Once you get past all of the PR spin and political grandstanding, the lengthy tech antitrust hearing that took place on Wednesday looks less like a seminal moment in the history of the tech sector than it does one more chapter in a tug-of-war between Washington and tech giants that's far from over.
And from an investor's perspective, what might be most insightful about this spectacle is how tech companies are putting their cards on the table regarding the stances they're taking as this battle continues playing out.
Tim Cook, Jeff Bezos, Mark Zuckerberg and Sundar Pichai kicked off the Congressional hearing, which lasted nearly six hours, by sharing prepared remarks in which they defended their companies against allegations of anti-competitive behavior and highlighted various positive things they'd done over the years. Among the key talking points:
- Cook highlighted Apple's high customer satisfaction ratings; its low market share (on a unit basis) in many of the markets it competes in; its privacy and security efforts; and the opportunities the App Store has created for developers.
- After going over his own background and upbringing, Bezos highlighted Amazon's early struggles, its high public approval ratings and the number of jobs and marketplace businesses it has helped create. He also noted Amazon still claims a small percentage of total retail spending activity, and that it faces significant competition from traditional retailers.
- Zuckerberg highlighted the number of small businesses and entrepreneurs that use Facebook's platforms to promote themselves, asserted that his company faces "intense competition" globally, and portrayed Facebook as a bulwark against Chinese tech firms. He also argued that Facebook's scale helps it better deal with problems such as harmful content and election interference.
- Pichai highlighted the role Google has played over the years in expanding access to information, as well as in providing various tools and services for small businesses. He also insisted that consumers have many other alternatives for finding information and content, and (like Zuckerberg) stressed that many of his company's most popular services are free.
Following the remarks, the CEOs were peppered with a wide variety of questions about their companies' business practices. A portion of these questions involved concerns and allegations that the tech giants shouldn't have much trouble defending themselves against -- for example, Cook defended Apple's decision to pull certain parental control apps by noting the move was done to protect kids' data, and all four CEOs promised not to allow the use of forced labor in the making of their products.
And other questions, such as ones about alleged political censorship and the tolerance of hate speech, are important to the extent that the concerns expressed by politicians are also shared by many of their voters, even if these concerns are unlikely to have a major direct impact on the tech giants' businesses for the time being.
But -- at a time when Amazon.com (AMZN) , Facebook (FB) , Apple (AAPL) and Alphabet (GOOGL) are all facing antitrust probes -- there were some hardball questions as well. Among other things, Zuckerberg had to face questions about whether Facebook specifically bought Instagram because it was a competitive threat; Pichai was questioned about Google's scraping of third-party content for integration within Google Search and (since it counts both publishers and advertisers as clients) potential conflicts of interest for its third-party ad business; Bezos faced questions about how Amazon's direct e-commerce business competes against marketplace sellers; and Cook was hit with questions about Apple's policy that all digital content transactions on iOS devices go through the App Store.
In the near-to-intermediate term, Google is arguably the tech giant facing the most antitrust risk, since the antitrust probes it's facing partly deal with the policies of what's by far its most profitable business (Google Search).
Apple and Amazon each face a measure of risk, to the extent that antitrust probes could impact Apple's App Store revenue and Amazon's direct e-commerce sales. But even if things don't go their way, the bottom-line impact is unlikely to be massive -- particularly for Amazon, which is believed to generate far more gross profit from its seller services than from direct e-commerce.
As for Facebook, probes of its acquisitions of Instagram and WhatsApp could in theory be a major problem. But in practice, it seems unlikely at this late juncture that regulators will be able to undo either of these acquisitions, given how much Facebook has moved to integrate the services it offers for consumers and businesses across its various platforms.
Meanwhile, as the CEOs' prepared remarks drive home -- and as tech analyst Ben Thompson recently highlighted -- the tech giants can lean heavily on the popularity of their products and services among consumers and small businesses as they defend themselves in the court of public opinion. And from all indications, this popularity has only grown over the last few months, as consumers leaned heavily on the tech giants during COVID-19 lockdowns.
All of this helps explain why the shares of tech giants followed equity markets higher on Wednesday. Though the companies do face genuine antitrust risks (Google particularly), the risks often aren't as bad as they've been hyped up to be, and not much was said or disclosed during Wednesday's hearing that really changed the status quo.