Anti-trust hearing of 4 Big Tech CEOs in progress in DC

Well, we had an antitrust hearing.

A long one, too. The House Judiciary Committee’s investigation into the market power of Amazon, Apple, Facebook and Google ran to nearly six hours, accounting for a handful of delays and intermissions. Alternating Democrats and Republicans asked the CEOs of those companies a combined 217 questions, ranging from pointed questions about how Facebook intimidates smaller competitors to comically self-interested inquiries into why members’ fundraising emails are going to the spam folder.

In its lunatic whipsawing between companies, issues, and conspiracy theories, Wednesday’s antitrust hearing resembled nothing so much as an endlessly scrolling social media feed. Every question shouted, every answer interrupted, nothing truly ventured, and very little learned. Polarized and polarizing. You want to look away, you can’t look away. Another day in 2020.

And yet for everything there is to criticize about Wednesday’s hearing, I came away from it mostly heartened. For the first time in half a century, Congress is taking its role as antitrust regulator seriously, and has undertaken a 13-month investigation that has so far produced 1.3 million documents laden with evidence. Members of the subcommittee have largely come to believe, as I do, that tech companies have grown too powerful and are in need of regulation. Wednesday offered them a chance to show us what they have found so far — and to hint at where they might be going next.

Let’s take a look at where Congress pressed each company.

With Amazon, members focused on two key areas: the company’s controversial use of data about third-party sellers on its platform to inform the development — and promotion — of its own products; and the proliferation of counterfeit goods on the site, and the harms that causes for buyers and sellers.

Amazon has a policy barring the practice, but lawmakers like Rep. Pramila Jayapal (D-WA) focused in on the company’s enforcement of that policy.

“Let me ask you, Mr. Bezos, does Amazon ever access and use seller data when making business decisions?” Jayapal asked.

Bezos highlighted the company’s policy banning the practice, but said, “I can’t guarantee you that that policy has never been violated.” He continued, “We continue to look into that very carefully. 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.”

Bezos was calm and genial in his first time testifying before Congress, but was mostly interrupted before he could get out more than a couple of sentences. Still, there were stumbles: he said he didn’t know if merchants were required to provide a name, address, or phone number before they could sign up to sell products on Amazon. And documents released by the committee outlined how Amazon executives schemed to undermine the parent company of Diapers.com, which once challenged it in the market for products for new parents. Amazon cut prices on diapers and eventually acquired the company for a fraction of its previous value.

Apple arguably got off the lightest of any of the companies in Wednesday’s hearing, if only by volume of questions: Tim Cook got just 35, compared to 59 for Bezos, 62 for Mark Zuckerberg, and 61 for Sundar Pichai. It’s not clear why, though the avenues of inquiry are clear. Apple makes at least 60 apps like Music and Mail that compete with third-party sellers but are not subject to the 30 percent tax that it places on them, reducing competition in the marketplace. Cook argued that there are many phones, and many operating systems, and more consumer choice than you can almost even imagine, and that the fees Apple charges are competitive with Google and other stores.

But documents released Wednesday offered evidence that the playing field is not level for all developers. Bloomberg’s Mark Gurman revealed how Apple was able to get Amazon’s Prime Video app on its App Store in 2017: by taking half as much revenue from the company as it takes from everyone else.

Cook also had to answer for why Apple wiped out a whole category of apps that parents used to monitor their children’s screen time while introducing a screen time measuring feature of its own. (I’m sympathetic to Apple’s position here — these apps used mobile device management features that were not designed for this sort of thing and could easily have been abused — but it does show the company’s tremendous market power.)

One place where Cook was let off the hook almost entirely: there were very few questions about the company’s reliance on China as a supplier or a market for its products.

For Facebook, the questions were mostly backward-looking: why did it buy Instagram? Was it to eliminate a competitor? With Nilay Patel, I took a look at this question in The Verge, looking at documents released by the committee. We wrote:

In late February 2012, Facebook CEO Mark Zuckerberg emailed his chief financial officer, David Ebersman, to float the idea of buying smaller competitors, including Instagram and Path. “These businesses are nascent but the networks established, the brands are already meaningful, and if they grow to a large scale the could be very disruptive to us,” he wrote. “Given that we think our own valuation is fairly aggressive and that we’re vulnerable in mobile, I’m curious if we should consider going after one or two of them. What do you think?”

