This newsletter was sent out on Thursday afternoon before it was reported that the hearing would likely be delayed so lawmakers can attend Rep. John Lewis’s funeral. The hearing is now expected to take place the following week.
On Monday at noon ET, one of the more notable Congressional hearings in Silicon Valley history is set to take place. The 15-member House Judiciary Antitrust Subcommittee will ask questions of Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg, and Google CEO Sundar Pichai. The event is what’s known as an evidentiary hearing: members of Congress are gathering evidence as part of a 13-month investigation into competition and digital marketplaces.
The outcome could be legislation that seeks to rein in the market power of these giants, limiting their ability to create monopolies. Or it could turn out to be one more theatrical tech hearing in a series of them, where members of Congress look to score points with gotcha-style questioning as CEOs furrow their brows and promise that a member of their teams will follow up on that later.
A weird thing about the hearing is that while Amazon, Apple, Facebook, and Google share some broad characteristics, they are also very different companies. (Scott Rosenberg has a nice, concise overview of their similarities and differences in Axios.) It is difficult to imagine a single antitrust remedy that applies equally to all four companies and restrains their power in the same way. When I try to imagine what this hearing will be like, I think of 15 prosecutors trying four murder cases simultaneously ... on Zoom. (That said, it’s not that unusual for a panel of industry CEOs to appear together before Congress.)
On the other hand, each of the companies operates one or more marketplaces. Amazon sells real goods; Facebook and Google sell ads; Apple sells apps. Each of them has successfully aggregated hundreds of millions of people or more into world-scale user bases that sometimes resemble nation-states unto themselves as much as they do traditional corporations. They are not alone in this — Microsoft is conspicuously absent from Monday’s proceedings, as Ben Thompson has noted — but if trying four murder cases simultaneously is crazy, five would have been even crazier.
So what will Congress ask about on Monday? In Protocol, Issie Lapowsky and Emily Birnbaum make their best guesses. And they make this salient point about how good these CEOs have it, all things considering:
In facing these questions together, the four CEOs are getting off easy. Their testimony will be virtual, for one thing, eliminating the bad optics of having them stand before the committee in suits, hands in the air as they swear to tell the truth. And by testifying as a group, not only will they share the brunt of the committee’s contempt, they’ll also benefit from the fact that, given the time constraints and the number of witnesses, lawmakers will never be able to probe all of the potential antitrust violations these companies are individually accused of.
For Amazon, expect questions about how the company uses data from the independent businesses who sell their products on Amazon to decide which products to build and sell under its own labels — while also giving them much better promotion. Last year the company told Congress it was not doing this, but then it turned out that they are. At that point Amazon’s explanation pivoted to “Hey, that’s not supposed to happen. We’re going to look into it!” But the European Union plans to sue the company over it anyway. In any case, this will be the first time Jeff Bezos has ever testified before Congress, and given how little he has said publicly during a year of crisis for the company, I’m looking forward to it.
Apple’s antitrust problems are centered on its App Store. The company extracts a 30 percent cut of revenue from apps selling digital goods, including from apps that it competes with directly. Apps like Spotify, which it challenges with Apple Music, or Basecamp’s Hey, which competes with Mail and iCloud. Apple’s response to this has been that these apps are doing fine, the app ecosystem is doing fine, and taking a 30 percent cut of everything is simply the industry standard.
The Information reports that Cook is extremely annoyed at having to appear at this hearing, in part because he has spent so much time sucking up to the Trump administration. Christopher Stern writes:
Cook’s mixture of low-key charm and savvy political maneuvering have also played a role in cultivating ties in Washington. He has built a rapport with Trump and his family, joining the president for private dinners while sitting by his side during White House events (including one last year in which Trump referred to Cook as “Tim Apple”).
Cook seems to have stayed on Trump’s good side partly by keeping his mouth shut. Last year, Cook led Trump on a tour of a Texas factory that makes high-end Mac computers, later taking credit for “opening” the plant as part of a push to bring more manufacturing jobs back to the U.S. Despite the fact that the plant had opened six years earlier, long before the start of Trump’s presidency, Cook didn’t correct him.
Alas, Congress is a separate branch of government. For now!
Facebook’s purchases of Instagram and WhatsApp, and aggressive cloning of Snap, led to a period of relative stagnation among social apps in the United States while cementing a dominant position alongside Google in digital advertising. It has also acted in arguably anticompetitive ways, like blocking Vine users from finding their Facebook friends on the app once Vine started to get traction. That’s why the company is currently under separate investigations for antitrust issues from the Department of Justice, the Federal Trade Commission, and state attorneys general. The promise of this hearing for Facebook watchers is that it could unearth new documents pointing to how executives talked about these issues internally when it was making the decisions in question. I’m excited for this part!
