A bevy of tech's biggest titans—Alphabet CEO Sundar Pichai, Amazon CEO Jeff Bezos, Apple CEO Tim Cook, and Facebook CEO Mark Zuckerberg—all took to their remote offices Wednesday to dial into a hotly anticipated Congressional hearing, the latest part of an in-depth investigation into their firms' behavior that began more than a year ago.
The almost six-hour hearing was nominally convened to talk about antitrust enforcement, and it had two core questions at its heart. First: do the biggest, globe-spanning US tech companies have too much power in the market? And second: did they come by the power they do have honestly, or did they somehow cheat to get it?
House Antitrust Subcommittee Chairman Rep. David Cicilline (D-R.I.) focused his opening remarks on how bipartisan the investigation process has been to date before sketching out his belief that all four companies present have behaved anticompetitively, become monopolies, and caused harm both to consumers and the entire democratic project writ large.
"When everyday Americans learn how much of their data is being mined, they can't run away fast enough," Cicilline said. "But in many cases, there is no escape from the surveillance, because there is no alternative. People are stuck with bad options.
"As gatekeepers of the digital economy, these platforms enjoy the power to determine winners and losers, to shake down small businesses and enrich themselves while choking off competitors," said Cicilline. "Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represents the powers of a private government. Our founders would not bow before a king, nor should we bow before the emperors of the online economy."
"Being big is not inherently bad," Ranking Member Jim Sensenbrenner (R-Wis.) added in his opening remarks, but the platforms can still have deleterious effects on the marketplace. "My colleagues and I have a great interest in what your companies do with [their] accumulated power.
"Conservatives are consumers, too, and they need the protection of the antitrust laws," Sensenbrenner said, hinting at the argument most of his Republican colleagues would later make. "The power to influence debate carries with it remarkable responsibilities, so let the facts be our guide here. Your companies are large; that's not a problem. Your companies are successful; that's not a problem, either. But I want to leave here with a more complete picture of how your companies use their size, success, and power and what it means to the American consumer."
All four CEOs in their opening statements (Apple, Amazon, Facebook, Google) strived to position themselves as plucky American success stories, job creators, drivers of economic success, and necessary alternatives to China, but they also argued their companies face intense competition on all sides.
Both the lawmakers and the witnesses stayed roughly on topic to begin with. But once the question-time portion of the festivities began, suddenly everyone had a pet issue to dig into. Democrats by and large tended to focus on issues related to competition, while Republicans zeroed in on alleged bias, leading the proceeding to feel almost like two overlapping hearings struggling to occupy the same moment in space-time.
On gatekeeping
Last year, as the antitrust investigation ramped up, the subcommittee requested decades' worth of internal documents from all four companies. Damning passages from those documents took center stage as the lawmakers challenged the CEOs about competition—and the lawmakers brought receipts.
During questioning, members of the committee zeroed in on the ways the four companies have been accused of stifling other businesses in the space. "Over 85 percent of all online searches go through Google," Cicilline said to Pichai, as soon as questioning started. "Numerous businesses told us that Google steals their content and privileges its own sites in ways that profit Google but crush everyone else… Did Google ever use its surveillance over Web traffic to identify competitive threats?"
Pichai tried to dodge the question, responding, "Just like other businesses, we try to understand trends from data, which we can see, and we use it to improve our products for users."
Later, House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) returned to press the issue harder, to which Pichai again hedged, "Just like other businesses, we try to understand trends from, you know, data, which we can see, and we use it to improve our products for users."
“Whats to stop Apple?”
Apple, too, faced accusations that it could leverage its data against potential competition.
Rep. Hank Johnson (D-Ga.) took Cook to task over the walled garden of the App Store and challenged Apple's ability to play gatekeeper and gather app distribution data even though its own first-party apps compete against third-party App Store offerings.
"With over 100 million iPhone users in the United States alone, and with Apple's ownership of the App Store giving Apple the ability to control which apps are allowed to be marketed to Apple users, you hold immense power over small businesses to grow and prosper," Johnson said. The rules of the store can be opaque and are "arbitrarily enforced," he went on, and iOS app developers have no choice but to roll with it. "Does Apple not treat all app developers equally?"
"We treat every developer the same," Cook replied. "We have open and transparent rules."
