source code is freely 
available for use under an open-source license).
    \1260\ See Google Android Comm'n Decision para.para. 160-63.
    \1261\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-02393308 (Mar. 11, 2011) (on file with Comm.) (describing the 
Mobile Application Distribution Agreement (MADA) as an agreement that 
specifies which apps Google requires hardware manufacturers to pre-
install and where on the phone the apps should be placed).
    \1262\ Id. at GOOG-HJC-02393318 (Feb. 25, 2011) (Google's 
Antifragmentation Agreement).
    \1263\ Id.; Google Android Comm'n Decision para.para. 170-71; see 
also Device Compatibility Overview, Android Devs., https://
developer.android.com/guide/practices/compatibility (lastvisited Oct. 
4, 2020). In 2017, Google released an alternative to its 
Antifragmentation Agreement called the Android Compatibility Commitment 
(ACC), which ``would permit OEMs to manufacture incompatible Android 
devices for a third party that are marketed under a third-party 
brand.'' Google Android Comm'n Decision para.para. 170-71.
---------------------------------------------------------------------------
    The Subcommittee's investigation revealed that Google has 
used Android to entrench and extend its dominance in a host of 
ways that undermine competition. These include: (1) using 
contractual restrictions and exclusivity provisions to extend 
Google's search monopoly from desktop to mobile and to favor 
its own applications; and (2) devising Android Lockbox, a 
covert effort to track real-time data on the usage and 
engagement of third-party apps, some of which were Google's 
competitors. Additionally, Google's Play Store now functions as 
a gatekeeper, which Google is increasingly using to hike fees 
and favor its own apps. Overall, Android's business practices 
reveal how Google has maintained its search dominance through 
relying on various contractual restrictions that blocked 
competition and through exploiting information asymmetries, 
rather than by competing on the merits.

    (ii) Using Contracts to Extend Google's Search Monopoly and 
Self-Preference. Early communications within Google show that 
it began investing in the mobile ecosystem because it 
recognized that the rise of smartphone usage threatened to 
disintermediate Google Search. Since losing its monopoly on 
search would mean losing its valuable trove of user data, 
maintaining dominance over search access points was paramount.
    To maintain its search dominance, Google invested in 
Android, which it recognized it could use to extend its search 
dominance onto mobile devices.\1264\ Google required that any 
smartphone manufacturer seeking to license Android preinstall 
Google Search and Google Play Store, alongside a host of other 
rotating apps selected by Google.\1265\ Google also offered 
mobile device manufacturers revenue-share agreements, under 
which smartphone manufacturers would receive a cut of the 
search advertising revenue that Google made from the use of 
Google's apps on their devices,\1266\ as well as a cut of Play 
Store revenues.\1267\ In return, however, manufacturers had to 
not only carry Google's apps, but also ensure that Google 
Search was the default and exclusive search app pre-installed 
on the manufacturers' devices. For example, one revenue share 
agreement reviewed by the Subcommittee stated that hardware 
manufacturers shall not ``pre-install, install, or incorporate 
on any Covered Device any application which is the same or 
substantially similar to a Google Search Client or the Google 
Search Services.'' \1268\
---------------------------------------------------------------------------
    \1264\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04216470 (May 2009) (on file with Comm.).
    \1265\ Id. at GOOG-HJC-02393308 (Mar. 11, 2011) (on file with 
Comm.) (Mobile Application Distribution Agreement).
    \1266\ Id. at GOOG-HJC-00660371 (Apr. 11, 2011).
    \1267\ Id. at GOOG-HJC-04216470 (May 2009).
    \1268\ Id. at GOOG-HJC-00660364 (Apr. 11, 2011).
---------------------------------------------------------------------------
    Documents show that Google executives knew that 
conditioning access to Android and to Google's suite of apps on 
the prominent placement of Google Search would disrupt existing 
partnerships between mobile network operators and rival search 
engines. For example, a 2009 slide deck stated that 
``[p]artners may have deals in place with other search 
providers,'' and noted that ``T-Mobile and AT&T have closed 
deals with Yahoo . . . . Verizon has tight relationship with 
MSFT re: search . . . . Expect MSFT & Yahoo to aggressively 
pursue `pre-load' deals on Android phones.'' \1269\ Google's 
strategy of licensing Android for free to hardware partners and 
conditioning access to Google's must-have apps on favorable 
treatment for Google Search enabled Google to box out rivals in 
mobile search and other markets. Google's strategy was 
successful. These agreements, which were reached with the 
leading smartphone providers, solidified Google Search as the 
default search option on a majority of the world's smartphones.
---------------------------------------------------------------------------
    \1269\ Id. at GOOG-HJC-04217467 (May 2009) (on file with Comm.).
---------------------------------------------------------------------------
    As Android gained market share, its demands grew and 
hardened. The European Commission found that between 2009 and 
2014, Google increased the number of pre-installed Google apps 
that it required from 12 to 30.\1270\ Documents submitted to 
the Subcommittee also show that instructions to heavily push 
Google Search were coming from the company's top management. 
Summarizing a meeting with Sundar Pichai, then-Vice President 
of Product Development, Director of Engineering for Android 
Patrick Brady recalled, ``His main feedback was . . . [s]earch 
is sacred, must be front and center.'' \1271\ He added, ``Our 
proposal covers that through more prescriptive search placement 
requirements.'' \1272\
---------------------------------------------------------------------------
    \1270\ Google Android Comm'n Decision para. 182.
    \1271\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00050146 (May 23, 2013) (on file with Comm.).
    \1272\ Id.
---------------------------------------------------------------------------
    Google's licensing agreement gave Google the right to amend 
the list of apps it required device manufacturers to pre-
install.\1273\ Documents show that market participants 
expressed frustration at Google's ability to set the terms and 
also change them routinely. Explaining the situation, Mr. Brady 
wrote, ``Some OEMs . . . do not like the idea of signing up to 
undefined requirements, but most of our partners are somewhat 
used to this as the [c]ompatibility requirements evolve with 
each release, and our [Google Mobile Services] suite expands 
(incl. mandatory apps) over time.'' \1274\ When one hardware 
manufacturer attempted to secure additional rights, Google 
pushed back. In 2014, John Lagerling, Senior Director of 
Android Global Partnerships, responded to such an effort:
---------------------------------------------------------------------------
    \1273\ See Google Android Comm'n Decision para. 183.
    \1274\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00050145 (May 23, 2013).

     LIn your redlines on [the contract], you are suggesting 
[OEM] approves any new additions to GMS. This has never been 
the case in our past history[,] and I think it is the wrong 
message for [OEM] to send Google. We just spent some hours 
explaining . . . that one of the main reasons we do Android is 
in order to secure distribution of Google services.\1275\
---------------------------------------------------------------------------
    \1275\ Id. at GOOG-HJC-04300658 (Jan. 21, 2014).

    Other smartphone manufacturers also attempted to resist 
Google's terms, noting that the requirements were crowding out 
placement for other apps while also taking up significant 
memory. For example, in 2014, one hardware manufacturer 
requested that Google ``reduce the number of preloaded apps on 
the device . . . so that we don't clutter our products with 
apps that may not be necessary for the majority of users and we 
give them as much space as possible,'' adding that this would 
also ``help us deal with complaints from governments, NGOs and 
end users.'' \1276\ Forwarding the email to others at Google, 
Mr. Langerling noted that the manufacturer's grievance was 
``not about clutter but about system memory,'' adding that 
``[u]sers have been complaining to [the device maker] that [it] 
sells them a 16Gb phone and delivers something that only has 7-
8Gb free.'' \1277\
---------------------------------------------------------------------------
    \1276\ Id. at GOOG-HJC-04308614 (Jan. 17, 2014).
    \1277\ Id.
---------------------------------------------------------------------------
    Despite complaints that Android's pre-install conditions 
favored Google's products at the expense of user experience, 
Google maintained its requirements. Interviews with market 
participants suggest that Google's ability to set the terms of 
commerce hurt mobile device manufacturers as well as third-
party developers, both of which had their own apps they were 
seeking to distribute. In a submission to the Subcommittee, one 
third party recalled being informed by a device manufacturer 
``that it could not provide home screen placement for our 
preloaded app due in part to contractual agreements to preload 
[Google's competing app].'' \1278\
---------------------------------------------------------------------------
    \1278\ Submission from Source 104, to H. Comm. on the Judiciary, 
Source 104-00000439 (Jan. 18, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Market participants noted that pre-installation on devices 
can be critical for successful distribution. One developer 
explained that ``integration into the initial device setup,'' 
in particular, can ``meaningfully drive the acquisition of new 
users.'' \1279\ Google's documents show that it recognized the 
importance of pre-installation, with one internal presentation 
stating that ``activation and defaults are a known issue that 
we should explore, as OEM/carrier pre-installed apps are among 
the most used.'' \1280\
---------------------------------------------------------------------------
    \1279\ Id. at Source 104-00000437.
    \1280\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04200778 (May 25, 2017) (on file with Comm.).
---------------------------------------------------------------------------
    Documents also show that Google uses its leverage to push 
hardware manufacturers to privilege Google's products over the 
manufacturers' products. Discussing the agenda for an upcoming 
meeting with a hardware manufacturer, one Google manager noted 
that the manufacturer should discourage the use of its email 
client for Gmail accounts, stating, ``They should use Gmail 
native app.'' \1281\ In a separate discussion in 2016, Google 
employees explained how Android Pay, a predecessor to Google 
Pay, would be given preferential treatment over the 
manufacturer's own mobile payment app.\1282\ Recent reporting 
that Google is pressuring Samsung to promote Google apps over 
those offered by Samsung is consistent with the company's past 
conduct.\1283\
---------------------------------------------------------------------------
    \1281\ Id. at GOOG-HJC-04204875 (Jan. 18, 2014).
    \1282\ Id. at GOOG-HJC-04299009 (Feb. 4, 2016) (discussing how the 
manufacturer's mobile payment app would be placed inside of an apps 
folder while Google's mobile payment app would be placed more 
prominently outside the folder of Google apps).
    \1283\ See, e.g., Mark Bergen & Sohee Kim, Google in Talks to Take 
Over More Search Tasks on Samsung Phones, Bloomberg (July 28, 2020), 
https://www.bloomberg.com/news/articles/2020-07-29/google-in-talks-to-
take-over-more-search-tasks-on-samsung-phones; Paresh Dave & Hyunjoo 
Jin, Samsung Weighs Dropping Bixby as Google Dangles New Mobile Apps 
Deal, Reuters (July 29, 2020), https://www.reuters.com/article/us-
google-samsung/samsung-weighs-dropping-bixby-as-google-dangles-new-
mobile-apps-deal-idUSKCN24U0TF.
---------------------------------------------------------------------------
    Lastly, Google appears to use its licensing agreements to 
deter mobile device manufacturers from collaborating with 
alternative mobile operating system providers. In 2012, for 
example, Acer, a hardware manufacturer, and Alibaba had planned 
to release a variant of Android, called Aliyun OS.\1284\ 
Reporting suggests that Google threatened to terminate its 
partnership with Acer in retaliation, leading Acer to cancel 
the launch of devices running on the Aliyun OS.\1285\ Google 
also requires hardware partners to agree that they will not run 
unsanctioned versions of Android on other hardware products, 
with the understanding that any manufacturer who violates this 
condition risks losing access to the Google Play Store and 
other popular apps across all of the manufacturer's 
devices.\1286\
---------------------------------------------------------------------------
    \1284\ See, e.g., Dieter Bohn, Google Explains Why It Stopped 
Acer's Aliyun Smartphone Launch (Updated), Verge (Sept. 14, 2012), 
https://www.theverge.com/2012/9/14/3335204/google-statement-acer-
smartphone-launch-aliyun-android; Roger Cheng, Alibaba: Google Forced 
Acer to Drop Our New Mobile OS, CNET (Sept. 13, 2012), https://
www.cnet.com/news/alibaba-google-forced-acer-to-drop-our-new-mobile-os/
; T.C. Sottek, Acer Cancels Phone Launch with Alibaba, Allegedly in 
Response to Threats from Google, Verge (Sept. 13, 2012), https://
www.theverge.com/2012/9/13/3328690/acer-google-alibaba-phone.
    \1285\ See id.
    \1286\ See, e.g., Janko Roettgers, How Google Kneecapped Amazon's 
Smart TV Efforts, Protocol (Mar. 11, 2020), https://www.protocol.com/
google-android-amazon-fire-tv; James Brumley, Google Just Made Sure 
It's Going to Win the Smart TV War, Motley Fool (Mar. 20, 2020), 
https://www.fool.com/investing/2020/03/20/google-just-made-sure-its-
going-to-win-the-smart-t.aspx.
---------------------------------------------------------------------------
    After investigating Google's licensing agreements, the 
European Commission concluded in 2018 that Google's conduct had 
illegally benefited Google's own services while blocking the 
rise of rival operating systems.\1287\ Although Google argued 
that users were free to download other apps and that Google's 
own apps were superior, the Commission determined that ``users 
who find search and browser apps pre-installed on their devices 
are likely to stick to these apps.'' \1288\ Responding to 
Google's claims that its tying agreements were necessary in 
order for Google to be able to monetize its investment in 
Android, the European Commission stated:
---------------------------------------------------------------------------
    \1287\ Press Release, Eur. Comm'n, Antitrust: Commission Fines 
Google =4.34 Billion for Illegal Practices Regarding Android Mobile 
Devices to Strengthen Dominance of Google's Search Engine (July 18, 
2018), https://ec.europa.eu/commission/presscorner/detail/en/
IP_18_4581.
    \1288\ Id.

     LGoogle achieves billions of dollars in annual revenues 
with the Google Play Store alone, it collects a lot of data 
that is valuable to Google's search and advertising business 
from Android devices, and it would still have benefitted from a 
significant stream of revenue from search advertising without 
the restrictions.\1289\
---------------------------------------------------------------------------
    \1289\ Id.

    (iii) Accessing Real-Time Market Data. The Subcommittee's 
investigation also revealed that Android gives Google 
unparalleled access to data on its users and developers. This 
includes information that Google can monetize through its ad 
business, as well as strategic intelligence that lets Google 
track emerging competitors and general business trends.
    Android's dominance in the mobile operating system market 
enables it to extensively surveil its users. This surveillance 
is partly enabled through Google's technology. In key ways, 
Google also uses its dominance and its integration across 
markets to increase the number of touchpoints from which it is 
constantly mining user data.
    Google's documents show that it has used its leverage over 
hardware manufacturers to demand that they structure their 
devices in ways that facilitate Google's data collection 
efforts. Google's agreements with device manufacturers, for 
example, require that manufacturers configure a ``Client ID,'' 
which is a unique alphanumeric code incorporated in the 
smartphone that enables Google to combine metrics tracked via 
the hardware with all the other data Google collects on 
users.\1290\ Additionally, Google's own documents also show 
that it has asked device manufacturers to use a Google Account 
as their identifier rather than a non-Google account--a way of 
ensuring that Google can capture a broader picture of its 
users.\1291\ On the Play Store, meanwhile, Google does not 
permit users to download apps unless they have a Google 
Account, further funneling users into the Google 
ecosystem.\1292\ Combined with location data, which Android 
also extensively collects, Google can build sophisticated user 
profiles reflecting a person's demographic, where they are, and 
where they go, as well as which apps they use at what time and 
for how long.\1293\ These intimate user profiles, spanning 
billions of people, are a key source of Google's advantage in 
its ad business. In this way, Android's location data feeds 
into Google's dominance in ads.
---------------------------------------------------------------------------
    \1290\ Google Android Comm'n Decision para. 187.
    \1291\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04204875 (Jan. 18, 2014) (on file with Comm.).
    \1292\ Innovation and Entrepreneurship Hearing at 471 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1293\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04198806 to -04198855 (Jan. 13, 2017) (on file with Comm.).
---------------------------------------------------------------------------
    Documents and information reviewed by the Subcommittee also 
show that Google has used Android to closely monitor competing 
apps--data that amounts to near-perfect market intelligence. 
Since at least 2012, Google has collected installation metrics 
for third-party apps,\1294\ which it combined with data 
analyzing search queries.\1295\ These early documents outline 
the early stages of Google's ``Lockbox,'' a project to collate 
data that provided Google with a range of competitor insights 
and market intelligence, ranging from an understanding of how 
installation of the Amazon app corresponded to a trend in 
Amazon shopping queries \1296\ to a close tracking of trends 
relating to Candy Crush and Angry Birds.\1297\
---------------------------------------------------------------------------
    \1294\ Id. at GOOG-HJC-00055102 (Nov. 2013).
    \1295\ Id. at GOOG-HJC-02598471 (June 6, 2010).
    \1296\ Id. at GOOG-HJC-00055102 (Nov. 2013).
    \1297\ Id.
---------------------------------------------------------------------------
    While Lockbox began as a way to collect data on the 
installation of apps, Google quickly realized it could harness 
it to yield other insights as well. One document from 2013 
identified a list of additional data points that the company 
desired, including ``[m]ore signals (including uninstalls and 
device app mapping)'' and ``reliable and long term app usage 
data,'' for which the document noted Google Play Services could 
help.\1298\ In short, Google began seeking out ways to collect 
specific usage data that enabled Google to track not just which 
apps a user has, but also how frequently they use the apps and 
for how long.
---------------------------------------------------------------------------
    \1298\ Id.
---------------------------------------------------------------------------
    Documents obtained by the Subcommittee suggest that by 
2015, Google's Lockbox data had succeeded in tracking more than 
just install rates.\1299\ Google's internal reports show that 
Google was tracking in real-time the average number of days 
users were active on any particular app,\1300\ as well as their 
``total time spent'' in first- and third-party apps.\1301\ 
Google subsequently used this data to benchmark the company's 
first-party apps against third-party apps, suggesting that 
Google was using Lockbox data to assess the relative strengths 
and weaknesses of its own offerings.\1302\ Google's documents 
show how Lockbox furnishes Google with near-perfect market 
intelligence, which Google has used to inform strategic moves 
and potential business transactions.\1303\ Recent reporting by 
The Information documented how YouTube employees used Lockbox 
data to track TikTok usage in India as Google was developing 
and planning its own rival to TikTok.\1304\
---------------------------------------------------------------------------
    \1299\ Alex Heath, Nick Bastone & Amir Efrati, Internal Google 
Program Taps Data on Rival Android Apps, Information (July 23, 2020), 
https://www.theinformation.com/articles/internal-google-program-taps-
data-on-rival-android-apps.
    \1300\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04198806 to -04198855 (Jan. 13, 2017) (on file with Comm.).
    \1301\ Id. at GOOG-HJC-04198814 (Jan. 13, 2017).
    \1302\ Id. at GOOG-HJC-04198812 (Jan. 13, 2017).
    \1303\ Id. at GOOG-HJC-04199726 (Jan. 13, 2017).
    \1304\ Alex Heath, Nick Bastone & Amir Efrati, Internal Google 
Program Taps Data on Rival Android Apps, Information (July 23, 2020), 
https://www.theinformation.com/articles/internal-google-program-taps-
data-on-rival-android-apps.
---------------------------------------------------------------------------
    During the Subcommittee's sixth hearing, Subcommittee Vice 
Chair Joe Neguse (D-CO) asked Mr. Pichai about allegations that 
Google had used Android to surveil rival apps and develop 
competing products.\1305\ Mr. Pichai responded, ``Congressman, 
because we try to understand what's going on in [the] market 
and we are aware of, you know, popularity of apps,'' adding, 
``But, in general, the primary use for that data is to improve 
the health of Android.'' \1306\
---------------------------------------------------------------------------
    \1305\ Jon Porter, Google Reportedly Keeps Tabs on Usage of Rival 
Android Apps to Develop Competitors, Verge (July 24, 2020), https://
www.theverge.com/2020/7/24/21336946/google-android-lockbox-data-rival-
apps-antitrust-scrutiny.
    \1306\ CEO Hearing at 164 (statement of Sundar Pichai, CEO, 
Alphabet, Inc.).
---------------------------------------------------------------------------
    In follow-up questions to Mr. Pichai, Google was asked to 
identify all acquisitions or product decisions that had been 
informed by data from Android Lockbox. Google's answer was not 
responsive to the question.\1307\
---------------------------------------------------------------------------
    \1307\ Id. at 346 (response to Questions for the Record of Sundar 
Pichai, CEO, Alphabet, Inc.).

    (b) Play Store. The Play Store is the dominant app store on 
Android devices. Early documents reviewed by the Subcommittee 
show that Google chose for a single app store to control 
software distribution on the Android ecosystem, with one 
executive noting that ``we would strongly prefer to have one 
Market that everyone focuses on.'' \1308\
---------------------------------------------------------------------------
    \1308\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04218465 (Nov. 26, 2009) (on file with Comm.).
---------------------------------------------------------------------------
    Because Google's Play Store is the primary way that users 
install applications on Android devices, the Play Store 
effectively functions as a gatekeeper for software distribution 
on a majority of the world's mobile devices. The Subcommittee's 
investigation reveals that Google uses this gatekeeper power in 
several key ways.
    First, Google uses its Play Store gatekeeper power to 
charge high fees to mobile developers. Amazon, Spotify, 
Netflix, Epic Games, and Tinder have all expressed public 
concerns about Google's app store fees, along with 
Apple's.\1309\ As a lawsuit recently filed by Epic Games 
stated, ``Google has thus installed itself as an unavoidable 
middleman for app developers who wish to reach Android users 
and vice versa. Google uses this monopoly power to impose a tax 
that siphons monopoly profits for itself every time an app 
developer transacts with a consumer for the sale of an app or 
in-app digital content.'' \1310\
---------------------------------------------------------------------------
    \1309\ See infra Section V.D.2(c)(i).
    \1310\ Complaint for Injunctive Relief at 2, Epic Games, Inc. v. 
Google LLC, No. 3:20-cv-05671 (N.D. Cal. Aug. 13, 2020).
---------------------------------------------------------------------------
    Although Google doesn't block off all alternative channels 
for accessing apps--allowing, for example, both some app stores 
and sideloading--in practice, these options do not provide 
meaningful alternatives to the Google Play Store. In contrast, 
the dual dominance of the Play Store and the Android ecosystem 
enables Google to exert control and engage in conduct that 
harms competition by exploiting, excluding, and discriminating 
against rivals.
    Google charges developers of paid apps a 30 percent 
commission for downloads from the Play Store.\1311\ Google also 
charges developers a 30 percent fee for in-app purchases.\1312\ 
According to documents obtained by the Subcommittee, from 2011 
to 2015, revenue from the Play Store accounted for 85 percent 
of Google's total revenue from the Android operating system, 
hardware sales, and the Play Store.\1313\
---------------------------------------------------------------------------
    \1311\ Play Console Help: Service Fees, Google, https://
support.google.com/googleplay/
android-developer/answer/112622?hl=en (last visited Oct. 4, 2020).
    \1312\ Transaction Fees for Merchants, Google Payments Help Ctr., 
https://support
.google.com/paymentscenter/answer/
7159343?hl=en#:#:text=The%20transaction%20fee%20for% 
20all,distribution%20partner%20and%20operating%20fees (last visited 
Oct. 4, 2020).
    \1313\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04217474 (on file with Comm.).
---------------------------------------------------------------------------
    Third-party apps can also avoid the Play Store's 
commissions and fees by directing consumers to sideload the 
app--that is, to install the app using a browser, outside of an 
app store. Rival app stores that are not pre-installed on the 
device, such as the Amazon Appstore, must be sideloaded. 
Although sideloading is technically an option for rival app 
stores and app developers, market participants explained that 
Google goes out of its way to make sideloading difficult. 
Epic's recent lawsuit against Google alleges:

     LGoogle ensures that the Android process is technically 
complex, confusing and threatening, filled with dire warnings 
that scare most consumers into abandoning the lengthy process. 
For example, depending on the version of Android running on a 
mobile device, downloading and installing Fortnite on an 
Android device could take as many as 16 steps or more, 
including requiring the user to make changes to the device's 
default settings and manually granting various permissions 
while being warned that doing so is dangerous.\1314\
---------------------------------------------------------------------------
    \1314\ Complaint for Injunctive Relief at 7, Epic Games, Inc. v. 
Google LLC, No. 3:20-cv-05671 (N.D. Cal. Aug. 13, 2020).

    Additionally, Epic's complaint notes that when it attempted 
to work with LG, another Android device manufacturer, LG told 
Epic that it had a contract with Google ``to block side 
downloading off Google Play Store this year.'' \1315\ If a user 
is able to install the competing app store, Google blocks them 
``from offering basic functions, such as automatic updating of 
apps in the background, which is available for apps downloaded 
from the Google Play Store.'' \1316\
---------------------------------------------------------------------------
    \1315\ Id. at 28.
    \1316\ Id. at 7.
---------------------------------------------------------------------------
    The Play Store's dominance over app distribution on Android 
devices has enabled Google to begin to require the use of its 
in-app payment system (IAP). As a result, Google has become the 
middleman between app developers and their customers. This was 
not always the case. Market participants explain that Google 
has changed its stance and re-interpreted policies over time to 
require more app developers to use Google Pay. Beginning in 
2014, for example, Google designated specific categories of 
applications--including mobile games--that would be required to 
use Google Play In-App Billing.\1317\ Recently, however, 
several market participants have informed the Subcommittee that 
Google has begun insisting that a broader category of apps will 
be required to use Google IAP exclusively, no longer allowing 
the option of a third-party payment processor.\1318\
---------------------------------------------------------------------------
    \1317\ Innovation and Entrepreneurship Hearing at 480 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1318\ Submission from Source 736, to H. Comm. on the Judiciary 
(Sept. 25, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    In interviews with the Subcommittee, developers state that 
one way Google exercises its gatekeeper power over third-party 
app developers is through its arbitrary and unaccountable 
enforcement of Play Store policies. One developer that spoke 
with the Subcommittee described Google's Play Store policies as 
an ``opaque system [that] threatens the ability of app 
developers to develop and compete in the market for consumers, 
who should ultimately determine which apps they use.'' \1319\ 
Another developer explained, ``When apps allegedly violate 
Google Play Store standards, Google does not ever explain how, 
other than to quote the policy above and attach pictures of the 
allegedly violating image. When the imagery does not fit the 
above definitions, app publishers such as [third party] are put 
in a position of having to guess how to apply these 
standards.'' \1320\
---------------------------------------------------------------------------
    \1319\ Submission from Source 62, to H. Comm. on the Judiciary, 1 
(July 31, 2020) (on file with Comm.).
    \1320\ Submission from Source 685, to H. Comm. on the Judiciary, 12 
(Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Developers also alleged that Google uses control over the 
Play Store to protect the dominance of its own services and 
stifle rivals. For example, Callsome, a mobile app that 
provided productive follow-up to phone calls or text messages, 
such as prompting a calendar entry or a reminder to text back, 
has sued Google and claimed it was banned from the Google Play 
store for ``Ad Policy'' violations only to later learn that a 
``fundamentally identical product'' was able to stay and thrive 
in the Play Store.\1321\ Callsome believes it was banned 
because of its partnership with StartApp, which--at the time--
was widely considered a nascent but rising rival to Google in 
the Russian search market.\1322\
---------------------------------------------------------------------------
    \1321\ Submission from Callsome, to H. Comm. on the Judiciary, 3 
(Apr. 28, 2020) (on file with Comm.).
    \1322\ Id. at 7.
---------------------------------------------------------------------------
    The Subcommittee also spoke with several market 
participants that said Google has abused its control of the 
Play Store by using rule violations as a pretext for 
retaliatory conduct. For example, one third party described 
how, soon after it ceased using Google's AdMob, an in-app ads 
monetization tool,\1323\ Google began sending the third party 
notifications of policy violations related to content the third 
party had included in its app for years.\1324\
---------------------------------------------------------------------------
    \1323\ Google AdMob, Google, https://admob.google.com/home/ (last 
visited Oct. 4, 2020).
    \1324\ Submission from Source 685, to H. Comm. on the Judiciary (on 
file with Comm.).
---------------------------------------------------------------------------
    In response to questions from the Subcommittee, Google 
stated that it ``only suspends apps from the Google Play Store 
if it finds the app in violation of Google Play Program 
Policies . . . or in violation of the Developer Distribution 
Agreement.'' \1325\ Google also stated that it gives developers 
opportunities to address what they may view as incorrect 
enforcement decisions of Play Store policies, adding that a 
``developer can easily contact the Policy Support Team 
(Appeals) in order to challenge the enforcement decision or 
receive additional clarification on the infraction.'' \1326\
---------------------------------------------------------------------------
    \1325\ Innovation and Entrepreneurship Hearing at 478 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1326\ Id. at 479.
---------------------------------------------------------------------------
    App developers, in contrast, said that challenging a Play 
Store decision was like navigating a black box. One third party 
explained that it ``tried for over a month through several 
channels to get a full explanation from Google of the problem 
and resolve it amicably. Google responded with silence, then 
roadblocks and runarounds.'' \1327\ However, one third party 
told the Subcommittee:
---------------------------------------------------------------------------
    \1327\ Submission from Callsome, to H. Comm. on the Judiciary, 5 
(Apr. 28, 2020) (on file with Comm.).

     LWhen apps allegedly violate Google Play Store standards, 
Google does not ever explain how, other than to quote the 
policy above and attach pictures of the allegedly violating 
image. When the imagery does not fit the above definitions, app 
publishers such as [third party] are put in a position of 
having to guess how to apply these standards.\1328\
---------------------------------------------------------------------------
    \1328\ Submission from Source 685, to H. Comm. on the Judiciary, 12 
(Oct. 15, 2019) (on file with Comm.).

In theory, one way that app developers could avoid Google's 
commissions and fees would be to negotiate with a mobile device 
manufacturer to have the app pre-installed on the device. In 
practice, however, Google's restrictive contracts with 
smartphone manufacturers have strictly limited--if not 
excluded--third-party apps from being pre-installed. In this 
way, Google's licensing agreements not only preclude the vast 
majority of third-party apps from being pre-installed, but they 
also funnel those apps into the Google Play Store, subject to 
Google's commissions and arbitrarily enforced policies.
5. Chrome
    (a) Overview. Google launched its web browser, Google 
Chrome, in 2008.\1329\ Chrome makes a significant portion of 
its underlying code base available through the open-source 
Chromium Project,\1330\ which has been used to build a series 
of ``chromium-based'' browsers such as Microsoft Edge and 
Opera.\1331\ In 2010, Google introduced the Chrome web store, 
which enables users to access and install browser extensions, 
such as Easy Ad Blocker, Grammarly, and Netflix Party.\1332\
---------------------------------------------------------------------------
    \1329\ Google Chrome: A New Take on the Browser, Google Press 
(Sept. 2, 2008), http://googlepress.blogspot.com/2008/09/google-chrome-
new-take-on-browser_02.html.
    \1330\ Chromium, The Chromium Projects, https://www.chromium.org/
Home (last visited Oct. 4, 2020).
    \1331\ Catalin Cimpanu, All the Chromium-Based Browsers, ZDNet 
(Jan. 29, 2019), https://www.zdnet.com/pictures/all-the-chromium-based-
browsers/4/.
    \1332\ An Update on Chrome, the Web Store and Chrome OS, Chrome 
Blog (Dec. 7, 2010), https://chrome.googleblog.com/2010/12/update-on-
chrome-web-store-and-chrome.html.
---------------------------------------------------------------------------
    Prior to Chrome's launch, Internet Explorer, Firefox, and 
Safari were the most popular browsers. Firefox leaned heavily 
on a partnership with Google Search, which documents show 
enabled Google to closely track Firefox's growth.\1333\
---------------------------------------------------------------------------
    \1333\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00125917 to -00125929, GOOG-HJC-00125937 (Apr. 25, 2005) (on file 
with Comm.).
---------------------------------------------------------------------------
    Chrome initially set itself apart by offering an address 
bar that also functioned as a Google search bar, and by 
enabling users to sign in to the browser, offering a faster 
browsing experience compared to other browsers.\1334\ Chrome 
was also integrated with other Google products. By signing in 
to the browser, Chrome automatically signed users into Gmail, 
YouTube, and additional Google services when users visited 
those sites, while also allowing users to sync their bookmarks, 
passwords, and other browser settings.\1335\ While automatic 
sign-in provided a more streamlined user experience, it also 
helped Google build more detailed user profiles by connecting 
activity data to the user's Google Account.\1336\
---------------------------------------------------------------------------
    \1334\ Trefis Team, Great Speculations, Rising Chrome Use Means 
Search Advertising Growth for Google, Forbes (Aug. 23, 2012), https://
www.forbes.com/sites/greatspeculations/2012/08/23/rising-chrome-use-
means-search-advertising-growth-for-google/#579c604f2d66; MG Siegler, 
Here It Is: Google's Kick-Ass Chrome Speed Test Video, TechCrunch (May 
5, 2010), https://techcrunch.com/2010/05/05/google-chrome-video-test/.
    \1335\ Turn Sync On and Off in Chrome, Google Chrome Help, https://
support.google.com/chrome/answer/
185277?co=GENIE.Platform%3DDesktop&hl=en (last visited Oct. 4, 2020).
    \1336\ Google Privacy Policy, Google Priv. & Terms, https://
policies.google.com/privacy (last visited Oct. 4, 2020) (``When you're 
signed in, we also collect information that we store with your Google 
Account.'').
---------------------------------------------------------------------------
    In a 2019 presentation to the Justice Department's 
Antitrust Division, Google explained that it had launched 
Chrome as a defensive move to protect users' access to Google's 
products.\1337\ Internally, however, Google frequently referred 
to Chrome as part of Google's growth strategy. For example, in 
2010, one of Google's strategy documents listed Chrome as a 
driver of ``significant value,'' \1338\ and Eric Schmidt gave a 
company-wide speech stating that the rise of cloud computing 
meant that the browser--the primary way users access the 
cloud--would be increasingly critical to Google's 
success.\1339\
---------------------------------------------------------------------------
    \1337\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04214204 (Sept. 17, 2019) (on file with Comm.) (``Alternatives to 
IE (Firefox, Opera, Safari) proved unattractive[:] Google initially 
partnered with Mozilla, but Firefox had technical limitations and faced 
uncertain prospects[.] Apple launched Safari for Windows in 2007. If 
Firefox was displaced by Safari, Apple could further constrain user 
access to Google[.]'' (bullets and emphasis removed)).
    \1338\ Id. at GOOG-HJC-00005661.
    \1339\ Id. at GOOG-HJC-00086891 (Jan. 24, 2011).
---------------------------------------------------------------------------
    Perhaps most critically, Chrome serves as a way for Google 
to control the entry points for its core markets: online search 
and online advertising.\1340\ Chrome uses Google Search as its 
default search engine--a default setting that market 
participants say Google makes difficult to change.\1341\ Chrome 
also provides Google with another source of user data that the 
company can feed into its ad business to offer behavioral 
ads.\1342\
---------------------------------------------------------------------------
    \1340\ Competition & Mkts. Auth. Report at 18-19.
    \1341\ Submission from Source 534, to H. Comm. on the Judiciary, 3 
(Oct. 14, 2019) (on file with Comm.).
    \1342\ Google Privacy Policy, Google Priv. & Terms, https://
policies.google.com/privacy (last visited Sept. 29, 2020) (``We collect 
information to provide better services to all our users . . . which ads 
you'll find most useful . . . which YouTube videos you might like.''). 
At the Subcommittee's sixth hearing, Committee Chair Jerrold Nadler (D-
NY) asked Google CEO Sundar Pichai to explain how Google uses data on 
browsing activity, asking, ``Does Google use that data for its own 
purposes, either in advertising or to develop and refine its 
algorithms?'' Mr. Pichai responded that Google uses data ``to improve 
our products and services for our users.'' CEO Hearing at 73.

    (b) Market Power. Chrome became a leading web browser as 
early as 2012.\1343\ In the U.S. market, Chrome captures an 
estimated 59 percent of desktop browser usage and 37 percent of 
mobile browser usage,\1344\ while capturing an estimated 66 
percent of overall browser usage worldwide.\1345\
---------------------------------------------------------------------------
    \1343\ Id.; Trefis Team, Great Speculations, Rising Chrome Use 
Means Search Advertising Growth for Google, Forbes (Aug. 23, 2012), 
https://www.forbes.com/sites/greatspeculations/2012/08/23/rising-
chrome-use-means-search-advertising-growth-for-google/#579c604f2d66 
(observing that Google captured 67 percent of desktop searches across 
all browsers and 95 percent of searches conducted on Chrome, and noting 
that ``[t]his large discrepancy in search market share, depending on 
which browser is used, is one of the reasons why we think that the 
Chrome browser has helped increase Google's revenues'').
    \1344\ Desktop Browser Market Share in the United States, 
StatCounter, https://gs
.statcounter.com/browser-market-share/desktop/united-states-of-america 
(last visited Sept. 27, 2020); Mobile Browser Market Share in the 
United States, StatCounter, https://gs
.statcounter.com/browser-market-share/mobile/united-states-of-america 
(last visited Sept. 27, 2020).
    \1345\ Browser Market Share, StatCounter, https://
gs.statcounter.com/browser-market-share/all/united-states-of-america 
(last visited Sept. 27, 2020).
---------------------------------------------------------------------------
    Several factors suggest that Google is likely to maintain 
its lead in the browser market. First, Google has established 
Chrome as the default browser on the majority of Android 
devices, which make up around 75 percent of smartphones 
globally.\1346\ While Google does allow users to change default 
browsers on Android, in practice users rarely do. As the United 
Kingdom's Competition and Markets Authority recently found, 
even platforms that do provide users with options often end up 
using ``defaults and choice architecture that make it difficult 
for consumers to exercise this choice.'' \1347\
---------------------------------------------------------------------------
    \1346\ Mobile Operating Systems' Market Share Worldwide from 
January 2012 to July 2020, Statista (July 2020), https://
www.statista.com/statistics/272698/global-market-share-held-by-mobile-
operating-systems-since-2009/.
    \1347\ Competition & Mkts. Auth. Report at 149.
---------------------------------------------------------------------------
    Second, Chrome is likely to remain dominant because it 
benefits from network effects. Web developers design and build 
for the Chrome browser because it has the most users, and 
users, in turn, are drawn to Chrome because webpages work well 
on it. And third, Chrome is likely to maintain its lead because 
Google can leverage the popularity of its apps to favor Chrome. 
Specifically, Google's documents show that the company has 
focused on designing Chrome features to provide a better 
experience of apps like YouTube and Search, advantages that 
other browsers lack.
    (c) Conduct. Google used its search engine dominance and 
control over the Android operating system to grow its share of 
the web browser market and favor its other lines of business. 
Reciprocally, Chrome's dominance in the browser market gives it 
significant gatekeeper power over managing and monitoring 
users' browsing activity--power Google can wield to shape 
outcomes across markets for search, mobile operating systems, 
and digital advertising. These advantages across markets feed 
back into and reinforce one another--advantages that standalone 
browsers lack.

    (i) Exploiting Information Asymmetries. Even before it 
developed Chrome, Google's search business and popular web-
based applications gave it unique insights into the browser 
market. Because Google.com is accessible through all browsers, 
Google Search usage data includes data on the browser where the 
search query began. Documents show that Google used search 
origination trends as early as 2004 to track Firefox's growth--
and Internet Explorer's decline--in the browser market.\1348\ 
Google's collection of Google Apps has also enabled it to 
monitor browser growth and performance. For example, in 2009, a 
Chrome team member explained:
---------------------------------------------------------------------------
    \1348\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-00126978 to -00126985 (Nov. 2004) (on file with Comm.).

     LI've looked at the Gmail numbers a little--enough to know 
that we have per-browser breakdowns of performance already. In 
the Gmail case, it's quite clear which browsers are faster. 
There are a zillion numbers we collect, including Gmail startup 
times. I am confident that the other Google Apps teams also 
have numbers. We could pull together a collection of 2-3 stats 
from each app, normalize the scores somehow, and produce a 
number.\1349\
---------------------------------------------------------------------------
    \1349\ Id. at GOOG-HJC-04214714 (Jan. 4, 2009) (on file with 
Comm.).

This data from Google's adjacent lines of business helped the 
Chrome team track their performance against competitors. Most 
of Chrome's competitors then and now lack access to this type 
---------------------------------------------------------------------------
of data at Google's scale.

    (ii) Favoring Google's Products in Adjacent Markets. 
Through design choices and default settings, Google can use its 
dominance in any one market to favor its other lines of 
business. For example, when Chrome launched in 2008, Google 
Search was already the most popular search engine in the 
world.\1350\ Shortly after releasing Chrome, Google began 
promoting the browser in the top corner of the Google.com 
homepage. The display was referred to internally as the 
``Google Chrome Promotion,'' and it was frequently discussed by 
Google's Chrome team within the company.\1351\ Internet 
Explorer users that visited Google's home page would see the 
Google Chrome installation button in the top-right corner, as 
shown below:
---------------------------------------------------------------------------
    \1350\ Danny Sullivan, Search Market Share 2008: Google Grew, Yahoo 
& Microsoft Dropped & Stabilized, Search Engine Land (Jan. 26, 2009), 
https://searchengineland.com/search-market-share-2008-google-grew-
yahoo-microsoft-dropped-stabilized-16310.
    \1351\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01465906 (Apr. 22, 2009) (on file with Comm.) (``We've been 
experimenting with some novel homepage promos for Chrome in preparation 
for the IE8 autoupgrade [sic]. Using 0.1% experiments, we found a few 
that performed very well. The promo on the homepage right now should be 
running for IE users only.''); id. at GOOG-HJC-01164689 (Apr. 23, 
2009).

     Google Chrome Promotion on Google.com Homepage \1352\
---------------------------------------------------------------------------

    \1352\ Christopher Williams, Google Chrome Takes Second Place from 
Firefox, Telegraph (Dec. 2, 2011), https://www.telegraph.co.uk/
technology/news/8930759/Google-Chrome-takes-second-place-from-
Firefox.html.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    At the time, several Google employees expressed concerns 
internally that this promotion strategy was unfairly harnessing 
Google's search dominance to boost Chrome. In an email among 
Chrome employees in 2009, one employee wrote, ``I find the 
very, very high-profile promotion of Google Chrome on 
Google.com quite frankly, startling.'' \1353\ Senior executives 
at the company pushed to continue this strategy. For example, 
in 2009, Sundar Pichai, then-Vice President of Product 
Development, encouraged the Chrome team to ``promote through 
Google.com'' and to push users to set Chrome as their default 
browser.\1354\
---------------------------------------------------------------------------
    \1353\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-01465903 (Apr. 22, 2009) (on file with Comm.).
    \1354\ Id. at GOOG-HJC-04214743 (Apr. 3, 2009).
---------------------------------------------------------------------------
    This strategy drove significant growth to Chrome. In 2009, 
Director of Product Management Brian Rakowski informed his team 
that the promotion was ``performing exceptionally well'' and 
was ``driving tremendous number[s] of downloads.'' \1355\ When 
Google halted the promotion, Chrome's growth rate dropped. In 
2011, Chrome employees noted that ``organic growth slowed a bit 
because our homepage promo was down for a couple of weeks.'' 
\1356\
---------------------------------------------------------------------------
    \1355\ Id. at GOOG-HJC-01465906 (Apr. 22, 2009).
    \1356\ Id. at GOOG-HJC-04195391 (Mar. 4, 2011) (``[O]rganic growth 
slowed a bit because our homepage promo was down for a couple of weeks 
due to a change in the HPP system. It's back up now.'').
---------------------------------------------------------------------------
    Market participants view this behavior as an example of how 
Chrome does not compete on the merits. One firm stated, 
``Google has abused its dominant position in the search space 
to build up another dominant position in the browser space.'' 
\1357\ In response to questions about this use of Google's 
search page, Google told the Subcommittee that these 
``promotional campaigns on Google.com on Internet Explorer have 
been run for over a decade.'' \1358\
---------------------------------------------------------------------------
    \1357\ Submission from Source 534, to H. Comm. on the Judiciary, 2 
(Oct. 14, 2019) (on file with Comm.).
    \1358\ CEO Hearing at 348 (response to Questions for the Record by 
Sundar Pichai, CEO, Alphabet, Inc.).
---------------------------------------------------------------------------
    Google has reinforced its market power in the browser 
market through its dominance in the mobile operating system 
market. Chrome is preinstalled on every mobile device that runs 
Google's Android operating system, and Android powers 
approximately 75 percent of the world's mobile devices. 
Beginning in 2014, Google mandated that Chrome be pre-installed 
and prominently placed on all certified Android devices that 
had entered a Mobile Application Distribution Agreement (MADA), 
which grants smartphone manufacturers access to Google's Play 
Store and other proprietary Google applications.\1359\ During 
negotiations with Android manufacturers for revenue share 
agreements, meanwhile, Google required that Chrome be set as 
the default browser.\1360\
---------------------------------------------------------------------------
    \1359\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-02393308 (Mar. 1, 2011) (on file with Comm.).
    \1360\ See generally Press Release, Eur. Comm'n, Antitrust: 
Commission Fines Google =14.34 Billion for Illegal Practices Regarding 
Android Mobile Devices to Strengthen Dominance of Google's Search 
Engine (July 17, 2018), https://europa.eu/rapid/press-release_IP-18-
4581_en.htm.
---------------------------------------------------------------------------
    For the remaining portion of the global mobile phone 
market--Apple iOS--Google uses the popularity of its mobile 
applications to promote Chrome installations. Although Apple 
does not permit Chrome to be set as the default browser on an 
iPhone, Google provides users the option to use Chrome whenever 
a user selects a link within a Google application, such as 
Gmail or YouTube.\1361\
---------------------------------------------------------------------------
    \1361\ Submission from Source 269, to H. Comm. on the Judiciary, 3 
(July 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    While Apple requires that Safari also be included as a 
choice,\1362\ Google does not allow any other browser to be 
listed. If the user has not previously installed the Chrome 
browser, then the menu displays a ``Get'' button that prompts 
the user to install Google's browser.\1363\
---------------------------------------------------------------------------
    \1362\ Id.
    \1363\ Id.
---------------------------------------------------------------------------
    Similarly, Google privileges its own line of business by 
setting Google Search as the default in Chrome. Although users 
can change this setting, the process is not intuitive and 
involves multiple steps, including:

     L1. At the top right, click More :> Settings.
     L2. Under ``Search engine,'' click Manage search engines.
     L3. Find ``Other search engines.''
        LAdd: To the right of ``Other search engines,'' 
click Add. Fill out the text fields and click Add.
        LSet as default: To the right of the search 
engine, click More :> Make default.
        LEdit: To the right of the search engine, click 
More :> Edit.
        LDelete: To the right of the search engine, 
click More :> Remove from list.\1364\
---------------------------------------------------------------------------
    \1364\ Set Your Default Search Engine, Google Chrome Help, https://
support.google.com/chrome/answer/
95426?co=GENIE.Platform%3DDesktop&hl=en (last visited Oct. 2, 2020).

One third party told the Subcommittee that, in some cases, 
Google prompts users to change their default search engine back 
---------------------------------------------------------------------------
to Google Search even after they have switched:

     LAfter a user installs the extension, Chrome is showing 
continuous warning prompts which ask users to restore their 
search settings back to Google. In user tests, we observe that 
most people are very confused about this prompt and often click 
``restore settings'' even though they actually want to keep 
using [our search engine]. In many Chrome versions the button 
``restore settings'' is even highlighted which makes it highly 
likely that users will click this button and thereby completely 
remove [our search engine] from their computers. We believe 
that we have already lost millions of users because of this 
prompt.\1365\
---------------------------------------------------------------------------
    \1365\ Submission from Source 534, to H. Comm. on the Judiciary, 3 
(Oct. 14, 2019) (on file with Comm.).

    (iii) Unilaterally Setting Standards. By virtue of its 
dominance in the browser market, Google can effectively set 
standards for the industry in two ways.
    First, changes to Chrome's functionality create de facto 
standards. Market participants must adhere to these standards 
or risk their technology no longer being compatible with most 
websites. Market participants explain that Google will often 
build features quickly, without using the standard-setting 
process or giving smaller browsers time to implement the new 
features. Once web developers start building to these 
specifications, however, smaller browsers are under pressure to 
quickly implement these changes, often with little 
notice.\1366\ If smaller browsers cannot keep up, users are 
flooded with ``[b]rowser not supported'' messages on webpages 
that have already been built to Chrome's specifications.\1367\ 
Several market participants told the Subcommittee that they 
felt ``bullied'' by this process.\1368\
---------------------------------------------------------------------------
    \1366\ Submission from Source 269, to H. Comm. on the Judiciary 
(Jan. 2020) (on file with Comm.).
    \1367\ Martin Brinkmann, The New Skype for Web Does Not Work in 
Firefox or Opera, ghacks.net (Mar. 8, 2019), https://www.ghacks.net/
2019/03/08/the-new-skype-for-web-does-not-work-in-firefox-or-opera/.
    \1368\ Interview with Source 482 (July 2, 2020).
---------------------------------------------------------------------------
    Second, Google has an outsized role in the formal 
stakeholder standards-making processes. As explained earlier in 
this Report, the World Wide Web Consortium (W3C) is one of the 
leading standards organizations in the browser market. Its 
stated mission is to be ``open and collectively empowering.'' 
\1369\ Other market participants believe that Google is 
significantly overrepresented in the W3C web platform incubator 
community group (WICG). They note that Google's employees 
comprise 106 members--more than eight times the number of 
employees from Microsoft, the next largest stakeholder 
represented. Most companies, meanwhile, have only one 
representative.\1370\ One market participant explained that, 
although standards bodies like the W3C give the impression of 
being a place where browser vendors collaborate to improve the 
web platform; in reality, Google's monopoly position and 
aggressive rate of shipping non-standard features frequently 
reduce standards bodies to codifying web features and decisions 
Google has already made.\1371\
---------------------------------------------------------------------------
    \1369\ W3C Mission, W3C, https://www.w3.org/Consortium/mission 
(last visited Oct. 4, 2020).
    \1370\ Submission from Source 269, to H. Comm. on the Judiciary, 4 
(July 23, 2019) (on file with Comm.).
    \1371\ Id.
---------------------------------------------------------------------------
    Recent events underscore how Google's ad-based business 
model can prompt questions about whether the standards Google 
chooses to introduce are ultimately designed primarily to serve 
Google's interests. In January 2020, Google announced that it 
plans to phase out third-party cookies in Chrome within two 
years.\1372\ Unlike other browsers that have limited cross-site 
tracking, Google's decision appears to be motivated by ``trying 
to cut down on tracking without kneecapping revenue for 
websites.'' \1373\
---------------------------------------------------------------------------
    \1372\ Sarah Sluis, Google Chrome Will Drop Third-Party Cookies in 
2 Years, Ad Exchanger (Jan. 14, 2020), https://www.adexchanger.com/
online-advertising/google-chrome-will-drop-third-party-cookies-in-2-
years/.
    \1373\ Dieter Bohn, Google to ``Phase Out'' Third-Party Cookies in 
Chrome, but Not for Two Years, Verge (Jan. 14, 2020), https://
www.theverge.com/2020/1/14/21064698/google-third-party-cookies-chrome-
two-years-privacy-safari-firefox.
---------------------------------------------------------------------------
    Several observers have noted that this change would have 
the likely effect of reinforcing Google's power and harming 
rivals, shifting more advertisers toward Google.\1374\ In 
particular, market participants are concerned that, while 
Google phases out third-party cookies needed by other digital 
advertising companies, Google can still rely on data collected 
throughout its ecosystem.
---------------------------------------------------------------------------
    \1374\ Nick Bastone, In Ironic Twist, Google's Pro-Privacy Move 
Boosted U.S. Antitrust Probe, Information (Sept. 18, 2020), https://
www.theinformation.com/articles/in-ironic-twist-googles-pro-privacy-
move-boosted-u-s-antitrust-probe.
---------------------------------------------------------------------------
    During the Subcommittee's sixth hearing, Representative 
Kelly Armstrong (R-ND) asked Mr. Pichai, ``[D]o you have other 
ways of collecting it [data] through Gmail or consumer facing 
platforms?'' \1375\ Mr. Pichai responded, ``[T]o the extent on 
the services where we provide ads and if users have consented 
to ads personalization, yes, we do have data.'' \1376\
---------------------------------------------------------------------------
    \1375\ CEO Hearing at 133 (question of Rep. Kelly Armstrong (R-ND), 
Member, Subcomm. on Antitrust, Commercial & Admin. Law of the H. Comm 
on the Judiciary).
    \1376\ Id. (statement of Sundar Pichai, CEO, Alphabet, Inc.).
---------------------------------------------------------------------------
6. Maps
    (a) Overview. Google dominates the market for digital maps 
with over a billion users.\1377\ Between Google Maps and Waze--
which Google also owns--the corporation captures an estimated 
80 percent of the navigation app market.\1378\ Financial 
analysts have described navigation maps as a ``utility'' that 
people cannot do without,\1379\ and one bank estimated that if 
Google Maps were a standalone product, its market 
capitalization would hit $61.5 billion.\1380\
---------------------------------------------------------------------------
    \1377\ Ethan Russell, 9 Things to Know About Google's Maps Data: 
Beyond the Map, Google Cloud (Sept. 30, 2019), https://
cloud.google.com/blog/products/maps-platform/9-things-know-about-
googles-maps-data-beyond-map.
    \1378\ Royal Bank of Canada Report at 5.
    \1379\ Id.
    \1380\ Ross Sandler, Barclays, Alphabet Inc.: Steady Compounder, 
With Plenty of Innovation Ahead 20 (Mar. 28, 2017) (on file with 
Comm.).
---------------------------------------------------------------------------
    Google Maps can be traced to a series of acquisitions. In 
September 2003, Google Labs launched ``Search by Location,'' a 
feature that sought to filter search results based on a user's 
geographic location.\1381\ Because Google lacked mapping data, 
however, the feature stalled.\1382\ In October 2004, a few 
months after Google's IPO, Google acquired Where 2 
Technologies, an Australian startup that created web-based 
dynamic maps.\1383\ Google soon followed this acquisition with 
two additional purchases: Keyhole, a firm that used satellite 
images and aerial photos to create digital-mapping software; 
and ZipDash, a provider of real-time traffic information 
captured through GPS.\1384\ In February 2005, Google launched 
Google Maps.\1385\
---------------------------------------------------------------------------
    \1381\ Scarlett Pruitt, Google Test Drives New Search Tool, PC 
World (Sept. 23, 2003), https://www.pcworld.com/article/112604/
article.html.
    \1382\ Google Maps, Acquired (Aug. 26, 2019), https://
www.acquired.fm/episodes/google-maps.
    \1383\ Id.
    \1384\ Google Acquires Keyhole, Wall St. J.: News Roundup (Oct. 27, 
2004), https://www.wsj.com/articles/SB109888284313557107; Michael 
Bazeley, Google Acquires Traffic Info Start-up ZipDash, VentureBeat 
(Mar. 30, 2005), https://venturebeat.com/2005/03/30/google-acquires-
traffic-info-start-up-zipdash/.
    \1385\ Elizabeth Reid, A Look Back at 15 Years of Mapping the 
World, Google: The Keyword (Feb. 6, 2020), https://blog.google/
products/maps/look-back-15-years-mapping-world/.
---------------------------------------------------------------------------
    The following year, Google introduced Google Maps API, 
which enabled developers to use and build on top of its digital 
maps.\1386\ In 2008, it launched ``Ground Truth,'' a project 
devoted to assembling and refining underlying mapping data and 
images.\1387\ This effort included Google Street View Cars, 
which drove around the country--and, eventually, the world--
taking pictures of the surrounding buildings and landscapes, 
and delivering Google structured data that it could use to 
create digital maps.\1388\ As part of Project Ground Truth, 
Google also obtained mapping information from satellite and 
aerial imagery, as well as from public databases.\1389\
---------------------------------------------------------------------------
    \1386\ Id.
    \1387\ Frederic Lardinois, Google's Ground Truth Initiative for 
Building More Accurate Maps Now Covers 50 Countries, TechCrunch (Sept. 
3, 2014), https://techcrunch.com/2014/09/03/googles-ground-truth-
initiative-for-building-more-accurate-maps-now-covers-50-countries/.
    \1388\ Greg Miller, The Huge, Unseen Operation Behind the Accuracy 
of Google Maps, Wired (Dec. 8, 2014), https://www.wired.com/2014/12/
google-maps-ground-truth/ (``As of December 2014, Google's `Street View 
cars ha[d] driven over 7 million miles, including 99 percent of the 
public roads in the U.S.' '').
    \1389\ Id.
---------------------------------------------------------------------------
    A 2008 budget request for Ground Truth stated that the goal 
of the project was ``long term independence from Tele Atlas and 
Navteq,'' two sources of mapping data that Google had been 
using at the time and that were owned by TomTom and Nokia, 
respectively.\1390\ The presentation stated that achieving 
independence would take several years and requested a five-to-
seven-year renewal of the Tele Atlas contract to help Google 
bridge ``between now and completion of Google Truth 
initiatives.'' \1391\ Although Google Maps was not generating 
revenues, Google was investing in it heavily. Google's 
documents show that, from 2008 to 2009, the company spent $32 
million on the Street View program and $88.7 million on Ground 
Truth overall.\1392\ When Google launched Google Maps in 2005, 
MapQuest had been the ``king of Internet-based maps and driving 
directions,'' with Yahoo gearing up to heavily compete.\1393\ 
By 2008, Google's internal documents show that Google was ``#1 
in Maps usage'' as well as at the top in capturing online local 
search.\1394\
---------------------------------------------------------------------------
    \1390\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-03386002 (Dec. 6, 2007) (on file with Comm.).
    \1391\ Id.
    \1392\ Id. at GOOG-HJC-04211018 (Oct. 17, 2010).
    \1393\ Chris Gaither, Overtaking MapQuest a Challenge for Yahoo, 
L.A. Times (Jan. 10, 2005), https://www.latimes.com/archives/la-xpm-
2005-jan-10-fi-maps10-story.html.
    \1394\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-03610422 (Oct. 28, 2008) (on file with Comm.).
---------------------------------------------------------------------------
    In 2009, Google introduced Google Maps for Mobile, a 
navigation service featuring turn-by-turn directions, live 
traffic updates, and automatic rerouting.\1395\ Whereas market 
leaders TomTom and Garmin sold navigation services through 
subscriptions, Google was offering its service for free 
\1396\--a fact widely seen as disfavoring the incumbents, whose 
stock prices fell upon Google's announcement.\1397\ As one 
analyst noted at the time, ``If it's free and a good service, 
why would you pay for something you can get for free?'' \1398\
---------------------------------------------------------------------------
    \1395\ Announcing Google Maps Navigation for Android 2.0, Google: 
Off. Blog (Oct. 28, 2009), https://googleblog.blogspot.com/2009/10/
announcing-google-maps-navigation-for.html.
    \1396\ Jenna Wortham & Miguel Helft, Hurting Rivals, Google Unveils 
Free Phone GPS, N.Y. Times (Oct. 28, 2009), https://www.nytimes.com/
2009/10/29/technology/companies/29gps .html.
    \1397\ Arik Hesseldahl, Garmin, TomTom Slash Prices Amid Google 
Threat, Bloomberg (Dec. 8, 2009), https://www.bloomberg.com/news/
articles/2009-12-08/garmin-tomtom-slash-prices-amid-google-threat 
(stating that upon Google's announcement, Garmin stock dropped around 
16 percent and TomTom stock fell by around 29 percent).
    \1398\ Jenna Wortham & Miguel Helft, Hurting Rivals, Google Unveils 
Free Phone GPS, N.Y. Times (Oct. 28, 2009), https://www.nytimes.com/
2009/10/29/technology/companies/29gps .html (internal quotation marks 
omitted).
---------------------------------------------------------------------------
    As smartphones overtook personal navigation devices, Google 
Maps further eclipsed TomTom and Garmin.\1399\ When asked in 
2015 what had accounted for TomTom's decline, its CEO cited two 
factors: the 2008 economic crisis and the fact that ``Google 
began offering navigation for free.'' \1400\
---------------------------------------------------------------------------
    \1399\ Kevin J. O'Brien, Smartphone Sales Taking Toll on G.P.S. 
Devices, N.Y. Times (Nov. 14, 2010), https://www.nytimes.com/2010/11/
15/technology/15iht-navigate.html.
    \1400\ Charles Arthur, Navigating Decline: What Happened to 
TomTom?, Guardian (July 21, 2015), https://www.theguardian.com/
business/2015/jul/21/navigating-decline-what-happened-to-tomtom-satnav.
---------------------------------------------------------------------------
    Some market participants at the time questioned whether 
Google was using its search dominance to give Google Maps a 
boost. In 2009, one publisher noted that ``61% of visits to 
Google Maps came directly from Google,'' giving it an advantage 
over MapQuest.\1401\ The publisher wrote, ``As long as Google 
dominates search, MapQuest will face a tough battle for 
visits.'' \1402\ A few years later, Consumer Watchdog wrote a 
letter to the Antitrust Division noting that Google ``was able 
to muscle its way to dominance by unfairly favoring its own 
service ahead of such competitors as Mapquest in its online 
search results.'' \1403\
---------------------------------------------------------------------------
    \1401\ Experian Mktg. Servs., Google Maps Edges Closer to Mapquest, 
Experian Blog (Feb. 11, 2009), http://www.experian.com/blogs/marketing-
forward/2009/02/11/google-maps-edges-
closer-to-mapquest/.
    \1402\ Id.
    \1403\ Letter from John M. Simpson, Priv. Project Dir., Consumer 
Watchdog, to William J. Baer, U.S. Dep't of Justice, Assistant Att'y 
Gen., Antitrust Div. (June 12, 2013), https://www
.consumerwatchdog.org/resources/cltrdojwaze061213.pdf.
---------------------------------------------------------------------------
    In 2013, Google purchased Waze, an Israeli crowd-sourced 
mapping provider, for $1.3 billion.\1404\ The acquisition 
solidified Google's dominance in turn-by-turn navigation, 
eliminating its only meaningful competitive threat.
---------------------------------------------------------------------------
    \1404\ Brian McClendon, Google Maps and Waze, Outsmarting Traffic 
Together, Google Blog (June 11, 2013), https://googleblog.blogspot.com/
2013/06/google-maps-and-waze-outsmarting
.html; Vindu Goel, Google Expands Its Boundaries, Buying Waze for $1 
Billion, N.Y. Times (June 11, 2013), https://bits.blogs.nytimes.com/
2013/06/11/google-expands-its-boundaries-
buying-waze-for-1-billion/.
---------------------------------------------------------------------------
    While Google captured the navigation market by offering 
Google Maps for free, even as it generated no revenue, Google 
now monetizes both Waze and Google Maps through selling ads. In 
2013, Google introduced a limited form of maps advertising, and 
in recent years, it has expanded the program, allowing local 
businesses to purchase advertising on maps to maximize foot 
traffic.\1405\ Research by Google shows that 76 percent of 
users who search for locations nearby end up visiting a related 
business within a day and that 28 percent of those searches 
ultimately lead to a purchase.\1406\ This high conversion rate 
leads analysts to believe that Google Maps alone could help 
drive between $1.9 billion and $3.7 billion of incremental 
revenue by 2021.\1407\ Commenting on the value of Google Maps 
to the Google ecosystem, one analyst noted:
---------------------------------------------------------------------------
    \1405\ Royal Bank of Canada Report at 10-11.
    \1406\ How Mobile Search Connects Users to Stores, Think With 
Google (May 2016), https://www.thinkwithgoogle.com/marketing-
strategies/app-and-mobile/mobile-search-trends-consumers
-to-stores/.
    \1407\ See, e.g., Royal Bank of Canada Report at 20.

     L[Google Maps'] user base has been impressive for years, 
crossing 1B a few years ago, but monetization is just getting 
started . . . . Maps is the closest thing to a platform that 
Google has at the application layer, with three stakeholders in 
the ecosystem: (1) users; (2) publishers; and (3) advertisers. 
The importance of Maps to mobile, including both the 
advertising and transportation-on-demand spaces, is one of the 
biggest potential markets Google is servicing in the 
future.\1408\
---------------------------------------------------------------------------
    \1408\ Ross Sandler, Barclays, Alphabet, Inc.: Steady Compounder, 
With Plenty of Innovation Ahead 20 (Mar. 28, 2017) (on file with 
Comm.).

    (b) Market Power. Google Maps is the dominant provider of 
mapping data and turn-by-turn navigation services. The company 
declined to provide the Committee with information about the 
market share captured by Google Maps.\1409\ According to a 
third-party estimate, however, Google Maps combined with Waze 
captures 81 percent of the market for turn-by-turn navigation 
services.\1410\ One market participant, meanwhile, estimated 
that Google Maps' API captures over 90 percent of the business-
to-business market.\1411\
---------------------------------------------------------------------------
    \1409\ Submission from Google, to H. Comm. on the Judiciary, A-4 
(Nov. 22, 2019) (on file with Comm.) (``Google Maps has a number of 
features, including maps, turn-by-turn navigation and directions, 
Street View, and information on local businesses (such as restaurants 
and services) and travel destinations (such as hotels and tourist 
spots) that are also offered by competitors. These competitors include 
Apple Maps, Bing Maps, TomTom, Yelp, TripAdvisor, Angie's List, and 
Facebook . . . . All of these competitors are widely used, with some 
having a strong presence on key platforms: for example, one report from 
2015 estimated that iPhone users use Apple Maps three times more than 
Google Maps. However, we are not aware of any public market share 
estimates that reflect the frequency of multi-homing among users or 
that account for competitors like TripAdvisor, OpenTable, Yelp, or 
directory apps such as Yellow Pages that overlap with many of the 
features of Google Maps, which would reflect the full range of robust 
competition in maps that drives Google to continually invest and 
innovate in the Google Maps product.'').
    \1410\ Royal Bank of Canada Report at 4.
    \1411\ Submission from Source 564, to H. Comm. on the Judiciary, 2 
(Nov. 13, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Several developers stated that Google Maps introduced 
greater licensing restrictions as it gained a stronger market 
position. One noted that Google's control over what now serves 
as a key mapping technology has allowed Google to call all the 
shots.\1412\ ``We license Google Maps and it's essentially a 
contract of adhesion. It's full of restrictions and we aren't 
able to negotiate any changes,'' the developer said.\1413\ The 
developer added that they have explored switching to 
alternative mapping providers, but that no other provider has 
the same geographic depth and coverage as Google Maps. ``Other 
providers still value us and want to know how they can 
accommodate us,'' they said. ``With Google, we just have to 
comply with all their restrictions.'' \1414\
---------------------------------------------------------------------------
    \1412\ Interview with Source 703 (June 22, 2020).
    \1413\ Id.
    \1414\ Id.
---------------------------------------------------------------------------
    Several factors suggest that Google Maps is well-positioned 
to maintain its dominance. The high fixed costs of creating 
mapping data pose a significant barrier to entry. Apple, which 
recently built its mapping database from the ground up, told 
the Subcommittee that the effort required billions of 
dollars.\1415\ Google, moreover, also benefits from an enormous 
lead in the tracking and processing of location data, as well 
as from the prevalence of tracking-enabled Android 
devices.\1416\ Commenting on its monetization potential, an 
analyst recently wrote that Google Maps has ``reasonably 
sustainable moats.'' \1417\
---------------------------------------------------------------------------
    \1415\ Innovation and Entrepreneurship Hearing at 589 (response to 
Questions for the Record from Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
    \1416\ Royal Bank of Canada Report at 10-11.
    \1417\ Id. at 1.
---------------------------------------------------------------------------
    Certain businesses have made public disclosures about their 
reliance on Google Maps. For example, in 2019, Uber disclosed 
that it relies on Google Maps for ``the mapping function that 
is critical to the functionality'' of its platform.\1418\ It 
added, ``We do not believe that an alternative mapping solution 
exists that can provide the global functionality that we 
require to offer our platform in all of the markets in which we 
operate.'' \1419\ Uber disclosed that between January 1, 2016 
and December 31, 2018, the company paid Google $58 million for 
use of Google Maps.\1420\
---------------------------------------------------------------------------
    \1418\ Uber Techs., Inc., Registration Statement (Form S-1) 46 
(Apr. 11, 2019), https://www.sec.gov/Archives/edgar/data/1543151/
000119312519103850/d647752ds1.htm.
    \1419\ Id. It is unclear whether Uber pays Google for the 
underlying maps data or for the place search function, both of which 
are part of ``Google Maps Core Services.''
    \1420\ Id. at 254.
---------------------------------------------------------------------------
    In a submission to the Subcommittee, one market participant 
who uses Google Maps to power its reservation system, website, 
and mobile app, stated that there are no alternatives to using 
Google Maps. It wrote, ``Local businesses are most likely to 
use Google's tools to index their websites because Google 
controls the search engine space, which has the ability to 
deliver--or restrict--whether these websites appear in 
corresponding links in consumer search results.'' \1421\ The 
market participant added that this dependence reinforces 
Google's market power, as it ``provides Google with another 
opportunity to monetize companies' supply chains and leverage 
its pricing power over companies that need to promote their 
businesses and/or purchase ad space to grow.'' \1422\ This 
business predicted that ``the data advantages that Google 
incorporates into its tools will only grow with time, making it 
impossible for a new player to ever achieve the scale, user 
base, or database necessary to compete.'' \1423\
---------------------------------------------------------------------------
    \1421\ Submission from Source 333, to H. Comm. on the Judiciary, 5 
(Oct. 21, 2019) (on file with Comm.).
    \1422\ Id.
    \1423\ Id.

    (c) Merger Activity. Google has made several acquisitions 
related to digital mapping: Where2Technologies (2004); Keyhole 
(2004); Skybox (2011); and Waze (2013). Of these acquisitions, 
only Waze--for which Google paid $1.1 billion--was subject to 
an antitrust investigation. Although Google did not originally 
report the Waze transaction, both the Federal Trade Commission 
(FTC) and the United Kingdom's Office of Fair Trading (OFT) 
reviewed the deal.\1424\ Both enforcers initially approved the 
transaction but have since revisited the decision. In 2019, the 
OFT commissioned a study reviewing its past merger cases, 
including Google/Waze, and the FTC is reportedly examining the 
Waze deal as part of its broader review of previous tech 
mergers.\1425\
---------------------------------------------------------------------------
    \1424\ Mark Bergen & Ben Brody, Google's Waze Deal Is a Likely 
Target in FTC Antitrust Sweep, Bloomberg (Feb. 14, 2020), https://
www.bloomberg.com/news/articles/2020-02-14/google-s-waze-deal-is-a-
likely-target-in-new-ftc-antitrust-sweep.
    \1425\ Id.
---------------------------------------------------------------------------
    Materials that the FTC produced to the Subcommittee suggest 
that the Commission's analysis of the Google/Waze deal was 
limited. A document from the FTC shows that the agency focused 
on assessing the quality of Waze's data and concluded that its 
maps were ``not a Google maps replacement.'' \1426\ It is 
unclear if or how closely the agency considered that Google was 
acquiring Waze not for its mapping features (which Google's own 
documents had suggested were inferior to Google's), but in 
order to eliminate an independent source of mapping data.\1427\
---------------------------------------------------------------------------
    \1426\ Id.
    \1427\ Id.
---------------------------------------------------------------------------
    In acquiring Waze, Google bought out one of the few 
companies in the world making navigable maps while also 
providing turn-by-turn navigation service.\1428\ Founded in 
Israel, Waze had entered the U.S. market by initially relying 
on public domain data, which it refined through input from 
drivers.\1429\ Waze's model has relied on user-generated maps, 
whereby drivers using Waze's app feed real-time data back into 
the app, and volunteer ``editors'' proactively fine-tune the 
maps by fixing street names, adding businesses, and making 
other updates. Waze's documents reveal that, through 2012, the 
firm had prioritized achieving growth and attracting users over 
earning revenue, although it had begun to monetize its 
navigation app through location-based advertising.\1430\
---------------------------------------------------------------------------
    \1428\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04208423 (June 2013) (on file with Comm.).
    \1429\ Id. at GOOG-HJC-04211080 (July 24, 2013) (citing the U.S. 
Census Bureau's TIGER mapping data as one source).
    \1430\ Id. at GOOG-HJC-04208066 (June 2013) (Waze was ``earning 
$250k in revenue in January 2013 and less than $1 million in revenue in 
2012'').
---------------------------------------------------------------------------
    Internal Waze presentations stated that its crowd-sourced 
data was one of the company's defining features. One 
presentation stated, ``The DNA of the company is of a social 
network, and user generated, we are merely the stage, and not 
the performers.'' \1431\ In a 2013 document, Waze identified 
its two main competitive advantages: first, the fact that Waze 
was a real-time map with fresh data, accounting for updates 
such as car accidents and road closures; and, second, that its 
business involved ``zero cost.'' \1432\
---------------------------------------------------------------------------
    \1431\ Id. at GOOG-HJC-04208423.
    \1432\ Id.
---------------------------------------------------------------------------
    Google's documents reveal that, by 2012, Google Maps was 
the top provider of digital maps in desktop, mobile, and 
API,\1433\ and it was closely tracking Waze's fast growth. One 
Google presentation in 2012 noted that Waze was the most-
downloaded app in the navigation category, and that it was 
seeing a 30 percent increase in daily downloads and averaging 
around 100,000 downloads a day.\1434\ Google also honed in on 
the fact that Waze was the only other mapping provider that was 
vertically integrated across the full stack, spanning the 
provider, application, map, traffic, and search layers.\1435\
---------------------------------------------------------------------------
    \1433\ Id. at GOOG-HJC-04208281 (May 2012).
    \1434\ Id. at GOOG-HJC-04208072 (Nov. 2012).
    \1435\ Id. at GOOG-HJC-04209632.
---------------------------------------------------------------------------
    In an internal presentation, Google identified several 
strategic rationales for acquiring Waze.\1436\ These included 
obtaining a ``highly-engaged community of map contributors and 
expertise'' in order to ``nurture/grow communities,'' which 
Google said it struggled with; achieving a ``scalable 
solution'' for maintaining a fresh map with ``real-time 
incident data''; using Waze as a ``sandbox'' to ``test map/
navigation features''; and acquiring a ``highly-talented team'' 
with ``deep experience in maps.'' \1437\ Google also ranked 
Waze poorly on several metrics, including the accuracy of its 
results in smaller cities and its limited map search 
capabilities.\1438\ Commenting on Waze's mapping tiles, Google 
wrote, ``[D]ata is missing and rendering is overly simple and 
missing detail.'' \1439\ Meanwhile, Google described Waze's 
future financial projections as ``highly speculative,'' \1440\ 
and noted that its purchase price of just under $1 billion was 
``expensive for a company with <$1 million in 2012 revenue.'' 
\1441\
---------------------------------------------------------------------------
    \1436\ Id. at GOOG-HJC-04208127 (May 2013).
    \1437\ Id.
    \1438\ Id. at GOOG-HJC-04208140.
    \1439\ Id.
    \1440\ Id. at GOOG-HJC-04213996 (June 2013).
    \1441\ Id. at GOOG-HJC-04208047.
---------------------------------------------------------------------------
    In its correspondence with the FTC, Google stated that 
``there is no shortage of full-featured navigation alternatives 
for users,'' which it said reflected the ``low (and continually 
decreasing) barriers to entry.'' \1442\ Google emphasized 
Waze's entry, in particular, focusing on how Waze ``spent far 
less than $20 million for all purposes in the two years 
preceding its US launch'' and noting that it was able to enter 
the market using only public domain data.\1443\
---------------------------------------------------------------------------
    \1442\ Id. at GOOG-HJC-04211046 (July 24, 2013).
    \1443\ Id. at GOOG-HJC-04211080.
---------------------------------------------------------------------------
    In contrast, market participants viewed Google and Waze as 
close competitors in a ``highly concentrated'' market for 
navigable digital map databases and turn-by-turn navigation 
applications. Prior to the transaction, Waze had observed that 
it and Google were ``the only vertically integrated stacks.'' 
\1444\ One market participant told antitrust enforcers that it 
viewed Waze as ``Google's closest competitor for real-time, 
updated [turn-by-turn] navigation services'' and that Waze 
``was the digital-map competitor with the best opportunity to 
overcome Google's significant data and funding advantage.'' 
\1445\
---------------------------------------------------------------------------
    \1444\ Id. at GOOG-HJC-04208696.
    \1445\ Submission from Source 26, to H. Comm. on the Judiciary, 
Source 26-000622 (Sept. 21, 2013) (on file with Comm.).
---------------------------------------------------------------------------
    Market participants cited a few reasons the transaction 
would undermine competition. First, they noted that barriers to 
entry in the market for turn-by-turn navigation providers were 
high and that it would be difficult for new firms to enter. One 
market participant stated, ``Navigable digital map databases 
contain far more information than maps and addresses. For 
example, Google's database includes a range of other 
information, including traffic, conditions and rerouting 
information, interior and exterior photographs, reviews, 
commentary from Google+ friends.'' \1446\ And Waze, in 
particular, had a unique crowd-sourced model that would be 
difficult for other firms to replicate. Although Waze had 
secured a ``first-mover advantage'' and acquired a ``critical 
mass of users,'' the group of self-selected volunteers who 
edited Waze's maps were ``unlikely to fill such a role (without 
payment) for more than one set of mapping data.'' \1447\ The 
market participant added, ``Once those editors provide the 
benefit of their input into Waze they create a powerful map 
that passive Waze users will turn to as well given the lack of 
other real-time-updated maps of comparable quality. As a 
result, passive Waze users likely will have no incentive to 
multi-home.'' \1448\
---------------------------------------------------------------------------
    \1446\ Id. See also Interview with Source 572 (Sept. 24, 2020).
    \1447\ Interview with Source 572 (Sept. 24, 2020).
    \1448\ Id.
---------------------------------------------------------------------------
    Second, market participants pointed to the fact that Waze 
was the only firm meaningfully positioned to dislodge Google 
Maps because it--like Google--lacked financial pressures. One 
entrepreneur noted, ``Google and Waze do not care how much it 
costs to keep the maps up-to-date. Google because it has a lot 
of money, and Waze because it relies on the community.'' \1449\ 
One market participant stated:
---------------------------------------------------------------------------
    \1449\ Id.

     LThe acquisition would effectively lead to the elimination 
of Waze as a market disrupting force that would otherwise be 
capable of challenging the model adopted by Google's dominant 
Google Maps. In essence, Google's acquisition of Waze is 
defensive--seeking to remove a disruptive force from the 
market.\1450\
---------------------------------------------------------------------------
    \1450\ Id.

    Several market participants and advocates who opposed the 
deal noted that Waze's own CEO, Noam Bardin, had recently 
stated that Waze was ``the only reasonable competition'' to 
Google Maps, which would suggest that Google may have been 
pursuing the acquisition in efforts to quash its most 
significant competitor.\1451\
---------------------------------------------------------------------------
    \1451\ Letter from John M. Simpson, Priv. Project Dir., Consumer 
Watchdog, to William J. Baer, Assistant Att'y Gen., U.S. Dep't of 
Justice, Antitrust Div. (June 12, 2013), https://www. 
consumerwatchdog.org/resources/cltrdojwaze061213.pdf.
---------------------------------------------------------------------------
    And third, market participants argued that the acquisition 
would give Google both the incentive and ability to foreclose 
rivals, including those apps that offer mobile navigation and 
social networking services. Seeking to mitigate this concern, 
Google's letter to the FTC emphasized the ``numerous providers 
who license mapping, traffic, and incident'' data for use in 
mobile apps.\1452\
---------------------------------------------------------------------------
    \1452\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04211030 (July 24, 2013) (on file with Comm.).
---------------------------------------------------------------------------
    Today, the Google Maps and Waze teams remain separate. 
Analysts have reported that Google has used Waze as a tool to 
``test and iterate on monetizing Navigation without disrupting 
its much larger Google Maps asset.'' \1453\ One market 
participant stated, ``Google has used Waze as an ads guinea 
pig,'' \1454\ noting that Waze has released efficacy reports of 
location-tailored ads, information that seems to have informed 
Google Maps' recent expansion of advertising.\1455\
---------------------------------------------------------------------------
    \1453\ Royal Bank of Canada Report at 14.
    \1454\ Interview with Source 572 (Sept. 24, 2020).
    \1455\ Id.
---------------------------------------------------------------------------
    Since completing the Waze acquisition, Google has 
reportedly come to capture 81 percent of the market for 
navigation mapping services.\1456\ Despite Google's claims that 
entry barriers were low and alternate offerings abundant, no 
meaningful competitor has emerged since Google acquired Waze. 
Based on the materials the FTC provided to the Subcommittee, it 
is unclear whether the Commission fully assessed the barriers 
to entry. It instead appears the FTC primarily took a static 
view--focusing on the existing quality of Waze's maps--rather 
than assessing the dynamic effects of the acquisition.
---------------------------------------------------------------------------
    \1456\ Royal Bank of Canada Report at 5.

---------------------------------------------------------------------------
    (d) Conduct

    (i) Raising Prices. For years, Google offered a free tier 
of the Maps API, incentivizing developers to build their apps 
with Google Maps. In 2018, however, Google Maps introduced a 
single ``pay-as-you-go'' pricing plan for the core mapping 
APIs.\1457\ This shift dramatically reduced the number of free 
Maps API calls a firm could make--from 25,000 per day to around 
930 per day.\1458\ Developers stated that the change amounted 
to a price increase of 1,400 percent.\1459\
---------------------------------------------------------------------------
    \1457\ Jagmeet Singh, Google Maps API Price Hike Is Threatening the 
Future of Some Companies, Gadgets 360 (Aug. 28, 2018), https://
gadgets.ndtv.com/apps/features/google-maps-apis-new-pricing-impact-
1907242.
    \1458\ Id.
    \1459\ Ishveena Singh, Insane, Shocking, Outrageous: Developers 
React to Changes in Google Maps API, Geo Awesomeness (May 3, 2018), 
https://geoawesomeness.com/developers-up-in-arms-over-google-maps-api-
insane-price-hike/ (``The Standard (no access to customer support) and 
Premium plans are being merged into one pay-as-you-go pricing plan. And 
the new fee structure is not pretty. Google is raising its prices by 
more than 1,400%. Obviously, no direct comparison figures of old and 
new prices have been provided by Google, but that's the average surge 
that is being reported by developers.'').
---------------------------------------------------------------------------
    In a submission to the Subcommittee, one market participant 
said that Google instituted this price hike after ``gaining 
dominance.'' \1460\ Since becoming a Google Maps customer, the 
market participant's costs ``have increased over 20'' and 
``there are no viable alternatives.'' \1461\ Another developer 
stated that the 2018 pricing change ``took our bill from $90/
month in October to $20,000/month in December.'' \1462\ The 
developer stated that it was able to subsequently reduce its 
bill through making a change that enabled the location-
retrieval function to occur directly on a user's device--a 
change that gave Google a ``greater ability to identify and 
track'' the device user.\1463\
---------------------------------------------------------------------------
    \1460\ Submission from Source 564, to H. Comm. on the Judiciary, 2 
(Nov. 13, 2019) (on file with Comm.).
    \1461\ Id. at 4.
    \1462\ Submission from Source 685, to H. Comm. on the Judiciary, 4 
(Oct. 15, 2019) (on file with Comm.).
    \1463\ Id.
---------------------------------------------------------------------------
    Several developers expressed their frustrations publicly, 
noting that Google's decision to hike prices so sharply, and 
without giving developers significant notice, underscored its 
power to set the terms of commerce. One developer stated:

     LI understand that Google wants to make this into a line 
of business. But it feels like they're taking advantage of us. 
They know that they're the best, and that no one else is even 
close. Instead of just giving us Maps for free or very cheap, 
in exchange for collecting all our usage data, they now feel 
they need to charge really high prices.\1464\
---------------------------------------------------------------------------
    \1464\ Jagmeet Singh, Google Maps API Price Hike Is Threatening the 
Future of Some Companies, Gadgets 360 (Aug. 28, 2018), https://
gadgets.ndtv.com/apps/features/google-maps-apis-new-pricing-impact-
1907242.

