Alphabets CEO says the company has plenty of competition. Why thats not enough to satisfy antitrust regulators – Fortune

With great power comes great competitionor so Alphabet CEO Sundar Pichai half-convincingly argued Tuesday.

In an interview at Vox Medias Code Conference, the chief of Google and YouTube made the case that his iconic brands already face stiff challenges from well-established rivals and aspiring upstarts. The comments came as Google faces multiple investigations and lawsuits, each of which allege that the Alphabet unit has employed anti-competitive practices to build and maintain its market share in various tech sectors.

The thing about being in tech is the competition comes from nowhere, Pichai said. None of us were talking about TikTok three years ago, so I think you have to be open-minded. He cited classic rivals to Googles core business, such as Amazon, Microsoft, Apple, and Facebook, as well as upstarts like TikTok, which is putting pressure on Googles YouTube video business. He even cited competitors from China, such as Tencent and Alibaba.

Pichais claim reveals a strategic framing of Alphabets relationship with competition, one that fails to differentiate between external threats and internal practices. In doing so, Pichai does little to reassure Alphabet shareholders that the company will easily fend off antitrust regulators circling the company.

While its a bit unfair to extrapolate Pichais full thoughts on competition from a two-minute snippet during an interview, its telling that the Alphabet leader chose to focus on the quantity of adversaries. By invoking the names of several tech mammoths and the fastest-growing app on the market, Pichai implies that Alphabets business faces more than enough competition.

And in some respects, Pichai has a point.

While Google remains far-and-away the leader in ad revenue, pulling in $34 billion more than Meta, Amazon, and Microsoft combined in the first half of 2022, some of its tech brethren are ever-so-slowly snagging some market share. Amazon and Microsoft both reported ad revenue gains of 20% to 25% in the first six months of the year, while Alphabet posted 16% growth. Apple doesnt divulge marketing revenues, but Bloomberg reported last month that the iPhone maker wants to more than double its current ad sales total.

Theres also no denying the success of fast-ascending short-form video app TikTok. Insider Intelligence estimates suggest YouTube users in the U.S. spent 13% more time on the app in 2021 when compared to 2019, while time on TikTok jumped 46% during that stretch. TikToks rise also forced YouTube to develop its own short-form video feature, YouTube Shorts, which Alphabet hasnt been able to monetize as well as its legacy platform.

Yet antitrust regulators arent arguing that Alphabet faces insufficient competition from deep-pocketed peers. Rather, theyre building cases around Alphabets own behavior over the past several years.

When the Department of Justice and 11 state attorneys general sued Google in 2020, government officials cited the Alphabet units entry into a series of exclusionary agreements that collectively lock up the primary avenues through which users access search engines, and thus the internet. As an example, DOJ and state prosecutors cited Googles multibillion-dollar deal to serve as the iPhones de facto search engine.

Similarly, European Union regulators are probing whether Google essentially paid off Meta to abandon efforts to build competing ad technologies and shun Google competitors. If the allegations are proven, the deal would restrict and distort competition in the already concentrated ad tech market, to the detriment of rival ad serving technologies, publishers and ultimately consumers, EU officials said in March.

The Department of Justice also is expected to sue Google later this year amid allegations that the unit abuses its role as both a broker and auctioneer of digital advertisements to steer itself business at the expense of rivals, The Wall Street Journal reported. While the lawsuit hasnt been filed, Alphabet has already offered to split up its ads business into more than one company, the Journal reported.

In all three instances, notice that the allegations center on Google foreclosing competition, not Google lacking competition.

It would be naive to expect Pichai to admit to anticompetitive practices on a conference stage, particularly with litigation pending on multiple fronts. At the same time, rattling off a list of rivals does little to bolster faith in the fairness of Googles practices. Its certainly not enough for domestic and foreign regulators.

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Still the same cost.Apple unveiled its latest line of iPhones on Wednesday, debuting a base and pro version with an unchanged price from the previous iteration. Company executives largely highlighted advanced camera and battery life features on the new iPhone 14 models, which will arrive in mid-September. The phones will go on sale at a time when many consumer electronics companies are seeing a slowdown in sales, though Apple reported no significant slippage in the first half of the year. Apple leaders also introduced upgrades to the company's smartwatch and wireless headphones.

Better luck after next year. A top Samsung executive warned Wednesday that a slowdown in semiconductor sales likely will extend into 2023, adding to growing concerns about an extended slump, The Wall Street Journal reported. Kyung Kye-hyun, Samsungs co-CEO and semiconductor unit chief, said during a media briefing that the outlook on chip sales doesnt really seem to show a clear momentum for much improvement in 2023. Semiconductor executives throughout the industry have forecasted a rough second half of 2022 amid a pullback on consumer electronics spending.

A split decision. A judge ruled Wednesday that Elon Musk can use a Twitter whistleblowers claims about major security lapses in his defense against a lawsuit demanding that he complete a $44 billion acquisition of the company, Bloomberg reported. However, the judge also denied Musks request to delay the start of a trial in the case, which is expected to begin in mid-October. Musk has argued that revelations provided last month by Twitters former head of security, Peiter Mudge Zatko, offer more evidence that the company violated terms of a takeover agreement.

Giving up the fight. Industry associations representing many of the largest U.S. telecommunications providers have dropped their legal objections to Maines strict internet privacy law, potentially opening the door for other states to enact similar statutes, The Associated Press reported Tuesday. The law, first enacted in 2020, forces internet service providers to obtain permission from customers before sharing or selling user data collected by the companies. Groups representing internet providers argued the mandate violated their First Amendment rights.

Very much made in China. Breaking up with Chinaor at least changing to a more-open relationshipwill be hard to do for Apple. The New York Times reported Tuesday that the iPhone makers budding efforts to shift manufacturing to other Asian nations would require uprooting deep ties to China, where the company contracts with an extensive web of assemblers and component makers to push out its products. Sources told the Times that Apples latest iPhone, unveiled Wednesday, relied more than ever on Chinese partners. At the same time, Apple is exploring options for moving manufacturing to India, Vietnam, and other countries in the region amid worsening U.S.-China relations and frustration with the republics COVID policies.

From the article:

The critical work provided by China reflects the countrys advancements over the past decade and a new level of involvement for Chinese engineers in the development of iPhones. After the country lured companies to its factories with legions of low-priced workers and unrivaled production capacity, its engineers and suppliers have moved up the supply chain to claim a bigger slice of the money that U.S. companies spend to create high-tech gadgets.

The increased responsibilities that China has assumed for the iPhone could challenge Apples efforts to decrease its dependency on the country, a goal that has taken on increased urgency amid rising geopolitical tensions over Taiwan and simmering concerns in Washington about Chinas ascent as a technology competitor.

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A lesson in cybersecurity. Its back-to-school season for hackers, too. The Associated Press reported Tuesday that cybercriminals launched a Labor Day weekend attack on Los Angeles Unified School District, the nations second-largest district, causing a shutdown of the organizations information technology systems. Los Angeles Unified becomes the biggest district to date hit by hackers, who have increasingly taken over schools online systems and demanded payment in exchange for relinquishing control. However, the superintendent of Los Angeles Unified said the hackers havent sought money from the district, and the attack appeared limited to business-related information. There was no cyber snow day, either, as classes were back in session Tuesday.

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Alphabets CEO says the company has plenty of competition. Why thats not enough to satisfy antitrust regulators - Fortune