Five years ago, in the midst of manufacturing delays and other issues plaguing Tesla’s planned Model 3 launch, Musk is said to have had a phone call with Tim Cook during which the Apple (AAPL) CEO proposed buying Tesla. Musk said he’d do it, but on one condition: “I’m CEO.” It reportedly took Cook a moment to realize Musk meant taking his job.That’s according to a Los Angeles Times review of “Power Play: Tesla, Elon Musk and the Bet of the Century,” a forthcoming book by Wall Street Journal reporter Tim Higgins, who covers Apple (AAPL), Tesla (TSLA) and other tech companies. The review, published Friday, adds that Cook reportedly responded to Musk with an expletive and hung up the phone. For their part, Musk and Cook have denied ever speaking to one another. In December, Musk revealed on Twitter that he had considered selling Tesla to Apple but said he never actually talked with Cook. Replying to a report about Apple’s plans to release a battery-powered, mass-market automobile, Musk said he reached out to Cook during the “darkest days of the Model 3 program” about acquiring Tesla “for 1/10 of our current value.” “He refused to take the meeting,” Musk said. Musk also denied that the interaction described in the book happened in a tweet on Friday, following the publication of the book review. “Cook & I have never spoken or written to each other ever,” Musk said, adding that he had once requested a meeting with Cook to discuss Apple buying Tesla, but that it didn’t happen and “there were no conditions of acquisition proposed whatsoever.”Higgins, the author, responded to Musk’s Friday tweet saying the Tesla founder was given “plenty of opportunities” to comment on the anecdote. “This anecdote comes from Musk’s own account of the conversation, according to people who heard the retelling at the time,” Higgins tweeted. When asked about the book’s claims, Apple directed CNN Business to an April interview Cook did with reporter Kara Swisher, who asked about Musk saying he refused a meeting. “You know,” Cook responded, “I’ve never spoken to Elon, although I have great admiration and respect for the company he’s built.” Musk and Cook were photographed sitting near one another — with only Oracle (ORCL) CEO Safra Catz between them — in a meeting with former President Donald Trump in December 2016. It’s unclear if the two spoke.”Power Play” is set to be released on August 3.
The fine was imposed on July 16 and disclosed Friday in a financial filing. It is the largest in the law’s three-year history, followed by Google’s 2019 fine of €50 million.Regulators said Amazon’s processing of personal data didn’t comply with GDPR requirements, and the company acknowledged it has been ordered to change its business practices. Amazon said the regulatory decision was “without merit” and added that it plans to “defend ourselves vigorously in this matter.””The decision relating to how we show customers relevant advertising relies on subjective and untested interpretations of European privacy law, and the proposed fine is entirely out of proportion with even that interpretation,” the company said.The penalty for the alleged violation was imposed by data regulators in Luxembourg, where Amazon has its European headquarters. A spokesperson for the Luxembourg data authority, CNPD, declined to comment, citing the ongoing nature of the legal proceeding.The fine marks the latest example of European regulators zeroing in on Big Tech. Officials in Europe and the UK have increasingly been scrutinizing the business practices of companies including Amazon, Apple (AAPL), Facebook (FB) and Google (GOOG) amid allegations they have harmed competition and abused consumer privacy. GDPR, or the General Data Protection Regulation, seeks to rein in how digital platforms use consumer data and to regulate data breaches.In a further statement to CNN Business, Amazon said customer information had not been leaked or exposed. “Maintaining the security of our customers’ information and their trust are top priorities,” the statement said. “There has been no data breach, and no customer data has been exposed to any third party. These facts are undisputed.”Under the EU’s privacy law, violations can carry penalties of up to €20 million or 4% of a company’s global revenue, whichever is higher.