In effect, Google makes market participants pay twice to access 
Google Maps--first by giving Google their valuable usage data 
and then again by paying Google's volume-based fees for API 
---------------------------------------------------------------------------
calls.

    (ii) Tying. Business-facing mapping products usually 
consist of a core set of features to provide greater mapping 
functionality. For example, the ``Google Maps Platform'' offers 
developers traffic data and places data (also known as place 
search), as well as map data.\1465\ Some developers choose to 
mix and match, using map data from one firm but placing data 
from another. Google, however, prohibits developers from using 
any part of its mapping tools alongside any non-Google mapping 
features. Until April 2020, Google's Maps Platform Terms of 
Service included the following provision:
---------------------------------------------------------------------------
    \1465\ Google Maps Platform Terms of Service, Google Sec. 21, 
https://cloud.google.com/maps-platform/terms (last visited Oct. 3, 
2020) (`` `Google Maps Content' means any content provided through the 
Service (whether created by Google or its third-party licensors), 
including map and terrain data, imagery, traffic data, and places data 
(including business listings).'').

     L(e) No Use With Non-Google Maps. Customer will not use 
the Google Maps Core Services in a Customer Application that 
contains a non-Google map. For example, Customer will not (i) 
display Places listings on a non-Google map, or (ii) display 
Street View imagery and non-Google maps in the same Customer 
Application.\1466\
---------------------------------------------------------------------------
    \1466\ Id. Sec. 3.2.2(e).

---------------------------------------------------------------------------
In April 2020, Google amended the language slightly:

     L(e) No Use With Non-Google Maps. To avoid quality issues 
and/or brand confusion, Customer will not use the Google Maps 
Core Services with or near a non-Google Map in a Customer 
Application. For example, Customer will not (i) display or use 
Places content on a non-Google map, (ii) display Street View 
imagery and non-Google maps on the same screen, or (iii) link a 
Google Map to non-Google Maps content or a non-Google 
map.\1467\
---------------------------------------------------------------------------
    \1467\ Id.

    Both versions of this provision prohibit developers from 
using any component of the Google Maps Core Service with 
mapping services provided by non-Google firms. The April 2020 
change to the terms of service is even more restrictive: It 
prohibits developers from even displaying any component of 
Google Maps ``near'' any other map. In practice, Google's 
contractual provision has led several major companies to switch 
entirely to Google's ecosystem, even in cases where they 
preferred mapping services from a non-Google provider, such as 
Mapbox.
    Through interviews with market participants, the 
Subcommittee learned that Google now enforces this provision 
aggressively. According to one firm, Google closely tracks and 
pressures developers who use Google's place data in conjunction 
with mapping data from a non-Google firm, effectively forcing 
them to choose whether they will use all of Google's mapping 
services or none of them.\1468\ One firm described Google's 
coercive tactics, stating, ``It's a bigger player putting a gun 
to our head saying `switch or else.' '' \1469\
---------------------------------------------------------------------------
    \1468\ Interview with Source 572 (Sept. 24, 2020).
    \1469\ Interview with Source 157 (Sept. 25, 2020).
---------------------------------------------------------------------------
    Because Google's monopoly in online search has furnished it 
with a trove of data, as well as a robust index, its place 
search feature is also seen by many market participants 
effectively as a must-have. One market participant that has 
lost business partnerships due to Google's coercive 
restrictions stated that Google is ``using access to its 
dominant search products as leverage to intimidate businesses 
out of working with other map providers.'' \1470\ He noted that 
Google's conduct now threatens his firm's survival, saying, 
``This is existential for us.'' \1471\
---------------------------------------------------------------------------
    \1470\ Interview with Source 572 (Sept. 24, 2020).
    \1471\ Id.
---------------------------------------------------------------------------
    Google was asked to identify and justify any limits it 
places on the ability of app developers who use the Google Maps 
Platform to use non-Google mapping services.\1472\ Google 
responded that it does ``restrict developers from incorporating 
Google Maps Core Services into an application that uses a non-
Google map'' in order to ``prevent brand confusion and other 
negative user experiences.'' \1473\ As described above, Google 
subsequently changed its terms of service to mirror its 
response to the Subcommittee's question. However, developers 
and mapping providers questioned Google's rationale, noting 
that developers were the ones best positioned to determine 
whether combining mapping services from multiple providers 
created a ``negative user experience.'' One provider added, 
``The developers we partner with are extremely sophisticated. 
They're not confused.'' \1474\
---------------------------------------------------------------------------
    \1472\ Innovation and Entrepreneurship Hearing at 424 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1473\ Id.
    \1474\ Interview with Source 572 (Sept. 24, 2020).
---------------------------------------------------------------------------
    Google has also used its dominance in mapping to acquire 
cloud computing customers for its Google Cloud Platform (GCP). 
Specifically, in 2018, Google implemented a change requiring 
all API calls to use a valid API key, which must be linked to a 
Google Cloud Platform account. All keyless calls to the Maps 
JavaScript API and Street View API trigger low-resolution maps 
that are watermarked with ``for development purposes only.'' 
\1475\ Developers who do not have a Google Cloud account, and 
therefore do not have an API key, are effectively locked out of 
Google Maps. Even if an application is built on a non-Google 
cloud platform, developers are forced to use GCP for the Maps 
API portion of their app.\1476\ By one estimate, revenue from 
Google Cloud Platform has more than tripled since 2017, the 
year before Google began tying access to Google Maps to Google 
Cloud Platform.\1477\
---------------------------------------------------------------------------
    \1475\ Guide for Existing Users, Google Cloud, https://
cloud.google.com/maps-platform/user-guide (last visited Oct. 3, 2020).
    \1476\ Daria Bulatovych, Mapbox as a Worthy Alternative to Google 
Maps Price Hike, Yalantis, https://yalantis.com/blog/mapbox-maps-ready-
mobile-apps/ (last visited Oct. 5, 2020).
    \1477\ Larry Dignan, Top Cloud Providers in 2020: AWS, Microsoft 
Azure, and Google Cloud, Hybrid, SaaS Players, ZDNet (Oct. 1, 2020), 
https://www.zdnet.com/article/the-top-cloud-
providers-of-2020-aws-microsoft-azure-google-cloud-hybrid-saas/.

    (iii) Self-Preferencing Through Contractual Restrictions. 
Some developers told the Subcommittee that Google uses its 
control over digital mapping to favor its own products in other 
lines of business. Since Google provides mapping services but 
also offers non-mapping products that use mapping as an input, 
Google can selectively degrade access for third parties that 
rely on its mapping product to disfavor them as competitors to 
its non-mapping products. For example, market participants 
noted that Google has added various restrictions to the license 
agreement for Google Maps API--restrictions that apply to 
third-party developers but not to Google's own competing 
products.
    One example is unequal rights to map caching. Map caching 
occurs when a server stores copies of map images that it can 
speedily distribute when next recalled. Without caching, a map 
is drawn each time it is requested, a much slower 
process.\1478\ Although previous versions of the Google Maps 
API agreement permitted caching by developers, the recent 
versions prohibit caching of maps with limited 
exceptions.\1479\ Third-party apps built on Google Maps API can 
no longer store a map cache. Market participants note, however, 
that Google's own products built on Google Maps--ranging from 
its local search service to its hotel finder--face no similar 
restrictions, enabling them to load faster than those run by 
third parties.
---------------------------------------------------------------------------
    \1478\ What Is Map Caching?, ArcGIS Enter., https://
enterprise.arcgis.com/en/server/latest/publish-services/linux/what-is-
map-caching-.htm (last visited Oct. 3, 2020).
    \1479\ Places API Policies, Google Maps Platform, Google, https://
developers.google.com/places/web-service/policies (last visited Oct. 3, 
2020) (stating ``that you must not pre-fetch, index, store, or cache 
any Content except under the limited conditions stated in the terms'').
---------------------------------------------------------------------------
    Commenting on the asymmetry, one market participant stated 
that Google's decision to deny third parties caching 
``denigrates the service that our maps can provide compared to 
Google's.'' \1480\ They added, ``[T]hat's why we can't create 
an app that provides directions as well as Google or we can't 
update a user's location as quickly as Google.'' \1481\
---------------------------------------------------------------------------
    \1480\ Interview with Source 521 (June 22, 2020).
    \1481\ Id.

    (iv) Strategic Platform Mismanagement. Although Google's 
responses to the Subcommittees' questions about its conduct 
regarding Google Maps emphasized ``quality'' and ``user 
experience,'' \1482\ public reporting has documented that 
Google Maps' listings are ``overrun with millions of false 
business addresses and fake names.'' \1483\ A fake listing can 
occur when a business creates a fake listing or when a 
fraudulent business hijacks the name of a legitimate business 
on Google Maps, diverting user calls or visits from the 
legitimate business to a fraudulent one. A survey of experts 
conducted by The Wall Street Journal estimated that Google Maps 
hosts around 11 million falsely listed businesses on any given 
day.\1484\ The same experts stated that ``a majority'' of the 
listings on Google Maps for businesses such as ``contractors, 
electricians, towing and car repair services, movers and 
lawyers,'' as well as others, are not actually located at the 
location given by Google Maps.\1485\
---------------------------------------------------------------------------
    \1482\ Innovation and Entrepreneurship Hearing at 403 (response to 
Questions for the Record of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1483\ Rob Copeland & Katherine Bindley, Millions of Business 
Listings on Google Maps Are Fake--and Google Profits, Wall St. J. (June 
20, 2019), https://www.wsj.com/articles/google-maps-littered-with-fake-
business-listings-harming-consumers-and-competitors-11561042283.
    \1484\ Id.
    \1485\ Id.
---------------------------------------------------------------------------
    These fake listings endanger consumer safety, giving rise 
to situations where users of Google Maps have unknowingly 
requested home repairs and other services from fraudulent 
providers, ultimately, paying inflated prices for shoddy 
work.\1486\ The fraudulent listings also disadvantage 
legitimate businesses, both those whose listings have been 
hijacked as well as those whose own listings appear below those 
of sham businesses. Marketers have weaponized this problem to 
demand ransom payments from businesses under the threat of 
wiping out their listings through a flood of fake businesses. 
When the listing of one auto junkyard fell from the first to 
the second page of Google Maps results, the owner's income fell 
by half and pushed him to the edge of closing shop 
entirely.\1487\
---------------------------------------------------------------------------
    \1486\ Id. (Reporting that a 67-year-old woman contacted a local 
home repair service she found through Google, only to be serviced by a 
man who was pretending to be from the company she had hired. The man 
charged almost twice the cost of previous repairs and demanded a 
personal check or cash. The woman told The Wall Street Journal, ``I'm 
at my house by myself with this guy. He could have knocked me over 
dead.'').
    \1487\ Id.
---------------------------------------------------------------------------
    Legitimate businesses hurt by fake listings say that 
contacting Google to report the situation generally fails to 
resolve the problem. In practice, the only way legitimate 
businesses can shield themselves from fake listings is to buy 
ads from Google. Ad prices for categories that are most 
susceptible to ad fraud have increased more than 50 percent 
over the last two years.\1488\
---------------------------------------------------------------------------
    \1488\ Id.
---------------------------------------------------------------------------
    The Subcommittee asked Google about this practice on 
several occasions. At the Subcommittee's July 16, 2019 hearing, 
Representative Lucy McBath (D-GA) asked Adam Cohen, Google's 
director of economic policy, what steps Google was taking to 
identify and remove fraudulent listings on Google Maps.\1489\ 
She added, ``Is it a lack of competition in online search that 
allows Google to be so complacent by addressing this problem 
head on?'' \1490\ Mr. Cohen responded that he was ``not 
familiar'' with the relevant facts.\1491\ In response to a 
follow-up letter sent by Chair Cicilline, Google wrote that it 
has ``no evidence'' that the number of fake listings on Google 
Maps is around 10 million.\1492\ Google stated that, as of July 
2019, it had taken down more than 3 million fake business 
profiles and that it has ``implemented strict policies and 
created tools that enable people to flag false content.'' 
\1493\
---------------------------------------------------------------------------
    \1489\ Innovation and Entrepreneurship Hearing at 69 (question of 
Rep. Lucy McBath (D-GA), Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary).
    \1490\ Id.
    \1491\ Id. (statement of Adam Cohen, Dir. of Econ. Pol'y, Google 
LLC).
    \1492\ Letter from Kent Walker, Senior Vice President, Glob. Affs. 
& Legal Officer, Google, to Hon. David N. Cicilline, Chair, Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary 
(July 26, 2019), https://judiciary.house.gov/sites/democrats.
judiciary.house.gov/files/documents/07.26.19%20-
%20google%20response.pdf.
    \1493\ Id.
---------------------------------------------------------------------------
    Both digital advertisement experts and individuals engaging 
in fraudulent activity believe that Google has turned a blind 
eye to the problem. According to The Wall Street Journal, one 
ad specialist who was invited by Google to help root out the 
problem left after concluding that Google ``has obviously 
chosen not to solve the problem.'' \1494\ A business owner who 
helps facilitate the fake listings says his activity leaves a 
``huge footprint'' and yet Google is ``just letting it 
happen.'' He added, ``I know Google knows.'' \1495\
---------------------------------------------------------------------------
    \1494\ Rob Copeland & Katherine Bindley, Millions of Business 
Listings on Google Maps Are Fake--and Google Profits, Wall St. J. (June 
20, 2019), https://www.wsj.com/articles/google-maps-littered-with-fake-
business-listings-harming-consumers-and-competitors-11561042283 
(internal quotation marks omitted).
    \1495\ Id. (internal quotation marks omitted).
---------------------------------------------------------------------------
7. Cloud
    Google Cloud Platform (GCP) is Google's suite of public 
cloud computing services that first launched in 2008.\1496\ 
Today, Google Cloud is Alphabet's fastest-growing line of 
business, with revenues in Q1 2020 hitting $2.78 billion, up 52 
percent from $1.83 billion in Q1 2019.\1497\ Documents provided 
to the Subcommittee make clear that the cloud market is a 
priority for the company.\1498\ GCP is the third largest 
provider of IaaS services in the United States and has a year-
over-year growth rate twice that of Amazon Web Services--the 
current market leader.\1499\ Today, GCP boasts long term 
contracts with data-intensive companies such as Snap, Spotify, 
and TikTok.\1500\
---------------------------------------------------------------------------
    \1496\ Michael Arrington, Google Jumps Head First into Web Services 
with Google App Engine, TechCrunch (Apr. 8, 2008), https://
techcrunch.com/2008/04/07/google-jumps-head-first-into-web-services-
with-google-app-engine/ (reporting that GCP's first public cloud 
offering, App Engine, launched as a private preview for developers in 
April 2008).
    \1497\ Benjamin Pimentel, Google Just Reported Cloud Revenue for 
the First Time Ever, Showing that It's Growing Fast but Nowhere Close 
to Amazon Web Services, Bus. Insider (Feb. 3, 2020), https://
www.businessinsider.com/google-cloud-revenue-first-time-thomas-kurian-
2020-2.
    \1498\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04266215 (on file with Comm.).
    \1499\ GCP's position in the cloud market is explained in the cloud 
computing market overview section. See supra Section IV.
    \1500\ Snap Inc., Annual Report (Form 10-K) 11 (Feb. 4, 2020) 
(indicating that Snap had committed to spend $2.0 billion with Google 
Cloud over five years beginning January 2017); Kevin McLaughlin and 
Amir Efrati, TikTok Agreed to Buy More than $800 Million in Cloud 
Services from Google, Information (July 14, 2020), https://
www.theinformation.com/articles/tiktok-agreed-to-buy-more-than-800-
million-in-cloud-services-from-google (reporting that TikTok signed a 
three-year agreement with GCP in 2019, with a minimum commitment of 
$800 million over the time period).
---------------------------------------------------------------------------
    The Subcommittee reviewed internal documents that outline 
Google's plans to invest significantly in acquisitions.\1501\ 
To date, these acquisitions include Orbitera,\1502\ Cask Data, 
Velostrata, and Elastifile, among others.\1503\ Most recently, 
Google purchased Looker for $2.6 billion to ``add a new 
analytics tool for Google Cloud's customers.'' \1504\ In some 
instances, Google acquired firms that were multi-cloud 
solutions but, after acquisition, Google made them compatible 
only with Google's cloud infrastructure, at times integrating 
them into first-party PaaS and SaaS offerings only available 
through the Google Cloud Portal.\1505\
---------------------------------------------------------------------------
    \1501\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04266215 (on file with Comm.).
    \1502\ Nan Boden, Orbitera Joins the Google Cloud Platform Team, 
Google (Aug. 8, 2016), https://cloud.google.com/blog/products/gcp/
orbitera-joins-the-google-cloud-platform-team (noting that GCP 
leveraged Orbitera technology to offer automated test drives and lead 
management, custom pricing and billing, cloud cost visibility and 
control, and self-serve onboarding to be fully integrated into the GCP 
console).
    \1503\ Ingrid Lunden, Google Acquires Cask Data to Beef Up Its 
Tools for Building and Running Big Data Analytics, TechCrunch (May 16, 
2018), https://techcrunch.com/2018/05/16/google-acquires-cask-data-to-
beef-up-its-tools-for-building-and-running-big-data-analytics/.
    \1504\ Lauren Feiner & Jordan Novet, Google Cloud Boss Thomas 
Kurian Makes His First Big Move--Buys Looker for $2.6 Billion, CNBC 
(June 6, 2019), https://www.cnbc.com/2019/06/06/google-buys-cloud-
company-looker-for-2point6-billion.html.
    \1505\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04167298 to -04167381 (July 2, 2019) (on file with Comm.). See also 
Donna Goodison, Google Cloud's New Alooma Migration Service Won't 
Accept New AWS, Microsoft Azure Customers, CRN (Feb 20, 2019), https://
www.crn.com/news/cloud/google-cloud-s-new-alooma-migration-service-won-
t-accept-new-aws-microsoft-azure-customers.
---------------------------------------------------------------------------
    According to interviews with market participants and 
Google's internal documents, Google employs two strategies that 
raise concerns about potential anticompetitive conduct. First, 
Google appears to leverage its dominant business lines, 
including popular APIs such as Google Search and Maps, along 
with machine learning services, to attract customers to its 
platform through discounts and free tier services.\1506\ For 
example, according to internal strategy documents, in 2018, 
Google ``launched a program with the Play team to provide GCP 
credits to game developers based on their Play Store spend, to 
increase focus on Play and incentivize migration to GCP.'' 
\1507\ By harnessing Google's advantages in existing markets, 
GCP is undermining competition on the merits.
---------------------------------------------------------------------------
    \1506\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-02456801 (on file with Comm.). See also id. at GOOG-HJC-04214427 
(Aug 4, 2016).
    \1507\ Id. at GOOG-HJC-04266213 (May 23, 2018).
---------------------------------------------------------------------------
    Second, Google's documents suggest the company is 
considering bundling its popular machine learning service with 
other services that Google is seeking to promote. One recent 
Google cloud pricing strategy document explains, ``the question 
that we need to think about is whether we use our entry point 
with Big Query to get a customer to use all the services such 
as Data Proc, Data Flow, as a suite and give them a price break 
on the Analytics Suite because it will be much harder for them 
to migrate away from us if they use all the other services.'' 
\1508\ The document goes on to describe potential discounts and 
ultimately a plan to have ``a pricing model that makes it 
advantageous for customers to put 80 percent of their workload 
on GCP.'' \1509\ As described elsewhere in this Report, absent 
interventions, the barriers to entry and network effects in 
this market mean there is a high potential for single-homing 
and an overall concentrated market.\1510\ As Google grows in 
this space, regulators and enforcers should be watchful for 
potential anticompetitive conduct.
---------------------------------------------------------------------------
    \1508\ Id. at GOOG-HJC-04215099 (Dec. 31, 2018).
    \1509\ Id.
    \1510\ See supra Section IV.
---------------------------------------------------------------------------

                               C. Amazon

1. Overview
    Amazon.com, Inc. was founded in 1994 as an online 
bookseller.\1511\ Today, it is one of the largest companies in 
the world. Based in Seattle, Amazon is estimated to be the 
second-largest private employer in the United States, with over 
500,000 employees.\1512\ The company operates across a wide 
range of direct-to-consumer and business-to-business markets, 
including e-commerce, consumer electronics, television and film 
production, groceries, cloud services, book publishing, and 
logistics. Amazon went public in 1997 but did not post its 
first full-year profit until 2003.\1513\ This is partly because 
Amazon's business strategy has generally focused on long-term 
growth over short-term profits.\1514\ Amazon is currently one 
of the most valuable companies in the world, and its CEO, Jeff 
Bezos, is reported to be the wealthiest person in the 
world.\1515\
---------------------------------------------------------------------------
    \1511\ Amazon.com, Inc., Annual Report (Form 10-K) 3 (Jan. 31, 
2020), http://d18rn0p25
nwr6d.cloudfront.net/CIK-0001018724/4d39f579-19d8-4119-b087-
ee618abf82d6.pdf.
    \1512\ Press Release, Amazon, Amazon.com Announces Second Quarter 
Results 2 (July 30, 2020), https://s2.q4cdn.com/299287126/files/
doc_financials/2020/q2/Q2-2020-Amazon-Earnings-Release.pdf; Charles 
Duhigg, Is Amazon Unstoppable?, New Yorker (Oct. 21, 2019), https://
www.newyorker.com/magazine/2019/10/21/is-amazon-unstoppable.
    \1513\ Amazon.com, Inc., Annual Report (Form 10-K) 83-84 (Mar. 9, 
2005), https://www.annualreports.com/HostedData/AnnualReportArchive/a/
NASDAQ_AMZN_2004.pdf; Saul Hansell, Amazon Reports First Full-Year 
Profit, N.Y. Times (Jan. 28, 2004), https://www
.nytimes.com/2004/01/28/business/technology-amazon-reports-first-full-
year-profit.html.
    \1514\ See, e.g., CEO Hearing at 15 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.) (``As I have said since my first shareholder letter 
in 1997, we make decisions based on the long-term value we create . . . 
.''); Submission from Amazon, to H. Comm. on the Judiciary, AMAZON-HJC-
00035545 (July 14, 2010) (on file with Comm.) (``Membership programs 
are created with a long-term, company-wide perspective with the goal of 
increasing loyalty and cross-category shopping behavior. The programs 
do not optimize for short-term gain or profitability in a single 
category.'').
    \1515\ See, e.g., Annie Palmer, Jeff Bezos Is Now Worth More than 
$200 Billion, CNBC (Aug. 26, 2020), https://www.cnbc.com/2020/08/26/
amazon-ceo-jeff-bezos-worth-more-than-200-
billion.html.
---------------------------------------------------------------------------

          Amazon's Annual Revenue, Operating Expenses,

                       and Profits \1516\
---------------------------------------------------------------------------

    \1516\ Prepared by the Subcommittee based on Amazon.com, Inc., 
Annual Reports (Form 10-K) (1997-2019).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Amazon reports financial information for three business 
segments: North America, International, and Amazon Web Services 
(AWS), Amazon's cloud services business.\1517\ Despite the fact 
that Amazon is already so large that it dominates several 
important industries, it continues to report strong and steady 
growth--as well as increasing profits. For 2019, Amazon 
reported total revenue of about $280 billion, up 20 percent 
from the previous year, and a net income of over $11 
billion.\1518\ AWS's revenue increased by 37 percent in 2019 to 
$35 billion.\1519\ Retail operations continue to be the 
platform's largest source of revenue, but AWS is a key source 
of its overall profits.\1520\ In 2019, Amazon's cloud business 
contributed over 60 percent of Amazon's total operating income, 
despite accounting for only 12.5 percent of its total 
revenue.\1521\
---------------------------------------------------------------------------
    \1517\ Amazon.com, Inc., Annual Report (Form 10-K) 3 (Jan. 31, 
2020), http://d18rn0p25
nwr6d.cloudfront.net/CIK-0001018724/4d39f579-19d8-4119-b087-
ee618abf82d6.pdf.
    \1518\ Id. at 18.
    \1519\ Id. at 24.
    \1520\ Id. at 3; see also Nathan Reiff, How Amazon Makes Money, 
Investopedia (Aug. 12, 2020), https://www.investopedia.com/how-amazon-
makes-money-4587523 (``Retail remains Amazon's primary source of 
revenue, with online and physical stores accounting for the biggest 
share.'').
    \1521\ Amazon.com, Inc., Annual Report (Form 10-K) 24-25 (Jan. 31, 
2020), http://d18rn0p25
nwr6d.cloudfront.net/CIK-0001018724/4d39f579-19d8-4119-b087-
ee618abf82d6.pdf.
---------------------------------------------------------------------------
    Sales on Amazon.com fall into one of two categories. First-
party sales are those where Amazon retails its own private-
label products or sources products wholesale from a vendor or 
manufacturer. Third-party sales, in contrast, refer to sales by 
independent merchants who sell through the Amazon Marketplace. 
When a consumer visits Amazon.com, Amazon's private-label 
products, such as AmazonBasics or its Kindle E-Readers, are 
listed for sale alongside independent merchants' offers.
    One of the unique features of Amazon's e-commerce site is 
its fast and free shipping on an extremely broad selection of 
products. Amazon Prime Members can choose from over 100 million 
items that are available for free two-day delivery in the 
continental United States. Walmart, by contrast, has only 
single-digit millions of products eligible for free two-day 
shipping.\1522\ In response to questions from the Subcommittee, 
Amazon represented that it offers approximately 158,000 
private-label products across 45 in-house brands, not including 
some additional private-label products sold through Amazon 
Fresh.\1523\ Amazon also hosts 2.3 million active third-party 
sellers from around the world,\1524\ about 45 times more than 
the 52,000 third-party sellers that Walmart hosts on its 
marketplace.\1525\ A recent survey estimated that about 37 
percent of Amazon's third-party sellers, representing over 
850,000 sellers, rely on Amazon as their sole source of 
income.\1526\
---------------------------------------------------------------------------
    \1522\ J.P. Morgan, Retail vs. Amazon: Life in a Post COVID-19 
World (2020), https://
markets.jpmorgan.com/research/email/-lbk68f4/Alp1kP9tQUPS29jlzW_3bOg/
GPS-3397412-0.
    \1523\ Innovation and Entrepreneurship Hearing at 499 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1524\ Number of Sellers on Amazon Marketplace, Marketplace Pulse, 
https://www .marketplacepulse.com/amazon/number-of-sellers (last 
visited Sept. 25, 2020); see also CEO Hearing at 17 (statement of Jeff 
Bezos, CEO, Amazon.com, Inc.) (``There are now 1.7 million small and 
medium-sized businesses around the world selling in Amazon's 
stores.'').
    \1525\ Number of Sellers on Amazon Marketplace, Marketplace Pulse, 
https://www .marketplacepulse.com/amazon/number-of-sellers (last 
visited Oct. 5, 2020).
    \1526\ Junglescout, The State of the Amazon Seller 2020, at 4 
(2020), https://www .junglescout.com/wp-content/uploads/2020/02/State-
of-the-Seller-Survey.pdf.
---------------------------------------------------------------------------
    Amazon does not limit the number of sellers that can offer 
the same product for sale on its platform. Because of this, the 
same product may be sold by multiple sellers, as well as by 
Amazon. Each time a consumer clicks on a product, Amazon 
chooses a single seller from all the vendors offering that 
product to display as the featured offer in the ``Buy Box.'' 
\1527\ In its response to questions from the Subcommittee, 
Amazon stated that the featured merchant algorithm, also 
commonly referred to as the Buy Box algorithm, is designed to 
predict the offer that consumers would choose after comparing 
all the available offers in detail.\1528\
---------------------------------------------------------------------------
    \1527\ Innovation and Entrepreneurship Hearing at 498 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1528\ Id.
---------------------------------------------------------------------------
    The Amazon Buy Box Playbook, a well-known guide for 
sellers, explains this in lay terms:

     LWhen a shopper lands on a product detail page, Amazon 
chooses one seller whose details appear in the Buy Box--the 
white box on the right-hand side of the page. When a customer 
clicks on the ``Add to Cart'' button, the sale goes to the 
seller in this box.\1529\
---------------------------------------------------------------------------
    \1529\ Feedvisor, The Amazon Buy Box Playbook for Sellers and 
Retailers 4 (2020).

    Industry experts estimate that about 80 percent of Amazon 
sales go through the Buy Box, and the percentage is even higher 
for mobile purchases.\1530\ In response to a question from the 
Subcommittee, Amazon provided only high-level information about 
how it chooses which offer will win the Buy Box, stating that 
the algorithm considers criteria such as price, delivery speed 
and cost, Prime eligibility, and seller performance.\1531\ 
Despite the importance of winning the Buy Box to sellers on its 
platform, only Amazon knows exactly how its featured merchant 
algorithm works.
---------------------------------------------------------------------------
    \1530\ Id. at 5.
    \1531\ CEO Hearing at 282 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
---------------------------------------------------------------------------
    As Amazon's e-commerce business has grown, it has also 
developed a significant logistics business providing 
fulfillment and delivery services to third-party sellers 
through its Fulfillment by Amazon (FBA) program. Nearly 85 
percent of the top 10,000 Amazon Marketplace sellers reportedly 
rely on this program to fulfill and deliver their orders.\1532\ 
Third-party sellers that use FBA keep their inventory in 
Amazon's fulfillment centers.\1533\ After a consumer places an 
order online, Amazon does the picking, packing, and shipping, 
and provides customer service to complete the order.\1534\ The 
figure below explains the different types of sellers on 
Amazon.com and the various modes of delivery and fulfillment 
they use.
---------------------------------------------------------------------------
    \1532\ FBA Usage Among Amazon Marketplace Sellers, Marketplace 
Pulse, https://www.marketplacepulse.com/amazon/fulfillment-by-amazon-
fba (last visited Oct. 5, 2020).
    \1533\ Fulfillment by Amazon, Amazon, https://sell.amazon.com/
fulfillment-by-amazon.html (last visited Sept. 28, 2020).
    \1534\ Id.

     Types of Sellers on Amazon and Shipping Options \1535\
---------------------------------------------------------------------------

    \1535\ Prepared by the Subcommittee based on Amazon 1P vs. 3P: What 
Are the Differences?, Feedvisor, https://feedvisor.com/university/
amazon-1p-vs-3p/ (last visited Sept. 24, 2020).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Amazon generates a significant amount of revenue from the 
fees that it charges third-party sellers. According to a recent 
SEC filing, net sales for services provided to third-party 
sellers increased from $23 billion in the first six months of 
2019 to $32 billion over the same period in 2020--an increase 
of 39 percent.\1536\ For the ability to sell a product on the 
platform, a seller might pay the company a monthly subscription 
fee, a high-volume listing fee, a referral fee on each item 
sold, and a closing fee on each item sold.\1537\ Amazon charges 
additional fees for fulfillment and delivery services, as well 
as for advertising.\1538\
---------------------------------------------------------------------------
    \1536\ Amazon.com, Inc., Quarterly Report (Form 10-Q) 18 (July 31, 
2020), http://d18rn0p25
nwr6d.cloudfront.net/CIK-0001018724/a77b5839-99b8-4851-8f37-
0b012f9292b9.pdf.
    \1537\ Selling on Amazon Fee Schedule, Amazon Seller Cent., https:/
/sellercentral
.amazon.com/gp/help/external/200336920 (last visited Sept. 25, 2020).
    \1538\ Pricing Overview, Amazon Seller Cent. (2020), https://
sell.amazon.com/pricing.html (last visited Sept. 25, 2020); see also 
Submission from Amazon, to H. Comm. on the Judiciary, 12 (Oct. 14, 
2019) (on file with Comm.) (noting that advertising revenue is not 
included in seller services).
---------------------------------------------------------------------------
    AWS, the company's cloud services business, offers digital 
infrastructure services to businesses that require increased 
computing infrastructure, such as increased capacity for 
servers to host or store data. Amazon is the dominant provider 
of infrastructure as a service. AWS accounts for close to half 
of all global spending on cloud infrastructure services, and 
the business has three times the market share of Microsoft, its 
closest competitor.\1539\ Cloud services are an essential and 
increasingly expensive line item for many companies. Given 
AWS's role as a dominant cloud provider, some of Amazon's 
competitors in other business lines often end up dependent on 
the platform. For example, Netflix, a competitor of Amazon 
Prime Video, paid AWS $500 million in 2018 to store its 
streaming video library.\1540\
---------------------------------------------------------------------------
    \1539\ Press Release, Gartner, Gartner Says Worldwide IaaS Public 
Cloud Services Market Grew 31.3% in 2018 (July 29, 2019), https://
www.gartner.com/en/newsroom/press-releases/2019-07-29-gartner-says-
worldwide-iaas-public-cloud-services-market-grew-31point3-percent-in-
2018; see also Letter from David Zapolsky, Gen. Couns., Amazon.com, 
Inc., to Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, 6 (July 26, 
2019) (on file with Comm.).
    \1540\ Kevin McLaughlin, Amazon's Cloud King: Inside the World of 
Andy Jassy, Information (Jan. 23, 2019), https://
www.theinformation.com/articles/amazons-cloud-king-inside-the-world-of-
andy-jassy.
---------------------------------------------------------------------------
    While the pandemic has harmed many businesses, Amazon has 
experienced a surge in sales.\1541\ The company's operating 
profit of $5.8 billion during the second quarter of 2020 
significantly outperformed the -$1.5 billion to +$1.5 billion 
projection that Amazon had issued to investors.\1542\ One 
analyst described the magnitude of Amazon's recent sales growth 
outperformance as a ``paradigm-shifting update.'' \1543\ In 
October 2020, Amazon's stock price was about $3,000, giving it 
a market valuation of about $1.5 trillion \1544\--greater than 
that of Walmart, Target, Salesforce, IBM, eBay, and Etsy, 
combined.\1545\ The company is consistently one of the highest-
priced stocks on Wall Street,\1546\ which is a clear indication 
investors expect Amazon to maintain and expand its market 
power.
---------------------------------------------------------------------------
    \1541\ See, e.g., Alana Semeuls, Many Companies Won't Survive the 
Pandemic. Amazon Will Emerge Stronger Than Ever, Time (July 28, 2020), 
https://time.com/5870826/amazon-coronavirus-jeff-bezos-congress/ 
(``Consumer spending on Amazon between May and July was up 60% from the 
same time frame last year.'').
    \1542\ Morningstar Equity Analyst Report: Amazon.com, Inc 6 (Aug. 
27, 2020) (on file with Comm.); Press Release, Amazon, Amazon.com 
Announces First Quarter Results (Apr. 30, 2020), https://s2.q4cdn.com/
299287126/files/doc_financials/2020/Q1/AMZN-Q1-2020-Earnings-
Release.pdf.
    \1543\ Morningstar Equity Analyst Report: Amazon.com, Inc 6 (Aug. 
27, 2020) (on file with Comm.).
    \1544\ Amazon.com, Inc. Common Stock (AMZN), Nasdaq, https://
www.nasdaq.com/market-
activity/stocks/amzn (last visited Oct. 3, 2020).
    \1545\ See Walmart, Inc. Common Stock (WMT), Nasdaq, https://
www.nasdaq.com/market-activity/stocks/wmt (last visited Oct. 5, 2020) 
($398 billion); Target Corp. Common Stock (TGT), Nasdaq, https://
www.nasdaq.com/market-activity/stocks/tgt (last visited Oct. 5, 2020) 
($79.6 billion); Salesforce.com, Inc. Common Stock (CRM), Nasdaq, 
https://www.nasdaq.com/market-activity/stocks/crm (last visited Oct. 5, 
2020) ($225.5 billion); Int'l Bus. Machines Corp. Common Stock (IBM), 
Nasdaq, https://www.nasdaq.com/market-activity/stocks/ibm (last visited 
Oct. 5, 2020) ($107 billion); eBay, Inc. Common Stock (EBAY), Nasdaq, 
https://www.nasdaq.com/
market-activity/stocks/ebay (last visited Oct. 5, 2020) ($36.2 
billion); Etsy, Inc. Common Stock (ETSY), Nasdaq, https://
www.nasdaq.com/market-activity/stocks/etsy (last visited Oct. 3, 2020) 
($16.7 billion).
    \1546\ See, e.g., Gabe Alpert, Top 5 Highest Priced Stocks in 
America, Investopedia (May 19, 2020), https://www.investopedia.com/
financial-edge/0711/the-highest-priced-stocks-in-america .aspx.
---------------------------------------------------------------------------
    The Subcommittee initiated its investigation of Amazon's 
market power and its role as a gatekeeper for digital markets 
in June 2019. Before and concurrent with the Subcommittee's 
investigation, many international and U.S. enforcement 
authorities also opened antitrust investigations into Amazon's 
business practices. Some of these investigations have led to 
Amazon making policy changes.\1547\ The European Commission 
began its in-depth antitrust investigation of Amazon on July 
17, 2019.\1548\ According to Executive Vice President Margrethe 
Vestager, the European Commission's investigation ``focuses on 
the use by Amazon of accumulated, competitively sensitive 
information about marketplace sellers, their products and 
transactions on the Amazon marketplace, which may inform 
Amazon's retail business decisions.'' \1549\ In the United 
States, the Federal Trade Commission (FTC) is investigating 
Amazon's past acquisition activity.\1550\ The FTC is also 
reportedly investigating Amazon's treatment of third-party 
sellers and its cloud services business.\1551\ Additionally, 
Amazon reportedly faces antitrust scrutiny by state attorneys 
general offices in California, Washington, and New York.\1552\
---------------------------------------------------------------------------
    \1547\ See, e.g., Data and Privacy Hearing at 170 (statement of 
Margrethe Vestager, Eur. Comm'r for Competition) (``[I]n 2017 we 
accepted commitments from Amazon not to introduce or enforce what are 
sometimes called `most-favoured nation' clauses in the e-books 
market.''); Press Release, Bundeskartellamt, Bundeskartellamt Obtains 
Far-Reaching Improvements in the Terms of Business for Sellers on 
Amazon's Online Marketplaces (July 17, 2019), https://
www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/
17_07_2019_
Amazon.html (``In response to the competition concerns expressed by the 
Bundeskartellamt, Amazon is amending its terms of business for sellers 
on Amazon's online marketplaces.''); Amazon Online Retailer: 
Investigation into Anticompetitive Practices, U.K. Competition & Mkts. 
Auth. (Oct. 1, 2013), https://www.gov.uk/cma-cases/amazon-online-
retailer-investigation-into-anticompetitive-practices (``In light of 
[Amazon's] decision to remove the price parity policy and subsequent 
steps to implement that decision . . . the [Office of Fair Trading] has 
decided to close its investigation on administrative priority 
grounds.'').
    \1548\ Press Release, Eur. Comm'n, Antitrust: Commission Opens 
Investigation into Possible Anti-competitive Conduct of Amazon (July 
17, 2019), https://ec.europa.eu/commission/presscorner/detail/en/
IP_19_4291.
    \1549\ Submission from Margrethe Vestager, Exec. Vice President, 
Eur. Comm'n, to H. Comm. on the Judiciary, 4 (July 24, 2020) (on file 
with Comm.).
    \1550\ Press Release, Fed. Trade Comm'n, FTC to Examine Past 
Acquisitions by Large Technology Companies (Feb. 11, 2020), https://
www.ftc.gov/news-events/press-releases/2020/02/ftc-examine-past-
acquisitions-large-technology-companies.
    \1551\ Jason Del Rey, Amazon May Soon Face an Antitrust Probe. Here 
Are 3 Questions the FTC Is Asking About It, Vox: Recode (June 4, 2019), 
https://www.vox.com/recode/2019/6/4/18651694/amazon-ftc-antitrust-
investigation-prime; Dina Bass, David McLaughlin & Naomi Nix, Amazon 
Faces Widening U.S. Antitrust Scrutiny in Cloud Business, Bloomberg 
(Dec. 4, 2019), https://www.bloomberg.com/news/articles/2019-12-04/
amazon-faces-widening-u-s-antitrust-scrutiny-in-cloud-business.
    \1552\ Tyler Sonnemaker, Amazon Is Reportedly Facing a New 
Antitrust Investigation into Its Online Marketplace Led by the FTC and 
Attorneys General in New York and California, Bus. Insider (Aug. 3, 
2020), https://www.businessinsider.com/amazon-antitrust-probe-ftc-new-
york-california-online-marketplace-2020-8; Karen Weise & David McCabe, 
Amazon Said to Be Under Scrutiny in 2 States for Abuse of Power, N.Y. 
Times (June 12, 2020), https://www.nytimes.com/2020/06/12/technology/
state-inquiry-antitrust-amazon.html.
---------------------------------------------------------------------------
    During the course of the investigation, Amazon displayed a 
lack of candor to the Subcommittee in response to questions 
about its business practices. As Chair Nadler, Subcommittee 
Chair Cicilline, and Ranking Member Sensenbrenner, along with 
other members of the Committee, wrote to Mr. Bezos in a 
bipartisan letter in May of this year, the Subcommittee was 
troubled that some of the ``statements Amazon made to the 
Committee about the company's business practices appear to be 
misleading, and possibly criminally false or perjurious.'' 
\1553\ In light of this concern, the Subcommittee views 
Amazon's other claims and representations with a degree of 
skepticism in instances where they conflict with credible 
sources, such as investigative reporting, interviews with 
market participants, or other evidence uncovered by the 
Subcommittee during the investigation.
---------------------------------------------------------------------------
    \1553\ Bipartisan Letter from the Chair, Ranking Member, and 
Members of H. Comm. on the Judiciary, to Jeff Bezos, CEO, Amazon.com, 
Inc. (May 1, 2020), https://judiciary.house.gov/uploadedfiles/2020-05-
01_letter_to_amazon_ceo_bezos.pdf.
---------------------------------------------------------------------------
2. Amazon.com
    (a) Market Power. Amazon has significant and durable market 
power in the U.S. online retail market.\1554\ The company's 
actual share of U.S. e-commerce is unknown outside of Amazon 
because it does not report the gross merchandise volume of 
third-party sales made on its marketplace. A frequently cited 
analysis by market research company eMarketer estimates that 
Amazon's share in this market is 38.7 percent.\1555\ 
eMarketer's estimate, however, is likely understated because 
its definition of e-commerce is overly broad. For example, 
under eMarketer's approach to e-commerce, the Auto and Parts 
category includes online sales of cars.\1556\ In contrast, 
marketing analytics company Jumpshot estimates that Amazon 
captures an average of 74 percent of digital transactions 
across a wide range of product categories.\1557\ The Jumpshot 
analysis may overstate Amazon's share because it calculates 
market share as a percentage of transactions made on well-known 
market participants' websites, like Amazon, Walmart, and 
Target, but excludes small, online retailers.\1558\ Based on 
the information the Subcommittee gathered during its 
investigation, estimates that place Amazon's share of U.S. e-
commerce at about 50 percent or higher are more credible than 
lower estimates of 30-40 percent.\1559\
---------------------------------------------------------------------------
    \1554\ See generally Dig. Competition Expert Panel Report at 30 
(finding that recent financial indicators suggest Amazon's 
``dominan[ce] in a meaningfully distinct sector of online retail'' will 
endure and that ``investors are expecting it to retain its dominant 
position, and to earn significantly higher profits in future''); 
Stigler Report at 78 (``[T]he evidence thus far does suggest that 
current digital platforms face very little threat of entry . . . . 
[T]he key players in this industry remained the same over the last two 
technology waves, staying dominant through the shift to mobile and the 
rise of AI. In the past, dominant business found it difficult to 
navigate innovation or disruption waves. By contrast, Facebook, Google, 
Amazon, Apple, and even Microsoft were able to ride these waves without 
significant impact on market share or profit margins.'').
    \1555\ Andrew Lipsman, Top 10 US Ecommerce Companies 2020, 
Emarketer (Mar. 10, 2020), https://www.emarketer.com/content/top-10-us-
ecommerce-companies-2020.
    \1556\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00206583 (2019) (on file with Comm.) (eMarketer Inc.--Global 
Ecommerce 2019 Report).
    \1557\ See Kimberly Collins, Google + Amazon: Data on Market Share, 
Trends, Searches from Jumpshot, Search Engine Watch (Aug. 1, 2019), 
https://www.searchenginewatch.com/2019/08/01/amazon-google-market-
share/.
    \1558\ See id.
    \1559\ See Submission from Source 11, to H. Comm. on the Judiciary, 
2 (Oct. 14, 2019) (on file with Comm.) (``Amazon has amassed at least a 
50% share of the ecommerce market and continues to expand, both its 
market share and the breadth of its offerings.''); Pymnts.com, Walmart 
vs. Amazon, Whole Paycheck Tracker: Battle for the Digital First 
Consumer 6 (2020), https://securecdn.pymnts.com/wp-content/uploads/
2020/09/Amazon-Walmart-Whole-Paycheck-092020.pdf (estimating Amazon's 
market share at 51.2 percent in Q1 2020 and 44.4 percent in Q2 2020, 
but noting U.S. e-commerce increased by 44 percent over the same 
period, and that ``[f]or Amazon to drop only 7 percent in total 
eCommerce share with that kind of overall increase is actually quite an 
achievement'').
---------------------------------------------------------------------------
    In a number of key product categories, ranging from 
household essentials to sports, fitness and outdoors, Amazon is 
reported to account for well over 50 percent of online 
sales.\1560\ The platform also has significant market power 
over the entire book industry, including sales, distribution, 
and publishing. In the U.S. market, Amazon accounts for over 
half of all print book sales and over 80 percent of e-book 
sales.\1561\
---------------------------------------------------------------------------
    \1560\ See, e.g., Kimberly Collins, Google + Amazon: Data on Market 
Share, Trends, Searches from Jumpshot, Search Engine Watch (Aug. 1, 
2019), https://www.searchenginewatch.com/2019/08/01/amazon-google-
market-share/; see also J.P. Morgan, Retail vs. Amazon: Life in a Post 
COVID-19 World 13 (2020) (Amazon's market share of online sales of 
``Books & Magazines'' is 75 percent).
    \1561\ See, e.g., Ben Evans, What's Amazon's Market Share?, 
Benedict Evans, https://www.ben-evans.com/benedictevans/2019/12/
amazons-market-share19#:#:text=Amazon%20has%
2050%25%20or%20more,it%20has%20over%2050%25 (``Amazon has 50% or more 
of the US print book market.''); Submission from Source 17, to H. Comm. 
on the Judiciary, 33 (Nov. 14, 2019) (on file with Comm.) (``Amazon 
accounts for roughly 83 percent of all e-book sales, about 90 percent 
of online print sales, and about 90 percent of digital audiobook 
sales.''); Dig. Competition Expert Panel Report at 30 (``In the e-book 
market, Amazon was reported in February 2017 to account for around 88% 
of total annual unit sales.'').
---------------------------------------------------------------------------
    Amazon is the dominant online marketplace. It reportedly 
controls about 65-70 percent of all U.S. online marketplace 
sales.\1562\ The platform's market power is at its height in 
its dealings with third-party sellers, as well as many of its 
suppliers, which Amazon refers to as vendors. Increasingly, 
Amazon is also gaining market power in certain business-to-
business (B2B) online markets through Amazon Business, its B2B 
marketplace.\1563\
---------------------------------------------------------------------------
    \1562\ Submission from Top Shelf Brands, to H. Comm. on the 
Judiciary, 26 (Oct. 26, 2019) (on file with Comm.) (citing Dig. 
Commerce 360, 2019 Online Marketplaces Report).
    \1563\ See Marketplace Pulse, Marketplaces Year in Review 48 
(2019), https://cdn .marketplacepulse.com/misc/marketplaces-year-in-
review-2019.pdf (``Amazon's `business-to-business,' or B2B, marketplace 
is gaining market share faster than its retail operation.''); Phone 
Interview with Nat'l Ass'n of Wholesaler-Distributors (Sept. 3, 2020); 
Stacy Mitchell & Olivia Lavecchia, Report: Amazon's Next Frontier: Your 
City's Purchasing 4 (2018), https://ilsr.org/amazon-and-local-
government-purchasing/ (``Amazon is leveraging its growing relationship 
with local governments to induce more businesses to join its 
Marketplace.'').
---------------------------------------------------------------------------
    In response to the Committee's requests for information, 
Amazon claims that ``estimates of total retail share are the 
most appropriate and relevant method of estimating'' Amazon's 
market share.\1564\ This approach is inconsistent with evidence 
gathered by the Subcommittee, conventional antitrust analysis 
of relevant product markets, and common sense. In a recent 
investigation, for example, the FTC concluded that a ``relevant 
market may be divided by channel of sale, resulting in separate 
markets for brick-and-mortar sales and online sales.'' \1565\ 
Illustrating the extent of Amazon's overly broad approach to 
identifying the relevant market and its top competitors, in 
response to the Committee's request for ``[a] list of the 
Company's top ten competitors,'' Amazon identified 1,700 
companies, including Eero (a company Amazon owns), a discount 
surgical supply distributor, and a beef jerky company.\1566\
---------------------------------------------------------------------------
    \1564\ Submission from Amazon, to H. Comm. on the Judiciary, 3 
(Oct. 14, 2019).
    \1565\ See Complaint at 4, In re Edgewell Personal Care Co., No. 
9390 (Fed. Trade Comm'n Feb. 2, 2020), https://www.ftc.gov/system/
files/documents/cases/public_p3_complaint_-_edge
well-harrys.pdf.
    \1566\ See Submission from Amazon, to H. Comm. on the Judiciary, 17 
(Oct. 14, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Amazon also included single-category companies in response 
to the Committee's request for a list of Amazon's top ten 
competitors. Yet documents produced by Amazon suggest that even 
in its early days it did not view such retailers as direct 
competitors. For instance, a recap of an Amazon marketing 
presentation identified one of its key points as: ``No direct 
competitors, closest competitors would be what you refer to as 
category driven, i.e. Best Buy, Barnes and Noble . . .  etc.'' 
\1567\
---------------------------------------------------------------------------
    \1567\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-0059575 (Nov. 22, 2010) (on file with Comm.).
---------------------------------------------------------------------------
    Regardless of the precise boundaries of e-commerce or 
online marketplaces, the sum of evidence that the Subcommittee 
examined demonstrates that Amazon functions as a gatekeeper for 
e-commerce. Amazon is the most-visited website in the world for 
e-commerce and shopping.\1568\ In a submission to the 
Committee, an e-commerce market participant said that ``many of 
the 64% of American households that have Prime memberships are 
effectively locked into Amazon for their online shopping.'' 
\1569\ Meanwhile, recent market analysis suggests that over 60 
percent of all online product searches in the U.S. begin on 
Amazon.com.\1570\
---------------------------------------------------------------------------
    \1568\ Similarweb, Worldwide E-Commerce and Shopping Category 
Performance (July 2020), https://pro.similarweb.com/#/industry/
overview/E-commerce_and_Shopping/999/1m/?webSource=Total (Amazon had 
2.6 billion visits in July 2020 compared to 940.8 million visits for 
eBay).
    \1569\ Submission from Source 11, to H. Comm. on the Judiciary, 5 
(Oct. 14, 2019) (on file with Comm.).
    \1570\ Lucy Koch, Looking for a New Product? You Probably Searched 
Amazon, Emarketer (Mar. 31, 2019), https://www.emarketer.com/content/
looking-for-a-new-product-you-probably-searched-amazon (citing 
Feedvisor, The 2019 Amazon Consumer Behavior Report 14 (2019)); see 
also Wunderman Thompson, The Future Shopper Report 2020, at 11 (2020), 
https://
insights.wundermanthompsoncommerce.com/hubfs/@UK/Landing%20Pages/2020/
The%20
Future%20Shopper%202020/WTC%20-
%20The%20Future%20Shopper%20Report%202020.pdf.
---------------------------------------------------------------------------
    At the Subcommittee's hearing on innovation and 
entrepreneurship, Stacy Mitchell, the Co-Director of the 
Institute for Local Self-Reliance, described one independent 
retailer's attempt to survive in e-commerce independent of 
Amazon:

     LAs its customers moved online, so too did the company. 
Gazelle Sports built a robust e-commerce site. With scores of 
enthusiastic reviews on Google and Yelp, the site came right up 
in online searches, yielding a brisk stream of customers and 
sales.

     LBut, in 2014, sales began to decline. The problem was 
that many people in Michigan and across the country were no 
longer starting their online shopping on a search engine, where 
they might find Gazelle Sports. Instead, they were going 
straight to Amazon. By 2016, the share of online shoppers 
bypassing search engines and beginning their product search on 
Amazon had grown to 55 percent. With sales flagging and staff 
reductions underway, the owner of Gazelle Sports . . . made 
what seemed like a necessary decision: Gazelle Sports would 
join Amazon Marketplace, becoming a third-party seller on the 
digital giant's platform. ``If the customer is on Amazon, as a 
small business you have to say, `That is where I have to go,' 
'' he explained. ``Otherwise, we are going to close our 
doors.'' \1571\
---------------------------------------------------------------------------
    \1571\ Innovation and Entrepreneurship Hearing at 190-191 
(statement of Stacy F. Mitchell, Co-Dir., Inst. for Local Self-
Reliance).

    Interviews with sellers, as well as documents that the 
Subcommittee reviewed, make clear that Amazon has monopoly 
power over most third-party sellers and many of its 
suppliers.\1572\ Numerous sellers told the Subcommittee in 
interviews that they cannot turn to alternative marketplaces, 
regardless of how much Amazon may increase their costs of doing 
business or how badly they are treated. David Barnett, the CEO 
and Founder of PopSockets, a former third-party seller and 
current Amazon supplier, testified about Amazon's coercive 
tactics at one of the Subcommittee's hearings:
---------------------------------------------------------------------------
    \1572\ See, e.g., Submission from Top Shelf Brands, to H. Comm. on 
the Judiciary, 49 (Oct. 26, 2019) (``98% of all of Top Shelf's 
transaction[s] has taken place on Amazon's platform.''); see also Dig. 
Competition Expert Panel Report at 30 (``Regardless of the view on 
dominance over a particular defined market, it is clear that for 
thousands of smaller independent online sellers in particular, Amazon's 
marketplace is a strategically important gateway to consumers.'').

     LI suspect that Amazon is accustomed to behaving this way 
because most brands cannot afford to leave Amazon. They 
evidently have no choice but to endure tactics that would be 
rejected out of hand in any ordinary relationship whereby the 
two parties enter into the relationship by preference rather 
than necessity.\1573\
---------------------------------------------------------------------------
    \1573\ Competitors Hearing at 20 (statement of David Barnett, CEO & 
Founder, PopSockets LLC).

    Sellers feel forced to be on Amazon because that is where 
the buyers are.\1574\ At the Subcommittee's sixth hearing, 
Representative Lucy McBath (D-GA) noted that the evidence the 
Subcommittee collected is at odds with how Amazon describes its 
relationship with third-party sellers. She asked Mr. Bezos:
---------------------------------------------------------------------------
    \1574\ Submission from Source 11, to H. Comm. on the Judiciary, 5 
(Oct. 14, 2019) (on file with Comm.).

     L[Y]ou referred to third party sellers today as ``Amazon's 
partners'' and that your success depends on their success. But, 
over the past year, we've heard a completely different story. 
As part of this investigation, we've interviewed many small 
businesses, and they use the words like ``bullying,'' ``fear,'' 
and ``panic'' to describe their relationship with Amazon . . . 
. You said that sellers have many other attractive options to 
reach customers, but that's not at all what we found in our 
investigation . . . . If Amazon didn't have monopoly power over 
these sellers, do you think they would choose to stay in a 
relationship that is characterized by bullying, fear, and 
panic? \1575\
---------------------------------------------------------------------------
    \1575\ CEO Hearing at 114-15 (question of Rep. Lucy McBath (D-GA), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).

Mr. Bezos responded that ``there are a lot of options'' for 
sellers, and that ``[t]here are more and more every day.'' 
\1576\ This claim is inconsistent with the Subcommittee's 
investigative record. In a submission to the Committee, the 
Online Merchants Guild, a trade association for small- and 
medium-sized online sellers, said that its members who try to 
diversify sales across multiple platforms often report that 
they are unable to generate many sales outside of Amazon.\1577\
---------------------------------------------------------------------------
    \1576\ Id. at 115 (statement of Jeff Bezos, CEO, Amazon.com, Inc.).
    \1577\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 4 (Oct. 23, 2019) (on file with Comm.) (``Members who sell 
across multiple platforms often report the amount of revenue generated 
outside of Amazon including their own eCommerce site, is insignificant, 
with over 90% of their sales being generated on the platform.''); see 
also Submission from Top Shelf Brands, to H. Comm. on the Judiciary, 
60-61 (Oct. 26, 2019) (explaining that it has ``no viable 
alternatives'' to Amazon, where 98 percent of its transactions have 
taken place on Amazon's platform, eBay accounts for one percent of its 
income, and Walmart accounts for less than one percent).
---------------------------------------------------------------------------
    An important limit on a seller's ability to switch from 
selling on Amazon to selling on its own site or a competing 
platform is that Amazon generally forbids sellers from 
contacting their customers.\1578\ The packaging and even the 
order confirmation email for third-party sales feature the 
Amazon brand prominently and do not reference the seller. A 
typical Amazon customer is unaware of the source of the 
sale.\1579\ According to the Online Merchants Guild, ``Many 
Amazon sellers use websites such as Shopify to try and 
establish their own eCommerce presence, but without the ability 
to market to their supposed core customer base, their Amazon 
customers, it's pretty futile.'' \1580\
---------------------------------------------------------------------------
    \1578\ Selling Polices and Seller Code of Conduct, Amazon Seller 
Cent., https://sellercentral.amazon.com/gp/help/external/
G1801?language=en_US&ref=efph_G1801_cont
_200386250 (last visited Sept. 28, 2020); see also Submission from 
Source 100, to H. Comm. on the Judiciary (Sept. 26, 2020) (raising 
concerns that Amazon permits itself to contact customers about negative 
reviews for Amazon-branded products, while third-party sellers are 
largely barred from customer engagement).
    \1579\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 4 (Oct. 23, 2019) (on file with Comm.); see also Submission 
from Source 11, to H. Comm. on the Judiciary, 3 (Oct. 14, 2019) (on 
file with Comm.) (explaining that, ``[w]henever an order is shipped 
through [Fulfillment by Amazon], even if the purchase is made through 
another marketplace, it is likely to arrive in an Amazon-branded box, 
creating confusion'' for customers).
    \1580\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 5 (Oct. 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    The Subcommittee heard from several market participants 
that Amazon also has significant market power over suppliers. 
For example, third-party sellers told the Subcommittee that 
Amazon frequently ignores manufacturer policies that bind 
sellers.\1581\ For example, brand manufacturers may establish 
minimum advertised pricing guidelines (MAP) to prevent online 
retailers from freeriding off brick-and-mortar stores' 
investments in product display or expertise--such as how to fit 
a running shoe. Amazon's leverage over suppliers gives it the 
ability to ``break'' minimum advertised pricing rules and 
undercut competing sellers on price. In contrast, third-party 
sellers must abide by the rules. As a former third-party seller 
explained, ``Given Amazon's immense clout, we believe that 
suppliers have no realistic threat to stop selling on Amazon in 
response to Amazon `breaking' MAP.'' \1582\ Amazon's internal 
documents suggest that it does not fear any consequences for 
failing to comply with most vendor policies.\1583\
---------------------------------------------------------------------------
    \1581\ See, e.g., Phone Interview with Source 84 (Mar. 4, 2020).
    \1582\ Submission from Source 48, to H. Comm. on the Judiciary, 8 
(Nov. 8, 2019) (on file with Comm.).
    \1583\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00151722 (Feb. 9, 2009) (on file with Comm.) 
(``[P]lease audit that we are price matching . . . any diapers.com 
pricing. If this puts us in the soup with P&G on their pampers map 
price, so be it.''); id. at AMAZON-HJC-00206714 (Mar. 8, 2018) (``Why 
did Walmart break MAP and we didn't?'').
---------------------------------------------------------------------------
    Another way that Amazon leverages its market power is to 
force certain brand manufacturers that would prefer to be 
third-party sellers into being wholesalers. A discussion among 
Amazon executives suggests that certain brands may only be 
allowed to have a wholesale relationship with Amazon even if 
the brand would prefer to be a third-party seller. In 2016, 
Sebastian Gunningham, then senior vice president of Amazon 
Marketplace, commented on a list of proposed seller tenets, ``I 
would add that there are x,000 suppliers around the world that 
do not get this choice . . . I am talking about the apple, 
nikes and p&g, etc . . . . We don't want to open that door, 
relationship has to be reseller.'' \1584\ Consistent with this 
stance, Popsockets CEO and Founder David Barnett testified that 
Amazon attempted to force him into maintaining a wholesale 
relationship with Amazon Retail despite his preference to be a 
third-party seller or make sales on the marketplace through an 
authorized distributor.\1585\ A former Amazon employee 
confirmed that it was not uncommon for Amazon to use its brand 
standards policy to shut down a brand's third-party seller 
account and force brands into an exclusive wholesaler 
relationship.\1586\
---------------------------------------------------------------------------
    \1584\ Id. at AMAZON-HJC-00190108 (June 6, 2016) (on file with 
Comm.).
    \1585\ Competitors Hearing at 20 (statement of David Barnett, CEO & 
Founder, PopSockets LLC).
    \1586\ Submission from Source 91, to H. Comm. on the Judiciary 
(Sept. 22, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    Amazon also enjoys significant market power over online 
consumers. Amazon uses Prime and its other membership programs 
to lock consumers into the Amazon ecosystem. According to an 
internal analysis, Amazon was willing to pay a credit card 
company a significant sum in 2013 for signing up new Prime 
members under the assumption that each new member would 
contribute $527 to Amazon's gross merchandise sales and $46 of 
gross profit.\1587\ Amazon estimated that the deal had a five-
year net present value of $17 million, assuming that it 
delivered 100,000 paid Prime members.\1588\
---------------------------------------------------------------------------
    \1587\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00199845 (Oct. 23, 2013) (on file with Comm.).
    \1588\ Id.
---------------------------------------------------------------------------
    Once Prime members pay the upfront annual membership fee, 
they are likely to concentrate their online purchases with 
Amazon.\1589\ According to a recent survey, Prime members spend 
an average of $1,400 annually on Amazon, versus $600 for non-
members.\1590\ As one market participant observed, ``Prime 
members will continue to use Amazon and not switch to competing 
platforms, despite higher prices and lower-quality items on 
Amazon compared to other marketplaces, and despite recent 
increases in the price of a Prime membership.'' \1591\
---------------------------------------------------------------------------
    \1589\ See Submission from Source 11, to H. Comm. on the Judiciary, 
3 (Oct. 14, 2019) (on file with Comm.) (``Amazon has been quite frank 
about the reality that once consumers invest in Prime, they do most of 
their online shopping on Amazon in order to gain value from the 
investment in shipping, whereas they might otherwise multisource.'').
    \1590\ Tonya Garcia, Amazon Prime Membership Exceeds 100 Million, 
Marketwatch (Jan. 17, 2019), https://www.marketwatch.com/story/amazon-
prime-membership-exceeds-100-million-2019-01-17; see also Brian 
Olsavsky, Senior Vice President & Chief Fin. Officer, Amazon.com, Inc., 
Q1 2020 Earnings Call (Apr. 30, 2020, 5:30 p.m.) (``We see our Prime 
customers are shopping more often and they have larger basket 
sizes.'').
    \1591\ Submission from Source 11, to H. Comm. on the Judiciary, 3 
(Oct. 14, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Other retailers are unable to match Amazon on its ability 
to provide free and fast delivery for such a large volume and 
inventory of products. Even Walmart, with its extensive 
national distribution network, does not come close to matching 
Amazon on this measure.\1592\ Amazon currently offers Prime 
members free, next-day delivery on over 10 million items 
anywhere in the continental United States.\1593\ Walmart, by 
contrast, has only about 200,000 products eligible for two-day 
shipping in select markets.\1594\
---------------------------------------------------------------------------
    \1592\ See J.P. Morgan, Retail vs. Amazon: Life in a Post COVID-19 
World (2020), https://markets.jpmorgan.com/research/email/-lbk68f4/
Alp1kP9tQUPS29jlzW_bOg/GPS-3397412-0 (``We believe there are no 
comparable unlimited free shipping offerings available at scale, with 
Amazon's large and growing infrastructure investments serving as a 
significant barrier to entry.'').
    \1593\ Prime, Amazon, https://www.amazon.com/
b?ie=UTF8&node=15247183011 (last visited Sept. 28, 2020) (``Free One-
Day Delivery . . . . Available coast-to-coast on more than 10 million 
items with no minimum purchase.'').
    \1594\ Press Release, Marc Lore, President & CEO, Walmart eCommerce 
US, Free NextDay Delivery Without a Membership Fee (May 14, 2019), 
https://corporate.walmart.com/newsroom/2019/05/14/free-nextday-
delivery-without-a-membership-fee; Walmart Help Center: NextDay 
Delivery, Walmart, https://www.walmart.com/help/article/nextday-
delivery/fd3f1c5cf0ec4682
abca8c83f5f0e977 (last visited Sept. 28, 2020) (``Currently, NextDay 
Delivery is only available in select markets.'').
---------------------------------------------------------------------------
    Amazon's market power is durable and unlikely to erode in 
the foreseeable future. There are several factors that make 
successful entry or expansion by a challenger to Amazon 
unlikely. Barriers to entry include: (1) network effects, which 
make it difficult for another marketplace to achieve a 
comparable number of buyers and sellers; (2) switching costs 
associated with consumers shopping outside of the Amazon 
ecosystem; and (3) the steep costs of building a logistics 
network comparable in size and scope to Amazon's massive 
international footprint in fulfillment and delivery. Amazon's 
internal documents recognize that entry into online commerce 
``require[s] significant incremental investments in brand 
development, inventory, and marketing/customer acquisition.'' 
\1595\ Further, Amazon expanded its market power by avoiding 
taxes, extracting state subsidies, and engaging in 
anticompetitive conduct--tactics that have given the company an 
unfair advantage over actual and potential competitors.
---------------------------------------------------------------------------
    \1595\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00154659 (Nov. 23, 2010) (on file with Comm.).
---------------------------------------------------------------------------
    As the COVID-19 pandemic pushes more American shoppers 
online, Amazon's market power has grown. Evidence shows that 
Amazon is willing to use its increased market power in e-
commerce during this crisis to exert pressure on suppliers and 
favor its own first-party products over those sold by third-
party sellers. Amazon initially responded to the sudden surge 
in sales by refusing to accept or deliver non-essential 
supplies from its third-party sellers--a stance that would seem 
reasonable except that Amazon continued to ship its own non-
essential products while restricting third-party sellers' 
ability to use alternative distribution channels to continue 
selling through Prime.\1596\ As for suppliers, the Subcommittee 
heard concerns that the platform used its power as a large 
buyer to pressure suppliers into prioritizing Amazon over other 
retail customers such as independent grocers.\1597\ Meanwhile, 
numerous reports suggest that Amazon is in talks to convert 
real estate in vacated malls into additional Amazon 
distribution centers, further highlighting how it will continue 
to amass further scale even as its brick-and-mortar 
counterparts crater.\1598\
---------------------------------------------------------------------------
    \1596\ Ron Knox & Shaoul Sussman, How Amazon Used the Pandemic to 
Amass More Monopoly Power, Nation (June 26, 2020), https://
www.thenation.com/article/politics/amazon-bezos-pandemic-monopoly/.
    \1597\ Phone Interview with Nat'l Grocers Ass'n (May 28, 2020) 
(raising concerns that Amazon and some Big Box retailers may have used 
their buyer power over suppliers during the pandemic to secure 
inventory at the expense of smaller businesses); Letter from Int'l Bhd. 
of Teamsters, Commc'n Workers of Am., United Food & Commercial Workers 
Int'l Union & Change to Win, to Comm'rs of the Fed. Trade Comm'n, 6 
(July 23, 2020) (stating that, if seller reports are true, ``Amazon's 
hold over sellers effectively took food from the shelves of 
neighborhood grocery stores . . . and moved it to Amazon's own 
warehouses, where it earned fees for Amazon''); see also Renee Dudley, 
The Amazon Lockdown: How an Unforgiving Algorithm Drives Suppliers to 
Favor the E-Commerce Giant over Other Retailers, ProPublica (Apr. 26, 
2020), https://www.propublica.org/article/the-amazon-lockdown-how-an-
unforgiving-algorithm-drives-suppliers-to-favor-the-e-commerce-giant-
over-other-retailers.
    \1598\ Esther Fung & Sebastian Herrera, Amazon and Mall Operator 
Look at Turning Sears, J.C. Penney Stores into Fulfillment Centers, 
Wall St. J. (Aug. 9, 2017), https://www.wsj.com/articles/amazon-and-
giant-mall-operator-look-at-turning-sears-j-c-penney-stores-into-
fulfillment-centers-11596992863.

    (b) Merger Activity. Amazon's acquisition strategy has 
primarily focused on purchasing its competitors and companies 
that operate in adjacent markets, providing access to 
additional valuable customer data. This strategy has 
effectively protected and expanded Amazon's market power in e-
commerce and helped Amazon extend that power to other markets.
    Over the past two decades, Amazon has acquired at least 100 
companies.\1599\ It has been particularly aggressive over the 
past few years, making deals that are bigger and more ambitious 
relative to its historical approach.\1600\ In 2017, the company 
made its largest acquisition to date by purchasing Whole Foods 
for $13.7 billion.\1601\ Amazon's other large purchases include 
Ring, which it bought for $1.2 billion in 2018; PillPack, which 
it bought for $1 billion in 2018; and Zappos, which it bought 
for $1.2 billion in 2009.\1602\ Over the years, Amazon has 
acquired an assortment of highly recognizable companies, 
including IMDB.com, which it bought in 1998; Audible, which it 
bought in 2008; Goodreads, which it bought in 2013; and Twitch, 
which it bought in 2014.\1603\
---------------------------------------------------------------------------
    \1599\ See infra Appendix.
    \1600\ Infographic: Amazon's Biggest Acquisitions, CB Insights 
(June 19, 2019), https://www.cbinsights.com/research/amazon-biggest-
acquisitions-infographic/.
    \1601\ Id.
    \1602\ Id.
    \1603\ Amazon Acquisitions, Microacquire, https://acquiredby.co/
amazon-acquisitions/ (last visited Oct. 3, 2020).
---------------------------------------------------------------------------
    Amazon's acquisition strategy has led to fewer choices for 
consumers in terms of differentiated online retail channels, as 
well as reduced competitive pressure in terms of price and 
quality. Additionally, Amazon's expansion into a diverse array 
of business lines--from brick-and-mortar supermarkets to home 
security--has reinforced its significant stockpile of consumer 
data. With more data about online and offline consumer 
behavior, Amazon's acquisitions set in motion a self-
reinforcing cycle, creating an ever-widening gap between the 
platform and its competitors. As one former Amazon employee 
told the Subcommittee, ``Amazon is first and foremost a data 
company[;] they just happen to use it to sell stuff.'' \1604\
---------------------------------------------------------------------------
    \1604\ Interview with Source 91 (May 8, 2020); see also Submission 
from Artist Rights Alliance, to H. Comm. on the Judiciary, 2 (July 31, 
2019) (on file with Comm.) (``With respect to the music world, at the 
heart of this problem lies a simple, economic truth--companies like . . 
. Amazon are not music businesses. They are advertising platforms and 
data machines. As our then-President, Melvin Gibbs, told the New York 
Times back in 2017, `None of these companies that are supposedly in the 
music business are actually in the music business. They are in the 
data-aggregation business. They're in the ad-selling business. The 
value of music means nothing to them.' '').
---------------------------------------------------------------------------
    Over its history, Amazon has acquired a number of its 
rivals.\1605\ A decade ago, Amazon acquired two of its direct 
competitors: Zappos and Quidsi.\1606\ Documents reviewed by the 
Subcommittee show that Amazon viewed both online retailers as 
competitive threats prior to acquiring them.
---------------------------------------------------------------------------
    \1605\ See Stigler Report at 75 n.152 (``The number of potential 
competitors purchased by the tech giants is large. For example, Amazon 
has purchased Zappos, Fabric, CDNow, Quorus, Audible, Goodreads, and 
Quidsi.''); Tim Wu, The Curse of Bigness: Antitrust in the New Gilded 
Age 124 (2018) (``Amazon acquired would-be competitors like Zappos, 
Diapers.com, and Soap.com.'').
    \1606\ Amazon Closes Zappos Deal, Ends Up Paying $1.2 Billion, 
TechCrunch (Nov. 2, 2009), https://techcrunch.com/2009/11/02/amazon-
closes-zappos-deal-ends-up-paying-1-2-billion/; Confirmed: Amazon 
Spends $545 Million on Diapers.com Parent Quidsi, TechCrunch (Nov. 8, 
2010), https://techcrunch.com/2010/11/08/confirmed-amazon-spends-545-
million-on-diapers-com-parent-quidsi/.
---------------------------------------------------------------------------
    Amazon's 2009 acquisition of Zappos, an online shoe 
retailer, marked the company's first $1 billion-plus 
purchase.\1607\ Acquiring Zappos provided Amazon with two 
important advantages. First, it enabled Amazon to add 
significant selection to its category of shoes and other 
fashion-related items at a time when expanding its selection 
was critical to the company's success.\1608\ The added 
selection included access to ``hold-out'' brands, which had 
previously refused to sell on Amazon.com or Amazon's other 
online retail store Endless.com.\1609\ Second, Zappos's unique 
approach to customer service, marked by ``a deeply felt 
connection with customers,'' added an emotional and 
psychological element to Amazon's relationship with 
consumers.\1610\ An Amazon internal planning document from 2008 
referred to Zappos as one of Endless's ``primary competitors,'' 
and noted that ``Zappos offers the largest selection of brands 
and styles and carries all of our top holdouts including Nike, 
Merrell, Keen, Cole Haan and Michael Kors.'' \1611\
---------------------------------------------------------------------------
    \1607\ Eric Engleman, Amazon and Zappos, Six Months Later: How 
They're Fitting Together, Puget Sound Bus. J. (May 21, 2010), https://
www.bizjournals.com/seattle/blog/techflash/2010/05/
amazon_and_zappos_how _theyre_fitting_together.html.
    \1608\ Bill Taylor, Amazon and Zappos: A Savvy Deal, Harv. Bus. 
Rev. (July 23, 2009), https://hbr.org/2009/07/a-savvy-deal-from-amazon-
to-za.
    \1609\ Alistair Barr, Amazon to Close Fashion Website Endless.com, 
Reuters: Indus., Materials & Utils. (Sept. 18, 2012), https://
www.reuters.com/article/amazon-endless/amazon-to-close-fashion-website-
endless-com-idUSL1E8KINKD20120918 (quoting an Amazon spokesman who 
stated that Amazon shut down Endless.com as an independent site in 2012 
and incorporated it into Amazon's main website, Amazon.com, ``in order 
to focus on the Amazon Fashion experience'').
    \1610\ Bill Taylor, Amazon and Zappos: A Savvy Deal, Harv. Bus. 
Rev. (July 23, 2009), https://hbr.org/2009/07/a-savvy-deal-from-amazon-
to-za.
    \1611\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00170649 (Sept. 23, 2008) (on file with Comm.).
---------------------------------------------------------------------------
    About a year later, Amazon acquired Quidsi, the parent 
company of Diapers.com and Soap.com, for about $540 
million.\1612\ Prior to buying it, Amazon identified 
Diapers.com as its ``largest and fastest growing competitor in 
the on-line diaper and baby care space,'' \1613\ and its ``#1 
short term competitor.'' \1614\ Amazon's internal documents 
said that Diapers.com ``keep[s] the pressure on pricing on us'' 
and provided extremely high customer service levels, which--
prior to the merger--had forced Amazon to up its game.\1615\ 
Amazon executives took swift and predatory action in response 
to this competitive threat. As Representative Mary Gay Scanlon 
(D-PA) summarized at the Subcommittee's sixth hearing, Amazon's 
internal documents ``show that Amazon employees began 
strategizing about ways to weaken this company, and, in 2010, 
Amazon hatched a plot to go after Diapers.com and take it 
out.'' \1616\ Specifically, Amazon's documents show that the 
firm entered into an aggressive price war, in which Amazon was 
willing to bleed over $200 million in losses on diapers in one 
month.\1617\ Addressing Mr. Bezos, Representative Scanlon 
added, ``Your own documents make clear that the price war 
against Diapers.com worked, and within a few months it was 
struggling, and so then Amazon bought it.'' \1618\
---------------------------------------------------------------------------
    \1612\ Claire Cain Miller, Amazon Has a Reported Deal to Buy Parent 
of Diapers.com, N.Y. Times (Nov. 7, 2010), https://www.nytimes.com/
2010/11/08/technology/08amazon.html.
    \1613\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00142833 (May 12, 2009) (on file with Comm.).
    \1614\ Id. at AMAZON-HJC-00151722 (Feb. 9, 2009).
    \1615\ Id. at AMAZON-HJC-00151722 to -00151724.
    \1616\ CEO Hearing at 109 (question of Rep. Mary Gay Scanlon (D-
PA), Vice Chair, H. Comm. on the Judiciary).
    \1617\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00057007 (Apr. 5. 2010) (on file with Comm.).
    \1618\ CEO Hearing at 110 (question of Rep. Mary Gay Scanlon (D-
PA), Vice Chair, H. Comm. on the Judiciary).
---------------------------------------------------------------------------
    In 2017, Amazon shut down Diapers.com, citing profitability 
issues, though some industry experts questioned the legitimacy 
of this rationale.\1619\ In shutting down the company, Amazon 
eliminated a differentiated online retailer that consumers 
loved \1620\--reducing the number of online options for 
consumers in the diaper and baby care markets. Further, it 
eliminated a potential competitor in other verticals such as 
household goods, toys, and pets.\1621\
---------------------------------------------------------------------------
    \1619\ See, e.g., Jason Del Rey, Why Amazon's Explanation for 
Shutting Down Diapers.com and Quidsi Stunned Employees, Vox: Recode 
(Apr. 2, 2017), https://www.vox.com/2017/4/2/15153844/amazon-quidsi-
shutdown-explanation-profits.
    \1620\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00034097 (Nov. 8, 2010) (on file with Comm.) 
(email from Diapers.com founder Vinit Bharara forwarding a customer 
testimonial in the form of a poem titled ``An Ode to Diapers.com,'' 
beginning, ``Oh how do I love thee, my Diapers.com?'' and ending with 
``Don't ever leave me, my Diapers.com'').
    \1621\ Id. at AMAZON-HJC-00154656 (noting that, ``[a]lthough Quidsi 
is still primarily an online baby care specialty retailer, it has 
recently begun selling new items such as household goods and personal-
care products with the launch of Soap.com . . . . In the future, 
management intends to launch additional vertical shopping categories 
such as beauty, toys and pets.''); id. at AMAZON-HJC-00132026 (June 8, 
2010) (email from Doug Herrington, Vice President of Consumables, to 
Jeff Bezos stating, ``While we find no evidence that alice.com has 
gotten traction with vendors or customers, and can't see an economic 
model for them that pencils out, soap.com feels like a more credible 
threat'').
---------------------------------------------------------------------------
    More recently, Amazon acquired Whole Foods, a strategic 
move to acquire both a competitor \1622\ and a new source of 
customer data.\1623\ Amazon purchased Whole Foods at around 
$13.7 billion, more than 10 times the cost of its second-most 
expensive acquisition.\1624\ In addition to bolstering its 
position in the grocery market, Amazon's purchase of Whole 
Foods expanded its touchpoints with Prime members and gave it 
access to a unique set of customer information.\1625\ 
Specifically, the deal enabled Amazon to monitor and compile 
data on how the same person shops both online and in person, 
data that is particularly useful for targeted advertising and 
promotional campaigns.\1626\
---------------------------------------------------------------------------
    \1622\ Id. at AMAZON-HJC-00172932 (June 22, 2017) (showing analysis 
that, for Amazon Fresh customers who don't do 100 percent shopping on 
Amazon Fresh, Whole Foods is consistently among the top 5 stand-alone 
national chains where Amazon Fresh customers do their grocery 
shopping).
    \1623\ Lauren Hirsch, A Year After Amazon Announced Its Acquisition 
of Whole Foods, Here's Where We Stand, CNBC (June 15, 2018), https://
www.cnbc.com/2018/06/15/a-year-after-
amazon-announced-whole-foods-deal-heres-where-we-stand.html.
    \1624\ Infographic: Amazon's Biggest Acquisition, CB Insights (June 
19, 2019), https://www.cbinsights.com/research/amazon-biggest-
acquisitions-infographic/.
    \1625\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00172090 (June 22, 2017) (on file with Comm.) (``[A] survey 
said about 45% of [Whole Foods Market] customers are Prime; and about 
20% of Prime members shop at [Whole Foods Market].''); id. at AMAZON-
HJC-00173652 (June 23, 2017) (on file with Comm.) (``Based on our 
survey results, we estimate that approximately 46% of Prime members 
have shopped at a [Whole Foods] store in the last four weeks.'').
    \1626\ Lauren Hirsch, A Year After Amazon Announced Its Acquisition 
of Whole Foods, Here's Where We Stand, CNBC (June 15, 2018), https://
www.cnbc.com/2018/06/15/a-year-after-
amazon-announced-whole-foods-deal-heres-where-we-stand.html.
---------------------------------------------------------------------------
    While the deal was under review by the FTC, then-Ranking 
Member Cicilline raised concerns that ``the proposed 
acquisition w[ould] result in additional consolidation in the 
retail sector, erode American jobs through increased 
automation, and threaten local communities through diminished 
economic opportunity for hardworking Americans.'' \1627\ 
Amazon's acquisition of Whole Foods has added to the platform's 
market power in retail by increasing its buyer power over 
suppliers,\1628\ adding to the platform's capabilities in 
online grocery, and expanding the company's brick-and-mortar 
retail footprint. In addition, it appears that concerns about 
diminished economic opportunities may have been well-founded as 
Amazon reportedly plans to implement cashier-less technology 
across all of its Whole Foods stores.\1629\
---------------------------------------------------------------------------
    \1627\ Letter from Hon. David N. Cicilline, Ranking Member, 
Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. 
Comm. on the Judiciary, to Hon. Bob Goodlatte, Chair, H. Comm. on the 
Judiciary, & Hon. Tom Marino, Chair, Subcomm. on Regulatory Reform, 
Commercial and Antitrust Law of the H. Comm. on the Judiciary, 3 (July 
13, 2017), https://cicilline.house.gov/sites/cicilline.house.gov/files/
images/
Amazon_Whole_ Foods_Acquistion.pdf.
    \1628\ See, e.g., Interview with Source 153 (May 11, 2020); 
Interview with Nat'l Grocers Ass'n (May 28, 2020).
    \1629\ Taylor Lyles, Amazon Go's Cashierless Tech May Come to Whole 
Foods As Soon As Next Year, Verge (Aug. 24, 2020), https://
www.theverge.com/2020/8/24/21399607/amazon-cashier
less-go-technology-whole-foods-2021-rumor.
---------------------------------------------------------------------------
    In recent years, Amazon has also made several significant 
acquisitions of home security companies, further expanding its 
reach and visibility into Americans' homes. An Amazon executive 
described the company's in-home strategy by noting, ``Two 
senses matter--eyes and ears.'' \1630\ In 2017, Amazon paid $90 
million to acquire Blink, a home security camera company whose 
technology and energy-efficient chips could be used by Amazon 
in its Echo speakers and other products.\1631\ In 2018, Amazon 
spent $1.2 billion to acquire Ring, a home-security system 
spanning cameras, doorbells, and floodlights.\1632\ Ring's 
``eyes and ears'' add significant value to Amazon's smart home, 
allowing customers to virtually interact with Amazon delivery 
personnel and instruct them on where to drop off Amazon 
packages.\1633\ Amazon's significant investments in the 
Internet of Things ecosystem and its strategy, centered on 
Amazon's voice assistant, Alexa, are discussed in other parts 
of this Report.
---------------------------------------------------------------------------
    \1630\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00170877 (Oct. 11, 2017) (on file with Comm.).
    \1631\ Jeffrey Dastin, Amazon Quietly Dropped $90 Million on a 
Camera Startup Last Year to Acquire Its Unique Chip Technology, Bus. 
Insider (Feb. 12, 2018), https://www.business
insider.com/amazon-blink-camera-maker-acquisition-2018-2.
    \1632\ Dennis Green, Amazon's $1 Billion Acquisition of the Door 
Camera Startup Ring Is the Company Doing What It Does Best--and It 
Should Terrify Every Other Retailer, Bus. Insider (Mar. 3, 2018), 
https://www.businessinsider.com/why-amazon-acquired-ring-2018-3.
    \1633\ Id.
---------------------------------------------------------------------------
    Other notable acquisitions include Kiva Systems in 2012, 
which provided Amazon with a robotics company that accelerated 
its ability to streamline picking, packing, and shipping e-
commerce products; \1634\ and PillPack in 2018, which equips 
Amazon with an online pharmacy and marks its entry into the 
pharmaceutical market.\1635\
---------------------------------------------------------------------------
    \1634\ Leena Rao, Amazon Acquires Robot-Coordinated Order 
Fulfillment Company Kiva Systems for $775 Million in Cash, TechCrunch 
(Mar. 19, 2012), https://techcrunch.com/2012/03/19/amazon-acquires-
online-fulfillment-company-kiva-systems-for-775-million-in-cash/.
    \1635\ Christina Farr, The Inside Story of Why Amazon Bought 
PillPack in Its Effort to Crack the $500 Billion Prescription Market, 
CNBC (May 13, 2019), https://www.cnbc.com/2019/05/10/why-amazon-bought-
pillpack-for-753-million-and-what-happens-next.html.
---------------------------------------------------------------------------
    Amazon's acquisition of Kiva gave it power over an 
important input for competitors. When Amazon bought the 
robotics company, Kiva was supplying technology to a large 
number of retailers, including Gap, Staples, and 
Walgreens.\1636\ Many of these customers had invested a sunk 
cost of $4 million to $6 million per warehouse in order to make 
use of Kiva's technologies.\1637\ Kiva had promised to keep 
shipping its technology to non-Amazon customers--regardless of 
whether they competed with Amazon--but in 2015, Amazon 
rebranded the company as Amazon Robotics and announced it would 
stop servicing other firms.\1638\ Amazon stated that retailers 
seeking to use Kiva's robots would need to use Amazon Services 
to fulfill orders with Amazon's technology in Amazon's 
warehouses.\1639\
---------------------------------------------------------------------------
    \1636\ Evelyn M. Rusli, Amazon.com to Acquire Manufacturer of 
Robotics, N.Y. Times: Dealbook (Mar. 19, 2012), https://
dealbook.nytimes.com/2012/03/19/amazon-com-buys-kiva-systems-for-775-
million/.
    \1637\ Mick Mountz, Kiva the Disrupter, Harv. Bus. Rev. (Dec. 
2012), https://hbr.org/2012/12/kiva-the-disrupter.
    \1638\ Adam Putz, M&A Flashback: Amazon Announces $775 M Kiva 
Systems Acquisition, Pitchbook (Mar. 19, 2018), https://pitchbook.com/
news/articles/ma-flashback-amazon-
announces-775m-kiva-systems-acquisition.
    \1639\ Id.
---------------------------------------------------------------------------
    Documents the Subcommittee reviewed relating to the 
PillPack deal, meanwhile, give insight into how Amazon views 
some acquisitions as opportunities to collect additional 
customer data and to cross-sell across its different business 
lines. One Amazon executive summarized a potential upside of 
the PillPack deal, asking, ``Is there a cross-selling 
opportunity with amazon.com based on known maladies from 
prescriptions? Or is this prohibited by privacy law? My 
understanding is there is a number of different ways we could 
cross-sell customers in both directions (Rx< >non-Rx).'' \1640\ 
Though it is unclear whether, and the extent to which, Amazon 
implemented this strategy, the exchange reveals how Amazon 
assesses potential acquisitions and the cross-business 
opportunities they create, suggesting that the firm views its 
vast operations in a highly integrated manner.
---------------------------------------------------------------------------
    \1640\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00172665 (May 23, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    The FTC investigated several of these transactions, 
including Amazon's acquisition of Quidsi, the parent company of 
Diapers.com,\1641\ and Whole Foods.\1642\ The agency declined, 
however, to challenge any of them as a violation of antitrust 
law, despite: (1) strong evidence, in some cases, of direct 
head-to-head competition on price and quality between the 
merging firms; and (2) evidence that many of these mergers 
would enable Amazon to expand or entrench its market power, 
particularly in e-commerce. For most, if not all, of the 
acquisitions discussed in this Report, the FTC had advance 
notice of the deals but did not attempt to block any of them.
---------------------------------------------------------------------------
    \1641\ Letter from April Tabor, Acting Sec'y, Fed. Trade Comm'n, to 
Thomas Barnett, Covington & Burling LLP (Aug. 22, 2012).
    \1642\ Press Release, Fed. Trade Comm'n, Statement of Federal Trade 
Commission's Acting Director of the Bureau of Competition on the 
Agency's Review of Amazon.com, Inc.'s Acquisition of Whole Foods Market 
Inc. (Aug. 23, 2017), https://www.ftc.gov/news-events/press-releases/
2017/08/statement-federal-trade-commissions-acting-director-bureau.
---------------------------------------------------------------------------
    In addition to eliminating competitive threats, Amazon's 
acquisition strategy has expanded and protected the company's 
dominance. The company's significant expansion into new 
markets, paired with Amazon's wealth of data from its retail 
business, has fueled the platform's increasing market power. 
Amazon Associate General Counsel Nate Sutton testified at the 
Subcommittee's hearing last July that ``Amazon is proud to be a 
company of builders and we have built our company from within, 
not through acquisitions.'' \1643\ But the evidence examined 
during the investigation demonstrates that Amazon's 
acquisitions--including acquisitions of its direct 
competitors--have been key to Amazon's attainment, maintenance, 
and expansion of market power.
---------------------------------------------------------------------------
    \1643\ Innovation and Entrepreneurship Hearing at 39 (statement of 
Nate Sutton, Assoc. Gen. Couns., Competition, Amazon.com, Inc.).

