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U.S. Rep. At CEO Hearing: Big Tech ‘Out To Get Conservatives’

‘We engage with campaigns according to law, and we approach our work in a non-partisan way,’ Google CEO Sundar Pichai said during a congressional hearing on the market power of Amazon, Apple, Facebook and Google.

The CEOs of technology giants Amazon, Apple, Facebook and Google took the heat in stride during a congressional hearing Wednesday that had lawmakers generally ripping the companies and their online platforms’ market power and dominance.

Amazon CEO Jeff Bezos, in his first appearance before Congress – albeit remotely -- fielded questions primarily about how the Amazon e-commerce platform uses third-party seller information during the hearing held by the House Committee on the Judiciary’s Subcommittee on Antitrust, Commercial and Administrative Law.

Alphabet/Google CEO Sundar Pichai, Apple CEO Tim Cook and Facebook CEO Mark Zuckerberg also answered lawmakers’ questions by video.

The bipartisan subcommittee’s hearing often yielded a very partisan tenor, of course, with the CEOs being asked whether they embrace “American values” and whether Google would commit to not silencing conservative voices and refrain from tailoring its search platform to favor former vice president Joe Biden, a Democrat, in the upcoming U.S. presidential election in November.

“I’ll just cut to the chase: Big tech is out to get conservatives,” Rep. Jim Jordan (R-Ohio) said. “That‘s not a suspicion, that’s not a hunch, that’s a fact… The power these companies have to impact what happens during the election, what American citizens get to see prior to their voting, is pretty darn important.”

Pichai defended how Google works with both presidential campaigns, noting political ads were an “important part of free speech in democratic societies.”

“We engage with campaigns according to law, and we approach our work in a non-partisan way,” Pichai said.

Subcommittee chairman David Cicilline (D-R.I.) set the tone for the hearing in his opening remarks, claiming many of the tech companies’ practices have harmful economic effects, alleging they discourage entrepreneurship, destroy jobs and force higher costs.

“Simply put, they have too much power,” Cicilline said. “This power staves off new forms of competition, creativity and innovation. And while these dominant firms may still produce some new innovative products, their dominance is killing the small businesses, manufacturing and overall dynamism that are the engines of the American economy. Several of these firms also harvest and abuse people’s data to sell ads for everything from new books to dangerous so-called miracle cures.”

Amazon runs the largest online marketplace in America, capturing approximately 70 percent of all online marketplace sales, Cicilline noted. It also operates across a vast array of businesses from cloud computing -- through Amazon Web Services -- and movie production, to transportation logistics and small business lending, he said.

“Amazon‘s market valuation recently hit $1.5 trillion dollars, more than that of Walmart, Target, Salesforce, IBM, eBay and Etsy combined,” Cicilline said.

Google, meanwhile, is the world‘s largest online search engine, capturing more than 90 percent of searches online, and it controls key technologies and digital ad markets, with more than 1 billion users across six products, including browsers, smartphones, and digital maps, Cicilline said.

Although the four corporations differ in important and meaningful ways, the subcommittee has observed common patterns and competition problems during its investigation, according to Cicilline.

“First, each platform is a bottleneck for a key channel of distribution,” he said. “Where they control access to information or to a marketplace, these platforms have the incentive and ability to exploit this power. They can charge exorbitant fees and impose oppressive contracts, and extract valuable data from the people and businesses that rely on them.”

Each platform also uses its control over digital infrastructure to surveil other companies, their growth, business activity and whether they might pose a competitive threat--and each has used that data to protect its power by either buying, copying or cutting off access for any actual or potential rival, Cicilline alleged.

“These platforms abuse their control over current technologies to extend their power,” he said. “Whether it‘s through self-preferencing, predatory pricing or requiring users to buy additional products, the dominant platforms have wielded their power in destructive, harmful ways in order to expand.”

Bezos In The Hot Seat

Many of the questions posed to Bezos centered on Amazon’s handling of its third-party sellers’ data, which is a key competitive concern for lawmakers.

Rep. Pramila Jayapal (D-Wash.) noted that Amazon associate general counsel Nathan Sutton testified under oath in 2019 that Amazon does not “use any specific seller data when creating its own private brand product.”

“So let me ask you, Mr. Bezos, does Amazon ever access and use third-party seller data when making business decisions,” Jayapal said. “Just a yes or no will suffice.”

But Bezos said he couldn’t answer the question with just a “yes” or “no.”

“What I can tell you is, we have a policy against using seller-specific data to aid our private-label business, but I can‘t guarantee you that that policy has never been violated,” Bezos said.

Jayapal noted an April report in the Wall Street Journal that alleged Amazon accesses data on third-party sellers by “reviewing data on popular individual sellers and products, and by creating tiny product categories that allowed your company to categorically access detailed seller information in a supposedly aggregate category.”

“Do you deny that report?” Jayapal asked.

“I‘m familiar with the Wall Street Journal article that you’re talking about, and we continue to look into that very carefully,” Bezos said “I’m not yet satisfied that we’ve gotten to the bottom of it, and we’re going to keep looking at it. It’s not as easy to do as you would think, because some of the sources in the article are anonymous.”

Rep. Lucy McBath (D-Ga.) asked Bezos whether third-party sellers would continue to work with Amazon if it didn’t have “monopoly power” over them.

“Do you think they would choose to stay in a relationship that’s characterized by bullying, fear and panic?” she asked.

Bezos said he did not accept the premise of McBath’s question.

“That is not how we operate the business and, in fact, we’ve worked very hard to provide fantastic tools for sellers, and that’s why they’ve been successful,” he said.

Amazon had 2.2 million active sellers as of yesterday, and about 37 percent rely on Amazon as their sole source of income, according to Cicilline.