Morgan took what she thought were adequate steps to ensure her timid then 9-month-old poodle mix would be in good hands during an upcoming trip. She interviewed a Rover sitter and did a trial run — dropping Zorro and a friend’s dog off together with the sitter for the day. Zorro’s “temperament was good,” said Morgan, after picking up her dog, which made her feel comfortable enough to book the same sitter for a five-day trip.One day after she left, the sitter said her phone had broken and she was using her computer to send updates through the platform. Morgan said she wasn’t sent photos of Zorro — something that is typically common for sitters to do — but she had been “satisfied with the in-depth messages” the sitter was providing. The evening before Morgan was set to return home to Chicago, the sitter messaged her that Zorro “got loose” while she was at her boyfriend’s house more than an hour away from her home, according to correspondence viewed by CNN Business. Morgan would soon discover through a post from the local Animal Control’s Facebook page that Zorro had gone missing at the beginning of the stay. (According to a police report, the local Animal Control received two calls reporting a loose dog on the first day of Zorro’s stay; one came from a man who claimed his girlfriend’s dog had gotten loose, describing a dog similar to Zorro.) The sitter waited four days to notify Morgan, all while providing false updates, according to correspondence viewed by CNN Business. Four months later, Morgan is still searching for Zorro — mostly, she feels, with little support from Rover which initially included Amber Alert robocalls, flyers and a $100 contribution towards a reward for finding Zorro.”We feel terribly that some pet parents believe we’ve fallen short of our obligation to them,” said Rover spokesperson Dave Rosenbaum in a statement for this story. “We’ll continue to work hard to live up to our community’s expectations.”More than 2 million “pet parents” have turned to Rover’s network of “trusted sitters and dog walkers” to book services including boarding, house sitting and day care, according to the company. Now, it is set to ride a wave of pandemic pet demand to a Wall Street debut. But as with other sharing economy platforms, which largely rely on independent contractors with limited amounts of vetting, there can be a dark side. CNN Business spoke with six pet owners who said their dogs have gone missing or died while in the care of a sitter they found on Rover’s platform since the start of the pandemic. All of them said they turned to the platform because it was a recognizable name in the industry and they felt more comfortable after reading positive reviews of their respective sitters on the site. One pet owner said her sitter remained on the platform for months after her dogs were lost while in the sitter’s care. (Rover declined to comment on this claim.) Another owner, whose dog was found dead with no explanation, said the sitter whose care he was in remains live on the platform. (Rover said it is reviewing this matter.)It’s unclear how many owners have experienced such incidents. Rosenbaum told CNN Business the company tracks these incidents but does not “currently disclose” numbers. However, there have been stories over the years of dogs who were lost, abused, or found dead while in the care of Rover sitters, often reported on by local news outlets. (CNN Business has not independently confirmed these accounts.) Others don’t make it to the press at all — in some cases potentially due to the company’s efforts to tie some payouts to non-disclosure agreements, which can effectively silence people from going public with their stories. Additionally, when signing up to use Rover, customers agree to bring any claims against the company to individual arbitration, a process that keeps issues out of court and prevents people from banding together to pursue combined cases such as a class action lawsuit, unless they explicitly opt out of the agreement with a written notice.”As a team motivated by a shared love of pets, we’re committed to helping people access quality pet care, so it weighs heavily on our hearts if someone has a negative experience,” Rosenbaum said in a statement to CNN Business. “Over 40 million services have been booked through the platform with 97% of reviewed stays receiving 5-stars. But even one negative experience is too many. We work every day to improve the platform so that every experience on Rover is a positive one.”Rosenbaum told CNN Business that it raised its standard reward for a lost dog from $100 to $500 in early July to address “the effects of rising ‘pandemic puppy’ adoptions and pent up travel demand.” At times, Rover increases the amount or applies other resources “if we believe doing so could materially increase the likelihood of quickly reuniting a pet with their family,” he said.That change came late for owners like Morgan and Elizabeth Snell, whose terrier mix Tony went missing in Greenville, South Carolina, on July 4. After CNN Business asked whether Rover would offer the $500 amount to pet owners whose dogs are still missing, and specifically mentioned Morgan’s Zorro, the company offered Morgan the $500 amount. Snell said she was offered the larger contribution after her story was featured on local news. (“This update would have been proactively communicated to the pet parent irrespective of press coverage,” Rosenbaum said.)A pandemic dog sitting boom Founded in Seattle in 2011, Rover is part of cohort of startups that emerged over the last decade — Uber (UBER) and Lyft (LYFT), chief among them — that created marketplaces to connect individuals in need of a particular service with individuals who can provide such a service on a gig-by-gig basis. The company dominated the sharing economy pet market even as it faced competition from Wag, a rival startup that raised an eye-popping $300 million only to stumble. As CNN Business previously