---------------------------------------------------------------------------
    (c) Conduct

    (i) Treatment of Third-Party Sellers

    (1) Bullying. While Amazon has referred to third-party 
sellers on its Marketplace as ``partners'' and ``customers,'' 
\1644\ numerous small- and medium-sized businesses told the 
Subcommittee that Amazon routinely bullies and mistreats them. 
The Online Merchants Guild, a trade association representing 
the interests of sellers engaged in online commerce, stated 
that they ``have seen Amazon use their position of strength to 
take advantage of sellers.'' \1645\
---------------------------------------------------------------------------
    \1644\ See, e.g., CEO Hearing at 323 (response to Questions for the 
Record of Jeff Bezos, CEO, Amazon.com, Inc.) (``Amazon makes 
significant investments to support Amazon's selling partners.''); id. 
at 41 (``Amazon recognizes that third-party sellers are our customers 
too, and their trust is critical to Amazon's success.'').
    \1645\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 3 (Oct. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Underlying Amazon's public-facing rhetoric is the reality 
that it views many of the sellers on its platform as 
competitors. In its internal documents, Amazon refers to third-
party sellers as ``internal competitors.'' \1646\ At the 
Subcommittee's sixth hearing, Subcommittee Chair Cicilline 
asked Mr. Jeff Bezos about Amazon's apparent doublespeak.\1647\ 
In response, Mr. Bezos conceded, ``[I]t wouldn't surprise me. 
In some ways, we are competing.'' \1648\
---------------------------------------------------------------------------
    \1646\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00206715 (Mar. 8, 2016) (on file with Comm.) 
(describing changes to manual Pricing Rules when Amazon offer is 
competing with ``internal 3P competitor'' offers); id. at AMAZON-HJC-
00038917 (Sept. 2009) (describing a proposal on ``how to treat FBA 
sellers differently from other Buy Box (BB) eligible 3P sellers when 
we're matching internal competitors for non-media categories''); id. at 
AMAZON-HJC-00171079 (defining Amazon's ``Standard Price Matching 
Policy'' and conditions when ``Internal competitors (3P merchants) are 
matched on box price'').
    \1647\ CEO Hearing at 115 (question of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
    \1648\ Id. (statement of Jeff Bezos, CEO, Amazon, Inc.).
---------------------------------------------------------------------------
    Over the course of the investigation, the Subcommittee 
heard from numerous sellers who described abusive tactics or 
mistreatment by Amazon in a variety of circumstances. For 
example, at the Subcommittee's fifth hearing, CEO and Founder 
of PopSockets David Barnett testified about Amazon's bullying 
tactics, which he said were enabled by ``the asymmetry in power 
between Amazon and its partners.'' \1649\ He stated that after 
the two companies decided on a minimum price at which Amazon 
would sell PopSockets, Amazon sold the products for a lower 
price and then demanded that PopSockets pay for the lost 
margin.\1650\ As a result, PopSockets decided to end its 
relationship with Amazon Retail.\1651\ When PopSockets 
communicated this intent to Amazon, its response was, ``No, you 
are not leaving the relationship.'' \1652\ PopSockets did sever 
its relationship with Amazon Retail for a period of time, but 
reestablished it about a year later.\1653\ Mr. Barnett 
estimates that, in 2019, his company incurred losses of $10 
million in revenue from when he stopped selling to Amazon 
Retail and Amazon blocked one of his authorized distributors 
from selling on the marketplace.\1654\
---------------------------------------------------------------------------
    \1649\ Competitors Hearing at 22 (statement of David Barnett, CEO & 
Founder, PopSockets LLC).
    \1650\ Id. at 20.
    \1651\ Id.
    \1652\ Id. at 17.
    \1653\ Id. at 20-21.
    \1654\ Id. at 4.
---------------------------------------------------------------------------
    The Subcommittee learned about numerous other instances of 
Amazon employing strong-arm tactics in negotiations. A company 
that conducts business with multiple divisions of Amazon 
described how the platform leveraged its dominance in e-
commerce to force acceptance of certain terms and conditions 
during negotiations over a different part of its 
business.\1655\ According to this company, Amazon knows the 
power they have as a retailer. In the midst of negotiations, 
the platform repeatedly referenced its power to destock the 
company's products on Amazon.com as a ``bargaining chip to 
force terms'' unrelated to retail distribution on the 
company.\1656\ The company added, ``Amazon know[s] they have a 
lot of power [in retail e-commerce] and they are not afraid to 
use it to get terms they want in other markets.'' \1657\
---------------------------------------------------------------------------
    \1655\ Interview with Source 148 (Aug. 26, 2020).
    \1656\ Id.
    \1657\ Id.
---------------------------------------------------------------------------
    Book publishers described a similar asymmetric power 
dynamic with Amazon. According to one publisher, ``Amazon has 
used retaliation . . . to coerce publishers to accept 
contractual terms that impose substantial penalties for 
promoting competition'' with Amazon's rivals.\1658\ The 
publisher added that the platform's retaliatory conduct shows 
``Amazon's ability and willingness to leverage its market power 
to prevent publishers from working effectively with rival e-
book retailers and, thereby, maintain and enhance its dominance 
in e-book distribution.'' \1659\ Amazon's retaliatory tactics 
against publishers include removing the ``buy'' button, which 
blocks a customer's ability to purchase a publisher's current 
titles; \1660\ and removing the ``pre-order'' button, which 
eliminates the ability for a consumer to pre-order a 
publisher's forthcoming titles.\1661\ Another form of 
retaliation that Amazon reportedly engaged in was showing 
publishers' titles as out of stock or with delayed shipping 
times.\1662\ According to credible reports, Amazon used these 
tactics in its public battle with Hachette Book Group in 2014 
over e-book pricing,\1663\ and it has used them or threatened 
to use them in more recent negotiations.\1664\ Publishers, 
authors, and booksellers have ``significant fear'' because of 
Amazon's dominance.\1665\
---------------------------------------------------------------------------
    \1658\ Submission from Source 17, to H. Comm. on the Judiciary, 13 
(Nov. 14, 2019) (on file with Comm.).
    \1659\ Id. at 3 (Sept. 22, 2020) (on file with Comm.).
    \1660\ See, e.g., David Streitfeld, Amazon Pulls Thousands of E-
Books in Dispute, N.Y Times: Bits (Feb. 22, 2012), https://
bits.blogs.nytimes.com/2012/02/22/amazon-pulls-thousands-of-e-books-in-
dispute/?hpw.
    \1661\ See, e.g., Polly Mosendz, Amazon Blocks Pre-orders of 
Hachette Books, Atlantic (May 23, 2014), https://www.theatlantic.com/
business/archive/2014/05/amazon-blacklists-hachette-books/371545/.
    \1662\ See, e.g., David Streitfeld, Writers Feel an Amazon-Hachette 
Spat, N.Y. Times (May 9, 2014), https://www.nytimes.com/2014/05/10/
technology/writers-feel-an-amazon-hachette-spat
.html.
    \1663\ Id.
    \1664\ See Interview with Source 155 (Sept. 29, 2020); Submission 
from Source 17, to H. Comm. on the Judiciary, 13-18 (Nov. 14, 2019) (on 
file with Comm.).
    \1665\ Interview with Ass'n of Am. Publishers, Authors Guild & Am. 
Booksellers Ass'n (Aug. 26, 2020).
---------------------------------------------------------------------------
    Amazon can treat sellers in this manner because it knows 
that sellers have no other realistic alternatives to the 
platform. As Mr. Barnett noted in his testimony:

     LWhen there is bullying by an extremely successful company 
with all these partners that continue to do business with it, 
one has to ask how is it that such a successful business 
maintains partnerships with so many companies while bullying 
them. It is because of the power asymmetry . . . that companies 
tolerate this.\1666\
---------------------------------------------------------------------------
    \1666\ Competitors Hearing at 17 (statement of David Barnett, CEO & 
Founder, PopSockets LLC).

    A recent complaint filed against Amazon described the 
situation as follows: ``From the third-party retailers' 
perspective, Amazon Marketplace is like Hotel California, a 
lovely place to start or expand an online retail business, but 
check out from Amazon Marketplace and you can quickly find your 
business in bankruptcy.'' \1667\ Additional comments from 
sellers that the Subcommittee interviewed include, ``We're 
stuck. We don't have a choice but to sell through Amazon,'' 
\1668\ and, referring to Amazon, ``They've never been a great 
partner, but you have to work with them.'' \1669\
---------------------------------------------------------------------------
    \1667\ Class Action Complaint at 20, Frame-Wilson v. Amazon.com, 
Inc., No. 20-cv-00424 (W.D. Wash. Mar. 9, 2020).
    \1668\ Interview with Source 150 (July 11, 2020).
    \1669\ Interview with Source 151 (July 2, 2020).
---------------------------------------------------------------------------
    As Stacy Mitchell, Co-Director of the Institute for Local 
Self-Reliance, noted during the Subcommittee's hearing on 
Innovation and Entrepreneurship, ``Among the most egregious 
examples of Amazon's arbitrary treatment of sellers are its 
abrupt suspensions of their accounts, frequently made without 
explanation.'' \1670\ Once Amazon suspends a seller's account 
or delists its products, the business is left with largely 
ineffective remedies as they watch their sales disappear. 
Sellers shared with the Subcommittee that communications to 
Amazon's Seller Support Central generally prompt automated, 
unhelpful responses, which may be entirely unrelated to the 
specific case, question, or concern raised by the seller.\1671\
---------------------------------------------------------------------------
    \1670\ Innovation and Entrepreneurship Hearing at 196 (statement of 
Stacy F. Mitchell, Co-Dir., Inst. for Local Self-Reliance).
    \1671\ Interview with Source 125 (Jan. 9, 2020); see also 
Submission from Joel Hellmann, to H. Comm. on the Judiciary (July 31, 
2019) (on file with Comm.) (responding to an automated message, ``If 
you were a person and not a robot you would have read that I already 
tried this and it failed'').
---------------------------------------------------------------------------
    The founder of an infant product sold on Amazon told the 
Subcommittee that, after her products were mistakenly delisted, 
``[i]t would take weeks of repeated calls--at least 10 or 15 
contacts with Seller Support--before somebody inside would 
determine that it was a mistake and error,'' and take action to 
fix the problem.\1672\ She stated that this happened at least 
six times, and that, in each instance, her listings would be 
down for two to three weeks at a time.\1673\ Describing how 
Amazon's mistakes can threaten a new business's survival, this 
small-business owner said:
---------------------------------------------------------------------------
    \1672\ Interview with Source 149 (July 22, 2020).
    \1673\ Id.

     LWhen you're a new company and Amazon suddenly delists 
you, it creates fear in the customer. ``Where did it go? Is 
there something wrong with the product? What happened?'' If a 
customer searched and it's no longer there, they're unlikely to 
ever come back and buy it . . . . You've probably lost that 
customer for good.\1674\
---------------------------------------------------------------------------
    \1674\ Id.

    In another example, a third-party bookseller told the 
Subcommittee that Amazon delisted 99 percent of his business's 
inventory in September 2019.\1675\ The bookseller requested 
that Amazon return its products, which were stored in Amazon's 
warehouses.\1676\ As of July 2020, Amazon had only returned a 
small fraction of the bookseller's inventory and continued to 
charge him storage fees.\1677\ Amazon blocked the bookseller 
both from selling its products on its marketplace and from 
retrieving its inventory, precluding the seller from trying to 
recover some of his losses by making sales through another, 
albeit lesser, channel. At the Subcommittee's sixth hearing, 
Representative Lucy McBath (D-GA) presented the bookseller's 
story to Mr. Bezos, who responded that this treatment is ``not 
the systematic approach that [Amazon] take[s].'' \1678\ 
However, evidence the Subcommittee collected through extensive 
seller interviews shows that Amazon's poor treatment of sellers 
is far from an isolated incident--a fact supported both by 
public posts on Amazon's Seller Central forum,\1679\ as well as 
pleas for help routinely sent directly to Mr. Bezos.\1680\
---------------------------------------------------------------------------
    \1675\ Interview with Source 125 (July 7, 2020).
    \1676\ Id.
    \1677\ Id.
    \1678\ CEO Hearing at 113 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1679\ See, e.g., iNOVATECH_MEDICAL, Inventory Being Held Hostage 
by Amazon for 3 Months, Amazon Servs. Seller Forums (Apr. 8, 2020, 
10:30 p.m.), https://sellercentral
.amazon.com/forums/t/inventory-being-held-hostage-by-amazon-for-3-
months/607892.
    \1680\ See Josh Dzieza, Prime and Punishment: Dirty Dealing in the 
$175 Billion Amazon Marketplace, Verge (Dec. 19, 2018), https://
www.theverge.com/2018/12/19/18140799/amazon-marketplace-scams-seller-
court-appeal-reinstatement (``Emailing the richest man in the world is 
actually the standard method of escalating an Amazon seller appeal. 
It's called a Jeff Bomb, or . . . a Jeff Letter.''); Interview with 
Chris McCabe, Founder, ecommerceChris LLC (Dec. 30, 2019) (``Out of 
desperation, some sellers try to email Jeff Bezos directly.''); 
Submission from Source 125, to H. Comm. on the Judiciary (Jan. 27, 
2020) (on file with Comm.); Submission from Source 150, to H. Comm. on 
the Judiciary (Aug. 16, 2017) (on file with Comm.).
---------------------------------------------------------------------------
    Because of the severe financial repercussions associated 
with suspension or delisting, many Amazon third-party sellers 
live in fear of the company.\1681\ For sellers, Amazon 
functions as a ``quasi-state,'' and many ``[s]ellers are more 
worried about a case being opened on Amazon than in actual 
court.'' \1682\ This is because Amazon's internal dispute 
resolution system is characterized by uncertainty, 
unresponsiveness, and opaque decision-making processes.
---------------------------------------------------------------------------
    \1681\ See, e.g., Submission from Source 125, to H. Comm. on the 
Judiciary (July 17, 2020) (on file with Comm.) (``My pregnant wife had 
to visit the ER due to increased anxiety and fear for the future . . . 
. Due to Amazon's stature, influence, and bullying nature, we are 
afraid of retaliation.''); Interview with Source 154 (July 2, 2019) 
(``[Amazon] know[s] that small sellers have no power and no ability to 
avoid them'' because ``they are the powerhouse giant in the transaction 
and they could crush us.''). See also Submission from Nat'l Ass'n of 
Wholesaler-Distributors, to H. Comm. on the Judiciary, 3 (July 22, 
2020) (on file with Comm.) (``Small businesses that depend upon Amazon 
for access to their markets, including many of our members, fear 
retribution by Amazon if they speak up.'').
    \1682\ Josh Dzieza, Prime and Punishment: Dirty Dealing in the $175 
Billion Amazon Marketplace, Verge (Dec. 19, 2018), https://
www.theverge.com/2018/12/19/18140799/amazon-
marketplace-scams-seller-court-appeal-reinstatement.
---------------------------------------------------------------------------
    Additionally, the sellers interviewed by the Subcommittee 
generally indicated that Amazon's customer service and 
treatment towards them have declined significantly in recent 
years. One business owner, who has been selling on Amazon for 
over a decade, told the Subcommittee that, in the past, a 
seller could get meaningful assistance by talking to an Amazon 
representative over the phone.\1683\ He said, ``I used to think 
that Amazon was a partner,'' but, now, ``I don't think they 
care about the third party seller . . . . They treat us as a 
commodity.'' \1684\ Internal Amazon documents suggest that the 
company's hyper-focus on a cost-cutting strategy to adopt 
automated processes for nearly everything--which Amazon refers 
to as ``HOTW'' or ``Hands off the wheel'' \1685\--combined with 
the platform's monopoly power over sellers may be to blame for 
Amazon's atrocious levels of customer service for sellers.
---------------------------------------------------------------------------
    \1683\ Interview with Source 152 (Sept. 18, 2020).
    \1684\ Id.
    \1685\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00227277 (on file with Comm.) (``The 
implementation of Hands Off the Wheel in [Site Merchandising] will mean 
that through automation . . . there is less work for humans . . . . 
Project Tiger combines all Hands off the Wheel (HOTW) programs and 
Amazon spans of control guidelines.''); id. at AMAZON-HJC-00227278 
(Apr. 27, 2017) (``We are pursuing three tracks to drive Productivity 
savings: (1) FCF initiatives; (2) HOTW; and (3) Defect Reduction & 
Catalog Improvement.'').
---------------------------------------------------------------------------
    Amazon has recently monetized the degradation of its seller 
services, rolling out a program where sellers can pay an extra 
fee for a dedicated account representative. Sellers are 
supposed to pay for representatives to help them solve the very 
problems that Amazon created in the first place. Many sellers 
say, however, that even with paid Amazon account managers they 
are often unable to get their issues resolved. One seller told 
the Subcommittee, ``It [i]s a problem that an algorithm can 
make a decision that just shuts off my income stream and 
there's nothing I can do to get it back . . . . The only thing 
I can do to get it back is pay $6,000 a month for a dedicated 
rep and even then, it doesn't always work.'' \1686\
---------------------------------------------------------------------------
    \1686\ Interview with Source 149 (July 22, 2020). See also 
Submission from Source 100, to H. Comm. on the Judiciary (identifying 
one concern with Amazon's treatment of sellers as, ``Pay or Die--
Forcing sellers to pay for their support services to correct Amazon's 
wrong doings'').
---------------------------------------------------------------------------
    The last resort for sellers facing these circumstances is 
the ``Jeff Bomb,'' or ``Jeff Letter,'' in which a seller sends 
an email to Mr. Bezos to plead their case.\1687\ As the Online 
Merchants Guild explained in its submission, ``a `Jeff Letter' 
is almost like a Writ of Certiorari within Amazon's internal 
kangaroo court system.'' \1688\ But by the time this point is 
reached, ``a seller could be locked out of their account, or 
denied funds, for weeks, losing hundreds of thousands of 
dollars even if the mistake was Amazon's.'' \1689\ Because of 
the large volume of sellers who reach this point of last 
resort, sending a ``Jeff Letter'' is not a realistic avenue for 
most sellers to get their issues addressed.
---------------------------------------------------------------------------
    \1687\ Josh Dzieza, Prime and Punishment: Dirty Dealing in the $175 
Billion Amazon Marketplace, Verge (Dec. 19, 2018), https://
www.theverge.com/2018/12/19/18140799/amazon-
marketplace-scams-seller-court-appeal-reinstatement (``Emailing the 
richest man in the world is actually the standard method of escalating 
an Amazon seller appeal. It's called a Jeff Bomb,
                                                                        
         Continued
or . . . a Jeff Letter.''). See also Interview with Chris McCabe, 
Founder, ecommerceChris LLC (Dec. 30, 2019) (``Out of desperation, some 
sellers try to email Jeff Bezos directly.''); Submission from Source 
125, to H. Comm. on the Judiciary (Jan. 27, 2020) (on file with Comm.); 
Submission from Source 150, to H. Comm. on the Judiciary (Aug. 16, 
2017) (on file with Comm.).
    \1688\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 3 (Oct. 29, 2019) (on file with Comm.).
    \1689\ Id.

    (2) Forced Arbitration. All of Amazon's third-party sellers 
and most of its vendors are subject to a pre-dispute, binding 
(forced) arbitration clause,\1690\ requiring them to sign away 
the right to their day in court if a dispute with Amazon 
arises. The Subcommittee heard from sellers who said that if it 
were not for Amazon's market power over them, they would not 
agree to this term.\1691\ As noted by the Online Merchants 
Guild, ``Through arbitration, Amazon knows it holds all the 
cards, and in many ways has the final say whenever there is a 
dispute.'' \1692\ As a result, sellers rarely initiate 
arbitration actions against Amazon. Between 2014 and 2019, even 
as the number of Amazon sellers continued to grow by hundreds 
of thousands per year, only 163 sellers and 16 vendors 
initiated arbitration proceedings.\1693\ Because sellers are 
generally aware that the process is unfair and unlikely to 
result in a meaningful remedy, they have little incentive to 
bring an action.
---------------------------------------------------------------------------
    \1690\ Innovation and Entrepreneurship Hearing at 545-46 (response 
to Questions for the Record, Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.); Amazon Services Business Solutions 
Agreement, Amazon Seller Cent., https://sellercentral.amazon.com/gp/
help/external/G1791 (last visited Sept. 29, 2020).
    \1691\ See, e.g., Interview with Source 125 (Jan. 9, 2020) 
(explaining the reason for agreeing to Amazon's terms, ``What can I do? 
They don't give me much choice. You are so small that you don't have 
any leverage.'').
    \1692\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 3 (Oct. 29, 2019) (on file with Comm.).
    \1693\ Innovation and Entrepreneurship Hearing at 545-47 (response 
to Questions for the Record, Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
---------------------------------------------------------------------------
    As extensive scholarship has shown, forced arbitration 
often fails to provide a legitimate forum for resolving 
disputes and instead usually serves to insulate those engaging 
in wrongdoing from liability.\1694\ The case of Amazon sellers 
is no different. In practice, arbitration functions as a way 
for Amazon to keep disputes within its control, with the scales 
tipped heavily in its favor. As such, Amazon can withhold 
payments from sellers, suspend their accounts without cause, 
and engage in other abusive behavior without facing any legal 
consequences for its actions.\1695\
---------------------------------------------------------------------------
    \1694\ See Cynthia Estlund, The Black Hole of Mandatory 
Arbitration, 96 N.C. L. Rev. 679, 684 (2018) (stating that mandatory 
arbitration ``effectively enables employers to nullify employee rights 
and to insulate themselves from the liabilities that back up crucial 
public policies''); see also Judith Resnik, Diffusing Disputes: The 
Public in the Private of Arbitration, the Private in Courts, and the 
Erasure of Rights, 124 Yale L.J. 2804, 2873 (2015) (``Mandated 
arbitration is also common in web-based sales.'').
    \1695\ See Submission from Online Merchants Guild, to H. Comm. on 
the Judiciary, 3 (Oct. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    (3) Seller Fee Increases. Amazon's treatment of sellers 
indicates that it sees them as a source of profit, rather than 
``partners.'' \1696\ Individuals and small businesses who 
depend on access to the platform to make sales report that 
Amazon has raised seller fees significantly over the past 
decade. Over the past five years, a recent Institute for Local 
Self-Reliance report estimates that Amazon added an extra 11 
percent to its cut of third-party sales.\1697\ The platform now 
takes an average of 30 percent of each sale compared to 19 
percent in 2015.\1698\ In 2018, third-party sellers paid Amazon 
$39.7 billion in fees, which totaled about 25 percent of 
Amazon's $160 billion in Gross Merchandise Volume.\1699\ This 
amount includes commissions, fulfillment and shipping fees, and 
other third-party seller services, but does not include revenue 
from the advertising fees for third-party sellers,\1700\ which 
are often substantial.\1701\ An internal Amazon document 
suggests the company can increase fees to third-party sellers 
without concern for them switching to another marketplace. The 
document notes that the amount of ``seller attrition as a 
result of [2018] fee increases'' for its Fulfillment by Amazon 
program was ``[n]othing significant.'' \1702\
---------------------------------------------------------------------------
    \1696\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00206936 (Nov. 8, 2013) (on file with Comm.) 
(``Seems like we should be making more on the seller loans . . . . Net 
takeaway is that sellers may be getting too good of a deal . . . . 
There are different ways to fix . . . commitment fees, higher rates, 
etc. We should get rewarded for satisfying a timing spike like 
this.'').
    \1697\ Stacy Mitchell, Ron Knox & Zach Freed, Inst. of Local Self-
Reliance, Report: Amazon's Monopoly Tollbooth 3 (2020), https://
ilsr.org/amazons_tollbooth/.
    \1698\ Id. See also Interview with Jason Boyce, Founder & CEO, 
Avenue7Media, LLC (Sept. 15, 2020) (estimating that most sellers are 
currently paying an average of 35 percent in fees to Amazon when you 
add up the referral fees and payments for ads based on his experience).
    \1699\ Marketplace Pulse, Marketplaces Year in Review 4 (2019), 
https://cdn .marketplacepulse.com/misc/marketplaces-year-in-review-
2019.pdf.
    \1700\ Id.
    \1701\ See, e.g., Interview with Top Shelf Brands (Sept. 29. 2020) 
(estimating Top Shelf paid Amazon over $1 million in fees for 
advertising in one year); Submission from Top Shelf, to H. Comm. on the 
Judiciary, Ex. 1 (Oct. 26, 2019) (on file with Comm.).
    \1702\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00186540 (Jan. 30, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    Amazon's pattern of exploiting sellers, enabled by its 
market dominance, raises serious competition concerns. For many 
sellers, there is no viable alternative to Amazon, and a 
significant number of sellers rely on its marketplace for their 
entire livelihood.\1703\
---------------------------------------------------------------------------
    \1703\ See, e.g., JungleScout, The State of the Amazon Seller 2020, 
at 4 (2020), https://www.junglescout.com/wp-content/uploads/2020/02/
State-of-the-Seller-Survey.pdf (``More than a third (37%) of sellers 
[surveyed] earn income from Amazon sales alone.'').

    (4) Appropriation of Third-Party Seller Data. One of the 
widely reported ways in which Amazon treats third-party sellers 
unfairly centers on Amazon's asymmetric access to and use of 
third-party seller data.\1704\ During the investigation, the 
Subcommittee heard repeated concerns that Amazon leverages its 
access to third-party sellers' data to identify and replicate 
popular and profitable products from among the hundreds of 
millions of listings on its marketplace.\1705\ Armed with this 
information, it appears that Amazon would: (1) copy the product 
to create a competing private-label product \1706\; or (2) 
identify and source the product directly from the manufacturer 
to free ride off the seller's efforts, and then cut that seller 
out of the equation.\1707\
---------------------------------------------------------------------------
    \1704\ Innovation and Entrepreneurship Hearing at 5 (statement of 
Stacy Mitchell, Co-Dir., Inst. for Local Self-Reliance) (``Amazon's 
[gatekeeper power] allows it to maintain a God-like view of the 
transactions of rival businesses and customers, and use this data to 
move into new markets with a built-in advantage.'').
    \1705\ See, e.g., Interview with Source 158 (July 2, 2020); 
Submission from Nat'l Ass'n of Wholesaler-Distributors, to H. Comm. on 
the Judiciary (July 22, 2020) (on file with Comm.).
    \1706\ See, e.g., Interview with Jason Boyce, Founder & CEO, 
Avenue7Media (Sept. 15, 2020).
    \1707\ See, e.g., Submission from Nat'l Ass'n of Wholesaler-
Distributors, to H. Comm. on the Judiciary (July 22, 2020) (on file 
with Comm.).
---------------------------------------------------------------------------
    Amazon claims that it has no incentive to abuse sellers' 
trust because third-party sales make up nearly 60 percent of 
its sales, and that Amazon's first-party sales are relatively 
small.\1708\ Amazon has similarly pointed out that third-party 
listings far outnumber Amazon's first-party listings.\1709\ In 
a recent shareholder letter, CEO Jeff Bezos wrote, ``Third-
party sellers are kicking our first-party butt. Badly.'' \1710\ 
In response to a question from the Subcommittee, however, 
Amazon admitted that by percentage of sales--a more telling 
measure--Amazon's first-party sales are significant and growing 
in a number of categories. For example, in books, Amazon owns 
74 percent of sales, whereas third-party sellers only account 
for 26 percent of sales.\1711\ At the category level, it does 
not appear that third-party sellers are kicking Amazon's first-
party butt. Amazon may, in fact, be positioned to overtake its 
third-party sellers in several categories as its first-party 
business continues to grow.
---------------------------------------------------------------------------
    \1708\ CEO Hearing at 302 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
    \1709\ Id. at 303.
    \1710\ Jeff Bezos, 2018 Letter to Shareholders, The Amazon Blog: 
Day One (Apr. 11, 2019), https://blog.aboutamazon.com/company-news/
2018-letter-to-shareholders.
    \1711\ CEO Hearing at 304 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).

              Third-Party vs. First-Party Listings
                   and Sales on Amazon \1712\
---------------------------------------------------------------------------

    \1712\ Id. at 303-04.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    

    Amazon recognizes that it competes against many of its 
third-party sellers.\1713\ In response to concerns about its 
unfair use of third-party seller data, Amazon points to its 
Seller Data Protection Policy, which it instituted in 
2014.\1714\ According to the company:
---------------------------------------------------------------------------
    \1713\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00142724 (on file with Comm.).
    \1714\ CEO Hearing at 281 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).

     LAmazon recognizes that third-party sellers are our 
customers too, and their trust is critical to Amazon's success. 
In an effort to further this partnership, Amazon decided years 
ago to take additional voluntary steps to protect seller data 
by instituting its voluntarily-adopted Seller Data Protection 
Policy, which prohibits Amazon Retail teams from using non-
public seller-specific data to compete against third-party 
sellers.\1715\
---------------------------------------------------------------------------
    \1715\ Id. at 320.

    Following up on public reporting and information collected 
during the investigation suggesting that Amazon might be 
abusing its access to third-party sellers' data, Representative 
Pramila Jayapal (D-WA) asked Amazon lawyer Nate Sutton about 
this precise issue at a Subcommittee hearing in July 2019. 
Sutton testified: ``We do not use [third-party sellers'] 
individual data when we're making decisions to launch private 
brands.'' \1716\
---------------------------------------------------------------------------
    \1716\ Innovation and Entrepreneurship Hearing at 42 (statement of 
Nate Sutton, Assoc. Gen. Couns., Competition, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Since the July 2019 hearing, public reporting has made 
clear that, contrary to its own internal policy and testimony 
before Congress, Amazon routinely appropriates seller data to 
benefit its own private-label and retail businesses. After the 
hearing, according to a July 2019 report, a former employee who 
worked in product management told The Capitol Forum, ``I used 
to pull sellers' data to look at what the best products were 
when I was there . . . . That was my job.'' \1717\ In September 
2019, employees reported to Yahoo Finance that access to data 
is a ``free-for-all'' and that Amazon Retail and Marketplace 
teams ``share the same access to the data warehouse, which 
makes it possible for the retail team to use the data from 
marketplace sellers to develop private labels.'' \1718\
---------------------------------------------------------------------------
    \1717\ Amazon: Former Employee Challenges Executives' Denial About 
Company's Use of Sellers' Data, Capitol Forum (July 18, 2019).
    \1718\ Krystal Hu, Amazon Uses Third-Party Seller Data to Build a 
Private Label Juggernaut, Yahoo Fin. (Sept. 27, 2019), https://
finance.yahoo.com/news/amazon-uses-thirdparty-sellers-data-to-build-
private-labels-145813238.html.
---------------------------------------------------------------------------
    Earlier this year, in a groundbreaking article, The Wall 
Street Journal reported that executives in Amazon's private-
label division ``had access to data containing proprietary 
information that they used to research bestselling items they 
might want to compete against, including on individual sellers 
on Amazon's website.'' \1719\ In one case, Amazon employees 
reportedly used non-public sales data about a third-party 
seller of car-trunk organizers named Fortem to develop an 
Amazon private-label version of the very same product.\1720\
---------------------------------------------------------------------------
    \1719\ Dana Mattioli, Amazon Scooped Up Data from Its Own Sellers 
to Launch Competing Products, Wall St. J. (Apr. 23, 2020), https://
www.wsj.com/articles/amazon-scooped-up-data-from-its-own-sellers-to-
launch-competing-products-11587650015.
    \1720\ Id.
---------------------------------------------------------------------------
    In light of the April 2020 report from The Wall Street 
Journal, the Committee requested that Jeff Bezos testify before 
Congress to address the possibility that Amazon's lawyer had 
misled Congress.\1721\ Despite significant public reporting on 
the issue and references to it in Amazon's internal documents, 
Mr. Bezos claimed to be unaware of these practices. According 
to Mr. Bezos, ``Amazon first learned about the alleged 
violations of Amazon's voluntarily adopted Seller Data 
Protection Policy recently reported in The Wall Street Journal 
from The Wall Street Journal.'' \1722\ When Representative 
Pramila Jayapal (D-WA) again asked in July 2020 about whether 
Amazon uses third-party seller data to benefit its private-
label products, Bezos could only respond: ``I can't answer that 
question yes or no . . . . [W]e have a policy against using 
seller-specific data to aid our private-label business, but I 
can't guarantee you that that policy has never been violated.'' 
\1723\
---------------------------------------------------------------------------
    \1721\ Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, Hon. Joe Neguse, Vice 
Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. 
on the Judiciary, Hon. Pramila Jayapal, Member, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Hon. Ken 
Buck, Member, Subcomm. on Antitrust, Commercial and Admin. Law of the 
H. Comm. on the Judiciary & Hon. Matt Gaetz, Member, Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
to Jeff Bezos, CEO, Amazon.com, Inc. (May 1, 2020) (on file with 
Comm.).
    \1722\ CEO Hearing at 280 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
    \1723\ Id. at 66 (statement of Jeff Bezos, CEO, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Representative Ken Buck (R-CO) similarly raised this issue 
with Mr. Bezos, stating, ``I'm concerned that you've used 
Amazon's dominant market position to unfairly harm competition. 
We've heard from a number of companies that Amazon uses 
proprietary data from third-party companies to launch its own 
private-label products.'' \1724\ Later in the hearing, 
Representative Kelly Armstrong (R-ND) described this as an 
``important issue,'' and asked whether ``Amazon is conducting 
an internal investigation into the use of third-party data,'' 
to which Mr. Bezos answered in the affirmative. Mr. Bezos 
agreed to inform the Subcommittee of the outcome of that 
investigation.
---------------------------------------------------------------------------
    \1724\ Id. at 121 (question of Rep. Ken Buck (R-CO), Member, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary).
---------------------------------------------------------------------------
    In October 2020, approximately six months after Amazon said 
that it had initiated the investigation,\1725\ the company 
informed the Committee that it had completed it.\1726\ 
According to Amazon's Vice President of Public Policy, Brian 
Huseman, ``Amazon's records of past data queries related to the 
two products cited in The Wall Street Journal report show that 
a single former employee pulled and analyzed only aggregate 
data for both products in compliance with the Seller Data 
Protection Policy.'' \1727\ The results of this limited 
investigation do not alter the views of the Subcommittee on 
Amazon's use of third-party seller data as set forth in this 
Report.
---------------------------------------------------------------------------
    \1725\ Amazon Policy (@amazon_policy), Twitter (Apr. 24, 2020, 3:36 
p.m.), https://twitter
.com/amazon_policy/status/1253769684425625601.
    \1726\ Letter from Brian Huseman, Vice President, Pub. Pol'y, 
Amazon.com, Inc., to Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary & Hon. Jim Jordan, 
Ranking Member, H. Comm. on the Judiciary (Oct. 4, 2020) (on file with 
Comm.).
    \1727\ Id.
---------------------------------------------------------------------------
    The Subcommittee uncovered evidence in interviews with 
former Amazon employees, as well as current and former sellers, 
that is consistent with the public reporting about Amazon's 
misuse of seller data.\1728\ In a submission to the 
Subcommittee, a former employee said:
---------------------------------------------------------------------------
    \1728\ See Submission from Nat'l Ass'n of Wholesaler-Distributors, 
to H. Comm. on the Judiciary (July 22, 2020) (on file with Comm.) 
(describing a member's experience in which Amazon allowed a distributor 
to sell a product for about a year, ``then went out and replicated the 
product and began selling their own branded product, terminating the 
distributor . . . . Amazon became the winner and the distributor was 
left empty handed'').

     LIn 2010, I started working on the Amazon marketplace team 
. . . . It was widely known that many (10+) of my peers were 
running very successful [third-party] accounts, where they were 
pulling private data on Amazon seller activity, so they could 
figure out market opportunity, etc. Totally not legitimate, but 
no one monitored or seemed to care.\1729\
---------------------------------------------------------------------------
    \1729\ Submission from Source 91, to H. Comm. on the Judiciary 
(Sept. 16, 2020) (on file with Comm.).

Referring to accessibility of third-party seller data, the same 
individual told the Subcommittee, ``It's a candy shop, everyone 
can have access to anything they want,'' and added, ``There's a 
rule, but there's nobody enforcing or spot-checking. They just 
say, don't help yourself to the data . . . it was `wink wink,' 
don't access.'' \1730\
---------------------------------------------------------------------------
    \1730\ Id.
---------------------------------------------------------------------------
    The Subcommittee interviewed a third-party seller who 
described how Amazon uses a request for proof of authenticity 
to collect proprietary information about a seller's business. 
According to the seller, Amazon will submit a product 
authenticity claim to sellers, forcing the retailer to submit 
their original sales receipts as proof that the items are 
authentic.\1731\ Although a seller is supposed to be able to 
black out price information, sometimes the platform will reject 
a submission on the basis that it is an ``altered document.'' 
\1732\ With insight into the seller's costs and supplier, 
combined with its knowledge of the seller's retail price among 
a virtually unfathomable amount of other data, it appears that 
Amazon Retail can easily replicate the seller's listing to 
offer a competing product.
---------------------------------------------------------------------------
    \1731\ Interview with Source 154 (July 2, 2019).
    \1732\ Id.
---------------------------------------------------------------------------
    A former third-party seller and retired U.S. Marine told 
the Subcommittee about several instances over his seventeen 
years as a seller when Amazon leveraged his work, undercut him 
on price, and eventually drove him out of business. In each 
instance, he had to change his business model after Amazon took 
over the Buy Box for his listings, ``killing'' his sales.\1733\ 
On at least two different occasions, his company did all the 
legwork to create a new, top-selling product or product line, 
as well as creating the product listings, only to have Amazon 
copy the idea and offer a competing product. Amazon used 
different tactics each time, but the result was always the 
same: Amazon profited from his work and made it impossible for 
him to fairly compete.\1734\
---------------------------------------------------------------------------
    \1733\ Interview with Jason Boyce, Founder & CEO, Avenue7Media 
(Sept. 15, 2020).
    \1734\ Id.
---------------------------------------------------------------------------
    As part of his last attempt to sell on Amazon, his business 
created its own line of table game products with a unique 
design and color palette. Once these products became top 
sellers, Amazon again swooped in to reap the rewards of his 
work. Amazon copied his designs, down to the color palette, and 
started selling their competing products at unsustainable 
prices. Ultimately, he exited his seller business, gave up on 
trying to bring new products to consumers, and founded a 
consulting agency for Amazon sellers.\1735\
---------------------------------------------------------------------------
    \1735\ Id.
---------------------------------------------------------------------------
    In addition to its private-label business, Amazon also uses 
third-party seller data to benefit its Amazon Retail business, 
where the company functions more like a retailer. At the 
Subcommittee's sixth hearing, Chair David N. Cicilline (D-RI) 
asked Mr. Bezos about this conduct, recounting the story that a 
former third-party seller shared with the Subcommittee:

     LDuring this investigation, we have heard so many 
heartbreaking stories of small businesses who sunk significant 
time and resources into building a business and selling on 
Amazon, only to have Amazon poach their best-selling items and 
drive them out of business.

     LSo I want to talk to you about one company that really 
stood out from the rest. I want you to pay close attention to 
how they described your partnership, Mr. Bezos. We heard from a 
small apparel company that makes and sells what they call 
``useful apparel'' for people who work on their feet and with 
their hands, like construction workers and firefighters.

     LThis particular business discovered and started selling a 
unique item that had never been a top seller for the brand. 
They were making about $60,000 a year on just this one item. 
One day, they woke up and found that Amazon had started listing 
the exact same product, causing their sales to go to zero 
overnight. Amazon had undercut their price, setting it below 
what the manufacturer would generally allow it to be sold so 
that, even if they wanted to, they couldn't match the 
price.\1736\
---------------------------------------------------------------------------
    \1736\ CEO Hearing at 116 (question of Rep. David N. Cicilline (D-
RI), Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).

    Amazon has tried to draw a meaningful distinction between 
individual and aggregate data, but this is largely beside the 
point when it comes to the concerns that Subcommittee members 
have about the platform's conduct and its effect on 
competition. Amazon says it only uses ``aggregate'' seller data 
across multiple sellers, not ``individual'' data about any 
specific seller.\1737\ Importantly, though, it chooses how 
those terms are defined and uses various methods to deem seller 
data as aggregate rather than individual. According to The Wall 
Street Journal report, because Fortem accounted for 99.95 
percent of total sales in the car-trunk organizer product 
category, not 100 percent, Amazon considered that data 
aggregate rather than individual.\1738\ And at the 
Subcommittee's hearing in July 2020, Bezos confirmed that 
Amazon indeed allows the use of aggregate data to inform 
private-label brands when there are only two or three sellers 
of a product.\1739\ Separately, if there is only one seller of 
an item, and Amazon is selling returned or damaged versions of 
that item through its Amazon Warehouse Deals program, that data 
is considered aggregate.\1740\
---------------------------------------------------------------------------
    \1737\ Letter from David Zapolsky, Gen. Couns., Amazon.com, Inc., 
to Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary (July 26, 2019) (on 
file with Comm.).
    \1738\ Dana Mattioli, Amazon Scooped Up Data from Its Own Sellers 
to Launch Competing Products, Wall St. J. (Apr. 23, 2020), https://
www.wsj.com/articles/amazon-scooped-up-data-from-its-own-sellers-to-
launch-competing-products-11587650015.
    \1739\ CEO Hearing at 132 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1740\ Dana Mattioli, Amazon Scooped Up Data from Its Own Sellers 
to Launch Competing Products, Wall St. J. (Apr. 23, 2020), https://
www.wsj.com/articles/amazon-scooped-up-data-from-its-own-sellers-to-
launch-competing-products-11587650015.
---------------------------------------------------------------------------
    An Amazon ``Frequently Asked Questions'' (FAQ) document 
from 2014 suggests that Amazon was aware that the Seller Data 
Protection Policy had significant loopholes. For example, the 
document indicates that even seller-specific data can be used 
for ``strategic business decision at the category level or 
above.'' \1741\ The answer to an FAQ also makes clear that the 
line between ``aggregated'' data and ``Seller-specific'' data 
is fuzzy: ``As a general rule, if information isn't directly 
tied or easily attributed to a specific Seller, it can be 
considered aggregated and non-Seller-specific.'' As to how 
aggregated information attributed to a small group of Sellers 
should be treated, the guidance is also ambiguous: ``This is a 
high judgment area. If Seller-specific information could be 
easily derived from aggregated information, it should be 
treated as Seller-specific.'' \1742\
---------------------------------------------------------------------------
    \1741\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00221869 (June 30, 2014) (on file with Comm.).
    \1742\ Id.
---------------------------------------------------------------------------
    In addition to collecting data relating to sales, Amazon 
may also be able to reverse engineer third-party sellers' cost 
structures through the tools that it offers sellers to track 
profits, costs, ad spend, and other expenses, as well as 
fulfillment services through Fulfillment by Amazon (FBA). An 
internal document suggests that Amazon may use its FBA service 
as an avenue to identify popular third-party seller items and 
gather competitively sensitive information about them.\1743\ 
FBA provides another avenue for Amazon to access competing 
sellers' third-party data.
---------------------------------------------------------------------------
    \1743\ See, e.g., id. at AMAZON-HJC-00207035 to -00207036 (Sept. 
19, 2013) (on file with Comm.) (``On the top selling Owl necklace . . . 
we should go deep and see what we can learn including how much it would 
costs [sic] to manufacture this?'').
---------------------------------------------------------------------------
    The documents and information that the Subcommittee 
reviewed suggest that instances of Amazon's data 
misappropriation go beyond what is in the public domain. 
Furthermore, the Subcommittee rejects Amazon's contention that 
Amazon's use of third-party seller data is no different from a 
traditional brick-and-mortar retailer's use of data. The 
Subcommittee also does not believe that the marketplace-derived 
data the platform uses to inform Amazon Retail's product 
pipeline, among other decisions, is equally available to all 
Amazon Marketplace sellers.
    On many fronts, Amazon makes inconsistent arguments 
depending on the forum and issue in support of its attempts to 
escape liability. In the context of lawsuits regarding 
liability for counterfeits and unsafe products sold on its 
site, Amazon insists it is a marketplace and not a 
retailer.\1744\ By contrast, in his testimony before the 
Subcommittee, Mr. Bezos referred to Amazon as a ``store'' and a 
``retailer.'' \1745\ Similarly, when Nate Sutton testified 
before the Subcommittee, he stated, ``Amazon is one of the 
leading retailers.'' \1746\ In response to price gouging 
allegations, Amazon switches back to the position that it is 
just a marketplace. As Public Citizen observed in a recent 
report titled Prime Gouging:
---------------------------------------------------------------------------
    \1744\ See Colin Lecher, How Amazon Escapes Liability for the 
Riskiest Products on Its Site, Verge (Jan. 28, 2020), https://
www.theverge.com/2020/1/28/21080720/amazon-product-liability-lawsuits-
marketplace-damage-third-party.
    \1745\ See generally CEO Hearing (statements of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1746\ See generally Innovation and Entrepreneurship Hearing 
(statements of Nate Sutton, Assoc. Gen. Couns., Competition, 
Amazon.com, Inc.).

     LAmazon is trying to have the best of both worlds by 
enabling third-party sellers to exploit the crisis (and 
benefiting from facilitating those sales), but also seeking to 
immunize itself from responsibility for directly engaging in 
price gouging by shifting the focus on to the unscrupulous 
actions of third-party sellers, not only in the eye of the 
public but also in the eye of the law.\1747\
---------------------------------------------------------------------------
    \1747\ Pub. Citizen, Prime Gouging: How Amazon Raised Prices to 
Profit from the Pandemic 5 (2020), https://www.citizen.org/article/
prime-gouging/ (also noting ``a pattern of
                                                                        
         Continued
significant price increases on essential products sold directly by 
Amazon, as well as price gouging by third-party sellers'').

    Amazon identified a few types of non-public seller data 
that it has access to, but which are supposed to be protected 
by its Seller Data Protection Policy.\1748\ It is obvious from 
this small glimpse into the data Amazon has at its disposal 
that the type and scope of data the platform can access is very 
different from the information available to traditional brick-
and-mortar stores. Physical stores have much less detailed 
information about the competing products they offer for sale 
alongside their private-label items. Physical stores also have 
far less information about customers' shopping habits and 
preferences.\1749\
---------------------------------------------------------------------------
    \1748\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00221867 (June 30, 2014) (on file with Comm.) (listing 
information protected by the Seller Data Protection Policy as ``Seller 
pricing plans (e.g., future promotions), Seller inventory levels, 
Seller sourcing information, Seller sales (e.g., unit sales, GMS), 
[and] Seller performance (e.g., non-public metrics)'').
    \1749\ See Stigler Report at 45 (``Traditional brick-and-mortar 
stores and online platforms differ greatly in their advertising and 
personalization capabilities.'').

    (5) Self-Preferencing. By virtue of its role as an 
intermediary in the marketplace, Amazon can give itself 
favorable treatment relative to competing sellers. It has done 
so through its control over the Buy Box, as well as by granting 
itself access to data and tools that are off-limits for third-
party sellers. Most recently, there have been reports that 
Amazon has given preferential treatment to its own non-
essential products over competitors' non-essential products 
---------------------------------------------------------------------------
during the pandemic.

    (a) Critical Inputs. Amazon has control over critical 
inputs for competing sellers and other types of competitors--
including consumer data, fulfillment and delivery services, and 
advertising and other marketing tools--that give it the ability 
to advantage itself over rivals. During the investigation, the 
Subcommittee conducted numerous interviews with market 
participants that, along with credible public reporting and 
Amazon's documents, confirm that Amazon employed this business 
strategy as early as 2009 and continues to do so today.

    (b) Access to Market Data. Amazon has access to data that 
gives it greater insight into consumer behavior and preferences 
than competing sellers on its platform. A former Amazon 
employee that the Subcommittee interviewed summarized the 
significance of this information asymmetry:

     LIt's important to understand that Amazon has access to 
every piece of data on what products each customer has searched 
and purchased [or] not purchased . . . . With information about 
what customers have searched, Amazon is able to create 
customized marketing [and] targeting of products for the 
individual customer. ``Is Amazon using a particular [third-
party] seller's data here? No,'' but it is using all of the 
aggregate site data to develop a highly targeted marketing plan 
for each customer. Should Amazon choose to use that targeting 
information to focus [on] its own products, it can, while 
[third-party] sellers don't have access to similar data.\1750\
---------------------------------------------------------------------------
    \1750\ Submission from Source 91, to H. Comm. on the Judiciary 
(Sept. 22, 2020) (on file with Comm.).

    Although Amazon provides its sellers with access to some 
helpful data and tools--which is a key differentiator from 
other marketplaces with no or limited seller tools--there is a 
large amount of data that is off-limits, only available at a 
largely prohibitive cost, or unhelpful because it is outdated 
or inaccurate. One paid service that Amazon offered sellers was 
called Amazon Retail Analytics Premium. Sellers who paid extra 
to participate in this program could access some, but not all, 
of the data Amazon collected on marketplace activity. But the 
program was expensive: Vendors reportedly had to pay a minimum 
of $30,000 to get access to this database.\1751\
---------------------------------------------------------------------------
    \1751\ Robyn Johnson, Amazon Just Made the $30k Amazon Retail 
Analytics Premium Data Free, Search Engine J. (Feb. 26, 2020), https://
www.searchenginejournal.com/amazon-retail-analytics-premium-data-free/
350692.
---------------------------------------------------------------------------
    Another example of this asymmetric access to data is 
evident from an Amazon internal email discussion. The 
discussion began with a consultant alerting Amazon employees 
about a problem with its Marketplace Web Services APIs that 
caused it to report information to sellers that is 
``disconnected from the reality and often misleading.'' \1752\ 
According to the representative, ``This is a huge issue and 
causes sellers losses and inconvenience.'' \1753\ In response, 
an Amazon employee said that there was not a problem with the 
API functionality; rather, the Pricing APIs just do not provide 
sellers with information at the level of granularity requested. 
Further, she explained that this is ``a feature request for 
adding location aware information to the Pricing APIs,'' which 
is ``currently below the line for 2018 for the pricing team.'' 
\1754\
---------------------------------------------------------------------------
    \1752\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00188405 to -00188406 (Dec. 14, 2017) (on file with Comm.).
    \1753\ Id.
    \1754\ Id. at AMAZON-HJC-00188536 (Dec. 15, 2017).

    (c) Marketing Tools. One tool that Amazon Retail uses to 
benefit its own business is Amazon Vine, a review-generating 
program.\1755\ In interviews with market participants, many 
sellers said that good reviews are critical for a product to be 
successful online.\1756\ Accordingly, sellers aim to obtain as 
many positive reviews as possible early in a product's life 
cycle. At one time, it was permissible for Amazon sellers to 
provide incentives such as free samples to reviewers. However, 
in 2016, it was widely reported that some sellers were 
generating fake reviews.\1757\ In response to these reports, 
Amazon announced that it would ban incentivized reviews except 
for those obtained through its own incentivized review program, 
Amazon Vine.\1758\ As a result, sellers lost access to this 
program, regardless of whether they were engaged in bad conduct 
or not.
---------------------------------------------------------------------------
    \1755\ Innovation and Entrepreneurship Hearing at 509 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1756\ See, e.g., Interview with Source 125 (July 7, 2020) 
(explaining that the inability to move customer reviews from Amazon to 
other marketplaces is a barrier to use of other marketplaces, due to 
the importance of customer feedback for seller reputation).
    \1757\ Elizabeth Weise, Amazon Bans ``Incentivized'' Reviews, USA 
Today (Oct. 3, 2016), https://www.usatoday.com/story/tech/news/2016/10/
03/amazon-bans-incentivized-reviews/91488702/.
    \1758\ Id.
---------------------------------------------------------------------------
    For many years, including after the incentivized-reviews 
ban, the Amazon Vine program was not available to third-party 
sellers, while Amazon continued to enjoy the program's ability 
to ``minimize marketing costs associated with generating 
awareness early in a product's lifecycle,'' among other 
benefits.\1759\ An Amazon internal document describes other 
advantages of the program as, ``[d]rive conversion and sales 
with more insightful reviews on detail pages,'' and ``can 
contribute to higher order counts and sales.'' \1760\
---------------------------------------------------------------------------
    \1759\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00146732 (Dec. 14, 2017) (on file with Comm.); Spencer 
Soper, Amazon Doles Out Freebies to Juice Sales of Its Own Brands, 
Bloomberg News (Oct. 16, 2018), https://www.bloomberg.com/news/
articles/2018-10-16/amazon-doles-out-freebies-to-juice-sales-of-its-
own-brands.
    \1760\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00146732 (Dec. 14, 2017) (on file with Comm.); see also id. 
at AMAZON-HJC-0059576 (Nov. 22, 2010) (describing the program as 
``[g]reat for new product launches--good for seeding'').
---------------------------------------------------------------------------
    By both banning incentivized reviews and excluding third-
party sellers from the Amazon Vine program, Amazon allocated to 
itself a significant marketing advantage over the other 
businesses with which it competes on its platform.
    Amazon's dual position as both operator and seller on its 
online marketplace also provides it with the ability to 
disadvantage competitors that seek to sell or advertise on its 
platform. One way that Amazon does this is by limiting certain 
rivals' ability to buy Amazon.com search advertising--ads that 
present products at the top of the search results when 
consumers enter specific search terms or a product name. 
Although ``search advertising is a lucrative part of the 
company's business,'' Amazon ``won't let some of its own large 
competitors buy sponsored-product ads tied to searches for 
Amazon's own devices.'' \1761\ The Wall Street Journal reported 
this month that Roku, Inc. ``can't even buy [ ] Amazon ads tied 
to its own products.'' \1762\ Consistent with this report, a 
competitor of Amazon that manufacturers voice-enabled devices 
told the Subcommittee that Amazon prohibited it from buying ads 
on Amazon.com.\1763\ The competitor expressed concerns about 
the harm this could cause consumers, who may be confused or 
deceived when they receive ads promoting Amazon products even 
when they specifically search for a competitor's product on 
Amazon.com.\1764\
---------------------------------------------------------------------------
    \1761\ Dana Mattioli et al., Amazon Restricts How Rival Device 
Makers Buy Ads on Its Site, Wall St. J. (Sept. 22, 2020), https://
www.wsj.com/articles/amazon-restricts-advertising-
competitor-device-makers-roku-arlo-11600786638.
    \1762\ Id.
    \1763\ Interview with Source 148 (Aug. 26, 2020).
    \1764\ Id.
---------------------------------------------------------------------------
    The Subcommittee's investigation also uncovered internal 
documents showing that Amazon executives have long understood 
the competitive advantage Amazon wields due to the company's 
control over search advertising on Amazon.com. In an internal 
email describing an ad block against Groupon and other ``deal 
site ecommerce competitors,'' \1765\ an Amazon executive wrote 
that ``Groupon is blocked + let's keep a clear line on this. No 
deal site ecommerce competitors allowed to advertise on 
amazon.x sites.'' \1766\
---------------------------------------------------------------------------
    \1765\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00129156 (Dec. 14, 2017) (on file with Comm.).
    \1766\ Id.
---------------------------------------------------------------------------
    Similarly, an email discussion in 2009 among high-level 
Amazon executives discussed the possibility of implementing an 
ad block against Diapers.com, saying:

     LDo we really think it is ok that Diapers.com flipped from 
selling on the platform to being a large scale user of Product 
Ads totally unscrrutinized [sic]? I don't . . . . We're under 
no obligation to allow them to advertise on our site. I'd argue 
we should block them from buying Product Ads immediately or at 
minimum price those ads so they truly reflect the opportunity 
cost of a lost diaper buyer (or to reflect the true value of a 
new customer to such a competitor[ ]).\1767\
---------------------------------------------------------------------------
    \1767\ Id. at AMAZON-HJC-00065094 (May 28, 2009) (on file with 
Comm.).

    The executive suggests that Amazon should maintain a 
``watch list'' of strategic competitors and set up ``[a]n 
automatic trigger when a merchant on [the] watch list . . . 
attempts to launch a significant quantity of product ads--with 
escalated approval required to allow their ads to launch.'' 
\1768\ The Wall Street Journal's report, based on discussions 
with Amazon employees, confirms that Amazon ultimately 
implemented a plan of this type. According to the report, 
``Tier 1 Competitors'' are blocked from buying certain ads and 
employees are allegedly instructed to ``mark any discussion of 
this practice . . . with `privileged and confidential' to evade 
regulators.'' \1769\
---------------------------------------------------------------------------
    \1768\ Id.
    \1769\ Dana Mattioli et al., Amazon Restricts How Rival Device 
Makers Buy Ads on Its Site, Wall St. J. (Sept. 22, 2020), https://
www.wsj.com/articles/amazon-restricts-advertising-
competitor-device-makers-roku-arlo-11600786638.
---------------------------------------------------------------------------
    In March 2020, Amazon announced that it would begin 
temporarily delaying shipments of all non-essential products 
from its warehouses, regardless of whether they were sold by 
Amazon or by competing third-party sellers.\1770\ The company 
claimed it was doing so to better serve customers in need while 
also helping to ensure the safety of warehouse workers. The 
effect of this change was to block third-party sellers of items 
that Amazon designated ``non-essential'' from shipping new 
inventory using Fulfillment by Amazon.
---------------------------------------------------------------------------
    \1770\ CEO Hearing at 286-87 (response to Questions for the Record 
of Jeff Bezos, CEO, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Amazon reportedly excepted itself from this policy and 
continued to ship non-essential items sold by Amazon Retail 
from its warehouses. According to a survey of Amazon workers 
conducted by Change to Win between April 29 and May 9, 2020, 
workers reported that Amazon had ``continued to ship non-
essential items such as hammocks, fish tanks, sex toys, and 
pool floaties.'' \1771\ More than two-thirds of fulfillment 
center workers reported that 50 percent or more of the items 
they handled during this period were non-essential. Based on 
the survey results, Change to Win concluded that ``Amazon has 
continued to place workers in danger of contracting COVID-19 in 
order to ship non-essential goods.'' \1772\ A number of market 
participants that the Subcommittee interviewed also indicated 
that Amazon prioritized shipping its own items over those sold 
by third-party sellers.\1773\ Amazon confirmed that it did give 
preferential treatment to its own products for a period of 
time, but claimed it was ``unintentional.'' \1774\
---------------------------------------------------------------------------
    \1771\ Change to Win, Amazon COVID-19 Worker Survey Data Brief 3 
(2020), https://static1.squarespace.com/static/
5d374de8aae9940001c8ed59/t/5ec67b15a155792a0f9ef435/15900
65963743/Amazon-Worker-COVID-19-Data-Brief.pdf.
    \1772\ Id.
    \1773\ See, e.g., Submission from Source 91, to H. Comm. on the 
Judiciary (Sept. 16, 2020) (``When we looked at Amazon private-label 
products during April/early May, they were almost all available for 
immediate Prime delivery, while comparable national brands were not 
able to get the same shipment times. Definitely preference was given to 
many Amazon private-label products during times of `essential'/`non-
essential' classification.''); Interview with Source 152 (Sept. 18, 
2020).
    \1774\ CEO Hearing at 287 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.) (``After instituting these changes, 
Amazon became aware that shipments of certain Amazon devices that did 
not fall into the priority categories had been inadvertently included 
in the list of products with faster delivery promises. This was 
unintentional.'').

    (6) Tying and Bundling--Fulfillment by Amazon and 
---------------------------------------------------------------------------
Advertising

    (a) Fulfillment by Amazon. There is a strong link between 
Amazon Marketplace and Fulfillment by Amazon (FBA), Amazon's 
paid logistics service. Amazon uses its dominance in each of 
these markets to strengthen and reinforce its position in the 
other.
    Amazon's FBA program combines warehousing, packing, and 
shipping services, and most importantly, access to Prime 
customers.\1775\ For a seller's products to get the Prime 
badge, which is essential to making sales on the platform, a 
seller must either qualify for Amazon's Seller Fulfilled Prime 
(SFP) program or use Amazon's FBA service. On August 18, 2020, 
Amazon informed sellers of changes to Seller Fulfilled Prime 
which render it an entirely impractical option for most 
sellers.\1776\ Even before this change, only a very small 
percentage of sellers could meet the onerous eligibility 
requirements for Seller Fulfilled Prime.\1777\ This means FBA 
is functionally the only way for sellers to get the Prime badge 
for their product listings.\1778\ A document setting forth 
draft Q&A before a 2018 earnings call for Amazon Chief 
Financial Officer Brian Olsavsky explained the connection 
between Prime and FBA: ``Prime and FBA reinforce each other--
they are inextricably linked. FBA adds Prime eligible 
selection. Prime member growth and purchasing habits attract 
sellers to FBA.'' \1779\
---------------------------------------------------------------------------
    \1775\ Fulfillment by Amazon, Amazon, https://sell.amazon.com/
fulfillment-by-amazon.html (last visited Oct. 4, 2020).
    \1776\ Pascal, The Seller Fulfilled Prime Team, Important Updates 
to Seller Fulfilled Prime, Amazon Servs. Seller Forums (Aug. 18, 2020), 
https://sellercentral.amazon.com/forums/t/important-updates-to-seller-
fulfilled-prime/682240.
    \1777\ See, e.g., Interview with Jason Boyce, Founder & CEO, 
Avenue7Media, LLC (Sept. 15, 2020) (``It used to be possible, but hard, 
to be a Seller Fulfilled Prime seller. There were only 200 sellers that 
were able to meet the requirements. What's changing recently is that 
they used to allow you to have the Prime badge in certain regions, but 
now they say you need the Prime badge nationally, i.e., you need to 
have multiple warehouses across the country plus ship on Saturdays, 
etc.'').
    \1778\ Regan McPhee, How to Sell on Amazon Prime in 2020, 
JungleScout (May 27, 2020), https://www.junglescout.com/blog/how-to-
sell-on-amazon-prime/.
    \1779\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00186643 (July 23, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    Due to a lack of alternatives, third-party sellers have no 
choice but to purchase fulfillment services from Amazon. More 
than 73 percent of all Marketplace sellers worldwide reportedly 
rely on FBA services.\1780\ Numerous third-party sellers told 
the Subcommittee that they feel they have no choice but to pay 
for FBA to maintain a favorable search result position, to 
reach Amazon's more than 112 million Prime members, and to win 
the Buy Box--through which the vast majority of Amazon sales 
are made.\1781\ A recent consumer survey indicated that 75 
percent of Amazon Prime customers specifically search for 
products flagged as Prime-eligible.\1782\ As a result, as the 
Online Merchant's Guild told the Subcommittee, many sellers 
will ``say that without Prime you are dead.'' \1783\
---------------------------------------------------------------------------
    \1780\ See J. Clament, Fulfillment by Amazon (FBA) Usage Among Top 
Marketplace Sellers Worldwide 2017-2018, Statista (Jan. 7, 2020), 
https://www.statista.com/statistics/1020046/global-fba-usage-top-
amazon-sellers/.
    \1781\ See, e.g., Submission from Source 43, to H. Comm. on the 
Judiciary, 30 (Oct. 26, 2019) (on file with Comm.).
    \1782\ Feedvisor, The 2019 Amazon Consumer Behavior Report 10 
(2019), https://fv.feedvisor.com/CN_2019_Amazon-Consumer-Behavior-
Report.html.
    \1783\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 7 (Oct. 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    In response to concerns about Amazon tying a seller's 
ability to make sales on its platform to participation in FBA, 
Amazon has offered contradictory statements. In the 
Subcommittee's second hearing, Representative Lucy McBath (D-
GA) asked Amazon's Associate General Counsel, Nate Sutton, 
whether Amazon ``privilege[d] vendors who use Amazon 
Fulfillment Services over those who chose not to.'' \1784\ Mr. 
Sutton asserted that Amazon ``do[es] not favor . . . products 
that use FBA over others.'' \1785\ He also indicated that 
Fulfillment by Amazon is not a factor in Amazon's ranking 
algorithm.\1786\
---------------------------------------------------------------------------
    \1784\ Innovation and Entrepreneurship Hearing at 50 (question of 
Rep. Lucy McBath (D-GA), Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary).
    \1785\ Id.
    \1786\ Id. at 499 (response to Questions for the Record of Nate 
Sutton, Assoc. Gen. Couns., Competition, Amazon.com, Inc.).
---------------------------------------------------------------------------
    At the Subcommittee's sixth hearing, Representative Mary 
Gay Scanlon (D-PA) asked Mr. Bezos about whether there is a 
connection between a seller's use of FBA and its ability to win 
the Buy Box.\1787\ In response, Mr. Bezos said, ``I'm not sure 
if it's direct, but, indirectly, I think the Buy Box does favor 
products that can be shipped with Prime.'' \1788\ Given that 
FBA is effectively the only way for sellers to get a Prime 
badge, this indicates that Amazon does favor sellers who use 
FBA over those who do not for both its search rankings and the 
Buy Box. Amazon claims that it favors sellers who use FBA 
because it is in the best interest of consumers and that it 
``does not consider profitability as part of the Featured 
Merchant Algorithm.'' \1789\ Documents reviewed by the 
Subcommittee, however, suggest that Amazon has used 
profitability--also referred to internally as ``contribution 
profit'' or ``CP''--as a factor in awarding the Buy Box.\1790\
---------------------------------------------------------------------------
    \1787\ CEO Hearing at 161 (question of Rep. Mary Gay Scanlon (D-
PA), Vice Chair, H. Comm. on the Judiciary).
    \1788\ Id. (statement of Jeff Bezos, CEO, Amazon.com, Inc.).
    \1789\ Id. at 282 (response to Questions for the Record of Jeff 
Bezos, CEO, Amazon.com, Inc.).
    \1790\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00141750 (Mar. 25, 2010) (on file with Comm.).
---------------------------------------------------------------------------
    Furthermore, Amazon's own documents show that it has 
considered FBA participation for purposes of determining the 
Buy Box winner.\1791\ An Amazon document that sets forth 
pricing rules for a pilot program appears to favor third-party 
sellers that use FBA over those who do not for awarding the Buy 
Box.
---------------------------------------------------------------------------
    \1791\ Id. at AMAZON-HJC-00142724.
---------------------------------------------------------------------------
    One third-party seller provided the Subcommittee with 
anecdotal evidence that Amazon favors sellers who participate 
in Amazon's fulfillment program over sellers who do not. The 
seller set up an experiment where he sold the same product, one 
self-fulfilled and the other fulfilled through FBA, and ran 
different test cases.\1793\ The seller found that, ``Even when 
the consumer price of the self-fulfilled order was reduced and 
sold for a lower price (7% lower) than the FBA offer, the FBA 
still `won' the `Buy Box.' '' \1794\ The seller indicated that, 
without this favorable treatment for FBA, they would not choose 
to use FBA, as they found Amazon's fulfillment service was 
often slower and less reliable than self-fulfillment.\1795\
---------------------------------------------------------------------------
    \1793\ Submission from Source 43, to H. Comm. on the Judiciary, 29 
(Oct. 26, 2019) (on file with Comm.).
    \1794\ Id.
    \1795\ Id.; see also Interview with Source 920 (July 14, 2020); 
Interview with Source 100 (July 24, 2020).

           Internal Pricing Strategy Document \1792\
---------------------------------------------------------------------------

    \1792\ Prepared by the Subcommittee based on Submission from 
Amazon, to H. Comm. on the Judiciary, AMAZON-HJC-00141750 (Mar. 25, 
2010) (on file with Comm.).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Although Jeff Bezos told the Subcommittee that Fulfillment 
by Amazon ``is probably the greatest invention that we ever 
created for sellers,'' and that ``it's working for sellers,'' 
information that the Subcommittee reviewed suggests that it has 
significant shortfalls.\1796\ One third-party seller told the 
Subcommittee, ``We use both FBA and self-fulfillment, [and] all 
of our negative comments are on items shipped through FBA.'' 
\1797\ According to another seller that uses FBA, at one point, 
Amazon decided to change the packaging on her products from 
cardboard boxes to padded envelopes, causing damage to her 
products in transit. When the damaged items started arriving at 
her customers' homes in a damaged state, this caused a surge of 
negative reviews and requests for returns. When she asked 
Amazon to remove these bad reviews, which were caused by FBA's 
shipping methods, Amazon refused.\1798\
---------------------------------------------------------------------------
    \1796\ CEO Hearing at 161 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1797\ Interview with Source 89 (July 22, 2020).
    \1798\ Interview with Source 149 (Feb. 26, 2020).
---------------------------------------------------------------------------
    A competing online marketplace described how Amazon's 
effectively forced-on-sellers FBA program makes it more 
difficult to compete with Amazon for sellers, stating, 
``[T]hrough anticompetitive strategies and practices by Amazon, 
many . . . sellers are being pulled into Amazon's tied 
marketplace-and-ecommerce-fulfilment ecosystem in a manner that 
makes them not only less independent

 
but directly dependent on Amazon.'' \1799\ It further explained 
that,
because of Amazon's dominance in online commerce, ``Even 
sellers who sell on other marketplaces are pushed into FBA, 
because it is the only practicable way to obtain sales on the 
Amazon marketplace.'' \1800\ In addition to the Subcommittee's 
investigation, antitrust enforcement agencies are currently 
investigating Amazon for tying these two services 
together.\1801\
---------------------------------------------------------------------------
    \1799\ Submission from Source 11, to H. Comm. on the Judiciary, 1 
(Oct. 14, 2019) (on file with Comm.).
    \1800\ Id. at 2.
    \1801\ See. e.g., Press Release, It. Competition Auth., Amazon: 
Investigation Launched on Possible Abuse of a Dominant Position in 
Online Marketplaces and Logistic Services (Apr. 15, 2019), https://
en.agcm.it/en/media/press-releases/2019/4/A528 (announcing the launch 
of an investigation into whether ``Amazon would unduly exploit its 
dominant position in the market for e-commerce platforms intermediary 
services in order to significantly restrict competition in the e-
commerce logistics market, as well as--potentially--in the e-commerce 
platform market, to the detriment of final consumers'').

    (b) Advertising. Consistent with public reporting,\1802\ 
evidence that the Subcommittee reviewed suggests that Amazon 
may require sellers to purchase their advertising services as a 
condition of making sales on the platform. Because 44 percent 
of consumers tend to only look through the first two search 
pages when shopping on Amazon, a seller is practically 
invisible if it does not show up on one of the first two 
pages.\1803\ Amazon's Sponsored Products and Sponsored Brand 
tools allow sellers to ensure they are prioritized in search 
results for specific key terms. A 2020 survey of large brands 
found that at least 73 percent used Amazon's advertising 
services, with 65 percent spending at least $40,000 a month on 
advertising on the site.\1804\ In just one year, the number of 
brands with this monthly advertising spend increased by 33 
percent.\1805\ A recent report issued by the Institute for 
Local Self-Reliance explained:
---------------------------------------------------------------------------
    \1802\ See, e.g., Shira Ovide, Amazon Advertising Is Just a Toll in 
Disguise, Bloomberg (July 15, 2019), https://www.bloomberg.com/opinion/
articles/2019-07-15/amazon-advertising-is-just-a-toll-in-disguise.
    \1803\ Feedvisor, The 2019 Amazon Consumer Behavior Report 5 
(2019), https://fv.feedvisor.com/CN_2019_Amazon-Consumer-Behavior-
Report.html.
    \1804\ Feedvisor, Brands and Amazon in the Age of E-Commerce, 2020 
Edition 12 (2020), https://fv.feedvisor.com/CN_2020_Brands-and-Amazon-
in-the-Age-of-E-Commerce.html.
    \1805\ Id.

     LSellers that decline to advertise risk losing their place 
in Amazon's organic search results, no matter how many glowing 
customer reviews they have. That's because the Amazon algorithm 
that delivers the search results favors products with more 
sales. As more orders are driven by ads, sellers than don't 
advertise lose out on those sales and, as their share of sales 
declines, they also slip in the search rankings, further 
reducing their sales in a negative cycle.\1806\
---------------------------------------------------------------------------
    \1806\ Stacy Mitchell, Ron Knox & Zach Freed, Inst. of Local Self-
Reliance, Report: Amazon's Monopoly Tollbooth 9 (2020), https://
ilsr.org/amazons_tollbooth/.

    Similarly, the Online Merchants Guild told the Subcommittee 
in a submission, ``[i]t is now common belief in the Amazon 
seller community that the only way to sell on Amazon is through 
Amazon's Pay-Per-Click (`PPC') offering.'' The submission 
describes the situation as ``pay-to-play,'' adding that ``[Pay-
Per-Click advertising] has become a major point of frustration 
for many sellers, with many sellers left feeling as if they are 
paying a mandatory fee, and have even described [Pay-Per-Click] 
as a way for Amazon to increase their seller fees without 
looking like they are increasing their seller fees.'' \1807\
---------------------------------------------------------------------------
    \1807\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 8 (Oct. 23, 2019) (on file with Comm.); see also Interview 
with Jason Boyce, Founder & CEO, Avenue7Media, LLC (Sept. 15, 2020) 
(``Pay-Per-Click is now mandatory.'').
---------------------------------------------------------------------------
    At the same time that advertising services have become 
``less of an option and more of a requirement for sellers to 
compete'' on the platform, Amazon's ads have also become more 
expensive.\1808\ The ads' costs are determined by reverse 
auction--businesses bid on keywords that customers may use to 
search for a given product. In just a year, ``the cost-per-
click for sponsored ads increased by about 15% on average,'' 
and for some, by as much as 127 percent.\1809\ A former third-
party seller told the Subcommittee that this harms both sellers 
and consumers, adding that ``those were the good old days; 
before [Pay-Per-Click], products would rise on the merits.'' 
\1810\ Similarly, the Online Merchants Guild said, ``[i]n the 
past, the belief was more reviews would create a trending 
product.'' \1811\
---------------------------------------------------------------------------
    \1808\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 8 (Oct. 23, 2019) (on file with Comm.).
    \1809\ Stacy Mitchell, Ron Knox & Zach Freed, Inst. of Local Self-
Reliance, Report: Amazon's Monopoly Tollbooth 10 (2020), https://
ilsr.org/amazons_tollbooth/.
    \1810\ Interview with Jason Boyce, Founder & CEO, Avenue7Media, LLC 
(Sept. 15, 2020).
    \1811\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 8 (Oct. 23, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    In response to concerns about tying, Amazon claims that it 
provides non-discriminatory access to the Buy Box and that 
participation in Fulfillment by Amazon and its Pay-Per-Click 
advertising program is voluntary.\1812\ Amazon's revenue from 
these sources is increasing, however, and sellers continue to 
raise concerns that increased fees for compulsory fulfillment 
and advertising services are squeezing their business.
---------------------------------------------------------------------------
    \1812\ See, e.g., CEO Hearing at 131 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.) (``I think what you're referring to is the fact that 
we offer an advertising service basically for third party sellers to 
drive additional promotion to their products. That is a voluntary 
program. Some sellers use it. Some don't.'').

