Antitrust lawsuits in the United States have their historical beginnings with the Carnegie Steel and Standard Oil monopolies.  The early 20th century was a time of trust-busting and a battle of government regulation of these industries, which were seemingly impossible to control due to power accumulated from insurmountable wealth and market domination.  Trust busting returned in the 1970s and 80s with the Bell System in the sector of telephones and communication.  Now, almost a century after the passing of the antitrust laws and a half-century after that era’s conglomerate disaggregation, monopolies adjacent to the industry of telephone and communications run rampant in the United States: Big Tech. The US government is again facing difficulty in quelling these companies and their expansive power.  However, efforts have become more fruitful in the past few years, as antitrust litigation against the Big Tech conglomerates of Alphabet, Amazon, Apple, and Meta (aka Facebook) continue to face global scrutiny for their monopolistic practices.  Analysis of these cases unveils the true market reach and influence that these companies have and poses questions on how breaking up their monopolies will affect individuals and businesses who use the services as part of in daily life.  This article will analyze three ongoing and one recently closed antitrust cases against Alphabet, Amazon, Apple, and Meta, and suggest effects that the rulings may have on how the nonprofit industry functions.

The Importance of Antitrust Lawsuits in the Nonprofit Sector

Due to the expansive market and industry reach of Amazon, Apple, Meta, and Alphabet (a breakdown can be read here), any result of litigation will affect how arts nonprofits run their organizations.  These corporations own internal systems and data collection practices that directly affect a majority of nonprofits.  Besides using its search engine for everyday searches, Google has a multitude of productivity tools that over 150,000 nonprofits use daily to run their internal operations.  Worldwide, 93% of nonprofits have a Facebook page and 50% have an Instagram account, where they leverage the platform’s integrated donation softwares, as well as use the live streaming features for special events.  Amazon Web Services, with tens of thousands of nonprofit users, offers multiple services incentivized with benefits, including donor-facing website improvements, implementing more refined data, database and analytics management, and the enhancement of machine learning.  Apple controls the data usage and privacy of apps developed by third party organizations, many of which are nonprofits who use that data to see how customers interact with their services. Apple provides applications for nonprofits through organizations such as Gro CRM, which has a business model based solely on the use of Apple products. Therefore, changes that these companies make to their services are already reliant on the activities of the tech conglomerates.  For example, when Apple changed its privacy terms with iOS 14 to accommodate GDPR and other emerging customer privacy legislations, many nonprofits, like the for-profits intended to be curtailed by the legislation, lost their ability to gain the consumer data generally used to determine how customers interact with their products.

The following summary of separate litigation of the four independent cases reveals how Big Tech partakes in anticompetitive practices and monopolistic tendencies.  Furthermore, each case cites issues of confounding monopolistic factors due to market domination and industry reach.  This indicates that each individual corporation’s success is directly aided by its control in another portion of the market, whether it be advertising, business intelligence and software tools, or online retailing.  Thus, if Big Tech companies continue to escape antitrust cases and use their services as normally, it could be detrimental for nonprofit organizations, as it will likely stifle development and exposure due to the exuberant cost of advertising and the unsolicited use of their patron data – especially since the attractiveness and increased use of BI (business intelligence) tools in the nonprofit sector is growing.  Conversely, if these, or similar antitrust lawsuits bust Big Tech, the world will go through a period of data disaggregation.  While difficult to predict how it will transpire, and although it will be beneficial for personal privacy in the long run, the result will likely create short term internal destabilizing regarding CRM operations, data collection methods and a plethora of other sticky issues that have no clean answer.  Regardless of these outcomes, however, antitrust legislative impact on the nonprofit world, and society as a whole, is insurmountable.

Alphabet

On October 20, 2020, the states of Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas, under the direction of the United States Attorney General, filed a lawsuit against Google, LLC for unlawfully maintaining monopolies (Case 1:20-cv-03010).  The case states that the company is using anticompetitive exclusionary practices in the markets of general search services, search advertising, and general search text advertising.

General Search Services

This case asserts that Google has a monopoly in general search services by maintaining control of the majority of the “search access points” available for users to insert their search queries.  Google has about 80% of search query control in the United States through exclusionary agreements and its ownership through search distribution channels (p. 4, 18).  About 60% of this control comes from exclusionary agreements with other tech companies.  For example, Google pays billions of dollars to device manufactures and browser developers so that it may have default search engine status on products.  This is exemplified with Apple devices; each of their pre-set search access points (whether through Safari or prompted by Siri) defaults to Google’s search engine (pp. 14-16, 27-28).  Since users rarely change their devices from their default settings, this gives the company de facto exclusivity, especially on mobile devices – about 95% of mobile searches are executed on Google’s search engine (pp. 3-4, 16-17).  The other 20% of this search query control comes through the company’s ownership or management of browsers and apps, such as Chrome (p, 4).