reported, Wag’s leadership had struggled to handle fundamental issues facing its business, including growth, customer service and the safety of pets.Rover weathered the pandemic and arguably emerged stronger this year, thanks to all the people who added canines to their homes and then needed pet walking and sitting services as the country reopened. Rover has increasingly eaten away at Wag’s market share, holding 95% of the US share of sales compared to Wag’s 5% in June 2021, according to data from Bloomberg Second Measure. Now, Rover expects to begin trading on the Nasdaq next month through a merger with a special purpose acquisition company, which will value the combined company at $1.63 billion and help it continue to expand. “A public listing will provide the capital to accelerate the expansion of core service offerings, support other pet types, and continue to grow our geographic footprint,” said Rover CEO Aaron Easterly in a statement about the merger deal.But amid the boom in business, there have also been new reports of missing or killed dogs while in the care of a Rover sitter. In an SEC filing from Nebula Caravel — the company Rover is merging with to go public — one of its risk factors is an acknowledgment that “Rover cannot guarantee the safety of pets, pet care providers, pet parents and third parties.” Like other on-demand companies, Rover requires pet sitters to pass at least a basic background check, which references a sex offender registry, terrorist watchlist, and the National Criminal Database, which has its own limitations, including the fact not all records are digitized. Rover says that sitter profiles are reviewed and approved by the company; applicants also take a basic six-question safety quiz. According to Rover’s site, sitters who apply for Rover will receive approval (or be notified that information provided is incomplete) within 24-48 hours.But some customers question the thoroughness of the background checks. Annette Leturia dropped off her two dogs — two-year-old Togo and nearly four-year-old Liam — with a Rover sitter in Houston, Texas, in late June for what was supposed to be a week-long vacation, only to return early after the sitter told her Togo was found dead on the bathroom floor. Afterward, Leturia said she had an independent background check done on the sitter, which turned up troubling charges for grand theft and fraud. She said she still has no closure on what happened to Togo.In the meantime, based on screenshots viewed by CNN Business, the sitter appears to be pet sitting on the platform. When asked about this, Rosenbaum said: “We have asked our team to review the specifics of this incident and take further action if appropriate.” Morgan, Zorro’s owner, also said she discovered her sitter had past criminal charges. Rosenbaum pointed out that cases can change between an initial charge and a final ruling. “In the interest of accuracy and fairness, we must make decisions based on what is legally available to our background check provider and reported to us,” he said.Rover said sitters can choose to apply for a standard ($25) or an enhanced ($35) background check, and pet owners can choose to only hire providers with enhanced checks. The company also said it promotes meet-and-greets with sitters as well as meeting with multiple potential sitters prior to booking.There is otherwise minimal vetting, training, or oversight because workers are treated by the company as independent contractors rather than employees — a classification that could be jeopardized if the company asserted more control over sitters. This factor is a standard complaint about the business model that worries some. “Whether you’re talking about ride share or grocery delivery, there are lots of complaints about poor service. Because these platforms have decided to go down this route of using independent contractors, they actually can’t really train people to do a good job or to screen people maybe the way you’d really want them to do it,” said Miriam Cherry, a law professor at Saint Louis University School of Law who has studied corporate social responsibility and the gig economy. “It is not a good model if you really care about wanting absolute good quality, knowing you’re covered if something goes wrong.””With a pet,” she added, “if things go bad, they can really go bad.”Rosenbaum said that “unlike some other ‘gig economy’ platforms, services on Rover are not assigned by Rover or offered on-demand. We believe that the best person to choose a provider for a pet are the pet parents themselves.”Venky Ganesan, a Rover board member and partner at Menlo Ventures, which invested early in the company, stressed the company’s commitment to safety. “At the board level, we have always made sure the company can over-invest in Trust and Safety because for lots of people, their pets are as important as their kids,” he said. He added that “one incident is too many” and said “the company should have the data.” A history of complaints — and NDAsThree years ago, Colleen Nolan’s senior, blind dog Mooshu died while in the care of a Rover sitter. The sitter was supposed to stay at Nolan’s Georgia home while she was on a business trip to Vermont. Instead, Nolan said the sitter took Mooshu to her own apartment where the sitter claimed the dog followed her cat out the door, onto her balcony, and fell two stories onto concrete. He died soon after at an animal hospital, according to his hospital record.Rover initially sent a message to Nolan apologizing for what happened and offering to cover expenses associated with Mooshu’s death, according to a copy provided to CNN Business. But after what she felt was a frustrating delay in correspondence, Nolan reached out to a Rover executive to escalate her situation. Nolan eventually heard back from the company and asked to be reimbursed for expenses totaling $5,000, including training and cost of a new dog that may “replace” Mooshu.A Rover representative said