    (7) Strategic Platform Management and Mismanagement. During 
the investigation, the Subcommittee also heard concerns that 
Amazon engages in strategic mismanagement of its platform by: 
(1) allowing the proliferation of counterfeit and unsafe goods; 
(2) using its ability to control the flow of counterfeits as 
leverage; and (3) putting in place ineffective counterfeit 
prevention tools that result in the suspension of a large 
number of innocent sellers.\1813\
---------------------------------------------------------------------------
    \1813\ During the investigation, the Committee also heard concerns 
about Amazon using ``brand gating'' to block competitors from selling 
certain products on its platform. See, e.g., Submission from Source 5, 
to H. Comm. on the Judiciary (Sept. 15, 2020) (on file with Comm.) 
(raising concerns about ``brand gating,'' which allows Amazon, on its 
own, or in concert with ``a trademark owner/manufacturer/seller, who is 
registered on the Brand Registry, to block other third party sellers 
from selling a particular brand, unless certain conditions are met''); 
Submission from Source 100, to H. Comm. on the Judiciary (Jan. 10, 
2020) (on file with Comm.) (raising concerns that Amazon ``gates'' a 
brand when it decides that it wants to source items directly from the 
manufacturer and limit competition from third-party sellers and 
stating, ``[w]e have lost literally millions of dollars on [inventory 
from] brands that Amazon has gated, purchases directly from 
manufacturers and we are no longer able to sell on Amazon'').
---------------------------------------------------------------------------
    As Amazon's dominance in e-commerce has grown, so has the 
proliferation of dangerous and counterfeit products on its 
marketplace.\1814\ A 2019 Wall Street Journal investigation 
found that Amazon had active listings for over 4,000 items 
``that have been declared unsafe by federal agencies [and] are 
deceptively labeled or are banned by federal regulators.'' 
\1815\ In the worst cases, these products have even caused 
bodily injury or even death to unsuspecting consumers.\1816\ As 
recently as September 2020, CNN released a report describing 
multiple instances in which Amazon's own private-label 
products, such as a phone charging cable, have caught fire 
while in use by consumers.\1817\
---------------------------------------------------------------------------
    \1814\ Alexandra Berzon, Shane Shifflett & Justin Scheck, Amazon 
Has Ceded Control of Its Site. The Result: Thousands of Banned, Unsafe 
or Mislabeled Products, Wall St. J. (Aug. 23, 2019), https://
www.wsj.com/articles/amazon-has-ceded-control-of-its-site-the-result-
thousands-of-banned-unsafe-or-mislabeled-products-11566564990.
    \1815\ Id.
    \1816\ Id.
    \1817\ Blake Ellis & Melanie Hicken, Dozens of Amazon's Own 
Products Have Been Reported as Dangerous--Melting, Exploding or Even 
Bursting into Flames. Many Are Still on the Market, CNN Bus. (Sept. 10, 
2020), https://www.cnn.com/2020/09/10/business/amazonbasics-
electronics-fire-safety-invs/index.html.
---------------------------------------------------------------------------
    The spread of counterfeit products also has serious 
consequences for vendors and brand manufacturers who rely on 
their reputations, and consumer trust, to maintain successful 
businesses. Amazon's marketplace platform is designed in a way 
that makes it difficult for consumers to identify counterfeit 
products. As the Retail Industry Leaders Association (RILA) 
noted in a submission to the Subcommittee, ``Where a platform 
both obfuscates the origin or source and provides fulfillment 
services, a seller of counterfeits is harder for consumers to 
uncover because the item appears to have the backing of the 
platform.'' \1818\
---------------------------------------------------------------------------
    \1818\ Submission from Retail Industry Leaders Ass'n, to H. Comm. 
on the Judiciary, 9 (July 16, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Although it claims to take its counterfeit problem 
seriously, Amazon's business model incentivizes it to do less, 
not more. Because Amazon's profits increase with the number of 
sales on the platform, the company has an incentive to turn a 
blind eye to counterfeit products that contribute to its 
increased sales volume. Regardless of the source, more sales 
generally result in more profits for Amazon because it 
typically ``profits twice from a sale through purchase and 
fulfillment[,] and potentially three times through 
advertising.'' \1819\
---------------------------------------------------------------------------
    \1819\ Id.
---------------------------------------------------------------------------
    For example, the Subcommittee uncovered evidence during the 
investigation that Amazon has used its ability to police 
counterfeits more or less aggressively as leverage in contract 
negotiations with brands who attempt to resist Amazon pressure 
to sell on its platform--referred to internally at Amazon as 
``holdouts.'' \1820\ This recently occurred when it agreed to 
increase efforts to crack down on counterfeit Apple products as 
part of Apple's agreeing to establish a wholesale relationship 
with Amazon Retail.\1821\ Documents received by the 
Subcommittee suggest that Apple was dissatisfied with Amazon's 
anti-counterfeiting program and sought the following as a 
condition of selling Apple products wholesale to Amazon: 
``Amazon must proactively monitor platform for counterfeits/
knockoffs and cooperate with Apple to remove and prevent 
them.'' \1822\
---------------------------------------------------------------------------
    \1820\ Competitors Hearing at 19-20 (statement of David Barnett, 
CEO & Founder, PopSockets LLC); see also Laura Stevens & Sara Germano, 
Nike Thought It Didn't Need Amazon--Then the Ground Shifted, Wall St. 
J. (June 28, 2017), https://www.wsj.com/articles/how-nike-resisted-
amazons-dominance-for-years-and-finally-capitulated-1498662435.
    \1821\ Jouzas Kaziukenas, Amazon's Apple Moment, Marketplace Pulse 
(Nov. 27, 2018), https://www.marketplacepulse.com/articles/amazon-
apple-moment.
    \1822\ See Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00190195 (Feb. 15, 2018) (on file with Comm.) (``We 
understand Apple's IP team may not be happy with elements of our anti-
counterfeiting program.'').
---------------------------------------------------------------------------
    At the Subcommittee's field hearing in Colorado, PopSockets 
founder David Barnett testified that ``Amazon was aware that 
large quantities'' of counterfeit PopSockets products were 
selling on its platform, but that Amazon allowed the problem to 
continue until PopSockets agreed to spend nearly two million 
dollars on Amazon marketing services.\1823\ Mr. Barnett further 
testified that Amazon was not just facilitating the sale of 
counterfeit PopSockets products, but that Amazon itself was 
engaged in selling knockoffs. Representative Ken Buck (R-CO) 
and Representative Henry C. ``Hank'' Johnson, Jr. (D-GA) 
confronted Mr. Bezos on Amazon's behavior towards PopSockets at 
the Subcommittee's sixth hearing. Mr. Bezos responded, ``if 
those are the facts and if someone somewhere inside Amazon 
said, you know, `Buy X dollars in ads, and then we'll help you 
with your counterfeit problem,' that is unacceptable. And I 
will look into that, and we'll get back to your office with 
that.'' To date, however, Amazon has not followed up with the 
Subcommittee to provide additional information.
---------------------------------------------------------------------------
    \1823\ Competitors Hearing at 19-20 (statement of David Barnett, 
CEO & Founder, PopSockets LLC).
---------------------------------------------------------------------------
    In response to criticism and negative publicity about the 
proliferation of counterfeit products on its platform, Amazon 
announced several initiatives to combat fake products.\1824\ 
During the Subcommittee's sixth hearing, Mr. Bezos testified 
that Amazon ``invest[s] hundreds of millions of dollars in 
systems'' that police counterfeits.\1825\ However, Amazon's 
approach appears to be ineffective, resulting in suspensions of 
many innocent, third-party sellers, with devastating effects on 
some sellers' businesses.\1826\
---------------------------------------------------------------------------
    \1824\ See, e.g., Press Release, Amazon, Amazon Establishes 
Counterfeit Crimes Unit to Bring Counterfeiters to Justice (June 24, 
2020), https://press.aboutamazon.com/news-releases/news-release-
details/amazon-establishes-counterfeit-crimes-unit-bring-
counterfeiters.
    \1825\ CEO Hearing at 131 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1826\ See, e.g., Submission from Amazon, to H. Comm. on the 
Judiciary, AMAZON-HJC-00173394 (Sept. 6, 2016) (on file with Comm.) 
(``Additional gating requirements were put in place to reduce 
counterfeit and improve product safety, but did not have the right 
processes in place to limit the number of false negatives (declining 
Seller applications despite the seller's ability to provide the correct 
documentation).'').
---------------------------------------------------------------------------
    For example, the Subcommittee interviewed a former Amazon 
employee and current consultant for Amazon sellers who 
described recent unfair changes in Amazon's treatment of 
sellers suspected of being counterfeiters. He said that, in the 
past, Amazon would only suspend accounts and withhold funds 
from third-party sellers it confirmed were selling counterfeit 
goods.\1827\ However, increasingly, ``Amazon rejects invoices 
or fails to verify suppliers without any justification or basis 
as to why . . . and they are using that as a reason to hold 
funds indefinitely.'' \1828\
---------------------------------------------------------------------------
    \1827\ Interview with Chris McCabe, Founder, ecommerceChris, LLC 
(June 12, 2020).
    \1828\ Id.
---------------------------------------------------------------------------
    One third-party seller told the Subcommittee that Amazon 
blocked some of her listings, citing a number of her products 
as ``inauthentic.'' \1829\ The seller provided evidence to 
Amazon that, not only were her vendor's products authentic, but 
Amazon actively sold the same products, sourced from the same 
vendor, through its first-party sales.\1830\ Despite elevating 
the issue to Amazon executives in July 2020, this issue has 
still not been resolved as of September 2020.\1831\
---------------------------------------------------------------------------
    \1829\ Submission from Source 100, to H. Comm. on the Judiciary 
(Sept. 18, 2020) (on file with Comm.).
    \1830\ Id.
    \1831\ Id.

    (ii) Most-Favored-Nation and Price Parity Provisions. 
Amazon also uses its dominant position in e-commerce as 
leverage with other businesses to require most-favored-nation 
(MFN) clauses or similar price parity provisions to guarantee 
that it will always receive the best prices and most favorable 
terms. While these clauses are not inherently anticompetitive, 
Amazon has a history of using MFN clauses to ensure that none 
of its suppliers or third-party sellers can collaborate with an 
existing or potential competitor to make lower-priced or 
innovative product offerings available to consumers.
    The anticompetitive effects of Amazon's use of MFN clauses 
are particularly pronounced in the book market. According to a 
book publisher, Amazon used its market power in print and e-
book sales to force a price MFN on it and other book 
publishers.\1832\ As the publisher explained, the result has 
been that ``publishers are completely handcuffed from 
stimulating platform competition because Amazon's price MFN 
causes publishers to incur significant financial penalties if 
they offer Amazon's rivals better pricing.'' \1833\ Another 
publisher told the Subcommittee that ``Amazon always has and 
still does require MFNs.'' \1834\ According to this publisher, 
the MFN provisions prevent publishers from partnering with any 
of Amazon's competitors and reinforces Amazon's 
``stranglehold'' and ``control'' over book distribution.\1835\ 
Although Amazon has changed the name and specific mechanisms 
over the years, it appears that the company continues to impose 
contract provisions that effectively function as MFNs on book 
publishers.
---------------------------------------------------------------------------
    \1832\ Submission from Source 17, to H. Comm. on the Judiciary, 9 
(Nov. 15, 2019) (on file with Comm.).
    \1833\ Id. at 10.
    \1834\ Interview with Source 155 (Sept. 29, 2020).
    \1835\ Id.
---------------------------------------------------------------------------
    In a joint letter to Subcommittee Chair Cicilline following 
the Subcommittee's sixth hearing, a group of organizations 
representing authors, publishers, and booksellers wrote that 
Amazon's use of MFNs has ``stifle[d] the emergence and growth 
of competitive alternatives in the book distribution 
marketplace.'' \1836\ When Amazon entered the e-book market 
through its release of the Kindle and Kindle Store in 2007, it 
unseated incumbent booksellers in market position by offering 
steep discounts on best-selling books.\1837\ Over a decade 
later, Amazon's dominance in e-books and its anticompetitive 
application of price parity clauses to its business 
relationships in this market ``eliminate the ability of rivals 
or new entrants to gain any meaningful competitive advantage 
relative to Amazon.'' \1838\ Essentially, Amazon disrupted this 
market, dominated it, and now wields its immense power to 
effectively guarantee that no competitor could possibly do the 
same.
---------------------------------------------------------------------------
    \1836\ Letter from Maria A. Pallante, President & CEO, Ass'n of Am. 
Publishers, Mary E. Rasenberger, Exec. Dir., Authors Guild, Allison K. 
Hill, CEO, Am. Booksellers Ass'n, to Hon. David. N. Cicilline, Chair, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 2 (Aug. 17, 2020), https://publishers.org/wp-content/
uploads/2020/08/Joint-Letter-to-Rep-Cicilline-081720.pdf.
    \1837\ George Packer, Cheap Words, New Yorker (Feb. 10, 2014), 
https://www.newyorker.com/magazine/2014/02/17/cheap-words (noting that, 
in 2007, the prices of e-books on Kindle were ``below wholesale in some 
cases, and so low that [they] represented a serious threat to the 
market . . . . By 2010, Amazon controlled ninety per cent of the market 
in digital books--a dominance that almost no company, in any industry, 
could claim.'').
    \1838\ Letter from Maria A. Pallante, President & CEO, Ass'n of Am. 
Publishers, Mary E. Rasenberger, Exec. Dir., Authors Guild, Allison K. 
Hill, CEO, Am. Booksellers Ass'n, to Hon. David. N. Cicilline, Chair, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 3 (Aug. 17, 2020), https://publishers.org/wp-content/
uploads/2020/08/Joint-Letter-to-Rep-Cicilline-081720.pdf.
---------------------------------------------------------------------------
    Amazon also aggressively enforces price parity rules on 
Amazon Marketplace's third-party sellers. It imposed MFN 
provisions on U.S. sellers until 2019. In response to antitrust 
scrutiny, the platform replaced those provisions with a ``Fair 
Pricing Policy,'' which has the same effect of blocking sellers 
from offering lower prices to consumers on other retail 
sites.\1839\ To enforce the policy, Amazon uses ``computer 
software to regularly scan listings on competitors' websites, 
and pressuring their sellers to change their price if their 
Amazon price is substantially higher.'' \1840\ A violation, or 
even a perceived violation, of the policy can lead to 
suspension of a seller's account, with dire consequences for 
the seller. A former third-party seller explained that Amazon 
uses ``Buy Box Suppression,'' where Amazon will remove a 
seller's ability to win the Buy Box, as a way to penalize 
sellers that offer products at a lower price on competing 
sites.\1841\
---------------------------------------------------------------------------
    \1839\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 7 (Oct. 29, 2019) (on file with Comm.).
    \1840\ Id. at 8.
    \1841\ Submission from Jason Boyce, Founder & CEO, Avenue7Media 
(Sept. 25, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    One of Amazon's competitors told the Subcommittee that, 
``as Amazon raises the costs to sellers, and requires that 
Amazon have the lowest prices available, for a seller to be 
able to make significant sales on its marketplace, these 
sellers will raise the price on competitor sites to match 
Amazon's price.'' \1842\ Amazon's ``Fair Price Policy,'' which 
has been described as a ``thinly-veiled MFN restriction,'' is 
likely anticompetitive with respect to blocking competition 
from other marketplaces, and does not result in lower prices 
for consumers as Amazon has claimed.\1843\
---------------------------------------------------------------------------
    \1842\ Submission from Source 11, to H. Comm. on the Judiciary, 4 
(Oct. 14, 2019) (on file with Comm.); see also Submission from Jason 
Boyce, Founder & CEO, Avenue7Media (Sept. 25, 2020) (on file with 
Comm.) (``Amazon prohibiting sellers from offering lower prices on 
other online retail platforms clearly hurts consumers if the only way 
for sellers to regain their listing on Amazon is to raise their prices 
on other platforms or remove their listings all together, therefore 
limiting competition.'').
    \1843\ Submission from Int'l Bhd. Of Teamsters, Commc'n Workers of 
Am., United Food & Commercial Workers Int'l Union, Serv. Emps. Int'l 
Union & Change to Win, to H. Comm. on the Judiciary, 4 (Mar. 10, 2020) 
(on file with Comm.).

    (iii) Predatory Pricing. As part of its business strategy, 
Amazon has historically placed a higher premium on long-term 
growth at the expense of short-term profitability. As noted 
earlier in this Report, Amazon did not post its first full-year 
profit until 2003--a decade after the company was 
founded.\1844\ Consistent with this trend, Amazon has adopted a 
predatory-pricing strategy across multiple business lines at 
various stages in the company's history.\1845\
---------------------------------------------------------------------------
    \1844\ Saul Hansen, Technology; Amazon Reports First Full-Year 
Profit, N.Y. Times (Jan. 28, 2004), https://www.nytimes.com/2004/01/28/
business/technology-amazon-reports-first-full-year-profit.html.
    \1845\ In this Report, the term ``predatory pricing'' should be 
understood in its broadest sense to refer to any situation where a 
dominant firm prices a good or service below cost in a way that is 
harmful to competition.
---------------------------------------------------------------------------
    Because of the nature of its marketplace business, Amazon's 
below-cost prices on products and services tend to lock 
customers into Amazon's full marketplace ecosystem. As a former 
Amazon employee told the Subcommittee, ``[A]bove all else, 
Amazon's goal is to keep the customer shopping on Amazon.'' 
\1846\ Once a customer is locked in, they are less likely to 
change their behavior even when Amazon's pricing is not 
competitive.
---------------------------------------------------------------------------
    \1846\ Submission from Source 91, to H. Comm. on the Judiciary 
(Sept. 22, 2020) (on file with Comm.).

    (1) Prime. The most prominent example of Amazon's use of 
strategic losses to lock customers into the platform's 
ecosystem is its popular membership program, Amazon Prime. As 
of August 2020, a Prime membership costs $119 per year, up from 
its original $79 at its launch in February 2005 and $99 from 
March 2014 to April 2018. An Amazon executive wrote in 2013, in 
reference to pricing Prime, ``the better course is to let the 
existing Prime program grow . . . and then raise prices later 
assuming a lower elasticity in future years,'' \1847\ once 
customers are locked in.
---------------------------------------------------------------------------
    \1847\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00216088 (Oct. 28, 2013) (on file with Comm.).
---------------------------------------------------------------------------
    An Amazon internal document describes the rationale behind 
Amazon Prime and its other membership programs: ``Membership 
programs are created with a long-term, company-wide perspective 
with the goal of increasing loyalty and cross-category shopping 
behavior. The programs do not optimize for short-term gain or 
profitability in a single category.'' \1848\ Another internal 
Amazon document describes these membership programs as, 
``[d]oubl[ing] down on `Big Moats,' '' aiming to create an 
impenetrable barrier around its dominant position.\1849\
---------------------------------------------------------------------------
    \1848\ Id. at AMAZON-HJC-00068510 (Sept. 8, 2010).
    \1849\ Id.; see also id. at AMAZON-HJC-00184863 (May 7, 2015) 
(``The value differentiation for Prime members accelerates the Prime 
flywheel creating an additional reason to become a Prime member and 
concentrate household spend with Amazon.'').
---------------------------------------------------------------------------
    Despite Amazon Prime's popularity and wide membership base, 
it is a loss-leader for the company. Many industry analysts 
have estimated Amazon's Prime losses over the years, finding 
that it is unprofitable, and that Amazon is willing to spend 
significant amounts of money to prop up the program.\1850\ In 
2016, a Forrester Research analysis estimated that Prime costs 
Amazon $1 billion per year.\1851\ In 2019, J.P. Morgan 
estimated that, though priced at $119, a Prime subscription is 
valued at about $860, up 10 percent from its estimated value in 
2018.\1852\ A Prime membership also includes access to Prime 
Video, Amazon's library of digital video content, and Amazon 
Music, its music streaming service.
---------------------------------------------------------------------------
    \1850\ See, e.g., Stu Woo, Amazon ``Primes'' Pump for Loyalty, Wall 
St. J. (Nov. 14, 2011), http://www.wsj.com/articles/
SB10001424052970203503204577036102353359784.
    \1851\ Nanette Byrnes, How Amazon Loses on Prime and Still Wins, 
MIT Tech. Rev. (July 12, 2016), https://www.technologyreview.com/2016/
07/12/158869/how-amazon-loses-on-prime-and-still-wins/ (last visited 
Oct. 4, 2020).
    \1852\ J.P. Morgan, Retail vs. Amazon: Life in a Post COVID-19 
World (2020), https://markets.jpmorgan.com/research/email/-lbk68f4/
Alp1kP9tQUPS29jlzW_bOg/GPS-3397412-0; Submission from Amazon, to H. 
Comm. on the Judiciary, AMAZON-HJC-00184863 (May 7, 2015) (on file with 
Comm.).
---------------------------------------------------------------------------
    The Artist Rights Alliance, an advocacy group for the 
digital rights of music creators, raised concerns that Amazon's 
inclusion of a streaming music service in its Prime program 
poses a severe risk of ``driv[ing] down royalties in an 
uncompetitive way.'' \1853\ According to its submission:
---------------------------------------------------------------------------
    \1853\ Submission from Artist Rights Alliance, to H. Comm. on the 
Judiciary, 5 (July 31, 2019) (on file with Comm.).

     LAmazon's ongoing efforts to launch a streaming music 
service as part of its Prime family of products should be 
carefully scrutinized . . . . [W]e are concerned about the 
dangers of predatory/sub-market pricing in a service that 
Amazon operates as a ``loss leader.'' In general, creators need 
an economy that more accurately sees and values their work; not 
one with cut-rate prices that entangles music even more deeply 
in a web of soulless data collection and ``content 
distribution'' operations.\1854\
---------------------------------------------------------------------------
    \1854\ Id.

    Although Amazon Prime is a loss-leader for the company, it 
is one of Amazon's most effective drivers of growth. Amazon 
Prime members account for 65 percent of Amazon shoppers as of 
Q4 2019.\1855\ While the average Amazon customer spends about 
$600 per year on Amazon.com, Prime members reportedly spend 
more than double that--an average of $1400 per year.\1856\
---------------------------------------------------------------------------
    \1855\ Fareeha Ali, Amazon Prime Has 112 Million Members in the 
U.S., Dig. Commerce 360 (Jan. 24, 2020), https://
www.digitalcommerce360.com/article/amazon-prime-membership/.
    \1856\ Jack Houston & Irene Anna Kim, How Amazon Gets You to Spend 
More Money, Bus. Insider (Sept. 17, 2020), https://
www.businessinsider.com/amazon-prime-members-spend-more-money-sneaky-
ways-2019-9.
---------------------------------------------------------------------------
    In 2010, Amazon started its Amazon Mom program, now called 
Amazon Family, another membership service that offers discounts 
on diapers and other items associated with parenthood.\1857\ At 
the outset, Amazon was willing to lose money to ensure the 
success of this program. A 2010 document outlining the lead-up 
to the official launch of Amazon Mom included a plan to 
discount diapers and wipes at a rate that would ``put [their] 
product below cost.'' \1858\ And selling diapers was not the 
goal of this program--instead Amazon recognized that ``a long-
lasting, sticky relationship'' with Amazon Mom members was the 
source of its true value.\1859\ Additionally, an internal 
presentation observed that ``[e]arly results from our Amazon 
Mom program'' showed that ``[n]ew Amazon customers, whose first 
purchase included diapers, spend over three times as much ($292 
vs. $91) during their first year as the average new Amazon 
customer.'' \1860\
---------------------------------------------------------------------------
    \1857\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00130737 (Aug. 31, 2010) (on file with Comm.).
    \1858\ Id. at AMAZON-HJC-00159560 (Apr. 2010).
    \1859\ Id. at AMAZON-HJC-00035545 (July 20, 2010) (``[W]e can see 
that Moms . . . have a favorable year one downstream value relative to 
the average customer.'').
    \1860\ Id. at AMAZON-HJC-00154656.
---------------------------------------------------------------------------
    Some of Amazon's rivals view this dynamic as harmful to 
competition, saying that Amazon is ``[u]nderpricing Prime to 
consumers to build a huge and highly targetable share of 
ecommerce demand.'' \1861\ Once consumers have paid the yearly 
fee for Prime, they are incentivized to use it as much as 
possible to maximize return on their investment, ``whereas they 
might otherwise multisource.'' \1862\
---------------------------------------------------------------------------
    \1861\ Submission from Source 11, to H. Comm. on the Judiciary, 2 
(Oct. 14, 2019) (on file with Comm.).
    \1862\ Id. at 3.

    (2) Diapers.com. The Amazon Mom program served another 
important function and had a central role in one of Amazon's 
early applications of its predatory-pricing strategy. In 2009, 
Bezos and other Amazon executives noticed and began discussing 
the rise of Diapers.com, a competitor in the baby and personal-
care product markets.\1863\ What followed was a year-long price 
war, ending in Amazon's eventual acquisition of Quidsi, the 
parent company of Diapers.com.
---------------------------------------------------------------------------
    \1863\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00151723 (Feb. 9, 2009) (on file with Comm.).
---------------------------------------------------------------------------
    At the Subcommittee's hearing, Mr. Bezos testified that 
Amazon was always a price follower in its war with Diapers.com. 
\1864\ However, Amazon's `` `plan to win' against 
[D]iapers.com'' explicitly included price-leading on 
diapers.\1865\ Recognizing that Diapers.com was the company's 
``#1 short term competitor,'' Amazon executives decided that 
going after them required a ``need to match pricing . . . no 
matter what the cost.'' \1866\ Amazon internal documents 
indicate that Amazon was willing to lose $200 million in one 
month alone on products in the relevant competitive 
categories.\1867\ Offering 30 percent cash back on diapers and 
a free year's worth of Prime membership to Amazon Mom members, 
an Amazon executive predicted in November 2010 that it would 
seriously wound Quidsi, stating, ``[T]hey expect to lose lots 
of money over the nxt [sic] few yrs [sic]--this will make it 
worse.'' \1868\ Quidsi explicitly identified ``Predatory 
Pricing'' as a ``Near-Term Risk'' in a 2009 presentation.\1869\ 
In November 2010, Amazon acquired its self-described ``largest 
and fastest growing competitor in the on-line diaper and baby 
care space.'' \1870\
---------------------------------------------------------------------------
    \1864\ CEO Hearing at 110 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1865\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00132026 (June 8, 2010) (on file with Comm.).
    \1866\ Id. at AMAZON-HJC-00151722 (Feb. 9, 2009).
    \1867\ Id. at AMAZON-HJC-00057007 (Apr. 5, 2010).
    \1868\ Id. at AMAZON-HJC-00009716 (Sept. 21, 2010).
    \1869\ Id. at AMAZON-HJC-00009596 (Nov. 2, 2010).
    \1870\ Id. at AMAZON-HJC-00142833 (May 12, 2009).

    (3) ``Can't Realize Any Profit''. Once Amazon succeeds in 
trapping enough customers in its ``flywheel'' to secure 
dominant position across varied markets, it can then raise 
prices or remove incentives or allowances for Marketplace 
sellers to sell products at favorable prices for consumers. One 
example of the latter is Amazon's treatment of ``CRAP,'' a term 
coined internally which refers to products on which Amazon 
``Can't Realize Any Profit.'' \1871\ CRAP products are low-
priced items that are heavy and expensive to ship--often 
consumables, like packs of bottled water.\1872\
---------------------------------------------------------------------------
    \1871\ Id. at AMAZON-HJC-00167480.
    \1872\ Laura Stevens, Sharon Terlep & Annie Gasparro, Amazon 
Targets Unprofitable Items, with a Sharper Focus on the Bottom Line, 
Wall St. J. (Dec. 16, 2018), https://www.wsj.com/
articles/amazon-targets-unprofitable-items-with-a-sharper-focus-on-the-
bottom-line-11544965201.
---------------------------------------------------------------------------
    These items were integral to Amazon's pursuit of dominance 
in the e-commerce market. But once Amazon began to switch its 
focus from pure growth to profitability, it reversed course on 
these products, engaging in an ongoing ``CRAP-Out Process,'' by 
which Amazon attempts to make CRAP profitable through a variety 
of methods, such as raising delivery fees or requiring vendors 
to repackage products.\1873\ This increases costs for sellers 
and brands, who have no choice but to acquiesce to the changed 
shipping and packaging rules given their dependence on Amazon 
for e-commerce sales. Amazon executives acknowledged that CRAP 
was an element of its plan for growth, noting in a strategy 
session that, ``We want to ensure that if despite all our 
efforts to improve our cost structure, we lose money on an ASIN 
[Amazon Standard Identification Number] it is for the long term 
strategic growth of Amazon.'' \1874\
---------------------------------------------------------------------------
    \1873\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00167484 (on file with Comm.) (``How to deal with CRAP.'').
    \1874\ Id.
---------------------------------------------------------------------------
    Amazon documents provided in response to the Committee's 
requests show the extent to which Amazon was committed to 
below-cost pricing. A 2010 review of its baby formula business 
identified Amazon's ``most frequently matched internal 
competitor'' as ABCBabyFormula, which ``typically [ ] price[d] 
15-20% below [Amazon's] cost.'' \1875\ Identifying this company 
as the most significant influence on Amazon's baby formula 
profit loss, the document notes of ABCBabyFormula that 
``[m]anufacturers do not sell to them directly and believe they 
are sourcing black market stolen goods.'' \1876\ Amazon 
frequently price-matched, at significantly below cost, a 
competitor that it had reason to believe was sourcing baby 
formula from illegal and potentially dangerous sources--
indicating the lengths to which Amazon was willing to go to 
ensure product selection and, in turn, growth.
---------------------------------------------------------------------------
    \1875\ Id. at AMAZON-HJC-0014302 (Sept. 30, 2010).
    \1876\ Id.

    (4) Amazon Devices. Finally, Amazon sells its own branded 
hardware devices on its Marketplace and has often priced those 
devices below cost in an attempt to corner the market for those 
devices and adjacent markets. In Amazon's effort to ``own the 
smart home,'' for example, Amazon sometimes prices its Echo 
Speaker below cost. Market estimates suggest that Amazon's Echo 
Dot third generation materials cost is $37.68,\1877\ while the 
company listed it at $22 during its 2019 Prime Day.\1878\ Other 
market research of Amazon products found that Amazon Echo 
products are on sale as often as they are at full price.\1879\ 
Illustrating how low prices may not always be in consumers' 
best interest, Patrick Spence, the CEO of Sonos, testified 
before the Subcommittee that these pricing habits ``hamstring[] 
those companies that have better products that cannot be sold 
at a loss.'' \1880\ At the Subcommittee's hearing, 
Representative Jamie Raskin (D-MD) raised this concern with Mr. 
Bezos.\1881\ In response, Mr. Bezos responded that the Amazon 
Echo is ``often on promotion, and sometimes when it's on 
promotion it may be below cost.'' \1882\
---------------------------------------------------------------------------
    \1877\ Submission from Source 38, to H. Comm. on the Judiciary, 19 
(Sept. 1, 2019) (citing TechInsights).
    \1878\ Id.; see also Samantha Gordon, Prime Day Is Almost Over--
These Are the Best Deals You Can Still Get, USA Today (July 15, 2019), 
https://www.usatoday.com/story/tech/reviewedcom/2019/07/15/prime-day-
2019-best-amazon-deals-you-can-get-during-massive-sale/1683589001/ 
(``Echo Dot--$22.'').
    \1879\ Sean Hollister, Amazon Doesn't Sell Echo Speakers at a Loss, 
Says Bezos--Unless They're on Sale, Verge (July 29, 2020), https://
www.theverge.com/2020/7/29/21347121/amazon-echo-speaker-price-undercut-
rivals-loss-sale-antitrust-hearing.
    \1880\ Competitors Hearing at 12-13 (statement of Patrick Spence, 
CEO, Sonos, Inc.).
    \1881\ CEO Hearing at 123 (question of Rep. Jamie Raskin (D-MD), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
    \1882\ Id. at 124 (statement of Jeff Bezos, CEO, Amazon.com, Inc.).
---------------------------------------------------------------------------
3. Fulfillment and Delivery

    (a) Market Power. As Amazon's e-commerce business has 
grown, it has also developed a significant logistics business 
surrounding fulfillment and delivery of third-party orders with 
its Fulfillment by Amazon (FBA) program. More than 73 percent 
of all Amazon Marketplace sellers reportedly rely on this 
program to fulfill their orders.\1883\ Because of this, a trade 
association that represents third-party sellers refers to 
Amazon's fulfillment operation ``as the railroad of [e-
commerce].'' \1884\ In addition to its fulfillment operation, 
Amazon is also one of the largest shippers in the world. The 
company provides global shipping services for its own products 
and independent sellers that sell on Amazon.com, as well as 
other e-commerce sites.\1885\
---------------------------------------------------------------------------
    \1883\ See Fulfillment by Amazon Usage Among Top Sellers Worldwide 
2017-2018, Statista, https://www.statista.com/statistics/1020046/
global-fba-usage-top-amazon-sellers/ (last visited Oct. 4, 2020).
    \1884\ Submission from Online Merchants Guild, to H. Comm. on the 
Judiciary, 8 (Oct. 23, 2019) (on file with Comm.).
    \1885\ Fill Orders from Other Sales Channels (Multi-Channel 
Fulfillment), Amazon Seller Cent., https://sellercentral.amazon.com/gp/
help/external/200332450 (last visited Oct. 4, 2020) (explaining that 
``Multi-Channel Fulfillment (MCF) is a program within Fulfillment by 
Amazon (FBA),'' that fills orders from sales channels placed on sites 
other than Amazon.com).
---------------------------------------------------------------------------
    Amazon's ground shipping infrastructure consists of 
``trucks, trailers, intermodal containers, and delivery 
vehicles.'' \1886\ Its truck fleet consists of more than 10,000 
trailers.\1887\ It also has its own freight airline, Amazon 
Air, with about 50 leased aircrafts,\1888\ and plans to expand 
its fleet to 70 by 2021.\1889\ Amazon has also built hundreds 
of package sorting and delivery centers across the United 
States and has established its own network of contracted 
delivery providers exclusively dedicated to delivering packages 
for Amazon.\1890\
---------------------------------------------------------------------------
    \1886\ Innovation and Entrepreneurship Hearing at 515 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1887\ Press Release, Amazon, Continued Growth for Amazon's Air 
Network (June 28, 2019), https://press.aboutamazon.com/news-releases/
news-release-details/continued-growth-amazons-air-network-expand-prime-
fast-free.
    \1888\ Innovation and Entrepreneurship Hearing at 515 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1889\ Press Release, Amazon, Continued Growth for Amazon's Air 
Network (June 28, 2019), https://press.aboutamazon.com/news-releases/
news-release-details/continued-growth-amazons-air-network-expand-prime-
fast-free.
    \1890\ Inst. for Local Self-Reliance, Amazon's Monopoly Tollbooth 8 
(2020), https://cdn.ilsr.org/wp-content/uploads/2020/07/
ILSR_Report_Amazon Tollbooth_Final.pdf.
---------------------------------------------------------------------------
    In recent years, the size and scope of Amazon's delivery 
services network have grown significantly. When Amazon first 
launched Fulfillment by Amazon, it stored products and packed 
orders in its warehouses, but relied on other carriers to 
handle shipping and delivery. Today, Amazon ships a growing 
number of products itself. In 2019, ``Amazon delivered about 
half of its own packages, up from 15 percent just two years 
before.'' \1891\ Amazon has also lessened its use of large 
delivery companies during this time, using ``800 small, 
independent contractors [which] are now responsible for around 
48 percent of Amazon's last mile deliveries.'' \1892\ These 
smaller providers are economically dependent on Amazon, and 
``many are in fact reliant on Amazon for 100 percent of their 
business.'' \1893\
---------------------------------------------------------------------------
    \1891\ Id.
    \1892\ Submission from Int'l Bhd. of Teamsters, Commc'n Workers of 
Am., United Food & Commercial Workers Int'l Union, Serv. Emps. Int'l 
Union & Change to Win, to H. Comm. on the Judiciary, 13 (Mar. 10, 2020) 
(on file with Comm.).
    \1893\ Id. at 14.
---------------------------------------------------------------------------
    Parcel volume handled by Amazon's delivery service now 
rivals the top carriers, including UPS, FedEx, and the U.S. 
Postal Service. ``In 2019, Amazon delivered 2.5 billion 
parcels, or about one-fifth of all e-commerce deliveries,'' 
\1894\ and anticipates growth. In a July 2020 investor call, 
Amazon CFO Brian Olsavsky stated that Amazon ``expect[s] a 
meaningfully higher year-over-year square footage growth of 
approximately 50%,'' which includes ``strong growth in new 
fulfillment center space as well as sort centers and delivery 
stations.'' \1895\
---------------------------------------------------------------------------
    \1894\ Inst. for Local Self-Reliance, Amazon's Monopoly Tollbooth 8 
(2020), https://cdn.ilsr.org/wp-content/uploads/2020/07/
ILSR_Report_Amazon Tollbooth_Final.pdf.
    \1895\ Rachel Premack, Amazon Is Piling Up Fulfillment Center 
Square Footage, and It Shows Bezos Thinks the Pandemic-Driven Online 
Shopping Surge Is Here to Stay, Bus. Insider: Mkts. (July 31, 2020), 
https://markets.businessinsider.com/news/stocks/amazon-fulfillment-
center-growth-reveals-pandemic-online-ordering-surge-2020-7-1029456709# 
(last visited Oct. 4, 2020).
---------------------------------------------------------------------------
    An analysis by Morgan Stanley concluded that Amazon will 
overtake UPS and FedEx in market share for delivery by 2022. 
Amazon has already surpassed the U.S. Postal Service, which has 
been downsized dramatically under its current leadership.\1896\ 
Last year, the U.S. Postal Service had a decrease in parcel 
volume for the first time in nearly a decade.\1897\
---------------------------------------------------------------------------
    \1896\ Inst. for Local Self-Reliance, Amazon's Monopoly Tollbooth 8 
(2020), https://cdn.ilsr.org/wp-content/uploads/2020/07/
ILSR_Report_Amazon Tollbooth_Final.pdf.
    \1897\ Id.

    (b) Monopsony Power. Amazon exercises monopsony power in 
labor markets directly and indirectly. As one of the largest 
employers in America, Amazon exercises direct power over 
hundreds of thousands of workers across the United 
States.\1898\ Amazon employees make up 22 percent of the U.S. 
labor market in warehousing and storage, excluding seasonal 
workers.\1899\ There has been a growing amount of public 
reporting in recent years regarding Amazon's treatment of 
warehouse employees, including strenuous working conditions, 
unforgiving packing and sorting quotas, and unfair 
firings.\1900\ Amazon warehouses also have a tendency to 
depress wages when they enter a local labor market. For 
example, since Amazon opened a warehouse in Lexington County, 
South Carolina in 2011, the county has seen average annual 
wages for warehouse workers fall more than 30 percent, from 
$47,000 to $32,000 annually.\1901\
---------------------------------------------------------------------------
    \1898\ Submission from Int'l Bhd. Of Teamsters, Commc'n Workers of 
Am., United Food & Commercial Workers Int'l Union, Serv. Emps. Int'l 
Union & Change to Win. to H. Comm. on the Judiciary, 12 (Mar. 10, 2020) 
(on file with Comm.).
    \1899\ What Amazon Does to Wages, Economist (Jan. 20, 2018), 
https://www.economist
.com/united-states/2018/01/20/what-amazon-does-to-wages.
    \1900\ See, e.g., Colin Lecher, How Amazon Automatically Tracks and 
Fires Warehouse Workers for ``Productivity,'' Verge (Apr. 25, 2019), 
https://www.theverge.com/2019/4/25/18516004/amazon-warehouse-
fulfillment-centers-productivity-firing-terminations.
    \1901\ What Amazon Does to Wages, Economist (Jan. 20, 2018), 
https://www.economist
.com/united-states/2018/01/20/what-amazon-does-to-wages.
---------------------------------------------------------------------------
    Indirectly, Amazon has wage-setting power through its 
ability to set route fees and other fixed costs for independent 
contractors in localities in which it dominates the delivery 
labor market. These entities are dependent on Amazon for a 
large majority--or even 100 percent--of their delivery 
business.\1902\ As a result, they have little choice but to 
``submit to Amazon's prices and other terms.'' \1903\ Amazon's 
dominance also enables it to compel logistics employees to quit 
their jobs and instead act as independent contractors, removing 
employment protections. A group of labor unions stated in their 
submission to the Subcommittee, ``By virtue of its size and 
power as a buyer of delivery services, Amazon can impose 
monopolistic restraints on the treatment of workers within its 
supply chain while, at the same time, avoiding legal 
responsibility for their fair treatment.'' \1904\
---------------------------------------------------------------------------
    \1902\ Submission from Int'l Bhd. Of Teamsters, Commc'n Workers of 
Am., United Food & Commercial Workers Int'l Union, Serv. Emps. Int'l 
Union & Change to Win, to H. Comm. on the Judiciary, 14 (Mar. 10, 2020) 
(on file with Comm.).
    \1903\ Id.
    \1904\ Id. at 13.
---------------------------------------------------------------------------
    Despite the loss of jobs and economic activity in the wake 
of the COVID-19 pandemic, Amazon's monopsony power has likely 
increased. In response to higher demand for goods and services, 
Amazon hired 175,000 temporary workers in March and April of 
2020, making 125,000 of those jobs permanent in May 2020.\1905\
---------------------------------------------------------------------------
    \1905\ Sebastian Herrera, Amazon to Keep Most of the Jobs It Added 
During Pandemic, Wall St. J. (May 28, 2020), https://www.wsj.com/
articles/amazon-to-keep-most-of-the-jobs-it-added-during-pandemic-
11590661802.
---------------------------------------------------------------------------
4. Alexa's Internet of Things Ecosystem
    (a) Overview. Amazon has significant investments in the 
Internet of Things ecosystem, centering its strategy around 
Amazon's voice assistant, Alexa. In 2014, Amazon launched the 
Alexa-enabled Echo smart speaker.\1906\ Since then, Amazon has 
built the largest ecosystem of devices and applications 
connected to the Internet of Things,\1907\ creating a broad 
portfolio of services, development tools, and devices for its 
Alexa platform. Amazon's research and development team, Lab126, 
leads the development of Amazon's Internet of Things hardware 
expansion, including the development of Amazon Echo and Fire 
TV.\1908\ These devices represent a ``critical touchpoint that 
generates insights into user behavior, which can then be used 
to deepen the relationship with consumers and expose them to 
new products through personalized recommendations.'' \1909\ 
Amazon encourages consumers to use Alexa through its Echo smart 
speakers and other Alexa compatible devices, ranging from smart 
microwaves to its Echo Frames.\1910\
---------------------------------------------------------------------------
    \1906\ See, e.g., Chris Welch, Amazon Just Surprised Everyone with 
a Crazy Speaker that Talks to You, Verge (Nov. 6, 2014), https://
www.theverge.com/2014/11/6/7167793/amazon-echo-speaker-announced; Nick 
Statt, Amazon Wants Alexa to Be the Operating System for Your Life, 
Verge (Sept. 27, 2018), https://www.theverge.com/2018/9/27/17911300/
amazon-alexa-echo-smart-home-eco-system-competition.
    \1907\ See supra Section IV.
    \1908\ Amazon Lab126, Amazon Jobs, https://amazon.jobs/en/teams/
lab126/ (last visited Sept. 29, 2020).
    \1909\ See Johanna Ambrosio, Amazon Smart Devices to Expand in 
Homes and Businesses, TechTarget (Mar. 23, 2020), https://
searchaws.techtarget.com/feature/Amazon-smart-devices-to-expand-in-
homes-and-businesses.
    \1910\ Echo Frames--Eyeglasses with Alexa--Black--A Day 1 Editions 
Product, Amazon, https://www.amazon.com/dp/B07W72XKPJ. See also 
AmazonBasics Microwave, Small, 0.7 Cu. Ft., 700-W, Works with Alexa, 
Amazon, https://www.amazon.com/dp/B07894S727 (last visited Sept. 29, 
2020).
---------------------------------------------------------------------------
    In 2015, Amazon launched a kit for independent developers 
to access Alexa in the cloud and create new Alexa apps, which 
Amazon refers to as ``skills.'' \1911\ Two years later, in an 
effort to expand its ecosystem of devices, Amazon launched 
Alexa Voice Service. This suite of services allows 
manufacturers of hardware with microphones and speakers to 
receive and respond to Alexa voice commands, making the device 
``Alexa-enabled,'' \1912\ or ``Alexa built-in.'' \1913\ 
Additionally, Amazon oversees Works with Alexa, an Alexa-
compatible device certification program for devices that 
receive commands through an Alexa-enabled device, such as a 
smart speaker.\1914\ Amazon does not charge third-party device 
manufacturers for access to its integration services, which 
promotes rapid adoption of Alexa in a larger number of devices, 
which, in turn, drives greater adoption by consumers.\1915\
---------------------------------------------------------------------------
    \1911\ David Isbitski, Introducing the Alexa Skills Kit, Enabling 
Developers to Create Entirely New Voice Driven Capabilities, Amazon 
Dev. (June 25, 2015), https://developer
.amazon.com/blogs/post/Tx205N9U1UD338H/Introducing-the-Alexa-Skills-
Kit-Enabling-Developers-to-Create-Entirely-New-Voic.
    \1912\ Satish Iyer, Introducing the Alexa Voice Service Device SDK 
for Commercial Device Makers, Amazon Alexa (Aug. 17, 2017), https://
developer.amazon.com/blogs/alexa/post/7a72f14e-66d6-42fb-b369-
c60af364489a/introducing-the-alexa-voice-service-avs-device-sdk-for-
commercial-device-makers.
    \1913\ What Are Alexa Built-in Devices?, Amazon Alexa, https://
developer.amazon.com/en-US/alexa/devices/alexa-built-in (last visited 
Sep. 29, 2020).
    \1914\ Works with Alexa Program, Amazon Alexa, https://
developer.amazon.com/en-US/alexa/connected-devices/launch/works-with-
alexa (last visited Sept. 29, 2020).
    \1915\ Class Action Complaint at 8, B.F. v. Amazon.com, Inc., No. 
2:19-cv-910 (W.D. Wash. June 11, 2019).
---------------------------------------------------------------------------
    These programs indicate that Amazon is focused on expanding 
Alexa's reach rather than short-term profitability, consistent 
with the early stages of its marketplace strategy. Amazon CFO 
Brian Olsavsky confirmed this in an earnings call in July 2019, 
saying that the company's ``emphasis is around expanding the 
reach of Alexa and the usefulness.'' \1916\ He added that, at 
the time, Alexa had ``over 45,000 skills'' and was in ``over 
13,000 smart home devices from 2,500 unique brands.'' \1917\
---------------------------------------------------------------------------
    \1916\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00200464 (July 26, 2018) (on file with Comm.).
    \1917\ Id.
---------------------------------------------------------------------------
    Lastly, Amazon's Alexa ecosystem is a major source of 
consumer data; it tracks if the home owner's lights are off and 
the events on their calendar.\1918\ Amazon is also building a 
series of devices that allow people to have ``Alexa in [their] 
ears, on [their] eyes, and around [their] fingers.'' \1919\
---------------------------------------------------------------------------
    \1918\ Innovation and Entrepreneurship Hearing at 536 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1919\ Daniel Newman, Opinion, Amazon's Alexa Is About to Become 
Even More of a Fixture in Our Lives, MarketWatch (Sept. 30, 2019), 
https://www.marketwatch.com/story/amazons-alexa-is-about-to-become-
even-more-of-a-fixture-in-our-lives-2019-09-27.

    (b) Market Power. Amazon's Alexa represents one of three 
emerging voice assistant platforms domestically, along with 
Google Assistant and Apple's Siri, but has a more expansive 
collection of integrated devices and voice applications than 
its competitors.\1920\ The Echo collection of smart speakers--
the hub of Alexa's ecosystem--captures over 60 percent of the 
smart speaker market in the U.S.\1921\
---------------------------------------------------------------------------
    \1920\ See supra Section IV.
    \1921\ Submission from Source 38, to H. Comm. on the Judiciary, 7 
(Sept. 1, 2019).
---------------------------------------------------------------------------
    As of September 2019, there were 85,000 Works with Alexa 
devices available for consumers to purchase.\1922\ The current 
network of Alexa-enabled devices includes companies like Sonos, 
Hewlett-Packard, and BMW.\1923\ The U.S.-based Alexa Skills 
Store as of January 2020 includes 70,729 skills.\1924\ In 
comparison, as of December 2019, Google's voice application 
ecosystem had just over 18,826 Google Actions.\1925\
---------------------------------------------------------------------------
    \1922\ Kyle Wiggers, The Alexa Skills Store Now Has More than 
100,000 Voice Apps, VentureBeat (Sept. 25, 2019), https://
venturebeat.com/2019/09/25/the-alexa-skills-store-now-has-more-than-
100000-voice-apps/.
    \1923\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00200465 (July 26, 2018) (on file with Comm.).
    \1924\ H. Tankovska, Total Number of Amazon Alexa Skills in 
Selected Countries as of January 2020, Statista (Aug. 27, 2020), 
https://www.statista.com/statistics/917900/selected-countries-amazon-
alexa-skill-count/722/worldwide-google-action-disappearance-by-
language.
    \1925\ Shanhong Liu, Number of Google Assistant Actions Worldwide 
2019, by Language, Statista (June 17, 2020), https://www.statista.com/
statistics/1062.
---------------------------------------------------------------------------
    The voice assistant market has strong entry barriers due to 
the significant investments required to compete in the market. 
These include investments in artificial intelligence, voice-
enabled hardware, and cloud computing infrastructure, which are 
critical inputs Amazon has been developing for years. Amazon's 
Alexa Voice Service is also hosted on Amazon Web Services, 
allowing it to bind products and developers to its cloud 
platform.\1926\ In turn, this relationship gives Amazon a 
potential head-start on turning its Alexa business partners 
into customers through the cross-sale of Amazon Web Services 
and other Amazon products and services down the line.
---------------------------------------------------------------------------
    \1926\ Build the Future of the Connected Home with AWS IoT and 
Amazon Alexa, Amazon Web Servs., https://aws.amazon.com/iot/solutions/
connected-home/iot-and-alexa/ (last visited Sept. 29, 2020).
---------------------------------------------------------------------------
    Voice assistants collect significant amounts of personal 
data and learn users' preferences over time. For example, when 
Alexa users add more devices that integrate with Alexa, they 
often manage the settings for these devices through mobile 
applications and websites that are tied to their Amazon 
credentials, thereby creating a robust user profile.\1927\ As 
Amazon continues to expand Alexa's reach, this customization of 
features allows Amazon to better ``understand'' its users, 
which may affect their willingness to retrain a new voice 
assistant.\1928\ In addition to the cost of replacing their 
devices, this friction--retraining a new voice assistant--may 
increase costs associated with switching to another voice 
assistant ecosystem.
---------------------------------------------------------------------------
    \1927\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00172104 (Mar. 9, 2018) (on file with Comm.).
    \1928\ Submission from Source 39, to H. Comm. on the Judiciary, 
Source 39-00000098, at 19 (Sept. 16, 2019) (on file with Comm.).

    (c) Merger Activity. Amazon has expanded its voice 
assistant ecosystem by acquiring artificial intelligence 
companies to strengthen Alexa's functionality and voice-enabled 
device manufacturers to expand Alexa's reach.\1929\ In 2011, 
Amazon acquired Yap, a speech recognition platform.\1930\ The 
next year, in 2012, Amazon acquired Evi, a technology for 
understanding natural language.\1931\ Over the years, Amazon 
has continued to acquire other businesses engaged in natural 
language processing, machine learning, and other related 
technologies in support of its continued efforts to improve 
Alexa's artificial intelligence functionality.\1932\
---------------------------------------------------------------------------
    \1929\ See infra Appendix.
    \1930\ Sam Byford, Amazon Acquires Yap, Move into Speech 
Recognition?, Verge (Nov. 9, 2011), https://www.theverge.com/2011/11/9/
2550764/amazon-acquires-yap-speech-recognition-siri.
    \1931\ Emma Bryce, How Amazon's Alexa Was ``Born'' and Where Voice-
Controlled Tech Will Take Us Next, Wired (Feb. 14, 2017), https://
www.wired.co.uk/article/amazon-alexa-ai-evi.
    \1932\ See infra Appendix.
---------------------------------------------------------------------------
    One of Amazon's strategic goals for Alexa has been to use 
its voice assistant to reinforce the company's dominance in e-
commerce and strengthen its presence in offline retail. In 
2017, Amazon acquired Graphiq, a technology company that 
collects and organizes details about ``products, places, and 
people to simplify online research.'' \1933\ This acquisition 
appears to have been part of Amazon's effort to improve Alexa's 
overall search capabilities, most notably product search, as 
the technology includes ``features to tailor comparisons around 
individual preferences.'' \1934\
---------------------------------------------------------------------------
    \1933\ Paresh Dave, Amazon Acquires Santa Barbara Start-Up Graphiq 
to Try to Bolster Alexa, L.A. Times (July 20, 2017), https://
www.latimes.com/business/technology/la-fi-tn-graphiq-
amazon-20170719-story.html.
    \1934\ Id.
---------------------------------------------------------------------------
    In 2017, Amazon purchased Blink, followed by Ring in 2018--
both to solidify its position in the home security 
market.\1935\ In an internal document, Amazon recognized that 
security could ``feed our flywheels (Prime, Alexa) while being 
a large, profitable business in its own right.'' \1936\ Prior 
to these acquisitions Jeff Helbling, Vice President at Amazon, 
emailed a group of Amazon executives, recapping a discussion on 
the transactions he had with Mr. Bezos. There, he detailed the 
twin justification for the acquisitions, saying that ``two 
senses matter--eyes and ears.'' \1937\ Amazon had already 
locked down ``ears'' through its continued development of 
Alexa. Ring and Blink would act as Amazon's ``eyes'' right 
outside the home.
---------------------------------------------------------------------------
    \1935\ Jacob Kastrenakes, Amazon Buys Smart Camera and Doorbell 
Startup Blink, Verge (Dec. 22, 2017), https://www.theverge.com/
circuitbreaker/2017/12/22/16810516/amazon-blink-acquisition-smart-
camera-doorbell-company; see also Samuel Gibbs, Amazon Buys Video 
Doorbell Firm Ring for Over $1bn, Guardian (Feb. 28, 2018), https://
www.theguardian
.com/technology/2018/feb/28/amazon-buys-video-doorbell-ring-smart-home-
delivery.
    \1936\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00169702 (Mar. 9, 2018) (on file with Comm.).
    \1937\ Id. at AMAZON-HJC-00170877 (Oct. 11, 2017).
---------------------------------------------------------------------------
    Amazon's internal documents show that, in large part, it 
purchased Ring to capture the company's share of the smart home 
security market. In December 2017, Mr. Bezos wrote to Dave 
Limp, the Senior Vice President of Devices & Services, that 
Amazon was really ``buying market position'' by acquiring 
Ring.\1938\ During the Subcommittee's sixth hearing, 
Representative Jamie Raskin (D-MD) asked Mr. Bezos about this 
exchange.\1939\ Mr. Bezos responded:
---------------------------------------------------------------------------
    \1938\ Id. at AMAZON-HJC-00173560 (Dec. 15, 2017).
    \1939\ CEO Hearing at 124 (question of Rep. Jamie Raskin (D-MD), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).

     LSir, market position is valuable in almost any business, 
and it's one of the primary things that one would look at in an 
acquisition. There are multiple reasons that we might buy a 
company. Sometimes we're trying to buy some technology or some 
IP. Sometimes it's a talent acquisition. But the most common 
case is market position, that the company has traction with 
customers, they've built a service, maybe they were the first 
mover. There could be any number of reasons why they have that 
market position. But that's a very common reason to acquire a 
company.\1940\
---------------------------------------------------------------------------
    \1940\ Id. (statement of Jeff Bezos, CEO, Amazon.com, Inc.).

This response suggests that adding Ring's users to the Alexa 
ecosystem quickly was also important to Amazon's rationale.
    A 2017 internal memorandum further explains Amazon's 
strategy behind these acquisitions. As the memorandum notes, 
while acquiring each company independently would make Amazon 
stronger, acquiring both ``would put us in a meaningfully 
better position than we are today (and we would not want to 
stake our chances in the segment on closing any one 
opportunity).'' \1941\ Douglas Booms, the Vice President of 
Corporate Development at Amazon, sent an email summarizing the 
thoughts of other senior executives at the company, which 
included: ``I don't know how we can get big fast in that 
segment without an [sic] acquiring someone.'' \1942\
---------------------------------------------------------------------------
    \1941\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00169706 (Mar. 9, 2018) (on file with Comm.).
    \1942\ Id. at AMAZON-HJC-00170869 (Nov. 1, 2017).
---------------------------------------------------------------------------
    The documents and other relevant information reviewed by 
the Subcommittee demonstrate that Amazon acquiring Ring and 
Blink was in part to expand and reinforce its market power for 
its other business lines. Internally, Amazon executives 
discussed how home surveillance acquisitions would help them 
implement unattended package delivery. Similarly, they 
discussed the idea that the acquisitions would help Amazon 
develop its Alexa Doorbell application program interface, an 
AWS service that allows Alexa Skills developers to build apps 
that respond to a ringing doorbell.\1943\ Amazon referred to 
this strategy as an ``integration approach'' to ``remove 
impediments to future growth.'' \1944\
---------------------------------------------------------------------------
    \1943\ Id. at AMAZON-HJC-00169706 (Mar. 9, 2018); 
Alexa.DoorbellEventSource Interface, Amazon Alexa, https://
developer.amazon.com/en-US/docs/alexa/device-apis/alexa-doorbell
eventsource.html (last visited Sept. 30, 2020).
    \1944\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00172104 (Mar. 9, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    More recently, Amazon purchased Eero, a mesh networking 
company, for $97 million in 2019.\1945\ The purchase was part 
of Amazon's strategy to offer ``frustration-free setup'' for 
smart home devices in the Alexa ecosystem, another move aimed 
at removing impediments to growing the platform's presence in 
the home.\1946\ ``Amazon Wi-Fi Simple Setup'' scans the user's 
Eero network during the initial set-up of an Alexa-enabled 
device, applying the user's stored credentials to automatically 
connect to other smart devices, such as outlets and Fire TV 
devices.\1947\ To achieve this, Eero must continually 
understand which devices are connected to the network, 
including the IP addresses of those devices.\1948\ This 
acquisition gives Amazon access to another important input for 
consumer data.\1949\
---------------------------------------------------------------------------
    \1945\ Lisa Eadicicco & Alexei Oreskovic, Amazon Paid $97 Million 
to Acquire Eero in a Fire Sale Deal that Left Some Shareholders with 
Practically Nothing, According to Leaked Documents, Bus. Insider (Apr. 
5, 2019), https://www.businessinsider.com/amazon-paid-97-million-to-
acquire-eero-in-fire-sale-leaked-documents-2019-4.
    \1946\ See Lisa Eadicicco, A Year After Selling to Amazon for $1 
Billion, the Chief Inventor of the Ring Video Doorbell Explains How 
He's Bringing His Entrepreneurial Spirit to the Online Retailer, Bus. 
Insider (Apr. 9, 2019), http://static7.businessinsider.com/ring-
founder-jamie-siminoff-life-after-amazon-acquisition-2019-4 (quoting 
Jamie Siminoff, Founder of Ring, describing the importance of Eero and 
his support of Amazon's acquisition, ``[Ring is] a product that 
requires great Wi-Fi connectivity. We use a lot of bandwidth so we 
we're certainly very sensitive to Wi-Fi networks.'').
    \1947\ Amazon Frustration-Free Setup Frequently Asked Questions, 
Amazon, https://www
.amazon.com/gp/help/customer/display.html?nodeId=GMPKVYDBR223TRPY (last 
visited Oct. 4, 2020).
    \1948\ Legal: Privacy Policy for Eero Devices, Applications and 
Services, Eero, https://eero.com/legal/privacy (last visited Sept. 29, 
2020); Legal: Privacy Policy for Eero Websites, Eero, https://eero.com/
legal/privacy-website (last visited Sept. 29, 2020).
    \1949\ Innovation and Entrepreneurship Hearing at 537 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).

    (d) Conduct. During the Subcommittee's investigation, 
market participants raised concerns about Amazon's business 
practices in the smart home market. As these market 
participants note, Amazon uses Alexa to favor its own goods and 
services, including AmazonBasics and Prime Music. Amazon has 
also imposed barriers to entry for other voice-enabled device 
manufacturers through predatory pricing of Alexa-enabled 
devices, and through its dominance as a leading distribution 
---------------------------------------------------------------------------
channel for smart home devices.

    (i) Self-Preferencing. Amazon has the largest voice 
application ``store'' of third-party skills, as well as first-
party services that represent popular voice assistant 
applications, such as Amazon Music and an e-commerce platform 
that it can favor over third-party applications.\1950\ Amazon 
favors its services in Alexa by making them defaults for common 
voice commands. For example, Amazon.com is the default store 
for basic voice commands related to shopping. ``Alexa, add milk 
to my cart,'' adds milk to the user's Amazon shopping 
cart.\1951\
---------------------------------------------------------------------------
    \1950\ Competitors Hearing at 12 (statement of Patrick Spence, CEO, 
Sonos, Inc.).
    \1951\ Do More with Alexa, Amazon, https://www.amazon.com/alexa-
voice-shopping/b?ie=UTF8&node=14552177011 (last visited Sept. 30, 
2020).
---------------------------------------------------------------------------
    Besides favoring Amazon services with default voice 
commands, Alexa also allows Amazon to favor its retail products 
over products offered by third-party sellers. When users shop 
via voice command, they are presented with one spoken offer and 
an option for a follow-up question, which is distinct from an 
online user interface that shows the additional offers ranked. 
This increases the importance of being Alexa's featured 
offer.\1952\
---------------------------------------------------------------------------
    \1952\ Submission from Source 39, to H. Comm. on the Judiciary, 
Source 39-00000097, at 19 (Sept. 16, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    For example, The New York Times reported in 2018 that when 
a user says, ``Alexa, buy batteries,'' Alexa responds with the 
AmazonBasics option.\1953\ Similarly, a study conducted by Bain 
& Company found that for categories in which Amazon offered a 
private-label product, Alexa recommended those products 17 
percent of the time, despite its private-label goods 
representing only about 2 percent of total volume sold.\1954\ 
During the Subcommittee's sixth hearing, Representative Jamie 
Raskin (D-MD) asked Mr. Bezos, ``[H]as Alexa ever been trained 
to favor Amazon products when users shop by voice?'' \1955\ Mr. 
Bezos responded that he didn't ``know if it's been trained in 
that way,'' but ``it wouldn't surprise me if Alexa sometimes 
does promote our own products.'' \1956\ Amazon chooses the 
products Alexa suggests based on a range of features, including 
products that ``customers frequently purchase based on their 
past orders'' and Amazon's Choice designation.\1957\ Amazon's 
method for determining ``Amazon's Choice'' is opaque.\1958\
---------------------------------------------------------------------------
    \1953\ Julie Creswell, How Amazon Steers Shoppers to Its Own 
Products, N.Y. Times (June 23, 2018), https://www.nytimes.com/2018/06/
23/business/amazon-the-brand-buster.html.
    \1954\ Aaron Cheris, Darrell Rigby & Suzanne Tager, Dreaming of an 
Amazon Christmas, Bain & Co. (Nov. 9, 2017), https://www.bain.com/
insights/retail-holiday-newsletter-2017-issue-2/.
    \1955\ CEO Hearing at 125 (question of Rep. Jamie Raskin (D-MD), 
Member, Subcomm. on Antirust, Commercial and Admin. Law of the H. Comm. 
on the Judiciary).
    \1956\ Id. (statement of Jeff Bezos, CEO, Amazon.com, Inc.).
    \1957\ Id. at 284 (response to Questions for the Record of Jeff 
Bezos, CEO, Amazon.com, Inc.); see also Aaron Cheris, Darrell Rigby & 
Suzanne Tager, Dreaming of an Amazon Christmas, Bain & Co. (Nov. 9, 
2017), https://www.bain.com/insights/retail-holiday-newsletter-2017-
issue-2/.
    \1958\ Aaron Cheris, Darrell Rigby & Suzanne Tager, Dreaming of an 
Amazon Christmas, Bain & Co. (Nov. 9, 2017), https://www.bain.com/
insights/retail-holiday-newsletter-2017-issue-2/.
---------------------------------------------------------------------------
    Amazon minimizes concerns about favoring its first-party 
goods through voice shopping by highlighting how rare it is for 
people to purchase goods through Alexa.\1959\ Reporting 
suggests, however, that there is an increasing number of 
queries from users who expect to hear product information or to 
complete a transaction while interacting with a voice 
assistant.\1960\ Amazon also justified the fact that third-
party sales through Alexa are lower than third-party sales on 
Amazon.com--42 percent compared to 58 percent--by saying that 
``customers disproportionately use Alexa to order household 
consumable items (like paper towels or batteries) for which 
Amazon's offers are particularly competitive.'' \1961\ This 
demonstrates the problem, however, given that voice shopping is 
most useful for products in which consumers do not have to do 
much research or engage in price comparison. Alexa's algorithm, 
in conjunction with the AmazonBasics business model, provides a 
convenient avenue for Amazon to favor first-party products.
---------------------------------------------------------------------------
    \1959\ Innovation and Entrepreneurship Hearing at 535 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \1960\ Khari Johnson, Voicelabs Ditches Analytics Service to Launch 
Alpine.ai for Ecommerce Voice Apps, VentureBeat (Jan. 29, 2018), 
https://venturebeat.com/2018/01/29/voicelabs-ditches-analytics-service-
to-launch-alpine-ai-for-ecommerce-voice-apps/.
    \1961\ CEO Hearing at 5 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Although it is technically possible for Alexa users to 
voice shop at other stores, there is significant friction. 
Users must first enable the shopping skills for other online 
retailers, which then requires the user to set up a completely 
separate billing profile, even though it contains similar 
information to their Amazon user profile.\1962\ Alexa-enabled 
devices are tied to the user's Amazon account, which populates 
the user's saved credit card and shipping information for use 
during general shopping commands.\1963\
---------------------------------------------------------------------------
    \1962\ See Alexa Skills: Shopping, Amazon, https://www.amazon.com/
s/ref=lp_13727921011 
_nr_n_16?fst=as%3Aoff&rh=n%3A13727921011%2Cn%3A%2113727922011%2Cn%3A1428
48
62011&bbn=13727922011&ie=UTF8&qid=1600864849&rnid=13727922011 (last 
visited Sept. 30, 2020).
    \1963\ Set Up Your Echo, Amazon, https://www.amazon.com/gp/help/
customer/display.html?
nodeId=GKFJXZCLQ83HGHQZ (last visited Oct. 3, 2020).

    (ii) Predatory Pricing and Bundling. Amazon uses a 
predatory pricing strategy to increase its sales of smart home 
devices by pricing its products below cost.\1964\ It is common 
for Amazon to sell these products in bundles at steep 
discounts. Several smart home device manufacturers told the 
Subcommittee that, when Amazon sells certain devices in a 
bundle or at a steep discount, it makes it nearly impossible 
for companies who specialize in making one piece of voice-
assistant enabled hardware to compete on its merits.\1965\ 
Furthermore, as described earlier in this Report, aggressive 
pricing of smart home devices--specifically ``hubs'' such as 
the Echo--has created a significant barrier to entry for 
companies that want to compete with the leading voice assistant 
platforms.
---------------------------------------------------------------------------
    \1964\ See CEO Hearing at 124 (statement of Jeff Bezos, CEO, 
Amazon.com, Inc.).
    \1965\ Competitors Hearing at 11-12 (statement of Patrick Spence, 
CEO, Sonos, Inc.).

    (iii) Use of Gatekeeper Power. Amazon Marketplace is an 
important distribution channel for voice-enabled electronics in 
its Alexa ecosystem. Amazon decides the availability and 
placement of products on its site. As a result, Amazon can use 
the threat of delisting a product on its marketplace to ensure 
that Alexa is enabled on other companies' devices or to secure 
other favorable contractual terms.
    In an interview with the Subcommittee, a seller that sells 
a significant number of its device on Amazon.com said that, 
during contract negotiations, Amazon repeatedly refers to its 
power to delist the company's product if Amazon's services are 
not prominent enough on the device.\1966\ In 2017, Amazon also 
reportedly informed one of its main home security competitors--
the Google-owned smart home company Nest--that it would not 
list any of its recently announced products, including its 
latest smart thermostat and home security system.\1967\ 
Notwithstanding its own market power, Google's internal 
communications describe Amazon as having ``changed the 
dynamics,'' observing that there is a ``built in incentive to 
partner with Alexa, since [Amazon] will pull you from their 
store if you don't support it.'' \1968\
---------------------------------------------------------------------------
    \1966\ Interview with Source 148 (Aug. 26, 2020).
    \1967\ Steve Kovach, Amazon Will Stop Selling Nest Smart Home 
Devices, Escalating Its War with Google, Bus. Insider (Mar. 2, 2018), 
https://www.businessinsider.com/amazon-wont-sell-nest-products-from-
google-2018-3.
    \1968\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04258793-993 (Jan. 29, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Additionally, Amazon controls the prominence of competing 
voice-enabled devices on its marketplace and promotes its 
first-party voice-enabled devices on Amazon.com. In an internal 
memorandum to Amazon executives about the Ring acquisition, 
Michael Deal, Amazon's Vice President and Associate General 
Counsel, said that Amazon ``can promote Ring's products and 
subscription plans heavily on our sites as we do with our 
current [first-party] devices.'' \1969\
---------------------------------------------------------------------------
    \1969\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00172104 (Mar. 9, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    Relatedly, Amazon can also use advertisement placement as 
leverage during negotiations with other device manufacturers. 
In interviews with and submissions to the Subcommittee, several 
market participants said that ad placement was used as leverage 
in negotiations. In one instance, Amazon placed a competing 
brand's ad beneath the product of the firm it was negotiating 
with ``to influence negotiations.'' \1970\ Additionally, the 
Subcommittee heard from a voice-enabled device manufacturer 
that offers a competitive product to Amazon's first-party 
devices that it was prohibited from buying ads on 
Amazon.com.\1971\ The competitor expressed concern about the 
harm this causes consumers, who may be confused or deceived 
when they receive ads promoting Amazon products even when they 
specifically search for a competitor's product on 
Amazon.com.\1972\
---------------------------------------------------------------------------
    \1970\ Submission from Source 38, to H. Comm. on the Judiciary, 27 
(Sept. 1, 2019) (on file with Comm.).
    \1971\ Interview with Source 148 (Aug. 26, 2020).
    \1972\ Id.
---------------------------------------------------------------------------
    Even Google, which ranks just behind Amazon in online 
shopping queries, believes it has a disadvantage with Amazon. 
In an internal email about smart speakers, a Google employee 
noted that ``fighting Amazon with a very-hard-to-differentiate 
product and a channel disadvantage and a huge economic 
disadvantage (due to channel mix margin differences) is already 
like fighting a shark on a surfboard.'' \1973\
---------------------------------------------------------------------------
    \1973\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04261582 to -04261585 (Nov. 27, 2018) (on file with Comm.).

    (iv) Misuse of Data. Amazon has access to information about 
consumer use of third-party applications on Alexa-enabled 
devices and uses its dominant position in the voice assistant 
market to collect more data from within the Alexa ecosystem.
    Amazon has insight into which Alexa skills are invoked by 
Alexa users and the frequency of usage.\1974\ Considering 
Amazon's use of third-party seller's data in e-commerce and 
cloud customer's data on Amazon Web Services, Amazon may use 
the same tactics with other firms' voice application data to 
determine which voice assistant skills it should invest in.
---------------------------------------------------------------------------
    \1974\ Innovation and Entrepreneurship Hearing at 536 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
---------------------------------------------------------------------------
    Additionally, Amazon uses its market power to collect 
third-party voice application data. According to a July 2020 
report by The Wall Street Journal, Amazon told Vivint, a 
manufacturer of smart-home devices that, ``it would only allow 
the company to remain on the Echo if Vivint agreed to give it 
not only the data from its Vivint function on Echo, but from 
every Vivint device in those customers' homes at all times.'' 
\1975\
---------------------------------------------------------------------------
    \1975\ Dana Mattioli & Cara Lombardo, Amazon Met with Startups 
About Investing, Then Launched Competing Products, Wall St. J. (July 
23, 2020), https://www.wsj.com/articles/amazon-tech-startup-echo-bezos-
alexa-investment-fund-11595520249.
---------------------------------------------------------------------------
    Amazon has also faced civil suits related to its storage of 
voice data.\1976\ When Alexa hears a ``wake'' word--such as 
``Alexa'' or ``Echo''--it records the user's voice command, 
including conversations in the background, and saves a 
permanent recording of the user's voice to its own servers, as 
opposed to temporary storage for artificial intelligence 
training purposes.\1977\
---------------------------------------------------------------------------
    \1976\ See Tice v. Amazon.com, Inc., No. 5:10-cv-1311 (C.D. Cal. 
Mar. 25, 2020); C.O. v. Amazon.com, Inc., No. C19-910 (W.D. Wash. Sept. 
23, 2019).
    \1977\ See id.

    (v) Copying Nascent Competitors' Technology. The 
Subcommittee's investigation produced evidence consistent with 
public reporting that Amazon uses information collected through 
Alexa Fund investments to inform and improve Amazon's smart 
home ecosystem. When Amazon invests in a startup, it obtains 
access to the company's non-public financial information, 
strategic plans, and other proprietary information.\1978\ 
According to a recent Wall Street Journal report, eight months 
after Alexa Fund invested in Nucleus, Amazon announced the Echo 
Show, a very similar Alexa-enabled video-chat device.\1979\ 
This report described several other examples, including 
Vocalife, the inventors of a ``speech-detection technology,'' 
which filed a lawsuit against Amazon alleging it improperly 
used proprietary technology.\1980\ At the Subcommittee's sixth 
hearing, Representative Ken Buck (R-CO) said that allegations 
that Amazon incorporated features demonstrated to it by 
Vocalife's founders during an investment meeting ``are serious, 
especially because the size and scope of these practices 
couldn't happen without Amazon's monopolistic control of the 
marketplace.'' \1981\
---------------------------------------------------------------------------
    \1978\ Dana Mattioli & Cara Lombardo, Amazon Met with Startups 
About Investing, Then Launched Competing Products, Wall St. J. (July 
23, 2020), https://www.wsj.com/articles/
amazon-tech-startup-echo-bezos-alexa-investment-fund-11595520249.
    \1979\ Id.
    \1980\ Id.
    \1981\ CEO Hearing at 121 (statement of Rep. Ken Buck (R-CO), 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary).
---------------------------------------------------------------------------
    Prior to Amazon's acquisition of Ring, Amazon invested in 
Ring through the Alexa Fund, and internal emails about meetings 
during this time demonstrate how Amazon is able to obtain 
crucial insights into young companies. Amazon was able to learn 
about Ring's ``roadmap, future products, [and] two acquisitions 
they have done.'' \1982\ While Amazon often denies public 
reporting that it steals and copies technology from young 
startups, Amazon's emails suggest that it does replicate some 
of the startups it meets with or invests in. An email out of 
Amazon's Lab126 regarding Ring indicated that Amazon ``could 
easily replicate all of their hardware to be better, [and] 
operate in a more secure and robust infrastructure, for a LOT 
less than [the] cost of buying them.'' \1983\ In the same email 
chain, Amazon employees wondered, ``[I]f we move forward with 
due diligence, then decide not to buy [Ring], could we have 
legal issues if we go into the market by ourselves as a 
competitor and materially impact their business?'' \1984\
---------------------------------------------------------------------------
    \1982\ Production from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00214240 (Oct. 18, 2017) (on file with Comm.).
    \1983\ Id. at AMAZON-HJC-00220705 (Nov. 4, 2017).
    \1984\ Id. at AMAZON-HJC-00220703.
---------------------------------------------------------------------------
5. Amazon Web Services

    (a) Overview. Amazon Web Services (AWS) is considered the 
pioneer of cloud computing and has sustained a first-mover 
advantage for over a decade.\1985\ AWS officially launched in 
2006, featuring two of its core IaaS offerings, Simple Storage 
Service (S3) and Elastic Compute Cloud (EC2).\1986\ While 
Amazon.com was AWS's first customer, in the early 2000s AWS 
began creating cloud offerings for third-party merchants, who 
could use AWS to ``build online shopping sites on top of 
Amazon's e-commerce engine.'' \1987\ For AWS, meanwhile, this 
partnership with third parties gave the company experience in 
creating well-documented APIs for internal developers.\1988\ 
Over the next few years, AWS rolled out additional programs to 
expand its network of third-party software vendors and 
implementation partners, including AWS Marketplace \1989\ and 
the AWS Partnership Network (APN) in 2012.\1990\
---------------------------------------------------------------------------
    \1985\ Ron Miller, How AWS Came To Be, TechCrunch (July 2, 2016), 
https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-the-
genesis-of-aws/.
    \1986\ What's New, Amazon Web Servs. (Oct. 4, 2006), https://
aws.amazon.com/about-aws/whats-new/2006/.
    \1987\ Id.
    \1988\ Ron Miller, How AWS Came To Be, TechCrunch (July 2, 2016), 
https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-the-
genesis-of-aws/.
    \1989\ Introducing AWS Marketplace, Amazon Web Servs. (Apr. 19, 
2012), https://aws
.amazon.com/about-aws/whats-new/2012/04/19/introducing-aws-marketplace/
 
    \1990\ Jeff Barr, Announcing the AWS Partner Network, AWS News Blog 
(Apr. 17, 2012), https://aws.amazon.com/blogs/aws/announcing-the-aws-
partner-network/ (in beta).
---------------------------------------------------------------------------
    Over the last decade, AWS has also secured significant 
government contracts. Most notably, in 2014, AWS signed a $600 
million Commercial Cloud Services (C2S) contract to build the 
AWS Secret Region, a cloud offering tailored for the U.S. 
intelligence community.\1991\ The deal marked the largest cloud 
infrastructure contract at the time and signaled the 
government's shift from investing in on-premise server capacity 
to cloud services.\1992\ Today, AWS boasts work ``with over 
6,500 government agencies'' and states that Amazon has been 
``among the first to solve government compliance challenges 
facing cloud computing,'' while also ``consistently help[ing] 
our customers navigate procurement and policy issues related to 
adoption of cloud computing.'' \1993\
---------------------------------------------------------------------------
    \1991\ Frank Konkel, Federal Cloud Spending Trends Toward All-Time 
High, Nextgov (Sept. 12, 2018), https://www.nextgov.com/it-
modernization/2018/09/federal-cloud-spending-trends-toward-all-time-
high/151221/.
    \1992\ Id.
    \1993\ The Trusted Cloud for Government, Amazon Web Servs., https:/
/aws.amazon.com/government-education/government/ (last visited Sept. 
30, 2020).
---------------------------------------------------------------------------
    AWS contributes immense value to Amazon's overall business. 
In each quarter since Amazon began publicly reporting its 
financials for cloud, AWS has accounted for an outsized share 
of Amazon's operating profits. While AWS contributes to less 
than 15 percent of Amazon's annual revenue, it consistently 
accounts for over 50 percent of the company's operating income. 
In 2017, AWS accounted for over 100 percent of Amazon's 
operating income, due to losses in the company's international 
business.\1994\ In the first quarter of 2020, AWS accounted for 
13.5 percent of Amazon's total revenues but 77 percent of its 
operating income.\1995\
---------------------------------------------------------------------------
    \1994\ Amazon.com, Inc., Annual Report (Form 10-K) 26 (Feb. 1, 
2018), https://s2.q4cdn.com/299287126/files/doc_financials/annual/
Amazon_AR.PDF.
    \1995\ Amazon.com, Inc., Quarterly Report (Form 10-Q) 17 (Apr. 30, 
2020), http://d18rn0p25nwr6d.cloudfront.net/CIK-0001018724/708a19c5-
7d8c-4fc9-ab37-bfaa7a31629b.pdf.
---------------------------------------------------------------------------

     Contributions to Amazon's Revenue and Operating Profit
                        over Time \1996\
---------------------------------------------------------------------------

    \1996\ Prepared by the Subcommittee based on Amazon.com, Inc., 
Annual Reports (Form 10-K) (2015-2019).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Profits earned through its cloud services enable Amazon to 
invest heavily in expanding its cloud operation, as well as to 
support its other lines of business. Several market 
participants expressed concerns to the Subcommittee that Amazon 
uses its high and steady profits from AWS to subsidize these 
other lines of business, including its retail operation.\1997\ 
In an internal document produced in response to the Committee's 
requests for information, Amazon instructs its employees to 
rebut this claim by referring to it as a ``myth.'' \1998\ 
However, Amazon failed to produce the financial data that would 
have enabled the Subcommittee to make an independent 
assessment.\1999\
---------------------------------------------------------------------------
    \1997\ Submission from Source 48, to H. Comm. on the Judiciary, 8 
(Nov. 8, 2019) (on file with Comm.).
    \1998\ Submission from Amazon, to H. Comm on the Judiciary, AMAZON-
HJC-00216209 (Aug. 24, 2018) (on file with Comm.).
    \1999\ See Letter from Hon. Jerrold Nadler, Chair, H. Comm. on the 
Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, 
Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary & Hon. F. James 
Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, to Jeff Bezos, CEO, 
Amazon.com, Inc., attach. Sec.  A.6, at 2-3 (Sept. 13, 2019) (on file 
with Comm.) (requesting data).

