Tech companies duke it out at Senate hearing

The Senate Judiciary antitrust subcommittee turned into a Silicon Valley battleground Wednesday, with representatives from several app-based companies accusing Apple and Google executives at the hearing of stifling competition in their app stores and retaliating against those who speak out.

The app companies lambasted the commission fees, of up to 30 percent, that the Silicon Valley giants impose on some apps, a practice that could influence senators weighing legislative proposals aimed at curbing alleged anti-competitive behavior.

Apple’s chief compliance officer, Kyle Andeer, and Google’s senior director of public policy and government relations, Wilson White, defended the app store policies as being competitive and helping to ensure data privacy and security.

But the executives representing app-based businesses dismissed those arguments. 

“When the veneer of their safety security and privacy arguments shatter under the weight of scrutiny, Apple and Google respond that they built the platforms and should be able to decide what business models they use,” said Jared Sine, chief legal officer and secretary of Match Group.

“Members of the committee, I submit that the railroad companies built the railroads. The steel companies built the steel mills. The telephone companies built the telephone lines. The creators of all of these incredible innovations each made the same argument at different times. It did not justify a monopoly then, and it should not today,” Sine added. 

Spotify’s head of global affairs and chief legal officer, Horacio Gutierrez, and Tile’s general counsel, Kirsten Daru, also testified at the hearing.

Amid backlash to the commission fees, Apple and Google have revised their policies to cut commission fees to 15 percent for the first $1 million of revenue every developer earns each year. Apple announced the change in November, and Google followed last month.

Senators from both sides of the aisle pressed the tech giants on their app store policies.

Sen. Mike Lee (R-Utah), the ranking member on the subcommittee, asked about the differences between apps they collect the commission from versus apps that are not subject to those fees.

For example, dating apps like Tinder, which is owned by Match, are subject to the commission fees for in-app purchases made by users, but apps such as Uber or other delivery services are not subject to those fees.

White and Andeer said the distinguishing factor is that Uber delivers physical products, as opposed to digital services such as Tinder.

“Uber is literally meeting a stranger for transportation,” Lee said. “I’m not grasping the differentiation point between meeting a stranger for transportation and meeting a stranger for dinner.”

The lawmakers also inquired about allegations of retaliation, or threats to do so, against app companies speaking out on the policies.

Gutierrez testified that Apple threatened in 2013 to ban Spotify from the app store unless it incorporated in-app payments which would make Spotify subject to the then-30 percent commission fees.

The threat of removing Spotify from the App Store is just one of many examples of “threats and relation” Spotify has faced with Apple, Gutierrez said.

In other cases, he said, the app had to wait months for updates to be approved that contained bug fixes.

“They’ve basically thrown the book at us in a number of ways to make it hard for us to continue to sustain our decision to speak up,” he said.

Similarly, Sine said Google reached out to the company Tuesday night after his testimony was made public asking what Google viewed as differences in his testimony from the company’s public earnings call.

Sen. Richard Blumenthal (D-Conn.) urged the committee to look into the matter further, which subcommittee Chair Amy Klobuchar (D-Minn.) said is “the plan.”

“We don’t have evidence of the exact words spoken but it looks like a threat, talks like a threat. It’s a threat,” Blumenthal said.

“When you receive something like that from a company that can turn you off over night, you’re always a little intimidated,” Sine said.

White said Google would “never threaten” its partners.

Daru also accused Apple of having “turned on” the company, after Apple started exploring its own product tracking features.

Tile has previously raised concerns over Apple’s practices, testifying during last year’s House Judiciary antitrust subcommittee hearings that the company changed its operating system to make it more difficult for users to use Tile’s products than Apple’s own.

The concerns were heightened after Apple unveiled its new AirTags product at a launch event Tuesday — the device is designed to help users locate lost items.

“Apple uses privacy as a blanket excuse to subject competitors to different rules,” Daru said. “This is what happens when you have a monopolist acting as a defacto regulator. The regulations will always favor the monopolist. If Apple turned on us it can turn on anyone.” 

Andeer said Apple sees the AirTags as being “very different” from other available products, and that the addition will lead to more competition in the market.