the company would pay roughly $2,600 to cover vet fees and aftercare including cremation and the urn but declined to cover the cooler to carry Mooshu’s dead body, according to an audio recording reviewed by CNN Business. To get the money, she’d need to sign a release of claims and a non-disclosure agreement (NDA). She said she refused. (Rover did not dispute this, while adding that its standardized settlement agreement “does not limit the user from sharing the facts of their experiences.”)Joy Collier, whose Blue Weimaraner and Aussie Shepard doodle went missing in late May 2020 while in the care of a sitter she booked through Rover, allegedly had a similar experience. She said Rover offered her roughly $4,300 on the condition of signing an NDA after she started to get some local press attention about her lost dogs. Collier declined and then filed a lawsuit against Rover in May 2021 over the incident. In her lawsuit, she alleges she also spent tens of thousands of dollars to date in an attempt to find her dogs, including taking out billboards in the Phoenix area, hiring scent handlers and drones. Her claims, however, will be forced into arbitration due to the company’s terms of service in which customers agree to resolve disputes in this forum. Rosenbaum, the Rover spokesperson, said the company cannot comment on ongoing litigation. “I can tell you that we disagree with many of the claims Ms. Collier has made and look forward to providing our perspective as part of the legal process,” he said. Meanwhile, Leturia, who had not spoken to press about the death of Togo, said Rover reimbursed her $249 vet bill but she was not asked to sign anything.”All I can do for Togo is to share that story, to warn others so this hopefully doesn’t happen again,” Leturia told CNN Business.Rosenbaum said that claims under the Rover Guarantee — which the company touts on its website as a reimbursement program of up to $25,000 for vet care when eligible — aren’t tied to settlement agreements but that the company does requires them if it is “providing support that exceeds our standard Rover Guarantee terms.” But Rover’s own terms of the Rover Guarantee state that it may condition payouts associated with the Guarantee on a settlement agreement, including a release of claims and “an obligation to keep confidential the reimbursement amount and circumstances.” (According to Rover’s terms of service, which people agree to when signing up, Rover has no liability for damages associated with services “which may include bodily injury to, or death of, a pet,” aside from the Guarantee.) Broadly, the usage of non-disclosure agreements or confidential settlements are “fairly common” when bringing disputes against a company, said Cherry, who noted that some states have passed laws to stop this practice because of “the incentive it creates.” As she put it, “if you condition the settlement on someone’s silence, it keeps the problem from getting out there.”Since Mooshu’s death in 2018, Nolan has focused her energy on getting the word out to help others. She set up a public Facebook group where people post about incidents on the platform. There’s also a private “support group” where hundreds of people are members. CNN Business has reviewed both. One week after Nolan was featured on CBS This Morning in April 2019 about her experience, Business Insider published an interview with Rover’s CEO about adding cat sitting to its services. He joked about adding “a cat that comes across the [web] page and shoves the dog off a ledge and says, ‘okay, this is my space now.'” The comment hit Nolan a little too close to home.Rosenbaum said the company is “deeply sorry if this comment was perceived as offensive. This was unrelated to the incident involving Ms. Nolan’s pet and was not an attempt to make light of any sort of tragic situation. Doing so would be antithetical to our company values.”
The e-commerce giant on Wednesday posted $113.1 billion in revenue during the three months ended June 30, an increase of 27% from the same period in the prior year but falling short of the $115.2 billion analysts had expected. It also marks a slowdown from the 40% sales growth Amazon posted during the second quarter of 2020, despite the fact that Prime Day fell during the June quarter this year. Amazon is also forecasting weaker sales growth in the upcoming quarter. The company predicts net sales will increase between 10% and 16% from the prior year. That would mark a notable slowdown compared to the 37% sales growth it reported in the third quarter of 2020. Amazon (AMZN) shares fell more than 7% in after-hours trading following the earnings report, effectively shaving off more than $100 billion from the company’s market value. Bezos stepped down as CEO earlier this month and became executive chair. Andy Jassy, the longtime head of Amazon’s cloud computing division, replaced him as CEO. Despite the sales miss, profits beat expectations at $7.8 billion, thanks in part to the performance of Jassy’s AWS, which posted more than $4 billion in profit for the quarter. But the mixed results highlight the challenge Jassy now faces in the top spot to maintain Amazon’s remarkable sales and profit growth that turned it into one of the world’s most valuable businesses. Preserving the company’s growth rate could be especially tricky after demand for its products and services exploded during the Covid-19 pandemic as customers and businesses leaned on Amazon’s services. Amazon’s guidance highlighted multiple risks to the company, including the possibility that consumers would cut back on spending if the economy takes a hit as Covid-19 surges again. It also noted the risk of “actions taken by governments” in response to the pandemic. Amazon is a target, along with fellow big tech giants, of a slate of new antitrust bills proposed last month by House lawmakers that could make it easier for regulators to disrupt or break up Amazon’s many different business units.