The committee, however, obtained emails showing that Apple agreed to halve its fee for revenue generated through Amazon's apps. Apple likewise waives its cut for certain streaming video services in exchange for those developers agreeing to integrate certain Apple features into their apps.
"What's to stop Apple from increasing its commission to 50 percent?" Johnson asked.
"We have never increased commissions in the store since the first day it operated," Cook responded, denying that there was no mechanism for preventing it. "There is a competition for developers just as there is a competition for customers. They could develop their app for Android or Windows or Xbox or Playstation… so competitive I would describe it as a street fight for market share in the smartphone business."
Several members pressed Amazon about its use of data generated by third-party merchants who use its marketplace as a selling platform.
"You've referred to third-party sellers today as Amazon's 'partners' and said that your success depends on their success," Rep. Lucy McBath (D-Ga.) said to Bezos. "But over the past year, we've heard a completely different story."
Small-business owners that spoke with the committee members described their relationship with Amazon using words such as "bullying," "fear," and "panic," McBath went on, before she played back a recording of a bookseller whose Amazon marketplace business was allegedly delisted in 2019 in retaliation for becoming too large.
Rep. Pramila Jayapal (D-Wash.) echoed the charge. "You have access to data that your competitors do not have, so you might allow third-party sellers onto your platform," she explained to Bezos. "But if you are continuously monitoring the data to make sure that they're never going to get big enough that they can compete with you, that is actually the concern that the committee has."
Jayapal concluded:
The whole goal of this committee's work is to make sure that there are more Amazons, that there are more Apples, that there are more companies that get to innovate and small businesses that get to thrive, and that is what we're trying to get at—that is why we need to regulate these marketplaces—so that no company has a platform so dominant that it is essentially a monopoly.
On acquisitions
Amazon and Facebook in particular both faced several rounds of questions regarding their histories of strong-arming, copying, or outright acquiring rival businesses before they could grow into meaningful competition.
Rep. Mary Gay Scanlon (D-Penn.) pressed Bezos at length over its 2010 acquisition of rival Diapers.com.
"In 2009, your company viewed Diapers.com as one of your largest and fastest-growing competitors," she said, citing a trove of emails the committee obtained. "Amazon saw it as a threat," she went on, and "Amazon hatched a plot to go after Diapers.com and take it out." Amazon cut its prices on diapers to significantly below cost, taking $200 million in losses in the segment, until Diapers.com's parent company could no longer compete and was forced to agree to a sale, internal documents showed (PDF).
Scanlon added that the committee had evidence "suggesting that these predatory practices weren't unique here." In 2013, "you instructed employees to approach discussions with certain business partners, and I quote, 'the way a cheetah would pursue a sickly gazelle.'" She went on: "Is the gazelle project still in place, and does Amazon pursue similar predatory campaigns in other parts of its business?"
"I cannot comment on that because I don't remember it," Bezos stammered out.
Questioning from Rep. Jamie Raskin (D-Md.), however, indicated that Amazon's strategy is still alive and well. He asked Bezos, "Does Amazon price the Echo device below cost?"
Bezos agreed that, while the list price is not below cost, the devices often go on sale for lower price points that are below cost.
"Several other companies did tell us that Amazon is pricing Echo devices well below cost, making it near impossible for them to compete, and aggressively discounting Alexa-enabled speakers is a strategy to own the smart home," Raskin went on. "Would you say the smart home market—for which the Echo, Ring security system, and other smart devices operate—is a 'winners take all' market?"
Bezos disagreed, saying that Amazon's vision for the future is that "smart home speakers should answer to different wake words." Bezos did agree, however, that although Alexa has not specifically been "trained" to do so, it may often promote Amazon's first-party brand products to users.
Facebook also faced several allegations of deliberately copying and crushing competition. The company's targeting and failed acquisition of rival Snapchat is now infamous—but that was far from an isolated incident, committee members alleged.
The committee also learned that killing competition was a primary driver behind Facebook's landmark billion-dollar acquisition of Instagram in 2012. Documents obtained by the committee showed Zuckerberg and other Facebook executives outright writing in emails that the purpose behind such a transaction was to "neutralize a potential competitor."
"When Facebook launched, you had competitors," said Rep. Joe Neguse (D-Colo.), rattling off a list of defunct or diminished platforms such as Friendster and Myspace. "By 2012, none of those companies I identified exist. Facebook, in my view was a monopoly by then."
