Amazon, AWS and antitrust: How tough could US lawmakers be on the tech titan? – ComputerWeekly.com

The US House Judiciary antitrust subcommittee sent requests for information letters to four of the biggest technology companies in the world in September 2019, out of concern at the fact a handful of companies hold a huge share of the digital market perhaps more than is deemed healthy.

The CEOs of Amazon, Apple, Alphabet and Facebook were the recipients of these letters, which contained a number of detailed questions about how they do business. The deadline for the companies to submit their responses has now passed, and the committee is in the process of reviewing their submissions.

For Amazon in particular, this investigation could have a huge impact on its business. The committee not only questioned Amazon around its e-commerce presence, but also about its crown jewel, Amazon Web Services (AWS), which accounts for 52% of its entire operating income.

There were numerous questions around AWS, but there were several which stood out in particular, with the committee requesting all communications to or from relevant executives relating to:

Jonathan Osborne, an attorney from Globalaws Florida firm Gunster, says the information being sought suggests the US Congress and regulators are trying to understand two key things about how Amazon is run.

The first is whether Amazon is using AWS and its relationships with its business customers to create an unfair advantage, both in the web services space but also in the other businesses that Amazon has, he says.

The second question is whether the current antitrust laws in the US adequately provide oversight and regulation for companies like Amazon in the web space.

Stacy Mitchell, co-director at the Institute for Local Self-Reliance, a not-for-profit that challenges concentrated economic and political power, says there are two main concerns around Amazons access to competitors data stored on AWS.

The first is whether AWS uses information it has on companies such as Netflix, which rely on AWS to host their data and manage their activity in the cloud for Amazon Prime, or information from its retail platform to use for its e-commerce operation.

Incidentally, the company faced similar scrutiny on these matters in the UK earlier this year, when its UK director of public policy, Lesley Smith, fielded questions from the House of Lords Communications Committee pertaining to its hold on the cloud and e-commerce markets.

On this front, Marks & Spencer is known to have moved from AWS to its own proprietary infrastructure because itfeared Amazon would use its information to secure a competitive advantageof some kind.

As far as I know, theres been no indication that [Amazon has] done anything with regards to those kinds of customers, but where there is more evidence and concern is around third-party applications which are resting on AWS infrastructure, says Mitchell.

The question is, is Amazon watching those companies, seeing which applications are popular, and then making knock-off versions itself? And then, as it is fully integrated with AWS, customers are more likely to choose them, and therefore its version has a degree of preferential placement and is therefore more likely to be used by customers.

For many of AWSs rivals, there is no question that this is what it is doing.

How do you suppose Amazon decides which cloud products to develop next? I fully expect that they look at what other vendors are selling on their platform and say Gee, that one is selling really well. We should build our own version and cut those guys out. Well make more money, says DavidFriend, CEO and co-founder of cloud storage providerWasabi Technologies.

Friend says if the firm is using this kind of information to gauge how well AWS-hosted applications are selling to inform its product development, it should be made accessible to all to create a level playing field.

Why shouldnt I be able to see whats hot on AWS as a way to guide my companys product development when Amazon is doing exactly that? DavidFriend,Wasabi Technologies

Why shouldnt I be able to see whats hot on AWS as a way to guide my companys product development when Amazon is doing exactly that? Amazon will never agree to publicly disclose this data, though, [because] who would want their applications hosted somewhere that discloses such proprietary information? he says.

The issue for these third-party companies, many of which are startups, is that AWS has such a big hold on the infrastructure-as-a-service (IaaS) market, that if they do not put their apps on AWS, they may not be able to reach their customers.

When Amazon owns the rails that you need to get your product to market, and they also compete directly with you on those same rails, that is a core competition problem, says Mitchell.

"If Amazon was a small company and there were lots of cloud providers, then the playing field would be more balanced as third parties could tell AWS that if theyre not treated well theyre not going to offer their products on Amazons platform.

In other words, the balance of power is very much in Amazons hands, forcing companies to operate on AWS.

This means that Amazon can do whatever it wants without repercussion and therein lies the problem of competition, says Mitchell.