Nauka — a long-delayed laboratory module that Russian space agency Roscosmos’ launched to the International Space Station last week — inadvertently fired its thrusters after docking with the International Space Station Thursday morning.NASA officials declared it a “spacecraft emergency” as the space station experienced a loss of attitude (the angle at which the ISS is supposed to remain oriented) control for nearly one hour, and ground controllers lost communications with the seven astronauts currently aboard the ISS for 11 minutes during the ordeal. A joint investigation between NASA and the Russian space agency Roscosmos is now ongoing. Joel Montalbano, the head of NASA’s International Space Station Program, insists the astronauts were never in danger and that they have not noticed any damage to the ISS. NASA’s Mission Control in Houston, Texas, however, at one point asked them to look outside the windows of the space station to see if they could spot any debris or damage to the station. The incident also delayed the launch of the Boeing Starliner uncrewed test flight to the station, which had been set to launch on Friday. NASA says the move allows the “International Space Station team time to continue working checkouts of the newly arrived Roscosmos’ Nauka module and to ensure the station will be ready for Starliner’s arrival.””Spaceflight is hard, and when we bring on new capabilities there can be glitches, which is why we prepare and train for these contingencies,” said Kathy Lueders, associate administrator for NASA’s Human Exploration and Operations Mission Directorate. NASA officials were quick to downplay the severity of the incident, describing it as a “pretty exciting hour” and a “dynamic event.””Until you exhaust all your contingency plans, that’s when you start to worry and today we just weren’t there,” said Montalbano.Yet Montalbano also acknowledged that accidental firings of thrusters have only taken place “maybe three or four times” during the 20 years that the space station has been in orbit.
Facebook (FB) on Wednesday reported revenue of nearly $29.1 billion for the three months ended June 30, a 56% jump from the same period last year when online advertising took a hit as businesses grappled with Covid-19. The company also more than doubled its quarterly profit to almost $10.4 billion, well above the $8.7 billion analysts projected. However, the outlook for the rest of 2021 is not so sunny, CFO David Wehner said in a statement. Sales growth could slow thanks to “regulatory and platform changes,” Wehner said, specifically pointing to Apple’s recent iOS app tracking rules. These changes, which went into effect in April, are likely to have a greater impact on Facebook’s business in the third quarter than they did in the second, he said.Facebook’s stock fell nearly 4% in after-hours trading following the earnings report. Apple’s (AAPL) iOS 14.5 software update requires that users give explicit permission for apps to track their behavior and sell their personal data, such as age, location, spending habits and health information, to advertisers. Facebook, which makes nearly all of its money from advertising, has aggressively pushed back against the changes and warned investors last year that the update could hurt its business if many users opt out of tracking. Facebook is also facing growing regulatory scrutiny. The company and fellow tech giants are the targets of a slate of new antitrust bills proposed by House lawmakers last month. And the company recently had a testy back-and-forth with the White House after President Joe Biden claimed that health misinformation on social media platforms is “killing people,” although he later backtracked slightly. A small group of protestors on Wednesday lined the street in front of Facebook’s Washington D.C. office with body bags labeled with tags saying “disinformation kills.” On Tuesday, Facebook announced a partnership with the Digital Health Lab at Meedan, a global technology nonprofit, to help train fact checkers in spotting health misinformation.