    (b) Market Power. As discussed earlier in this Report, AWS 
is the largest provider of cloud computing services, capturing 
approximately 24 percent of the U.S. spend in 2018 on cloud 
computing services, including IaaS, PaaS, and SaaS.\2000\ AWS 
represents close to half of global spending on cloud 
infrastructure services, with three times the market share of 
Microsoft, its closest competitor.\2001\ Its growth continues 
to soar. In the first quarter of 2020, AWS crossed $10 billion 
in quarterly revenue while growing 33 percent on an annualized 
basis.\2002\
---------------------------------------------------------------------------
    \2000\ Letter from David Zapolsky, Gen. Couns., Amazon.com, Inc., 
to Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 6 (July 26, 2019) (on 
file with Comm.).
    \2001\ Id.; Press Release, Katie Costello, Gartner, Gartner 
Forecasts Worldwide Public Cloud Revenue to Grow 17.5 Percent in 2019 
(Apr. 2, 2019), https://www.gartner.com/en/newsroom/press-releases/
2019-04-02-gartner-forecasts-worldwide-public-cloud-revenue-to-g.
    \2002\ Jordan Novet, AWS Tops $10 Billion in Quarterly Revenue for 
the First Time, CNBC (Apr. 30, 2020), https://www.cnbc.com/2020/04/30/
aws-earnings-q1-2020.html.
---------------------------------------------------------------------------
    Amazon has a ``lion's share of the government cloud 
infrastructure market.'' \2003\ Exact data on AWS's share of 
government cloud expenditure is opaque because most of AWS's 
public sector revenue comes through subcontracts, which are 
harder to track, and contracts related to the intelligence 
community, which are listed as classified spending and are 
rarely reported. Market participants, however, emphasize that 
AWS is considered a major player in federal cloud 
contracts.\2004\
---------------------------------------------------------------------------
    \2003\ David Ramel, AWS vs. Azure Heats Up in Federal Market, Wash. 
Tech. (Sept. 14, 2018), https://washingtontechnology.com/articles/2018/
09/14/aws-vs-azure-public-sector.aspx.
    \2004\ Interview with Source 31 (May 27, 2020).
---------------------------------------------------------------------------
    In its submissions to the Subcommittee, Amazon describes 
itself as a relatively small player representing ``less than 1% 
of IT spending globally and less than 2% in the United 
States.'' \2005\ Amazon states that AWS competes with a large 
array of offerings including on-premise computing.\2006\ In 
other contexts, however, Amazon has highlighted its leading 
position, describing itself as the ``largest cloud software 
marketplace'' and the ``only cloud provider with existing 
classified infrastructure.'' \2007\
---------------------------------------------------------------------------
    \2005\ Letter from David Zapolsky, Gen. Couns., Amazon.com, Inc., 
to Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 6 (July 26, 2019) (on 
file with Comm.).
    \2006\ Id.
    \2007\ Complaint at 5, Amazon Web Servs, Inc. v. United States, 147 
Fed. Cl. 146 (2020) (No. 1:19-cv-01796), https://
www.courthousenews.com/wp-content/uploads/2019/12/amazon-trump
-cafc.pdf.
---------------------------------------------------------------------------
    Through a careful review of Amazon's internal documents and 
other evidence during the investigation, the Subcommittee found 
that Amazon has a dominant position in cloud computing. 
Amazon's dominance in cloud computing traces in part to its 
first-mover advantage and the high fixed costs and economies of 
scale associated with this market.\2008\ But evidence suggests 
that Amazon has also taken steps to lock in and extend this 
dominance in ways that risk harming customers, businesses, and 
the broader public.
---------------------------------------------------------------------------
    \2008\ See supra Section IV.
---------------------------------------------------------------------------
    Network effects incentivized Amazon to build out AWS 
offerings quickly. As with other sectors of the digital 
economy, the value of Amazon's cloud offerings increases with 
the number of businesses and customers that use it. Introducing 
more services and partnership programs draws more customers and 
attracts more developers and implementation partners, which, in 
turn, draws additional customers.\2009\
---------------------------------------------------------------------------
    \2009\ Submission from Google, to H. Comm. on the Judiciary, GOOG-
HJC-04260401 (Aug. 25, 2016) (on file with Comm.).
---------------------------------------------------------------------------
    AWS is considered to have the largest collection of cloud 
offerings. Its AWS Management Console and supporting 
technologies span many categories, including storage and 
computing, databases, migration services, and machine learning 
tools.\2010\ Many of these products are based on open-source 
software or on the technology of companies that Amazon 
acquired.\2011\ In addition to selling cloud offerings 
directly, AWS also runs a cloud marketplace where third-party 
vendors can list their products. The AWS Marketplace enjoys 
over 1,300 vendors as of 2018, and over 9,000 products, 
functioning as the largest cloud marketplace in the 
sector.\2012\
---------------------------------------------------------------------------
    \2010\ AWS Marketplace, Amazon Web Servs., https://aws.amazon.com/
marketplace (last visited Sept. 30, 2020).
    \2011\ CEO Hearing at 285 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
    \2012\ AWS Marketplace, Amazon Web Servs., https://aws.amazon.com/
marketplace (last visited Sept. 30, 2020); Brad Lyman, See What's New 
for AWS Marketplace Sellers, AWS Partner Network Blog (Mar. 9, 2018), 
https://aws.amazon.com/blogs/apn/see-whats-new-for-aws-
marketplace-sellers.
---------------------------------------------------------------------------
    The widespread adoption of AWS's developer certification 
programs, partner networks, and student programs has meant that 
there are far more engineers familiar with AWS technology than 
with any other platform.\2013\ Several market participants 
listed the availability of AWS-trained engineers as a reason 
for selecting AWS over other cloud vendors and as a barrier for 
switching platforms or attempting to multi-cloud.\2014\
---------------------------------------------------------------------------
    \2013\ Interview with Source 736 (June 10, 2020).
    \2014\ Interview with Source 126 (June 29, 2020).
---------------------------------------------------------------------------
    High switching costs reinforce Amazon's dominance in the 
cloud market.\2015\ A cloud-based application company 
interviewed by the Subcommittee explained these costs:
---------------------------------------------------------------------------
    \2015\ See supra Section IV.

     LWe've looked at other services (Google, Microsoft, 
Oracle) but we've relied on AWS for so long that we couldn't 
just flip a switch, and we've run down a lot of engineering 
problems with AWS . . . . There are other providers we could go 
to, but it would take work. We could also build some 
functionality internally, but that would also take a lot of 
work.\2016\
---------------------------------------------------------------------------
    \2016\ Interview with Source 111 (Apr. 6, 2020).

    For cloud-based application developers, whose entire 
product is dependent on AWS, the fears of lock-in are even 
---------------------------------------------------------------------------
greater. One marketplace participant said:

     L[A]ny transition of the cloud services currently provided 
by AWS to another cloud service provider would be difficult to 
implement and would cause us to incur significant time and 
expense and could disrupt or degrade our ability to deliver our 
products and services. Our business relies on the availability 
of our services for [users] and advertisers.\2017\
---------------------------------------------------------------------------
    \2017\ Submission from Source 32, to H. Comm. on the Judiciary, 
Source 32-000009 (Oct. 29, 2019) (on file with Comm.).

    Amazon has also taken steps to lock-in its position, 
including through long-term contracts, volume minimums, and the 
use of fees to move data to other cloud providers, which are 
also known as egress fees. In submissions to the Subcommittee, 
numerous market participants noted that AWS often seeks multi-
year contracts during negotiations.\2018\ These contracts are 
also commonplace in companies' investor statements. For 
example, according to Lyft's 2020 investor filing, it agreed to 
pay ``an aggregate of at least $300 million between January 
2019 and December 2021 on AWS services.'' \2019\ According to 
Slack's investor filling, in 2018, it committed to a five-year 
contract with minimum annual commitments of $50 million.\2020\
---------------------------------------------------------------------------
    \2018\ Id. at Source 32-000017.
    \2019\ Lyft, Annual Report (Form 10-K) 7 (Feb. 28, 2020), https://
investor.lyft.com/static-files/981ad93a-5d97-4f7f-8937-5682ca83cba7.
    \2020\ Slack, Registration Statement (Form S-1) 90 (Apr. 26, 2019), 
http://d18rn0p25 nwr6d.cloudfront.net/CIK-0001764925/b6da15ae-25c5-
4447-ba38-c287bf11e624.pdf.
---------------------------------------------------------------------------
    The Subcommittee also uncovered evidence that Amazon 
sometimes requires a volume agreement when a large company 
seeks to negotiate lower prices. In an internal email 
discussion on this topic, a senior executive at AWS wrote that 
Amazon has ``a private rate card which has a commit level for 
bandwidth pricing. Rates at or above the private rate card are 
pre-approved. Anything below that has to be first approved by 
me and then the price goes to service GM.'' \2021\
---------------------------------------------------------------------------
    \2021\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00206893 (May 11, 2017) (on file with Comm.).
---------------------------------------------------------------------------
    When an Amazon customer chooses to move data to another 
cloud provider, they are charged an egress fee. Market 
participants told the Subcommittee that they view these fees 
less as a cost for Amazon to transport data and more as 
friction imposed by Amazon for switching providers, noting that 
Amazon charges egress fees even when data is staying locally 
within the same data center.\2022\
---------------------------------------------------------------------------
    \2022\ Interview with Source 170 (May 27, 2020).
---------------------------------------------------------------------------
    The COVID-19 pandemic has underscored the centrality of 
cloud computing to the functioning of an increasing swath of 
businesses--highlighting how cloud services have come to 
resemble critical infrastructure. Reporting by The Information 
in April 2020 discussed how the major cloud providers are 
facing requests from many customers for financial relief, while 
the demand for cloud computing has increased.\2023\ As this 
reporting noted, ``AWS has been the least willing to offer 
flexible terms on customer bills, according to numerous 
customers. That stands in contrast to Microsoft and Google 
which have shown some flexibility, partners say.'' \2024\
---------------------------------------------------------------------------
    \2023\ Kevin McLaughlin & Amir Efrati, AWS Holds the Line on Cloud 
Bills as Customers Ask for Relief, Information (Apr. 17, 2020), https:/
/www.theinformation.com/articles/aws-holds-the-line-on-cloud-bills-as-
customers-ask-for-relief.
    \2024\ Id.

    (c) Merger Activity. Amazon has acquired a significant 
number of cloud computing firms over the past decade. Although 
a full discussion of this activity is beyond the scope of this 
Report, Amazon's acquisition activity in the cloud market 
appears to be part of a broader trend among dominant cloud 
providers to make serial acquisitions, any one of which may 
seem insignificant, but which collectively serve to solidify 
and expand their dominance.\2025\ In some instances AWS has 
acquired cloud technologies that previously integrated with 
multiple clouds, only for AWS to make it an AWS-specific 
product after acquisition, foreclosing competitors and 
increasing consumers' switching costs.\2026\
---------------------------------------------------------------------------
    \2025\ See supra Section IV.
    \2026\ Ron Miller, Update: Amazon Has Acquired Israeli Disaster 
Recovery Service CloudEndure for Around $200M, TechCrunch (Jan. 8, 
2019), https://techcrunch.com/2019/01/08/
                                                                        
         Continued
amazon-reportedly-acquired-israeli-disaster-recovery-service-
cloudendure-for-around-200m/. See also CloudEndure Deprecation, Google 
Cloud, https://cloud.google.com/compute/docs/deprecations/cloudendure 
(last visited Oct. 4, 2020).

    (d) Competitive Significance of AWS to Amazon's Other Lines 
of Business. Amazon's dual role as a dominant provider of cloud 
infrastructure and as a dominant firm in other markets creates 
a conflict of interest that Amazon has the incentive and 
ability to exploit.
    Amazon's dominance in cloud computing alongside its 
integration across an array of businesses--online retail, music 
and video, and smart home devices--creates a core conflict of 
interest. Cloud computing customers like Netflix and Target are 
in the position of competing with Amazon while also relying on 
AWS. Firms in their position effectively have to choose between 
switching to one of the alternative cloud infrastructure 
providers or funding their primary competitor.\2027\ One 
venture capitalist described Amazon as ``useful but dangerous'' 
because ``it's hard to predict what Amazon wants to get into . 
. . . [Y]ou can't know.'' \2028\ Similarly, a business-to-
business application developer told the Subcommittee that they 
felt pressure to switch their entire product to Microsoft Azure 
because of its client's concerns with Amazon's anticompetitive 
conduct in the online retail sector.\2029\
---------------------------------------------------------------------------
    \2027\ Christina Farr & Ari Levy, Target Is Plotting a Big Move 
Away from AWS as Amazon Takes Over Retail, CNBC (Aug. 29, 2017), 
https://www.cnbc.com/2017/08/29/target-is-moving-away-from-aws-after-
amazon-bought-whole-foods.html). See also Netflix on AWS, Amazon Web 
Servs., https://aws.amazon.com/solutions/case-studies/netflix/ (last 
visited Sept. 30, 2020).
    \2028\ Interview with Source 146 (May 28, 2020).
    \2029\ Interview with Source 126 (June 29, 2020).
---------------------------------------------------------------------------
    Amazon acknowledges that its cloud customers--which are 
also its competitors--are wary of using AWS. One internal 
document had guidance on how to discuss the issue with 
customers. One FAQ sheet listed, ``What do you say to customers 
who are worried that using AWS services will support Amazon's 
competitive growth in the retail space?'' Amazon's sample 
answer stated, ``How can you afford to not compete with the 
best possible tools in such a tough market like retail?'' 
\2030\
---------------------------------------------------------------------------
    \2030\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00216210 (Aug. 24, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    The Subcommittee also spoke with market participants that 
expressed concern about how this conflict of interest shapes 
Amazon's behavior in its other lines of business. For example, 
in 2015, Amazon kicked Google Chromecast and Apple TV--direct 
competitors with the Amazon Fire Stick and Fire TV Cube--out of 
its retail store.\2031\ AWS is also positioned to use customer 
and seller data from one line of business to inform decisions 
in other lines of business, analogous to its conduct in Amazon 
Retail. At least one market participant who spoke with the 
Subcommittee had evidence that AWS engaged in this cross-
business data sharing.\2032\ In another internal document with 
guidance for staff on ``AWS Competitive Messaging,'' employees 
were advised to offer the following response:
---------------------------------------------------------------------------
    \2031\ Barb Darrow, Why Cloud Users Should Care that Amazon Just 
Kicked Apple TV to the Curb, Fortune (Oct. 2, 2015), http://
fortune.com/2015/10/02/why-aws-users-should-care-that-amazon-nixed-
apple-tv/.
    \2032\ Interview with Source 126 (June 29, 2020).

      Q: LWalmart is warning its suppliers that they don't want 
them to be running on AWS because they don't want Amazon.com, a 
competitor of Walmart's, to have access to their data. How are 
you addressing that?
      A: LEven though Amazon's consumer business has no access 
to any customer data in AWS, I can understand why Walmart would 
be paranoid in making sure that their data is private. So, I 
think it's a pretty reasonable expectation for them to ask 
their suppliers to encrypt that data in AWS.\2033\
---------------------------------------------------------------------------
    \2033\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00216213 (Aug. 24, 2018) (on file with Comm.).

    Engineers and market participants have also raised concerns 
that AWS employees may have access to Amazon's Key Management 
Services (KMS), which customers can use to store encryption 
keys.\2034\ If an employee were able to access a customer's 
encryption keys, they could potentially see the contents of a 
customer's application, including proprietary code, business 
transactions, and data on their users. In response to questions 
from the Subcommittee, Amazon said that the company's 
``policies prohibit employees from accessing and reading 
customer keys in KMS. KMS is designed such that customer keys 
in the service cannot be retrieved in plain text (unencrypted) 
form by anybody, including AWS employees.'' \2035\ Even if AWS 
employees can never access the content of their customers 
applications, AWS tracks a host of commercially sensitive 
metrics, including any changes in demand for storage and 
compute services, the components of their application's 
architecture, the requests to a specific database per second, 
database size, and the types of requests.\2036\ One industry 
expert told the Subcommittee:
---------------------------------------------------------------------------
    \2034\ Interview with Source 146 (May 28, 2020).
    \2035\ CEO Hearing at 296 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
    \2036\ Interview with Source 146 (May 28, 2020); Innovation and 
Entrepreneurship Hearing at 44 (response to Questions for the Record of 
Nate Sutton, Assoc. Gen. Couns., Competition, Amazon.com, Inc.).

     LThey don't need to see the encrypted content of a movie 
to see that there are a ton of requests to particular data . . 
. . [If Netflix] announced five new movies this weekend and 
there's a ton of data to five new objects . . . , you don't 
need all the information to know what's happening.\2037\
---------------------------------------------------------------------------
    \2037\ Interview with Source 146 (May 28, 2020).

    Finally, AWS provides Amazon with unparalleled insights 
into the trajectory of startups using its services--information 
that it can use to guide acquisitions and replicate promising 
technology. Data that AWS collects on cloud computing customers 
can provide unique business intelligence--information that 
investors, other firms, and entrepreneurs lack.
    A report from 2011 published in Reuters, profiling the AWS 
Start-up Challenge, describes cases where AWS has used insights 
gleaned from its cloud computing service to inform its venture 
capital investment decisions.\2038\ Adam Selipsky, then Vice 
President of AWS, told Reuters, ``AWS has great relationships 
with many young companies and there have been cases where we've 
been able to help with investment opportunities.'' \2039\ 
Today, one way Amazon leverages AWS is through relationships 
with startups. The AWS Activate program provides startups with 
free credits, technical support, and training.\2040\
---------------------------------------------------------------------------
    \2038\ Alistair Barr, Amazon Finds Startup Investments in the 
``Cloud,'' Reuters (Nov. 9, 2011), http://www.reuters.com/article/
amazon-cloud-idUSN1E7A727Q20111109.
    \2039\ Id.
    \2040\ AWS Activate, Amazon Web Servs., https://aws.amazon.com/
activate/ (last visited Sept. 30, 2020).
---------------------------------------------------------------------------
    The Subcommittee interviewed a startup and beneficiary of 
AWS Activate that had engaged in partnership conversations with 
Amazon. During these discussions, the startup shared 
information about how its product was built with AWS. Within a 
few years, the startup learned that Amazon had introduced a 
replica product. This company said that Amazon ``had so many 
incentives[,] [r]ate cuts, and free services. Not having a lot 
of resources, it's hard to turn that down. But fast forward, we 
basically helped them build their offering that they copied 
from us.'' \2041\
---------------------------------------------------------------------------
    \2041\ Interview with Source 126 (May 11, 2020).
---------------------------------------------------------------------------
    As part of its investigation, the Subcommittee asked Amazon 
whether it uses or has ever used AWS usage patterns or data to 
inform its investment decisions. Amazon responded:

     LAWS uses data on individual customers' use of AWS to 
provide or improve the AWS services and grow the business 
relationship with that customer. This data may inform AWS's 
decisions about how AWS invests in infrastructure, such as data 
centers, edge networks, hardware, and related software 
solutions in order improve the customer experience.\2042\
---------------------------------------------------------------------------
    \2042\ Innovation and Entrepreneurship Hearing at 541 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).

Amazon's response leaves unclear whether it would view it as 
appropriate to use a firm's AWS data to develop products 
competing with that firm, so long as Amazon could identify some 
benefit to the broader ``customer experience.''
    Prior to 2017, Amazon also required that AWS customers 
agree ``not to assert any intellectual property claim against 
any AWS service used by that customer.'' \2043\ Amazon removed 
that condition from the AWS online customer agreement on June 
28, 2017.\2044\
---------------------------------------------------------------------------
    \2043\ Id. at 539.
    \2044\ Id. at 538.
---------------------------------------------------------------------------
    In addition to creating a significant information advantage 
for Amazon, AWS may also reinforce its market power in other 
ways. Because startups often rely heavily on AWS, Amazon is a 
natural choice when pursuing a sale or seeking investment. In 
an internal email produced to the Subcommittee, Peter Krawiec, 
Amazon's Vice President of Worldwide Corporate Development, 
recapped a meeting with a recently acquired company, noting 
that the company was ``[s]uper excited about Amazon and 
relieved that Walmart will not be the buyer. Engineering team 
thrilled that they won't have to unplug from AWS under a 
Walmart world.'' \2045\
---------------------------------------------------------------------------
    \2045\ Submission from Amazon, to H. Comm. on the Judiciary, 
AMAZON-HJC-00225832 (June 15, 2018) (on file with Comm.).

    (e) Conduct. The leading position AWS enjoys in the market 
traces in part to its first-mover advantage, network effects, 
and steep investments that the company made in building out the 
physical infrastructure on which the cloud resides. However, 
AWS has also engaged in a series of business practices designed 
to maintain its market dominance at the expense of choice and 
innovation. Through a combination of self-preferencing, 
misappropriation, and degradation of interoperability, Amazon 
has sought to eliminate cross-platform products with Amazon-
only products. Amazon's conduct has already led several open-
source projects to become more closed--a move driven by a need 
for protection from Amazon's misappropriation. If unchecked, 
Amazon's tactics over the long-term risk solidifying lock-in 
and diminishing the incentive to invest. Because the cloud is 
the core infrastructure on which the digital economy runs, 
---------------------------------------------------------------------------
ensuring its openness and competitiveness is paramount.

    (i) Misappropriation of Data. As described earlier in this 
Report, cloud platform vendors compete by expanding their 
first-party cloud offerings, such as those offered through the 
AWS Management Console.\2046\ Market participants note that one 
way AWS has expanded its offerings is by creating proprietary 
versions of products that have been developed under open-source 
licenses.\2047\
---------------------------------------------------------------------------
    \2046\ See supra Section IV.
    \2047\ Interview with Source 152 (Apr. 15, 2020).
---------------------------------------------------------------------------
    Open-source licenses allow software to be freely used, 
modified, and shared.\2048\ Open-source software can run on any 
infrastructure, local machine, server room, or on the cloud, 
reducing lock-in to a specific hardware vendor.\2049\ Companies 
based on open-source software bring in revenue by selling 
additional features under proprietary licenses or 
services.\2050\ In recent years, open-source development has 
been a leading model for software development, attracting 
significant venture capital investment.\2051\
---------------------------------------------------------------------------
    \2048\ Open Source Licenses by Category, Open Source Initiative, 
https://opensource.org/
licenses/category (last visited Sept. 30, 2020).
    \2049\ Nicholas Loulloudes et al., Enabling Interoperable Cloud 
Application Management Through an Open Source Ecosystem, 19 IEEE 
Internet Computing 54 (2015), https://ieeexplore.ieee.org/document/
7111887.
    \2050\ Max Schireson & Dharmesh Thakker, The Money in Open-Source 
Software, TechCrunch (Feb. 9, 2016), https://techcrunch.com/2016/02/09/
the-money-in-open-source-software/.
    \2051\ Interview with Source 152 (Apr. 15, 2020).
---------------------------------------------------------------------------
    Market participants note that the rise of cloud computing 
services has led to a shift in the way open-source software is 
delivered and used. Many open-source software companies allowed 
engineers to download free versions of their software from 
their website, often without collecting any personal data about 
their users. As engineers outgrew the functionality of the free 
version, they would purchase more powerful versions.\2052\ As 
cloud computing grew in popularity, open-source software 
vendors began offering versions of their software on the AWS 
Marketplace, where application developers could easily 
integrate the software. Market participants explain that AWS 
was able to use the data collected on their customers, 
including usage metrics, to learn which third-party software 
was performing well and ultimately to create their own 
proprietary version offered as a managed service. Creating a 
``knock-off'' version of software was particularly easy when 
the product was using an open-source license, which provides 
more visibility to the underlying code.\2053\
---------------------------------------------------------------------------
    \2052\ Id.
    \2053\ Id.
---------------------------------------------------------------------------
    In interviews with the Subcommittee, market participants 
repeatedly said that AWS relied on innovations from open-source 
software communities to gain dominance. A venture capitalist 
told the Subcommittee that ``open-source is critical for AWS 
getting market power. They're standing on the shoulders of 
giants and they're not paying the giants.'' \2054\ A long-time 
cloud vendor likewise said that ``Amazon never built a 
database, never built cloud services, never built any of their 
AWS offerings. They took open source and offered it out on 
[the] cloud. At the time that was innovative.'' \2055\
---------------------------------------------------------------------------
    \2054\ Interview with Source 146 (May 28, 2020).
    \2055\ Interview with Source 31 (May 27, 2020).
---------------------------------------------------------------------------
    AWS has developed many of its offerings using this practice 
and has created products that are only accessible as first-
party offerings through the AWS Management Console.\2056\ An 
example frequently cited by market participants is Amazon 
Elasticsearch Service (AESS), a tool for searching and 
analyzing data, and a first-party product listed on the AWS 
Management Console.\2057\ According to public reporting and 
interviews with market participants, this product is a copy of 
Elastic's Elasticsearch open-source product that was available 
for purchase on the AWS Marketplace.\2058\ According to public 
reporting, within a year of introducing the product, Amazon was 
generating more money from its replica of Elasticsearch than 
Elasticsearch itself was generating. One key advantage that 
Amazon's ``knock-off'' had was that Amazon had given it 
superior placement in AWS Management Console.\2059\ 
Additionally, as described in the Elasticsearch v. Amazon case, 
AWS can name their open-source ``knock-off'' products in a way 
that can mislead customers into believing that the ``knock-
off'' product is sponsored by the open-source software 
vendor.\2060\
---------------------------------------------------------------------------
    \2056\ What Is the AWS Management Console, Amazon Web Servs., 
https://docs.aws
.amazon.com/awsconsolehelpdocs/latest/gsg/getting-started.html#learn-
whats-new (last visited Sept. 30, 2020).
    \2057\ Daisuke Wakabayashi, Prime Leverage: How Amazon Wields Power 
in the Technology World, N.Y. Times (Dec. 16, 2019), https://
www.nytimes.com/2019/12/15/technology/amazon-aws-cloud-
competition.html. See also Interview with Source 152 (Apr. 15, 2020).
    \2058\ Id.
    \2059\ Id.
    \2060\ Complaint at 2, Elasticsearch, Inc. v. Amazon.com, Inc., No. 
4:19-cv-06158 (N.D. Cal. Sept. 27, 2019), http://ipcasefilings.com/wp-
content/uploads/2019/10/ElasticSearch_Amazon .pdf.
---------------------------------------------------------------------------
    The Subcommittee's investigation uncovered evidence 
relating to numerous instances in which Amazon has offered 
proprietary managed services based on knock-offs of open-source 
code. One open-source market participant interviewed by the 
Subcommittee said that, because of this conduct, the benefits 
of open source ``weren't accruing to [the] open-source 
community. People were feeling, we develop all this work and 
then some large company comes and monetizes that.'' \2061\ 
MongoDB, a document-based database, has similarly commented 
that, ``once an open source project becomes interesting, it is 
too easy for large cloud vendors to capture all the value but 
contribute nothing back to the community.'' \2062\
---------------------------------------------------------------------------
    \2061\ Interview with Source 144 (Apr. 17, 2020).
    \2062\ Server Side Public License FAQ, MongoDB, https://
www.mongodb.com/licensing/server-side-public-license/faq (last visited 
Sept. 30, 2020).
---------------------------------------------------------------------------
    When the Subcommittee inquired about this practice, Amazon 
responded that, ``Projects where AWS has developed 
distributions on top of OSS [open-source software], like Open 
Distro for Elastic-search and Amazon Corretto, add to, not 
supplant, the set of capabilities provided by the upstream 
open-source projects . . . . [I]t allows them to move between 
deploying OSS themselves and using managed services for open-
source.'' \2063\ Market participants told the Subcommittee, 
however, that in the instances when AWS creates a ``knock-off'' 
version of an open-source software by adding ``additional 
developments,'' those additional developments often only work 
with AWS infrastructure and are no longer cross-platform--
heightening the risk of lock-in.\2064\ As one third-party 
explains, ``So, the earlier benefits of open-source go out the 
window as Amazon takes over each of these product areas.'' 
\2065\
---------------------------------------------------------------------------
    \2063\ CEO Hearing at 285 (response to Questions for the Record of 
Jeff Bezos, CEO, Amazon.com, Inc.).
    \2064\ Interview with Source 152 (Sept. 24, 2020).
    \2065\ Id.
---------------------------------------------------------------------------
    For example, while MongoDB is an open-source document-based 
database project, Amazon offers a proprietary product called 
Amazon DocumentDB. According to AWS, DocumentDB implements the 
open-source MongoDB API and is designed to ``emulate the 
responses that a MongoDB client expects from a MongoDB 
server.''\2066\ When a cloud customer chooses to build an 
application using DocumentDB they are tied to AWS's 
infrastructure. If they ever wanted to switch to another 
provider they would have to extensively re-engineer their 
product in another software, whereas, had they built their 
application using MongoDB--on AWS or any other cloud provider's 
infrastructure--their applications could move to other 
platforms.\2067\
---------------------------------------------------------------------------
    \2066\ Jeff Barr, New-Amazon DocumentDB (with MongoDB 
Compatibility): Fast, Scalable, and Highly Available, Amazon Web 
Servs.: AWS News Blog (Jan. 9, 2019), https://aws
.amazon.com/blogs/aws/new-amazon-documentdb-with-mongodb-compatibility-
fast-scalable-and-highly-available/.
    \2067\ Interview with Source 152 (Sept. 24, 2020).

    (ii) Harms to Innovation. Amazon's practice of offering 
managed service versions of open-source software has prompted 
open-source software companies to make defensive changes, such 
as closing off advanced features and changing their open-source 
license to be less permissive.\2068\ One open-source vendor 
that recently started offering premium closed-sourced features 
said they were ``paranoid'' in light of Amazon cloning 
Elastic's features, noting that if this had happened to them 
they ``would not have a business.'' \2069\ Amazon's conduct has 
also reduced the availability of features in open-source 
software. Confluent,\2070\ Redis Labs,\2071\ and 
CochroachDB,\2072\ along with several other open-source 
software vendors, have made similar license and business model 
changes, reducing the level of access to their software.\2073\
---------------------------------------------------------------------------
    \2068\ Open Source Licenses by Category, Open Source Initiative, 
https://opensource.org/faq#permissive (last visited Sept. 30, 2020) 
(``A `permissive' license is simply a non-copyleft open source 
license--one that guarantees the freedoms to use, modify, and 
redistribute, but that permits proprietary derivative works.'').
    \2069\ Interview with Source 144 (Apr. 17, 2020).
    \2070\ Confluent Community License FAQ, Confluent, https://
www.confluent.io/confluent-
community-license-faq/ (last visited Sept. 30, 2020).
    \2071\ Frederic Lardinois, Redis Labs Changes Its Open-Source 
License--Again, TechCrunch (Feb. 21, 2019), https://techcrunch.com/
2019/02/21/redis-labs-changes-its-open-source-license-again/.
    \2072\ Tom Krazit, Another Open-Source Database Company Will 
Tighten Its Licensing Strategy, Wary of Amazon Web Services, GeekWire 
(June 4, 2019), https://www.geekwire.com/2019/another-open-source-
database-company-will-tighten-licensing-strategy-wary-amazon-web-
services/.
    \2073\ Interview with Source 152 (Apr. 15, 2020).
---------------------------------------------------------------------------
    Market participants believe that these changes 
significantly undermine innovation. Several noted that more 
closed-off licenses will result in fewer free, open-source 
features available to startups building prototypes and research 
labs that cannot afford access to paid features.\2074\ The 
Subcommittee also spoke with cloud computing customers in the 
public sector who worry about the changes and ambiguity in 
open-source licenses. One cloud computing customer told the 
Subcommittee that three pieces of open-source software that 
they use underwent license changes in the last year and that, 
due to strict ``open source only'' policies, they are ``now 
stuck using older versions of the software [from] before the 
license change which requires additional work to improve the 
code base, implement the same functionality in-house or switch 
to a competitive product.'' \2075\
---------------------------------------------------------------------------
    \2074\ Interview with Source 146 (May 28, 2020).
    \2075\ Interview with Source 49 (May 20, 2020).

    (iii) Self-Preferencing. According to market participants, 
once a product--based on open source or otherwise--is available 
in the AWS Management Console, it becomes an easier choice for 
existing AWS customers relative to purchasing a managed service 
from a third-party vendor or self-managing open-source 
software. In an interview with the Subcommittee, one startup 
said they purchased software services through the AWS 
Management Console as opposed to identical or nearly identical 
software from a third-party vendor because they were a small 
company and, ``instead of us managing everything, it was hit a 
button . . . they are all in one, it was easier.'' \2076\ As 
with all cloud services offered through the AWS Management 
Console, customers benefit from a single sign-on with billing 
information already in place.\2077\
---------------------------------------------------------------------------
    \2076\ Interview with Source 126 (June 29, 2020).
    \2077\ Interview with Source 146 (May 28, 2020).
---------------------------------------------------------------------------
    Market participants also note that Amazon makes certain 
functionality available to its first-party products that it 
doesn't make available to the companies managing the original 
version of the open-source software.\2078\ For example, AWS 
services can run inside Amazon's Virtual Private Cloud (Amazon 
VPC) offering, which allows users to provision an ``isolated 
section of the AWS Cloud,'' but third-party services cannot do 
so.\2079\
---------------------------------------------------------------------------
    \2078\ Interview with Source 152 (Sept. 24, 2020).
    \2079\ Amazon Virtual Private Cloud, Amazon Web Servs., https://
aws.amazon.com/vpc/ (last visited Sept. 30, 2020).
---------------------------------------------------------------------------
    While Amazon failed to provide the Subcommittee with 
financial data identifying what AWS makes in revenue from 
individual cloud offerings, many marketplace participants 
believe that AWS makes more from managed versions of open-
source software than the third-party vendors and managers of 
the software. In 2019, The New York Times reported that the 
Chief Executive of MariaDB, an open-source relational database 
company, estimated that ``Amazon made five times more revenue 
from running MariaDB software than his company generated from 
all of its businesses.'' \2080\ Market participants suggest 
this multiple of difference in income is likely for other AWS 
products based on open-source projects.\2081\
---------------------------------------------------------------------------
    \2080\ Daisuke Wakabayashi, Prime Leverage, How Amazon Wields Power 
in the Technology World, N.Y. Times (Dec. 16, 2019), https://
www.nytimes.com/2019/12/15/technology/amazon-aws-cloud-
competition.html.
    \2081\ Interview with Source 146 (May 28, 2020).
---------------------------------------------------------------------------

                                D. Apple

1. Overview
    Apple was incorporated in 1977 and is headquartered in 
Cupertino, California.\2082\ Apple was an early pioneer in 
designing and marketing mass-produced personal computers.\2083\ 
Today, the company ``designs, manufacturers, and markets 
smartphones, personal computers, tablets, wearables, and 
accessories, and sells a variety of related services.'' \2084\ 
Apple's hardware products include the iPhone, iPad, Mac, Apple 
TV, and AirPods; its Services business segment includes the App 
Store, iCloud, AppleCare, Apple Arcade, Apple Music, Apple TV+, 
and other services and software applications.\2085\ Apple 
tightly integrates its services and software applications with 
its products to ensure a seamless experience for 
consumers.\2086\
---------------------------------------------------------------------------
    \2082\ Apple, Inc., Annual Report (Form 10-K) 1 (Sept. 28, 2019), 
https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-
(As-Filed).pdf.
    \2083\ See Angelique Richardson & Ellen Terrell, Apple Computer, 
Inc., Lib. of Cong. (Apr. 2008), https://www.loc.gov/rr/business/
businesshistory/April/apple.html.
    \2084\ Apple, Inc., Annual Report (Form 10-K) 1 (Sept. 28, 2019), 
https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-
(As-Filed).pdf.
    \2085\ Id. at 1-2.
    \2086\ See Apple, Apple: Distinctive Products with a Seamless, 
Integrated User Experience 1 (July 13, 2020) (unpublished white paper) 
(on file with Comm.).
---------------------------------------------------------------------------

     Apple's Ecosystem: Hardware, Software Infrastructure,
                Apple & Third-Party Apps \2087\
---------------------------------------------------------------------------

    \2087\ Are Domestic Investors Missing Out?, Swell, (June 22, 2018), 
https://swellasset.com.au/2018/06/domestic-investors-missing/.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Apple reports financial information for two business 
categories: Products and Services.\2088\ For Fiscal Year 2019, 
Apple reported total revenue of approximately $260 billion, 
down 2 percent from 2018, but up nearly 13.5 percent from 
2017.\2089\ Apple's margins totaled 37.8 percent, with profits 
of $98.3 billion.\2090\ As of September
  
  
---------------------------------------------------------------------------
    \2088\ Apple, Inc., Annual Report (Form 10-K) 19 (Sept. 28, 2019), 
https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-
(As-Filed).pdf.
    \2089\ Id. at 17-19; see also Apple's 1 Crazy Number Key to $800 
Billion in Stock Growth, Forbes (July 13, 2020), https://
www.forbes.com/sites/greatspeculations/2020/07/13/how-did-apple-add-
800-billion-in-value-over-3-years/#5b9250df20f8.
    \2090\ Id. at 21, 29.
---------------------------------------------------------------------------

2020, Apple is the most valuable public company in the world and, in 
August 2020, became the first publicly traded U.S. firm to be valued at 
$2 trillion.\2091\ Apple's stock rose by 60 percent in the first 8 
months of 2020.\2092\
---------------------------------------------------------------------------
    \2091\ Jessica Bursztynsky, Apple Becomes First U.S. Company to 
Reach a $2 Trillion Market Cap, CNBC (Aug. 19, 2020), https://
www.cnbc.com/2020/08/19/apple-reaches-2-trillion-market-cap.html.
    \2092\ Kif Leswing, Apple's $2 Trillion Value Is Proof that Tim 
Cook's Services Plan Worked, CNBC (Aug. 19, 2020), https://
www.cnbc.com/2020/08/19/apples-2-trillion-value-proof-that-tim-cooks-
services-plan-worked.html.
---------------------------------------------------------------------------
    Apple is the leading smartphone vendor in the U.S., 
accounting for approximately 45 percent of the domestic 
market,\2093\ with more than 100 million iPhone users 
nationwide.\2094\ Apple's iOS is also one of two dominant 
mobile operating systems--the other operating system, Android, 
is discussed elsewhere in this Report. iOS runs on more than 
half of U.S. smartphones and tablets.\2095\ Globally, Apple 
accounts for less than 20 percent of the smartphone market, and 
roughly 25 percent of smartphones and tablets run on iOS 
worldwide.\2096\ In 2018, Apple sold its two-billionth iOS 
device and is projected to sell its two-billionth iPhone by 
2021.\2097\
---------------------------------------------------------------------------
    \2093\ See S. O'Dea, Manufacturers' Market Share of Smartphone 
Sales in the United States from 2016 to 2020, Statista (Sept. 3, 2020), 
https://www.statista.com/statistics/620805/smartphone-sales-market-
share-in-the-us-by-vendor/; S. O'Dea, Manufacturers' Market Share of 
Smartphone Subscribers in the United States from 2013 and 2019, by 
Month*, Statista (June 9, 2020), https://www.statista.com/statistics/
273697/market-share-held-by-the-leading-smart
phone-manufacturers-oem-in-the-us/; US Smartphone Market Share: By 
Quarter, Counterpoint Rsch. (Aug. 17, 2020), https://
www.counterpointresearch.com/us-market-smartphone-share/; S. O'Dea, 
Share of Smartphone Users that Use an Apple iPhone in the United States 
from 2014 to 2021, Statista (Sept. 10, 2020), https://www.statista.com/
statistics/236550/percentage-of-us-population-that-own-a-iphone-
smartphone/.
    \2094\ S. O'Dea, Share of Smartphone Users that Use an Apple iPhone 
in the United States from 2014 to 2021, Statista (Sept. 10, 2020), 
https://www.statista.com/statistics/236550/percentage-of-us-population-
that-own-a-iphone-smartphone/.
    \2095\ See S. O'Dea, Subscriber Share Held by Smartphone Operating 
Systems in the United States from 2012 to 2020, Statista (Aug. 17, 
2020), https://www.statista.com/statistics/266572/market-share-held-by-
smartphone-platforms-in-the-united-states/; Mobile Operating System 
Market Share United States of America Aug. 2019-Aug. 2020, GlobalStats 
(on file with Comm.).
    \2096\ See Global Smartphone Market Share: By Quarter, Counterpoint 
Rsch., (Aug. 18, 2020), https://www.counterpointresearch.com/global-
smartphone-share/; Mobile Operating System Market Share Worldwide Aug. 
2019-Aug. 2020, GlobalStats (on file with Comm.).
    \2097\ Malcolm Owen, How Apple Has Hit 2 Billion iOS Devices Sold, 
and When It Will Hit 2 Billion iPhones, Apple Insider (Sept. 13, 2018), 
https://appleinsider.com/articles/18/09/13/how-apple-has-hit-2-billion-
ios-devices-sold-and-when-it-will-hit-2-billion-iphones.
---------------------------------------------------------------------------
    Apple also owns and operates the App Store for iOS devices. 
Launched in 2008, Apple highlights that the App Store allows 
app developers to reach consumers in 155 countries, and that 
more than 27 million app developers have published millions of 
apps in the App Store. Apple credits the App Store with 
creating 1.5 million jobs in the United States and more than 
$120 billion in worldwide revenue for app developers.\2098\ 
According to Apple, the App Store ecosystem, including direct 
sales of apps, sales of goods and services inside of apps, and 
in-app advertising, facilitated more than $138 billion in 
economic activity in the U.S. last year.\2099\
---------------------------------------------------------------------------
    \2098\ See Letter from Kyle Andeer, Vice President Legal & Chief 
Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 2 (Oct. 14, 2019) (on 
file with Comm.); Letter from Kyle Andeer, Vice President, Corp. Law & 
Chief Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, 
H. Comm. on the Judiciary, Hon. Jim Jordan, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 3 (Sept. 21, 2020) (on 
file with Comm.).
    \2099\ Letter from Kyle Andeer, Vice President, Corp. Law & Chief 
Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Jim Jordan, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 2 (Sept. 21, 2020) (on 
file with Comm.) (citing Jonathan Borck et al., Analysis Grp., How 
Large Is the Apple App Store Ecosystem: A Global Perspective for 2019, 
at 4 (2020), https://www.apple.com/newsroom/pdfs/app-store-study-
2019.pdf).
---------------------------------------------------------------------------
    In addition to the Subcommittee's investigation of Apple's 
market power and conduct, federal antitrust authorities are 
investigating the company for potential violations of the U.S. 
antitrust laws. In June 2019, The New York Times and The Wall 
Street Journal reported that the Justice Department had opened 
investigations into potential violations of the antitrust laws 
by Apple.\2100\ Apple is also under investigation by multiple 
international competition authorities for antitrust violations 
and anticompetitive practices,\2101\ in addition to facing 
private antitrust lawsuits in the U.S.\2102\
---------------------------------------------------------------------------
    \2100\ See Celia Kang et al., Antitrust Troubles Snowball for Tech 
Giants as Lawmakers Join In, N.Y. Times (June 3, 2019), https://
www.nytimes.com/2019/06/03/technology/facebook-ftc-antitrust.html; 
Brent Kendall & John McKinnon, Congress, Enforcement Agencies Target 
Tech, Wall St. J. (June 3, 2019), https://www.wsj.com/articles/ftc-to-
examine-how-facebook-s-practices-affect-digital-competition-
11559576731.
    \2101\ See, e.g., Press Release, Eur. Comm'n, Antitrust: Commission 
Opens Investigation into Apple Practices Regarding Apple Pay (June 16, 
2020), https://ec.europa.eu/commission/presscorner/detail/en/
ip_20_1075; Foo Yun Chee, Apple in Dutch Antitrust Spotlight for 
Allegedly Promoting Own Apps, Reuters (Apr. 11, 2019), https://
www.reuters.com/article/us-apple-antitrust-netherlands/apple-in-dutch-
antitrust-spotlight-for-allegedly-promoting-own-apps-idUSKCN1RN215; 
Italy Antitrust Opens Inquiry into Google, Apple, Dropbox on Cloud 
Computing, Reuters (Sept. 7, 2020), https://www.reuters.com/article/us-
google-italy-antitrust/italy-antitrust-opens-inquiry-into-google-apple-
dropbox-on-cloud-computing-idUSKBN25Y0YM; Tim Hardwick, Apple and 
Amazon Under Investigation by Italian Watchdog for Alleged Price 
Fixing, Apple Insider (July 22, 2020), https://www.macrumors.com/2020/
07/22/apple-amazon-italy-alleged-price-fixing/.
    \2102\ See, e.g., Nick Statt, Epic Games Is Suing Apple, Verge 
(Aug. 13, 2020), https://www
.theverge.com/2020/8/13/21367963/epic-fortnite-legal-complaint-apple-
ios-app-store-removal-injunctive-relief; Reed Albergotti, Apple 
Suppressed Competitors in Its App Store--Until It Got Caught, a Lawsuit 
Alleges, Wash. Post (Dec. 20, 2019), https://www.washingtonpost
.com/technology/2019/12/20/apple-suppressed-competitors-its-app-store-
until-it-got-caught-lawsuit-alleges/; Bob Van Voris & Peter Blumberg, 
Apple App Developers Jump on Silicon Valley Antitrust Bandwagon, 
Bloomberg (June 4, 2019), https://www.bloomberg.com/news/articles/2019-
06-04/apple-inc-sued-by-app-developers-claiming-antitrust-violations; 
David G. Savage & Suhauna Hussain, Supreme Court Rules Apple Can Face 
Antitrust Suits from iPhone Owners over App Store Sales, L.A. Times 
(May 13, 2019), https://www.latimes.com/politics/la-na-pol-
supreme-court-apple-smart-phone-20190513-story.html.
---------------------------------------------------------------------------
    Previously, the Justice Department and attorneys general of 
33 states sued Apple for orchestrating a conspiracy to fix 
prices in the eBooks market in 2012.\2103\ Apple was found to 
have violated state and federal antitrust laws and was forced 
to pay $450 million.\2104\ In 2010, Apple settled an antitrust 
complaint with the Department of Justice alleging that it had 
conspired with several other technology companies to eliminate 
competition for employees through non-solicitation 
agreements.\2105\ It later entered into a $415 million joint 
settlement agreement in a class-action lawsuit filed by 
affected employees.\2106\
---------------------------------------------------------------------------
    \2103\ See Complaint, United States v. Apple, Inc., 952 F. Supp. 2d 
638 (S.D.N.Y. 2013) (No.12-cv-2826).
    \2104\ See United States v. Apple, Inc., 952 F. Supp. 2d 638 
(S.D.N.Y. 2013), aff'd, 791 F.3d 209 (2d Cir. 2015); Dawn Chmielewski, 
Apple to Pay $450 Million E-Book Settlement After Supreme Court Waves 
Off Case, Vox: Recode (Mar. 7, 2016), https://www.vox.com/2016/3/7/
11586748/apple-to-pay-450-million-e-book-settlement-after-supreme-
court-waves; see also Aug. 27, 2013 Hr'g Tr. at 17:1-6, United States 
v. Apple, Inc., 952 F. Supp. 2d 638 (S.D.N.Y. 2013) (No. 12-cv-2826) 
(``The record at trial demonstrated a blatant and aggressive disregard 
at Apple for the requirements of the law. Apple executives used their 
considerable skills to orchestrate a price-fixing scheme that 
significantly raised the prices of E-books. This conduct included Apple 
lawyers and its highest level executives.''); Philip Elmer-Dewitt, 
``I'd Do It Again,'' Says the Man at the Center of Apple's E-book Case, 
Fortune (Dec. 2, 2014), https://fortune.com/2014/12/02/id-do-it-again-
says-the-man-at-the-center-of-apples-e-book-case/.
    \2105\ Press Release, U.S. Dep't of Justice, Department Requires 
Six High Tech Companies to Stop Entering into Anticompetitive Employee 
Solicitation Agreements (Sept. 24, 2010), https://www.justice.gov/opa/
pr/justice-department-requires-six-high-tech-companies-stop-entering-
anticompetitive-employee.
    \2106\ Dawn Chmielewski, Silicon Valley Companies Agree to Pay $415 
Million to Settle ``No Poaching'' Suit, Vox: Recode (Jan. 15, 2015), 
https://www.vox.com/2015/1/15/11557814/
silicon-valley-companies-agree-to-pay-415-million-to-settle-no.
---------------------------------------------------------------------------
2. iOS and the App Store
    (a) Market Power. Apple has significant and durable market 
power in the market for mobile operating systems and mobile app 
stores, both of which are highly concentrated.\2107\ Apple's 
iOS mobile operating system is one of two dominant mobile 
operating systems, along with Google's Android, in the U.S. and 
globally.\2108\ Apple installs iOS on all Apple mobile devices 
and does not license iOS to other mobile device manufacturers. 
More than half of mobile devices in the U.S. run on iOS or 
iPadOS, an iOS derivation for tablets introduced in 2019.\2109\ 
Apple's market power is durable due to high switching costs, 
ecosystem lock-in, and brand loyalty. It is unlikely that there 
will be successful market entry to contest the dominance of iOS 
and Android.
---------------------------------------------------------------------------
    \2107\ See Stigler Report at 78 (``[T]he evidence thus far does 
suggest that current digital platforms face very little threat of entry 
. . . . [T]he key players in this industry remained the same over the 
last two technology waves, staying dominant through the shift to mobile 
and the rise of AI. In the past, dominant businesses found it difficult 
to navigate innovation or disruption waves. By contrast, Facebook, 
Google, Amazon, Apple, and even Microsoft were able to ride these waves 
without significant impact on market share or profit margins. This 
indirect evidence corroborates the argument that these companies are 
facing few competitive threats.'').
    \2108\ See supra Section IV.
    \2109\ See S. O'Dea, Subscriber Share Held by Smartphone Operating 
Systems in the United States from 2012 to 2020, Statista (Aug. 17, 
2020), https://www.statista.com/statistics/266572/market-share-held-by-
smartphone-platforms-in-the-united-states/; Mobile Operating System 
Market Share United States of America Aug. 2019-Aug. 2020, GlobalStats 
(on file with Comm.); Jason Cipriani, iPad Turns 10: Why Did It Take a 
Decade for Apple's Tablet to Get Its Own Operating System, ZDNet (Jan. 
24, 2020), https://www.zdnet.com/article/a-decade-old-device-why-did-
it-take-nine-years-for-the-ipad-to-get-its-own-operating-system/.
---------------------------------------------------------------------------
    As a result, Apple's control over iOS provides it with 
gatekeeper power over software distribution on iOS devices. 
Consequently, it has a dominant position in the mobile app 
store market and monopoly power over distribution of software 
applications on iOS devices.\2110\
---------------------------------------------------------------------------
    \2110\ See supra Section IV.
---------------------------------------------------------------------------
    Apple's App Store is the only method to distribute software 
applications on iOS devices.\2111\ It does not permit 
installation of alternative app stores on iOS devices, nor does 
it permit apps to be sideloaded. As discussed earlier in this 
Report, consumers have a strong preference for native apps to 
web apps,\2112\ and Apple has acknowledged key differences 
between them. Developers have explained that Apple actively 
undermines the open web's progress on iOS ``to push developers 
toward building native apps on iOS rather than using web 
technologies.'' \2113\ As a result, Apple's position as the 
sole app store on iOS devices is unassailable. Apple fully 
controls how software can be installed on iOS devices, and CEO 
Tim Cook has explained that the company has no plan to permit 
an alternative app store.\2114\ The former director of the app 
review team for the App Store observed that Apple is ``not 
subject to any meaningful competitive constraint from 
alternative distribution channels.'' \2115\
---------------------------------------------------------------------------
    \2111\ CEO Hearing at 80 (statement of Tim Cook, CEO, Apple, Inc.) 
(responding to a question about whether Apple alone determines whether 
apps are admitted to the App Store, Mr. Cook replied, ``If it's a 
native app, yes, sir. If it's a web app, no.'').
    \2112\ See supra Section IV.
    \2113\ Owen Williams, Apple Is Trying to Kill Web Technology, 
OneZero (Nov. 7, 2019), https://onezero.medium.com/apple-is-trying-to-
kill-web-technology-a274237c174d.
    \2114\ CEO Hearing at 397 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2115\ Phillip Shoemaker, Apple v. Everybody, Medium (Mar. 29, 
2019), https://medium.com/@phillipshoemaker/apple-v-everybody-
5903039e3be.
---------------------------------------------------------------------------
    In response to these concerns, Apple has not produced any 
evidence that the App Store is not the sole means of 
distributing apps on iOS devices and that it does not exert 
monopoly power over app distribution. Apple says it does not 
create data--nor is it aware of third-party data--that tracks 
market share in the app distribution market.\2116\ Apple claims 
the App Store competes in a larger software distribution market 
that includes other mobile app stores as well as the open 
internet, personal computers, gaming consoles, smart TVs, and 
online and brick-and-mortar retail stores.\2117\ While 
consumers can access software and developers can distribute 
software through those platforms, none of those platforms 
permit consumers to access apps on an iOS device or developers 
to distribute apps to iOS devices.
---------------------------------------------------------------------------
    \2116\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-000008 (Oct. 14, 2019) (on file with Comm.).
    \2117\ See CEO Hearing at 27, 81 (statement of Tim Cook, CEO, 
Apple, Inc.); see also Submission from Apple, to H. Comm. on the 
Judiciary, HJC-APPLE-000012 to -000013 (Oct. 14, 2019) (on file with 
Comm.).
---------------------------------------------------------------------------
    Apple's monopoly power over software distribution on iOS 
devices appears to allow it to generate supranormal profits 
from the App Store and its Services business. Apple CEO Tim 
Cook set a goal in 2017 to rapidly double the size of the 
Services business by the end of 2020.\2118\ Apple met this goal 
by July 2020, six months ahead of schedule.\2119\ The Services 
business accounted for nearly 18 percent of total revenue in 
Fiscal Year 2019, about $46.2 billion. Services grew faster 
than Products in recent years, increasing by more than 41 
percent since 2017.\2120\ The Services category is also Apple's 
highest margin business at 63.7 percent in Fiscal Year 2019 and 
67.2 percent for the quarter ending in June 2020.\2121\
---------------------------------------------------------------------------
    \2118\ Anita Balakrishnan, Tim Cook: Goal Is to Double Apple's 
Services Revenue by 2020, CNBC (Jan. 31, 2017), https://www.cnbc.com/
2017/01/31/tim-cook-on-apple-earnings-call-double-services-revenue-by-
2020.html.
    \2119\ See Apple (AAPL) Q3 2020 Earnings Call Transcript, Motley 
Fool (July 31, 2020), https://www.fool.com/earnings/call-transcripts/
2020/07/31/apple-aapl-q3-2020-earnings-call-transcript.aspx.
    \2120\ Apple, Inc., Annual Report (Form 10-K) 19 (Sept. 28, 2019), 
https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-
(As-Filed).pdf.
    \2121\ Id. at 21; Apple, Inc., Quarterly Report (Form 10-Q) 28 
(June 27, 2020), https://s2.q4cdn.com/470004039/files/doc_financials/
2020/q3/_10-Q-Q3-2020-(As-Filed).pdf.
---------------------------------------------------------------------------

                Annual Revenue by Segment \2122\
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    \2122\ Prepared by the Subcommittee based on Apple, Inc., Annual 
Reports (Form 10-K) (2017-2019).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Industry observers credit Apple's successful focus on 
growing the Services business for its rising valuation and 
long-term future.\2123\ Apple has attributed the growth of 
Services as a driver of the firm's profits from sales and an 
important factor supporting Apple's overall margins as hardware 
sales slowed or declined.\2124\ The company has consistently 
credited the App Store, licensing sales, and AppleCare for the 
success of Services.\2125\
---------------------------------------------------------------------------
    \2123\ See, e.g., Kif Leswing, Apple's $2 Trillion Value Is Proof 
that Tim Cook's Services Plan Worked, CNBC (Aug. 19, 2020), https://
www.cnbc.com/2020/08/19/apples-2-trillion-value-proof-that-tim-cooks-
services-plan-worked.html; Anne Sraders, As Apple Stock Tops $500, 
Bulls Cite These Key Reasons It Could Still Go Higher, Fortune (Aug. 
24, 2020), https://fortune.com/2020/08/24/apple-stock-tops-500-can-it-
go-higher/.
    \2124\ Apple, Inc., Annual Report (Form 10-K) 22, 26 (Sept. 29, 
2018), https://www.sec.gov/Archives/edgar/data/320193/
000032019318000145/a10-k20189292018.htm; Apple, Inc., Annual Report 
(Form 10-K) 22, 26 (Sept. 30, 2017), https://www.sec.gov/Archives/
edgar/data/320193/000032019317000070/a10-k20179302017.htm.
    \2125\ Apple, Inc., Annual Report (Form 10-K) 19 (Sept. 28, 2019), 
https://s2.q4cdn.com/470004039/files/doc_financials/2019/ar/_10-K-2019-
(As-Filed).pdf; Apple, Inc., Annual Report (Form 10-K) 25 (Sept. 29, 
2018), https://www.sec.gov/Archives/edgar/data/320193/
000032019318000145/a10-k20189292018.htm; Apple, Inc., Annual Report 
(Form 10-K) 25 (Sept. 30, 2017), https://www.sec.gov/Archives/edgar/
data/320193/000032019317000070/a10-k20179302017.htm. AppleCare is 
Apple's extended warranty product for Apple devices. See Jason Cross, 
AppleCare+: Everything You Need to Know About Apple's Extended Warranty 
Program, MacWorld (Sept. 16, 2020), https://www.macworld.com/article/
3227045/applecare-warranty-faq.html. In addition to the markets 
discussed in this Section, the Committee sought information and 
continues to investigate competition and conduct in the resale and 
repair markets for Apple products.

    (b) Merger Activity. In 2019, Apple CEO Tim Cook told CNBC 
that Apple buys a new company every two-to-three weeks, 
focusing on acquiring ``talent and intellectual property.'' 
\2126\ In July 2020, Mr. Cook explained that Apple's ``approach 
on acquisitions has been to buy companies where we have 
challenges, and IP, and then
  
  
---------------------------------------------------------------------------
    \2126\ Lauren Feiner, Apple Buys a Company Every Few Weeks, Says 
CEO Tim Cook, CNBC (May 6, 2019), https://www.cnbc.com/2019/05/06/
apple-buys-a-company-every-few-weeks-says-ceo-tim-cook.html.
---------------------------------------------------------------------------

make them a feature of the phone.'' \2127\ An Apple submission to the 
Subcommittee explains that it:
---------------------------------------------------------------------------
    \2127\ Kif Leswing, Tim Cook Says Apple Buys Innovation, not 
Competitors, CNBC (July 31, 2020), https://www.cnbc.com/2020/07/31/tim-
cook-contrasts-apple-ma-with-other-big-tech.html.

     L[H]as not embarked on a strategy of acquiring nascent 
competitors in service of its growth and market position. 
Instead, Apple's acquisitions generally are meant to complement 
its product business by accelerating innovation and building 
out new features and technologies for Apple's hardware and 
software offerings.\2128\
---------------------------------------------------------------------------
    \2128\ Apple, Apple: Distinctive Products with a Seamless, 
Integrated User Experience 2 (July 13, 2020) (unpublished white paper) 
(on file with Comm.).

    In 2020, Apple continued acquiring small firms, including 
artificial intelligence and virtual reality startups, an 
enterprise software maker, a contactless payment startup, and a 
weather application, among others.\2129\ One of Apple's largest 
transactions occurred in 2019 when it paid $1 billion to 
acquire Intel's smartphone modem business.\2130\
---------------------------------------------------------------------------
    \2129\ See Jordan Novet, Apple Buys an A.I. Start-up that Came from 
Microsoft Co-Founder Paul Allen's Research Lab, CNBC (Jan. 15, 2020), 
https://www.cnbc.com/2020/01/15/apple-acquires-xnor-ai-startup-that-
spun-out-of-allen-institute.html; Mark Gurman, Apple Acquires AI 
Startup to Better Understand Natural Language, Bloomberg (Apr. 3, 
2020), https://www.bloomberg.com/news/articles/2020-04-03/apple-
acquires-ai-startup-to-better-understand-natural-language; Kif Leswing, 
Apple Buys Virtual Reality Company NextVR, CNBC (May 14, 2020), https:/
/www.cnbc.com/2020/05/14/apple-buys-virtual-reality-company-
nextvr.html; Kif Leswing, Apple Buys Fleetsmith, a Company Making It 
Easier to Deploy iPhones and Macs at Workplaces, CNBC (June 24, 2020), 
https://www.cnbc.com/2020/06/24/apple-acquires-device-management-
company-fleetsmith.html; Jessica Bursztynsky, Apple Buys Popular 
Weather App Dark Sky and Plans to Shut Down Android Versions, CNBC 
(Mar. 31, 2020), https://www.cnbc.com/2020/03/31/apple-buys-popular-
weather-app-dark-sky.html; Mark Gurman, Apple Buys Startup to Turn 
iPhones into Payment Terminals, Bloomberg (July 31, 2020), https://
www.bloomberg.com/news/articles/2020-08-01/apple-buys-startup-to-turn-
iphones-into-payment-terminals.
    \2130\ Press Release, Apple, Apple to Acquire the Majority of 
Intel's Smartphone Modem Business (July 25, 2019), https://
www.apple.com/newsroom/2019/07/apple-to-acquire-the-majority-of-intels-
smartphone-modem-business/.
---------------------------------------------------------------------------
    Apple has also recently acquired software companies to 
create a foundation from which it could launch new apps. For 
example, after purchasing the digital magazine subscription 
service Texture in 2018, Apple integrated most of Texture's 
functionality into its own Apple News+ service, which debuted 
the following year.\2131\ Similarly, one of Apple's largest 
purchases to date--its $3 billion acquisition of Beats 
Electronics in 2014--was instrumental to the 2015 launch of 
Apple Music.\2132\ Apple sought to grow Apple Music quickly 
after its introduction. Apple pre-installed the service on 
iPhones and made it the only music service accessible through 
Siri, Apple's virtual assistant. Apple also offered Apple Music 
with a free month trial period and made it available on Android 
devices. The strategy saw Apple gain 10 million paying 
subscribers within six months.\2133\ Apple supplemented its 
music services business in 2018 by acquiring the music 
recognition app Shazam, and most recently, by acquiring podcast 
app Scout FM in 2020.\2134\
---------------------------------------------------------------------------
    \2131\ Anita Balakrishnan, Apple Buys Texture, a Digital Magazine 
Subscription Service, CNBC (Mar. 12, 2018), https://www.cnbc.com/2018/
03/12/apple-buys-texture-a-digital-magazine-subscription-service.html.
    \2132\ Billy Steele, Apple's $3 Billion Purchase of Beats Has 
Already Paid Off, Engadget (May 28, 2019), https://www.engadget.com/
2019-05-28-apple-beats-five-years-later.html.
    \2133\ Neth. Auth. for Consumers & Mkts. Study at 62.
    \2134\ Press Release, Apple, Apple Acquires Shazam, Offering More 
Ways to Discover and Enjoy Music (Sept. 24, 2018), https://
www.apple.com/newsroom/2018/09/apple-acquires-shazam-offering-more-
ways-to-discover-and-enjoy-music/; Mark Gurman, Apple Buys Startup that 
Creates Radio-Like Stations for Podcasts, Bloomberg (Sept. 24, 2020), 
https://www.bloomberg.com/news/articles/2020-09-24/apple-buys-startup-
that-creates-radio-like-stations-for-podcasts.
---------------------------------------------------------------------------
    It is common for Apple to integrate apps it purchases into 
its own pre-existing apps or into the iOS mobile operating 
system. Examples of this include the 2014 acquisition of Swell, 
a podcast app, and the 2013 acquisition of HopStop, a transit 
navigation app.\2135\
---------------------------------------------------------------------------
    \2135\ Chris Gayomali, Swell Shuts Down Following Apple 
Acquisition, Fast Co. (July 29, 2014), https://www.fastcompany.com/
3033698/swell-shuts-down-following-apple-acquisition; Andrew Nusca, 
Apple Maps vs. Google Maps Heats Up as Apple Shuts Down HopStop, 
Fortune (Sept. 12, 2015), https://fortune.com/2015/09/12/hopstop-apple-
shutdown/.
---------------------------------------------------------------------------
    Apple has followed a similar strategy for integrating the 
Dark Sky weather app. Apple shut down Dark Sky's Android app in 
August 2020 and plans to integrate the app's features with the 
iPhone's Weather widget on iOS 14.\2136\ In addition to its 
app, Dark Sky supplied data to independent weather apps, like 
Carrot, Weather Line, and Partly Sunny. As a result of Apple's 
takeover of Dark Sky, independent weather apps will lose access 
to the inexpensive, hyper-local weather data that Dark Sky 
supplied, leading some weather apps to shut down and others to 
rely on higher-priced suppliers for forecast data.\2137\
---------------------------------------------------------------------------
    \2136\ Hannah Klein, The Dark Sky Android App is Officially Kaput, 
Slate (Aug. 4, 2020), https://slate.com/technology/2020/08/dark-sky-
app-android-shuts-down.html.
    \2137\ Jared Newman, Apple's Dark Sky Acquisition Could Be Bad News 
for Indie Weather Apps, Fast Co. (Apr. 2, 2020), https://
www.fastcompany.com/90485131/apples-dark-sky-acquisition-could-be-bad-
news-for-indie-weather-apps. But see CEO Hearing at 403 (response to 
Questions for the Record of Tim Cook, CEO, Apple, Inc.) (noting Dark 
Sky will ``continue to make its API available to Dark Sky's existing 
customers until the end of 2021'').

    (c) Conduct
    (i) Commissions and In-App Purchases. The Committee sought 
information regarding Apple's policy of collecting commissions 
from apps sold through the App Store and purchases made in iOS 
apps. Apple charges a 30 percent commission on paid apps--those 
that charge a fee for users to download--downloaded from the 
App Store. It also takes a 30 percent fee for in-app purchases 
(IAP) of ``digital goods and services.''\2138\ For app 
subscriptions, Apple charges a 30 percent commission for the 
first year and a 15 percent commission for subsequent 
years.\2139\ Apps are not permitted to communicate with iOS 
users that the app may be available for purchase at a lower 
price outside the App Store, provide links outside of the app 
that may lead users to find alternative subscription and 
payment methods, or offer their own payment processing 
mechanism in the app to avoid using Apple's IAP.\2140\ Apps 
that violate Apple's policies can be removed from the App 
Store, losing access to the only means of distributing apps to 
consumers with iOS devices.\2141\
---------------------------------------------------------------------------
    \2138\ App Store: Dedicated to the Best Store Experience for 
Everyone, Apple, https://www.apple.com/ca/ios/app-store/principles-
practices/ (last visited Oct. 4, 2020).
    \2139\ Id.
    \2140\ See Innovation and Entrepreneurship Hearing at 584-85 
(response to Questions for the Record of Kyle Andeer, Vice President, 
Corp. Law, Apple, Inc.); Submission from ProtonMail, to H. Comm. on the 
Judiciary, 5 (Aug. 22, 2020) (on file with Comm.); Interview with 
Source 143 (Aug. 27, 2020).
    \2141\ See, e.g., Sara Morrison, Apple's Fortnite Ban, Explained, 
Vox: Recode (Sept. 8, 2020), https://www.vox.com/recode/2020/8/20/
21373780/fortnite-epic-apple-lawsuit-app-store-antitrust; Nick Statt, 
Apple Doubles Down on Controversial Decision to Reject Email App Hey, 
Verge (June 18, 2020), https://www.theverge.com/2020/6/18/21296180/
apple-hey-email-app-basecamp-rejection-response-controversy-antitrust-
regulation.
---------------------------------------------------------------------------
    Apple describes its policies as standard industry practice 
and says that other app stores charge the same fees.\2142\ In 
2020, Apple funded a study that concluded that other software 
distribution platforms run by Google, Amazon, Samsung, 
Microsoft, and others charge identical or similar commissions 
on software downloads and transactions, and that commissions 
are common in other digital markets.\2143\ Apple also 
highlighted that its commissions are lower than the cost of 
software distribution by brick-and-mortar retailers, which 
dominated the marketplace prior to the introduction of the App 
Store.\2144\ The Apple-commissioned study explained that Apple 
funds the App Store through a $99 annual fee it charges to 
developers and $299 for developers building enterprise apps, as 
well as the commission and fees collected on apps and in-app 
purchases.\2145\
---------------------------------------------------------------------------
    \2142\ Innovation and Entrepreneurship Hearing at 585 (response to 
Questions for the Record of Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.); see also Mark Gurman, Apple Defends App Store Revenue 
Take Ahead of Antitrust Hearing, Bloomberg (July 22, 2020), https://
www.bloomberg.com/news/articles/2020-07-22/apple-defends-app-store-
revenue-cut-ahead-of-antitrust-hearing; David Pierce & Emily Birnbaum, 
Apple Defends Its App Store Tax Ahead of Antitrust Hearings, Protocol 
(July 22, 2020), https://www.protocol.com/apple-app-store-commission-
study.
    \2143\ See Jonathan Borck et al., Analysis Grp., Apple's App Store 
and Other Digital Marketplaces: A Comparison of Commission Rates 2, 5-6 
(2020), https://www .analysisgroup.com/globalassets/insights/
publishing/apples_app_store_and_other_digital 
_marketplaces_a_comparison_of_commission_rates.pdf.
    \2144\ See CEO Hearing at 150 (statement of Tim Cook, CEO, Apple, 
Inc.); Letter from Kyle Andeer, Vice President, Corp. Law & Chief 
Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Jim Jordan, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 3 (Sept. 21, 2020) (on 
file with Comm.).
    \2145\ See Jonathan Borck et al., Analysis Grp., Apple's App Store 
and Other Digital Marketplaces: A Comparison of Commission Rates 4 n.5, 
app. A1 at A-3 (2020), https://www.analysisgroup.com/globalassets/
insights/publishing/apples_app_store_and_other_ 
digital_marketplaces_a_comparison_of_ commission_rates.pdf.
---------------------------------------------------------------------------
    Apple also noted that 84 percent of all apps distributed 
through the App Store pay no commissions or fees.\2146\ Apple 
does not take a commission on purchases from apps like Uber or 
Etsy that sell ``physical goods or services that will be 
consumed outside the app.'' \2147\ Apple also makes some 
exceptions to its rules and may change or update its 
rules.\2148\ For example, Apple has an exception for ``Reader'' 
apps such as Netflix and Kindle that permit users to access 
content purchased outside the app, but do not allow for in-app 
subscriptions or purchases.\2149\ Apple also makes exceptions 
for ``third-party premium video apps'' that integrate with 
Apple TV and other Apple services.\2150\ Mr. Cook explained, 
``[t]oday, there are over 130 apps that participate in this 
program,'' and ``[t]he reduced 15 percent commission is 
available to all developers offering premium video content on 
the same terms as Amazon Prime Video, with the same 
qualification criteria.'' \2151\ Amazon Prime Video, Altice 
One, and Canal+ have been publicly confirmed as 
participants.\2152\
---------------------------------------------------------------------------
    \2146\ See, e.g., Innovation and Entrepreneurship Hearing at 68 
(statement of Kyle Andeer, Vice President, Corp. Law, Apple, Inc.); 
Letter from Timothy Powderly, Apple, Inc., to Hon. David N. Cicilline, 
Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. 
on the Judiciary & Hon. F. James Sensenbrenner, Ranking Member, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary, 3 (July 15, 2019).
    \2147\ App Store Review Guidelines 3.1.3(e): Goods and Services 
Outside of the App, Apple, https://developer.apple.com/app-store/
review/guidelines/#goods-and-services-outside-of-the-app (last visited 
Sept. 27, 2020).
    \2148\ See, e.g., Sarah Perez & Anthony Ha, Apple Revises App Store 
Rules to Permit Game Streaming Apps, Clarify In-App Purchases and More, 
TechCrunch (Sept. 11, 2020), https://techcrunch.com/2020/09/11/apple-
revises-app-store-rules-to-permit-game-streaming-apps-clarify
-in-app-purchases-and-more/; Phillip Shoemaker, Apple v. Everybody, 
Medium (Mar. 29, 2019), https://medium.com/@phillipshoemaker/apple-v-
everybody-5903039e3be.
    \2149\ App Store Review Guidelines 3.1.3(a): ``Reader'' Apps, 
Apple, https://developer
.apple.com/app-store/review/guidelines/#reader-apps (last visited Sept. 
27, 2020). 
    \2150\ CEO Hearing at 402 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2151\ Id.
    \2152\ Nick Statt, Apple Now Lets Some Video Streaming Apps Bypass 
the App Store Cut, Verge (Apr. 1, 2020), https://www.theverge.com/2020/
4/1/21203630/apple-amazon-prime-video-ios-app-store-cut-exempt-program-
deal. See also Submission from Apple, to H. Comm. on the Judiciary, 
HJC-APPLE-015111 (Nov. 1, 2016) (on file with Comm.) (showing details 
of negotiations between Eddy Cue, Senior Vice President, Internet 
Software and Services, Apple, Inc., and Jeff Bezos, CEO, Amazon.com, 
Inc.).
---------------------------------------------------------------------------
    During the investigation, the Subcommittee received 
evidence from app developers regarding Apple's commissions and 
fees for IAPs. ProtonMail, a secure email provider, explained 
that Apple's justification of its 30 percent commission 
overlooks the dynamics of the marketplace for distributing 
software to consumers with iOS devices--conflating practices 
that may be unremarkable in competitive markets but abusive in 
monopoly markets.\2153\
---------------------------------------------------------------------------
    \2153\ See Submission from ProtonMail, to H. Comm. on the 
Judiciary, 11-12 (Aug. 22, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    For example, personal computer (PC) users can install 
software from app stores run by Microsoft, Google, Amazon, and 
others or download software directly from the software 
developer's website and bypass app stores altogether. 
Similarly, Apple's Mac App Store is one of many options for Mac 
users to download software. While Samsung is a global leader in 
smartphones, the Samsung Galaxy Store is one of several app 
stores available on Samsung's mobile devices. Google's Play 
Store dominates app distribution on Android devices and is the 
most apt comparison to the App Store, but Google permits some 
competition via sideloading and alternative app stores.\2154\
---------------------------------------------------------------------------
    \2154\ See id. Apple has pointed to these as benchmarks for the App 
store. See Jonathan Borck et al., Analysis Grp., Apple's App Store and 
Other Digital Marketplaces: A Comparison of Commission Rates 4-6 
(2020), https://www.analysisgroup.com/globalassets/
insights/publishing/
apples_app_store_and_other_digital_marketplaces_a_comparison_
of_commission_rates.pdf.
---------------------------------------------------------------------------
    In contrast, Apple owns the iOS operating system as well as 
the only means to distribute software on iOS devices. Using its 
role as an operating system provider, Apple prohibits 
alternatives to the App Store and charges fees and commissions 
for some categories of apps to reach customers. It responds to 
attempts to circumvent its fees and commissions with removal 
from the App Store.\2155\ Because of this policy, developers 
have no other option than to play by Apple's rules to reach 
customers who own iOS devices. Owners of iOS devices have no 
alternative means to install apps on their phones. Apple notes 
that its 30 percent commission has remained static for most 
apps for more than a decade.\2156\ A group of developers that 
filed a lawsuit against Apple challenging this policy argue 
that the persistence of Apple's 30 percent rate over time, 
``despite the inevitable accrual of experience and economies of 
scale,'' indicates there is insufficient competition.\2157\ 
Additionally, as previously noted, there is little likelihood 
for new market entry in the mobile operating system or mobile 
app store markets to compel Apple to lower its rates.\2158\
---------------------------------------------------------------------------
    \2155\ See Submission from ProtonMail, to H. Comm. on the 
Judiciary, 5 (Aug. 22, 2020) (on file with Comm.).
    \2156\ See CEO Hearing at 151 (statement of Tim Cook, CEO, Apple, 
Inc.); Letter from Kyle Andeer, Vice President, Corp. Law & Chief 
Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Jim Jordan, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 3 (Sept. 21, 2020) (on 
file with Comm.).
    \2157\ Class Action Complaint at 2, Cameron v. Apple, Inc., No. 
5:19-cv-3074 (N.D. Cal. June 4, 2019).
    \2158\ See supra Section IV.
---------------------------------------------------------------------------
    Industry observers have also challenged Apple's implicit 
claim that the iPhone was the start of the online software 
distribution market. For example, Mac and iOS developer Brent 
Simmons remarked that, ``when the App Store was created, 
developers were selling and distributing apps over the web, and 
it worked wonderfully,'' noting that, he began distributing 
software over the internet in the 1990s.\2159\ Software 
designer and technology writer John Gruber agreed, explaining 
that, in the mid-1990s, there was ``a thriving market for 
software sold directly over a thing called `The Internet,' '' 
and that Apple's omission of the fact that ``direct downloads 
and sales over the web'' pre-dated the iPhone by more than a 
decade ``is flat-out dishonest.'' \2160\
---------------------------------------------------------------------------
    \2159\ See Rob Pegoraro, What Tim Cook Left Out of His Version of 
App Store History, Forbes (July 29, 2020), https://www.forbes.com/
sites/robpegoraro/2020/07/29/what-tim-cook-left-out-of-his-version-of-
app-store-history/.
    \2160\ John Gruber, Parsing Tim Cook's Opening Statement from 
Today's Congressional Antitrust Hearing, Daring Fireball (July 29, 
2020), https://daringfireball.net/2020/07/
parsing_cooks_opening_statement.
---------------------------------------------------------------------------
    Many developers have stressed that, because Apple dictates 
that the App Store is the only way to install software on iOS 
devices and requires apps offering ``digital goods and 
services'' to implement the IAP mechanism, Apple has illegally 
tied IAP to the App Store.\2161\ Consumers with iOS devices 
account for a disproportionately high amount of spending on 
apps--spending twice as much as Android users.\2162\ Further, 
iOS users seldom switch to Android.\2163\ Thus, developers 
cannot abandon the App Store--it is where the highest value 
customers are and will remain. As a result, developers say that 
Apple abuses control over its valuable user base by prohibiting 
alternative payment processing options to compete with Apple's 
IAP mechanism.
---------------------------------------------------------------------------
    \2161\ See, e.g., Submission from Source 711, to H. Comm. on the 
Judiciary, app. A, at 4-8 (Oct. 15, 2019) (on file with Comm.); 
Submission from Source 202, to H. Comm. on the Judiciary, 22-41 (Oct. 
18, 2018); Submission from Source 736, to H. Comm. on the Judiciary, 6-
10 (Oct. 31, 2019) (on file with Comm.).
    \2162\ See Global App Revenue Grew 23% Year-Over-Year Last Quarter 
to $21.9 Billion, SensorTower (Oct. 23, 2019), https://sensortower.com/
blog/app-revenue-and-downloads-q3-2019; Prachi Bhardwaj & Shayanne Gal, 
Despite Android's Growing Market Share, Apple Users Continue to Spend 
Twice as Much Money on Apps as Android Users, Bus. Insider (July 6, 
2018), https://www.businessinsider.com/apple-users-spend-twice-apps-vs-
android-charts-2018-7.
    \2163\ See Mobile Operating System Loyalty: High and Steady, 
Consumer Intel. Rsch. Partners (Mar. 8, 2018), http://
files.constantcontact.com/150f9af2201/4bca9a19-a8b0-46bd-95bd-
85740ff3fb5d.pdf; iPhone vs. Android--Cell Phone Brand Loyalty Survey 
2019, SellCell (Aug. 20, 2019), https://www.sellcell.com/blog/iphone-
vs-android-cell-phone-brand-loyalty-survey-2019/; see also Morningstar 
Equity Analyst Report: Apple, Inc. 3 (Aug. 6, 2020) (on file with 
Comm.) (``Recent survey data shows that iPhone customers are not even 
contemplating switching brands today. In a December 2018 survey by 
Kantar, 90% of U.S.-based iPhone users said they planned to remain 
loyal to future Apple devices.''); Martin Armstrong, Most iPhone Users 
Never Look Back, Statista (May 22, 2017), https://www.statista.com/
chart/9496/most-iphone-users-never-look-back/.
---------------------------------------------------------------------------
    Developers further argue that Apple's 30 percent commission 
from IAP is a ``payment processing'' fee and not a distribution 
fee.\2164\ In a submission to the Committee, Match Group said, 
``Apple distorts competition in payment processing by making 
access to its App Store conditional on the use of IAP for in-
app purchases, thus excluding alternative payment processors. 
IAP eventually becomes the vessel through which Apple extracts 
its extraordinary commissions.'' \2165\ Two app developers that 
offer services that compete with Apple explained that IAP is a 
payment processing fee and not a distribution fee. Both pointed 
out that Apple does not charge apps for distribution, evidenced 
by the fact that Apple admits to distributing most apps for 
free. Instead, Apple generates revenue by adding a 30 percent 
processing fee on transactions in the App Store and using 
IAP.\2166\ Apple's Developer Program website explains that 
Apple does charge for distribution--it requires enrollment in 
the Apple Developer Program and payment of a $99 fee to 
distribute apps on the App Store.\2167\
---------------------------------------------------------------------------
    \2164\ See, e.g., Competitors Hearing at 34 (statement of David 
Heinemeier Hansson, Cofounder & Chief Tech. Officer, Basecamp); 
Interview with Source 143 (Aug. 27, 2020); Submission fromMatch Group, 
to H. Comm. on the Judiciary, MATCH-GRP-00000168 (July 1, 2019) (on 
file
                                                                        
