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Congress’ Big Tech CEO Hearing: What to Watch

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Congress’ Big Tech CEO Hearing: What to Watch

On Wednesday, after a brief delay, the CEOs of Google, Facebook, Amazon, and Apple will testify together in front of Congress for the first time ever. Well, sort of: Thanks to the ongoing pandemic, the executives will appear via video, presumably from some bland settings that belie the fact that the group includes two of…

Congress’ Big Tech CEO Hearing: What to Watch

On Wednesday, after a brief delay, the CEOs of Google, Facebook, Amazon, and Apple will testify together in front of Congress for the first time ever. Well, sort of: Thanks to the ongoing pandemic, the executives will appear via video, presumably from some bland settings that belie the fact that the group includes two of the world’s richest people. (And while Zoom has become synonymous with pandemic era meetings, Congress actually uses Cisco’s Webex.) Even so, the event could be historic, with Amazon founder Jeff Bezos making his congressional hearing debut. The theme: whether the four companies, each among the most valuable in history, have built their economic power, or are using it, in ways that harm American society overall.

The four executives will be looking to avoid saying anything damaging on the record. But the stakes are even higher for the lawmakers questioning them. For decades, the Silicon Valley giants have been permitted to expand essentially free from government regulation, and past hearings have given the impression that Congress couldn’t tame them even if it wanted to. During the Cambridge Analytica hearings in 2018, for example, Mark Zuckerberg was able to deflect tough questions, assuring Congress at least 46 times that he would have to get back to them later.

That tactic could be harder on Wednesday, because this time Congress has done its homework. The hearing, by the antitrust subcommittee of the House Judiciary Committee, led by Rhode Island Democrat David Cicilline, caps an investigation that began in June 2019 and has yielded more than a million documents. It will be a major test of whether federal lawmakers finally understand what makes Big Tech tick, and whether they have a vision for how to make it tick differently.

The House effort has been running in parallel with investigations by the Department of Justice and Federal Trade Commission, as well as by the state attorneys general. But there’s a major difference. Those groups are enforcers, meaning their investigations are about whether the big tech companies have broken the law. Congress, on the other hand, gets to write the laws. A key purpose of Monday’s hearing is to determine whether any laws need to be changed to deal with competition problems in the internet era.

All congressional hearings are political theater, and this one will no doubt have its share of grandstanding and partisan bickering. But there’s reason to think it will be on the more substantive side. First, it’s just the 15-member antitrust subcommittee asking questions, not the entire judiciary committee, and they will be looking to enter their juiciest findings into the congressional record. Second, this is an area of relative bipartisanship at a time of historic polarization; while Democrats have been leading the charge, congressional Republicans also have real concerns over the platforms’ effects on competition. (Here we must pause to note that the Republican subcommittee members include Matt Gaetz, whose recent hits include wearing a gas mask on the House floor in early March to mock coronavirus fears, and who on Monday announced that he had filed a criminal referral against Mark Zuckerberg for supposedly lying about whether Facebook discriminates against conservatives. So some chaos is possible, to put it mildly.)

Above all, the hearing represents the investigators’ best chance to present their case to the American public. With four CEOs who preside over sprawling corporate empires, however, there’s no way to cover everything. Here’s what the hearing is most likely to focus on.

Facebook

Facebook isn’t just the world’s biggest social media network; it also owns two of the other biggest, Instagram and WhatsApp, each of which has more than a billion users. And those are just two of more than 80 companies Facebook has acquired. One less well known name you can expect to hear is Onavo, a mobile analytics startup that Facebook bought in 2013 and whose data on other apps it allegedly used to identify candidates to acquire or copy. One up-and-comer that Onavo reportedly flagged: WhatsApp. (Facebook has defended its use of Onavo, and later similar projects, as “market research.”)

“All of the platforms, every one of them, has acquired small firms by the dozens or even hundreds,” said Herbert Hovenkamp, a leading antitrust expert who has been publicly skeptical of some of the other arguments made against Big Tech. Even Hovenkamp agrees, however, that these so-called “killer acquisitions,” which absorb potential rivals before they grow into the next big thing, are a major barrier to entrepreneurship and innovation. “Everybody knows what’s going on, which is that they’re trying to prevent the emergence of new platforms like themselves.” A concrete question for Congress is whether the laws around these purchases, especially under-the-radar acquisitions of nascent competitors, need to be tightened.

Look to see, also, whether the subcommittee is able to spell out how those acquisitions contribute to Facebook’s more high-profile problems. Facebook might feel more pressure to revise some of its policies on fact checking and hate speech, for example, if it thought users had anywhere else to take their business. Likewise, the legal scholar Dina Srinivasan has argued that while Facebook originally marketed itself as the most privacy-friendly social network, it has been able to gradually renege on its privacy commitments as it eliminates or swallows rivals. Expect Mark Zuckerberg to face tough questions about whether his long-term shopping spree has been aimed at snuffing out the competition—and whether that has been a good thing for Facebook’s users.