In an email to staff, CEO Sundar Pichai said the policy would roll out in the United States in the coming weeks, and in other regions in the following months as vaccines become more widely available. It’s not clear how Google plans to enforce the policy. “Getting vaccinated is one of the most important ways to keep ourselves and our communities healthy in the months ahead,” Pichai said. Many companies are still trying to figure out exactly when and how to bring employees back to the office safely after nearly 16 months of having them work from home. And with the rapid spread of the Delta Covid-19 variant, vaccinations are an important part of the equation. Google’s announcement follows a call earlier this week by major medical groups to mandate Covid-19 vaccines for health care workers, and comes ahead of an expected announcement by US President Joe Biden that all federal employees and contractors must be vaccinated or submit to regular testing and mitigation requirements. Google is also the latest tech company to push back the timing of its reopening plans. The company had planned to end its work-from-home period on September 1, after which employees could choose to return to their pre-pandemic office, work out of a Google office in a different city or permanently work from home if their role allows. Now it will wait to bring most employees back until October 18, Pichai said in the email. “We are excited that we’ve started to re-open our campuses and encourage Googlers who feel safe coming to sites that have already opened to continue doing so,” Pichai said. “At the same time, we recognize that many Googlers are seeing spikes in their communities caused by the Delta variant and are concerned about returning to the office.”Google plans to give employees at least 30 days notice before the company transitions to its full return plans. The internet giant isn’t the only Silicon Valley firm changing its reopening plans because of the Delta variant. Last week, Bloomberg reported that Apple would delay its reopening until at least October, a month later than initially planned. CEO Tim Cook confirmed those plans to CNBC on Tuesday.
On any given day, you might receive a package you ordered from Amazon, log onto a website hosted by Amazon, ask an Amazon device about the weather and grab groceries at a Whole Foods owned by Amazon. Amazon is more than just the “everything store.” It’s become something of an “everything company” that touches nearly every corner of our lives and the economy.
That growing reach — and, in some cases, dominance — has increasingly made Amazon, like its Big Tech peers, a target for regulators and lawmakers. But its vast size and impact also creates a challenge for regulators who want to rein in or break up the company without harming the consumers and businesses that rely on it.
Last month, a bipartisan group of US House lawmakers introduced a slate of bills aimed at addressing the power of dominant tech firms — namely, Facebook
(AAPL) and Google
(GOOGL GOOGLE). Each of these companies has been accused by regulators in the United States and Europe of engaging in anticompetitive practices, and the proposed US legislation could help pave the way for one or more of them to be broken up, among other possible remedies.
Of the big four, Amazon has given the clearest picture yet of how its business might change if the proposed bills become law. And the first piece of its empire to go might be its massive third-party marketplace,
The company recently suggested that it could be forced to stop operating its marketplace for third-party sellers and return to the days when it simply sold all the goods on its site itself. Such a move could have huge implications for the millions of sellers who rely on it to run their businesses and upend the shopping experience for consumers accustomed to getting basically anything they want in one place.
Longtime Amazon watchers are torn on whether Amazon would actually follow through with this plan if the legislation is passed — which itself is probably a long way off — because it could harm the company’s bottom line. But the possibility demonstrates the challenges lawmakers face as they seek to temper the power of Amazon and its fellow tech giants.
“Breaking up companies is very, very hard,” said Joel Mitnick, a partner in the antitrust group at law firm Cadwalader. “Breaking up companies that consumers love is even harder.”
Unraveling Amazon’s web of businesses
Amazon was once just a bookseller. Now, a short list of Amazon’s businesses includes its cloud division Amazon Web Services; Whole Foods; advertising; gaming; entertainment and streaming; logistics, warehousing and delivery; smart devices; payment services and, of course, e-commerce.
A number of these divisions have become targets of critics in recent years. Senator Elizabeth Warren, during her 2020 presidential primary bid, suggested appointing regulators to “unwind anti-competitive mergers,” including Amazon’s $13.7 billion purchase of Whole Foods in 2017.
More recently, Amazon’s proposed $8.45 billion acquisition of legendary film studio MGM also faced pushback from Warren and other lawmakers. The Federal Trade Commission, under newly-appointed Commissioner and Amazon critic Lina Khan, is set to review the deal.
And while it’s yet to attract serious attention, regulatory action could also affect Amazon Web Services, the company’s most profitable division, which provides crucial IT infrastructure for companies and government agencies around the world, as well as for Amazon itself.