         Continued
with Comm.); Submission from Source 482, to H. Comm. on Judiciary, 9 
(Oct. 15, 2019) (on file with Comm.).
    \2165\ Submission from Match Group, to H. Comm. on the Judiciary, 
MATCH-GRP-00000238 (Nov. 1, 2019) (on file with Comm.).
    \2166\ See Submission from ProtonMail, to H. Comm. on the 
Judiciary, 11 (Aug. 22, 2020) (on file with Comm.); Submission from 
Spotify, to H. Comm. on the Judiciary, app. A, at 7-8 (Oct. 15, 2019) 
(on file with Comm.).
    \2167\ See Apple Developer Program, How the Program Works, Apple, 
https://developer
.apple.com/programs/how-it-works/ (last visited Sept. 27, 2020) (``If 
you're new to development on Apple Platforms, you can get started with 
our tools and resources for free. If you're ready to build more 
advanced capabilities and distribute your apps on the App Store, enroll 
in the Apple Developer Program. The cost is 99 USD per membership 
year.'').
---------------------------------------------------------------------------
    Apple responded that its ``commission is not a payment 
processing fee'' and that it ``reflects the value of the App 
Store as a channel for the distribution of developers' apps and 
the cost of many services'' it incurs to maintain the App 
Store.\2168\ It said that ``[t]he commission also enables Apple 
to realize a return on its investment in the App Store and in 
Apple's intellectual property, and to fund future App Store 
innovation.'' \2169\ Similarly, a study commissioned by Apple 
in 2020 explained that the annual fees paid by developers, 
commissions, and charges for in-app purchases fund investments 
in the App Store ecosystem, such as app review, developer 
tools, marketing, search functionality, application program 
interfaces, and software development kits.\2170\ Apple has also 
argued that its App Store Developer Guidelines--including its 
requirement to use Apple's in-app purchase mechanism--is 
``designed to keep the store safe for our users.'' \2171\
---------------------------------------------------------------------------
    \2168\ Letter from Kyle Andeer, Vice President, Corp. Law & Chief 
Compliance Officer, Apple, Inc. to Hon. Jerrold Nadler, Chair, H. Comm. 
on the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on the 
Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 3 (Feb. 17, 2020), 
https://docs.house.gov/meetings/JU/JU05/20200117/110386/HHRG-116-JU05-
20200117-SD004.pdf; see also Letter from Kyle Andeer, Vice President, 
Corp. Law & Chief Compliance Officer, Apple, Inc., to Hon. Jerrold 
Nadler, Chair, H. Comm. on the Judiciary, Hon. Jim Jordan, Ranking 
Member, H. Comm. on the Judiciary, Hon. David N. Cicilline, Chair, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary & Hon. F. James Sensenbrenner, Ranking Member, Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
3 (Sept. 21, 2020) (on file with Comm.).
    \2169\ Apple, Apple: Distinctive Products with a Seamless, 
Integrated User Experience 14 (July 13, 2020) (unpublished white paper) 
(on file with Comm.); see also Letter from Kyle Andeer, Vice President, 
Corp. Law & Chief Compliance Officer, Apple, Inc., to Hon. Jerrold 
Nadler, Chair, H. Comm. on the Judiciary, Hon. Jim Jordan, Ranking 
Member, H. Comm. on the Judiciary, Hon. David N. Cicilline, Chair, 
Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. on the 
Judiciary & Hon. F. James Sensenbrenner, Ranking Member, Subcomm. on 
Antitrust, Commercial and Admin. Law of the H. Comm. on the Judiciary, 
3 (Sept. 21, 2020) (on file with Comm.).
    \2170\ See Jonathan Borck et al., Analysis Grp., Apple's App Store 
and Other Digital Marketplaces: A Comparison of Commission Rates 2-3 
(2020), https://www.analysis
group.com/globalassets/insights/publishing/
apples_app_store_and_other_digital_
marketplaces_a_ comparison_of_commission_rates.pdf; see also Letter 
from Kyle Andeer, Vice President, Corp. Law & Chief Compliance Officer, 
Apple, Inc. to Hon. Jerrold Nadler, Chair, H. Comm. on the Judiciary, 
Hon. Doug Collins, Ranking Member, H. Comm on the Judiciary, Hon. David 
N. Cicilline, Chair, Subcomm. on Antitrust, Commercial and Admin. Law 
of the H. Comm. on the Judiciary & Hon. F. James Sensenbrenner, Ranking 
Member, Subcomm. on Antitrust, Commercial and Admin. Law of the H. 
Comm. on the Judiciary, 2 (Feb. 17, 2020), https://docs.house.gov/
meetings/JU/JU05/20200117/110386/HHRG-116-JU05-20200117-SD004.pdf.
    \2171\ Kif Leswing, Apple Sued by Fortnite Maker After Kicking the 
Game out of the App Store for Payment Policy Violations, CNBC (Aug. 13, 
2020), https://www.cnbc.com/2020/08/13/apple-kicks-fortnite-out-of-app-
store-for-challenging-payment-rules.html.
---------------------------------------------------------------------------
    Apple's rationale for its commissions and fees has evolved 
over time. Its recent explanations of the basis for its 30 
percent commission differs significantly from its explanation 
of its fee and revenue expectations in the early years of the 
App Store. Prior to the App Store's debut in 2008, Apple's 
then-CEO Steve Jobs explained, ``We don't intend to make any 
money off the App Store . . . . We're basically giving all the 
money to the developers and the 30 percent that pays for 
running the store, that'll be great.'' \2172\ In 2011, Apple's 
Chief Financial Officer Peter Oppenheimer explained to Apple's 
shareholders that Apple runs the App Store ``just a little over 
break even.'' \2173\
---------------------------------------------------------------------------
    \2172\ Peter Cohen, ``App Store'' Will Distribute iPhone Software, 
Macworld (Mar. 6, 2008), https://www.macworld.com/article/1132402/
appstore.html.
    \2173\ Daniel Eran Dilger, Inside Apple's Shareholder Meeting and 
Q&A with Tim Cook, Apple Insider (Feb. 23, 2011), https://
appleinsider.com/articles/11/02/23/tim_cook_presides
_over_annual_apple_shareholder_meeting.
---------------------------------------------------------------------------
    Apple's financial reports indicate that the App Store is 
faring far better than the modest business Apple originally 
contemplated. According to a 2019 market analysis, Apple's net 
revenue from the App Store is projected to be $17.4 billion for 
Fiscal Year 2020.\2174\ CNBC estimated the App Store had total 
sales of nearly $50 billion in 2019, generating ``about $15 
billion in revenue for Apple.'' With $50 billion in annual 
sales, CNBC explained, ``the App Store alone would be no. 64 on 
the Fortune 500, ahead of Cisco and behind Morgan Stanley.'' 
\2175\ An analytics firm concluded that Apple likely made $15.5 
billion from the App Store in 2018, and estimated $18.8 billion 
for 2022. Bloomberg reported that analysts forecasting Apple's 
third-quarter 2020 performance predicted growth from Services 
``up 15% from a year earlier,'' and that growth would largely 
be attributable to the App Store and licensing, not new 
services.\2176\ In addition to Apple's commissions and fees for 
IAP, App Store revenue also includes $2.67 billion Apple would 
make through the $99 annual fee paid by Apple's 27 million iOS 
developers.\2177\ Apple also reportedly made $9 billion in 2018 
and $12 billion in 2019 to set Google as the default search 
engine on the Safari browser.\2178\ Revenue from setting Google 
as Safari's default search engine is attributed to Apple's 
Services business, which is the business unit that includes the 
App Store.\2179\
---------------------------------------------------------------------------
    \2174\ Eric J. Savitz, App Stores Could Be Ripe for Regulation. 
Here's Who Benefits if Commissions Fall, Barrons (July 25, 2019), 
https://www.barrons.com/articles/news-updates-51599747657.
    \2175\ Kif Leswing, Apple's App Store Had Gross Sales Around $50 
Billion Last Year, but Growth Is Slowing, CNBC (Jan. 8, 2020), https://
www.cnbc.com/2020/01/07/apple-app-store-
had-estimated-gross-sales-of-50-billion-in-2019.html.
    \2176\ Mark Gurman, Apple's New Services Off to a Slow Start in 
First Year, Bloomberg (July 28, 2020), https://www.bloombergquint.com/
business/apple-s-new-services-off-to-a-slow-start-in-first-year.
    \2177\ See Letter from Kyle Andeer, Vice President, Corp. Law & 
Chief Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, 
H. Comm. on the Judiciary, Hon. Jim Jordan, Ranking Member, H. Comm. on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H.
                                                                        
         Continued
Comm. on the Judiciary, 3 (Sept. 21, 2020) (on file with Comm.) 
(``[T]here are more than 1.8 million apps on the App Store, and a 
thriving community of more than 27 million iOS developers.''); 
Developer Support, Purchase and Activation, Apple, https://
developer.apple.com/support/purchase-activation/ (last visited Sept. 
27, 2020) (``The Apple Developer Program annual fee is $99 USD and the 
Apple Developer Enterprise Program annual fee is $299 USD.'').
    \2178\ See Lisa Marie Segarra, Google to Pay Apple $12 Billion to 
Remain Safari's Default Search Engine in 2019: Report, Fortune (Sept. 
29, 2018), https://fortune.com/2018/09/29/google-apple-safari-search-
engine/.
    \2179\ See Mark Gurman, Apple's New Services Off to a Slow Start in 
First Year, Bloomberg (July 28, 2020), https://www.bloombergquint.com/
business/apple-s-new-services-off-to-a-slow-start-in-first-year.
---------------------------------------------------------------------------
    In an interview with the Subcommittee, Phillip Shoemaker, 
Apple's former Senior Director of App Store Review, estimated 
that Apple's costs for running the App Store are less than $100 
million. Other analysts estimate that the App Store has 
significantly higher profits. A gaming developer explained that 
the fees it pays Apple add up to millions of dollars--and for 
some developers, those fees are in the tens or hundreds of 
millions of dollars--far in excess of the developer's estimate 
of Apple's costs of reviewing and hosting those apps.\2180\ 
Although only estimates, these figures indicate that, as the 
mobile app economy has grown, Apple's monopoly power over app 
distribution on iPhones permits the App Store to generate 
supra-normal profits. These profits are derived by extracting 
rents from developers, who either pass on price increases to 
consumers or reduce investments in innovative new services. 
Apple's ban on rival app stores and alternative payment 
processing locks out competition, boosting Apple's profits from 
a captured ecosystem of developers and consumers.\2181\
---------------------------------------------------------------------------
    \2180\ Interview with Source 143 (Aug. 27, 2020).
    \2181\ Dr. Carl Shapiro of the University of California, Berkeley--
the former top economist for the Justice Department's Antitrust 
Division during the Obama Administration--has noted that persistently 
high corporate profits that are not eroded by competitive forces over 
time are an indicator of market power. Such profits also suggest the 
rise of incumbency rents, or the earning of excess profits ``by firms 
whose positions are protected by high barriers to entry.'' Carl 
Shapiro, Antitrust in a Time of Populism, 61 Int'l J. Indus. Org. 714, 
733-37 (2018), https://faculty
.haas.berkeley.edu/shapiro/antitrustpopulism.pdf.
---------------------------------------------------------------------------
    To address this concern without compromising the security 
or quality of the App Store, some developers argue in favor of 
allowing third-party payment processors like PayPal, Square, 
and Stripe to compete in the App Store. They explain that the 
most likely competitors are already trusted and widely used for 
e-commerce transactions.\2182\ David Heinemeier Hansson, 
Cofounder and CTO of Basecamp, testified at the Subcommittee's 
fifth hearing that Apple's market power allows it to keep fees 
``exorbitantly high.'' \2183\ By comparison, he noted that 
other markets, such as credit card processes, are ``only able 
to sustain a two percent fee for merchants. Apple, along with 
Google, has been able to charge an outrageous 30 percent for 
years on end.'' \2184\ Several other firms observed that 
Apple's control over app distribution allows it to extract high 
fees on a minority of apps, and that competition for processing 
payments would drive prices down. For example, developers 
explain that payment processing typically costs less than five 
percent of the transaction value.\2185\ Before the App Store, 
one developer reportedly explained that ``[w]e typically paid 
about 5%--not 30%--to a payment processor,'' and it ``worked 
just as well for small developers as for large.'' \2186\
---------------------------------------------------------------------------
    \2182\ Submission from ProtonMail, to H. Comm. on the Judiciary, 13 
(Aug. 22, 2020) (on file with Comm.).
    \2183\ Competitors Hearing at 33 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp); see also Interview 
with Source 88 (May 12, 2020).
    \2184\ Competitors Hearing at 33 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp); see also Interview 
with Source 873 (May 12, 2020).
    \2185\ See, e.g., Competitors Hearing at 33 (statement of David 
Heinemeier Hansson, Cofounder & Chief Tech. Officer, Basecamp); 
Submission from Source 202, to H. Comm. on the Judiciary, 15 (Oct. 18, 
2018) (on file with Comm.).
    \2186\ Rob Pegoraro, What Tim Cook Left Out of His Version of App 
Store History, Forbes (July 29, 2020), https://www.forbes.com/sites/
robpegoraro/2020/07/29/what-tim-cook-left-out-of-his-version-of-app-
store-history/.
---------------------------------------------------------------------------
    Other developers have noted that alternative payment 
processing providers charge significantly lower rates than 
Apple's fee for IAP. Match Group estimates that Apple's 
expenses related to payment processing ``justify charging no 
more than 3.65% of revenue.'' \2187\ Some app developers would 
prefer to implement in-house payment processing. In August 
2020, Epic Games introduced a direct payment option in its 
Fortnite app, allowing gamers to elect to use Apple's IAP or 
pay Epic directly. Epic's payment processing option charged 
consumers 10 percent--a 20 percent discount from purchases 
using IAP.\2188\ In response, Apple disabled updates for 
Fortnite for violating the App Store Guidelines.\2189\
---------------------------------------------------------------------------
    \2187\ Submission of Match Group, to H. Comm. on the Judiciary, 6 
(Oct. 31, 2019) (on file with Comm.).
    \2188\ See Andrew Webster, Epic Offers New Direct Payment in 
Fortnite on iOS and Android to Get Around App Store Fees, Verge (Aug. 
13, 2020), https://www.theverge.com/2020/8/13/21366259/epic-fortnite-
vbucks-mega-drop-discount-iphone-android.
    \2189\ Nick Statt, Apple Just Kicked Fortnite off the App Store, 
Verge (Aug. 13, 2020), https://www.theverge.com/2020/8/13/21366438/
apple-fortnite-ios-app-store-violations-epic-payments.
---------------------------------------------------------------------------
    Developers have also detailed that Apple attempts to lock 
in its fees by preventing apps from communicating with 
customers about alternatives. Under the App Store Guidelines, 
apps may not provide any information ``that direct[s] customers 
to purchasing mechanisms other than in-app purchase.'' \2190\ 
They also cannot communicate with iOS app customers about 
purchasing methods other than IAP.\2191\
---------------------------------------------------------------------------
    \2190\ App Store Developer Guidelines 3.1.1: In-App Purchase, 
Apple, https://developer
.apple.com/app-store/review/guidelines/#in-app-purchase (last visited 
Sept. 27, 2020).
    \2191\ App Store Developer Guidelines 3.1.3: Other Purchase 
Methods, Apple, https://developer
.apple.com/app-store/review/guidelines/#other-purchase-methods (last 
visited Sept. 27, 2020).
---------------------------------------------------------------------------
    In an interview with the Subcommittee, one developer that 
offers a ``freemium'' app--a popular business model where the 
app is available for free but users can purchase upgrades--
recalled that it sent an email to customers with iOS devices 
with information about how to upgrade to a paid subscription, 
including a link to the service's website where customers could 
upgrade their subscription. Apple responded by threatening to 
remove the app from the App Store and blocked its updates, 
including security patches.\2192\ A game developer described 
Apple's rules as reaching outside the App Store itself to 
police the communications that an app can have with its own 
customers, including communications intended to improve 
customer experience and offer discounts.\2193\
---------------------------------------------------------------------------
    \2192\ Submission from ProtonMail, to H. Comm. on the Judiciary, 5 
(Aug. 22, 2020) (on file with Comm.).
    \2193\ Interview with Source 143 (Aug. 27, 2020).
---------------------------------------------------------------------------
    In his questions for the record for the Subcommittee's 
second hearing, Representative W. Gregory Steube (R-FL) asked 
Apple about banning communications to customers by app 
providers. Apple responded that its restrictions on 
communications between apps and customers are to ensure Apple 
can collect commissions and ``prevent free-riding.'' \2194\ 
Apple explained that it restricts developers from using the iOS 
ecosystem to ``direct customers they have acquired through 
Apple to purchase content elsewhere for the purpose of avoiding 
Apple's rightful commission.'' \2195\ The company described its 
policy as a prohibition ``on developers promoting, via the App 
Store, transactions outside the App Store,'' and said Apple's 
policies were no different than most other retailers.\2196\
---------------------------------------------------------------------------
    \2194\ Innovation and Entrepreneurship Hearing at 585 (response to 
Questions for the Record of Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
    \2195\ Id. at 584. 
    \2196\ Id. at 584-85.
---------------------------------------------------------------------------
    In June 2020, the European Commission announced that it had 
opened a formal antitrust investigation of Apple's App Store 
rules and conduct, including ``the mandatory use of Apple's own 
proprietary in-app purchase system and restrictions on the 
availability of developers to inform iPhone and iPad users of 
alternative cheaper purchasing possibilities outside of apps.'' 
\2197\
---------------------------------------------------------------------------
    \2197\ Press Release, Eur. Comm'n, Antitrust: Commission Opens 
Investigations into Apple's App Store Rules (June 16, 2020), https://
ec.europa.eu/commission/presscorner/detail/en/ip_
20_1073.
---------------------------------------------------------------------------
    As Apple has emphasized growing its Services business, app 
developers and technology writers have observed Apple is 
increasingly insistent that apps implement IAP--cutting Apple 
in on revenue from more developers--and threatening apps that 
do not comply with expulsion from the App Store.\2198\ In June 
2020, HEY, an email app developed by Basecamp, was approved by 
the App Store and then abruptly told it would have to implement 
Apple in-app purchasing or face removal from the 
platform.\2199\ While HEY's app updates were eventually 
allowed, Apple did force it to create a free trial option for 
iOS customers.\2200\ Basecamp Cofounder and CTO David 
Heinemeier Hansson observed that Apple threatened and abused 
small app developers for years, and that the conflict with HEY 
amounted to a ``shakedown.'' \2201\ In August 2020, Apple 
denied WordPress the ability to update its app unless it 
implemented IAP, even though the WordPress app does not sell 
anything. Apple ultimately backed off its demands only after 
the issue received negative attention on social media.\2202\ 
ProtonMail told the Subcommittee that its privacy-focused email 
app competes with Apple's email app, and after being in the App 
Store for two years, Apple demanded the ProtonMail implement 
IAP or be removed from the App Store. ProtonMail complied to 
avoid damage to its business.\2203\
---------------------------------------------------------------------------
    \2198\ See, e.g., Jeremy Howitz, Apple's Antitrust Woes Stem from 
Its Obsessions with Control and Money, Venture Beat (Aug. 7, 2020), 
https://venturebeat.com/2020/08/07/apples-antitrust-woes-stem-from-its-
obsessions-with-control-and-money/ (``Apple might act like it's too 
large to care about money, but the company has recently sniped at 
developers who have succeeded on iOS without paying Apple anything, 
while doing as much as possible to push other developers--and users--
into coughing up recurring subscription fees for both apps and 
games.'').
    \2199\ See, e.g., Nilay Patel, Apple Approves Hey Email App, but 
the Fight's Not Over, Verge (June 22, 2020), https://www.theverge.com/
2020/6/22/21298552/apple-hey-email-app-approval-rules-basecamp-launch; 
Rob Pegoraro, Apple to Basecamp's Hey: Expect to Pay Us If You Want to 
Sell Privacy, Forbes (June 17, 2020), https://www.forbes.com/sites/
robpegoraro/2020/06/17/apple-to-basecamps-hey-expect-to-pay-us-if-you-
want-to-sell-privacy/.
    \2200\ Chaim Gartenberg, Hey Opens Its Email Service to Everyone as 
Apple Approves Its App for Good, Verge (June 25, 2020), https://
www.theverge.com/2020/6/25/21302931/hey-email-service-public-launch-
apple-approves-app-fight-policy-price.
    \2201\ Apple v. Hey, Hey, https://hey.com/apple/ (last visited 
Sept. 27, 2020).
    \2202\ See Sean Hollister, WordPress Founder Claims Apple Cut Off 
Updates to His Completely Free App Because It Wants 30 Percent, Verge 
(Aug. 21, 2020), https://www.theverge.com/2020/8/21/21396316/apple-
wordpress-in-app-purchase-tax-update-store; Sean Hollister, Apple 
Apologizes to WordPress, Won't Force the Free App to Add Purchases 
After All, Verge (Aug. 23, 2020), https://www.theverge.com/2020/8/22/
21397424/apple-wordpress-apology-iap-free-ios-app.
    \2203\ Submission from ProtonMail, to H. Comm. on the Judiciary, 5 
(Aug. 22, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    Internal Apple communications reviewed by the Subcommittee 
indicate that Apple has leveraged its power over the App Store 
to require developers to implement IAP or risk being thrown out 
of the App Store.\2204\ Apple's then-CEO Steve Jobs once 
explained, ``there will be some roadkill because of it. I don't 
feel guilty'' when confronted with developer complaints about 
Apple's commission and requirement to use IAP.\2205\ The 
Netherlands Authority for Consumers and Markets has noted that 
some app developers attribute Apple's inconsistent application 
of its rules to inattention to apps that are infrequently 
updated, and that Apple likely focuses on requiring IAP for 
high revenue-generating apps.\2206\
---------------------------------------------------------------------------
    \2204\ See Submission from Apple, to H. Comm. on the Judiciary, 
HJC-APPLE-014701 to -014702 (Nov. 23, 2010) (on file with Comm.).
    \2205\ Patrick McGee & Javier Espinoza, Apple Conflict with 
Developers Escalates Ahead of Worldwide Conference, Fin. Times (June 
22, 2020), https://www.ft.com/content/733ae8d4-e516-4418-9998-
30414c368c6f.
    \2206\ See Neth. Auth. for Consumers & Mkts. Study at 89, 92-93.
---------------------------------------------------------------------------
    In response to the COVID-19 pandemic, some businesses moved 
physical events online, often booking through an app and 
holding the event through a video chat application. Educators 
have also shifted resources online, including through apps. The 
New York Times reported that Apple demanded a 30 percent 
commission from these virtual class offerings. As a result, one 
company stopped offering virtual classes to users of its iOS 
app. The Times reported that Apple threatened Airbnb that it 
would remove its app from the App Store if Airbnb did not 
comply with Apple's demand for a share of its revenues.\2207\
---------------------------------------------------------------------------
    \2207\ Jack Nicas & David McCabe, Their Business Went Virtual. Then 
Apple Wanted a Cut, N.Y. Times (July 28, 2020), https://
www.nytimes.com/2020/07/28/technology/apple-app-store-airbnb-
classpass.html.
---------------------------------------------------------------------------
    In interviews with the Subcommittee, multiple app 
developers confirmed The New York Times's reporting.\2208\ 
Airbnb spoke with the Subcommittee and described conversations 
with the App Store team in which Apple said it had observed an 
uptick in the number of apps offering virtual classes in lieu 
of in-person classes due to the COVID-19 pandemic. As a result, 
Apple began canvassing the App Store to require that app 
developers implement IAP, entitling Apple to take 30 percent of 
in-app sales. Airbnb explained that Apple's commission, plus 
compliance with Apple's pricing tiers for in-app purchases, 
would ultimately result in a 50-60 percent price increase for 
consumers.\2209\
---------------------------------------------------------------------------
    \2208\ See, e.g., Interview with Airbnb; Interview with Source 147 
(Sept. 10, 2020).
    \2209\ See Interviews with Airbnb.
---------------------------------------------------------------------------
    Technology industry observers have reported similar 
conduct. On June 17, 2020, Ben Thompson, a prominent business 
analyst, wrote that app developers told him that Apple was 
demanding 30 percent commissions from businesses that have had 
to change their business models from live, in-person events to 
virtual events as a result of the COVID-19 pandemic. Mr. 
Thompson quoted one developer who explained that Apple was 
taking advantage of small businesses in the midst of the 
ongoing public health crisis.\2210\
---------------------------------------------------------------------------
    \2210\ See Ben Thompson, Xscale and ARM in the Cloud, Hey Versus 
Apple, Apple's IAP Campaign, Stratechery (June 17, 2020), https://
stratechery.com/2020/xscale-and-arm-in-the-cloud-hey-versus-apple-
apples-iap-campaign/.
---------------------------------------------------------------------------
    At the Subcommittee's sixth hearing, Chair Jerrold Nadler 
(D-NY) asked Mr. Cook about the allegations that Apple was 
canvassing the App Store to extract commissions from businesses 
that have been forced to change their business model in order 
to survive during the pandemic. Mr. Cook responded that Apple 
``would never take advantage'' of the pandemic, but justified 
the conduct, explaining that the app developers were now 
offering what Apple defined as a ``digital service'' and Apple 
was entitled to commissions.\2211\ Responding to The New York 
Times's reporting on the matter, Apple defended its conduct, 
explaining that, ``[t]o ensure every developer can create and 
grow a successful business, Apple maintains a clear, consistent 
set of guidelines that apply equally to everyone.'' \2212\
---------------------------------------------------------------------------
    \2211\ CEO Hearing at 150 (statement of Tim Cook, CEO, Apple, 
Inc.).
    \2212\ Jack Nicas & David McCabe, Their Business Went Virtual. Then 
Apple Wanted a Cut, N.Y. Times (July 28, 2020), https://
www.nytimes.com/2020/07/28/technology/apple-app-store-airbnb-
classpass.html.
---------------------------------------------------------------------------
    App developers affected by these changes said that, after 
Apple's conduct became public, it created an exception to its 
policies until the end of 2020. However, on January 1, 2021, 
those businesses will be required to implement IAP or remove 
the ability to book virtual classes from their apps.\2213\
---------------------------------------------------------------------------
    \2213\ Interview with Airbnb (Aug. 31, 2020).
---------------------------------------------------------------------------
    Developers have submitted evidence that Apple's commissions 
and fees, combined with the lack of competitive alternatives to 
the App Store and IAP, harm competition and consumers. For 
instance, Match Group called Apple's fee for IAP 
``unreasonable,'' saying that it leads to higher prices for 
consumers and ``an inferior user experience and a reduction of 
innovation.'' \2214\
---------------------------------------------------------------------------
    \2214\ Submission from Match Group, to H. Comm. on the Judiciary, 
MATCH_GRP_00000236, MATCH_GRP_00000238 (Oct. 23, 2019) (on file with 
Comm.).
---------------------------------------------------------------------------
    One developer that offers an app that directly competes 
with Apple told the Subcommittee it was forced to raise prices 
to pay Apple's commission. As a result, it was less 
competitive, and fewer iOS users purchased its service. The 
company said that, because apps often have small margins, they 
cannot absorb Apple's fees, so the price consumers pay for its 
app is more than 25 percent higher than it would otherwise 
be.\2215\ Small developers described Apple's 30 percent cut as 
``onerous.'' \2216\ Epic Games, which recently filed an 
antitrust complaint against Apple, has told a federal court 
that Apple's fees and commissions force developers ``to 
increase the prices they charge in order to pay Apple's app 
tax. There is no method app developers can use to avoid this 
tax.'' \2217\ Mac and iOS app developer Brent Simmons explained 
that Apple's fees reduce innovation and lead to fewer apps in 
the marketplace, observing:
---------------------------------------------------------------------------
    \2215\ Submission from ProtonMail, to H. Comm. on the Judiciary, 6 
(Aug. 22, 2020) (on file with Comm.); see also Neth. Auth. for 
Consumers & Mkts. Study at 91.
    \2216\ Interview with Source 143 (Aug. 27, 2020).
    \2217\ Complaint at 3, Epic Games, Inc. v. Apple, Inc., 4:20-cv-
05640 (N.D. Cal. Aug. 13, 2020), https://cdn2.unrealengine.com/apple-
complaint-734589783.pdf.

     L[T]he more money Apple takes from developers, the fewer 
resources developers have. When developers have to cut costs, 
they stop updating apps, skimp on customer support, put off 
hiring a graphic designer, etc. They decide not to make apps at 
all that they might have made were it easier to be 
profitable.\2218\
---------------------------------------------------------------------------
    \2218\ Brent Simmons, I Got Teed Off and Went on a Long Rant About 
This Opinion Piece on the App Store, Inessential (July 28, 2020), 
https://inessential.com/2020/07/28/untrue.

    In Apple's internal documents and communications, the 
company's senior executives previously acknowledged that the 
IAP requirement would stifle competition and limit the apps 
available to Apple's customers. For example, in an email 
conversation with other senior leaders at Apple about whether 
to require IAP for e-Book purchases, then-CEO Steve Jobs 
concluded, ``I think this is all pretty simple--iBooks is going 
to be the only bookstore on iOS devices. We need to hold our 
heads high. One can read books bought elsewhere, just not buy/
rent/subscribe from iOS without paying us, which we acknowledge 
is prohibitive for many things.'' \2219\
---------------------------------------------------------------------------
    \2219\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-014816 to -014818 (Feb. 6, 2011) (on file with Comm.).
---------------------------------------------------------------------------
    International competition authorities have also examined 
the competitive effects of Apple's App Store commissions and 
fees. The Australian Competition and Consumer Commission (ACCC) 
observed that Apple's control over app distribution on iOS 
devices gives it leverage to extract commissions from apps, 
reducing the revenue that app providers like media businesses 
can invest in content.\2220\ The Netherlands Authority for 
Consumers and Markets, which completed a comprehensive study of 
mobile app stores in 2019, noted that developers have increased 
prices to account for commissions and fees.\2221\ The study 
also remarked that Apple's 30 percent commission on in-app 
purchases may distort competition because Apple's requirement 
to use IAP often applies to apps competing directly against 
Apple's apps. As a result, app developers with small margins 
cannot simply absorb the cost of Apple's commission, so they 
increase their price, which gives Apple's competing service an 
advantage.\2222\ Developers cited in the study ``mentioned that 
it is highly unlikely that it is a coincidence that these 
digital services that are required to use IAP face competition 
from Apple's own apps, or possibly will do so in the future.'' 
\2223\
---------------------------------------------------------------------------
    \2220\ See Austl. Competition & Consumer Comm'n Report at 223, 225 
(2019); see also Ben Thompson, Antitrust, the App Store, and Apple, 
Stratechery (Nov. 27, 2018), https://www.
stratechery.com/2018/antitrust-the-app-store-and-apple (``Apple makes a 
huge amount of money, with massive profit margins, by virtue of its 
monopolistic control of the App Store. It doesn't make the games or the 
productivity applications or the digital content, it simply skims off 
30%, and not because its purchasing experience is better, but because 
it is the only choice.'').
    \2221\ Neth. Auth. for Consumers & Mkts. Study at 91.
    \2222\ See id. at 7.
    \2223\ Id. at 89.

    (ii) Pre-Installed Apps, Default Settings, Private App 
Programming Interfaces (APIs), and Device Functionality. In 
addition to investigating whether Apple abuses its monopoly 
power over app distribution to leverage high commissions and 
fees from app developers, the Subcommittee also examined 
whether Apple abuses its role as the owner of iOS and the App 
Store to preference its own apps or harm rivals. The Committee 
requested information regarding Apple's practice of locking-in 
Apple's apps as defaults on the iPhone, and Subcommittee Chair 
David N. Cicilline (D-RI) requested information from Apple 
regarding its practice of pre-installing its own apps on the 
iPhone. Subcommittee Chair Cicilline also asked whether Apple's 
policy of reserving certain application programming interfaces 
(APIs) and access to certain device functionalities for its 
apps gives Apple's services a competitive advantage.
    It is widely understood that consumers usually do not 
change default options.\2224\ This is the case ``even if they 
can freely change them or choose a competitive alternative.'' 
\2225\ The Subcommittee reviewed communications between Apple 
employees that demonstrate an internal understanding that pre-
loading apps could be advantageous when competing against 
third-party apps.\2226\
---------------------------------------------------------------------------
    \2224\ See, e.g., Dig. Competition Expert Panel Report at 36 
(``[C]onsumers in digital markets display strong preferences for 
default options and loyalty to brands they know.''); Stigler Report at 
8; id. at 41 (``Consumers do not replace the default apps on their 
phones . . . and take other actions that may look like poor decisions 
if those consumers like to choose among options and experience 
competition.'').
    \2225\ John Bergmayer, Pub. Knowledge, Tending the Garden: How to 
Ensure That App Stores Put Users First 19 (2020), https://
www.publicknowledge.org/wp-content/uploads/2020/06/
Tending_the_Garden.pdf.
    \2226\ See Submission from Apple, to H. Comm. on the Judiciary, 
HJC-APPLE-011035 to -011036 (Mar. 12, 2019) (on file with Comm.) 
(noting that Apple pre-loading software products onto iOS devices 
``would clearly be even more problematic'' than ``Apple releasing its 
apps via the App Store'').
---------------------------------------------------------------------------
    Apple pre-installs about 40 Apple apps into current iPhone 
models.\2227\ Several of these apps are set as defaults and are 
``operating system apps'' that are ``integrated into the 
phone's core operating system and part of the combined 
experience of iOS and iPhone.'' \2228\ According to Apple, 
users can delete most of these pre-installed apps.\2229\ Apple 
does not pre-install any third-party apps, and until the 
September 2020 release of iOS 14, it did not allow consumers to 
select third-party web browsers or email apps as 
defaults.\2230\ Apple says that it is making ``more than 
250,000 APIs available to developers in iOS 14.'' \2231\
---------------------------------------------------------------------------
    \2227\ CEO Hearing at 395 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2228\ Id. at 396.
    \2229\ Id.
    \2230\ Id. See also Press Release, Apple, Apple Reveals New 
Developer Technologies to Foster the Next Generation of Apps (June 22, 
2020), https://www.apple.com/newsroom/2020/06/apple-reveals-new-
developer-technologies-to-foster-the-next-generation-of-apps/ (``Email 
and browser app developers can offer their apps as default options, 
selectable by users.'').
    \2231\ CEO Hearing at 397 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
---------------------------------------------------------------------------
    The Netherlands Authority for Consumers and Markets report 
on mobile app stores observed that app providers believe they 
``have a strong disadvantage'' when competing with Apple's apps 
due to the fact that those services are often pre-installed on 
iOS devices.\2232\ The study also noted that ``pre-installation 
of apps can create a so-called status-quo bias. Consumers are 
more likely to use the apps that are pre-installed on their 
smartphones.'' \2233\ Consumers will download apps that compete 
with pre-installed apps only when there is a noted quality 
difference, and even then, lower-quality pre-installed apps 
will still enjoy an advantage over third-party apps.\2234\ The 
European Commission's 2019 report on competition in digital 
markets explained that privileging access to APIs can provide 
an advantage to those with greater access over those with more 
innovative products.\2235\ Public Knowledge concluded that 
Apple's control of iOS and the App store enables it to 
advantage its own apps and services by pre-installing them on 
iOS devices, leading consumers to rely on the pre-installed 
apps rather than looking for alternatives in the App 
Store.\2236\
---------------------------------------------------------------------------
    \2232\ Neth. Auth. for Consumers & Mkts. Study at 5, 15, 85-86.
    \2233\ Id. at 84 (citing Press Release, Eur. Comm'n, Antitrust: 
Commission Fines Google =4.34 Billion for Illegal Practices Regarding 
Android Mobile Devices to Strengthen Dominance of Google's Search 
Engine (July 18, 2018), https://ec.europa.eu/commission/presscorner/
detail/en/ip_18_4581).
    \2234\ Id.
    \2235\ Eur. Comm'n Competition Report at 34.
    \2236\ John Bergmayer, Pub. Knowledge, Tending the Garden: How to 
Ensure That App Stores Put Users First 20 (2020), https://
www.publicknowledge.org/wp-content/uploads/2020/06/
Tending_the_Garden.pdf. See also Dig. Competition Expert Panel, Public 
Responses to Call for Evidence from Organisations 44 (2018), https://
assets
.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/785549/
DCEP_Public_responses_to_call_for_evidence_from_organisations.pdf (BBC 
response) (``Apple's control of devices and operating system allows it 
to pre-load and favour its own services i.e. Apple Podcasts.'').
---------------------------------------------------------------------------
    Mobile operating system providers develop APIs to permit 
apps to access a device's features, such as the microphone, 
camera, or GPS, or other software programs, and determine what 
information on the device apps can access.\2237\ Public APIs 
for iOS are made available to app developers to ensure apps are 
integrated with the device and function as intended. These 
public APIs also control the services that are opened via 
default when users click a link to open a webpage or an address 
to open a map application. Private APIs access functionality 
that is not publicly released. Apple is permitted to use 
private APIs on iOS devices, but third-party developers are 
not.\2238\
---------------------------------------------------------------------------
    \2237\ Competition & Mkts. Auth. Report at 42; Neth. Auth. for 
Consumers & Mkts. Study at 59.
    \2238\ See Thomas Claburn, Apple Frees a Few Private APIs, Makes 
Them Public, Register (June 13, 2017), https://www.theregister.com/
2017/06/13/apple_inches_toward_openness/.
---------------------------------------------------------------------------
    Apple's public APIs default to Apple's pre-installed 
applications. As a result, when an iPhone user clicks on a 
link, the webpage opens in the Safari Browser, a song request 
opens in Apple Music, and clicking on an address launches Apple 
Maps.\2239\ With some recent exceptions, iPhone users are 
unable to change this default setting.\2240\ However, they are 
able to send app-specific links from inside many popular apps. 
For example, a person can share a link to a song in a third-
party music streaming app such that it would open that song in 
the same app if it is already downloaded on the recipient's 
smartphone. One app developer has argued, however, that Apple 
uses its control over iOS to give its own apps and services 
advantages that are not available to competitors. For example, 
the developer explained that for years it was barred from 
integrating with Siri, Apple's intelligent virtual assistant 
that is built into Apple devices. Although Siri can now 
integrate with the app, users must explicitly request that Siri 
launch the third-party app. Otherwise, it will default to 
launch Apple's service.\2241\
---------------------------------------------------------------------------
    \2239\ Neth. Auth. for Consumers & Mkts. Study at 59-60.
    \2240\ See Press Release, Apple, Apple Reveals New Developer 
Technologies to Foster the Next Generation of Apps (June 22, 2020), 
https://www.apple.com/newsroom/2020/06/apple-reveals-new-developer-
technologies-to-foster-the-next-generation-of-apps/ (``Email and 
browser app developers can offer their apps as default options, 
selectable by users.'').
    \2241\ Submission from Source 711, to H. Comm. on the Judiciary, 
Source 711-00000080, at 23 (Oct. 15, 2019) (on file with Comm.).
---------------------------------------------------------------------------
    Like setting advantageous defaults and pre-installing its 
own apps, Apple is also able to preference its own services by 
reserving access to APIs and certain device functionalities for 
itself. ACM and technology reporters have noted both that 
``private APIs have the potential to give Apple apps a 
competitive advantage,'' and that ``Apple has for a long time 
favored its own services through APIs.'' \2242\ For example, 
from the release of iOS 4.3 until iOS 8, ``third-party 
developers had to rely on the UIWebView API to render web pages 
in iOS apps, while Apple gave its own apps access to a private, 
faster API,'' and as a result, ``Google's mobile version of 
Chrome for iOS could not compete with Apple's mobile version of 
Safari in terms of speed.'' \2243\
---------------------------------------------------------------------------
    \2242\ Thomas Claburn, Apple Frees a Few Private APIs, Makes Them 
Public, Register (June 13, 2017), https://www.theregister.com/2017/06/
13/apple_inches_toward_openness/; see also Neth. Auth. for Consumers & 
Mkts. Study at 82.
    \2243\ Thomas Claburn, Apple Frees a Few Private APIs, Makes Them 
Public, Register (June 13, 2017), https://www.theregister.com/2017/06/
13/apple_inches_toward_openness/.
---------------------------------------------------------------------------
    Apple's mobile payments service, Apple Pay, is an example 
of an in-house app that enjoys an advantage due to its ability 
to access certain functionalities, such as near-field 
communication (NFC), on the iPhone that are off-limits to 
third-party apps. According to Apple, ``NFC is an industry-
standard, contactless technology'' that enables communications 
between the mobile device and the payment terminal.\2244\ Apple 
Pay uses the iPhone's NFC chip to allow users to make 
contactless payments at retail outlets that use the 
technology.\2245\ However, Apple blocks access for third-party 
apps. In June 2020, the European Commission opened a formal 
antitrust investigation into Apple's conduct in the mobile 
payments market, including ``Apple's limitation of access to 
the Near Field Communication . . . functionality (`tap and go') 
on iPhones for payments in stores.'' \2246\ In response to 
questions from Subcommittee Chair David N. Cicilline (D-RI) and 
Representative Kelly Armstrong (R-ND) about Apple's treatment 
of third-party mobile payment apps and access to the iPhone's 
NFC chip, Apple said that it limits access to the NFC chip to 
protect the security of the iPhone and has detailed the 
differences between Apple's treatment of Apple Pay and third-
party mobile payment apps.\2247\
---------------------------------------------------------------------------
    \2244\ Apple Pay Security and Privacy Overview, Apple, https://
support.apple.com/en-us/HT203027 (last visited Oct. 4, 2020).
    \2245\ Id.
    \2246\ Press Release, Eur. Comm'n, Antitrust: Commission Opens 
Investigation into Apple Practices Regarding Apple Pay (June 16, 2020), 
https://ec.europa.eu/commission/presscorner/
detail/en/ip_20_1075.
    \2247\ CEO Hearing at 395, 397 (response to Questions for the 
Record of Tim Cook, CEO, Apple, Inc.).
---------------------------------------------------------------------------
    The advantage Apple provides Apple Pay may be heightened 
during the COVID-19 pandemic. During the pandemic, consumers 
have accelerated their adoption of contactless payments, with 
more than half of global consumers preferring contactless 
payments over cash or traditional credit cards.\2248\ In April 
2020, MasterCard reported a 40 percent rise in contactless 
payments, with the trend expected to continue after the 
pandemic. MasterCard CEO Ajay Banga explained the trend was 
driven by shoppers ``looking for a quick way to get in and out 
of stores without exchanging cash, touching terminals, or 
anything else.'' \2249\ Apple itself has capitalized on the 
perception that contactless is the safest way to make 
transactions, marketing Apple Pay as ``a safer way to pay that 
helps you avoid touching buttons or exchanging cash.'' \2250\
---------------------------------------------------------------------------
    \2248\ See Dynata, Global Consumer Trends: COVID-19 Edition, The 
New Normal, A Breakthrough for Contactless Payments 2 (2020), http://
info.dynata.com/rs/105-ZDT-791/images/Dynata-Global-Consumer-Trends-
COVID-19-The-New-Normal-Breakthrough-for-Contactless-Payments.pdf; see 
also Press Release, Eur. Comm'n, Antitrust: Commission Opens 
Investigation into Apple Practices Regarding Apple Pay (June 16, 2020), 
https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1075 
(``Executive Vice-President Margrethe Vestager, in charge of 
competition policy, said: `Mobile payment solutions are rapidly gaining 
acceptance among users of mobile devices, facilitating payments both 
online and in physical stores. This growth is accelerated by the 
coronavirus crisis, with increasing online payments and contactless 
payments in stores.' '').
    \2249\ Kate Rooney, Contactless Payments Jump 40% as Shoppers Fear 
Germs on Cash and Credit Cards, Mastercard Says, CNBC (Apr. 29, 2020), 
https://www.cnbc.com/2020/04/29/mastercard-sees-40percent-jump-in-
contactless-payments-due-to-coronavirus.html.
    \2250\ Apple Pay, Apple, https://www.apple.com/apple-pay/ (last 
visited Sept. 26, 2020).
---------------------------------------------------------------------------
    Like Apple Pay, Safari is another pre-installed app that 
enjoys advantages over rivals. Safari is Apple's default 
browser on iOS and Mac devices. When someone using an Apple 
device clicks on a website link, the webpage opens in the 
Safari browser.\2251\ Until the September 2020 release of iOS 
14, Apple did not allow consumers to select a third-party web 
browser as a default.\2252\ This was unique to iOS. Other 
mobile device operating systems allow the user to set a default 
browser across all applications.\2253\
---------------------------------------------------------------------------
    \2251\ Neth. Auth. for Consumers & Mkts. Study at 59-60.
    \2252\ See Mark Gurman, Apple's Default iPhone Apps Give It Growing 
Edge Over App Store Rivals, Bloomberg (Oct. 2, 2019), https://
www.bloomberg.com/news/articles/2019-10-02/iphone-ios-users-can-t-
change-default-apps-safari-mail-music; Press Release, Apple, Apple 
Reveals New Developer Technologies to Foster the Next Generation of 
Apps (June 22, 2020), https://www.apple.com/newsroom/2020/06/apple-
reveals-new-developer-technologies-to-foster-the-next-generation-of-
apps/ (``Email and browser app developers can offer their apps as 
default options, selectable by users.'').
    \2253\ See, e.g., Google Chrome Help, Google, https://
support.google.com/chrome/answer/
95417?co=GENIE.Platform%3DAndroid&hl=en-GB (last visited Sept. 26, 
2020); Support, Mozilla, https://support.mozilla.org/en-US/kb/make-
firefox-default-browser-android (last visited Sept. 26, 2020); Support, 
Microsoft, https://support.microsoft.com/en-us/help/4028606/windows-10-
change-your-default-browser (last visited Sept. 26, 2020).
---------------------------------------------------------------------------
    Apple's policies require alternative browser apps for iOS 
(iPhone) to use Apple's WebKit browser engine. As a result, all 
competing web browser companies must rebuild their product to 
make it available for iOS users.\2254\ Additionally, browser 
engines are used in other applications that link to web 
content, such as email applications.\2255\ Market participants 
explained to the Subcommittee that these guidelines cost 
significant internal resources and create a hurdle for market 
entry on iOS. These requirements also make alternative browsers 
on iOS less technically distinct from Safari, limiting product 
differentiation.\2256\ Further, market participants expressed 
concern that, because Apple mandates the use of WebKit, as 
opposed to allowing options for developers, WebKit has become 
slower to innovate and adopt standards.\2257\
---------------------------------------------------------------------------
    \2254\ App Store Review Guidelines 2.5.6, Apple: Dev., https://
developer.apple.com/app-store/review/guidelines/#software-requirements 
(last visited Sept. 26, 2020) (``Apps that browse the web must use the 
appropriate WebKit framework and WebKit Javascript.'').
    \2255\ See Michael Krasnov, Browser Engine Diversity or Internet of 
Google, Everday.codes (Dec. 15, 2019), https://everyday.codes/google/
browser-engine-diversity-or-internet-of-google/.
    \2256\ Interview with Source 269 (July 23, 2019) (``Apple prohibits 
competitors from deploying their own web browsing engines on its mobile 
operating system. Web browsing engines provide the distinctive features 
of a web browser. Apple forces competitors to base their web browsers 
on a reduced version of its own web browser engine, `WebKit.' '').
    \2257\ See Owen Williams, Apple Is Trying to Kill Web Technology, 
OneZero (Nov. 7, 2019), https://onezero.medium.com/apple-is-trying-to-
kill-web-technology-a274237c174d.
---------------------------------------------------------------------------
    At the Subcommittee's second hearing, Chair Cicilline asked 
Apple about its policies related to web browser engines. Apple 
responded, ``By requiring use of WebKit, Apple can provide 
security updates to all our users quickly and accurately, no 
matter which browser they decide to download from the App 
Store.'' \2258\ While market participants agree that Apple's 
WebKit mandates would allow for easier updates to browser apps, 
there is disagreement about whether WebKit is measurably less 
secure than other browser engines.\2259\
---------------------------------------------------------------------------
    \2258\ Innovation and Entrepreneurship Hearing at 585 (response to 
Questions for the Record of Kyle Andeer, Vice President, Corp. Law, 
Apple, Inc.).
    \2259\ See Andy Greenberg, How Safari and iMessage Have Made 
iPhones Less Secure, Wired (Sept. 9, 2019), https://www.wired.com/
story/ios-security-imessage-safari/.
---------------------------------------------------------------------------
    The Netherlands Authority for Consumers and Markets has 
noted that app providers have limited access to some APIs 
``that are essential for the functioning of apps. In certain 
cases, these functionalities are, however, used by Apple for 
their own apps,'' \2260\ which may limit competitive 
alternatives to Apple's products and services.\2261\
---------------------------------------------------------------------------
    \2260\ Neth. Auth. for Consumers & Mkts. Study at 85-86.
    \2261\ Id. at 103.
---------------------------------------------------------------------------
    In January 2020, Kirsten Daru, Chief Privacy Officer and 
General Counsel of Tile, offered testimony to the Subcommittee 
about this dynamic.\2262\ Tile is a company that makes hardware 
and software that helps people find lost items.\2263\ Ms. Daru 
testified that for years Tile successfully collaborated with 
Apple. However, reports surfaced in 2019 that Apple planned to 
launch a hardware product to compete with Tile.\2264\ Ms. Daru 
said that Apple's 2019 release of iOS 13 harmed Tile's service 
and user experience while simultaneously introducing a new pre-
installed Apple finder app called Find My.\2265\ Changes to iOS 
13 made it more difficult for Tile's customers to set up the 
service, requiring several confusing steps to grant Tile 
permission to track the phone's location.\2266\ Meanwhile, 
Apple's Find My app was pre-installed on iOS devices and 
activated by default during iOS installation. Users are unable 
to opt out of Find My's location tracking ``unless they go deep 
into Apple's labyrinthine menu of settings.'' \2267\ Tile's 
response to the Subcommittee's Questions for the Record 
included detailed location permission flow comparisons between 
Tile and Find My.\2268\ Tile explained that, as a result of 
Apple's changes to iOS 13, it saw significant decreases in 
users and a steep drop-off in users enabling the proper 
settings on iOS devices.\2269\
---------------------------------------------------------------------------
    \2262\ See Competitors Hearing (statement of Kirsten Daru, Chief 
Priv. Officer & Gen. Couns., Tile, Inc.).
    \2263\ Id. at 41.
    \2264\ See Guilherme Rambo, Apple Revamping Find My Friends & Find 
My iPhone in Unified App, Developing Tile-Like Personal Item Tracking, 
9to5Mac (Apr. 17, 2019), https://9to5mac.com/2019/04/17/find-my-iphone-
revamp/.
    \2265\ Competitors Hearing at 42 (statement of Kirsten Daru, Chief 
Priv. Officer & Gen. Couns., Tile, Inc.).
    \2266\ Id.
    \2267\ Reed Albergotti, Apple Says Recent Changes to Operating 
System Improve User Privacy, but Some Lawmakers See Them as an Effort 
to Edge Out Its Rivals, Wash. Post (Nov. 26, 2019), https://
www.washingtonpost.com/technology/2019/11/26/apple-emphasizes-user-
privacy-lawmakers-see-it-an-effort-edge-out-its-rivals/; see also 
Competitors Hearing at 43 (statement of Kirsten Daru, Chief Priv. 
Officer & Gen. Couns., Tile, Inc.).
    \2268\ Competitors Hearing at 87-100 (response to Questions for the 
Record of Kirsten Daru, Chief Priv. Officer & Gen. Couns., Tile, Inc.).
    \2269\ Id. at 89; Interview with Kirsten Daru, Vice President & 
Gen. Couns., Tile, Inc. (July 10, 2020).
---------------------------------------------------------------------------
    A group of app developers wrote to Apple CEO Tim Cook in 
2019 arguing that Apple's new location notification permission 
policies will hurt their businesses and accused Apple of acting 
anticompetitively by treating its own services differently:

     LThe developers conclude their email by asserting that 
Apple's own apps don't have to jump through similar hoops to 
get access to user location. An Apple app called Find My for 
tracking the location of other iPhone users, for example, 
bypasses the locating tracking requests that apps from outside 
developers must go through, the email reads. Instead, Find My 
gains location access through a process that occurs as users 
install the new operating system.\2270\
---------------------------------------------------------------------------
    \2270\ Aaron Tilley, Developers Call Apple Privacy Changes Anti-
Competitive, Information (Aug. 16, 2019), https://
www.theinformation.com/articles/developers-call-apple-privacy-changes-
anticompetitive.

    The app developers--including Tile, Arity, Life360, Happn, 
Zenly, Zendrive, and Twenty--explained that this gives Apple 
products that compete against their apps an advantage. ``Apple 
says Find My and other apps are built into iOS and that it 
doesn't see a need to make location-tracking requests from 
users for the apps after they install the operating system.'' 
\2271\ Apple also differentiates Find My by pointing out that 
`` `Find My' stores user location data locally on the user's 
iPhone, and Apple only transmits the location upon the user's 
request.'' \2272\
---------------------------------------------------------------------------
    \2271\ Id.
    \2272\ Letter from Kyle Andeer, Vice President, Corp. Law & Chief 
Compliance Officer, Apple, Inc., to Hon. Jerrold Nadler, Chair, H. 
Comm. on the Judiciary, Hon. Doug Collins, Ranking Member, H. Comm on 
the Judiciary, Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary & Hon. F. 
James Sensenbrenner, Ranking Member, Subcomm. on Antitrust, Commercial 
and Admin. Law of the H. Comm. on the Judiciary, 3 (Feb. 17, 2020), 
https://docs.house.gov/meetings/JU/JU05/20200117/110386/HHRG-116-JU05-
20200117-SD004.pdf.
---------------------------------------------------------------------------
    In response to the Subcommittee's questions after its 
second hearing, Apple explained that the iOS 13 changes give 
users more control over background location tracking by apps. 
Apple also explained that turning on location tracking to 
Apple's Find My service was ``essential'' for users, and that 
the disparate treatment between Find My and Tile was due to the 
fact that data from Find My remains on the device, while Tile 
stores data externally.\2273\ Additionally, during Apple's June 
2020 World Wide Developers Conference, Apple announced that the 
Find My app would work with third-party finder hardware like 
Tile's.\2274\ However, Apple's service would require companies 
like Tile to abandon their apps and the ability to 
differentiate their service from Apple's and other 
competitors.\2275\ Apple's solution would continue to put Tile 
and other apps and hardware developers offering finder services 
at a competitive disadvantage.\2276\
---------------------------------------------------------------------------
    \2273\ See, id. at 2.
    \2274\ See Ben Lovejoy, Comment: This Week's Keynote Quietly 
Tackled Five of Apple's Antitrust Issues, 9to5Mac (June 24, 2020), 
https://9to5mac.com/2020/06/24/apples-antitrust-issues-2/.
    \2275\ See Interview with Kirsten Daru, Vice President & Gen. 
Couns., Tile, Inc. (July 10, 2020); Apple, Find My Network Accessory 
Specification, Developer Preview: Release R1, at 14 (2020), https://
images.frandroid.com/wp-content/uploads/2020/06/Find_My_
network_accessory_protocol_specification.pdf (prohibiting ``an 
accessory that supports the Find My network accessory protocol'' from 
``operat[ing] simultaneously on the Find My network and another finder 
network'').
    \2276\ Interview with Kirsten Daru, Vice President & Gen. Couns., 
Tile, Inc. (June 26, 2020). See Reed Albergotti, Amid Antitrust 
Scrutiny, Apple Makes Quiet Power Moves over Developers, Wash. Post 
(July 24, 2020), https://www.washingtonpost.com/technology/2020/07/24/
apple-find-my-competition/.

    (iii) App Search Rankings. In response to extensive 
reporting on the subject, the Subcommittee has also examined 
the competitive effects of Apple's search rankings in its App 
Store. In 2019, The Wall Street Journal and The New York Times 
both conducted extensive investigations and reported that Apple 
appeared to be favoring its apps in the App Store search 
results.\2277\ The Wall Street Journal explained that ``Apple's 
mobile apps routinely appear first in search results ahead of 
competitors in its App Store, a powerful advantage that skirts 
some of the company's rules on search rankings.'' \2278\ The 
New York Times reported that six years of analysis of App Store 
search rankings found Apple-owned apps ranked first for at 
least 700 common search terms. ``Some searches produced as many 
as 14 Apple apps before showing results from rivals,'' although 
app developers could pay Apple to place ads at the top of the 
search results.\2279\ Searches for the app titles of competing 
apps even resulted in Apple's apps ranked first.\2280\
---------------------------------------------------------------------------
    \2277\ See Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-
results-thwarting-competitors-11563897221; Jack Nicas & Keith Collins, 
How Apple's Apps Topped Rivals in the App Store It Controls, N.Y. Times 
(Sept. 9, 2019), https://www.
nytimes.com/interactive/2019/09/09/technology/apple-app-store-
competition.html.
    \2278\ Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-results-
thwarting-competitors-11563897221.
    \2279\ Jack Nicas & Keith Collins, How Apple's Apps Topped Rivals 
in the App Store It Controls, N.Y. Times (Sept. 9, 2019), https://
www.nytimes.com/interactive/2019/09/09/technology/apple-app-store-
competition.html.
    \2280\ Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-results-
thwarting-competitors-11563897221.
---------------------------------------------------------------------------
    Apple's apps ``ranked first in more than 60% of basic 
searches, such as for `maps' '' and ``Apple apps that generate 
revenue through subscriptions or sales, like Music or Books, 
showed up first in 95% of searches related to those apps.'' 
\2281\ The Wall Street Journal noted that growing revenue from 
its apps is core to Apple's strategy of offsetting sluggish 
hardware sales by increasing revenue from its Services 
business.\2282\
---------------------------------------------------------------------------
    \2281\ Id.
    \2282\ Id.
---------------------------------------------------------------------------
    Rival app developers slipped down the search rankings as 
Apple introduced new services in their product categories. For 
example, Spotify had long been the top search result for the 
query ``music,'' but Apple Music quickly became the top search 
result shortly after it joined the App Store in June 2016. By 
the end of 2018, eight of Apple's apps appeared in the first 
eight search results for ``music,'' and Spotify had fallen to 
the 23rd result. Similarly, Audiobooks.com was the top-ranked 
result for ``audiobooks'' for nearly two years but was 
overtaken by Apple Books shortly after Apple began marketing 
for Books. Audiobooks explained to The Wall Street Journal that 
losing the top search ranking to Apple ``triggered a 25% 
decline in Audiobooks.com's daily app downloads.'' \2283\
---------------------------------------------------------------------------
    \2283\ Id.
---------------------------------------------------------------------------
    Reporting on App Store search revealed that Apple may also 
advantage its apps by holding them to a different standard when 
they appear in the App Store search rankings. Apple told The 
Wall Street Journal that ``it uses 42 factors to determine 
where apps rank,'' and that the four most important factors are 
``downloads, ratings, relevance, and `user behavior,''' with 
user behavior the most important factor because it measures how 
often users select and download an app.\2284\ Approximately 40 
of Apple's apps come preinstalled on iPhones. These apps do not 
have reviews and consumers cannot rate them. Mr. Cook explained 
at the Subcommittee's sixth hearing that Apple's ``apps that 
are integrated into the iPhone are not reviewable by users on 
the App Store.'' \2285\ Apple has also said that its search 
algorithm works the same for all apps, including its own.\2286\
---------------------------------------------------------------------------
    \2284\ Id.
    \2285\ CEO Hearing at 396 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2286\ See Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-
results-thwarting-competitors-11563897221.
---------------------------------------------------------------------------
    Despite the fact that Apple's pre-installed apps do not 
have ratings or reviews--factors that Apple says are most 
influential in determining app ranking--many of Apple's pre-
installed apps ``still tend to be ranked first, even when users 
search for exact titles of other apps.'' \2287\ For example, 
Apple Books has no reviews or rankings and appears first in a 
search for ``books,'' while competing apps have tens-of-
thousands of customer reviews and ratings of 4.8 or 4.9 stars 
on Apple's five-star rating system.\2288\ A search by the 
Subcommittee of terms ``music,'' ``news,'' ``TV,'' and 
``podcast'' returned Apple Music, News, TV, and Podcasts as 
top-ranked search results, although those apps do not have any 
reviews or ranking.\2289\
---------------------------------------------------------------------------
    \2287\ Id.
    \2288\ Search Results: ``books,'' iOS App Store (Sept. 17, 2020).
    \2289\ Search Results: ``music,'' ``news,'' ``TV,'' ``podcast,'' 
iOS App Store (Sept. 17, 2020).
---------------------------------------------------------------------------
    Despite the lack of reviews or rankings, Apple told The 
Wall Street Journal that ``the No. 1 position for Books in a 
`books' search is reasonable, since it is an exact name 
match.'' \2290\ Philip Schiller, Apple's Senior Vice President, 
Worldwide Marketing, who oversees the App Store, and Eddy Cue, 
Apple's Senior Vice President Internet and Software Services, 
said ``there was nothing underhanded about the algorithm the 
company had built to display search results in the store,'' 
\2291\ and that Apple's apps tend to rank highly because they 
are popular and their generic names like Books and Music 
closely match common search terms.\2292\
---------------------------------------------------------------------------
    \2290\ Tripp Mickle, Apple Dominates App Store Search Results, 
Thwarting Competitors, Wall St. J. (July 23, 2019), https://
www.wsj.com/articles/apple-dominates-app-store-search-results-
thwarting-competitors-11563897221.
    \2291\ Jack Nicas & Keith Collins, How Apple's Apps Topped Rivals 
in the App Store It Controls, N.Y. Times (Sept. 9, 2019), https://
www.nytimes.com/interactive/2019/09/09/technology/apple-app-store-
competition.html.
    \2292\ Id.; see also Apple, Apple: Distinctive Products with a 
Seamless, Integrated User Experience 23 (July 13, 2020) (unpublished 
white paper) (on file with Comm.) (``Because many of Apple's apps are 
named after generic topics (such as Music, Maps, and Podcasts), those 
apps benefit from functional queries that have essentially become 
navigational.'').
---------------------------------------------------------------------------
    It appears that Apple does not apply the same rule to 
third-party apps. Documents reviewed by the Subcommittee show 
that Apple previously punished non-Apple apps that attempted to 
``cheat'' the app store rankings. Apple determined that at 
least one third-party app had achieved its high search ranking 
because its name was a generic name that was also a common 
search term. Apple's employees determined it was cheating to 
give an app the name of a common search term.
    In February 2018, Apple's App Store search team noted that 
an app named ``Photo Editor--Stylo'' was the top-ranked result 
when users searched the App Store for ``photo editor.'' \2293\ 
In an email thread with Philip Schiller, Apple's Senior Vice 
President, Worldwide Marketing, an Apple employee wrote that, 
``[s]ince the app name matched a broad query term like `photo 
editor' the developer was able to game the query with a direct 
name match.'' \2294\ The Apple employee explained that ``[t]he 
app has been added to the Search Penalty Box for rank 
demotion,'' and the action was labeled as complete.\2295\ 
Additional action was slated to disable the initial boost that 
new apps are given in the app store if the app name is an 
``exact match to broad queries.'' \2296\ Here, Apple punished 
an app for the same conduct it said justified Apple's position 
atop the App Store rankings.
---------------------------------------------------------------------------
    \2293\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-008082 to -008086 (Feb. 9, 2018) (on file with Comm.).
    \2294\ Id.
    \2295\ Id.
    \2296\ Id.
---------------------------------------------------------------------------
    Apple's position as the provider of iOS enables it to 
designate the App Store as the sole means for app developers to 
distribute software to iPhone users. Apple's public statements, 
including testimony by Mr. Cook that Apple's apps ``go through 
the same rules'' as more than 1.7 million third-party apps, 
appear to be inconsistent with Apple's actual practices.\2297\ 
In this case, Apple leveraged its control of iOS and the App 
Store to give its own apps preferential treatment, and it 
applied a different set of rules to third-party apps, punishing 
them for the very conduct Apple engaged in. The Subcommittee 
did not have access to additional evidence from Apple to 
determine how widespread this practice is within the company.
---------------------------------------------------------------------------
    \2297\ CEO Hearing at 162 (statement of Tim Cook, CEO, Apple, 
Inc.).

    (iv) Competitively Sensitive Information. In addition to 
investigating allegations Apple engages in self-preferencing in 
the App Store, the Committee sought information regarding 
whether Apple exploits third-party developers that rely on 
distribution in the App Store. Developers have alleged that 
Apple abuses its position as the provider of iOS and operator 
of the App Store to collect competitively sensitive information 
about popular apps and then build competing apps or integrate 
the popular app's functionality into iOS.\2298\ The practice is 
known as ``Sherlocking.'' The antitrust laws do not protect app 
developers from competition, and platforms should continue to 
innovate and improve their products and services. However, 
Sherlocking can be anticompetitive in some instances.\2299\
---------------------------------------------------------------------------
    \2298\ See, e.g., Brian Heater, The Makers of Duet Display and Luna 
on Life After Apple's Sidecar, TechCrunch (June 7, 2019), https://
techcrunch.com/2019/06/07/the-makers-of-duet-
display-and-luna-on-life-after-apples-sidecar/.
    \2299\ See John Bergmayer, Pub. Knowledge, Tending the Garden: How 
to Ensure that App Stores Put Users First 21, 58 (2020), https://
www.publicknowledge.org/wp-content/uploads/2020/06/Tending_the 
_Garden.pdf.
---------------------------------------------------------------------------
    Some app developers have complained that Apple leverages 
its control of iOS and the App Store to glean business 
intelligence that enables it to better compete against third-
party apps.\2300\ For example, after a stress relief app called 
Breathe was Sherlocked in 2016, the app's developers said that 
Apple used third-party developers ``as an R&D arm.'' \2301\ The 
Washington Post reported on the phenomenon, explaining:
---------------------------------------------------------------------------
    \2300\ See, e.g., Reed Albergotti, How Apple Uses Its App Store to 
Copy the Best Ideas, Wash. Post (Sept. 5, 2019), https://
www.washingtonpost.com/technology/2019/09/05/how-apple-uses-its-app-
store-copy-best-ideas/. See also William Gallagher, Developers Talk 
About Being ``Sherlocked'' as Apple Uses Them ``For Market Research,'' 
Apple Insider (June 6, 2019), https://appleinsider.com/articles/19/06/
06/developers-talk-about-being-sherlocked-as-apple-uses-them-for-
market-research; John Patrick Pullen, Why These People Are Upset About 
Apple's Latest Updates, Time (June 21, 2016), https://time.com/4372515/
apple-app-developers-wwdc-sherlock-sherlocked/; Adi Robertson, Apple 
Restores Mail App After Developer Tries to Rally ``Sherlocked'' 
Victims, Verge (Feb. 11, 2020), https://www.theverge.com/2020/2/11/
21133023/apple-bluemail-blix-restored-mac-app-store-sherlocking-patent-
lawsuit.
    \2301\ John Patrick Pullen, Why These People Are Upset About 
Apple's Latest Updates, Time (June 21, 2016), https://time.com/4372515/
apple-app-developers-wwdc-sherlock-sherlocked/.

     LDevelopers have come to accept that, without warning, 
Apple can make their work obsolete by announcing a new app or 
feature that uses or incorporates their ideas. Some apps have 
simply buckled under the pressure, in some cases shutting down. 
They generally don't sue Apple because of the difficulty and 
expense in fighting the tech giant--and the consequences they 
might face from being dependent on the platform.\2302\
---------------------------------------------------------------------------
    \2302\ Reed Albergotti, How Apple Uses Its App Store to Copy the 
Best Ideas, Wash. Post (Sept. 5, 2019), https://www.washingtonpost.com/
technology/2019/09/05/how-apple-uses-its-app-store-copy-best-ideas/.

    At the Subcommittee's fifth hearing, Subcommittee Vice 
Chair Joe Neguse (D-CO) asked Ms. Daru of Tile about how Apple 
used competitively sensitive information it collects as the 
owner of the iOS ecosystem to compete against third-party apps. 
She explained that, as an operating system provider and App 
Store operator, Apple knows who Tile's customers are, the types 
of apps those customers preferred, and the demographics of iOS 
users that look at Tile's app or search for similar apps--
information that would give Apple a competitive advantage 
against Tile.\2303\ Ms. Daru testified that Apple had harmed 
Tile's service and user experience while simultaneously 
introducing a rival app and preparing to launch a rival 
hardware product.\2304\ Blix, the developer of email management 
app BlueMail, has sued Apple in federal court. They claim that 
Apple has engaged in Sherlocking and infringed the patents 
underlying BlueMail:
---------------------------------------------------------------------------
    \2303\ Competitors Hearing at 53 (statement of Kirsten Daru, Chief 
Priv. Officer & Gen. Couns., Tile, Inc.).
    \2304\ See id. at 87; Guilherme Rambo, Apple Revamping Find My 
Friends & Find My iPhone in Unified App, Developing Tile-Like Personal 
Item Tracking, 9to5Mac (Apr. 17, 2019), https://9to5mac.com/2019/04/17/
find-my-iphone-revamp/.

     LApple frequently takes other companies' innovative 
features, adds those ideas to Apple's own software products 
without permission, and then either ejects the original third-
party application from the App Store (as it did with Blix's 
software) or causes the third-party software developer to close 
its doors entirely.\2305\
---------------------------------------------------------------------------
    \2305\ Amended Complaint at 4, Blix Inc. v. Apple, Inc., No. 1:19-
cv-1869-LPS (D. Del. Dec. 20, 2019).

    In response to the requests for information, Match Group 
told the Subcommittee that Apple has a history of ``closely 
monitoring the success of apps in the App Store, only to copy 
the most successful of them and incorporate them in new 
iPhones'' as a pre-installed app.\2306\ Phillip Shoemaker, 
Apple's former Senior Director of App Store Review, similarly 
told the Subcommittee that during his time at Apple, an app 
developer proposed an innovative way to wirelessly sync the 
iPhone and Mac.\2307\ The app did not violate any of Apple's 
Guidelines, but it was rejected from the App Store 
nonetheless.\2308\ Apple then appropriated the rejected app's 
feature for its own offerings.\2309\
---------------------------------------------------------------------------
    \2306\ Submission from Source 736, to H. Comm. on the Judiciary, 
Source 736-00000243 (Oct. 23, 2019) (on file with Comm.).
    \2307\ Interview with Phillip Shoemaker, former Senior Dir., App 
Store Review, Apple, Inc. (Sept. 21, 2020).
    \2308\ Id.
    \2309\ Id.
---------------------------------------------------------------------------
    During the Subcommittee's sixth hearing, Vice Chair Neguse 
asked Mr. Cook about Tile's testimony. In particular, he asked 
if Apple has access to the confidential information of app 
developers, and whether Apple's Developer Agreement explicitly 
authorizes Apple to use developers' information to build apps 
to compete against them.\2310\ Mr. Cook's answer was non-
responsive regarding allegations of Sherlocking. Instead, he 
said that Apple does not violate other companies' intellectual 
property rights.\2311\
---------------------------------------------------------------------------
    \2310\ CEO Hearing at 162 (question of Rep. Joe Neguse (D-CO), Vice 
Chair, Subcomm. on Antitrust, Commercial and Admin. Law of the H. Comm. 
on the Judiciary).
    \2311\ Id. at 162-63 (statement of Tim Cook, CEO, Apple, Inc.) 
(``[Apple] run[s] the App Store to help developers, not hurt them. We 
respect innovation. It's what our company was built on. We would never 
steal somebody's IP.'').
---------------------------------------------------------------------------
    In contrast, Apple cofounder and former CEO Steve Jobs once 
noted that, ``[w]e have always been shameless about stealing 
great ideas.'' \2312\ The Apple Developer Agreement, which 
Apple requires every app developer to agree to, appears to warn 
developers that, in exchange for access to the App Store, Apple 
is free to build apps that ``perform the same or similar 
functions as, or otherwise compete with,'' apps in the App 
Store.\2313\ Additionally, ``Apple will be free to use any 
information, suggestions or recommendations you provide to 
Apple pursuant to this Agreement for any purpose, subject to 
any applicable patents or copyrights.'' \2314\
---------------------------------------------------------------------------
    \2312\ Reed Albergotti, How Apple Uses Its App Store to Copy the 
Best Ideas, Wash. Post (Sept. 5, 2019), https://www.washingtonpost.com/
technology/2019/09/05/how-apple-uses-its-app-store-copy-best-ideas/.
    \2313\ Apple Developer Agreement, Apple: Dev. 4, https://
developer.apple.com/terms/apple-developer-agreement/Apple-Developer-
Agreement-English.pdf (last visited Sept. 27, 2020) (Clause 11: Apple 
Independent Development).
    \2314\ Id.
---------------------------------------------------------------------------
    Mr. Cook's statement that Apple's apps play by the same 
rules as other apps appears contrary to Apple's stated 
policies. While the Apple Developer Agreement provides Apple 
the right to replicate third-party apps, Apple's Guidelines 
direct developers not to ``copy another developer's work'' and 
threaten removal of apps and expulsion from the Developer 
Program for those that do.\2315\ Further, the Guidelines 
instruct developers to ``[c]ome up with your own ideas'' and 
admonish them to not ``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.'' \2316\ Lastly, Apple 
differentiates between--rather than conflates or confuses--
copycat apps and intellectual property infringement, which are 
both prohibited in the App Store.\2317\
---------------------------------------------------------------------------
    \2315\ App Store Review Guidelines: Introduction, Apple: Dev., 
https://developer.apple
.com/app-store/review/guidelines/#introduction (last visited Sept. 27, 
2020).
    \2316\ App Store Review Guidelines 4.1: Copycats, Apple: Dev., 
https://developer.apple
.com/app-store/review/guidelines/#copycats (last visited Sept. 27, 
2020).
    \2317\ Id.; App Store Review Guidelines 5.2: Intellectual Property, 
Apple: Dev., https://
developer.apple.com/app-store/review/guidelines/#intellectual-property 
(last visited Sept. 27, 2020).

    (v) Excluding Rival Apps. During the Subcommittee's sixth 
hearing, Representatives Val Demings (D-FL) and Lucy McBath (D-
GA) asked questions regarding Apple's removal of parental 
control apps from the App Store in 2018 and 2019. In 2018, 
Apple announced its Screen Time app, a new feature bundled with 
iOS 12 that helped iOS users limit the time they and their 
children spent on the iPhone. Thereafter, Apple began to purge 
many of the leading rival parental control apps from the App 
Store. Apple explained the apps were removed because they used 
a technology called Mobile Device Management (MDM). MDM 
technology allowed parents to remotely take over their 
children's phones and block content. Apple noted that MDM could 
allow the app developer to access sensitive content on the 
device.\2318\
---------------------------------------------------------------------------
    \2318\ See Jack Nicas, Apple Cracks Down on Apps that Fight iPhone 
Addiction, N.Y. Times (Apr. 27, 2019), https://www.nytimes.com/2019/04/
27/technology/apple-screen-time-trackers
.html. See also Sarah Perez, Apple Puts Third-Party Screen Time Apps on 
Notice, TechCrunch (Dec. 5, 2018), https://techcrunch.com/2018/12/05/
apple-puts-third-party-screen-time-apps-on-notice/.
---------------------------------------------------------------------------
    According to The New York Times, the parental control apps 
using MDM had been offered in the App Store for years, and 
hundreds of updates to those apps had been approved by 
Apple.\2319\ As a result, many apps were forced to shut 
down,\2320\ although some were given a reprieve.\2321\ Two 
parental control apps filed a complaint with the European 
Commission, alleging Apple's App Store policies were 
anticompetitive. The complaint alleged that Apple purged 
competitors when it introduced Screen Time, pre-installed 
Screen Time on iOS 12 and activated it by default, and gave 
Screen Time access to iOS functionalities it denied to 
competing third-party apps.\2322\
---------------------------------------------------------------------------
    \2319\ Jack Nicas, Apple Cracks Down on Apps that Fight iPhone 
Addiction, N.Y. Times (Apr. 27, 2019), https://www.nytimes.com/2019/04/
27/technology/apple-screen-time-trackers.html. See also Submission from 
Apple, to H. Comm. on the Judiciary, HJC-APPLE-012255 to -012259 (Apr. 
28, 2019); id. at HJC-APPLE-013251 to -013253 (Apr. 28, 2019).
    \2320\ See, e.g., Nick Kuh, Mute App: Startup to Shutdown, Medium 
(Oct. 22, 2018), https://medium.com/@nick.kuh/mute-app-startup-to-
shutdown-a1db01440c56; Georgie Powell, In the Kill Zone--Update for 
Space on iOS, Space (Nov. 6, 2018), https://findyourphonelife
balance.com/news/2018/11/6/in-the-kill-zone-an-update-for-space-on-ios; 
Is Apple Systematically Destroying the Time Management Industry?, 
KidsLox (Nov. 8, 2018), https://kidslox.com/blog/apple-destroying-
screen-time-industry/; OurPact, There Used To Be an App for That, 
Medium (May 1, 2019), https://medium.com/@ourpactapp/there-used-to-be-
an-app-for-that-41344f61fb6f; Justin Payeur, Letter to Users About 
Apple Parental Controls, Boomerang (Jan. 31, 2020), https://
useboomerang.com/2020/01/31/letter-users-apple-parental-controls/.
    \2321\ See Nick Kuh, Apple Called, Medium (Oct. 27, 2018), https://
medium.com/@nick.kuh/apple-called-a229d86ece30; Georgie Powell, Space 
Is Back! An Update on Our Discussions with Apple, Space (Nov. 7, 2018), 
https://findyourphonelifebalance.com/news/2018/11/7/space-versus-apple.
    \2322\ Press Release, Qustodio Techs. SL, Qustodio & Kidslox File a 
Complaint Against Apple with the European Commission over Abuse of 
Dominant Position (Apr. 30, 2019), https://www.globenewswire.com/news-
release/2019/04/30/1812192/0/en/Qustodio-Kidslox-File-a-Complaint-
Against-Apple-with-the-European-Commission-over-Abuse-of-Dominant-
Position
.html#.
---------------------------------------------------------------------------
    The Subcommittee reviewed emails from parents who contacted 
Apple to complain about the removal of one of the purged 
parental control apps.\2323\ They said that Screen Time was a 
comparably worse option for consumers--and described it as 
``more complicated'' and ``less restrictive'' than 
competitors.\2324\ In emails to the company reviewed by the 
Subcommittee, parents complained about Apple's monopoly power 
over app distribution on iOS and claimed that self-interest in 
promoting Screen Time motivated Apple's actions.\2325\ In 
response, Apple's Senior Vice President, Worldwide Marketing, 
Phil Schiller, explained that Screen Time was ``designed to 
help parents manage their children's access to technology.'' 
\2326\ He added that Apple would ``work with developers to 
offer many great apps on the App Store for these uses, using 
technologies that are safe and private for us and our 
children.'' \2327\
---------------------------------------------------------------------------
    \2323\ See, e.g., Submission from Apple, to H. Comm. on the 
Judiciary, HJC-APPLE-012242 to -012243 (May 6, 2019), HJC-APPLE-012245 
to -012246 (May 6, 2019), HJC-APPLE-012247 to -012248 (June 5, 2019), 
HJC-APPLE-013220 (May 14, 2019), HJC-APPLE-013219 (May 5, 2019), HJC-
APPLE-013251 to -013253 (Apr. 28, 2019) (on file with Comm.).
    \2324\ Jack Nicas, Apple Cracks Down on Apps that Fight iPhone 
Addiction, N.Y. Times (Apr. 27, 2019), https://www.nytimes.com/2019/04/
27/technology/apple-screen-time-trackers.html.
    \2325\ See, e.g., Submission from Apple, to H. Comm. on the 
Judiciary, HJC-APPLE-013210 to -013211 (Apr. 27, 2019), HJC-APPLE-
013215 (May 17, 2019), HJC-APPLE-013216 (May 6, 2019),HJC-APPLE-013221 
to -013223 (Apr. 29, 2019), HJC-APPLE-013265 to -013266 (Apr. 27, 2019) 
(on file with Comm.).
    \2326\ See, e.g., id. at HJC-APPLE-013210 to -013211 (Apr. 27, 
2019), HJC-APPLE-013217 (Apr. 27, 2019), HJC-APPLE-013221 to -013223 
(Apr. 29, 2019) (on file with Comm.).
    \2327\ Id. at HJC-APPLE-013221 to -013223 (Apr. 29, 2019).
---------------------------------------------------------------------------
    Internally, Apple's Vice President of Marketing 
Communications, Tor Myhren, stated, ``[t]his is quite 
incriminating. Is it true?'' in response to an email with a 
link to The New York Times's reporting.\2328\ Apple's 
communications team asked CEO Tim Cook to approve a 
``narrative'' that Apple's clear-out of Screen Time's rivals 
was ``not about competition, this is about protecting kids 
[sic] privacy.'' \2329\
---------------------------------------------------------------------------
    \2328\ Id. at HJC-APPLE-013175 (Apr. 27, 2019).
    \2329\ Id. at HJC-APPLE-012223 (June 2, 2019). See also CEO Hearing 
at 134 (statement of Tim Cook, CEO, Apple, Inc.) (``It was that the use 
of technology called MDM, mobile device management, placed kids' data 
at risk, and so we were worried about the safety of kids.''); id. at 
141 (``We were concerned, Congresswoman, about the privacy and security 
of kids.'').
---------------------------------------------------------------------------
    Developers of the purged apps also contacted Apple, 
outraged that they had been removed from the App Store while 
other apps that used MDM remained.\2330\ One developer 
explained it had invested more than $200,000 building its 
parental control app, then another $30,000 to fix the problem 
Apple identified, only to be told that Apple would no longer 
support parental control apps in the App Store.\2331\
---------------------------------------------------------------------------
    \2330\ See, e.g., Submission from Apple, to H. Comm. on the 
Judiciary, HJC-APPLE-012255 to -012259 (Apr. 28, 2019), HJC-APPLE-
012275 to -012279 (Jan. 17, 2019), HJC-APPLE-012286 to -012287 (Jan. 
17, 2019) (on file with Comm.).
    \2331\ Id. at HJC-APPLE-012286 to -012287 (Jan. 17, 2019) (on file 
with Comm.).,
---------------------------------------------------------------------------
    Although Apple claimed its conduct was motivated to protect 
privacy and not intended to clear out competitors to Screen 
Time, Apple reinstated many of the apps the same day that it 
was reported the Department of Justice was investigating Apple 
for potential antitrust violations.\2332\ Apple's solution to 
address privacy concerns was to ask the apps to promise not to 
sell or disclose user data to third parties, which could have 
been achieved through less restrictive means and without 
removing those apps from the App Store.\2333\
---------------------------------------------------------------------------
    \2332\ Jack Nicas, Apple Cracks Down on Apps that Fight iPhone 
Addiction, N.Y. Times (Apr. 27, 2019), https://www.nytimes.com/2019/04/
27/technology/apple-screen-time-trackers.html.
    \2333\ Id. See also App Store Review Guidelines 5.5: Mobile Device 
Management, Apple, https://
developer.apple.com/app-store/review/guidelines/#mobile-device-
management (last visited Sept. 27, 2020).
---------------------------------------------------------------------------
    Developers of parental control apps asked Apple to 
``release a public API granting developers access to the same 
functionalities that Apple's native `Screen Time' uses.'' 
\2334\ Eventually, Apple did grant some apps access to 
APIs,\2335\ but only after rival app developers were accused of 
being a risk to children's privacy, removed from the App Store, 
and forced to incur significant costs.\2336\ As one developer 
noted, Apple's new MDM privacy policies resulted in ``really 
nothing much changing from the developer side as far as the 
technology goes.'' \2337\
---------------------------------------------------------------------------
    \2334\ Screen Time API, https://screentimeapi.com/ (last visited 
Sept. 27, 2020).
    \2335\ See Joe Rossignol, Apple Reverses Course and Allows Parental 
Control Apps to Use MDM Technology with Stricter Privacy Requirements, 
MacRumors (June 4, 2019), https://www.macrumors.com/2019/06/04/apple-
lets-parental-apps-use-mdm-strict-privacy/.
    \2336\ See, e.g., Submission from Apple, to H. Comm. on the 
Judiciary, HJC-APPLE-012275 to -012279 (Jan. 17, 2019), HJC-APPLE-
013210 to -013211 (Apr. 27, 2019) (on file with Comm.).
    \2337\ Id. at HJC-APPLE-012273 to -012274 (June 4, 2019) (on file 
with Comm.).
---------------------------------------------------------------------------
    Here, Apple's monopoly power over app distribution enabled 
it to exclude rivals to the benefit of Screen Time. Apple could 
have achieved its claimed objective--protecting user privacy--
through less restrictive means, which it ultimately did only 
after significant outcry from the public and a prolonged period 
of harm to rivals.\2338\ Apple's conduct here is a clear 
example of Apple's use of privacy as a sword to exclude rivals 
and a shield to insulate itself from charges of anticompetitive 
conduct.
---------------------------------------------------------------------------
    \2338\ See Damien Geradin & Dimitrios Katsifis, The Antitrust Case 
Against the Apple App Store 55-56 (Tilberg Univ. Law & Econ. Ctr. 
Discussion Paper, Paper No. DP2020-039, 2000), https://papers.ssrn.com/
sol3/papers.cfm?abstract_id=3583029.
---------------------------------------------------------------------------
    The Subcommittee learned that Apple has engaged in conduct 
to exclude rivals to benefit Apple's services in other 
instances. For example, Mr. Shoemaker explained that Apple's 
senior executives would find pretextual reasons to remove apps 
from the App Store, particularly when those apps competed with 
Apple services.\2339\
---------------------------------------------------------------------------
    \2339\ Interview with Phillip Shoemaker, former Senior Dir., App 
Store Review, Apple, Inc. (Sept. 21, 2020).

