Barbara Ortutay

Congress grills Big Tech over competition, money and power

Big Tech faced tough questions last week as federal lawmakers focused on issues of potentially anticompetitive behavior by technology giants and expressed bipartisan skepticism over Facebook’s plan for a new digital currency. Companies such as Apple, Google, Facebook and Amazon have long enjoyed nearly unbridled growth and a mythic stature as once-scrappy startups — born in garages and a dorm room and a road trip across the United States — that grew up to dominate their rivals. But as they’ve grown more powerful, critics have also grown louder, questioning whether the companies stifle competition and innovation, and if their influence poses a danger to society. Both Democrats and Republicans had grievances to air, even if there wasn’t much consensus on what to do about them. A July 16 panel of the House Judiciary Committee focused on whether it’s time for Congress to rein in these companies, which are among the largest on Earth by several measures. Central to that case is whether their business practices run afoul of century-old laws originally designed to combat railroad and oil monopolies. For some legislators, mostly Democrats, those laws are in need of updates or at least more stringent enforcement. Ultimately such action could lead to breaking up big online platforms, blocking future acquisitions or imposing other limits on their actions. Subcommittee chairman David Cicilline, a Rhode Island Democrat, charged that technology giants had enjoyed “de facto immunity” thanks to current antitrust doctrine, which typically equates anticompetitive behavior with higher prices for consumers. That allowed them to expand without restraint and to gobble up potential competitors, he argued, creating a “startup kill zone” that prevents smaller companies from challenging incumbents with innovative services and technology. A panel of four mid-level executives from the companies countered that their firms continue to innovate, that they face vigorous competition on all fronts — including from one another — and, perhaps most of all, that they were not monopolists in any way, shape or form. Facebook, for instance, has argued that it is not a monopoly because it has many competitors in businesses as diverse as private messaging, photo sharing and online advertising. So Democratic Rep. Joe Neguse of Colorado asked Facebook’s head of global policy development, Matt Perault, to name the world’s largest social network by active users. (It is Facebook.) When Perault said he couldn’t, Neguse ticked off four of the six largest — Facebook, Facebook Messenger, Instagram and WhatsApp — and had Perault verify that all are owned by Facebook. “We have a word for that and that word is monopoly, or at least monopoly power,” Neguse said. The company representatives didn’t help their case by pleading ignorance on multiple occasions. Google’s director of economic policy, Adam Cohen, said he was “not familiar” with how much Google pays Apple for the right to supply the default search engine for Safari on iPhones. (Rep. Jamie Raskin, a Democrat from Maryland, said it was $9 billion in 2018 and $12 billion in 2019.) Cohen also said he was “not familiar” with allegations of widespread fraudulent listings on Google Maps. Amazon also faced some pointed questioning. Cicilline asked Nate Sutton, an associate general counsel at the online retailer, whether it uses the data it collects about popular products to direct consumers to Amazon’s own in-house products. Sutton said the company doesn’t use third-party sellers’ data to “directly compete” with them. Cicilline, affecting disbelief, twice reminded Sutton that he was under oath. “Amazon is a trillion-dollar company that runs an online platform with real-time data,” he said. Expert witnesses suggested it might be time to reassess antitrust policy. Timothy Wu, a law professor at Columbia University who has advocated for more expansive antitrust enforcement, noted concerns about a fall in the number of startups being formed, and wondered aloud whether the U.S. will remain a place where startups thrive and launch new industries. Fiona Scott Morton, a Yale economics professor, argued that stifled competition has hampered innovation and hurt both smaller businesses and consumers, who have no choice but to surrender their privacy and watch more advertising. Others, mostly Republicans, rejected what they described as a big-is-bad approach in favor of keeping antitrust enforcers narrowly focused on protecting consumers when there’s clear evidence of harm such as price gouging. Attorney Maureen Ohlhausen, a former Republican commissioner and acting chairwoman of the Federal Trade Commission, said the government can still protect against anticompetitive behavior without “reducing the focus on consumer welfare.” She warned against “drastic” steps such as breakups that carry “serious risk of doing more harm than good for competition and consumers.” Earlier on July 16, a Facebook executive appeared before a Senate panel to defend the company’s ambitious plan to create a digital currency and pledged to work with regulators to achieve a system that protects the privacy of users’ data. David Marcus, who leads the Libra project, faced sharp criticism from both Democrats and Republicans. “Facebook is dangerous,” asserted Sen. Sherrod Brown of Ohio, the committee’s senior Democrat. Like a toddler playing with matches, “Facebook has burned down the house over and over,” he told Marcus. “Do you really think people should trust you with their bank accounts and their money?” Republican Sen. Martha McSally of Arizona said “the core issue here is trust.” Users won’t be able to opt out of providing their personal data when joining the new digital wallet for Libra, McSally said.