Some analysts — as well as one former Amazon vice president — have previously suggested that Amazon spin off AWS as a way of countering antitrust pressure and to fuel the business unit’s growth. In 2019, Andy Jassy, the former AWS head who recently took over as Amazon CEO, laughed off a reporter question about the possibility of spinning off the cloud business in the near future.
For now, at least, US regulators’ focus is on the core piece of Amazon’s empire: retail.
Ending the Amazon marketplace
When you search for products on Amazon’s site, many of the items listed for sale are not sold by Amazon itself, but by millions of outside sellers who use the platform to reach the company’s hundreds of millions of customers. But Amazon’s relationship with those third-party sellers has become a major focal point for the company’s critics.
Some have raised concerns about Amazon copying products from third-party sellers and selling them for cheaper because it has the scale and resources to do so. For its part, Amazon execs have argued that this has long been a common strategy for retailers.
During a Congressional hearing last year, Amazon founder Jeff Bezos faced sharp questioning about whether the company uses third-party seller data to support its own private-label business. Bezos said Amazon has a policy prohibiting that practice, but, he admitted, “I can’t guarantee you that policy has never been violated.”
The six proposed antitrust bills aimed at Big Tech
American Innovation and Choice Online Act: Bars large tech platforms from preferencing their own products and services, and disadvantaging rivals.
Platform Competition and Opportunity Act: Prohibits dominant online platforms from acquiring direct competitors or nascent firms that could eventually become rivals.
Ending Platform Monopolies Act: Prohibits tech giants from owning multiple business lines that create conflicts of interest and could be used to self-preference or thwart competition.
Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act: Requires dominant online platforms to make it easier for users to migrate their data to other platforms.
Merger Filing Fee Modernization Act: Increases the merger filling fees companies must pay, to provide more funding for antitrust enforcement agencies.
State Antitrust Enforcement Venue Act: Makes it harder for companies to transfer state antitrust lawsuits to friendlier court venues.
The District of Columbia in May sued Amazon, alleging that it prohibits third-party sellers from offering products at lower prices on other websites, which it claims helps Amazon maintain dominance. Some sellers have also complained about such terms. (Amazon said that sellers set their own prices, but it reserves the right not to highlight sellers who don’t price goods competitively.)
The Ending Platform Monopolies Act, one of the six bills introduced in the House last month, takes aim at Amazon’s relationship with sellers, although it doesn’t directly name the company. The bill would prohibit a dominant tech platform from owning multiple business lines that create conflicts of interest, or could be used to favor its own offerings or thwart competition — for example, a tech giant owning a marketplace platform and competing with others on it at the same time.
A complementary bill, the American Innovation and Choice Online Act, would prohibit Amazon from requiring sellers to buy other Amazon products and services as a condition of being on the platform. It would also block Amazon from using sellers’ sales data to promote Amazon-branded products and prevent the tech giant from trying to control how a seller prices its products.
In a statement after the bills were announced, Amazon’s vice president of public policy, Brian Huseman, suggested that if forced to choose one business model, the company could stop supporting independent, third-party sellers, a move it positioned as a potential detriment to the economy.
“More than a half million American small- and medium-sized businesses make a living via Amazon’s marketplace, and without access to Amazon’s customers, it will be much harder for these third-party sellers to create awareness for their business and earn a comparable income,” Huseman said.
Highlighting the potential threat to third-party businesses is a politically savvy argument, analysts say. “They’re playing to their strongest suit, which is how Amazon makes money for others,” said D.A. Davidson analyst Tom Forte.
But it’s also a somewhat surprising claim, given how lucrative the third-party seller business is for Amazon. As far back as the end of 2018, independent, third-party sellers made up nearly 60% of total physical gross merchandise sales on Amazon — amounting to $160 billion in sales, Bezos wrote in his annual shareholder letter that year.
“Third-party sellers are kicking our first party butt. Badly,” he wrote at the time.
That’s still the case, analysts say. Amazon earns a “superior” profit margin on third-party sales compared to its own first-party sales, Forte said, because it keeps the prices of its own goods so low. Amazon also makes additional income when sellers use its delivery service.
Protecting the delivery empire
By threatening to sacrifice one arm of its business, Amazon may be trying to preserve another: the massive logistics and fulfillment system it has built out around the world.