As for Google? That company probably faces the most serious near-term consequences of antitrust action. The Justice Department is reportedly planning to file a case against Google this summer. Two separate investigations by the nation’s attorneys general are also underway — one led by Google’s home state of California, and the other comprising most other states. At issue are longstanding questions around how Google promotes its own products over rivals in search results, as I wrote about here last week. Protocol notes that other issues under investigation include Google making its search engine the default on Android devices, paying Apple billions to be the default search engine on the iPhone, and buying up major digital advertising networks to build its half of the digital advertising duopoly.
It’s hard to read about everything at stake here and not wish that each of these companies had been called to attend separate, more focused hearings. And not just because it would likely result in more revealing questions being asked — but also because it could give room for CEOs to give more complete, meaningful answers.
But given the somnambulant state of antitrust regulation in the United States over the past 20 years, I’ll take what I can get. Whatever happens on Monday, it seems likely that the hearing will be one we talk about for a long time to come.
Today in news that could affect public perception of the big tech platforms.
⬆️ Trending up: TikTok launched a $200 million fund to pay creators directly for their content. The fund is meant to support ambitious creators who “are seeking opportunities to foster a livelihood” on the app. (Julia Alexander / The Verge)
⬇️Trending down: On Wednesday Facebook said it would create a panel devoted to studying racial bias in its algorithms. A story from NBC News today helps explain why: internal research showed that Black users of Instagram were 50 percent more likely to have their accounts disabled by the company’s systems. The company reportedly shut down further research into the issue. (Olivia Solon / NBC News)
⭐ President Trump’s campaign is locked in a battle with AT&T, Verizon, and T-Mobile over an effort to blast millions of cell users with unsolicited texts. Jared Kushner called the CEOs of the companies to complain after they blocked a mass campaign text to voters. Here’s Tom LoBianco at Business Insider:
The cellphone companies viewed the texts as a possible violation of federal anti-robocall laws and Federal Communications Commission rules that come with hefty fines, the two Republicans told Insider.
The Trump campaign countered that the cellphone companies were stifling its ability to reach voters. It said the texts did not violate a 1991 law, the Telephone Consumer Protection Act, which set strict limits on telemarketing and robocalling and formed the basis of anti-spamming measures ruled on by the FCC. And the campaign points to a June 25 FCC ruling, which it argued loosened the rules on what counted as spam.
⭐ Multiple states are investigating Apple for potentially deceiving consumers. The company is already facing antitrust investigations from US House lawmakers and the European Union. Here’s Margaret Harding McGill at Axios:
The Texas attorney general may sue Apple for violating the state’s deceptive trade practices law in connection with a multi-state investigation, according to the document, obtained by the Tech Transparency Project through a public records request and shared with Axios Thursday.
The Texas AG’s Consumer Protection Division “initiated this investigation for enforcement purposes. If violations are uncovered, CPD will initiate enforcement proceedings. Accordingly, the OAG anticipates litigation in this matter,” the document reads.
Most Americans think social media companies have too much influence in politics today. Roughly 82 percent of people who lean Republican think these companies have too much power, compared to 63 percent of people who lean Democratic. (Pew Research Center)
Tim Bray, a former vice president at Amazon, is calling on the company to separate its retail business from its lucrative cloud computing unit. Bray resigned in May for what he called “a vein of toxicity” running through Amazon’s culture. (Karen Weise / The New York Times)
Startup founders are accusing Amazon of meeting with them on the pretense of investing in their companies, only to develop competing products that put their business at risk. In some cases, Amazon went through with the investment, but still developed competing products on the side. Something else for the subcommittee to ask about Monday! (Dana Mattioli and Cara Lombardo / The Wall Street Journal)
TikTok founder Zhang Yiming is racing to address US national security concerns before the White House issues a possible ban. The company is considering selling TikTok to US investors, or splitting off the US business. This piece does a good job of laying out his options. (Zheping Huang and Katie Roof / Bloomberg)
To cybersecurity experts, the case for banning TikTok isn’t black and white. They say concerns about national security are likely rooted not in xenophobia, but in the fact that the Communist Party of China has a track record of surveillance, censorship, and data theft. (Rebecca Jennings / Vox)
