Did you know that if your company’s business dealings do not consistently reflect your company’s mission with consumers, that can lead to legal and regulatory scrutiny? The recent antitrust cases against Google, Facebook, Apple and Amazon suggest so.
Once “young, scrappy and hungry” (credit: My Shot, Hamilton) tech startups, the government and other industry players are now accusing these companies, collectively referred to as “Big Tech,” of improper tactics that have artificially inflated their record-setting financial success. Specifically, their distribution and advertising deals, acquisitions, and dealings with “frenemies” (companies that could be considered a friend or enemy depending on the circumstances) are alleged to be inconsistent with their stated company missions to empower consumers online.
Regardless of the ultimate result of these legal matters (during which time our antitrust laws themselves may change), there are valuable leadership insights for all business leaders to consider.
The Allegations. Google’s stated mission is to organize the world’s information and make it universally accessible and useful, previously using the motto “don’t be evil.” The lawsuit brought by the Department of Justice Antitrust Division (DOJ) against Google focuses on its agreements with distributors, specifically ISPs and phone makers such as T-Mobile and Samsung.
The DOJ accuses Google of paying billions of dollars to the distributors for preferential treatment and to block competition from competitive search engines such as Bing. These distributor agreements allegedly include terms that guarantee Google’s placement as a default search engine, preventing other search engines from being pre-installed or set as default, and requiring that other Google Apps be pre-installed and ineligible for deletion.
DOJ argues that the distributors were induced into these terms because Google shares the revenue it gains as the dominant provider of search advertising, in which consumer data is used to deliver targeted ads. The case contends that Google is not the “free” search engine that consumers may perceive.
Google disputes these allegations and states that consumers choose their search engine because of its quality, and not because consumers are forced to do so.
The parallel case against Google brought by the Texas Attorney General and other States criticize its agreements involving delivery of online advertising. The case contends that Google improperly has influence on both the buy-side and sell-side of advertising transactions through exchanges, and using a baseball analogy, argues that Google is the pitcher, batter, and umpire, all at the same time in the competition for online advertising.
In other words, Google is accused of profiting from both sides of online advertising transactions while also having a vested interest in who wins each transaction. This is ostensibly contrary to its original “don’t be evil” motto, and extending its dominance into areas beyond search.
Google denies these allegations and points out that it has “invested in state-of-the-art ad tech services that help businesses and benefit consumers.” It points out that digital ad prices have fallen over the last decade, ad tech fees are falling, Google’s ad tech fees are lower than the industry average, and these are the hallmarks of a highly competitive industry.
Facebook’s stated mission is to give people the power to build community and bring the world closer together. The Federal Trade Commission’s case against Facebook focuses on its acquisition of Instagram and WhatsApp to prevent advertisers from migrating to alternative social networks.
The case contends that the acquisitions were primarily driven by the competitive threat the mobile networks posed for user time spent on social media. The deals allegedly alleviated the pressure on Facebook to improve its mobile experience for consumers, consistent with its company mission.
Facebook denies these allegations and points out that “years after the FTC cleared these acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.”
Apple’s stated mission is to bring the best personal computing products and support to students, educators, designers, scientists, engineers, businesspersons and consumers in over 140 countries around the world, and Amazon states that their mission is to be Earth’s most customer-centric company.
The allegations against Apple and Amazon are of a different flavor, but also focus on competitive strategies that are allegedly harmful to consumers. Opponents argue that Apple’s treatment of App developers and Amazon’s treatment of online merchants were originally friendly, because they made their platforms more valuable to gain consumer acceptance, but when the developers and merchants later posed a competitive threat or barrier to the companies, they were unfairly discriminated against as enemies. These allegations imply that there is a public misperception of how much control the platforms have over others companies’ access to the market and the resulting choices that consumers make, despite the companies’ consumer-centric missions.
Apple maintains that its ecosystem has expanded from 500 Apps to over 1.7M, and only 60 of which are Apple software, which supports the premise that innovation and consumer choice are prevalent on its platform. Amazon denies that it has harmed competition on its platform, and maintains that it has created millions of jobs and opportunities for third parties that benefit from its scale.
Leadership Strategy Implications. All antitrust cases are decided on their unique facts, and it will take time to determine how these issues will play out in Court and in Congress (hearings continue next week). Still, the claims against Big Tech highlight the need for consistency between business tactics and a company’s mission, or greatest value, to consumers.
All companies aim for strong brand equity, market share, and the trust of their customers, and the key is to earn that position both (i) with the customers directly and (ii) on the back-end with other business operations and dealings.
The allegations above all involve back-end, operational initiatives such as distribution and advertising agreements, acquisitions, and dealings with partners, but the concept of consistency can encompass any initiative that may directly or indirectly impact your customers. Where those efforts are inconsistent with or contradictory of the company mission with consumers, it can lead to unexpected and unwelcome regulatory and business challenges.
It can be tempting to think about regulatory and legal compliance as a “check the box” exercise that is largely kept separate from a company’s business strategy and plans. (For instance, making sure your product or service is compliant with safety standards.)
But in the current environment, it is critical to harmonize a company’s core competitive strategy with what its customers value most. If there is a consumer-centric way to collaborate with others for consumers’ benefit (e.g., collaborating on a COVID-19 remedy or vaccine distribution plan), this is not only good compliance but good business.
Conversely, if there are strategies that enhance a company’s position but are adverse to consumer interests, it may be problematic on multiple fronts. As we saw for COVID-19, the DOJ quickly announced in March 2020 that agreements or tactics that take advantage of consumers under the circumstances will not be tolerated, and were in fact prosecuted. For instance, hoarders of hand sanitizer were prosecuted for price gouging on Amazon, and Amazon supported the authorities in that effort.
Companies need to compete relentlessly and also do so in a way that benefits consumers. We enjoy and incentivize great success stories in our economy, and the best way to ensure that the success is celebrated, rather than scrutinized, is to assess how much the consuming public is cheering you on.
Whether you are looking for your next standing ovation (via a growth strategy) or trying to avoid or change the minds of booing critics, your short and long term value to customers as encompassed by your mission should be your true north and reflected in all of your dealings, both visible and operational.