Advertising

Google holds a monopoly over general search advertising and general search text advertising, and has been successful in doing so through the sale of data collected on consumer search queries and information.  These two methods of search are similar in that they are most effective through user data.  Google is notorious for collecting user data through algorithms that are refined over time, yielding more accurate results, which in turn makes marketing more precise and effective (pp. 6-7, 31-32).  This distribution of data is costly, but fruitful for many, as advertisers pay about $40 billion yearly to advertise on Google’s search engine (pp. 4-5).  The sheer cost of advertising is a large barrier to entry for any organization that cannot afford to spend millions of annual dollars advertising on one platform, making competition obsolete (p. 5, 35).  Due to this control, Google has a share of over 70% of both the search advertising and general search text advertising markets individually (p. 35).

Meta

The Federal Trade Commission filed a lawsuit against Meta (then Facebook) on August 19, 2021 for its monopoly in social media, maintained by its monopolistic practices of acquisition, strict third-party agreements, and selling advertising through user data (Case 1:20-cv-03590-JEB).  These complex and confounding factors is what gives Meta the status of a dangerous, far-reaching monopoly.

Acquisitions

Back in 2008, Facebook’s CEO Mark Zuckerberg stated a damning phrase that reflects the company’s strategies since: “It is better to buy than compete” (p. 1).  About a decade ago, Facebook failed to acquire Twitter, and has made multiple unsuccessful attempts to acquire Snapchat, after both proved to be direct competition with potential wealthy investors (pp. 21-22).  In 2013, the company acquired Onavo, which it subsequently shut down in 2019, so that it could use its data to better identify firms that had a high probability of being a competitor to its social networking platform (pp. 23-24).  The well-known WhatsApp acquisition emerged from this, as well as that of tbh, which was a rapidly-growing success until Facebook shut it down in 2017.  This is one of many instances where the corporation acquired and terminated multiple apps of growing popularity that posed threats to business (pp. 24-28).

Third-Party Agreements

Facebook also holds its monopoly through conditions on third-party app usage on its platform.  The company allowed open access to its services (such as Candy Crush and FarmVille), including its APIs, other software connection tools, and plug-ins, on the condition that apps would not compete with the social media platform’s core services and grow to a state of potential rivalry to Facebook (pp. 4-5, 12-14, 45-46).  Developers were incentivized to agree, as the possible exposure to billions of Facebook users outweighed the anticompetitive agreements and open access to user data (pp. 12-14).  This allows Facebook to gain the advertising profits, user time, and user data through these apps while ensuring that they would not pose a threat to competition (p. 10).

Selling Advertisements Through User Data

Facebook’s most lucrative practice is selling advertisements to other businesses.  The company mines users’ personal data (activities, interests, and affiliations) and sells them to advertisers for billions of dollars for a place on Facebook and Instagram feeds (pp. 2, 15).  In 2020 alone, the company sold $84 billion of advertisements, collecting revenues of greater than $85 billion and profits of greater than $29 billion (pp. 2, 15).  Advertisers will pay this cost because of the extent to which Facebook uses the personal data of its consumers, resulting in hyper-accurate and targeted social advertising that is unique to each user’s account (p. 15-17). Through this data collection, Facebook can better adapt its APIs, which makes its advertising and third-party affiliation more attractive, allowing for further collection of user data (p. 12, 14).  This integrated, data-dominated nature of Facebook’s monopoly is underscored by the multiple accounts of misrepresentation of the alleged privacy of user data, resulting in it being undermined and used illegally (pp. 48-49). 

Amazon

In May 2021, Washington, D.C., under the direction of the Attorney General, sued Amazon for violation of the Antitrust Act (Case 2021 CA 001775 B).  The case against Amazon was filed due to its large market share of online retail sales, as well as its domination of other multi-seller retail markets through barriers to entry and price-suppression tactics.

Barriers to Entry

Due to Amazon’s expansive domination in the online retail industry, accounting for 50-70% of all online purchases, many third-party sellers are bound to sell their products to Amazon for any exposure in the marketplace (p. 1).  Two of the largest barriers to entry are network effects and data collection.  While network effects are generated through true success of a business, and are more common in the retail space since a retailer becomes more reputable with its growing popularity, Amazon reinforces it through artificially inflated sales (pp. 5, 11) and offering cheap membership services such as Amazon Prime, Prime Video, and other incentives that allows them to keep substantial control of the market (p. 19). These strategies would not be as successful if it were not for Amazon’s massive data collection efforts.