    (vi) Opaque Guidelines and Arbitrary Enforcement. At the 
Subcommittee's sixth hearing, Representative Henry C. ``Hank'' 
Johnson, Jr. (D-GA) asked Mr. Cook about how the App Store 
Developer Guidelines are interpreted and applied to developers 
in the App Store. Subcommittee Chair David N. Cicilline (D-RI) 
requested similar information about the Guidelines as well, 
including how they have evolved and whether there are 
``unwritten rules'' developers must comply with.
    The Guidelines are the rules with which more than 20 
million iOS app developers and more than 1.8 million apps in 
the App Store must comply to reach ``hundreds of millions of 
people around the world.'' \2340\ Apple notes that the App 
Store is ``highly curated'' and that ``every app is reviewed by 
experts.'' \2341\ The introductory section of the Guidelines 
warns that Apple can create new rules at any time, and explains 
that ``[w]e will reject apps for any content or behavior that 
we believe is over the line. What line, you ask? Well as a 
Supreme Court Justice once said, `I'll know it when I see it.' 
And we think that you will also know it when you cross it.'' 
\2342\
---------------------------------------------------------------------------
    \2340\ App Store Review Guidelines: Introduction, Apple: Dev., 
https://developer.apple
.com/app-store/review/guidelines/#introduction (last visited Sept. 27, 
2020).
    \2341\ Id.
    \2342\ Id.
---------------------------------------------------------------------------
    App developers the Subcommittee spoke with expressed 
frustration with Apple's curation of the App Store. Cofounder 
and Chief Technology Officer of Basecamp, David Heinemeier 
Hansson, testified before the Subcommittee and explained:

     LIt's complete tyranny, and the rules are often 
interpreted differently by different reviewers because they're 
intentionally left vague. So we live in constant fear we may 
have violated these vague rules, and that the next update to 
our applications will be blocked by Apple. There are countless 
examples where developers large and small have been denied 
access to publish their applications without explanation for 
days or even weeks at a time. It's insufferable.\2343\
---------------------------------------------------------------------------
    \2343\ Competitors Hearing at 34 (statement of David Heinemeier 
Hansson, Cofounder & Chief Tech. Officer, Basecamp).

    One social media platform expressed concern that Apple has 
absolute discretion about whether to approve apps or accept 
updates.\2344\ Developers are frustrated that Apple's 
interpretation and enforcement of the Guidelines have changed 
over time, despite prior precedents and the fact developers 
rely on understanding the Guidelines to operate their 
businesses. One developer described Apple's Guidelines as 
``arbitrarily interpreted,'' and another party called them 
``opaque and arbitrary.'' \2345\ Internally, after an app was 
rejected from the App Store, an Apple employee wrote to the 
leadership of the App Store that Apple's decision ``still isn't 
obvious to people inside the company that work directly on the 
App Store.'' \2346\
---------------------------------------------------------------------------
    \2344\ Submission from Source 247, to H. Comm. on the Judiciary, 
Source 247_0000000002 (Oct. 14, 2019) (on file with Comm.).
    \2345\ Submission from Source 736, to H. Comm. on the Judiciary, 
Source 736_00000236 (Oct. 23, 2019) (on file with Comm.); Interview 
with Source 88 (May 12, 2020).
    \2346\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-014848 (May 30, 2018) (on file with Comm.).
---------------------------------------------------------------------------
    In 2017, Gizmodo reported that iOS app maker Deucks saw its 
Finder for the AirPods app removed from the App Store. The app 
used the iPhone's Bluetooth signal to locate lost AirPods, 
helping its users find a missing earbud and save money by not 
having to purchase replacements. After the app was reviewed and 
approved, it disappeared from the App Store. Deucks told 
Gizmodo that Apple's app review team ``didn't find anything 
wrong with the app itself, but rather they didn't like the 
`concept' of people finding their AirPods and hence [the app] 
was deemed `not appropriate for the App Store.' '' \2347\ At 
the time, Deucks had several other finder apps, such as Finder 
for Fitbit and Finder for Jawbone, that remained available in 
the App Store.\2348\
---------------------------------------------------------------------------
    \2347\ Michael Nunez, ``Finder for AirPods'' App Mysteriously 
Disappears from App Store Without Much Explanation from Apple, Gizmodo 
(Jan. 9, 2017), https://gizmodo.com/finder-for-airpods-app-
mysteriously-disappears-from-app-1790999059.
    \2348\ Id.
---------------------------------------------------------------------------
    Developers also say that Apple uses its power over the App 
Store to change the Guidelines when convenient in ways that 
benefit Apple. The Guidelines--along with their interpretation 
and enforcement--all change over time in ways that always 
appear to benefit Apple.\2349\ Spotify noted that ``[t]he 
reality is Apple continues to move the goal posts and change 
the rules to its advantage and the detriment of developers,'' 
and that the company's ``selective and capricious enforcement 
[of its App Store policies] is designed to put companies like 
[Spotify] at an untenable competitive disadvantage.''\2350\ 
ProtonMail explained that it offered a free version of its app 
in the App Store for years, but then Apple abruptly changed the 
way it applied its IAP requirement and demanded the app add the 
ability for consumers to purchase upgraded functionality 
through the app--giving Apple a 30 percent cut from those 
subscriptions. ProtonMail noted that its app competes with an 
Apple service and that requiring it to implement IAP would 
increase its customer acquisition costs and make it less 
competitive, benefitting Apple.\2351\ Another third party the 
Subcommittee spoke with said that when Apple introduces a new 
app, developers with rival apps know they may be targeted for a 
violation of a Rule Apple has suddenly decided to interpret or 
enforce differently.\2352\ Another app developer that competes 
with Apple services noted that the Guidelines are constantly 
shifting, that Apple arbitrarily decides when an app no longer 
complies with the rules, and those decisions always favor 
Apple's interests.\2353\
---------------------------------------------------------------------------
    \2349\ See Dieter Bohn, Apple's App Store Policies Are Bad, but Its 
Interpretation and Enforcement Are Worse, Verge (June 17, 2020), 
https://www.theverge.com/2020/6/17/21293813/apple-app-store-policies-
hey-30-percent-developers-the-trial-by-franz-kafka (``The key thing to 
know is that the text of this policy is not actually the policy. Or 
rather, as with any law, the text is only one of the things you need to 
understand. You also need to know how it is enforced and how the 
enforcers interpret that text.'').
    \2350\ Kara Swisher, Is It Finally Hammer Time for Apple and Its 
App Store, N.Y. Times (June 19, 2020), https://www.nytimes.com/2020/06/
19/opinion/apple-app-store-hey.html?referring Source=articleShare.
    \2351\ Submission from ProtonMail, to H. Comm. on the Judiciary, 5 
(Aug. 22, 2020) (on file with Comm.).
    \2352\ Interview with Source 88 (May 12, 2020).
    \2353\ Interview with Source 766 (July 2, 2020).
---------------------------------------------------------------------------
    Others have noted that Apple unilaterally determines if, 
how, and when to apply its Guidelines, and that it also freely 
makes up ``unwritten rules'' when convenient.\2354\ For 
example, Apple's distinction between ``business'' and 
``consumer'' apps to justify its June 2020 decision to require 
Basecamp to redesign its app to permit in-app signups--and 
attempt to require implementation of IAP--was not a distinction 
that appeared in Apple's Guidelines until an update on 
September 11, 2020.\2355\ Apple said that it has a ``set of 
standard terms for Amazon, and every other video-streaming 
service that met the criteria, to launch their service on Apple 
TV and iOS.'' \2356\ One of Apple's business partners told the 
Subcommittee that it suspects Amazon receives preferential 
treatment by being exempt from sharing revenue for some 
categories of transactions.\2357\
---------------------------------------------------------------------------
    \2354\ See John Bergmayer, Pub. Knowledge, Tending the Garden: How 
to Ensure That App Stores Put Users First 27 (2020), https://
www.publicknowledge.org/wp-content/uploads/2020/06/
Tending_the_Garden.pdf; Bapu Kotapati et al., The Antitrust Case 
Against Apple 22 (Yale Univ. Thurman Arnold Project Digital Platform 
Theories of Harm Paper Series, Paper No. 2, 2020), https://
papers.ssrn.com/sol3/papers.cfm?abstract_id=3606073.
    \2355\ See Ben Thompson, Xscale and ARM in the Cloud, Hey Versus 
Apple, Apple's IAP Campaign, Stratechery (June 17, 2020), https://
stratechery.com/2020/xscale-and-arm-in-the-cloud-hey-versus-apple-
apples-iap-campaign/; John Gruber, The Flimsiness of ``Business vs. 
Consumer'' as a Justification for Apple's Rejection of Hey from the App 
Store for Not Using In-App Purchases, Daring Fireball (June 16, 2020), 
https://daringfireball.net/2020/06/hey_ app_store_rejection_flimsiness; 
Sarah Perez & Anthony Ha, Apple Revises App Store Rules to Permit Game 
Streaming Apps, Clarify In-App Purchases and More, TechCrunch (Sept. 
11, 2020), https://techcrunch.com/2020/09/11/apple-revises-app-store-
rules-to-permit-game-streaming-apps-clarify-in-app-purchases-and-more/.
    \2356\ CEO Hearing at 402 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2357\ Interview with Source 77 (Sept. 10, 2020).
---------------------------------------------------------------------------
    The Subcommittee reviewed communications between Apple CEO 
Tim Cook and an executive from Baidu regarding whether Apple 
would provide Baidu with preferential treatment. At the 
Subcommittee's sixth hearing, Representative Henry C. ``Hank'' 
Johnson, Jr. (D-GA) questioned Mr. Cook about whether Apple 
differentiates in its treatment of app developers. 
Representative Johnson also asked if it was true that Apple 
assigned Baidu two employees to help it navigate the App Store 
bureaucracy, and whether other app developers receive the same 
access to Apple personnel. Mr. Cook responded, ``we treat every 
developer the same,'' and explained the App Store Guidelines 
``apply evenly to everyone.'' \2358\ He also said, ``I don't 
know about that, sir,'' in response to Representative Johnson's 
inquiry about Baidu, adding, ``We do a lot of things with 
developers including looking at their beta test apps regardless 
of whether they're large or small.'' \2359\
---------------------------------------------------------------------------
    \2358\ CEO Hearing at 80 (statement of Tim Cook, CEO, Apple, Inc.).
    \2359\ Id.
---------------------------------------------------------------------------
    Communications reviewed by the Subcommittee show that, in 
2014, Baidu requested, among other things, that Apple ``set up 
a fast track for the review process for Baidu APPs,'' along 
with setting Baidu as the default search and mapping services 
on ``all Apple devices in China.'' \2360\ Mr. Cook solicited 
feedback from Apple's senior executives regarding these and 
other requests from Baidu, also noting, ``I think we should 
have someone focus on them as we have done with Facebook. 
Thoughts?'' \2361\ Responding to the email thread with Mr. 
Cook's request that Apple focus on Baidu as it had with 
Facebook, one executive explained, ``Engineering proposal is 
for extensions to be our path for integration,'' and responded 
to Baidu's app review fast track request, ``I believe we put a 
lot of work into having a fast review process for all apps.'' 
\2362\
---------------------------------------------------------------------------
    \2360\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-011082 (June 3, 2015) (on file with Comm.).
    \2361\ Id. at HJC-APPLE-011081 (Aug. 3, 2014).
    \2362\ Id. at HJC-APPLE-011079 to -011080.
---------------------------------------------------------------------------
    Within two weeks, Mr. Cook responded to the Baidu 
executive's requests. ``I'd like Apple to have a deeper 
relationship with Baidu,'' Cook wrote, noting that ``some of'' 
the Baidu executive's requests were ``great starts.'' \2363\ In 
response to the Baidu executive's request for ``APP Review Fast 
Track,'' Mr. Cook wrote, ``We can set up a process where Baidu 
could send us a beta app for review and this can often speed up 
the process.'' \2364\ Mr. Cook then noted he had assigned Baidu 
two employees from App Store chief Phil Schiller's team to 
``help manage through Apple.'' \2365\
---------------------------------------------------------------------------
    \2363\ Id. at HJC-APPLE-011083 (June 3, 2015).
    \2364\ Id. at HJC-APPLE-011084.
    \2365\ Id.
---------------------------------------------------------------------------
    When asked about these issues in questions submitted for 
the record following the hearing, Mr. Cook explained his view 
that ``There is no `fast track' for App Review special to 
Baidu,'' that ``any developer can request expedited review from 
App Review by submitting a formal expedite request,'' and 
``[t]he beta app review process I referenced in my email has 
been available to developers since 2009.'' \2366\ Mr. Cook also 
noted, ``The key contacts referenced in my email were focused 
on other strategic opportunities outlined by Baidu. Neither 
individual had responsibility for App Store review.'' \2367\
---------------------------------------------------------------------------
    \2366\ CEO Hearing at 402 (response to Questions for the Record of 
Tim Cook, CEO, Apple, Inc.).
    \2367\ Id. at 403.
---------------------------------------------------------------------------
    In a subsequent interview with Phillip Shoemaker, Apple's 
former Senior Director of App Store Review, the Subcommittee 
asked about Apple's treatment of app developers. Mr. Shoemaker 
responded that Apple ``was not being honest'' when it claims it 
treats every developer the same.\2368\ Mr. Shoemaker has also 
written that the App Store rules were often ``arbitrary'' and 
``arguable,'' and that ``Apple has struggled with using the App 
Store as a weapon against competitors.'' \2369\ He has noted 
that ``Apple has complete and unprecedented power over their 
customers' devices. The decisions they make with regards to 
third-party apps needs to be above reproach, and currently are 
not.'' \2370\
---------------------------------------------------------------------------
    \2368\ Interview with Phillip Shoemaker, former Senior Dir., App 
Store Review, Apple, Inc. (Sept. 21, 2020).
    \2369\ Phillip Shoemaker, A Modern Content Store, Medium (Dec. 12, 
2017), https://
medium.com/@phillipshoemaker/a-modern-content-store-3344bbe79edc.
    \2370\ Phillip Shoemaker, Apple v. Everybody, Medium (Mar. 29, 
2019), https://medium.com/@phillipshoemaker/apple-v-everybody-
5903039e3be.
---------------------------------------------------------------------------
    Mr. Shoemaker also admitted that Apple advantages its own 
apps over third-party apps. In an interview with the 
Subcommittee, he described it as inaccurate to say Apple does 
not favor its own apps over third-party apps.\2371\ He has 
previously noted that apps that compete against Apple's 
services often have problems getting through the App Store's 
review process. For example, Apple's gaming service, Apple 
Arcade, is a type of app that was ``consistently disallowed 
from the store'' when offered by third-party developers, but 
Apple allowed its own app in the store, ``even though it 
violates existing [App Store] guidelines.'' \2372\ Mr. 
Shoemaker explained to the Subcommittee that Apple's new 
Guideline 3.1.2a, related to streaming game services, was 
likely written to ``specifically exclude Google Stadia,'' 
describing the decision as ``completely arbitrary.'' \2373\ 
Similar conduct has been commented on by the courts,\2374\ as 
well as international antitrust authorities.\2375\
---------------------------------------------------------------------------
    \2371\ Interview with Phillip Shoemaker, former Senior Dir., App 
Store Review, Apple, Inc. (Sept. 21, 2020).
    \2372\ Phillip Shoemaker, Apple v. Everybody, Medium (Mar. 29, 
2019), https://medium.com/@phillipshoemaker/apple-v-everybody-
5903039e3be.
    \2373\ Interview with Phillip Shoemaker, former Senior Dir., App 
Store Review, Apple, Inc. (Sept. 21, 2020).
    \2374\ United States v. Apple, Inc., 952 F. Supp. 2d 638, 662 
(S.D.N.Y. 2013), aff'd, 791 F.3d 290 (2d Cir. 2015).
    \2375\ See, e.g., Neth. Auth. for Consumers & Mkts. Study at 5-6, 
68, 79; Killian Bell, Apple Rejects Samsung Pay App for iOS, Cult of 
Mac (Dec. 12, 2016), https://www.cultofmac.com/457916/apple-rejects-
samsung-pay-app-ios/; Gil Jaeshik & Park Sora, Apple Rejects Samsung 
Pay Mini To Be Registered on Its App Store, Korea IT News (Dec. 12, 
2016), http://english
.etnews.com/20161212200003.
---------------------------------------------------------------------------
    Apple disputes that its rules are opaque and arbitrarily 
applied. In response to questions from Representative Henry C. 
``Hank'' Johnson, Jr. (D-GA), Mr. Cook insisted the Guidelines 
are ``open and transparent'' and that Apple ``treat[s] every 
developer the same.'' \2376\ In response to Questions for the 
Record from Subcommittee Chair David N. Cicilline (D-RI), Mr. 
Cook reiterated that ``[t]he Guidelines provide transparency 
and act as a practical guide to help developers better 
understand the app approval process . . . . Apple attempts to 
apply the Guidelines uniformly to all developers and all types 
of apps.'' \2377\
---------------------------------------------------------------------------
    \2376\ CEO Hearing at 80 (statement of Tim Cook, CEO, Apple, Inc.).
    \2377\ Id. at 399 (response to Questions for the Record of Tim 
Cook, CEO, Apple, Inc.).
---------------------------------------------------------------------------
    Apple appears to have recently revised some of its App 
Store policies under the scrutiny of the Subcommittee, the 
Department of Justice, and global competition authorities. In 
June 2020, Apple announced new policies for its App Store 
review that will allow app developers to appeal decisions by 
app reviewers and even challenge the Guidelines governing the 
App Store. Apple also announced that app updates with bug fixes 
would no longer be held up due to a violation of an App Store 
guideline. Additionally, on September 11, 2020, Apple changed 
its App Developer Guidelines to address some of the questions 
which arose from recent controversies described earlier in this 
Report.\2378\
---------------------------------------------------------------------------
    \2378\ See Sarah Perez & Anthony Ha, Apple Revises App Store Rules 
to Permit Game Streaming Apps, Clarify In-App Purchases and More, 
TechCrunch (Sept. 11, 2020), https://tech
crunch.com/2020/09/11/apple-revises-app-store-rules-to-permit-game-
streaming-apps-clarify-in-app-purchases-and-more/.
---------------------------------------------------------------------------
3. Siri Intelligent Voice Assistant

    (a) Market Power. Apple describes Siri as ``an intelligent 
assistant that offers a faster, easier way to get things done 
on Apple devices,'' helping users to ``make calls, send text 
messages or email, schedule meetings and reminders, make notes, 
search the Internet, find local businesses, get directions, get 
answers, find facts, and more just by asking.'' \2379\ Apple 
integrated Siri into iPhone 4S at its release in October 2011. 
As of January 2018, Apple said Siri was active on over 500 
million devices, making Siri one of the most widely used voice 
assistants in the world.\2380\
---------------------------------------------------------------------------
    \2379\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-000007 (Oct. 14, 2019) (on file with Comm.).
    \2380\ Press Release, Apple, HomePod Arrives February 9, Available 
to Order This Friday (Jan. 13, 2018), https://www.apple.com/newsroom/
2018/01/homepod-arrives-february-9-available-to-order-this-friday/.
---------------------------------------------------------------------------
    In a production to the Committee, Apple stated that it 
neither creates market share data for Siri nor tracks third-
party market share data for integrated voice assistants.\2381\ 
Market research firm FutureSource Consulting found that, as of 
December 2019, Siri was the leading intelligent virtual 
assistant with a 35 percent market share globally.\2382\ A 
third party supplied the Subcommittee with additional market 
research showing that, in the first half of 2018, Apple's Siri 
was built into 42 percent of virtual-assistant-enabled devices 
sold worldwide.\2383\ Apple, Google, Amazon, and Microsoft are 
the leading providers of intelligent virtual assistants.\2384\ 
Siri's success reflects its integration into the iPhone and 
other Apple hardware, such as the iPad, Mac, Apple Watch, Apple 
TV, and HomePod.\2385\ Siri is the hub of Apple's ecosystem of 
smart-home devices. Users can control Apple HomeKit-compatible 
devices using Siri on an Apple device.\2386\
---------------------------------------------------------------------------
    \2381\ Submission from Apple, to H. Comm. on the Judiciary, HJC-
APPLE-000011 (Oct. 14, 2019) (on file with Comm.).
    \2382\ Press Release, FutureSource Consulting, Virtual Assistants 
to Exceed 2.5 Billion Shipments in 2023 (Dec. 18, 2019), https://
www.futuresource-consulting.com/press-release/consumer-electronics-
press/virtual-assistants-to-exceed-25-billion-shipments-in-2023/.
    \2383\ Submission from Source 918, to H. Comm. on the Judiciary, 
Source 918-0001578 (Nov. 4, 2019) (on file with Comm.).
    \2384\ See, e.g., Press Release, FutureSource Consulting, Virtual 
Assistants to Exceed 2.5 Billion Shipments in 2023 (Dec. 18, 2019), 
https://www.futuresource-consulting.com/press-release/consumer-
electronics-press/virtual-assistants-to-exceed-25-billion-shipments-in-
2023/; Submission from Source 918, to H. Comm. on the Judiciary, Source 
918-0001578 (Nov. 4, 2019) (on file with Comm.).
    \2385\ See Press Release, FutureSource Consulting, Virtual 
Assistants to Exceed 2.5 Billion Shipments in 2023 (Dec. 18, 2019), 
https://www.futuresource-consulting.com/press-release/consumer-
electronics-press/virtual-assistants-to-exceed-25-billion-shipments-in-
2023/; Juli Clover, Siri: Everything You Need to Know, Mac Rumors (July 
27, 2020), https://www.macrumors
.com/guide/siri/.
    \2386\ Daniel Wroclawski, How to Use Siri and Apple HomeKit to 
Control Your Smart Home, Consumer Reps. (Oct. 5, 2019), https://
www.consumerreports.org/home-automation-systems/how-to-use-siri-to-
control-smart-home/.

    (b) Merger Activity. The startup Siri, Inc launched the 
Siri app for iOS in February 2010 based on a prototype 
developed by Adam Cheyer while working at SRI International 
Research Lab.\2387\ Apple acquired the company two months 
later.\2388\ Apple has followed up on its acquisition of Siri 
with a series of additional acquisitions to strengthen Siri's 
underlying technology and natural language processing. For 
example, in 2019, Apple acquired Laserlike, technology to help 
Siri improve at delivering personalized results for 
users.\2389\ In 2020, Apple acquired Inductiv, an AI technology 
for correcting data flaws; Xnor.ai, which specializes in low-
power, edge-based artificial-intelligence tools needed for 
smart home devices; and Voysis, to increase Siri's speech 
recognition accuracy.\2390\
---------------------------------------------------------------------------
    \2387\ Catherine Clifford, Here's How Siri Made It Onto Your 
iPhone, CNBC (June 29, 2017), https://www.cnbc.com/2017/06/29/how-siri-
got-on-the-iphone.html.
    \2388\ Jenna Wortham, Apple Buys a Start-Up for Its Voice 
Technology, N.Y. Times (Apr. 29, 2010), https://www.nytimes.com/2010/
04/29/technology/29apple.html.
    \2389\ Jeremy Horwitz, Apple Acquires Laserlike, an ML Startup that 
Might Make Siri Smarter, Venture Beat (Mar. 13, 2019), https://
venturebeat.com/2019/03/13/apple-bought-laserlike-an-ml-startup-that-
might-make-siri-smarter/.
    \2390\ See Lisa Eadicicco, Apple Just Bought Another AI Startup to 
Help Siri Catch Up to Rivals Amazon and Google, Bus. Insider (May 28, 
2020), https://www.businessinsider.com/apple-buys-ai-startup-inductiv-
siri-catch-up-amazon-google-2020-5; Mark Gurman, Apple Acquires AI 
Startup to Better Understand Natural Language, Bloomberg (Apr. 3, 
2020), https://www.
bloomberg.com/news/articles/2020-04-03/apple-acquires-ai-startup-to-
better-understand-natural-language; Charlie Wood, Apple Has Acquired 
the Artificial-Intelligence Startup Xnor.ai for a Reported $200 
Million, Bus. Insider (Jan. 16, 2020), https://www.businessinsider.com/
apple-reportedly-buys-xnor-ai-200-million-2020-1.

    (c) Conduct. As with many of Apple's other products and 
services, Apple has taken a walled garden approach to the 
intelligent voice assistant market by, among other tactics, 
limiting interoperability by restricting how digital voice 
assistants work on Apple devices and how Siri works with non-
Apple devices, and by using Siri to guide users to its own 
products and services.
    Apple does not allow competing digital voice assistants to 
replace Siri as the default on Apple devices. On iOS devices, 
the user must download the app for a competing digital voice 
assistant and then either use Siri to access that voice 
assistant or use that app directly.\2391\ Additionally, Apple 
does not allow third-party device manufacturers to install a 
speaker that receives Siri commands; only Apple devices can 
respond to the ``Hey Siri'' prompt.\2392\ While third-party 
hardware manufacturers can make their products Siri-compatible 
through the Works with Apple HomeKit, the voice commands needed 
to control the smart devices must still be directed to Siri on 
an Apple device, such as an iPhone or iPad.\2393\
---------------------------------------------------------------------------
    \2391\ See, e.g., Ben Lovejoy, Alexa iPhone App Can Now Operate 
Hands-Free--with a Little Help from Siri, 9to5Mac (July 8, 2020), 
https://9to5mac.com/2020/07/08/alexa-iphone-
app/; Chris Welch, Google Assistant Just Got Much Better and More 
Convenient on iOS Thanks to Siri Shortcuts, Verge (Nov. 20, 2018), 
https://www.theverge.com/2018/11/20/18105693/google-assistant-siri-
shortcuts-feature-iphone-ios.
    \2392\ How ``Hey Siri'' Works with Multiple Devices, Apple, https:/
/support.apple.com/en-us/HT208472 (last visited Sept. 27, 2020).
    \2393\ HomeKit, Apple, https://developer.apple.com/homekit/ (last 
visited Oct. 3, 2020).
---------------------------------------------------------------------------
    In addition to keeping Siri closely tied to Apple hardware, 
Apple has used its voice-enabled devices to strengthen consumer 
engagement with its own services and apps. For example, as of 
October 2020, by default, requests to Siri to play music open 
the Apple Music app, requests for directions open the Apple 
Maps app, and requests for web searches open the Safari 
app.\2394\ To use a competing service through Siri, a user must 
adjust the device's settings and identify the service in the 
command to Siri--for example, ``Hey Siri, play the National 
Anthem on Spotify.'' \2395\ For streaming music services, this 
integration only became possible with the introduction of iOS 
13 in 2019.\2396\ Previously, even when a user said the name of 
a third-party streaming service in the voice command, Apple 
opened an Apple-branded alternative.\2397\ In June 2020, Apple 
announced that it would update its HomePod smart speaker system 
to support third-party music services.\2398\ It remains unclear 
how seamless the integration will be and if Apple Music will 
remain the pre-installed default service.\2399\
---------------------------------------------------------------------------
    \2394\ E.g., Use Siri to Play Music or Podcasts, Apple, https://
support.apple.com/en-us/HT208279 (last visited Sept. 27, 2020); David 
Phelan, Apple Mulls Letting You Choose Default iOS 14 Apps: Why It 
Matters, Forbes (Feb. 21, 2010), https://www.forbes.com/sites/
davidphelan/2020/02/21/apple-mulls-letting-you-switch-default-iphone-
apps-in-ios-14/#70330
c9c11f8.
    \2395\ Kate Kozuch, How to Use Siri to Control Spotify in iOS 13, 
Tom's Guide (Oct. 7, 2019), https://www.tomsguide.com/how-to/how-to-
use-siri-to-control-spotify-ios-13.
    \2396\ Jason Cross, iOS 13 Enables Siri Support in Third Party 
Media Apps: Spotify, Pandora, Overcast, and Much More, MacWorld (June 
7, 2019), https://www.macworld.com/article/3400881/ios-13-enables-siri-
support-in-third-party-media-apps.html.
    \2397\ See Submission from Source 301, to H. Comm. on the 
Judiciary, Source 301-00000080, at 23 (Oct. 15, 2019) (on file with 
Comm.).
    \2398\ Kif Leswing, Apple Will Let iPhone Users Change Default Mail 
and Browser Apps, Addressing Antitrust Concerns, CNBC (June 22, 2020), 
https://www.cnbc.com/2020/06/22/apple-
allows-users-to-change-default-mail-and-browser-apps-at-wwdc.html.
    \2399\ Filipe Esposito, iOS 14 Includes Option to Change Default 
Services on HomePod for Each User, 9to5Mac (July 7, 2020), https://
9to5mac.com/2020/07/07/ios-14-includes-option-to-change-default-
services-on-homepod-for-each-user/.
---------------------------------------------------------------------------
    One app developer that spoke with the Subcommittee 
described Siri as a ``closed'' intelligent virtual assistant 
that limits the types of voice interactions that voice app 
developers have access to.\2400\ The app developer explained 
that SiriKit, which allows iOS apps to work with Siri, relies 
on a pre-designed list of basic interactions that third parties 
can use, such as messaging, calling, or payments. The very 
limited set of interactions permitted by Apple can make it 
impossible to launch an app for the third party's services, 
including those that compete with an Apple service.\2401\
---------------------------------------------------------------------------
    \2400\ Submission from Source 711, to H. Comm. on the Judiciary, 
Source 711-00000080, at 6-7 (Oct. 15, 2019) (on file with Comm.).
    \2401\ Id.
---------------------------------------------------------------------------
    These practices have recently come under scrutiny by 
antitrust authorities. In March 2019, Spotify filed a complaint 
against Apple before the European Commission, reportedly 
alleging, among other things, that Apple is restricting 
Spotify's access to Siri.\2402\ In July 2020, the European 
Commission's antitrust authority announced that it had opened 
an inquiry into the use of digital assistants and smart home 
products by Apple, Google, and Amazon, among other 
companies.\2403\ In her statement accompanying the 
announcement, Margrethe Vestager, the Commission's Executive 
Vice President, identified interoperability and self-
preferencing as areas of concern.\2404\
---------------------------------------------------------------------------
    \2402\ Thomas Ricker, Apple To Be Formally Investigated over 
Spotify's Antitrust Complaint, Says Report, Verge (May 6, 2019), 
https://www.theverge.com/2019/5/6/18530894/apple-music-monopoly-
spotify-app-store-europe.
    \2403\ Margrethe Vestager, Exec. Vice President, Eur. Comm'n, 
Statement by Executive Vice President Margrethe Vestager on the Launch 
of a Sector Inquiry on the Consumer Internet of Things (July 16, 2020), 
https://ec.europa.eu/commission/presscorner/detail/en/speech_20_
1367.
    \2404\ Id.
---------------------------------------------------------------------------

                          VI. RECOMMENDATIONS

    As part of its top-to-bottom review of competition in 
digital markets, the Subcommittee examined whether current laws 
and enforcement levels are adequate to address the market power 
concerns identified through this investigation. In pursuit of 
this goal, on March 13, 2020, the Subcommittee requested 
submissions from antitrust and competition policy experts. 
These experts were chosen on a careful, bipartisan basis to 
ensure the representation of a full range of views.
    Throughout the investigation, the Subcommittee received 
additional submissions and written statements from antitrust 
enforcers and other leading experts, including Margrethe 
Vestager, the Executive Vice President of the European 
Commission, and Rod Sims, the Chair of the Australian 
Competition and Consumer Commission. Most recently, the 
Subcommittee held an oversight hearing on October 1, 2020 
regarding ``Proposals to Strengthen the Antitrust Laws and 
Restore Competition Online,'' its seventh and final hearing as 
part of the investigation.
    Subcommittee Chair David N. Cicilline (D-RI) requested that 
staff provide Members of the Subcommittee with a series of 
recommendations, informed by this investigation, on how to 
strengthen the antitrust laws and restore competition online. 
As he noted in remarks to the American Antitrust Institute in 
June 2019:

     LNo doubt, other branches of government have a key role to 
play in the development of antitrust law. But Congress--not the 
courts, agencies, or private companies--enacted the antitrust 
laws, and Congress ultimately decides what the law should be 
and whether the law is working for the American people. As 
such, it is Congress' responsibility to conduct oversight of 
our antitrust laws and competition system to ensure that they 
are properly working and to enact changes when they are not. 
While I do not have any preconceived ideas about what the right 
answer is, as Chair of the Antitrust Subcommittee, I intend to 
carry out that responsibility with the sense of urgency and 
serious deliberation that it demands.\2405\
---------------------------------------------------------------------------
    \2405\ Hon. David N. Cicilline, Chair, Subcomm. on Antitrust, 
Commercial and Admin. Law of the H. Comm. on the Judiciary, Keynote 
Address at American Antitrust Institute's 20th Annual Policy Conference 
(June 20, 2019), https://cicilline.house.gov/press-release/cicilline-
delivers-keynote-address-american-antitrust-institute%E2%80%99s-20th-
annual-policy.

    In response to this request, the Subcommittee identified a 
broad set of reforms for further examination by the Members of 
the Subcommittee for purposes of crafting legislative and 
oversight responses to the findings of this Report. These 
reforms include proposals to: (1) promote fair competition in 
digital markets; (2) strengthen laws relating to mergers and 
monopolization; and (3) restore vigorous oversight and 
enforcement of the antitrust laws.
    The Subcommittee intends for these recommendations to serve 
as a complement, not a substitute, to strong enforcement of the 
antitrust laws. This is particularly true for acquisitions by 
dominant firms that may have substantially lessened competition 
or tended to create a monopoly in violation of the Clayton Act. 
In these cases, the Subcommittee supports as a policy matter 
the examination of the full range of remedies--including 
unwinding consummated acquisitions or divesting business 
lines--to fully restore competition that was harmed as a result 
of these acquisitions and to prevent future violations of the 
antitrust laws.\2406\
---------------------------------------------------------------------------
    \2406\ Due to separation of powers concerns and other relevant 
considerations, we do not take a position on the outcome of any 
individual matter before the Justice Department or the Federal Trade 
Commission.
---------------------------------------------------------------------------

            A. Restoring Competition in the Digital Economy

    For more than a century, Congress has addressed the market 
power of dominant intermediaries using a robust antitrust and 
antimonopoly toolkit.\2407\ The antitrust laws prohibit 
anticompetitive mergers and monopolistic conduct in order to 
promote open markets and prevent undue concentration of 
economic power. In many critical sectors of the economy--
including financial services, telecommunications, and 
transportation--Congress has also relied on a broad set of 
policies to create the conditions necessary for fair 
competition, even when economies of scale may favor 
concentration.
---------------------------------------------------------------------------
    \2407\ See, e.g., Subcomm. on Study of Monopoly Power of the H. 
Comm. on the Judiciary, 81st Cong. 2d Sess., The Antitrust Laws: A 
Basis for Economic Freedom iii (1950) (identifying an extensive list of 
statutes ``dealing directly with the preservation of the American 
competitive economy'' and reflecting the legislative policy that 
``under no circumstances should [laws] foster the growth of 
monopoly'').
---------------------------------------------------------------------------
    In a similar vein, the remedies identified in this Section 
seek to restore competition online by addressing harmful 
business practices as well as certain features of digital 
markets that tend to tip the market towards concentration.
1. Reduce Conflicts of Interest Through Structural Separations and Line 
        of Business Restrictions
    In addition to controlling one or multiple key channels of 
distribution, the dominant firms investigated by the 
Subcommittee are integrated across lines of business. When 
operating in adjacent markets, these platforms compete directly 
with companies that depend on them to access users, giving rise 
to a conflict of interest. As discussed earlier in this Report, 
the Subcommittee's investigation uncovered several ways in 
which Amazon, Apple, Facebook, and Google use their dominance 
in one or more markets to advantage their other lines of 
business, reducing dynamism and innovation.
    First, the investigation revealed that the dominant 
platforms have misappropriated the data of third parties that 
rely on their platforms, effectively collecting information 
from customers only to weaponize it against them as rivals. For 
example, the investigation produced documents showing that 
Google used the Android operating system to closely track usage 
trends and growth patterns of third-party apps--near-perfect 
market intelligence that Google can use to gain an edge over 
those same apps. Facebook used its platform tools to identify 
and then acquire fast-growing third-party apps, thwarting 
competitive threats at key moments. A former Amazon employee 
told the Subcommittee that Amazon has used the data of third-
party merchants to inform Amazon's own private label strategy, 
identifying which third-party products were selling well and 
then introducing copycat versions. These and other examples 
detailed in this Report demonstrate a dangerous pattern of 
predatory conduct that, if left unchecked, risk further 
concentrating wealth and power.
    Some have suggested that there is little difference between 
the dominant platforms' access to and use of this data and the 
way that brick-and-mortar retailers track popular products. The 
Subcommittee's investigation, however, produced evidence that 
the platforms' access to competitively significant market data 
is unique. Specifically, the dominant platforms collect real-
time data which, given the scale of their user-base, is akin to 
near-perfect market intelligence. Whereas firms with a choice 
among business partners might seek to protect their proprietary 
data, the platforms' market power lets them compel the 
collection of this data in the first place.
    Second, dominant platforms can exploit their integration by 
using their dominance in one market as leverage in negotiations 
in an unrelated line of business. For example, evidence 
produced during the investigation showed that Amazon has 
leveraged its dominance in online commerce as pressure during 
negotiations with firms in a separate line of business. Market 
participants that depend on Amazon's retail platform are 
effectively forced to accept its demands--even in markets where 
Amazon would otherwise lack the power to set the terms of 
commerce.
    Third, dominant platforms have used their integration to 
tie products and services in ways that can lock in users and 
insulate the platform from competition. Google, for example, 
required that smartphone manufacturers seeking to use Android 
also pre-install and give default status to certain Google 
apps--enabling Google to maintain its search monopoly and crowd 
out opportunities for third-party developers.
    And fourth, these firms can use supra-competitive profits 
from the markets they dominate to subsidize their entry into 
other markets. Documents uncovered during the Subcommittee's 
investigation indicate that the dominant platforms have relied 
on this strategy to capture markets, as startups and non-
platform businesses tend to lack the resources and capacity to 
bleed billions of dollars over multiple years in order to drive 
out rivals. For dominant platforms, meanwhile, this strategy 
appears to be a race to capture ecosystems and control 
interlocking products that funnel data back to the platforms, 
further reinforcing their dominance.
    By using market power in one area to advantage a separate 
line of business, dominant firms undermine competition on the 
merits. By functioning as critical intermediaries that are also 
integrated across lines of business, the dominant platforms 
face a core conflict of interest. The surveillance data they 
collect through their intermediary role, meanwhile, lets them 
exploit that conflict with unrivaled precision. Their ability 
both to use their dominance in one market as negotiating 
leverage in another, and to subsidize entry to capture 
unrelated markets, have the effect of spreading concentration 
from one market into others, threatening greater and greater 
portions of the digital economy.
    To address this underlying conflict of interest, the 
Subcommittee recommends that Congress consider legislation that 
draws on two mainstay tools of the antimonopoly toolkit: 
structural separation and line of business restrictions.\2408\ 
Structural separations prohibit a dominant intermediary from 
operating in markets that place the intermediary in competition 
with the firms dependent on its infrastructure. Line of 
business restrictions, meanwhile, generally limit the markets 
in which a dominant firm can engage.
---------------------------------------------------------------------------
    \2408\ See Submission from Sally Hubbard, Dir. of Enf't Strategy, 
Open Mkts. Inst., et al., to H. Comm. on the Judiciary, 7-8 (Apr. 17, 
2020) (on file with Comm.) [hereinafter Hubbard Submission]; Submission 
from Stacy Mitchell, Co-Dir., Inst. for Local Self-Reliance, to H. 
Comm. on the Judiciary, 4 (May 4, 2020) (on file with Comm.) 
[hereinafter Mitchell Submission]; Submission from Zephyr Teachout, 
Assoc. Prof. of Law, Fordham Univ. Sch. of Law, to H. Comm. on the 
Judiciary, 6 (Apr. 23, 2020) (on file with Comm.) [hereinafter Teachout 
Submission]; Submission from Ams. for Fin. Reform, to H. Comm. on the 
Judiciary, 3-4 (Apr. 17, 2020) (on file with Comm.).
---------------------------------------------------------------------------
    Congress has relied on both policy tools as part of a 
standard remedy for dominant intermediaries in other network 
industries, including railroads and telecommunications 
services.\2409\ In the railroad industry, for example, a 
congressional investigation found that the expansion of common 
carrier railroads into the coal market undermined independent 
coal producers, whose wares the railroads would deprioritize in 
order to give themselves superior access to markets. In 1893, 
the Committee on Interstate and Foreign Commerce wrote that 
``[n]o competition can exist between two producers of a 
commodity when one of them has the power to prescribe both the 
price and output of the other.'' \2410\
---------------------------------------------------------------------------
    \2409\ Mitchell Submission at 4.
    \2410\ H.R. Rep. No. 52-2278, at vii-viii (1893).
---------------------------------------------------------------------------
    Congress subsequently enacted a provision to prohibit 
railroads from transporting any goods that they had produced or 
in which they held an interest.\2411\ Congress has legislated 
similar prohibitions in other markets. The Bank Holding Company 
Act of 1956 broadly prohibited bank holding companies from 
acquiring nonbanking companies.\2412\ Vertically integrated 
television networks, meanwhile, were subject to ``fin-syn'' 
rules, which prohibited networks from entering production and 
syndication markets.\2413\
---------------------------------------------------------------------------
    \2411\ Hepburn Act, Pub. L. No. 59-337, Sec. 1, 34 Stat. 584, 585 
(1906).
    \2412\ Bank Holding Company Act of 1956, Pub. L. No. 84-511, 
Sec. 4(a), 70 Stat. 133, 135 (codified as amended at 12 U.S.C. 
1843(a)).
    \2413\ Report and Order, Amendment of Rules Regarding Competition 
and Responsibility in Network Television Broadcasting, 23 F.C.C.2d 382, 
398 para. 30 (1970).
---------------------------------------------------------------------------
    Both structural separations and line of business 
restrictions seek to eliminate the conflict of interest faced 
by a dominant intermediary when it enters markets that place it 
in competition with dependent businesses. In certain cases, 
structural separations have also been used to prevent 
monopolistic firms from subsidizing entry into competitive 
markets and to promote media diversity.\2414\
---------------------------------------------------------------------------
    \2414\ Mitchell Submission at 4.
---------------------------------------------------------------------------
    At a general level, there are two forms of structural 
separation: (1) ownership separations, which require 
divestiture and separate ownership of each business; and (2) 
functional separations, which permit a single corporate entity 
to engage in multiple lines of business but prescribe the 
particular organizational form it must take.\2415\ Importantly, 
both forms of structural limits apply on a market-wide basis, 
while divestitures in antitrust enforcement generally apply to 
a single firm or merging party.
---------------------------------------------------------------------------
    \2415\ John Kwoka & Tommaso Valletti, Scrambled Eggs and Paralyzed 
Policy: Breaking Up Consummated Mergers and Dominant Firms (forthcoming 
Oct. 2020) (manuscript at 22) (on file with Comm.).
---------------------------------------------------------------------------
    A benefit of these proposals is their administrability. By 
setting rules for the underlying structure of the market--
rather than policing anticompetitive conduct on an ad hoc 
basis--structural rules are easier to administer than conduct 
remedies, which can require close and continuous 
monitoring.\2416\
---------------------------------------------------------------------------
    \2416\ OECD, Structural Separation in Regulated Industries: Report 
on Implementing the OECD Recommendation 9 (2016), https://www.oecd.org/
daf/competition/Structural-separation-in-regulated-industries-
2016report-en.pdf (``[S]eparation limits the need for regulation that 
is difficult and costly to devise and implement, and may be only partly 
effective; it improves information; and it eliminates the risk of 
cross-subsidies by the incumbent from its non-competitive to its 
competitive segments.'').
---------------------------------------------------------------------------
    The challenges of crafting and implementing structural 
solutions vary by market and market participants. In response 
to the Subcommittee's requests for comments on potential 
reforms, some antitrust experts have cautioned that crafting 
separations can pose a major cost and challenge, especially in 
dynamic markets.\2417\ Others have responded by identifying 
certain principles that can make identifying the fault lines 
easier. In the case of separations undoing vertical mergers, 
the fault lines designating the separate companies are likely 
to still be apparent, even in the new structure.\2418\ In cases 
where a firm grew through internal expansion or when the 
constituent parts are no longer clearly distinguishable, 
scholars have suggested identifying distinct business 
operations.\2419\ Experts have also noted that business-
initiated corporate restructuring and divestitures may in some 
cases also provide a guide to designing and implementing 
successful break-ups.\2420\
---------------------------------------------------------------------------
    \2417\ See, e.g., Submission from Maureen K. Ohlhausen, Partner, 
Baker Botts L.L.P., to H. Comm. on the Judiciary, 5 (Apr. 17, 2020) (on 
file with Comm.).
    \2418\ John Kwoka & Tommaso Valletti, Scrambled Eggs and Paralyzed 
Policy: Breaking Up Consummated Mergers and Dominant Firms (forthcoming 
Oct. 2020) (manuscript at 11) (on file with Comm.).
    \2419\ Id. at 15.
    \2420\ Id.; Rory Van Loo, In Defense of Breakups: Administering a 
``Radical'' Remedy, 105 Cornell L. Rev. (forthcoming 2020), https://
ssrn.com/abstract=3646630.
---------------------------------------------------------------------------
    Several enforcement bodies around the world are exploring 
the use of structural separations in digital markets. In July 
2020, the United Kingdom's Competition and Markets Authority 
recommended that its digital regulatory body have powers to 
``implement ownership separation or operational separation,'' 
concluding that ``there could be significant benefits if there 
were more formal separation between businesses with market 
power'' in digital advertising markets in particular.\2421\ 
Meanwhile, the OECD in 2001 adopted recommendations to 
structurally separate vertically integrated regulated firms 
that operate in concentrated markets.\2422\ In its 15-year 
overview, the OECD concluded that ``structural separation 
remains a relevant remedy'' and identified other market areas 
where it might be adopted.\2423\
---------------------------------------------------------------------------
    \2421\ Competition & Mkts. Auth. Report at 405-06.
    \2422\ OECD, Structural Separation in Regulated Industries: Report 
on Implementing the OECD Recommendation 9 (2016), https://www.oecd.org/
daf/competition/Structural-
separation-in-regulated-industries-2016report-en.pdf.
    \2423\ Id. at 3.
---------------------------------------------------------------------------
2. Implement Rules to Prevent Discrimination, Favoritism, and Self-
        Preferencing
    As discussed throughout this Report, the Subcommittee 
identified numerous instances in which dominant platforms 
engaged in preferential or discriminatory treatment. In some 
cases, the dominant platform privileged its own products or 
services. In others, the dominant platform gave preferential 
treatment to one business partner over others. Because the 
dominant platform was, in most instances, the only viable path 
to market, its discriminatory treatment had the effect of 
picking winners and losers in the marketplace.
    Google, for example, engaged in self-preferencing by 
systematically ranking its own content above third-party 
content, even when its content was inferior or less relevant 
for users. Web publishers of content that Google demoted 
suffered economic losses and had no way of competing on the 
merits. Over the course of the investigation, numerous third 
parties also told the Subcommittee that self-preferencing and 
discriminatory treatment by the dominant platforms forced 
businesses to lay off employees and divert resources away from 
developing new products and towards paying a dominant platform 
for advertisements or other ancillary services. They added that 
some of the harmful business practices of the platforms 
discouraged investors from supporting their business and made 
it challenging to grow and sustain a business even with highly 
popular products. Without the opportunity to compete fairly, 
businesses and entrepreneurs are dissuaded from investing and, 
over the long term, innovation suffers.
    In response to these concerns, the Subcommittee recommends 
that Congress consider establishing nondiscrimination rules to 
ensure fair competition and to promote innovation online. 
Nondiscrimination rules would require dominant platforms to 
offer equal terms for equal service and would apply to price as 
well as to terms of access. As several experts noted, 
nondiscrimination has been a mainstay principle for governing 
network intermediaries, especially those that play essential 
roles in facilitating transportation and communications.\2424\
---------------------------------------------------------------------------
    \2424\ See, e.g., Submission from Harry First, Charles L. Denison 
Prof. of Law, N.Y.U. Sch. of Law & Eleanor Fox, Walter J. Derenberg 
Prof. of Trade Reg., N.Y.U. Sch. of Law, to H. Comm. on the Judiciary, 
5 (Aug. 6, 2020) [hereinafter First & Fox Submission] (``[Google, 
Amazon, Facebook, and Apple] are akin to essential facilities for many 
smaller businesses. Many businesses, to do business, must use the 
platform. They have almost no choice. The GAFA compete with the 
businesses on their platforms.'') (on file with Comm.); Submission from 
Albert A. Foer, Founder & Senior Fellow, Am. Antitrust Inst., to H. 
Comm. on the Judiciary, 1-2 (Apr. 14, 2020) (on file with Comm.) 
[hereinafter Foer Submission]; Hubbard Submission at 5-7; Remedies 
Hearing 6-7 (statement of K. Sabeel Rahman, President, Demos).
---------------------------------------------------------------------------
    The 1887 Interstate Commerce Act, for example, prohibited 
discriminatory treatment by railroads.\2425\ In the years 
since, Congress and policymakers have continued to apply 
nondiscrimination principles to network monopolies, even as 
technologies have rapidly evolved. Most recently, the Open 
Internet Order written by the Federal Communications Commission 
(FCC) in 2015 was effectively a nondiscrimination regime, 
prohibiting internet service providers from picking winners and 
losers among content providers and other users.\2426\ Other 
jurisdictions have begun to apply nondiscrimination principles 
to digital markets. For example, after determining that Google 
had engaged in illegal self-preferencing, the European 
Commission required that Google follow ``the simple principle 
of equal treatment.'' \2427\
---------------------------------------------------------------------------
    \2425\ Hubbard Submission at 4-5.
    \2426\ Report and Order on Remand, Protecting and Promoting the 
Open Internet, 30 FCC Rcd. 5601, 5603 para. 4 (2015) (``[C]arefully-
tailored rules that would prevent specific practices we know are 
harmful to Internet openness--blocking, throttling, and paid 
prioritization--as well as a strong standard of conduct designed to 
prevent the deployment of new practices that would harm Internet 
openness.'').
    \2427\ Press Release, Eur. Comm'n, Antitrust: Commission Fines 
Google =2.42 Billion for Abusing Dominance as Search Engine by Giving 
Illegal Advantage to Own Comparison Shopping Service (June 27, 2017), 
https://ec.europa.eu/commission/presscorner/detail/en/MEMO_17_
1785.
---------------------------------------------------------------------------
    Historically, Congress has implemented nondiscrimination 
requirements in a variety of markets. With railroads, the 
Interstate Commerce Commission oversaw obligations and 
prohibitions applied to railroads designated as common 
carriers.\2428\ More recently, the Cable Act of 1992 included a 
provision requiring the Federal Communications Commission to 
oversee a nondiscrimination requirement for cable 
operators.\2429\ Some experts have proposed establishing a 
similar venue to adjudicate discrimination disputes between 
dominant platforms and the third parties that depend on 
them.\2430\ Others note that the Federal Trade Commission could 
also use its existing competition rulemaking authority to 
``require dominant gatekeepers to apply a rule of neutrality in 
operating their platforms.'' \2431\
---------------------------------------------------------------------------
    \2428\ Hubbard Submission at 5.
    \2429\ See, e.g., Submission from Hal Singer, Managing Dir., Econ 
One Research, to H. Comm. on the Judiciary, 4-5 (Mar. 30, 2020) (on 
file with Comm.) [hereinafter Singer Submission].
    \2430\ Id.
    \2431\ First & Fox Submission at 12.
---------------------------------------------------------------------------
    Finally, on several occasions, nondiscrimination rules have 
been treated as an important complement to divestitures in 
antitrust enforcement. For example, the Justice Department 
combined AT&T's divestiture of the Regional Bell Operating 
Companies with an equal access obligation, requiring AT&T to 
offer independent long-distance providers access to its network 
on equal terms of quality and price.\2432\ The DOJ argued that 
requiring equal access without mandating divestiture would be 
insufficient due to AT&T's incentive and ability to 
discriminate against local carriers.\2433\
---------------------------------------------------------------------------
    \2432\ See United States v. AT&T Co., 552 F. Supp. 131 (D.D.C. 
1982).
    \2433\ Mitchell Submission at 4 (``It's important to note here that 
applying this kind of [nondiscrimination-based] regulatory oversight to 
the big tech firms will not be effective unless it's done in 
conjunction with breakups. In the case of Amazon, it's my view that 
several factors make it virtually impossible to establish a system of 
oversight and adjudication that would be robust enough to protect 
competition and fair market access, absent spinning off its shopping 
platform from its other divisions. These factors include the enormous 
number of sellers and transactions, the low dollar value of most 
transactions, and the many subtle and hard-to-detect ways that Amazon 
can skew outcomes to favor its own interests. Therefore, oversight must 
be combined with structural separation, which would do much of the work 
by removing the underlying conflicts of interest, thus allowing for an 
effective and less bureaucratic system of oversight.'').
---------------------------------------------------------------------------
3. Promote Innovation Through Interoperability and Open Access
    As discussed elsewhere in the Report, digital markets have 
certain characteristics--such as network effects, switching 
costs, and other entry barriers--that make them prone to 
tipping in favor of a single dominant firm. As a result, these 
markets are no longer contestable by new entrants,\2434\ and 
the competitive process shifts from ``competition in the market 
to competition for the market.'' \2435\
---------------------------------------------------------------------------
    \2434\ Competition & Mkts. Auth. Report at 10-11.
    \2435\ See Stigler Report at 29; Michael Kades & Fiona Scott 
Morton, Interoperability as a Competition Remedy for Digital Networks 1 
(Wash. Ctr. for Equitable Growth Working Paper Series, 2020), https://
equitablegrowth.org/working-papers/interoperability-as-a-competition-
remedy-for-digital-networks/ (``The monopolist operates in a market 
with significant network effects, scale and scope economies, and low 
distribution costs. Therefore, the competition that matters most is 
often for the market not within the market. Anticompetitive conduct is 
more likely to succeed. And, the harm to consumers greater because the 
market tends to be winner-take-all, or most, (it `tips').'').
---------------------------------------------------------------------------
    This dynamic is particularly evident in the social 
networking market. As discussed earlier in the Report, 
Facebook's internal documents and communications indicate that, 
due to strong network effects and market tipping, the most 
significant competitive pressure to Facebook is from within its 
own family of products--Facebook, Instagram, Messenger, and 
WhatsApp--rather than from other social apps in the market, 
such as Snapchat or Twitter. In the case of messaging apps, 
Facebook's documents show that network effects can be even more 
extreme. And because Facebook is not interoperable with other 
social networks, its users face high costs to switch to other 
platforms, locking them into Facebook's platform.
    High switching costs are also present in other markets. In 
the smartphone market, switching costs include learning a new 
operating system, which can discourage users from leaving 
Google or Apple due to familiarity with their distinct 
operating systems, as well as the inability to easily port all 
of their data, such as messages, call history, and photos. In 
online commerce, sellers have high switching costs associated 
with their reputation. Sellers can be locked into an incumbent 
platform for online commerce if they are unable to transfer 
their reputation--ratings and customer reviews accrued over a 
long period of time--to a different platform. Switching costs 
involving data for other services, such as email, can also 
contribute to user lock-in.\2436\ In response to these 
concerns, the Subcommittee recommends that Congress consider 
data interoperability and portability to encourage competition 
by lowering entry barriers for competitors and switching costs 
for consumers. These reforms would complement vigorous 
antitrust enforcement by spurring competitive entry.
---------------------------------------------------------------------------
    \2436\ Chris Riley, A Framework for Forward-Looking Tech 
Competition Policy 10 (Mozilla Working Paper, 2019), https://
blog.mozilla.org/netpolicy/files/2019/09/Mozilla-Competition-Working-
Paper.pdf.

    (a) Interoperability. Interoperability is fundamental to 
the open internet.\2437\ It is present in email, which is an 
open, interoperable protocol for communicating online 
regardless of a person's email service or the type of device 
they use to send the email.\2438\ It has also been built into 
numerous other services online \2439\ and is a ``core technical 
structure of the Internet.'' \2440\ Interoperability standards 
are also present in other communications systems, from 
telephones to telegraphs.\2441\ Telecommunications would not 
work without the ability of users on one carrier's network to 
interconnect with other carriers.\2442\ And in the absence of 
interoperability, dominant carriers could foreclose new 
entrants from offering lower prices or better services, 
reinforcing their monopoly power while harming consumers and 
competition.\2443\
---------------------------------------------------------------------------
    \2437\ See generally id. at 18-24.
    \2438\ Michael Kades & Fiona Scott Morton, Interoperability as a 
Competition Remedy for Digital Networks 14 (Wash. Ctr. for Equitable 
Growth Working Paper Series, 2020), https://equitablegrowth.org/
working-papers/interoperability-as-a-competition-remedy-for-digital-
networks/.
    \2439\ Becky Chao & Ross Schulman, Promoting Platform 
Interoperability, New Am. Found. (May 13, 2020), https://
www.newamerica.org/oti/reports/promoting-platform-interoperability/.
    \2440\ Chris Riley, A Framework for Forward-Looking Tech 
Competition Policy 18 (Mozilla Working Paper, 2019), https://
blog.mozilla.org/netpolicy/files/2019/09/Mozilla-Competition-Working-
Paper.pdf.
    \2441\ Becky Chao & Ross Schulman, Promoting Platform 
Interoperability, New Am. Found. (May 13, 2020), https://
www.newamerica.org/oti/reports/promoting-platform-interoperability/.
    \2442\ Michael Kades & Fiona Scott Morton, Interoperability as a 
Competition Remedy for Digital Networks 13-14 (Wash. Ctr. for Equitable 
Growth Working Paper Series, 2020), https://equitablegrowth.org/
working-papers/interoperability-as-a-competition-remedy-for-digital-
networks/.
    \2443\ Id.
---------------------------------------------------------------------------
    An interoperability requirement would allow competing 
social networking platforms to interconnect with dominant firms 
to ensure that users can communicate across services.\2444\ 
Foremost, interoperability ``breaks the power of network 
effects'' by allowing new entrants to take advantage of 
existing network effects ``at the level of the market, not the 
level of the company.'' \2445\ It would also lower switching 
costs for users by ensuring that they do not lose access to 
their network as a result of switching.
---------------------------------------------------------------------------
    \2444\ Competition in Digital Technology Markets: Examining Self-
Preferencing by Digital Platforms: Hearing Before the Subcomm. on 
Antitrust, Competition Policy and Consumer Rights of the S. Comm. on 
the Judiciary, 116th Cong. 21 (2020) (statement of Sally Hubbard, Dir. 
of Enf't Strategy, Open Mkts. Inst.) (``Interoperability is an anti-
monopoly tool that has been used successfully many times to promote 
innovation by reducing barriers to entering markets.'').
    \2445\ Michael Kades & Fiona Scott Morton, Interoperability as a 
Competition Remedy for Digital Networks 13-14 (Wash. Ctr. for Equitable 
Growth Working Paper Series, 2020), https://equitablegrowth.org/
working-papers/interoperability-as-a-competition-remedy-for-digital-
networks/.
---------------------------------------------------------------------------
    The implementation cost of requiring interoperability by 
dominant firms would be relatively low. Unlike interconnecting 
in traditional communications markets, there is little direct 
cost associated with interoperating with dominant 
platforms.\2446\
---------------------------------------------------------------------------
    \2446\ Id. at 15 (``Unlike the familiar AT&T example, there would 
be no cost to interconnection in the digital platform context. The 
standard is simply a way to present and transfer information that is 
already being presented and transferred. No wire needs to be connected 
to achieve it, nor do machines need to be co-located, or special 
workers employed. Transferring digital files has almost zero cost, but 
regardless of that cost, Facebook would be transferring those files to 
serve its users in any case. Facebook might need to pay some costs to 
redesign the format in which it transfers text and images, but if it 
has been found liable for monopolization by a court, it is expected 
that a remedy will have costs. The real cost of ongoing 
interoperability to Facebook.com is the possibility that it loses 
customers once the barriers to entry fall. But that risk is what every 
firm faces in a competitive market and represents a benefit to 
consumers.'').
---------------------------------------------------------------------------
    Finally, interoperability is an important complement, not 
substitute, to vigorous antitrust enforcement. As discussed in 
this Report, Facebook has tipped the social network toward a 
monopoly, and due to its strong network effects, does not face 
competitive pressure. On its own, interoperability is unlikely 
to fully restore competition in the social networking market 
due to the lack of meaningful competition in the market today. 
On the other hand, in the absence of procompetitive policies 
like interoperability, it is also possible that enforcement 
alone may provide incomplete relief due to future market 
tipping.\2447\
---------------------------------------------------------------------------
    \2447\ Id. at 10 (``A divestiture may reduce the existing market 
power of the dominant network but not eliminate the market power due to 
network effects that was achieved through anticompetitive conduct. And, 
alone, divestiture may not prevent future tipping. Thus, on their own, 
they risk being insufficient to fully restore the lost competition.'').

    (b) Data Portability. Data portability is also a remedy for 
high costs associated with leaving a dominant platform. These 
costs present another barrier to entry for competitors and a 
barrier to exit for consumers. Dominant platforms can maintain 
market power in part because consumers experience significant 
frictions when moving to a new product.\2448\ Users contribute 
data to a platform, for example, but can find it hard to 
migrate that data to a rival platform.\2449\ The difficulty of 
switching tends to keep users on incumbent platforms.\2450\ 
Providing consumers and businesses with tools to easily port or 
rebuild their social graph, profile, or other relevant data on 
a competing platform would help address these concerns.\2451\ 
Although complementary to interoperability, data portability 
alone would not fully address concerns related to network 
effects since consumers would still need to recreate their 
networks on a new platform and would not be able to communicate 
with their network on the incumbent platform.\2452\
---------------------------------------------------------------------------
    \2448\ See Joshua Gans, The Hamilton Project, Enhancing Competition 
with Data and Identity Portability 5 (2018), http://
www.hamiltonproject.org/assets/files/Gans_20180611
.pdf.
    \2449\ See id.
    \2450\ See Josh Constine, Friend Portability Is the Must-Have 
Facebook Regulation, TechCrunch (May 12, 2019), https://
technologycrunch.com/2019/05/12/friends-wherever; Chris Dixon, The 
Interoperability of Social Networks, Bus. Insider (Nov. 10, 2010), 
https://www.businessinsider.com/the-interoperability-of-social-
networks-2011-2; Data and Privacy Hearing at 134 (statement of Dina 
Srinivasan, Fellow, Yale Thurman Arnold Project).
    \2451\ Submission from Charlotte Slaiman, Competition Policy Dir., 
Pub. Knowledge, to H. Comm. on the Judiciary (May 14, 2020) (on file 
with Comm.) [hereinafter Slaiman Submission]; id., app. I, at 3-4 
(statement of Gene Kimmelman, Senior Advisor, Pub. Knowledge).
    \2452\ Competition in Digital Technology Markets: Examining Self-
Preferencing by Digital Platforms: Hearing Before the Subcomm. on 
Antitrust, Competition Policy and Consumer Rights of the S. Comm. on 
the Judiciary, 116th Cong. 21 (2020) (statement of Sally Hubbard, Dir. 
of Enf't Strategy, Open Mkts. Inst.) (on file with Comm.). Last year, 
Senators Mark R. Warner (D-VA), Josh Hawley (R-MO), and Richard 
Blumenthal (D-CT) introduced S.2658, the ``Augmenting
                                                                        
         Continued
Compatibility and Competition by Enabling Service Switching (ACCESS) 
Act of 2019,'' bipartisan legislation to require that dominant 
platforms make user data portable and their services interoperable. 
Additionally, this proposal would also allow users to delegate 
management of their privacy preferences to a third-party service. Press 
Release, Sen. Mark R. Warner, Senators Introduce Bipartisan Bill to 
Encourage Competition in Social Media (Oct. 22, 2019), https://
www.warner.senate.gov/public/index.cfm/2019/10/senators-introduce-
bipartisan-bill-to-encourage-competition-in-social-media.
---------------------------------------------------------------------------
4. Reduce Market Power Through Merger Presumptions
    The firms investigated by the Subcommittee owe part of 
their dominance to mergers and acquisitions. Several of the 
platforms built entire lines of business through acquisitions, 
while others used acquisitions at key moments to neutralize 
competitive threats. Although the dominant platforms 
collectively engaged in several hundred mergers and 
acquisitions between 2000-2019, antitrust enforcers did not 
block a single one of these transactions. The Subcommittee's 
investigation revealed that several of these acquisitions 
enabled the dominant platforms to block emerging rivals and 
undermine competition.
    Despite a significant number of ongoing antitrust 
investigations, the dominant platforms have continued to pursue 
significant deal-making. Over the last year, for example, 
Google purchased Fitbit for $2.1 billion and Looker for $2.6 
billion; Amazon purchased Zoox for $1.3 billion; and Facebook 
acquired Giphy for an undisclosed amount.\2453\ Meanwhile, all 
four of the firms investigated by the Subcommittee have 
recently focused on acquiring startups in the artificial 
intelligence and virtual reality spaces.\2454\
---------------------------------------------------------------------------
    \2453\ Chaim Gartenberg, Google Buys Fitbit for $2.1 Billion, Verge 
(Nov. 1, 2019), https://www.theverge.com/2019/11/1/20943318/google-
fitbit-acquisition-fitness-tracker-announcement; Lauren Feiner & Jordan 
Novet, Google Cloud Boss Thomas Kurian Makes His First Big Move--Buys 
Looker for $2.6 Billion, CNBC (June 6, 2019), https://www.cnbc.com/
2019/06/06/google-buys-cloud-company-looker-for-2point6-billion.html; 
Karen Weise & Erin Griffith, Amazon to Buy Zoox, in a Move Toward Self-
Driving Cars, N.Y. Times (June 26, 2020), https://www. nytimes.com/
2020/06/26/business/amazon-zoox.html; Kurt Wagner & Sarah Frier, 
Facebook Buys Animated Image Library Giphy for $400 Million, Bloomberg 
(May 15, 2020), https://www.bloomberg.com/news/articles/2020-05-15/
facebook-buys-animated-image-library-giphy-to-boost-messaging.
    \2454\ See infra Appendix.
---------------------------------------------------------------------------
    Ongoing acquisitions by the dominant platforms raise 
several concerns. Insofar as any transaction entrenches their 
existing position, or eliminates a nascent competitor, it 
strengthens their market power and can close off market entry. 
Furthermore, by pursuing additional deals in artificial 
intelligence and in other emerging markets, the dominant firms 
of today could position themselves to control the technology of 
tomorrow.
    It is unclear whether the antitrust agencies are presently 
equipped to block anticompetitive mergers in digital markets. 
The record of the Federal Trade Commission (FTC) and the 
Justice Department in this area shows significant missteps and 
repeat enforcement failures. While both agencies are currently 
pursuing reviews of pending transactions, it is not yet clear 
whether they have developed the analytical tools to challenge 
anticompetitive deals in digital markets. For example, the 
Justice Department in February permitted Google's acquisition 
of Looker, a data analytics and business intelligence startup, 
despite serious risks that the deal would eliminate an 
independent rival and could allow Google to cut off access to 
rivals.\2455\ These concerns are especially acute today, given 
the combined national health and economic crises, which have 
widened the gap between the dominant platforms and businesses 
across the rest of the economy.
---------------------------------------------------------------------------
    \2455\ Letter from Diana L. Moss, President, Am. Antitrust Inst., 
to Hon. Makan Delrahim, Assistant Att'y Gen., U.S. Dep't of Justice, 
Antitrust Div. (July 8, 2019), https://www.antitrust
institute.org/wp-content/uploads/2019/07/AAI-Ltr-to-DOJ_Google-
Looker_7.8.19.pdf.
---------------------------------------------------------------------------
    To address this concern, the Subcommittee recommends that 
Congress consider shifting presumptions for future acquisitions 
by the dominant platforms. Under this change, any acquisition 
by a dominant platform would be presumed anticompetitive unless 
the merging parties could show that the transaction was 
necessary for serving the public interest and that similar 
benefits could not be achieved through internal growth and 
expansion. This process would occur outside the current Hart-
Scott-Rodino Act (HSR) process, such that the dominant 
platforms would be required to report all transactions and no 
HSR deadlines would be triggered. Establishing this presumption 
would better reflect Congress's preference for growth through 
ingenuity and investment rather than through acquisition.
5. Create an Even Playing Field for the Free and Diverse Press
    The free and diverse press--particularly local press--is 
the backbone of a healthy and vibrant democracy. But as 
discussed in this Report, the rise of market power online has 
corresponded with a significant decline in the availability of 
trustworthy sources of news.\2456\ Through dominating both 
digital advertising and key communication platforms, Google and 
Facebook have outsized power over the distribution and 
monetization of trustworthy sources of news online,\2457\ 
creating an uneven playing field in which news publishers are 
beholden to their decisions.\2458\
---------------------------------------------------------------------------
    \2456\ Free and Diverse Press Hearing at 21 (statement of David 
Chavern, President & CEO, News Media All.) (``In effect, a couple of 
dominant tech platforms are acting as regulators of the digital news 
industry.'').
    \2457\ Submission of Source 52, to H. Comm. on the Judiciary, 12 
(Oct. 30, 2019) (on file with Comm.).
    \2458\ Submission from Source 53, to H. Comm. on the Judiciary, 7 
(Oct. 14, 2019) (on file with Comm.). Although Apple News and Apple 
News Plus are increasingly popular news aggregators, most market 
participants that the Subcommittee received evidence from during the 
investigation do not view Apple as a critical intermediary for online 
news at this time. Some publishers raised competition concerns about 
the tying of payment inside Apple's news product.
---------------------------------------------------------------------------
    To address this imbalance of bargaining power, we recommend 
that the Subcommittee consider legislation to provide news 
publishers and broadcasters with a narrowly tailored and 
temporary safe harbor to collectively negotiate with dominant 
online platforms.
    In April 2019, Subcommittee Chair Cicilline and Doug 
Collins (R-GA), the former Ranking Member of the Committee on 
the Judiciary, introduced H.R. 2054, the ``Journalism 
Competition and Preservation Act of 2019.'' \2459\ H.R. 2054 
would allow coordination by news publishers under the antitrust 
laws if it: (1) directly relates to the quality, accuracy, 
attribution or branding, or interoperability of news; (2) 
benefits the entire industry, rather than just a few 
publishers, and is non-discriminatory to other news publishers; 
and (3) directly relates to and is reasonably necessary for 
these negotiations, instead of being used for other purposes. 
As Subcommittee Chair Cicilline noted at the time of the bill's 
introduction:
---------------------------------------------------------------------------
    \2459\ Press Release, Rep. David N. Cicilline, Cicilline, Collins 
Introduce Bill to Provide Lifeline to Local News (Apr. 3, 2019), 
https://cicilline.house.gov/press-release/cicilline-collins-introduce-
bill-provide-lifeline-local-news.

     LThe free press is a cornerstone of our democracy. 
Journalists keep the public informed, root out corruption, and 
hold the powerful accountable. This bill will provide a much-
needed lifeline to local publishers who have been crushed by 
Google and Facebook. It's about time we take a stand on this 
issue.\2460\
---------------------------------------------------------------------------
    \2460\ Id.

Mr. Collins added that the proposed legislation would allow 
``community newspapers to more fairly negotiate with large tech 
platforms that are operating in an increasingly anticompetitive 
space,'' which would ``help protect journalism, promote 
competition and allow communities to stay informed.'' \2461\
---------------------------------------------------------------------------
    \2461\ Id.
---------------------------------------------------------------------------
    We recommend the consideration of this legislation as part 
of a broader set of reforms to address the rise of market power 
online. This proposed legislation follows a long congressional 
tradition of allocating coordination rights to individuals or 
entities that lack bargaining power in a marketplace.\2462\ 
Although antitrust exemptions have been disfavored, at various 
times lawmakers have created exemptions in order to rectify 
imbalances of power or to promote non-competition values.\2463\ 
In this instance, the risk associated with antitrust exemptions 
to preserve the free and diverse press--a bedrock 
constitutional value--is low, while the benefits of preserving 
access to high-quality journalism are difficult to overstate. 
As discussed earlier in the Report, the bill would follow steps 
that other jurisdictions are similarly taking to rebalance the 
power between news publishers and the dominant platforms.
---------------------------------------------------------------------------
    \2462\ See generally Submission from Sanjukta Paul, Assistant Prof. 
of Law, Wayne State Univ., to H. Comm. on the Judiciary, 2-4 (Apr. 21, 
2020) (on file with Comm.) [hereinafter Paul Submission].
    \2463\ See, e.g., Clayton Act, 15 U.S.C. 17 (1914); Capper-Volstead 
Act, Pub. L. No. 67-146, ch. 57, 42 Stat. 388 (1922) (codified as 
amended at 7 U.S.C. 291-292).
---------------------------------------------------------------------------
6. Prohibit Abuse of Superior Bargaining Power and Require Due Process
    By virtue of functioning as the only viable path to market, 
dominant platforms enjoy superior bargaining power over the 
third parties that depend on their platforms to access users 
and markets. Their bargaining leverage is a form of market 
power,\2464\ which the dominant platforms routinely use to 
protect and expand their dominance.
---------------------------------------------------------------------------
    \2464\ Aviv Nevo, Deputy Assistant Att'y Gen. for Econ., U.S. Dep't 
of Justice, Antitrust Div., Mergers that Increase Bargaining Leverage, 
Remarks at the Stanford Institute for Economic Policy Research 7 (Jan. 
22, 2014), https://www.justice.gov/atr/file/517781/download (``[A]s a 
matter of economic theory and case law bargaining leverage is a source 
of market power.'').
---------------------------------------------------------------------------
    Through its investigation, the Subcommittee identified 
numerous instances in which the dominant platforms abused this 
power. In several cases, dominant platforms used their leverage 
to extract greater money or data than users would be willing to 
provide in a competitive market. While a firm in a competitive 
market would lose business if it charged excessive prices for 
its goods or services because the customer would switch to a 
competitor, dominant platforms have been able to charge 
excessive prices or ratchet up their prices without a 
significant loss of business. Similarly, certain dominant 
platforms have been able to extort an ever-increasing amount of 
data from their customers and users, ranging from a user's 
personal data to a business's trade secrets and proprietary 
content. In the absence of an alternative platform, users 
effectively have no choice but to accede to the platform's 
demands for payment whether in the form of dollars or data.
    The Subcommittee's investigation found that dominant 
platforms have also leveraged their market power in 
negotiations with businesses and individuals to dictate the 
terms of the relationship. The dominant platforms frequently 
impose oppressive contractual provisions or offer ``take-it-or-
leave-it'' terms in contract negotiations--even when dealing 
with relatively large companies represented by sophisticated 
counsel.\2465\ Lacking bargaining power, dependent third 
parties often find themselves at the whims of the platform's 
arbitrary decisions. The Subcommittee encountered numerous 
instances in which a third party had been abruptly delisted or 
demoted from a platform, without notice or explanation, and 
often without a clear avenue for recourse.
---------------------------------------------------------------------------
    \2465\ See, e.g., Dig. Competition Expert Panel Report at 45 
(noting how a report commissioned by the UK's Department for Digital, 
Culture, Media & Sport found that, as ``a consequence of their high 
market share, ownership of key technologies and strong user data 
assets, Google and Facebook are, to some extent, able to set their own 
terms to advertisers and publishers'').
---------------------------------------------------------------------------
    The dominant platforms' ability to abuse their superior 
bargaining power in these ways can cause long-term and far-
reaching harm. To address these issues, the Subcommittee 
recommends that Congress consider prohibiting the abuse of 
superior bargaining power, including by targeting potentially 
anticompetitive contracts and introducing due process 
protections for individuals and businesses dependent on the 
dominant platforms.\2466\
---------------------------------------------------------------------------
    \2466\ Foer Submission at 2-3; Submission from Marshall Steinbaum, 
Assistant Prof. of Econ., Univ. of Utah, to H. Comm. on the Judiciary, 
8 (Apr. 2020) (on file with Comm.) [hereinafter Steinbaum Submission]. 
See generally Austl. Competition & Consumer Comm'n Report at 205-79; 
Competition & Mkts. Auth. Report at 328-49.
---------------------------------------------------------------------------

                  B. Strengthening the Antitrust Laws

1. Restore the Antimonopoly Goals of the Antitrust Laws
    The antitrust laws that Congress enacted in 1890 and 1914--
the Sherman Act, the Clayton Act, and the Federal Trade 
Commission Act--reflected a recognition that unchecked monopoly 
power poses a threat to our economy as well as to our 
democracy.\2467\ Congress reasserted this vision through 
subsequent antitrust laws, including the Robinson-Patman Act of 
1936, the Celler-Kefauver Act of 1950, and the Hart-Scott-
Rodino Act of 1976.\2468\
---------------------------------------------------------------------------
    \2467\ See generally First & Fox Submission at 10-11; Steinbaum 
Submission; Submission from Robert H. Lande, Venable Prof. of Law, 
Univ. of Balt. Sch. of Law, to H. Comm. on the Judiciary (Apr. 16, 
2020) (on file with Comm.) [hereinafter Lande Submission]; Paul 
Submission at 2-4; Submission from Maurice Stucke, Douglas A. Blaze 
Distinguished Prof. of Law, Univ. of Tennessee, to H. Comm. on the 
Judiciary, 2 (Mar. 13, 2020) (on file with Comm.) [hereinafter Stucke 
Submission].
    \2468\ Thomas J. Horton, Rediscovering Antitrust's Lost Values, 16 
U.N.H. L. Rev. 179 (2018).
---------------------------------------------------------------------------
    In the decades since Congress enacted these foundational 
statutes, the courts have significantly weakened these laws and 
made it increasingly difficult for federal antitrust enforcers 
and private plaintiffs to successfully challenge 
anticompetitive conduct and mergers.\2469\ By adopting a narrow 
construction of ``consumer welfare'' as the sole goal of the 
antitrust laws, the Supreme Court has limited the analysis of 
competitive harm to focus primarily on price and output rather 
than the competitive process \2470\--contravening legislative 
history and legislative intent.\2471\ Simultaneously, courts 
have adopted the view that underenforcement of the antitrust 
laws is preferable to overenforcement, a position at odds with 
the clear legislative intent of the antitrust laws, as well as 
the view of Congress that private monopolies are a ``menace to 
republican institutions.'' \2472\ In recent decades, the 
Justice Department and the FTC have contributed to this problem 
by taking a narrow view of their legal authorities and issuing 
guidelines that are highly permissive of market power and its 
abuse. The overall result is an approach to antitrust that has 
significantly diverged from the laws that Congress enacted.
---------------------------------------------------------------------------
    \2469\ See generally Submission from Tim Wu, Julius Silver Prof. of 
Law, Columbia Law Sch., to H. Comm. on the Judiciary (Apr. 25, 2020) 
(on file with Comm.) [hereinafter Wu Submission];
                                                                        
         Continued
Submission from Spencer Weber Waller, John Paul Stevens Chair in 
Competition Law, Loyola Univ. Chi. Sch. of Law, to H. Comm. on the 
Judiciary (Apr. 28, 2020) (on file with Comm.) [hereinafter Waller 
Submission].
    \2470\ Jonathan Sallet, Protecting the ``Competitive Process''--The 
Evolution of Antitrust Enforcement in the United States, Wash. Ctr. for 
Equitable Growth (Oct. 31, 2018), https://equitablegrowth.org/
competitive-edge-protecting-the-competitive-process-the-evolution-of-
antitrust-enforcement-in-the-united-states/.
    \2471\ Submission from John Newman, Assoc. Prof. of Law, Univ. of 
Miami Sch. of Law, to the Subcomm. on Antitrust, Commercial and Admin. 
Law of the H. Comm. on the Judiciary, 2 (Apr. 1, 2020) (on file with 
Comm.) [hereinafter Newman Submission]; Stucke Submission at 2.
    \2472\ 21 Cong. Rec. 3146 (1890) (statement of Sen. George F. 
Hoar).
---------------------------------------------------------------------------
    In part due to this narrowing, some of the anticompetitive 
business practices that the Subcommittee's investigation 
uncovered could be difficult to challenge under current 
law.\2473\ In response to this concern, this Section identifies 
specific legislative reforms that would help renew and 
rehabilitate the antitrust laws in the context of digital 
markets. In addition to these specific reforms, the 
Subcommittee recommends that Congress consider reasserting the 
original intent and broad goals of the antitrust laws by 
clarifying that they are designed to protect not just 
consumers, but also workers, entrepreneurs, independent 
businesses, open markets, a fair economy, and democratic 
ideals.\2474\
---------------------------------------------------------------------------
    \2473\ See Wu Submission at 2 (``If read broadly, the prohibitions 
on `monopolization,' `unfair means of competition,' and `restraints on 
trade' could be used to handle the challenges of our time. But 
`broadly' is manifestly not how the laws are read by the judiciary at 
this point. For the courts have grafted onto these laws burdens of 
proof, special requirements and defenses that are found nowhere in the 
statutes, and that have rendered the laws applicable only to the 
narrowest of scenarios, usually those involving blatant price effects. 
And it is this that makes the laws inadequate for the challenges 
presented by digital markets.'').
    \2474\ See generally First & Fox Submission at 10-11; Stucke 
Submission at 2; Wu Submission; Waller Submission.
---------------------------------------------------------------------------
2. Invigorate Merger Enforcement
    Section 7 of the Clayton Act, as amended, prohibits any 
transaction where ``the effect of such acquisition may be 
substantially to lessen competition, or to tend to create a 
monopoly.'' \2475\ In 1950, Congress passed the Celler-Kefauver 
Anti-Merger Act to broaden the types of transactions covered by 
the Clayton Act, specifically to include vertical mergers, 
conglomerate mergers, and purchases of assets.\2476\
---------------------------------------------------------------------------
    \2475\ 15 U.S.C. 18; accord Clayton Antitrust Act of 1914, Pub. L. 
No. 63-212, Sec. 7, ch. 323, 38 Stat. 730, 731-32 (codified as amended 
at 15 U.S.C. 18).
    \2476\ Celler-Kefauver Anti-Merger Act, Pub. L. No. 81-899, ch. 
1184, 64 Stat. 1125, 1125-26 (1950) (amending 15 U.S.C. 18).
---------------------------------------------------------------------------
    As noted above, since 1998, Amazon, Apple, Facebook, and 
Google collectively have purchased more than 500 
companies.\2477\ The antitrust agencies did not block a single 
acquisition. In one instance--Google's purchase of ITA--the 
Justice Department required Google to agree to certain terms in 
a consent decree before proceeding with the transaction.\2478\
---------------------------------------------------------------------------
    \2477\ See infra Appendix.
    \2478\ Stipulation and Order, United States v. Google Inc. & ITA 
Software Inc., No. 1:11-cv-00688 (D.D.C. Apr. 12, 2011).
---------------------------------------------------------------------------
    The Subcommittee's review of the relevant documents 
revealed that several of these acquisitions lessened 
competition and increased market power. In several cases, 
antitrust enforcers permitted dominant platforms to acquire a 
competitive threat. For example, documents produced during the 
investigation demonstrate that Facebook acquired Instagram to 
neutralize an emerging rival, while Google purchased Waze to 
eliminate an independent provider of mapping data. In other 
instances, the platform engaged in a series of acquisitions 
that enabled it to gain a controlling position across an entire 
supply chain or ecosystem. Google's acquisitions of 
DoubleClick, AdMeld, and AdMob, for example, let Google achieve 
a commanding position across the digital ad tech market.
    In light of this, the Subcommittee recommends that Congress 
consider a series of reforms to strengthen merger enforcement.