Read Zuckerberg’s written testimony here.

Google

Because Google has such a dominant position in so many different areas of the internet economy, the case against it might be both the strongest and the hardest to explain. Google is a dominant player not just in search, but also in digital advertising, cell phone operating systems, navigation, email, video sharing—it’s almost easier to name parts of the internet’s infrastructure in which Google doesn’t play an outsized role. And, like Facebook, the company has built that dominance through a dizzying array of acquisitions, including the likes of YouTube, Android, and DoubleClick. Expect the subcommittee to have plenty to say about those mergers.

The questioning is also likely to focus on the thing that turned “Google” into a verb. In its early days, using Google usually meant searching for something and then clicking a link to another website. But increasingly, businesses and rivals complain that Google has designed its search engine in ways that benefit Google at their expense. Today, ads dominate the top of search results like never before, which puts pressure on companies to pay to be seen. Organic results meanwhile appear to favor Google’s own properties: Google reviews instead of Yelp, YouTube instead of Vimeo, and so on. And the answer box, which pulls information from other websites, keeps users on Google, rather than clicking away, which in turn means more opportunities for them to click on ads.

Speaking of ads, Google’s share of digital advertising, a sector that it dominates along with Facebook, goes far beyond search ads. According to a comprehensive investigation by the UK Competition and Markets Authority, Google has up to a 90 percent share in multiple parts of the digital ad market, including the tools that publishers and small businesses use every time they buy and sell advertising. Remarkably, as annual digital advertising spending grows into the hundreds of billions of dollars, the sector remains almost entirely unregulated—a Wild West in which Google is the sheriff.

What’s the cost of Congress’ laissez-faire attitude? The report found that ad-tech middlemen, of which Google is the largest, take at least a 35 percent cut of all digital advertising spending. Other studies have pegged the ad-tech toll even higher, at 50 or even 60 percent. The question for Sundar Pichai is whether his company is taking that cut because it deserves to, or because it can.

Read Pichai’s written testimony here.

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Amazon

A fair bit of the momentum behind the recent Big Tech antitrust push owes itself to a widely read paper published by a law student named Lina Khan called “Amazon’s Antitrust Paradox.” In the paper, Khan argued that modern antitrust doctrine, narrowed since the 1970s by the Supreme Court, was blind to the threat that Amazon’s exponential growth posed to the rest of the American economy and even to American democracy. Specifically, she took aim at the court’s theory that “predatory pricing,” the practice of selling something below market in order to drive out the competition, is economically irrational and therefore never happens. Amazon’s decades-long strategy of selling goods at a loss while rolling up various markets would seem to suggest otherwise.

Today, Khan is a subcommittee staffer who has spent the past year helping manage the investigation. Jeff Bezos will have some explaining to do about Amazon’s pricing strategies.

Because customers love Amazon’s low prices, however, it might be tricky to win that particular fight in the court of public opinion. Amazon is more vulnerable when it comes to how it treats the businesses who operate on its platform. Because it both runs the largest online marketplace and participates in that marketplace—and because it has access to unprecedented amounts of buyer and seller data—questions have swirled for years about Amazon’s incentives to squeeze money unfairly out of brands and third-party sellers. Most merchants can’t afford not to be on the platform, which accounts for nearly 40 percent of all US ecommerce spending. (Second-place Walmart comes in below 6 percent.) That means they feel they must take whatever deal Amazon gives them. And in recent years, an increasing number of businesses have complained that the deal sucks. Independent merchants have complained that Amazon forces them to sell at punishingly low prices, allows counterfeiters to run wild, and even undercuts sellers by mimicking their designs with Amazon-branded products.

In April, The Wall Street Journal reported that Amazon was using data from third-party sellers to develop its private-label products, despite the company’s insistence that it never does so. In the frenzy over that report, Congress called on Jeff Bezos to testify for the first time. The issue is sure to be front of mind for his interrogators.

Read Bezos’ written testimony here.

Apple

The case against Apple should be the simplest to follow, and it is likely to revolve around the App Store. App developers have complained—all the way to the Supreme Court—that the 30 percent cut Apple takes of all revenues from its App Store is unfair. They have also accused Apple of discriminating against or ripping off apps that compete with Apple’s own offerings. The CEO of Tile, which makes hardware and software to help people keep track of things like their keys and wallet, has testified that Apple changed its Find My iPhone app to mimic Tile—and then decided to stop selling Tile products in its stores.

Apple’s iPhone accounts for some 40 to 50 percent of the US mobile market. Just like online merchants and Amazon, app developers being denied access to the App Store face an existential threat. The tech entrepreneur and gadfly David Heinmeier Hansson recently beefed with Apple after it rejected an updated version of his new email app, Hey, from the platform. He told WIRED that the move reflected a “capricious and inconsistent review process,” and also called the 30 percent fee “completely outrageous.” Hansson may be one of the loudest voices criticizing Apple’s policies toward develop

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