“Isn’t it true that small businesses have no real option but to rely on Amazon to connect with customers and make online sales?” he asked.

“I do have a different opinion on that,” Bezos replied. “I believe there are a lot of options for small sellers. I believe Amazon is a great one, and we’ve worked very hard. I think we are the best one. We have a lot of different programs that help sellers.”

Cicilline questioned whether it’s an inherent conflict of interest for Amazon to produce and sell products on its platform and compete directly with third-party sellers when “Amazon sets the rules of the game.”

“No, I don‘t believe it is,” Bezos said. “The consumer is the one ultimately making the decisions. They’re making the decisions about what to buy, what price to buy it at, who to buy from.”

But Cicilline said evidence collected by the subcommittee shows Amazon is “only interested in exploiting its monopoly power over the e-commerce marketplace to further expand to protect this power.”

“This investigation makes clear that Amazon‘s dual role as a platform operator and competing seller on that platform is fundamentally anti-competitive, and Congress must take action,” he said.

Rep. Jim Sensenbrenner (R-Wisc.), meanwhile, said history proves that Congress does a poor job of “picking winners and losers.”

“I’ve been working with the chairman for over a year on this bipartisan investigation, and I have reached the conclusion that we do not need to change our antitrust laws,” Sensenbrenner said. “They have been working just fine. The question here is the question of enforcement of those antitrust laws.”

Facebook’s $1 billion acquisition of Instagram in 2012 passed the “smell test” of the federal regulators involved, Sensenbrenner said. He also pointed to the 1984 breakup of AT&T, saying it shows that “congressional pressure is not the best.”

“Say the AT&T example was applied to Amazon, and you were required to spin stuff off, so you might have no more of a one-stop shop, but you have to go to separate places for books or groceries or videos or electronics,” Sensenbrenner said to Bezos. “How are the consumers helped by that?”

“They would not be – very clear,” Bezos responded.

Pichai Defends Google

Every U.S. company depends on Google to reach customers, according to Cicilline, who said 85 percent of all online searches go through Google’s platform.

“A business may sink or swim based on Google‘s decisions alone,” he said. “Numerous online businesses told us that Google steals their content and privileges its own sites in ways that profit Google but crush everyone else. My first question is which is why does Google steal content from honest businesses?”

Pichai disagreed with the characterization.

“Just last week, I met with many small businesses,” Pichai said. “In fact, today we support 1.4 million small businesses, supporting over $385 billion in economic activity.”

Cicilline said when most Americans conduct a search query on Google, they believe Google shows the most relevant results. But, increasingly, Google “just shows whatever is most profitable for Google, be it Google ads or Google‘s own sites,” he said.

“Isn’t there a fundamental conflict of interest between serving users who want to access the best and most relevant information and Google‘s business model, which incentivizes Google to sell ads and keep users on Google’s own sites?” Cicilline said.

Google has always focused on providing users with the most relevant information, according to Pichai.

“We rely on the trust for users to come back to Google every day,” he said. “In fact, (for) the vast majority of queries in Google, we don‘t show ads at all. We show ads only for a small subset of queries, where the intent from users is highly commercial.”

Documents obtained by the subcommittee show that Google evolved from a “turnstile” to the rest of the web to a “walled garden that increasingly keeps users within it sights,” Cicilline maintained. He asked whether Google ever uses its surveillance over web traffic to identify competitive threats.

“Just like other businesses, we try to understand trends from data which we can see, and we use it to improve our products for our users,” Pichai said.

Rep. Ken Buck (R-Colo.) questioned Pichai about Google Cloud’s 2018 decision to drop out of the running for the U.S. Department of Defense’s potentially $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud computing contract for the military’s digital transformation, because the “U.S. military‘s project did not align with Google’s corporate values and principles.”

“This is the same U.S. military that fights for our freedoms and stands as a force for good across the globe,” Buck said. “Only months after making this decision to withdraw from the JEDI contract, (U.S.) Marine Gen. Joseph Dunford, (then) the chairman of the U.S. Joint Chiefs of Staff, warned the Senate Armed Forces Committee that the Chinese military was directly benefiting from Google‘s work. It made me wonder what values Google and Communist ‘red’ China had in common.”

Pichai countered that Google – which, at the time, also criticized the Pentagon’s decision to award the contract to a single cloud provider -- was proud to support the U.S. government.

“We recently signed a big project with the Department of Defense where we are bringing our world-class, zero-trust-based cyber security approach to help protect Pentagon networks from cybersecurity attacks,” Pichai said. “We have projects underway with the Navy, the Department of Veterans Affairs. We have a very limited presence in China. We don‘t offer any of our services – Search, Maps, Gmail, YouTube, etc., in China.”

Analyst Reaction

From the line of questions during the hearing, Wedbush Securities analyst Dan Ives said it’s clear the antitrust argument around all four tech stalwarts centers around each platform as a bottleneck for competition and ultimately cutting off access and opportunity for potential rivals.

“The anti-trust storm clouds appear to be building in the Beltway against Big Tech looking ahead into the rest of 2020, with today‘s hearings setting the stage for a battle royale over the next six to nine months, with the fate of the presidential election and Senate control also playing a major swing factor in this issue potentially,” Ives said in a research note this evening.

Ives believes that only a legislative fix creates the potential for limitations on the companies’ ability to conduct business, whether that takes the form of higher taxes or new rules regarding market concentration.

“Absent a legislative fix, we don’t see meaningful change in regulation, although future acquisitions will most certainly be scrutinized and more difficult to close,” he said, noting Alphabet’s proposed $2.1 billion acquisition of smartwatch maker Fitbit – announced in November – has yet to close.

“We don’t see Congress agreeing on legislation unless both houses…and the presidency are controlled by the same party, as the parties have had difficulty reaching consensus on more pressing issues,” Ives said.

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