Facebook CEO: regulation of social media firms is ‘inevitable’

WASHINGTON (AP) — Facebook CEO Mark Zuckerberg told a House oversight panel April 11 that he believes it is “inevitable” there will be regulation of the social media industry and also disclosed to lawmakers that his own data was included in the personal information sold to malicious third parties. “The internet is growing in importance around the world in people’s lives and I think that it is inevitable that there will need to be some regulation,” Zuckerberg said during testimony before the House Energy and Commerce Committee. “So my position is not that there should be no regulation but I also think that you have to be careful about regulation you put in place.” Larger, more dominant companies like Facebook have the resources to comply with government regulation, he said, but “that might be more difficult for a smaller startup to comply with.” Lawmakers in both parties have floated possible regulation of Facebook and other tech companies amid privacy scandals and Russian intervention on the platform. It’s not clear what that regulation would look like and Zuckerberg didn’t offer any specifics. Zuckerberg was answering a question from Rep. Anna Eshoo, D-Calif., when he informed lawmakers about his personal data, a reference to the Cambridge Analytica scandal that has rocked his company over the past several weeks. His remarks came as he opened the second day of a congressional inquisition in the wake of the worst privacy debacle in his company’s history. A day earlier Zuckerberg batted away often-aggressive questioning from senators who accused him of failing to protect the personal information of millions of Americans from Russians intent on upsetting the U.S. election. The stakes are high for both Zuckerberg and his company. Facebook has been reeling from its worst-ever privacy failure following revelations last month that the political data-mining firm Cambridge Analytica, which was affiliated with Trump’s 2016 campaign, improperly scooped up data on about 87 million users. Zuckerberg has been on an apology tour for most of the past two weeks, culminating in his congressional appearances this week. But what comes next is unclear. Lawmakers said repeatedly they think Facebook should probably be regulated. But there was no consensus at all on that point — what exactly should be regulated, or even what the biggest problems are. Members pressed Zuckerberg on the company’s privacy policies and often declared that Facebook needs to do more to protect user data. Several lawmakers touted bills they’ve introduced. But there was no clear thread among them as to how, or if, the government should step in. Rep. Frank Pallone of New Jersey, the committee’s top ranking Democrat, sounded pessimistic that Congress will pass anything. “I’ve just seen it over and over again — that we have the hearings, and nothing happens,” Pallone said. Rep. Greg Walden, R-Ore., the committee chairman, asked Zuckerberg if it ever crossed his mind several years ago when user data was being extracted from Facebook “that you should be communicating more clearly with users that Facebook is monetizing their data.” Information about users “is probably the most valuable thing about Facebook,” Walden added. Zuckerberg said that Facebook allows people to decide whether and how they want their information shared. But he said his company “can do a better job of explaining how advertising works.” After a testy exchange with Zuckerberg, Rep. Diana DeGette, D-Colo., said Congress should consider imposing “really robust penalties” for social media companies that repeatedly compromise user information. “We continue to have these abuses and these data breaches,” DeGette said. “But at the same time it doesn’t seem like future activities are prevented.” Facebook’s stock rose slightly in Wednesday’s early afternoon trading, providing an indication that investors are betting the company’s ability to sell ads based on the personal information that it collects won’t be hampered by whatever action Congress might take. But Facebook’s stock remains 10 percent below where it stood before news of the privacy scandal broke last month, a decline that has wiped out about $50 billion in shareholder wealth. During roughly five hours of questioning by members of the Senate Judiciary and Commerce committees on April 10, Zuckerberg apologized several times for Facebook failures. He also disclosed that his company was “working with” special counsel Robert Mueller in the federal probe of Russian election interference and said it was working hard to change its own operations in the wake of the Cambridge Analytica revelations. Seemingly unimpressed, Republican Sen. John Thune of South Dakota said Zuckerberg’s company had a 14-year history of apologizing for “ill-advised decisions” related to user privacy. “How is today’s apology different?” Thune asked. As for the federal Russia probe that has occupied much of Washington’s attention for months, he said he had not been interviewed by special counsel Mueller’s team, but “I know we’re working with them.” He offered no details, citing a concern about confidentiality rules of the investigation. Earlier this year Mueller charged 13 Russian individuals and three Russian companies in a plot to interfere in the 2016 presidential election through a social media propaganda effort that included online ad purchases using U.S. aliases and politicking on U.S. soil. A number of the Russian ads were on Facebook. Zuckerberg said Facebook had been led to believe Cambridge Analytica had deleted the user data it had harvested and that had been “clearly a mistake.” He said Facebook had considered the data collection “a closed case” and had not alerted the Federal Trade Commission. He assured senators the company would have handled the situation differently today. Associated Press writers Richard Lardner and Lisa Mascaro contributed to this report. Ortutay and Hamilton reported from New York.
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