Tech Daily: FTC Investigation, Trump Testimony, MWC, More

The Federal Trade Commission (FTC) is investigating big tech for antitrust activity, Amazon AMZN is seeking Trump testimony, coronavirus impact on Apple’s AAPL Chinese manufacturing, companies pulling out of MWC and other stories are detailed below-

FTC Investigates Big Tech

The FTC has asked Alphabet GOOGL, Amazon, Apple, Facebook FB and for the first time, Microsoft MSFT to furnish details (terms, scope, structure and purpose) of acquisitions going back to 2010 that were exempted (because of their small size) from antitrust scrutiny by the federal government under the Hart-Scott-Rodino, or HSR, Act.

The FTC derives authority under Section 6(b) of the FTC Act to collect non-public information from companies that can then be integrated into a report and used to improve understanding of markets, boost enforcement strategies, formulate industry guidelines and best practices, and facilitate antitrust investigations.

FTC Chairman Joseph Simons said, "If during the study we see that there are transactions that are problematic... we could go back and initiate enforcement action to deal with those transactions." He also said that “Digital technology companies are a big part of the economy and our daily lives… This initiative will enable the Commission to take a closer look at acquisitions in this important sector, and also to evaluate whether the federal agencies are getting adequate notice of transactions that might harm competition.”

The companies are already being investigated by the Justice Department, the FTC, state attorneys general and the House Judiciary Committee on concerns that their size and financial might position them to unfairly maneuver situations to either defend their market share or expand into adjacent areas.

And tech companies have fueled these concerns with some big deals, such as Facebook's acquisition of Instagram and WhatsApp, Amazon’s acquisition of Whole Foods and Google’s acquisition of Waze, Nest and DoubleClick. All the companies have spent more than a billion dollars in 2019 on just the kind of small acquisitions on which the FTC is seeking information.

Paul Holland, a general partner at Foundation Capital, said, "They've created a true marketplace for startups. They've created a destination for them." The problem is, they’ve simply become too big to control with regulations.

Amazon Wants Trump Testimony

Amazon’s AWS lost the $10 billion Joint Enterprise Defense Infrastructure Cloud, or JEDI contract to Microsoft, but it vowed at the time to not take it lying down. Following up on that promise, it first filed a motion in court to delay the Department of Defense (DoD) deal until a court ruled on its challenge of the award.

That was followed by a discovery motion seeking to make President Donald Trump and Defense Secretary Mark Esper in particular and also former Defense Secretary James Mattis, Pentagon's chief information officer Dana Deasy, and the selection authority and its chairman to testify in court.

Amazon contends that “President Trump has unique knowledge about his involvement in the bid process, including private conversations with and instructions to others about the process and the award.” Also, “President Trump is the only individual who can testify about the totality of his conversations and the overall message he conveyed. AWS seeks leave to depose President Trump about conversations or other involvement he had regarding the JEDI bid process or efforts to harm Amazon or AWS.”

Further, "President Trump has repeatedly demonstrated his willingness to use his position as President and Commander in Chief to interfere with government functions – including federal procurements – to advance his personal agenda," an AWS spokesperson said in a statement issued to Reuters. So now Amazon wants to establish in court “exactly how President Trump's order to 'screw Amazon' was carried out during the decision making process."

“AWS has alleged zero facts -- nothing -- plausibly indicating any DOD official involved in the JEDI procurement, at any level, was actually influenced by the alleged anti-Bezos statements,” Microsoft wrote in its own statement.

Amazon must prove the connect between Trump’s personal animosity toward its CEO and the DoD award if the lawsuit is to succeed.

Google Holiday Rental Service Under Fire

Forty companies and trade bodies in nine EU countries, Switzerland and the U.S. have written to EU Competition Commissioner Margrethe Vestager, urging an investigation into the way Google ranks and displays that they allege favor its own service over its competitors'.

Google prominently displays its product at the top of its general search results pages, along with pictures, a map review, ratings and prices, which the companies say is sufficient indication of “a competitive strategy for Google” to reduce them and the industry to “mere content providers for the 'one-stop-shop' of Google's new product."

"Such favorable ranking and display secures Google's service more user attention and clicks than any competing service may acquire, even if these are more relevant for the user's search query," says the letter.

In Google’s defense, a spokeswoman said, “We're currently testing a new format for specialist searches in Europe, including jobs, local and travel, where people might see a carousel of links to direct sites across the top of the search results," and "this is designed to demonstrate the range of results available."