Facebook agreed to pay $650 million in a class action lawsuit over the company’s unauthorized use of facial recognition. The settlement covers any Facebook user in Illinois whose picture appeared on the site after 2011. (Jeff John Roberts / Fortune)
Facebook is facing a reckoning from some employees who are questioning whether the social giant is doing more harm than good. New documents, including internal message threads and recordings of CEO Mark Zuckerberg, show how Facebook workers are grappling with the company’s recent decisions. (Ryan Mac and Craig Silverman / BuzzFeed)
Content moderators working for Facebook via third-party companies in India and the Philippines are not part of the lawsuit between the company and its US moderators that is the subject of a preliminary $52 million settlement. They report grueling working conditions, but won’t receive the same support for the often traumatic work that their American coworkers will get. (Vittoria Elliott and Tekendra Parmar / Rest of World)
Steve Wozniak is suing YouTube for allowing scammers to use his name and likeness in scammy bitcoin giveaways. The lawsuit claims YouTube is aware of these scams but has nonetheless not taken the videos down. He’s the latest in a line of well-connected executives who, for lack of any other option, have sued YouTube over impersonation scams. (Monica Chin / The Verge)
Twitter said the hackers behind last week’s unprecedented attack accessed the direct message inbox of an elected official in the Netherlands. The revelation comes as part of the company’s ongoing investigation. (Jay Peters / The Verge)
The Twitter hackers also viewed the DMs of 36 other accounts involved in last week’s attack. Twitter did not disclose who the accounts belonged to beyond the elected official in the Netherlands. (Leo Kelion / BBC)
Also: here’s the email that Twitter is sending hacking victims. (Lorenzo Franceschi-Bicchierai / Vice)
Nearly three months after Google and Apple announced their contact-tracing API, contact-tracing apps have quietly taken a backseat in the fight against COVID-19. Pandemic apathy in the US is partly to blame, but the technical failures of the apps may have been an even bigger factor. (Chas Kissick, Elliot Setzer, Jacob Schulz / Lawfare)
⭐ Twitter is actively exploring a subscription model as a way to make money from its users. The move comes as Twitter suffers a sharp decline in its core advertising business. Brian Fung at CNN has the story:
“You will likely see some tests this year” of various approaches, Dorsey told analysts on an investor call held to discuss the company’s second quarter earnings results. Dorsey said he has “a really high bar for when we would ask consumers to pay for aspects of Twitter,” but confirmed that the company is seeking to diversify its sources of revenue in what are “very, very early phases of exploring.”
Earlier this month, rumors flared about a paid Twitter option after the company posted a job opening focused on building a subscription platform codenamed “Gryphon.” Twitter’s stock surged at the time, signaling investor appetite for the company to find new revenue streams.
Twitter reported second-quarter earnings that missed analyst expectations on revenue. The company said ad revenue is down 23 percent year over year, although user growth is up. (Lauren Feiner / CNBC)
Amazon launched a sports category on Twitch. The standalone sports category will include streams from soccer clubs like Arsenal and Real Madrid, with Juventus and Paris Saint-Germain set to follow. (Tom Warren / The Verge)
Facebook announced a new feature that lets users live broadcast video calls with up to 50 participants. The move means competition for Zoom, which allows paid users to livestream video calls to services like Facebook, YouTube and Twitch. As someone who has tried and failed to stream Zoom to YouTube, I find this new competition extremely welcome! (Salvador Rodriguez / CNBC)
Facebook is testing a new design for Facebook Pages that gets rid of the “Like” button. The test also offers a cleaner and more readable layout, and makes it easier for those who operate Pages to actually use and manage them. (Sarah Perez / TechCrunch)
Facebook is simulating the actions of bad actors using AI-powered bots. The new method is meant to help them identify users spreading spam, scamming others, or buying and selling weapons on the platform. Is it possible that we are living in one of these simulations? I can’t be the only person asking this. (James Vincent / The Verge)
While the AI tool GPT-3 has earned ecstatic reviews from experts, some critics are pointing out clear issues around bias. Researchers at OpenAI noted in the paper introducing GPT-3 that “internet-trained models have internet-scale biases.” (Bryan Walsh / Axios)
Things to do
Stuff to occupy you online during the quarantine.
Watch a departing Facebook engineer’s video about why he left. After nine years at Facebook, Max Wang reflects on why he became disillusioned. It’s a brainy, literate video about Hannah Ahrendt and how Facebook’s ideological fervor around “giving people a voice” led to the erosion of personal social interactions in favor of political expression, making many of us feel alienated and more vulnerable to authoritarian ideologies. I’m going to be thinking about this video for a long time.
Learn how to take a Quibi screenshot. It’s very special.