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 (from Rep. Pramila Jayapal) to comically self-interested inquiries into why members’ fundraising emails are going to the spam folder (thank you, Rep. Greg Steube.)
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. Makena Kelly caught a key exchange at The Verge:
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.”
It was not nearly enough. But it was true, and it was a beginning.
Today in news that could affect public perception of the big tech platforms.
⭐ Turkish lawmakers passed legislation requiring social media platforms with over one million daily users, including Facebook, Twitter, and YouTube, to open offices in Turkey and comply with government demands to block or remove content hosted on their platforms. Companies would have 48 hours to comply and could be fined more than $700,000 if they fail to respond. Marc Santora at The New York Times explains:
The new law, which is expected to go into effect Oct. 1, also requires the social media companies to store user data inside Turkey, raising privacy concerns.
President Recep Tayyip Erdogan and his governing A.K.P. party, having already taken control over most of the nation’s traditional media outlets, were behind the legislation, arguing that it was needed to protect citizens from cybercrime and slander. Critics, however, say it is part of a broader effort to control the flow of information in the country and stifle dissent.
Arizona is leading a multi-US state probe into whether Apple deliberate slowing older iPhones violated deceptive trade practice laws. The company came under fire in 2017 when it was revealed that some iPhones became slower as they aged. (Paresh Dave and Stephen Nellis / Reuters)
The tech hearing was conducted on Cisco’s WebEx platform. As if the tech CEOs didn’t have enough to worry about today. (Ryan Tracy / Wall Street Journal)
64 percent of voters think Facebook should be held accountable for failing to warn users about opinion articles that spread misinformation about climate change. The news comes from a new survey conducted by the think tank Data for Progress. (Justine Calma / The Verge)
The argument that Facebook is too big to moderate content effectively is popular but nonsensical, argues this article. In no industry, save perhaps airlines and nuclear power plants, do we suggest that anything short of perfection is equivalent to failure. (Gilad Edelman / Wired)
The US filed a revised indictment against two former Twitter employees for allegedly spying on dissidents for the Saudi royal family. The indictment is intended to replace a written accusation that prosecutors asked a federal court in San Francisco to dismiss yesterday. (Joel Rosenblatt / Bloomberg)
Meme 2020, the collective of content creators that supported Michael Bloomberg’s presidential run, is back with a new campaign aimed at preventing the re-election of President Trump. The new meme campaign is primarily focused on vote-by-mail registration. (Taylor Lorenz / The New York Times)
The QAnan conspiracy theory is spreading globally, thanks in part to the pandemic. (Mack Lamoureux / Vice)
⭐ Some ByteDance investors seeking to take over TikTok at valuing the app at about $50 billion. The investors’ bid values TikTok at 50 times its projected 2020 revenue of about $1 billion. Echo Wang, Kane Wu and Julie Zhu of Reuters have the story:
It is unclear whether ByteDance’s founder and CEO, Yiming Zhang, will be satisfied with the offer. ByteDance executives recently discussed valuation projections for TikTok that exceed $50 billion, one of the sources said.
TikTok is growing rapidly as it rakes in more cash from advertising, and its management team expects to achieve $6 billion in revenue in 2021, one of the sources said. ByteDance, which owns other apps including TikTok’s Chinese counterpart, Douyin, has set itself a revenue target for 2020 of about 200 billion yuan ($28 billion), Reuters has previously reported.
⭐ TikTok CEO Kevin Mayer says the company will be releasing the code that drives its content-moderation algorithms so that experts can observe how its policies are enforced in real time. He says TikTok will also reveal its data flows to regulators, and is calling on its rivals to do the same. (Read Mayer’s entire memo here.) Here’s Sara Fischer at Axios:
TikTok will launch a Transparency and Accountability Center in Los Angeles for moderation and data practices that will house all of its data flows and code moving forward. The center will host online tours of its data during the pandemic. [...]
TikTok’s transparency ideals sound virtuous, but Google and most other platforms have long argued that publicizing their algorithms’ workings would make it easier for bad actors to game their services.