But this isnt all the committee is asking about, as Osborne alludes to.

To sign up for an AWS account, a business or individual would have to provide Amazon with identifying information, whether thats their email account, phone number or where they live. The question would be whether Amazon is making that same data, which is a pretty simple database of information, available to its other businesses, he says.

This ranges from groceries, to in-home services like Alexa, to the way people are reading books, listening to podcasts or even securing their homes.

While the first question for the committee would be around whether Amazon is freely sharing this data among its businesses, the second would be whether Amazons access to and use of this data has an exclusionary effect in the market.

In other words, is it enhancing Amazons power in other business realms, in a way that other competitors are not able to keep up with, because Amazon is getting the data from its AWS offerings? Osborne asks.

According to Mitchell, the US has not had a congressional investigation into monopoly power like this in decades. So not only is the investigation into these technology companies from an antitrust perspective new in itself, but the process has not been used for so long that this is new territory for everyone involved.

But the in-depth questions the committee has pulled together for each of the four tech companies suggests this is not a case of an investigation being undertaken for the sake of an investigation.

This is not a fire drill, theyre very serious and the list of information theyve requested speaks to that. The specific things theyre asking illustrates a depth of knowledge about these corporations and their business models and where the anti-competitive issues exist, says Mitchell.

So what next? Well, although the technology companies have sent over their evidence, there is uncertainty from AWS on when this evidence will be made public, and how.

Much to Mitchells surprise, Amazon has shared details of the evidence and responses it shared with the committee to its questions, which he previously thought the firm would be unwilling to do because of the potential impact such disclosures could have on its cloud and retail businesses.

Osborne says that after reviewing the data, the committee is likely to set hearings in which they would take comments from Amazons representatives as well as other experts in the fields of antitrust and potentially e-commerce and cloud computing.

After these hearings, the committee, which is made up of members of Congress, can propose legislation to change the landscape for antitrust regulations in the online market going forward in the US.

That would take proposing a bill, passing a bill and the bill ultimately being signed by the president, says Osborne.

This could take a significant amount of time, and as it involves the Federal Trade Commission (FTC) and US Attorneys offices in different parts of the country, as well as state regulators, a lot of complexity is involved.

This could lead to legislation which would break up the companies including Amazon.com from AWS, and Instagram from Facebook.

It appears from the congressional paperwork and the nature of the investigation that what they want to determine is whether the current antitrust laws adequately protect consumers, and if not, what if any changes could be made, says Osborne.

I think the third thing is Amazon is going to have to decide is whether it wants to break off from AWS to keep control over the way it operates and not wait for the government to step in and tell Amazon what it has to do, he adds.

Another course of action could be litigation.

Antitrust lawsuits could be filed by either of the two enforcement agencies in the FTC or the Department of Justice, if the agencies look at the findings in the report and see behaviours which violate antitrust laws and they can file a suit to address those, says Mitchell.

The key is whether the antitrust laws that the US currently has are strong enough or even applicable to these new companies. Considering the technicalities involved in cloud computing, this is unlikely to be the case, and a new set of laws would make sense.

It will be intriguing to see whether Amazon will wait for this to be completed or decide of its own accord to split the e-commerce and cloud computing businesses, although AWS CEO Andy Jassy recently told US news site CNBC that there is no incentive to spin-off the latter at this time.

Either way, Osborne says the outcome of this inquiry could be a defining one in the history of online marketplaces and how they are operated.

And while this is only US law, the changes it could potentially bring in with regard to how these companies operate could have a huge impact all over the world.

Data sovereignty issues are only going to increase and this antitrust probe is just another example of growing concerns about the power and accountability of big tech, and its ability to transcend individual government regulatory oversight, says Memset chief operating officer Chris Burden.

Monopolies damage choice, close down new ideas and slow down the pace in which innovation comes to market, he adds. Anything that can be done to control this monopoly before it is too late should be welcomed.

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Amazon, AWS and antitrust: How tough could US lawmakers be on the tech titan? - ComputerWeekly.com

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