Ebersman was skeptical. “All the research I have seen is that most deals fail to create the value expected by the acquirer,” he wrote back. “I would ask you to find a compelling elucidation of what you are trying to accomplish.” Ebersman went on to list four potential reasons to buy companies and his thoughts on each: neutralizing a competitor, acquiring talent, integrating products to improve the Facebook service, and “other.”

It’s a combination of neutralizing a competitor and improving Facebook, Zuckerberg said in a reply. “There are network effect around social products and a finite number of different social mechanics to invent. Once someone wins at a specific mechanic, it’s difficult for others to supplant them without doing something different.”

In the hearing, Zuckerberg copped to buying a competitor, but said he thought it would be complementary to Facebook rather than an app that would one day rival its size:

“I’ve been clear that Instagram was a competitor in the space of mobile photo sharing,” Zuckerberg told Congress on Wednesday. “There were a lot of others at the time. They competed with apps like VSCO Cam and PicPlz and companies like Path. It was a subset of the overall space of connecting that we exist in. And by having them join us, they certainly went from being a competitor in the space of being a mobile camera to an app that we could help grow and to help get more people to be able to use.”

The question is whether members will find that satisfying, or whether the documents will be used to fuel a new effort to break up Facebook, requiring it to spin off Instagram and possibly WhatsApp. But no member of Congress openly advocated that during the hearing, at least that I heard.

Outside questions about Instagram, the subcommittee asked Zuckerberg lots of questions about content moderation. (How can a piece of harmful content get 20 million views in five hours? Are you biased against conservatives?) We’ve heard those questions and his answers before. But mostly Congress just interrupted before he could answer.

Finally, Google took questions about the way its search engine often privileges results from Google-owned properties at the expense of small businesses. Rich Nieva captured the threat in CNET:

Of the four companies, Google is in the most imminent danger of antitrust action. The US Department of Justice is investigating Google’s massive digital advertising business, and is expected to file a lawsuit against the search giant this summer. The company is also ensnared in another probe by a coalition of state attorneys general, led by Texas AG Ken Paxton.

Lawmakers are mainly focused Google’s on dominance in web search, digital advertising and smartphone software. The company processes around 90% of all online searches in the US. That stranglehold on the market is the foundation of Google’s massive advertising business, which generates almost all of the company’s $160 billion in annual sales. Critics accuse Google of anticompetitive behavior with its ad business because the company owns all sides of the auction system, which could give Google an unfair edge.

The calm and soft-spoken Pichai responded to questions by arguing that advertisers have many choices, and that Google is only trying to give consumers what they want. When the Republicans began grilling him on why some conservatives have been banned from YouTube, Pichai said there are more conservative voices on YouTube today than there ever have been before.

The downside of Wednesday’s format is that Congress struggled to make airtight antitrust cases while prosecuting four of them simultaneously. (The constant attempts by Republicans to derail the hearing with phony “bias” complaints were unfortunately successful.)

But the upside is that Congress actually mentioned, often by name, the many businesses that have been squashed as a result of anticompetitive behavior by the giants. Amazon was asked why, during the pandemic, its own Ring doorbells were deemed an “essential good” so as not to interrupt their distribution, where competitors Arlo and Eufy were not. Tim Cook was made to answer for why Basecamp had such a hell of a time getting an email app approved without giving Apple 30 percent of its revenue. Sundar Pichai had to take questions about the many ways in which the company has made life worse for Yelp.

In an age where these tech CEOs can feel all but untouchable, Wednesday showed us the beginnings of accountability. The giants were called on the carpet and interrogated. It was overdue, it was messy, and it was unsatisfying. In other words, it was democracy, and I for one was glad to see it.

And the tech CEOs were likely glad it all happened on Wednesday, rather than any later date. On Thursday the companies report earnings, and if you see a huge spike in sales at Apple or Amazon, you might understand why the companies were eager to reschedule their inquisition as soon as possible after it was delayed. With everything else they stand accused of, pandemic profiteering is something I don’t imagine they want to take questions about.

In the end I’m left with the words of Rep. David Cicilline (D-RI) as he ended the hearing. “The companies as they exist today have monopoly power,” he said. “Some need to be broken up. All need to be properly regulated.”

–The Verge