Breaking off TikTok from the rest of ByteDance would be time-consuming and difficult. It would mean cutting off the app’s access to a wide range of technology, powering everything from personalized recommendations to advertising to content moderation. (Juro Osawa, Yunan Zhang and Amir Efrati / The Information)
A small group of TikTok stars is leaving the platform and encouraging followers to join them on a rival app called Triller, based in LA. Some of the stars are becoming advisors and investors in the new app. (Wendy Lee / Los Angeles Times)
Facebook has approached a handful of small venture capital firms to discuss becoming an investor in their funds. Facebook recently appointed Sunita Parasuraman, who previously ran the treasury for its embattled Libra project, to lead the investing initiative. If you can’t acquire, invest! (Alex Heath and Kate Clark / The Information)
Three streamers who were recently banned or suspended from Twitch and Facebook following accusations of sexual harassment have shifted to streaming on YouTube. Because YouTube isn’t actively recruiting the banned streamers or signing them to contracts, it’s unlikely to get much criticism for allowing them on board. (Olga Kharif / Bloomberg)
Snap released its first diversity report, showing Black and African American people only represent 4.1 percent of the entire workforce. The report comes after years of the company resisting pressure to make diversity statistics public. (Ashley Carman / The Verge)
Google and Samsung are negotiating a major deal that would give Google products more prominence on the Samsung’s smartphones. The deal would give Google more control over search on Samsung handsets. (Mark Bergen and Sohee Kim / Bloomberg)
Google is launching a new “for context” feature in Google News. The secondary box underneath Google News stories links to secondary, broader stories on the same topic. (Sean Hollister / The Verge)
Spotify launched a new feature in beta called Group Session that allows paid users to listen to music and podcasts with friends and family. Premium users can generate a shareable link with up to five friends, who also have Spotify Premium, that’ll allow them to simultaneously stream content. (Ashley Carman / The Verge)
Software engineers on H-1B visas make a median salary between $142,000 and $168,000 at the big tech companies. Many of these tech firms also subcontract H-1B workers from consulting firms, and data suggests that the H-1B workers at these subcontracting firms earn significantly less. (Nick Kolakowski / Dice)
Zoom had a security vulnerability that could have allowed hackers to guess the 6-digit password for a private meeting. The company has since fixed the problem.
In a new white paper, Tencent, the owner of WeChat, argued deepfake technology is “not just about ‘faking’ and ‘deceiving,’ but a highly creative and groundbreaking technology.” It asked regulators to avoid clamping down. (Karen Hao / MIT Technology Review)
Things to do
Stuff to occupy you online during the quarantine.
Evaluate the tech CEO’s hearing fashions. “Beamed in from their offices on the West Coast because of concerns about the coronavirus, facing down the mask-clad members of Congress who were socially distanced from one another on the wood-paneled stage of the hearing room in the Rayburn House Office Building, the four men looked more like four guys dressed up in their first graduation suits — serious, sincere, a little uncomfortable — than the four horsemen of the digital apocalypse whose planetary power was a threat to one and all.” (Vanessa Friedman / New York Times)
Those good tweets
When you define the market correctly—as in, all the air that everyone inhales—then oxygen doesn’t seem so important after all. Nitrogen actually has 78% market share. https://t.co/4i3qcJzGxE— Robinson Meyer (@yayitsrob) July 29, 2020
Summary of the hearing so far:— Mike Masnick (@mmasnick) July 29, 2020
Congressional rep: [Disingenuous, misleading question that misrepresents reality in a really ridiculous way.] "Is that so?"
CEO: "That's not exactly..."
Rep: "YES OR NO!"
CEO: "Let me..."
Rep: "So you admit you're evil!"
Jeff Bezos hasn't been asked a single question by Congress yet, so the world's richest man is having a snack... pic.twitter.com/zMZ4iEuHyY— Claire Reilly (@reillystyley) July 29, 2020