Amazon collects a wealth of data, such as data on pricing and revenue, customer reviews, viewed products that were not purchased, and the length of time for which an item was viewed, aidins the company in creating hyper-targeted advertisements.  This data collection is enhanced by Amazon’s market domination in the cloud computing software market, allowing them an unfair advantage to leverage consumer data and the data analytics tools that online retailers heavily rely on (pp. 19-20).

Artificial Price Inflation

Since Amazon’s market domination is grossly inflated, many third-party retailers have no choice but to sell on its platform.  However, they must incur the costs to sell on Amazon, which is sometimes up to 40% of a product’s price (pp. 2-3).  This artificially inflates prices on and off Amazon, as third-party sellers must agree to not sell their products on other platforms for lower prices than what is listed on Amazon (p. 2).  These factors force market prices to inflate, while Amazon is able to sell products closer to their actual market value.  As a result, competition is stifled and innovation is unable to occur as the corporation has market control over the online retail space and that data analytics required to be successful in it (pp. 5, 24-26).  The video below further clarifies this accusation.

Figure 2: Video explaining the core accusation of the Amazon lawsuit and the company’s statement against it.  Source: CNBC.

Apple

Epic Games (creator and owner of Fortnite) filed a lawsuit (Case 4:20-cv-05640-YGR) against Apple on September 10, 2021 in California for anticompetitive effects in the app store through the use of foreclosed competition, increased consumer app prices, decreased output, and decreased innovation (p. 95).  This case has since closed, and overall, the Supreme Court of California found that Apple was not performing in monopolistic practices, specifically regarding the foreclosure of competition (pp. 95-96). However, the court felt the need to address the rest of the accusations for the possibility of anticompetitive actions in the future.

Increased Consumer App Prices

Apple charges a higher commission rate (30%) for third party use of the app store, but upon an economic review, would only need to charge a 15.6% commission rate and still be highly profitable, therefore making its high rate is suspicious (p. 97).  The court noted that Apple’s restrictions increased prices for developers and the company has not been able to provide reasonable evidence as to why its high prices are relatable to the services provided.  However, since this particular issue was not the focus of the trial, and therefore a substantial amount of evidence was not focused on the effects of prices for consumers, the court could not provide a ruling based on mixed evidence, but noted that it was a point of interest (pp. 97-98).

Decreased Output

There was not a substantial amount of evidence for the court to rule that Apple’s App store has contributed to a decrease in developer output of apps, especially as iOS gaming transactions have increased by 1,200% since 2008 (p. 99).  However, multiple developers have stated they are unable to support the 30% commission, making it a barrier to entry into the market, which directly affects the abilities of developers to produce new apps and sell them (pp. 99-100).

Decreased Innovation

The court asserts that Apple’s App Store has stagnated in innovation within the past decade, and a substantial portion of developers have indicated that they are neutral or dissatisfied with the company’s response to complaints such as the inconsistent implementation of the terms of service, a poorly-implemented search algorithm, and the lack of implementation of app recommendations based on consumer data (which is widely provided on other app-selling platforms) (pp. 100-101).   This lack of care, in congruence with the raised possibility of monopolistic tendencies, asserts that a third party app-purchasing platform would benefit the innovation of the app-buying experience (p. 102).

Concluding Thoughts of the Court

Regardless of these mixed factors, the court has found that Apple consistently holds 52-57% of market share, which is not enough for a full assertion of a monopoly, but is enough to raise concern on the durability and competitiveness of the market and its development.  It additionally stated that the outcome of the case may have indicated a monopoly if Epic Games focused Apple’s market share and the lack of power of third party platforms in this space (p. 138-139).

Looking Forward

The world against Big Tech is a fascinating and immensely important issue for all industries and is just as much so for the personal realm as it is for the professional world.  In recent years, governments around the globe have committed to focusing their energies on de-monopolizing Amazon, Apple, Meta, and Alphabet, as well as other tech giants, with slowly increasing success rates.  Each case raises concern over individual and organizational data privacy and its ethical collection, the stifling of competition and thus innovation from software to app development, to advertising methods and smaller business exposure.  Whatever the issue, the outcome of these cases will affect how organizations inwardly and outwardly function.  Thus, it is critical for nonprofits to stay vigilant in their awareness of Big Tech activities, as the outcomes greatly affect business models and patron interactions.