The Ending Platform Monopolies Act could require tech giants “to divest lines of business — such as Fulfillment by Amazon — where the platform’s gatekeeper power allows it to favor its own services,” said Chris Evans, a spokesman for Rep. Pramila Jayapal, who co-authored the bill. Evans cited reports by numerous sellers who felt “they had no choice but to pay for Fulfillment by Amazon in order to sell their products.”
If Amazon only sold its own products, it would be more like any other retailer that has a delivery network to ship products to customers, potentially avoiding a spinoff of that section of the business.
“Think about the billions of dollars that they’ve put in capital and the construction jobs they’ve created by building these fulfillment centers,” said Edward Jones senior analyst Brian Yarbrough.
Amazon’s global logistics operation now includes a cargo air network with dozens of planes, a freight shipping system and a massive fleet of trucks, as well as its many fulfillment centers. In a hiring spree last year, Amazon brought on around 500,000 employees, many of them fulfillment workers, pushing the company’s total employment to over 1.3 million.
Some of those jobs could be at risk if the bills pass and Amazon sheds its third-party marketplace as a result.
“I think [regulators] have got to be careful being too shortsighted here, and think about the job creation and how large these companies have become and how meaningful they are for the overall economy,” Yarbrough said.
Amazon’s antitrust battle is likely to take years — the company is already pushing back by asking the FTC’s Khan to recuse herself from any Amazon-related cases, citing her previous criticisms of the company — and it will probably evolve over time.
But the e-commerce giant’s early reaction to the bills offers a glimpse at what parts of its business Amazon will fight for most in an antitrust world.
“Every voice matters — and we will do a better job of listening now, and in the future,” Kotick said in a note to employees on Tuesday. “I am sorry that we did not provide the right empathy and understanding.”Kotick’s response comes as hundreds of employees gear up for a walkout on Wednesday to pressure the company to do more to address a host of issues including unequal pay, gender discrimination and harassment. Those issues burst into the open last week, when California’s Department of Fair Employment and Housing, filed a lawsuit accusing Activision Blizzard — the company behind popular video games such as “Call of Duty,” “World of Warcraft” and “Candy Crush” — of fostering a “frat boy” work culture where female employees have to “continually fend off unwanted sexual comments and advances by their male coworkers.”The complaint also alleges that “the company’s executives and human resources personnel knew of the harassment and failed to take reasonable steps to prevent the unlawful conduct, and instead retaliated against women who complained.”The company’s director of corporate communications, Kelvin Liu, blasted the state’s filing and investigation as “inaccurate” and “distorted” in a statement to CNN Business following the lawsuit.Several former employees have detailed their experiences at Activision Blizzard (ATVI) on social media since the lawsuit was filed, and more than 2,000 current and former employees signed a petition on Monday slamming the company’s initial pushback against the lawsuit’s claims as “abhorrent and insulting.”The petition also cited an internal statement by Frances Townsend, a former George W. Bush administration counterterrorism official and Activision Blizzard’s executive vice president of corporate affairs, in which she reportedly described the lawsuit’s allegations as “factually incorrect, old and out of context.”Wednesday’s walkout aims to “improve conditions for employees at the company, especially women, and in particular women of color and transgender women, nonbinary people, and other marginalized groups,” according to a document shared with CNN Business. Its demands of leadership include an end to mandatory arbitration clauses in all employee contracts, changing hiring and promotion policies to improve representation within the company, and publication of compensation data. Participants of the walkout are also calling on company leadership to hire a third party to audit Activision Blizzard’s reporting structure, human resources department and executive staff. “It is imperative to identify how current systems have failed to prevent employee harassment, and to propose new solutions to address these issues,” the document said.In his note to employees, Kotick announced he had hired the law firm WilmerHale to review the company’s policies “to ensure that we have and maintain best practices to promote a respectful and inclusive workplace.” He urged employees to reach out to the law firm’s team led by Stephanie Avakian, a former director of the US Securities and Exchange Commission’s Division of Enforcement.”Of course, NO retaliation will be tolerated,” Kotick said. He also said the company would do more to support its workers, creating “safe spaces, moderated by third parties,” for employees to share their issues. “We are immediately evaluating managers and leaders across the company,” he said. “Anyone found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences will be terminated.”More than 100 Activision Blizzard employees are expected to attend Wednesday’s walkout in person outside the company’s offices in Irvine, California, a Blizzard employee told CNN Business, while over 1,000 others are expected to participate virtually.
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