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Top tech CEOs brace for House grilling

Top tech CEOs brace for House grilling
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The CEOs of Amazon, Apple, Facebook and Google will testify before Congress Wednesday in what will be a crucial hearing for the future of both antitrust law and Big Tech’s relationship with Washington.

It will be the first time that Jeff BezosJeffrey (Jeff) Preston BezosElon Musk passes Bill Gates to become world's second-richest person in Bloomberg rankings How space exploration will help to address climate change Bezos makes first donations from billion Earth Fund MORE, Tim Cook, Mark ZuckerbergMark Elliot ZuckerbergAttorneys general plan to sue Facebook over antitrust violations next week: report Facebook-backed cryptocurrency Libra changes names Democrats urge YouTube to remove election misinformation, step up efforts ahead of Georgia runoff MORE and Sundar Pichai appear for questioning together and comes as the congressional panel hosting the hearing enters the final stretch of its investigation into digital marketplace competition.

For Democrats on the House Judiciary antitrust subcommittee, led by Rep. David CicillineDavid Nicola CicillineThe Hill's 12:30 Report - Presented by Capital One - Tensions rise with Trump, Barr Maloney to lead Democrats' campaign arm Hillicon Valley: GOP chairman says defense bill leaves out Section 230 repeal | Senate panel advances FCC nominee | Krebs says threats to election officials 'undermining democracy' MORE (D-R.I.), Wednesday’s testimony will be one of the last major components of that exhaustive process, which started in June 2019 and included hundreds of hours of calls, meetings and briefings, as well as the review of 1.3 million documents. No release date has been announced for the report.

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A few Republicans on the subcommittee have signaled they will use the hearing to grill the nation’s top tech CEOs on content moderation, pursuing persistent yet unsubstantiated allegations that social media platforms discriminate against conservatives.

Bezos is the only CEO that will be appearing before Congress for the first time Wednesday, and his inaugural hearing is likely to be combative given that members of the committee have already threatened Amazon with a perjury referral.

He will likely face questioning about Amazon’s dual role as the operator of an online marketplace and a seller of goods on that market.

A bipartisan group of members from the House Judiciary Committee has wanted Bezos to testify ever since The Wall Street Journal reported earlier this year that the company used information from other sellers on the platform to make decisions regarding its private label business, which includes more than 243,000 products.

The article directly contradicted testimony last year from Amazon associate general counsel Nate Sutton, who told the committee that “we do not use any seller data to compete with them.”

The European Union’s top antitrust regulator announced last year it was investigating Amazon over its dual role.

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Smaller vendors say Amazon also imposes warehouse and shipping fees that make it “virtually impossible to sustain a profitable business on Amazon's marketplace,” according to Stacy Mitchell, co-director of the Institute for Local Self-Reliance.

Matt Stoller, director of research at the anti-monopoly organization the American Economic Liberties Project, told The Hill he hopes Wednesday’s hearing will give lawmakers a chance to press Bezos on Amazon Prime, which critics say the company is running at a loss to crowd out other marketplaces.

For the other CEOs testifying, Cicilline has indicated his questioning of Cook will focus on Apple’s App Store and allegations that the company buries apps that could displace its own products.

“Because of the market power that Apple has, it is charging exorbitant rents — highway robbery, basically — bullying people to pay 30 percent or denying access to their market,” the Rhode Island lawmaker said on a podcast with The Verge last month.

“It’s crushing small developers who simply can’t survive with those kinds of payments. If there were real competition in this marketplace, this wouldn’t happen.”

The European Commission has opened a formal probe into the App Store over the mandatory use of Apple’s proprietary in-app purchasing system for distributing paid content, which takes a 30 percent cut.

Apple previewed its response to Cicilline’s likely line of questioning last week, touting a study it commissioned conducted by the Analysis Group that says the App Store’s fees and practices are largely in line with other digital marketplaces.

App developer Blix, which claims it has been suppressed in search functions by Apple, has recommended Cicilline press Cook on the company’s search algorithm.

For Facebook, the company’s acquisitions of Instagram in 2012 and WhatsApp in 2014 are likely to feature heavily in Wednesday’s testimony.

The company claims that concerns about dominating social media because of those purchases are overblown, emphasizing that the two platforms were not that big before being purchased by Facebook and that it still has to compete with apps like TikTok. Zuckerberg will likely point out that his company’s purchase of Instagram and WhatsApp were approved by federal regulators at the time.

Another concern is how Facebook treats data collected by its different apps. Germany’s top court ruled last month that the social media giant illegally combined data it collected about users across different platforms it owns.

Critics have also argued that Facebook’s massive trove of data collected from users puts it in a dominant position, making it easy to push aside competitors that can’t tailor their products to users in the same hyper-specific fashion Facebook can.

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The biggest competition concerns with Google are tied to its dominance in search and the ad tech market.

The company has been accused of self-preferencing in search results, burying vertical search competitors far down the page. The European Commission fined Google $2.7 billion in 2017 for boosting its own shopping results over competing services.

Google has strengthened its position in the ad tech space in recent years with acquisitions of companies like DoubleClick and AdMob that give it dominance in nearly every step of the online advertising chain.

Issues outside of antitrust and competition will inevitably come up at the hearing, especially given the attention that will be paid to the hearing because of its high profile participants.

Rep. Jim JordanJames (Jim) Daniel JordanCheney, top GOP lawmakers ask Trump campaign for proof of election fraud New RSC chairman sees 'Trumpism' as future Sunday shows preview: Biden team gears up for transition, Trump legal battles continue and pandemic rages on MORE (Ohio), the top Republican on the Judiciary Committee, publicly pushed for Twitter CEO Jack Dorsey to testify at the hearing despite the company not having the same competition concerns as the ones already involved because of “its role in moderating content on its platform,” a clear reference to accusations of anti-conservative bias. The heads of the full committee — Jordan and Chairman Jerry NadlerJerrold (Jerry) Lewis NadlerThis week: Congress races to wrap work for the year Top Republicans praise Trump's Flynn pardon Democratic impeachment leaders blast Trump's pardon of Flynn MORE (D-N.Y.) — will be allowed to participate in the subcommittee hearing.

Stoller, of the American Economic Liberties Project, warned that Republicans focusing on anti-conservative bias would play into the hands of tech companies.

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“That's actually what the tech CEOs want, they want to have an argument about whether they're screening for conservative content or not,” he told The Hill. “They’re trying to turn it into a clown show.”

Section 230 of the Communications Decency Act, which gives internet companies immunity from lawsuits for content posted on their sites by third parties and allows them to make "good faith" efforts to moderate content, is also likely to come up given the administration's efforts to amend or scrap it entirely, according to Arun Sundararajan, an expert in big tech regulation at New York University’s Stern School of Business.

Democrats on the subcommittee have brushed off concerns about the hearing being derailed by political fights.

“This is in the antitrust subcommittee for that exact reason — we want this hearing to be laser-focused on competition problems as part of a yearlong investigation,” a senior committee aide told reporters last week. “Opening it up to the full committee would have opened up that entire range of topics to cover, whereas our subcommittee has been really deeply engaged on this subject.”

Wednesday’s hearing is likely to be a significant moment for antitrust investigations into big tech, whether they come from Congress or other regulatory bodies like the Justice Department or state attorneys general.

“The House has ended up being the forum in which you have these four guys sitting together for the first time and having this discussion,” Sundararajan said. “And so, while Congress may not be the eventual body that makes the case for any particular change, it's certainly a good catalyst.”