Zuckerberg answered, "We face a lot of competitors in every part of what we do. I would bet that you and most people here have multiple apps on your phone" that they use to communicate with people. "The space of people connecting with other people is a very large space," Zuckerberg added.
“That word is monopoly”
Neguse in response showed a presentation slide Facebook shared with investors in 2012, which boasted, explicitly, "Facebook is now 95 percent of all social media in the United States."
"It strikes me that, over the course of the last several years, Facebook has used its power to either purchase or replicate the competition," Neguse said, pointing out that Facebook Messenger, Facebook, WhatsApp, and Instagram are collectively the most-downloaded apps in the world. "We have a word for that," he concluded, "and that word is 'monopoly.'"
Jayapal also pressed Zuckerberg about his company's record. "In March of 2012, you suggested by email to your management team that moving faster and copying other apps could 'prevent our competitors from getting footholds.'" she said. "[Facebook COO] Sheryl Sandberg responded, 'It is better to do more and move faster, especially if that means you don't have competitors build products that could take some of our users.'"
"Has Facebook ever taken steps to prevent competitors from gaining footholds by copying competitors?" Jayapal asked.
"I view it as our job to understand what people are finding valuable in all of the services that they use," Zuckerberg answered.
Jayapal again asked bluntly, "Do you copy your competitors?"
"We've certainly adapted features that others have led in," Zuckerberg replied.
"When the dominant platform threatens its potential rivals, that should not be a normal business practice."
Jayapal added:
Facebook is a case study, in my opinion, in monopoly power because your company harvests and monetizes our data, and then your company uses that data to spy on competitors, and to copy, acquire, and kill rivals. You've used Facebook's power to threaten smaller competitors and to ensure that you always get your way. These tactics reinforce Facebook's dominance, which you then use in increasingly destructive ways. So Facebook's very model makes it impossible for new companies to flourish separately, and that harms our democracy, it harms mom-and-pop businesses, and it harms consumers.
BuzzFeed News reporter Ryan Mac amusingly tweeted during the exchange, "A Facebook employee who just texted me: 'We're literally copying TikTok right now.'"
On privacy
About a year ago, Makan Delrahim, head of the Justice Department's Antitrust Division, laid out a framework for how data privacy—and the lack thereof—could be seen as an antitrust issue:
Diminished quality is also a type of harm to competition. As an example, privacy can be an important dimension of quality. By protecting competition, we can have an impact on privacy and data protection. Moreover, two companies can compete to expand privacy protections for products or services, or for greater openness and free speech on platforms. Where competition pushes companies to develop quality elements that better satisfy consumer preferences, our enforcement can protect that sort of competition, too.
Rep. Val Demings (D-Fla.) took that idea and ran with it during her questioning. "In 2007, Google purchased DoubleClick," she began. "When Google proposed the merger, alarm bells were raised about the access to data Google would have, specifically the ability to connect users' personal identity with their browsing history." Google, however, promised at the time that it "wouldn't be able to merge this data, even if it wanted to," she added.
"But in June of 2016, Google went ahead and merged this data anyway, effectively destroying anonymity on the Internet," Demings went on. "Practically, this decision meant that your company would now combine, for example, all of my data on Google—my search history, my location from Google Maps, information from my emails, from Gmail, as well as my personal identity, along with the record of almost all the websites I have visited. That is absolutely staggering."
She cited Google founders Larry Page and Sergey Brin expressing concern about the data at the time. "So in 2007, Google's founders feared making this change because they knew it would upset their users," Demings said. "But in 2016, Google didn't seem to care. Mr. Pichai: isn't it true that what changed between 2007 and 2016 is that Google gained enormous market power? So while Google had to care about user privacy in 2007, it no longer had to in 2016?"
Pichai tried to counter, saying, "We today make it very easy for users to be in control of their settings," by allowing users to opt out of ad personalization and reminding users to access privacy checkup. But Demings was having none of it.
"I am concerned that Google's bait-and-switch with DoubleClick is part of a pattern where Google buys up companies for the purposes of surveilling Americans, and because of Google's dominance, users have no choice but to surrender," she said.
Rep. Kelly Armstrong (R-N.D.) also expressed concern about privacy in the wake of Read More – Source
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