The government's fight for consumers' rights

Today we’ll be talking about David and Goliath. It’s a biblical story from the Book of Samuel, where David defeats Goliath, a Philistine giant, in single combat. In the Bible, it signified King Saul’s unfitness to rule Israel. However, in modern times, it’s taken on a different meaning. When someone mentions David and Goliath, it signifies an underdog fighting and besting someone near impossible to defeat.

Now I might be engaging in a little hyperbole here – but stick with me. The United States Government is currently going through a historic antitrust trial against Google. I’ve mentioned this one before, but the Justice Department alleges that Google has maintained and abused a monopoly in the online search market, therefore breaking antitrust law. So, essentially, the government is representing the consumer, who is David. And of course, Goliath is Google and big tech.

The heart of the government's case revolves around Google's dominance as a search engine and its alleged efforts to stifle competition. Google's market share in the U.S. is nearly 90%, and its actions have raised concerns about its influence on market competition. The government's final witness, MIT economics professor Michael Whinston, argued that Google's large payments to companies like Apple for being the default search engine on their devices were essentially monopoly profits. Whinston also claimed that Google had the market power to raise ad rates without losing advertisers, which he said was proven by Google's internal experiments​​.

It gets even worse when you consider the search advertising front – in a previous episode of The Social Room Podcast, I mentioned that Google controls nearly the entire market share of search advertising, let alone video and display advertising through Google Ads. This doesn’t help the fact that Google has been engaging in a sort of payola with Apple, where they have paid a sizable portion of the $26 billion they pay to various companies to be the primary search engine on their software or hardware. Google's justification is that these payments are akin to a supplier paying for shelf space in a store, arguing that this practice benefits users. However, critics and the DOJ argue that such practices could prevent companies like Apple from developing or promoting alternative search engines​​.

The conundrum is this: every single other search engine is kind of awful. I cannot tell you the last time I used Bing. And in fact, Bing is finally getting its big break now that OpenAI is using Bing to browse research for Chat-GPT 4 prompts. And that’s only really because Microsoft is a primary investor in OpenAI, and Microsoft is the parent of Bing.

Also, consider this. Chat-GPT and other generative AI models are not real users. A primary moneymaker for these search engines are ads, and the money that businesses pay to use them. Bing is not getting any cost-per-click revenue from these generative AI models, which I can assume now make up a large margin of Bing’s userbase. If these crawlers from Chat-GPT are not making revenue for Bing, then Bing cannot innovate because it's not making enough money.

Yahoo isn’t better. In fact, Mozilla’s chief executive took the stand in this trial and talked about how they dropped Google as their primary search engine and went with Yahoo in 2014. The executive claimed it was “painful” to send their users through Yahoo because there were so many ads. And that goes back to what I was saying earlier – if these search engines can’t make money off real users, they’ll just sell more and more ads. Which makes the service worse. Funnily enough, Mozilla went back to Google three years later, and is now taking the stand and saying Google is simply a better product. Which, honestly, is true.

This case holds broader ramifications for the technology industry. It touches upon issues of default settings and monopoly power, concerns that are relevant to other major tech firms as well. The outcome of this trial could set a precedent, influencing how companies like Amazon, Facebook, and Apple approach the legality of their default settings. As the trial concludes and moves towards a decision, the tech industry and investors are watching closely, understanding that the ramifications of this case could extend far beyond Google itself​​.

At the end of the day, the government is fighting for consumers’ rights. That is the real nature of these kinds of trials, all the way back to the Sherman Anti-Trust Act to trust-bust Carnegie Steel and Rockefeller.

Now, let’s pivot to another government fighting for consumers’ rights: the European Union.

Apple, following negotiations and regulatory pressures within the European Union, has announced that it will adopt the Rich Communications Services (RCS) messaging standard on iPhones by 2024. This decision comes as a significant shift in the technology and communication landscape, particularly influenced by the EU's Digital Markets Act and ongoing campaigns by Google and other telecom companies.

Now, if you’ve ever used an Apple device before to text someone on Android, you’re going to notice the notorious green bubble. That’s because Apple is still using SMS communication, something that came from the 90s, to communicate with other devices that are not Apple. This is by design, too. The blue bubble from iMessage, which is the service that communicates from Apple device to Apple device, has become a status symbol. It’s just so awful to communicate with someone on Android.

The DMA (Digital Markets Act), enacted by the EU's 27 member countries, is a legislative framework designed to ensure fair competition and consumer choice in the tech industry. And honestly, they’re doing a lot to rein in the tech giant right now; perhaps moreso than the SEC is doing with Google.

The EU has also forced the hand of Apple to adopt USB-C charging ports. The iPhone 15 Pro Max, which I have, has adopted this early, but it will be switching all devices to USB-C by its next generation of phones. Apple, which had exclusively used its Lightning charger for its devices, initially opposed this rule, citing concerns over stifling innovation. Despite this opposition, Apple has now adapted to comply with the EU's standards, demonstrating the significant impact of the EU's regulatory decisions on tech companies, even beyond its borders​​​​.

These case studies are important to understand how governments are treating big tech nowadays. After decades of rapid expansion and little to no government intervention the government is now stepping in to protect consumers’ rights. The ongoing antitrust trial against Google, led by the U.S. Department of Justice, represents a significant effort in protecting consumer rights in the digital age. By challenging Google's alleged monopolistic practices in the online search market, this landmark case aims to ensure fair competition and prevent abuse of market dominance.

In Apple’s scenario, the EU is doing more to protect the market and allowing more choice for consumers. You are no longer forced to use one or the other, and pressure others to switch over to Apple to have the blue bubble. Same with the charger port – by allowing a universal standard (which should have been the case already), Apple can no longer fleece their user base by charging exorbitant amounts for a charger and charging block when you could just get the same one for cheap.

I respect these moves from the government. I really vouch for consumers’ rights in this digital landscape. Big Tech controls so much of our lives, and they are truly able to make us deal with anything they want. Like LinkedIn: LinkedIn is such a frustrating platform, and to make any sort of presence, you have to pay upwards of $500 a month or more for services such as Recruiter.

I’ve been really into learning about World War I recently, and in trench warfare,any inch that you gained against the enemy mattered towards the offensive. I think this is somewhat the same case. You give an inch to these companies, they’ll take a mile. I think it’s time to take some of that real estate back, no matter how small it may be.