Apple’s Chinese Production

Media reports indicate that manufacturing at Apple’s Chinese partner Foxconn is off to a slow start as spread of the coronavirus couldn’t be contained as well as hoped. Chinese authorities are asking for greater protections before normal production can resume. Inflation rates are at an eight-year high as supply shortages are leading to stockpiling, thus deepening the shortage. Rsearch firm TrendForce expects first-quarter global smartphone production to fall by 12% to its lowest level in five years.

Apple supplier Foxconn is taking to steps to comply with government directives. It’s also using its own production lines in the southern province of Guangdong to make masks for workers. The goal is to get to two million masks a day by late February, when the plant will work at full capacity.

Meanwhile, sources tell Reuters that around 16,000 people or 10% of its Zhengzhou workforce have returned to work while about 20,000 workers, or roughly 10% of the Shenzhen workforce are back from the New Year holiday. The Shenzhen workforce will return in stages.

Foxconn’s slow return indicates the extent of the problem that the World Health Organization has declared to be a global health emergency. It’s a huge disruption because Foxconn makes components for many electronics manufacturers globally so its shutdowns impact the global supply chain.

In Apple’s case, it could not only push out iPhone sales into the next quarter but also disrupt its iPods business, as Wedbush analyst Daniel Ives says. According to him, every week of closure will push back around a million units of sales, so he expects a 3-5 million-unit risk to his 44 million estimate if the disruption continues to February-end. He says that iPods are already seeing supply shortages, so could be more severely impacted.

Tech Titans Pull Out of Barcelona MWC

Amazon became the fourth company to pull out of the annual gathering on Feb. 24-27. The first three to pull out were South Korea's LG Electronics, Swedish equipment maker Ericsson and U.S. chipmaker NVIDIA. After Amazon, Sony, Intel and Cisco also pulled out. It will be a big loss for Barcelona if the event has to be cancelled because it reportedly brings around $546 million in revenues and 14,000 temporary jobs.

Amazon’s was supposed to be a significant presence with its cloud computing arm AWS slated to host a full-day conference track on Day 1.

Sony’s was a launch event that is now set to be hosted via video. "As we place the utmost importance on the safety and wellbeing of our customers, partners, media and employees, we have taken the difficult decision to withdraw from exhibiting and participating at MWC 2020 in Barcelona, Spain," it said in a statement.

“The safety and well-being of all our employees and partners is our top priority, and we have withdrawn from this year’s Mobile World Congress out of an abundance of caution. We are grateful to the GSMA for their understanding and look forward to attending and supporting future Mobile World Congress events,” Intel said in a statement.

Chinese companies Xiaomi, Huawei and ZTE have said they will attend. Their China-based employees are self-isolating ahead of the event to ensure they are free of the illness.

The GSMA telecoms industry association, which runs the Congress, earlier said that the show would continue as planned with more stringent health protections. But with some of the biggest companies bowing out, there could be a change in plans. Spanish media has since reported that organizers will meet on Friday to decide whether or not to go ahead with the event.

The virus has spread to at least 27 countries and territories, according to a Reuters count based on official reports. The death toll crossed 1,000 and infections reached 43,000 as of Tuesday.

Executive Changes

Apple Hires Warner Music Executive: Warner Music Group veteran Jeff Bronikowski is now at Apple as its global head of strategic music initiatives, according to his LinkedIn post. Apple has more than 60 million paid music subscribers, about half the number of market leader Spotify. The company is now focused on growing its services business strongly as it adjusts to a market where devices are changed less frequently. The Music business is where it has had some immediate success, so it makes sense to focus on growing it.

Google HR Chief Steps Down: Google’s head of human resources Eileen Naughton is leaving the company to move closer to her family. She may continue in some smaller role at the company, as some news reports say. Google added 70,000+ employees during her 13-year tenure. She will be working with CEO Pichai and CFO Porat to find a successor.

Sony Executive to Lead Amazon Entertainment: Chairman of Sony Pictures Television and former chief of the Hulu streaming service, Mike Hopkins is moving to Amazon to head its Studios and Prime Video divisions. Jennifer Salke, a former NBC executive hired in 2018 to lead Amazon’s studios, and Greg Hart, chief of the Prime Video streaming service, will report to him, and he in turn will report to CEO Jeff Bezos.

Amazon veteran Jeff Blackburn previously headed Amazon Studios, while also overseeing the company’s music streaming service, business development and advertising units. Hopkins is being brought in to fill some of these roles as Blackburn takes a one-year break.

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