    (a) Codify Bright-Line Rules and Structural Presumptions in 
Concentrated Markets. A major change in antitrust enforcement 
over the last few decades has been the shift away from bright-
line rules in favor of ``rule of reason'' case-by-case 
analysis. Although the rule of reason approach is said to 
reduce errors in enforcement through fact-specific analysis, in 
practice the standard tilts heavily in favor of 
defendants.\2479\ The departure from bright-line rules and 
presumptions has especially affected merger enforcement, where 
enforcers seeking to challenge a merger must fully prove that 
it will have anticompetitive effects, even in cases where the 
merging parties are dominant firms in highly concentrated 
markets. Scholarship by Professor John Kwoka of Northeastern 
University shows that the antitrust agencies acted in only 38 
percent of all mergers that led to price increases, suggesting 
that the current approach to merger review is resulting in 
significant underenforcement.\2480\
---------------------------------------------------------------------------
    \2479\ Michael A. Carrier, The Rule of Reason: An Empirical Update 
for the 21st Century, 16 Geo. Mason L. Rev. 827 (2009).
    \2480\ John Kwoka, Mergers, Merger Control, and Remedies 155 
(2014).
---------------------------------------------------------------------------
    To respond to this concern, the Subcommittee recommends 
that Members consider codifying bright-line rules for merger 
enforcement, including structural presumptions.\2481\ Under a 
structural presumption, mergers resulting in a single firm 
controlling an outsized market share, or resulting in a 
significant increase in concentration, would be presumptively 
prohibited under Section 7 of the Clayton Act.\2482\ This 
structural presumption would place the burden of proof upon the 
merging parties to show that the merger would not reduce 
competition. A showing that the merger would result in 
efficiencies should not be sufficient to overcome the 
presumption that it is anticompetitive. It is the view of the 
Subcommittee that the 30 percent threshold established by the 
Supreme Court in Philadelphia National Bank is appropriate, 
although a lower standard for monopsony or buyer power claims 
may deserve consideration by the Subcommittee.
---------------------------------------------------------------------------
    \2481\ For support for codifying the structural presumption, see 
Submission from John Kwoka, Finnegan Prof. of Econ., Northeastern 
Univ., to H. Comm. on the Judiciary, 3 (Apr. 17, 2020) (on file with 
Comm.) [hereinafter Kwoka Submission]; Submission from Michael Kades, 
Dir., Mkts. & Competition Pol'y, Wash. Ctr. for Equitable Growth, et 
al., to H. Comm. on the Judiciary, 9 (Apr. 30, 2020) (on file with 
Comm.) [hereinafter Kades Submission]; Lande Submission at 5; Slaiman 
Submission at 3; Foer Submission at 9. See also Herbert Hovenkamp & 
Carl Shapiro, Horizontal Mergers, Market Structure, and Burdens of 
Proof, 127 Yale L.J. 1996 (2018); Steven C. Salop, The Evolution and 
Vitality of Merger Presumptions: A Decision-Theoretic Approach, 80 
Antitrust L.J. 269 (2015).
    \2482\ Although some courts still follow the structural presumption 
adopted by the Supreme Court in United States v. Philadelphia National 
Bank, 374 U.S. 321 (1963), it is not universally followed, especially 
given the D.C. Circuit's decision in United States v. Baker Hughes 
Inc., 908 F.2d 981 (D.C. Cir. 1990).
---------------------------------------------------------------------------
    By shifting the burden of proof to the merging parties in 
cases involving concentrated markets and high market shares, 
codifying the structural presumption would help promote the 
efficient allocation of agency resources and increase the 
likelihood that anticompetitive mergers are blocked.

    (b) Protect Potential Rivals, Nascent Competitors, and 
Startups. The Subcommittee's investigation produced evidence 
that several of the dominant platforms acquired potential 
rivals and nascent competitors. Potential rivals are firms that 
are planning to enter or could plausibly enter the acquirer's 
market. Nascent competitors are firms whose ``prospective 
innovation represents a serious future threat to an 
incumbent.'' \2483\ In digital markets, potential rivals and 
nascent competitors play a critical role in driving innovation, 
as their prospective entry may dislodge incumbents or spur 
competition. For this reason, incumbents may view potential 
rivals and nascent competitors as a significant threat, 
especially as their success could render the incumbent's 
technologies obsolete.
---------------------------------------------------------------------------
    \2483\ Wu Submission at 4-5; see also C. Scott Hemphill & Tim Wu, 
Nascent Competitors, 168 U. Pa. L. Rev. 1879 (2020); Kades Submission 
at 14.
---------------------------------------------------------------------------
    To strengthen the law relating to potential rivals and 
nascent competitors, the Subcommittee recommends strengthening 
the Clayton Act to prohibit acquisitions of potential rivals 
and nascent competitors. This could be achieved by clarifying 
that proving harm on potential competition or nascent 
competition grounds does not require proving that the potential 
or nascent competitor would have been a successful entrant in a 
but-for world.\2484\ Given the patchwork of cases that are 
unfavorable to potential and nascent competition-based theories 
of harm, this amendment should also make clear that Congress 
intends to override this case law.\2485\
---------------------------------------------------------------------------
    \2484\ Wu Submission at 6; Kwoka Submission at 6.
    \2485\ See, e.g., United States v. Marine Bancorporation, Inc., 418 
U.S. 602 (1974).
---------------------------------------------------------------------------
    Since startups can be an important source of potential and 
nascent competition, the antitrust laws should also look 
unfavorably upon incumbents purchasing innovative startups. One 
way that Congress could do so is by codifying a presumption 
against acquisitions of startups by dominant firms, 
particularly those that serve as direct competitors, as well as 
those operating in adjacent or related markets.\2486\
---------------------------------------------------------------------------
    \2486\ Submission from Mark Lemley, William H. Neukom Prof. of Law, 
Stanford Law Sch., to H. Comm. on the Judiciary, 7-8 (Apr. 8, 2020) (on 
file with Comm.) [hereinafter Lemley Submission].
---------------------------------------------------------------------------
    Lastly, the Subcommittee's review of relevant documents 
produced by the FTC and Justice Department demonstrated that 
the antitrust agencies consistently underestimated--by a 
significant margin--the degree to which an acquisition would 
undermine competition and impede entry. In light of this 
tendency, the Subcommittee recommends that Congress consider 
strengthening the incipiency standard by amending the Clayton 
Act to prohibit acquisitions that ``may lessen competition or 
tend to increase market power.'' \2487\ Revising the law would 
``arrest the creation of trusts, conspiracies, and monopolies 
in their incipiency and before consummation.'' \2488\
---------------------------------------------------------------------------
    \2487\ Submission from Consumer Reps., to H. Comm. on the 
Judiciary, 5 (Apr. 17, 2020) (on file with Comm.) [hereinafter Consumer 
Reports Submission]; Submission from Richard M. Steuer, Adjunct Prof., 
Fordham Univ. Sch. of Law, to H. Comm. on the Judiciary (Apr. 8, 2020) 
(on file with Comm.) [hereinafter Steuer Submission]; Peter C. 
Carstensen & Robert H. Lande, The Merger Incipiency Doctrine and the 
Importance of ``Redundant'' Competitors, 2018 Wis. L. Rev. 783 (2018).
    \2488\ S. Rep. No. 63-698, at 1 (1914); see also Earl W. Kintner, 
The Legislative History of the Federal Antitrust Laws and Related 
Statutes 1744-52 (1978) (noting that the Senate Judiciary Committee 
report stated that the purpose of the bill was to supplement the 
Sherman Act ``by making these practices illegal, to arrest the creation 
of trusts, conspiracies, and monopolies in their incipiency and before 
consummation'').

    (c) Strengthen Vertical Merger Doctrine. The Subcommittee's 
investigation identified several ways in which vertical 
integration of dominant platforms enabled anticompetitive 
conduct. For this reason, the Subcommittee recommends that 
Congress examine proposals to strengthen the law relating to 
vertical mergers. The current case law disfavors challenges to 
vertical mergers. Specifically, courts tend to defer to claims 
from the merging parties that the transaction will yield 
efficiencies through the ``elimination of double 
marginalization'' and are skeptical about claims that the 
merger will result in foreclosure.
    To address this concern, the Subcommittee recommends that 
Congress explore presumptions involving vertical mergers, such 
as a presumption that vertical mergers are anticompetitive when 
either of the merging parties is a dominant firm operating in a 
concentrated market, or presumptions relating to input 
foreclosure and customer foreclosure.\2489\
---------------------------------------------------------------------------
    \2489\ Kades Submission at 5; Jonathan Baker et al., Five 
Principles for Vertical Merger Enforcement Policy, 33 Antitrust 3 
(2019).
---------------------------------------------------------------------------
3. Rehabilitate Monopolization Law
    Section 2 of the Sherman Act makes it illegal to 
``monopolize, or attempt to monopolize, or combine or conspire 
with any other person or persons, to monopolize any part of the 
trade or commerce among the several States.'' \2490\ Over 
recent decades, courts have significantly heightened the legal 
standards that plaintiffs must overcome in order to prove 
monopolization. Several of the business practices the 
Subcommittee's investigation uncovered should be illegal under 
Section 2. This Section briefly identifies the relevant 
business practices and the case law that impedes effective 
enforcement of Section 2 of the Sherman Act.
---------------------------------------------------------------------------
    \2490\ 15 U.S.C. 2; accord Sherman Antitrust Act of 1890, Ch. 647, 
Sec. 2, 26 Stat. 209, 209 (codified as amended at 15 U.S.C. 2).

    (a) Abuse of Dominance. The Subcommittee's investigation 
found that the dominant platforms have the incentive and 
ability to abuse their dominant position against third-party 
suppliers, workers, and consumers. Some of these business 
practices are a detriment to fair competition, but they do not 
easily fit the existing categories identified by the Sherman 
Act, namely ``monopolization'' or ``restraint of trade.'' Since 
courts have shifted their interpretation of the antitrust law 
to focus primarily on the formation or entrenchment of market 
power, and not on its exploitation or exercise, many of the 
business practices that the Subcommittee identified as 
undermining competition in digital markets could be difficult 
to reach under the prevailing judicial approach.
    To address this concern, the Subcommittee recommends that 
Congress consider extending the Sherman Act to prohibit abuses 
of dominance.\2491\ Furthermore, the Subcommittee should 
examine the creation of a statutory presumption that a market 
share of 30 percent or more constitutes a rebuttable 
presumption of dominance by a seller, and a market share of 25 
percent or more constitute a rebuttable presumption of 
dominance by a buyer.\2492\
---------------------------------------------------------------------------
    \2491\ First & Fox Submission at 2; Foer Submission at 2-4; Newman 
Submission at 7-8; Stucke Submission at 14; Waller Submission at 13.
    \2492\ Waller Submission at 12.

    (b) Monopoly Leveraging. The Subcommittee's investigation 
found that the dominant platforms have engaged in ``monopoly 
leveraging,'' where a dominant firm uses its monopoly power in 
one market to boost or privilege its position in another 
market. For example, Google's use of its horizontal search 
monopoly to advantage its vertical search offerings is a form 
of monopoly leveraging. Although monopoly leveraging was 
previously a widely cognizable theory of harm under antitrust 
law, courts now require that use of monopoly power in the first 
market ``actually monopolize'' the secondary market or 
``dangerously threaten[] to do so.'' \2493\ The Subcommittee's 
investigation identified several instances in which use of 
monopoly power in one market to privilege the monopolist's 
position in the second market injured competition, even though 
the conduct did not result in monopolization of the second 
market. For this reason, the Subcommittee recommends overriding 
the legal requirement that monopoly leveraging ``actually 
monopolize'' the second market, as set out in Spectrum Sports, 
Inc. v. McQuillan.\2494\
---------------------------------------------------------------------------
    \2493\ Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993).
    \2494\ Id. See also Alaska Airlines, Inc. v. United Airlines, Inc., 
948 F.2d 536 (9th Cir. 1991).

    (c) Predatory Pricing. The Subcommittee's investigation 
identified several instances in which a dominant platform was 
pricing goods or services below-cost in order to drive out 
rivals and capture the market. For example, documents produced 
during the investigation revealed that Amazon had been willing 
to lose $200 million in a single quarter in order to pressure 
Diapers.com, a firm it had recognized as its most significant 
rival in the category. Amazon cut prices and introduced steep 
promotions, prompting a pricing war that eventually weakened 
Diapers.com. Amazon then purchased the company, eliminating its 
competitor and subsequently cutting back the discounts and 
promotions it had introduced.
    Predatory pricing is a particular risk in digital markets, 
where winner-take-all dynamics incentivize the pursuit of 
growth over profits, and where the dominant digital platforms 
can cross-subsidize between lines of business. Courts, however, 
have introduced a ``recoupment'' requirement, necessitating 
that plaintiffs prove that the losses incurred through below-
cost pricing subsequently were or could be recouped. Although 
dominant digital markets can recoup these losses through 
various means over the long term, recoupment is difficult for 
plaintiffs to prove in the short term. Since the recoupment 
requirement was introduced, successful predatory pricing cases 
have plummeted.\2495\
---------------------------------------------------------------------------
    \2495\ Hubbard Submission at 20; Stucke Submission at 7; Teachout 
Submission at 12; Christopher R. Leslie, Predatory Pricing and 
Recoupment, 113 Colum. L. Rev. 1695 (2013).
---------------------------------------------------------------------------
    The Subcommittee recommends clarifying that proof of 
recoupment is not necessary to prove predatory pricing or 
predatory buying, overriding the Supreme Court's decisions in 
Matsushita Electric Industrial Co. v. Zenith Radio Corp.,\2496\ 
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,\2497\ 
and Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. \2498\
---------------------------------------------------------------------------
    \2496\ 475 U.S. 574 (1986).
    \2497\ 509 U.S. 209 (1993).
    \2498\ 549 U.S. 312 (2007).

    (d) Essential Facilities and Refusals to Deal. The 
Subcommittee's investigation uncovered several instances in 
which a dominant platform used the threat of delisting or 
refusing service to a third party as leverage to extract 
greater value or more data or to secure an advantage in a 
distinct market. Because the dominant platforms do not face 
meaningful competition in their primary markets, their threat 
to refuse business with a third party is the equivalent of 
depriving a market participant of an essential input. This 
denial of access in one market can undermine competition across 
adjacent markets, undermining the ability of market 
participants to compete on the merits.
    To address this concern, the Subcommittee recommends that 
Congress consider revitalizing the ``essential facilities'' 
doctrine, the legal requirement that dominant firms provide 
access to their infrastructural services or facilities on a 
nondiscriminatory basis.\2499\ To clarify the law, Congress 
should consider overriding judicial decisions that have treated 
unfavorably essential facilities- and refusal to deal-based 
theories of harm.\2500\
---------------------------------------------------------------------------
    \2499\ Submission from the Am. Antitrust Inst., to H. Comm. on the 
Judiciary, 4 (Apr. 17, 2020) (on file with Comm.) [hereinafter AAI 
Submission]; Waller Submission at 13.
    \2500\ Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, 
LLP, 540 U.S. 398 (2004); Pac. Bell Tel. Co. v. LinkLine Commc'ns, 
Inc., 555 U.S. 438 (2009).

    (e) Tying. The Subcommittee's investigation identified 
several instances in which a dominant platform conditioned 
access to a good or service that the dominant platform 
controlled on the purchase or use of a separate product or 
service. This business practice undermines competition on the 
merits by enabling a firm with market power in one market to 
privilege products or services in a distinct market.
    Although antitrust law has long treated tying by a 
monopolist as anticompetitive, in recent decades, courts have 
moved away from this position. The Subcommittee recommends that 
Congress consider clarifying that conditioning access to a 
product or service in which a firm has market power to the 
purchase or use of a separate product or service is 
anticompetitive under Section 2, as held by the Supreme Court 
in Jefferson Parish Hospital District No. 2 v. Hyde.\2501\
---------------------------------------------------------------------------
    \2501\ 466 U.S.C. 2 (1984).

    (f) Self-Preferencing and Anticompetitive Product Design. 
The Subcommittee's investigation uncovered several instances in 
which a dominant platform used the design of its platform or 
service to privilege its own services or to disfavor 
competitors. This practice undermines competition by enabling a 
firm that controls an essential input to distort competition in 
separate markets. The Subcommittee recommends that Congress 
consider whether making a design change that excludes 
competitors or otherwise undermines competition should be a 
violation of Section 2, regardless of whether the design change 
can be justified as an improvement for consumers.\2502\
---------------------------------------------------------------------------
    \2502\ This would require overriding Allied Orthopedic Appliances, 
Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991 (9th Cir. 2010).
---------------------------------------------------------------------------
4. Additional Measures to Strengthen the Antitrust Laws
    In response to the Subcommittee's requests for submissions, 
experts identified other proposals that the Subcommittee 
believes warrant review by Congress. These include:

      LOverriding Ohio v. American Express by 
clarifying that cases involving platforms do not require 
plaintiffs to establish harm to both sets of customers; \2503\
---------------------------------------------------------------------------
    \2503\ AAI Submission at 4; Submission from Herbert Hovenkamp, 
James G. Dinan Univ. Prof., Univ. of Pa. Law Sch., to H. Comm. on the 
Judiciary, 3 (Apr. 17, 2020) (on file with Comm.) [hereinafter 
Hovenkamp Submission]; Hubbard Submission at 20; Kades Submission at 8.
---------------------------------------------------------------------------
      LOverriding United States v. Sabre Corp., 
clarifying that platforms that are ``two-sided,'' or serve 
multiple sets of customers, can compete with firms that are 
``one-sided''; \2504\
---------------------------------------------------------------------------
    \2504\ United States v. Sabre Corp., 452 F. Supp. 3d 97 (D. Del. 
2020). See also Kades Submission at 10.
---------------------------------------------------------------------------
      LClarifying that market definition is not 
required for proving an antitrust violation, especially in the 
presence of direct evidence of market power; \2505\ and
---------------------------------------------------------------------------
    \2505\ Hovenkamp Submission at 3-4; Newman Submission at 5-6.
---------------------------------------------------------------------------
      LClarifying that ``false positives''--or 
erroneous enforcement--are not more costly than ``false 
negatives''--or erroneous non-enforcement--and that, in 
relation to conduct or mergers involving dominant firms, 
``false negatives'' are costlier.\2506\
---------------------------------------------------------------------------
    \2506\ The Subcommittee believes that Congress could clarify that 
the views set out by then-Professor Frank Easterbrook in The Limits of 
Antitrust, 63 Tex. L. Rev. 1 (1984), do not reflect the views of the 
Congress in enacting the antitrust laws. See also Submission from Bill 
Baer, Visiting Fellow, Brookings Inst., to H. Comm. on the Judiciary, 3 
(May 19, 2020) (on file with Comm.) [hereinafter Baer Submission] 
(``That is my fundamental concern with the state of antitrust 
enforcement today. It is too cautious, too worried about adverse 
effects of `over enforcement' (so called Type I errors).'').
---------------------------------------------------------------------------

                 C. Strengthening Antitrust Enforcement

1. Congressional Oversight
    As discussed earlier in the Report, Congress has a strong 
tradition of performing vigorous oversight of the enforcement 
and adequacy of the antitrust laws. Over the last century, 
Congress at key moments responded forcefully to the courts' 
narrowing of antitrust laws, the rising tide of economic 
concentration, or other challenges to the sound and effective 
Administration of the antitrust laws.\2507\
---------------------------------------------------------------------------
    \2507\ See generally Marc Winerman, The Origins of the FTC: 
Concentration, Cooperation, Control, and Competition, 71 Antitrust L.J. 
1 (2003).
---------------------------------------------------------------------------
    This tradition includes the creation of the FTC and 
concurrent enactment of the Clayton Antitrust Act in 1914, as 
both a response to the Supreme Court's narrow construction of 
the Sherman Act in 1911 and an effort to limit the discretion 
of the courts.\2508\ It also includes Congress's broadening of 
merger enforcement to cover non-horizontal acquisitions and 
other transactions in the Celler-Kefauver Anti-Merger Act of 
1950 as well as establishing a mechanism for judicial oversight 
of consent decrees in response to political interference in 
merger enforcement with the Tunney Act of 1974.\2509\ 
Additionally, Congress has regularly investigated the rise and 
abuse of market power in important markets.\2510\ In support of 
these efforts, Congress dedicated substantial congressional and 
agency resources to perform the task of identifying and 
responding to anticompetitive conduct.\2511\
---------------------------------------------------------------------------
    \2508\ Clayton Antitrust Act of 1914, Pub. L. No. 63-212, ch. 323, 
38 Stat. 730 (codified as amended at 15 U.S.C. 12-27); Fed. Trade 
Comm'n Act of 1914, Pub. L. No. 63-203, ch. 311, 38 Stat. 717 (codified 
as amended at 15 U.S.C. 41-58).
    \2509\ Antitrust Procedures and Penalties Act (Tunney Act), Pub. L. 
No. 93-528, Sec. 2, 88 Stat. 1706, 1706-08 (1974) (amending 15 U.S.C. 
16). See also Consent Decree Program of the Dep't of Justice: Hearings 
Before the Subcomm. on Antitrust of the H. Comm. on the Judiciary, 85th 
Cong. (1957); Subcomm. on Antitrust of the H. Comm. on the Judiciary, 
86th Cong., 1st Sess., Report on the Consent Decree Program of the 
Department of Justice (1959).
    \2510\ In the 1990s, the Committee on the Judiciary conducted 
significant oversight of competition in the telecommunications market 
in the wake of the breakup of Ma Bell, including through oversight of 
the 1982 consent decree. These efforts culminated in the passage of 
H.R. 3626, the ``Antitrust and Communications Reform Act,'' by the 
House of Representatives in 1994 by a vote of 423 to 5. Chair Jack B. 
Brooks introduced this bill--a precursor to the Telecommunications Act 
of 1996--to address monopolization in the telecommunications market. 
See generally H. Rep. No. 103-559 (1994); Robert M. Frieden, The 
Telecommunications Act of 1996: Predicting the Winners and Losers, 20 
Hastings Commc'ns & Ent. L.J. 11, 57 n.8 (1997).
    \2511\ Submission from Alison Jones & William E. Kovacic, to H. 
Comm. on the Judiciary, 4 (Apr. 17, 2020) (on file with Comm.) 
[hereinafter Jones & Kovacic Submission].
---------------------------------------------------------------------------
    In recent decades, Congress has departed from this 
tradition, deferring largely to the courts and to the antitrust 
agencies in the crafting of substantive antitrust policy.\2512\ 
Its inaction has been read as acquiescence in the narrowing of 
the antitrust laws and has contributed to antitrust becoming 
``overly technical and primarily dependent on economics.'' 
\2513\
---------------------------------------------------------------------------
    \2512\ Harry First & Spencer Weber Waller, Antitrust's Democracy 
Deficit, 81 Fordham L. Rev. 2543, 2556 (2013) (``[D]espite a history of 
bipartisan congressional support for the importance of the antitrust 
laws and their enforcement, of late Congress has done little. And when 
it has done something, it has focused on the micro rather than the 
macro changes that have occurred in the field.'').
    \2513\ Id. at 2559.
---------------------------------------------------------------------------
    In other cases, congressional attention has fallen short as 
lawmakers tried to address competition problems without 
sustained efforts to implement enforcement changes, leading 
some reform efforts in recent decades to misfire.\2514\ 
Responding to these concerns, Congress has increased 
appropriations and provided modest improvements to the FTC's 
budget and remedial authority during this period. But these 
efforts were insufficient without sustained support in the face 
of ``ferocious opposition'' from large defendants and 
businesses lobbying Congress.\2515\
---------------------------------------------------------------------------
    \2514\ Jones & Kovacic Submission at 4 (``The miscalculation of 
Congress (and the agencies) about the magnitude of implementation tasks 
in this earlier period came at a high price. Implementation weaknesses 
undermined many investigations and cases that the federal agencies 
launched in response to congressional guidance. The litigation failures 
raised questions about the competence of the Federal agencies, 
particularly their ability to manage large cases dealing with 
misconduct by dominant firms and oligopolists. The wariness of the 
federal agencies since the late 1970s to bring cases in this area--a 
wariness that many observers today criticize as unwarranted--is in 
major part the residue of bitter litigation experiences from this 
earlier period.'').
    \2515\ Id. at 6.
---------------------------------------------------------------------------
    To remedy these broader trends, the Subcommittee recommends 
that Congress revive its long tradition of robust and vigorous 
oversight of the antitrust laws and enforcement, along with its 
commitment to ongoing market investigations and legislative 
activity. Additionally, greater attention to implementation 
challenges will enable Congress to better see its reform 
efforts through.
2. Agency Enforcement
    Over the course of the investigation, the Subcommittee 
uncovered evidence that the antitrust agencies consistently 
failed to block monopolists from establishing or maintaining 
their dominance through anticompetitive conduct or 
acquisitions. This institutional failure follows a multi-decade 
trend whereby the antitrust agencies have constrained their own 
authorities and advanced narrow readings of the law. In the 
case of the FTC, the agency has been reluctant to use the 
expansive set of tools with which Congress provided it, 
neglecting to fulfill its broad legislative mandate. Restoring 
the agencies to full strength will require overcoming these 
trends.
    As a general matter, Congress created the FTC to police and 
prohibit ``unfair methods of competition,'' \2516\ and to serve 
as an ``administrative tribunal'' that carefully studied 
ongoing business practices and economic conditions.\2517\ To 
enable the agency to carry out these functions, Congress 
assigned the Commission powers to ``make rules and regulations 
for the purpose of carrying out the [FTC Act's] provisions,'' 
as well as broad investigative authority to compel business 
information and conduct market studies.\2518\ Notably, Congress 
established the provision prohibiting ``unfair methods of 
competition'' to reach beyond the other antitrust statutes, 
``to fill in the gaps in the other antitrust laws, to round 
them out and make their coverage complete.'' \2519\ Lawmakers 
delegated to the FTC the task of defining what constituted an 
``unfair method of competition,'' recognizing that an expert 
agency equipped to continuously monitor business practices 
would be best positioned to ensure the legal definition kept 
pace with business realities.
---------------------------------------------------------------------------
    \2516\ See S. Rep. No. 63-597, at 13 (1914) (``The committee gave 
careful consideration to the question as to whether it would attempt to 
define the many and variable unfair practices which prevail in commerce 
and to forbid [them] . . . or whether it would, by a general 
declaration condemning unfair practices, leave it to the commission to 
determine what practices were unfair. It concluded that the latter 
course would be better, for the reason . . . that there were too many 
unfair practices to define, and after writing 20 of them into the law 
it would be quite possible to invent others.'').
    \2517\ Neil W. Averitt, The Meaning of ``Unfair Methods of 
Competition'' in Section 5 of the Federal Trade Commission Act, 21 B.C. 
L. Rev. 227 (1980); see also Marc Winerman, The Origins of the FTC: 
Concentration, Cooperation, Control, and Competition, 71 Antitrust L.J. 
1 (2003).
    \2518\ 15 U.S.C. 46.
    \2519\ Neil W. Averitt, The Meaning of ``Unfair Methods of 
Competition'' in Section 5 of the Federal Trade Commission Act, 21 B.C. 
L. Rev. 227, 251 (1980) (``Section 5 is not confined to conduct that 
actually violates, or that threatens to violate, one of the other 
antitrust statutes. If it were limited to this extent it would be a 
largely duplicative provision. The legislative purpose instead assigned 
to Section 5 a broader role. It was to be an interstitial statute: it 
was to fill in the gaps in the other antitrust laws, to round them out 
and make their coverage complete. In addition to overt violations, 
therefore, Section 5 would reach closely similar conduct that violates 
the policy or `spirit' of the antitrust laws, even though it may not 
come technically within its terms.'').
---------------------------------------------------------------------------
    In practice, however, the Commission has neglected to play 
this role. In its first hundred years, the FTC promulgated only 
one rule defining an ``unfair method of competition.'' \2520\ 
In 2015, the Commission adopted a set of ``Enforcement 
Principles,'' stating that the FTC's targeting of ``unfair 
methods of competition'' would be guided by the ``promotion of 
consumer welfare,'' a policy goal absent from any legislative 
directive given to the Commission.\2521\ Since the adoption of 
this framework, the FTC has brought only one case under its 
standalone Section 5 authority.\2522\ The agency has also 
failed to regularly produce market-wide studies, having halted 
regular data collection in the 1980s.\2523\
---------------------------------------------------------------------------
    \2520\ Discriminatory Practices in Men's and Boys' Tailored 
Clothing Industry, 16 C.F.R. pt. 412 (1968).
    \2521\ Fed. Trade Comm'n, Statement of Enforcement Principles 
Regarding ``Unfair Methods of Competition'' Under Section 5 of the FTC 
Act (Aug. 13, 2015), https://www.ftc.gov/system/files/documents/
public_statements/735201/150813section5enforcement.pdf.
    \2522\ The one exception is the FTC's recent suit against Qualcomm. 
Fed. Trade Comm'n v. Qualcomm Inc., 411 F. Supp. 3d 658 (N.D. Cal. 
2019) (No. 5:17-cv-00220).
    \2523\ Fed. Trade Comm'n, Bur. of Econ., Annual Line of Business 
Report 1977 (1985), https://www.ftc.gov/reports/us-federal-trade-
commission-bureau-economics-annual-line-business
-report-1977-statistical.
---------------------------------------------------------------------------
    Together with the DOJ, the FTC has also chosen to stop 
enforcing certain antitrust laws entirely. For two decades, 
neither agency has filed a suit under the Robinson-Patman Act, 
which Congress passed in order to limit the power of large 
chain retailers to extract concessions from independent 
suppliers.\2524\ In 2008, the Justice Department issued a 
report recommending that Section 2 of the Sherman Act be curbed 
dramatically.\2525\ Although the report was subsequently 
rescinded, the Justice Department has not filed a significant 
monopolization case in two decades. Meanwhile, both agencies 
have targeted their enforcement efforts on relatively small 
players--including ice skating teachers and organists--raising 
questions about their enforcement priorities.\2526\
---------------------------------------------------------------------------
    \2524\ In a memo submitted on behalf of the United States to the 
OECD, the Justice Department stated that ``a shift in emphasis based on 
economic analysis resulted in a significant reduction in enforcement 
actions brought by the Agencies under the Robinson-Patman Act. As a 
result, current enforcement of the Act occurs mainly through private 
treble damages actions.'' Note by the United States, Roundtable on 
``Price Discrimination,'' OECD Doc. No. DAF/COMP/WD(2016)69, at 6 (Nov. 
2016), https://www.justice.gov/atr/case-document/file/979211/download.
    \2525\ Thomas O. Barnett & Hill B. Wellford, The DOJ's Single-Firm 
Conduct Report: Promoting Consumer Welfare Through Clearer Standards 
for Section 2 of the Sherman Act, U.S. Dep't of Justice (Sept. 8, 
2008), https://www.justice.gov/sites/default/files/atr/legacy/2009/05/
11/238599.pdf.
    \2526\ Sandeep Vaheesan, Accommodating Capital and Policing Labor: 
Antitrust in the Two Gilded Ages, 78 Md. L. Rev. 766 (2019). See also 
Brief for the United States & the Federal Trade Commission as Amicus 
Curiae in Support of Appellant & in Favor of Reversal, Chamber of 
Commerce of the United States v. City of Seattle, 890 F.3d 769 (9th 
Cir. 2018) (No. 17-35640).
---------------------------------------------------------------------------
    The agencies have also been hamstrung by inadequate 
budgets. In 1981, FTC Chair Jim Miller won steep budget cuts at 
the Commission, a drastic rollback from which the agency has 
not yet recovered. Prior to this Congress, appropriations for 
both agencies have reached historic lows.\2527\ To restore the 
antitrust agencies to full strength, the Subcommittee 
recommends that Congress consider the following:
---------------------------------------------------------------------------
    \2527\ Michael Kades, Wash. Ctr. for Equitable Growth, The State of 
U.S. Federal Antitrust Enforcement (2019), https://equitablegrowth.org/
wp-content/uploads/2019/09/091719-antitrust-enforcement-
CRPT117hrpt.pdf.

      LTriggering civil penalties and other relief for 
violations of ``unfair methods of competition'' rules, creating 
symmetry with violations of ``unfair or deceptive acts or 
practices'' rules;
      LRequiring the Commission to regularly collect 
data and report on economic concentration and competition in 
sectors across the economy, as permitted under Section 6 of the 
FTC Act;
      LEnhancing the public transparency and 
accountability of the antitrust agencies, by requiring the 
agencies to solicit and respond to public comments for merger 
reviews, and by requiring the agencies to publish written 
explanations for all enforcement decisions; \2528\
---------------------------------------------------------------------------
    \2528\ Mitchell Submission at 9-10.
---------------------------------------------------------------------------
      LRequiring the agencies to conduct and make 
publicly available merger retrospectives on significant 
transactions consummated over the last three decades;
      LCodifying stricter prohibitions on the revolving 
door between the agencies and the companies that they 
investigate, especially with regards to senior officials; 
\2529\ and
---------------------------------------------------------------------------
    \2529\ See Submission from Source 17, to H. Comm. on the Judiciary, 
13-14 (Sept. 22, 2020).
---------------------------------------------------------------------------
      LIncreasing the budgets of the Federal Trade 
Commission and the Antitrust Division.\2530\
---------------------------------------------------------------------------
    \2530\ See Baer Submission at 7-8; Kades Submission at 12-13.
---------------------------------------------------------------------------
3. Private Enforcement
    Private enforcement plays a critical role in the nation's 
antitrust system. The Sherman Act and Clayton Act both include 
a private right of action. This reflected lawmakers' desire to 
ensure that those abused by monopoly power have an opportunity 
for direct recourse.\2531\ It also reflected a recognition that 
public enforcers would be susceptible to capture by the very 
monopolists that they were supposed to investigate, 
necessitating other means of enforcement.
---------------------------------------------------------------------------
    \2531\ See, e.g., 51 Cong. Rec. 9073 (1914) (remarks of Rep. Edwin 
Y. Webb) (stating that private Section 7 remedies ``open the door of 
justice to every man, whenever he may be injured by those who violate 
the antitrust laws, and give the injured party ample damages for the 
wrong suffered'').
---------------------------------------------------------------------------
    Empirical surveys of trends in antitrust enforcement 
indicate that private enforcement deters anticompetitive 
conduct and strengthens enforcement overall.\2532\ In recent 
decades, however, courts have erected significant obstacles for 
private antitrust plaintiffs, both through procedural decisions 
and substantive doctrine.
---------------------------------------------------------------------------
    \2532\ Joshua P. Davis & Robert H. Lande, Toward an Empirical and 
Theoretical Assessment of Private Antitrust Enforcement, 36 Seattle U. 
L. Rev. 1269, 1276 (2013).
---------------------------------------------------------------------------
    One major obstacle is the rise of forced arbitration 
clauses, which undermine private enforcement of the antitrust 
laws by allowing companies to avoid legal accountability for 
their actions.\2533\ These clauses allow firms to evade the 
public justice system--where plaintiffs have far greater legal 
protections--and hide behind a one-sided process that is tilted 
in their favor.\2534\ For example, although Amazon has over two 
million sellers in the United States, Amazon's records reflect 
that only 163 sellers initiated arbitration proceedings between 
2014 and 2019.\2535\ This data seems to confirm studies showing 
that forced arbitration clauses often fail to provide a 
meaningful forum for resolving disputes and instead tend to 
suppress valid claims and shield wrongdoing.\2536\
---------------------------------------------------------------------------
    \2533\ Justice Denied: Forced Arbitration and the Erosion of our 
Legal System: Hearing Before the Subcomm. on Antitrust, Commercial and 
Admin. Law of the H. Comm. on the Judiciary, 116th Cong. 51 (2019) 
(statement of Myriam Gilles, Paul R. Verkuil Rsch. Chair in Pub. Law & 
Prof. of Law, Benjamin N. Cardozo Sch. of Law).
    \2534\ Id. at 12 (statement of Deepak Gupta, Founding Principal, 
Gupta Wessler PLLC).
    \2535\ Innovation and Entrepreneurship Hearing at 545 (response to 
Questions for the Record of Nate Sutton, Assoc. Gen. Couns., 
Competition, Amazon.com, Inc.).
    \2536\ Judith Resnik, Diffusing Disputes: The Public in the Private 
of Arbitration, the Private in Courts, and the Erasure of Rights, 124 
Yale L.J. 2804 (2015).
---------------------------------------------------------------------------
    Several other trends in judicial decisions have hampered 
private antitrust plaintiffs, including in cases involving 
dominant platforms. To address these concerns, the Subcommittee 
recommends that Congress consider:

      LEliminating court-created standards for 
``antitrust injury'' \2537\ and ``antitrust standing,'' \2538\ 
which undermine Congress's grant of enforcement authority to 
``any person . . . injured . . . by reason of anything 
forbidden in the antitrust laws''; \2539\
---------------------------------------------------------------------------
    \2537\ Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 
(1977).
    \2538\ Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council 
of Carpenters, 459 U.S. 519 (1983).
    \2539\ 15 U.S.C. 15; accord Clayton Antitrust Act of 1914, Pub. L. 
No. 63-212, Sec. 4, ch. 323, 38 Stat. 730, 731 (codified as amended at 
15 U.S.C. 15).
---------------------------------------------------------------------------
      LReducing procedural obstacles to litigation, 
including through eliminating forced arbitration clauses \2540\ 
and undue limits on class action formation; \2541\ and
---------------------------------------------------------------------------
    \2540\ American Express Co. v. Italian Colors Rest., 570 U.S. 228 
(2013); AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).
    \2541\ Comcast Corp. v. Behrend, 569 U.S. 27 (2013).
---------------------------------------------------------------------------
      LLowering the heightened pleading requirement 
introduced in Bell Atlantic Corp. v. Twombly.\2542\
---------------------------------------------------------------------------
    \2542\ 550 U.S. 544 (2007).

?

      

  VII. APPENDIX: MERGERS AND ACQUISITIONS BY DOMINANT PLATFORMS \2543\

     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     

\2543\ Prepared by the Subcommittee based on The Acquisition Takeover 
by the 5 Tech Giants, Univ. of Cal., Berkeley, Sch. of Info., http://
people.ischool.berkeley.edu/neha01mittal/infoviz/dashboard/ (last 
visited Sept. 28, 2020). See also Big Tech Mergers, Am. Econ. Liberties 
Project, https://www.economicliberties.us/big-tech-merger-tracker/ 
(last visited Oct. 4, 2020); Search Results: ``acquisitions'', 
Crunchbase, https://www.crunchbase.com/ (last visited Oct. 4, 2020).

                               A. Amazon

 
----------------------------------------------------------------------------------------------------------------
                                                     Amazon
-----------------------------------------------------------------------------------------------------------------
                                                                                              Acquisition Value
       Company          Year Acquired                        Categories                             (USD)
----------------------------------------------------------------------------------------------------------------
Zoox                             2020   Autonomous Vehicles, Robotics, Transportation             1,200,000,000
Health Navigator                 2019    Health Care                                                         --
Internet Gaming                  2019    Video Games, Content, Media and Entertainment                       --
 Database (IGDB)
INLT                             2019    Enterprise Applications, Freight Service,                           --
                                         Logistics, SaaS, Shipping, Transportation
E8 Storage                       2019    Cloud Computing, Enterprise Software, Flash                 50,000,000
                                         Storage, Software
Bebo                             2019    Internet, Video Games                                       25,000,000
Sizmek Ad Server                 2019    Advertising, Marketing                                              --
CANVAS Technology                2019    Robotics                                                            --
Eero                             2019    Internet, IoT, Wireless                                     97,000,000
CloudEndure                      2019    Cloud Computing, Cloud Storage, Enterprise                 200,000,000
                                         Software, SaaS
TSO Logic                        2019    Analytics, Cloud Computing, Cloud Management, Data                  --
                                         Center, Software
Tapzo                            2018    E-Commerce, Mobile, Software                                40,000,000
PillPack                         2018    Pharmacy, E-Commerce                                       753,000,000
Ring                             2018    Consumer Electronics, Security, Smart Home                          --
Immedia                          2018    Semiconductors                                                      --
Sqrrl                            2018    Cybersecurity                                               40,000,000
Dispatch                         2017    Robotics                                                            --
Blink                            2017    Consumer Electronics, Electronics, Hardware,                90,000,000
                                         Security
Goo Technologies                 2017    3D Technology, Internet, Software, Web Development                  --
Body Labs                        2017    3D Technology, Artificial Intelligence, Computer            50,000,000
                                         Vision, Developer APIs, Machine Learning
Wing                             2017    Information Technology, Logistics, Mobile, SaaS                     --
GameSparks                       2017    E-Commerce, Mobile, Software                                10,000,000
Graphiq                          2017    Artificial Intelligence, Big Data, Data                     50,000,000
                                         Visualization, Market Research, Search Engine,
                                         Semantic Web
Souq.com                         2017    Consumer Electronics, E-Commerce, Shopping                 580,000,000
Whole Foods                      2017    Food and Beverage, Grocery, Organic Food                13,700,000,000
Do.com                           2017    Internet, Meeting Software, Software                                --
Thinkbox Systems                 2017    Software                                                            --
Colis Prive                      2017    Shipping & Delivery, Logistics                                      --
Harvest.ai                       2017    Artificial Intelligence, Cloud Security, Cyber              19,000,000
                                         Security, Predictive Analytics
Biba Systems                     2016    Apps, Messaging, Mobile                                             --
Partpic                          2016    Photo Recognition                                                   --
Westland                         2016    Publishing                                                          --
Curse Inc.                       2016    Digital Media, Gaming, Video Games                                  --
Cloud9 IDE                       2016    Cloud Computing, Enterprise Software, Mobile, Open                  --
                                         Source, Software
Orbeus                           2016    Artificial Intelligence, Photo Recognition                          --
NICE                             2016    Cloud Infrastructure, Enterprise Software, Power                    --
                                         Grid
Emvantage Payments               2016    Mobile Payments, Payments                                           --
Elemental                        2015    Content Delivery Network, Enterprise Software,             500,000,000
 Technologies                            Video, Video Streaming
Safaba Translation               2015    Software                                                            --
 Systems
AppThwack                        2015    Android, Cyber Security, iOS, Mobile, SaaS, Test                    --
                                         and Measurement
Shoefitr                         2015    E-Commerce, Fashion, Personalization, Software                      --
ClusterK                         2015    Software                                                            --
Amiato                           2015    Analytics, Real Time, Service Industry                              --
2lemetry                         2015    Cloud Computing, IoT, Software                                      --
Annapurna Labs                   2015    Cloud Computing, Cloud Storage, Data Storage               350,000,000
GoodGame                         2014    Video Games, Social Media                                           --
Rooftop Media                    2014    Content, Digital Entertainment, Audio                               --
ComiXology                       2014    Cloud Data Services, Comics, Digital                                --
                                         Entertainment, Digital Media, Reading Apps
Twitch                           2014    Social Media, Video, Video Games, Video Streaming          970,000,000
Double Helix Games               2014    Developer Platform, PC Games, Video Games                           --
TenMarks Education               2013    E-Learning, EdTech, Education                                       --
Liquavista                       2013    Electronics, Hardware, Manufacturing, Software                      --
Goodreads                        2013    E-Learning, Social Media                                            --
INOVA Software                   2013    Software                                                            --
UpNext                           2012    3D Mapping                                                          --
Evi                              2012    Mobile, Search Engine                                       26,000,000
Avalon Books                     2012    Books, Education                                                    --
Kiva Systems                     2012    Hardware, Mobile, Robotics, Software                       775,000,000
Teachstreet                      2012    Charter Schools, Education                                          --
Yap                              2011    Artificial Intelligence, Audio, Messaging, Mobile,                  --
                                         Speech Recognition, Telecommunications
Pushbutton                       2011    Content, Digital Entertainment, TV                                  --
The Book Depository              2011    E-Commerce, Retail                                                  --
Toby Press                       2010    Books                                                               --
Quidsi                           2010    Beauty, Child Care, E-Commerce                             545,000,000
BuyVIP                           2010    E-Commerce, Marketing, Shopping                             96,500,000
Amie Street                      2010    Media and Entertainment, Music, Music Streaming                     --
Woot.com                         2010    Electronics, Fashion, Wine and Spirits                     110,000,000
Touchco                          2010    Hardware, Software                                                  --
Zappos                           2009    E-Commerce, Retail, Shoes                                1,200,000,000
SnapTell                         2009    Advertising, Marketing, Mobile                                      --
Lexcycle                         2009    iOS, Mobile, Software                                               --
AbeBooks                         2008    E-Commerce, Marketplace, Shopping                                   --
Reflexive                        2008    Gaming, Mobile, Video Games                                         --
 Entertainment
Shelfari                         2008    Social Media                                                        --
Box Office Mojo                  2008    Analytics, Film, Media and Entertainment                            --
Fabric.com                       2008    E-Commerce, Fashion, Retail                                         --
LoveFilm                         2008    Digital Entertainment, Gaming, Internet                    312,000,000
Without A Box                    2008    Video                                                               --
Audible                          2008    Audio, Audiobooks, Digital Entertainment, E-               300,000,000
                                         Commerce, Media and Entertainment
Brilliance Audio                 2007    E-Commerce                                                          --
Digital Photography              2007    E-Commerce, News, Publishing                                        --
 Review
Text Pay Me                      2006    Messaging, Payments                                                 --
Shopbop.com                      2006    E-Commerce, Lifestyle, Shopping                                     --
CustomFlix                       2005    Digital Media, DVDs                                                 --
Small Parts Inc.                 2005    3D Printing, E-Commerce, Manufacturing, Retail                      --
MobiPocket                       2005    Shopping                                                            --
Createspace                      2005    Digital Media, Printing, Publishing                                 --
Joyo.com                         2004    E-Commerce, Internet, Music, Video                          75,000,000
Egghead.com                      2002    E-Commerce, Retail                                           6,100,000
OurHouse                         2001    E-Commerce, Retail                                                  --
Leep Technology                  1999    CRM, Information Technology, Software                               --
Back to Basics                   1999    Internet, Toys, Video Games                                         --
Tool Crib                        1999    Tools, E-Commerce                                                   --
Convergence Corp.                1999    Enterprise Software, Internet, Wireless                     23,000,000
Accept.com                       1999    E-Commerce Platforms, Photography, Retail                  101,000,000
Alexa                            1999    Digital Marketing, SEO, Web Development                    250,000,000
LiveBid                          1999    Auctions                                                            --
Exchange.com                     1999    Books, Music                                                        --
MindCorps                        1999    Web Development, Consulting                                         --
Bookpages                        1998    E-Commerce, Internet                                                --
Internet Movie                   1998    Content, Media and Entertainment, TV                        55,000,000
 Database (IMDb)
Junglee                          1998    E-Commerce, Retail, Shopping                               250,000,000
PlanetAll                        1998    Internet, Social Media, Web Development                             --
Telebook                         1998    E-Commerce, Internet                                                --
----------------------------------------------------------------------------------------------------------------

                                B. Apple

 
----------------------------------------------------------------------------------------------------------------
                                                      Apple
-----------------------------------------------------------------------------------------------------------------
                                                                                              Acquisition Value
       Company          Year Acquired                        Categories                             (USD)
----------------------------------------------------------------------------------------------------------------
Spaces                           2020   AR/VR                                                                --
Mobeewave                        2020   Software                                                    100,000,000
Fleetsmith                       2020   Software, Security                                                   --
NextVR                           2020   AR/VR                                                       100,000,000
Inductiv                         2020   AI, Machine Learning, Software                                       --
Voysis                           2020   AI, Machine Learning, Software                                       --
Dark Sky                         2020   Software, Apps                                                       --
Xnor.ai                          2020   AI, Machine Learning, Software                              200,000,000
Spectral Edge                    2019   Photography, Software, Artificial Intelligence                       --
iKinema                          2019   Graphics, 3D Animation, Digital Media                                --
Intel Smartphone                 2019   Hardware                                                  1,000,000,000
 Modem Business
Drive.ai                         2019   Autonomous Vehicles                                                  --
Tueo Health                      2019   Health Care, Information Technology                                  --
Laserlike                        2019   Machine Learning                                                     --
Stamplay                         2019   Cloud Computing, Data Integration, Developer Tools,           5,600,000
                                         SaaS, Sales Automation
DataTiger                        2019   Marketing                                                            --
PullString                       2019   Voice Recognition                                                    --
Platoon                          2018   Talent Search/Acquisition                                            --
Silk Labs                        2018   AI, Machine Learning, Software                                       --
Dialog                           2018   Semiconductors                                              300,000,000
Shazam                           2018   Android, iOS, Music, Audio Recognition                      400,000,000
Akonia                           2018   Glasses, AR                                                          --
Texture                          2018   Content, Digital Entertainment, Digital Media                        --
Buddybuild                       2018   Developer Tools, Mobile, Software                                    --
Pop Up Archive                   2017   Audio, Podcasts, Software                                            --
Spektral                         2017   Photography, Software, AR                                    30,000,000
InVisage                         2017   Photography, Software                                                --
Vrvana                           2017   Computer, Hardware, Information Technology, Virtual          30,000,000
                                         Reality
Init.ai                          2017   Artificial Intelligence, B2B, Developer Platform,                    --
                                         Developer Tools, Machine Learning, Messaging,
                                         Natural Language Processing, Virtual Assistant
PowerbyProxi                     2017   Consumer Electronics, Industrial, Wireless                           --
Regaind                          2017   Artificial Intelligence, Computer Vision, Photo                      --
                                         Sharing, Photography
SensoMotoric                     2017   Computer Vision, Image Recognition, Psychology,                      --
 Instruments                             Software
Beddit                           2017   Fitness, Health Care, Wellness                                       --
Lattice Data                     2017   Big Data, Information Technology, Machine Learning          200,000,000
Workflow                         2017   Mobile, Productivity Tools, Software                                 --
RealFace                         2017   Facial Recognition                                                   --
Indoor.io                        2016   Mapping Services, Navigation, Service Industry,                      --
                                         Internet
Tuplejump                        2016   Analytics, Artificial Intelligence, Big Data, Data                   --
                                         Visualization, Machine Learning, Software
Turi                             2016   Analytics, Artificial Intelligence, Big Data,               200,000,000
                                         Machine Learning, Software
Gliimpse                         2016   Health Care, Information Technology                                  --
Emotient                         2016   Artificial Intelligence, Machine Learning,                           --
                                         Software, Video
LearnSprout                      2016   Analytics, Big Data, EdTech, Education, Predictive                   --
                                         Analytics
Flyby Media                      2016   Augmented Reality, Computer Vision, Internet,                        --
                                         Location Based Services, Mobile, Social Media,
                                         Video
Faceshift                        2015   Broadcasting, Content Creators, Digital Media,                       --
                                         Facial Recognition, Information Technology, Video
                                         Conferencing
LegbaCore                        2015   Consulting, Information Technology, Security                         --
VocalIQ                          2015   Artificial Intelligence, Audio, Automotive, Machine                  --
                                         Learning, Mobile, Wearables
Perceptio                        2015   Artificial Intelligence, Digital Media, Machine                      --
                                         Learning
Mapsense                         2015   Geospatial, Location Based Services, Web Hosting             25,000,000
Coherent Navigation              2015   Apps, Software                                                       --
Metaio                           2015   Advertising, Augmented Reality, Mobile, Software                     --
LinX                             2015   Mobile, Social Media                                         20,000,000
Dryft                            2015   Hardware, Software                                                   --
FoundationDB                     2015   Analytics, Database, Enterprise Software                             --
Camel Audio                      2015   Audio, Music                                                         --
Semetric                         2015   Analytics, Content Discovery, Predictive Analytics           50,000,000
Prss                             2014   iOS, Publishing                                                      --
Beats Electronics                2014   Consumer Electronics, Hardware, Manufacturing,            3,000,000,000
                                         Media and Entertainment, Music, Software
BookLamp                         2014   Content Discovery, Reading Apps, Software                            --
Spotsetter                       2014   Big Data, Social Media                                               --
Swell                            2014   Content Discovery, Machine Learning, Mobile,                 30,000,000
                                         Personalization
LuxVue Technologies              2014   Consumer Electronics, Hardware, Software                             --
Burstly                          2014   Advertising, Analytics, iOS, Mobile Advertising                      --
SnappyLabs                       2014   Photography                                                          --
Acunu                            2013   Analytics, Big Data, Software                                        --
Topsy                            2013   Analytics, Internet, Real Time, Search Engine,              200,000,000
                                         Social Media
BroadMap                         2013   Geospatial, Software                                                 --
PrimeSense                       2013   3D Technology, Consumer Electronics, Hardware               345,000,000
Cue                              2013   Internet, Mobile Apps                                        35,000,000
Passif Semiconductor             2013   Manufacturing, Semiconductor, Wireless                               --
Matcha                           2013   Content, Online Portals, Video                                       --
Embark                           2013   Mobile, Mobile Apps, Public Transportation                           --
AlgoTrim                         2013   Mobile                                                               --
Catch.com                        2013   Android, iOS, Mobile                                                 --
Locationary                      2013   Analytics, Crowdsourcing, Location Based Services                    --
HopStop.com                      2013   Android, iOS, Navigation                                             --
OttoCat                          2013   Apps, Internet, Mobile                                               --
WiFiSlam                         2013   Location Based Services, Mobile, Wireless                    20,000,000
Novauris Technologies            2013   Information Services, Mobile, VoIP                                   --
Anobit                           2012   Electronics, Flash Storage, Semiconductor                   390,000,000
Chomp                            2012   Mobile                                                       50,000,000
AuthenTec                        2012   Biometrics, Cyber Security, Identity Management,            356,000,000
                                         NFC, Security, Semiconductor, Sensors
Particle                         2012   Developer Platform, Mobile, Web Development                          --
Redmatica                        2012   Music, Music Streaming                                               --
C3 Technologies                  2011   Assistive Technology, Enterprise Software,                  240,000,000
                                         Information Technology
Quattro Wireless                 2010   Ad Network, Advertising, Advertising Platforms,             275,000,000
                                         Mobile, Publishing
Intrinsity                       2010   Manufacturing, Mobile, Semiconductor                        121,000,000
Siri                             2010   Consumer Electronics, iOS, Software, Virtualization                  --
Gipsy Moth Studios               2010   App Localization                                                     --
Poly9                            2010   Geospatial, Software                                                 --
Polar Rose                       2010   Internet, Browser Extensions, Image Recognition,             22,000,000
                                         Photography
IMSense                          2010   Image Recognition, Photography, Software                             --
Placebase                        2009   Database, Developer APIs, Developer Tools                            --
Lala                             2009   Internet, Music, Music Streaming                             17,000,000
P.A. Semi                        2008   Electronics, Manufacturing, Semiconductor                   278,000,000
Silicon Color                    2006   Film, Software, Video                                                --
Proximity                        2006   Media Asset Management                                               --
SchemaSoft                       2005   Software                                                             --
FingerWorks                      2005   Hardware, Human Computer Interaction, Software                       --
Nothing Real                     2002   Software                                                             --
Zayante                          2002   Software                                                     13,000,000
Emagic                           2002   Software                                                     30,000,000
Prismo Graphics                  2002   Robotics, Software, Video                                    20,000,000
Silicon Grail Corp-              2002   Software                                                     20,000,000
 Chalice
Propel Software                  2002   Computer, Internet, Software                                         --
PowerSchool                      2001   EdTech, Education, SaaS, Software                            62,000,000
Spruce Technologies              2001   Information Technology                                       15,000,000
Bluebuzz                         2001   Internet Service Provider                                            --
Bluefish Labs                    2001   Database, Mobile Apps, Web Apps                                      --
Astarte                          2000   DVD Authoring                                                        --
NetSelector                      2000   Information Technology, Internet, Software                           --
SoundJam MP                      2000   MP3 Player, Audio Player, Software                                   --
Raycer Graphics                  1999   3D Technology, Graphic Design, Information                   15,000,000
                                         Technology
Xemplar Education                1999   Education                                                     5,000,000
NeXT                             1997   Education, Hardware, Software                               404,000,000
Power Computing Corp.            1997   Manufacturing, Software                                     100,000,000
Coral Software                   1989   Artificial Intelligence, Information Technology,                     --
                                         Software
Nashoba Systems                  1988   Software                                                             --
Network Innovations              1988   Information Technology, Software, Virtualization                     --
Orion Network Systems            1988   Communications Infrastructure, Satellite                             --
                                         Communication
Styleware                        1988   Internet, IoT, Software, Web Hosting                                 --
----------------------------------------------------------------------------------------------------------------

                              C. Facebook

 
----------------------------------------------------------------------------------------------------------------
                                                    Facebook
-----------------------------------------------------------------------------------------------------------------
                                                                                              Acquisition Value
       Company          Year Acquired                        Categories                             (USD)
----------------------------------------------------------------------------------------------------------------
Giphy                            2020   Software                                                    400,000,000
Ready at Dawn                    2020   VR, Video Games                                                      --
Mapillary                        2020   Software, Mapping                                                    --
Sanzaru Games                    2020   VR, Video Games                                                      --
Scape Technologies               2020   AR/VR, Computer Vision, Software                             40,000,000
PlayGiga                         2019   Digital Media, Video Games                                           --
Beat Games                       2019   VR, Video Games                                                      --
Packagd                          2019   E-Commerce, Shopping                                                 --
GrokStyle                        2019   Artificial Intelligence                                              --
CTRL-labs                        2019   Augmented Reality                                                    --
Servicefriend                    2019   AI, Messaging                                                        --
Chainspace                       2019   Apps, Blockchain, Information Technology                             --
Vidpresso                        2018   Broadcasting, Software                                               --
Redkix                           2018   Productivity, Enterprise Collaboration                               --
Bloomsbury AI                    2018   AI, Machine Learning                                         30,000,000
Confirm.io                       2018   Identity Management                                                  --
Tbh                              2017   iOS, Mobile Apps, Social, Social Media                               --
Fayteq                           2017   Software                                                             --
Source3                          2017   Content Rights Management                                            --
Ozlo                             2017   Artificial Intelligence, Computer, Information                       --
                                         Services, Mobile
Zurich Eye                       2017   AR/VR, Computer Vision, Robotics                                     --
CrowdTangle                      2016   Brand Marketing, Non-Profit, Social Media                            --
FacioMetrics                     2016   Machine Learning, Mobile Apps, Social Media,                         --
                                         Software
InfiniLED                        2016   Lighting, Hardware                                                   --
Nascent Objects                  2016   Manufacturing, Product Design, Software                              --
Two Big Ears                     2016   Audio, Consumer Electronics, Software, Virtual                       --
                                         Reality
Masquerade                       2016   Consumer Applications, Mobile, Photo Editing                         --
Endaga                           2015   Communications Infrastructure, Impact Investing,                     --
                                         Infrastructure, Mobile, Telecommunications
Pebbles Interfaces               2015   Digital Media, Hardware, Mobile                              60,000,000
Surreal Vision                   2015   Software                                                             --
TheFind                          2015   Coupons, E-Commerce, Lifestyle, Local, Mobile,                       --
                                         Search Engine, Shopping
QuickFire Networks               2015   Cloud Data Services, Video                                           --
Wit.ai                           2015   Artificial Intelligence, Computer, Developer APIs,                   --
                                         Machine Learning, Software
WaveGroup Sound                  2014   Music, Product Design                                                --
PRYTE                            2014   Mobile Devices, Emerging Markets                                     --
PrivateCore                      2014   Cyber Security, Security                                             --
LiveRail                         2014   Advertising, Enterprise Software, Video                     500,000,000
ProtoGeo Oy                      2014   Mobile                                                               --
Ascenta                          2014   Aerospace, Manufacturing                                     20,000,000
WhatsApp                         2014   Android, Messaging, Mobile, Subscription Service         19,000,000,000
Oculus VR                        2014   Augmented Reality, Consumer Electronics, Hardware,        2,000,000,000
                                         Video Games, Virtual Reality, Virtualization
Branch                           2014   Internet, Messaging, Social                                  15,000,000
Little Eye Labs                  2014   Android, Mobile, Test and Measurement                        15,000,000
SportStream                      2013   Consumer Electronics, Mobile, Sports                                 --
Onavo                            2013   Finance, Mobile, Social Network                                      --
Jibbigo                          2013   Apps, Audio, Big Data, Language Learning, Mobile                     --
Monoidics                        2013   Analytics, Enterprise Software, Information                          --
                                         Technology
Parse                            2013   Android, Cloud Computing, Enterprise Software, iOS,          85,000,000
                                         Mobile, PaaS
Hot Studio                       2013   Internet, Social Media, Web Design                                   --
Spaceport                        2013   Gaming, Mobile, Mobile Devices, Online Games, Web                    --
                                         Development
Atlas Solutions                  2013   Advertising, Advertising Platforms, Internet                100,000,000
Osmeta                           2013   Hardware, Software                                                   --
Storylane                        2013   Social Media                                                         --
Threadsy                         2012   Messaging, Social Media, Social Network                              --
Spool                            2012   Enterprise Software, Mobile, Social Bookmarking,                     --
                                         Video
Acrylic Software                 2012   Software                                                             --
Karma                            2012   Gifts, Mobile, Social                                                --
Face.com                         2012   Artificial Intelligence, Cloud Storage, Facial              100,000,000
                                         Recognition, Machine Learning, Photography, Social
                                         Network
TagTile                          2012   Direct Marketing, Loyalty Programs, Mobile, Social                   --
                                         Media
Glancee                          2012   Android, Dating, iOS, Location Based Services,                       --
                                         Mobile, Public Relations, Search Engine
Lightbox.com                     2012   Android, Mobile, Photo Sharing                                       --
Instagram                        2012   Mobile, Photo Sharing, Photography, Social Media          1,000,000,000
Caffeinated Mind                 2012   File Transfer, Big Data                                              --
Gowalla                          2011   Location Based Services, Photography, Private                        --
                                         Social Networking, Travel, Internet
Strobe                           2011   iOS, Mobile, Software, Web Development                               --
Friend.ly                        2011   Blogging Platforms, Social Media                                     --
Push Pop Press                   2011   Advertising, Digital Media, Marketing                                --
MailRank                         2011   Email, CRM, Information Technology, Software                         --
DayTum                           2011   Analytics, Big Data, Database                                        --
Sofa                             2011   Developer Tools, Software                                            --
RecRec                           2011   Computer Vision                                                      --
Beluga                           2011   Messaging, Mobile, Social Media                                      --
Rel8tion                         2011   Advertising, Advertising Platforms                                   --
Snaptu                           2011   Mobile                                                       70,000,000
ShareGrove                       2010   Real Time, Social Network, Web Hosting                               --
Drop.io                          2010   EdTech, Education, Email, File Sharing, Finance,             10,000,000
                                         FinTech, Flash Storage, Mobile
Hot Potato                       2010   Social, Social Media, Social Media Marketing                 10,000,000
Nextstop                         2010   Digital Entertainment, Social, Travel                         2,500,000
Chai Labs                        2010   Software                                                     10,000,000
Zenbe                            2010   Android, Email, Location Based Services, Messaging,                  --
                                         Mobile, Software, Web Apps
Divvyshot                        2010   Photo Sharing, Social Network, Web Hosting                           --
Octazen                          2010   Enterprise Software, Social Network, Web Browsers                    --
FriendFeed                       2009   Social Media                                                 47,500,000
ConnectU                         2009   Social Media                                                         --
Parakey                          2007   Social Media, Web Browsers, WebOS                                    --
AboutFace                        2007   Internet                                                             --
----------------------------------------------------------------------------------------------------------------

                               D. Google

 
----------------------------------------------------------------------------------------------------------------
                                                     Google
-----------------------------------------------------------------------------------------------------------------
                                                                                              Acquisition Value
       Company          Year Acquired                        Categories                             (USD)
----------------------------------------------------------------------------------------------------------------
Stratozone                       2020   Cloud, Platform Migration                                            --
North                            2020   Hardware, Glasses                                           180,000,000
Looker                           2020   Big Data, Analytics                                       2,600,000,000
Cornerstone                      2020   Cloud, Platform Migration                                            --
 Technology
AppSheet                         2020   Enterprise Software                                                  --
Pointy                           2020   Software, Inventory                                         163,000,000
Fitbit                           2019   User Data, Mobile Devices, Fitness Tracking, Health       2,100,000,000
                                         Care
Typhoon Studios                  2019   Video Games, Video Streaming                                         --
CloudSimple                      2019   Cloud                                                                --
Elastifile                       2019   Cloud, Storage                                                       --
Nightcorn                        2019   Internet, Social Media, Video Streaming                              --
Alooma                           2019   Data Integration, Cloud, Platform Migration                          --
Superpod                         2019   Software                                                     60,000,000
DevOps Research and              2018   Cloud                                                                --
 Assessment
Sigmoid Labs                     2018   Software                                                             --
Workbench                        2018   Software, Education                                                  --
Onward                           2018   AI, Customer Service, Sales                                          --
GraphicsFuzz                     2018   Graphics Drivers, Security                                           --
Velostrata                       2018   Cloud Migration, Data Centers                                        --
Cask Data                        2018   Big Data, Analytics                                                  --
Lytro                            2018   Photography, Film, Hardware, VR                                      --
Tenor                            2018   Messaging, Social Media, Video                                       --
Socratic                         2018   AI, Software                                                         --
Xively                           2018   Enterprise Software, IoT, SaaS                                       --
Redux                            2018   Speakers, Mobile Devices                                             --
HTC Smartphone                   2018   Consumer Electronics, Manufacturing, Mobile               1,100,000,000
 Division
Banter                           2017   Mobile Software, Messaging                                           --
Relay Media                      2017   Analytics                                                            --
60db                             2017   Audio, Media and Entertainment, Social Media, Video                  --
                                         Streaming
Bitium                           2017   Cloud Computing, Cyber Security, Identity                            --
                                         Management, SaaS, Security, Software
AIMatter                         2017   Artificial Intelligence, Computer Vision, Software                   --
Senosis Health                   2017   Health, Mobile Device, Software                                      --
Halli Labs                       2017   Artificial Intelligence, Machine Learning, Software                  --
                                         Engineering
Owlchemy Labs                    2017   Gaming, Software Engineering, Virtual Reality                        --
Kaggle                           2017   Analytics, Big Data, Data Mining, News, Predictive                   --
                                         Analytics
AppBridge                        2017   Apps, Data Storage, Google                                           --
Crashlytics                      2017   Android, iOS, Mobile, SaaS                                           --
Fabric                           2017   Cloud Infrastructure, Developer APIs, Developer                      --
                                         Tools, Enterprise Software, Mobile Apps, Real Time
Limes Audio                      2017   Audio, Communication Hardware, Telecommunications                    --
Cronologics                      2016   Hardware, Software, Wearables                                        --
LeapDroid                        2016   Software                                                             --
Qwiklabs                         2016   Cloud Computing, Information Technology, Software                    --
FameBit                          2016   Internet, Music, Video                                               --
Eyefluence                       2016   Consumer Electronics, Manufacturing, Wearables                       --
Apigee                           2016   Cloud Data Services, Enterprise Software,                   625,000,000
                                         Information Technology
Urban Engines                    2016   Analytics, Big Data, GovTech, Mobile, Software,                      --
                                         Transportation
Api.ai                           2016   Natural Language Processing, Voice Recognition                       --
Orbitera                         2016   Analytics, Cloud Computing, E-Commerce, Marketing           100,000,000
                                         Automation, SaaS, Software
Apportable                       2016   Developer Tools, Enterprise Software, Mobile, iOS                    --
Moodstocks                       2016   Artificial Intelligence, Hardware, Image                             --
                                         Recognition, Machine Learning, Mobile, QR Codes,
                                         Real Time, Visual Search
Anvato                           2016   Software, Video Conferencing, Video Streaming                        --
Kifi                             2016   Analytics, Artificial Intelligence, Big Data,                        --
                                         Content Discovery, Knowledge Management
LaunchKit                        2016   Developer Tools, Mobile Apps                                         --
Webpass                          2016   Internet, ISP, Wireless                                              --
Synergyse                        2016   Apps, Search Engine, Software, Training                              --
BandPage                         2016   Consumer, Facebook, Marketplace, Music                               --
Pie                              2016   Automotive, Incubators                                               --
Fly Labs                         2015   iOS                                                                  --
Bebop                            2015   Business Development, Enterprise, Enterprise                380,000,000
                                         Software
Digisfera                        2015   Images                                                               --
Oyster                           2015   Email, Web Design, Web Hosting                                       --
Jibe Mobile                      2015   File Sharing, Messaging, Mobile, Social Media                        --
Pixate                           2015   Computer, Enterprise Software, Mobile                                --
Timeful                          2015   Analytics, Artificial Intelligence, Database,                        --
                                         Machine Learning, Task Management
Pulse.io                         2015   Apps, Mobile                                                         --
Thrive Audio                     2015   Audio, 3D Technology                                                 --
Skillman & Hackett               2015   Software, Virtual Reality                                            --
Launchpad Toys                   2015   Apps, Education, iOS                                                 --
Odysee                           2015   Enterprise Software, Mobile Apps, Photo Sharing                      --
Softcard                         2015   Apps, Mobile Payments                                                --
Red Hot Labs                     2015   Advertising Platforms, Apps, Mobile, Software                        --
Granata Decision                 2015   Analytics, Artificial Intelligence, Machine                          --
 Systems                                 Learning
Vidmaker                         2014   Collaboration, Social Media, Video                                   --
Lumedyne Technologies            2014   Consumer Electronics, Information Technology,                        --
                                         Semiconductors
RelativeWave                     2014   Apps, Developer Tools                                                --
Agawi                            2014   EdTech, Gaming, Mobile Apps, Mobile Devices                          --
Firebase                         2014   Cloud Infrastructure, Developer APIs, Developer                      --
                                         Tools, Enterprise Software, Mobile Apps, Real Time
Dark Blue Labs                   2014   Artificial Intelligence, Data Visualization,                         --
                                         Machine Learning
Vision Factory                   2014   Artificial Intelligence, Computer Vision, Machine                    --
                                         Learning, Search Engine, Software
Revolv                           2014   Internet of Things, Smart Home, Software                             --
Lift Labs                        2014   Hardware, Health Care, Medical, Software                             --
Polar                            2014   Fitness, Health Care, Wearables                                      --
Skybox Imaging                   2014   Cloud Security, Cyber Security, Enterprise                  500,000,000
                                         Software, Network Security, Security, Software
Emu                              2014   E-Commerce                                                           --
Directr                          2014   Energy, Solar                                                        --
Jetpac                           2014   AI, ML                                                               --
Gecko Design                     2014   Product Design                                                       --
Zync Render                      2014   Digital Media, Flash Storage, Social Media                           --
Dropcam                          2014   Consumer Electronics, Hardware, SaaS                        555,000,000
Songza                           2014   Music                                                                --
DrawElements                     2014   Enterprise Software                                                  --
mDialog                          2014   Advertising, Information Technology, Video                           --
                                         Streaming
Aplental Technologies            2014   Information Technology, Wireless                                     --
Baarzo                           2014   Video, Search                                                        --
Appurify                         2014   Android, Apps, iOS, Mobile, Test and Measurement                     --
Rangespan                        2014   Analytics, E-Commerce, Supply Chain Management                       --
Adometry                         2014   Advertising, Analytics, SaaS                                         --
Appetas                          2014   Network Security, Restaurants, SaaS                                  --
Stackdriver                      2014   Apps, Cloud Computing, Enterprise Software,                          --
                                         Infrastructure
Quest Visual                     2014   Data Visualization, iOS, Software                                    --
Gridcentric                      2014   Software, Virtualization                                             --
Divide                           2014   Enterprise Software, Information Technology,                         --
                                         Mobile, SaaS, Software
Titan Aerospace                  2014   Aerospace, Manufacturing                                             --
GreenThrottle                    2014   Console Games, Consumer Electronics, Mobile                          --
Nest Labs                        2014   Sensor, Manufacturing, Smart Home                         3,200,000,000
SlickLogin                       2014   Mobile, Mobile Apps, Security                                        --
Spider.io                        2014   Advertising, Analytics, Fraud Detection, Internet,                   --
                                         Security
Bitspin                          2014   Apps, Web Development                                                --
Impermium                        2014   Security                                                             --
DeepMind Technologies            2014   AI, ML                                                      500,000,000
Flutter                          2013   Content, Software                                            40,000,000
FlexyCore                        2013   Software                                                     23,000,000
Calico                           2013   Biotech, Genetics, Health Care                                       --
Bump                             2013   Mobile, Contact Sharing                                              --
WIMM Labs                        2012   Hardware, Software, Wearables                                        --
Waze                             2013   Mobile Apps, Navigation, Transportation                     966,000,000
Makani Power                     2013   Energy                                                               --
MyEnergy                         2013   Clean Energy, Energy Efficiency                                      --
Behavio                          2013   Software                                                             --
Wavii                            2013   ML, AI                                                       30,000,000
Channel Intelligence             2013   Manufacturing, Product Search, Shopping                     125,000,000
DNNresearch                      2013   AI                                                                   --
Talaria Technologies             2013   Software, Web Design, Web Development                                --
Schaft                           2013   Hardware, Robotics                                                   --
Industrial Perception            2013   AI                                                                   --
Redwood Robotics                 2013   Robotics                                                             --
Meka Robotics                    2013   Robotics                                                             --
Holomni                          2013   Mobile, Robots                                                       --
Bot & Dolly                      2013   Software, Robotics                                                   --
Autofuss                         2013   Product Design                                                       --
Incentive Targeting              2012   Public Relations, Retail                                             --
BufferBox                        2012   E-Commerce, Marketplace, Shopping                            17,000,000
Viewdle                          2012   Analytics, Augmented Reality, Computer Vision,               45,000,000
                                         Mobile, Facial Recognition
VirusTotal.com                   2012   Security                                                             --
Nik Software                     2012   Image Recognition, Software                                          --
Sparrow                          2012   Email, Messaging                                             25,000,000
Wildfire Interactive             2012   Consulting, Content, Data Integration, Developer            450,000,000
                                         Tools
Cuban Council                    2012   Consulting, Consumer Electronics, Search Engine                      --
Meebo                            2012   Internet, Messaging, Web Development                        100,000,000
Quickoffice                      2012   Enterprise Software, iOS, Mobile                                     --
TxVia                            2012   Finance, FinTech, Mobile, PaaS                                       --
Milk, Inc                        2012   Apps, Mobile, Software                                               --
RightsFlow                       2011   Accounting, Music, Legal                                             --
Clever Sense                     2011   ML, AI                                                               --
Apture                           2011   Advertising                                                          --
Katango                          2011   Social Media                                                         --
Anthony's Robots                 2011   Autonomous Vehicles                                                  --
510 Systems                      2011   Autonomous Vehicles, Software                                        --
SocialGrapple                    2011   Analytics, Social Media                                              --
Zave Networks                    2011   Apps, Mobile                                                         --
Zagat                            2011   Consumer Reviews                                            151,000,000
DailyDeal                        2011   Beauty, Shopping                                            114,000,000
Dealmap                          2011   Coupons, Local, Mobile, Search Engine, Social Media                  --
Motorola Mobility                2011   Mobile Apps                                              12,500,000,000
Punchd                           2011   Android, iOS, Loyalty Programs, Mobile                               --
Fridge                           2011   Photo Sharing                                                        --
PittPatt                         2011   Facial Recognition                                                   --
PostRank                         2011   Analytics, Social Media, Test and Measurement                        --
Admeld                           2011   Advertising, Auctions, Software                             400,000,000
SageTV                           2011   Digital Entertainment, Events, Media and                             --
                                         Entertainment
Modu                             2011   Mobile, Telecommunications, Wireless                                 --
Sparkbuy                         2011   Consumer Electronics, E-Commerce, Shopping                           --
PushLife                         2011   Digital Media, E-Commerce, Mobile                            25,000,000
ITA Software                     2011   Information Technology                                      676,000,000
TalkBin                          2011   Messaging                                                            --
BeatThatQuote.com                2011   Auto Insurance, E-Commerce, Price Comparison                 65,000,000
Next New Networks                2011   Video, Video Streaming                                               --
Green Parrot Pictures            2011   Digital Media, Enterprise Software, Video                            --
Zynamics                         2011   Security                                                             --
eBook Technologies               2011   Content, E-Books                                                     --
SayNow                           2011   Messaging, Social Network, Telecommunications                        --
Phonetic Arts                    2010   Software                                                             --
Widevine Technologies            2010   Digital Entertainment, Digital Media, Video                          --
Zetawire                         2010   Mobile Payments, NFC                                                 --
BlindType                        2010   Mobile                                                               --
Plannr                           2010   Mobile                                                               --
Quiksee                          2010   Digital Media                                                10,000,000
MentorWave                       2010   Software, 3D Visualization                                           --
 Technologies
Slide.com                        2010   Developer Tools, Software                                   228,000,000
Jambool                          2010   Apps, Internet                                               70,000,000
Like.com                         2010   Image Recognition                                           100,000,000
Angstro                          2010   Enterprise Software, Facebook, Social Network                        --
SocialDeck                       2010   Mobile, Social Website                                               --
Metaweb                          2010   Database, Infrastructure                                             --
Invite Media                     2010   Advertising                                                  81,000,000
Instantiations                   2010   Software                                                             --
Global IP Solutions              2010   Software                                                     68,200,000
Simplify Media                   2010   Digital Entertainment, Digital Media, Mobile                         --
Ruba.com                         2010   Guides, Internet                                                     --
PinkArt                          2010   Software                                                             --
Agnilux                          2010   Hardware                                                             --
LabPixies                        2010   Software                                                             --
BumpTop                          2010   Software                                                     30,000,000
Picnik                           2010   Photosharing                                                         --
DocVerse                         2010   Document Management                                          25,000,000
Episodic                         2010   Broadcasting, Internet                                               --
reMail                           2010   Email, Messaging, Mobile Apps                                        --
Aardvark                         2010   Internet, Search Engine, Social                              50,000,000
AdMob                            2009   Ad Network, Advertising, Apps, Marketing, Mobile            750,000,000
Gizmo5                           2009   Public Relations, VoIP                                       30,000,000
Teracent                         2009   Advertising, Machine Learning                                        --
AppJet                           2009   Software, Web Development                                            --
reCAPTCHA                        2009   Security                                                             --
On2                              2009   Content, Internet, SaaS, Software, Video                    133,000,000
Eluceon Research                 2009   Internet, Software                                                   --
TNC                              2008   Google, Web Browsers, Web Hosting                                    --
Begun                            2008   Advertising                                                          --
Omnisio                          2008   File Sharing, Video                                          15,000,000
Jaiku                            2007   Mobile                                                               --
Zingku                           2007   Digital Media, Social Media, Social Network                          --
Postini                          2007   Cyber Security, Internet, Security                          625,000,000
ImageAmerica                     2007   Software, Document Scanning                                          --
FeedBurner                       2007   Blogging Platforms, Internet, Podcast                       100,000,000
PeakStream                       2007   Apps, Developer APIs, GPU, Software                                  --
Zenter                           2007   Content, E-Commerce, Web Hosting                                     --
GrandCentral                     2007   Mobile, Telecommunications, VoIP                             45,000,000
GreenBorder                      2007   Computer, Internet, Software                                         --
Panoramio                        2007   Photo Sharing, Photography, Social Media                             --
Crusix                           2007   Social Networking                                                    --
DoubleClick                      2007   Advertising                                               3,100,000,000
Tonic Systems                    2007   Web Development                                                      --
Marratech                        2007   Software, Video Conferencing                                 15,000,000
Trendalyzer                      2007   Visual Statistics, Data Visualization, Software                      --
Adscape                          2007   Advertising, Digital Media, Marketing                        23,000,000
Endoxon                          2006   Information Technology                                       28,000,000
JotSpot                          2006   Collaboration, Enterprise Software, Software                         --
YouTube                          2006   Internet, Music, Video                                    1,650,000,000
Neven Vision                     2006   Software                                                             --
2Web Technologies                2006   Software                                                             --
Orion                            2006   Content, Search Engine, Web Hosting                                  --
Upstartle                        2006   Software                                                             --
@Last Software                   2006   3D Technology, Developer Tools                                       --
Measure Map                      2006   Advertising, Analytics, Big Data                                     --
dMarc Broadcasting               2006   Advertising, Advertising Platforms, Internet Radio          102,000,000
Phatbits                         2005   XML Desktop Applications                                             --
allPAY GmbH                      2005   Mobile                                                               --
bruNET GmbH                      2005   Digital Entertainment, Social Media                                  --
Skia                             2005   Graphic Design                                                       --
Akwan Information                2005   Information Technology, IT Management, Search                        --
 Technologies                            Engine
Android                          2005   Linux, Mobile, Search Engine                                 50,000,000
Reqwireless                      2005   Wireless                                                             --
Dodgeball                        2005   Mobile Devices, Software                                             --
Urchin Software                  2005   Software                                                             --
 Corporation
Where 2 Technologies             2004   Software                                                             --
Keyhole                          2004   Geospatial, Software                                                 --
ZipDash                          2004   Automotive, E-Commerce, Mobile, Real Time, Travel                    --
Picasa                           2004   Photos, Photo Editing                                                --
Ignite Logic                     2004   Internet, Software, Web Design                                       --
Sprinks                          2003   Online Advertising                                                   --
Genius Labs                      2003   Developer APIs, Developer Tools, Software                            --
Neotonic Software                2003   CRM, Software                                                        --
Applied Semantics                2003   Developer APIs, Enterprise Software, Mobile Apps            102,000,000
Kaltix                           2003   SEO, Web Hosting                                                     --
Pyra Labs                        2003   Blogging Platforms, Developer APIs, Developer                        --
                                         Tools, Enterprise Software, Project Management,
                                         Social Media
Outride                          2001   Energy, Information Technology, Online Portals                       --
Deja                             2001   Information Technology, Internet, Web Development                    --
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                  VIII. APPENDIX: ADDITIONAL VIEWS OF

                     MEMBERS OF JUDICIARY COMMITTEE

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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]