Hillicon Valley: Senators unload on Facebook cryptocurrency plan | Trump vows to 'take a look' at Google's ties to China | Google denies working with China's military | Tech execs on defensive at antitrust hearing | Bill would bar business with Huawei

Hillicon Valley: Senators unload on Facebook cryptocurrency plan | Trump vows to 'take a look' at Google's ties to China | Google denies working with China's military | Tech execs on defensive at antitrust hearing | Bill would bar business with Huawei
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Welcome! Follow the cyber team, Olivia Beavers (@olivia_beavers) and Maggie Miller (@magmill95), and the tech team, Harper Neidig (@hneidig) and Emily Birnbaum (@birnbaum_e).

 

NOT HAPPY ABOUT CRYPTO: Facebook on Tuesday sought to defend its plans for a new global cryptocurrency at a contentious hearing as lawmakers aggressively blasted the project and questioned whether the embattled company should be in charge of launching such an ambitious venture.

David Marcus, head of Calibra -- the new Facebook subsidiary that will be partially responsible for launching the cryptocurrency -- assured lawmakers that the Libra coin will not launch until financial regulators are satisfied.

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But Marcus's testimony did little to quell concerns from bipartisan lawmakers on the Senate Banking Committee, many of whom delivered blistering condemnations of the company's plans.

Senators unload: "[Facebook] moved fast and broke our political discourse, they broke journalism, they helped incite a genocide and they're undermining our democracy," Sen. Sherrod BrownSherrod Campbell BrownDayton Democrat launches challenge to longtime GOP rep Dayton mayor: Trump visit after shooting was 'difficult on the community' Consoler in Chief like Biden is the perfect antidote to a Divider in Chief like Trump MORE (D-Ohio), the ranking member of the committee, said during his opening remarks. "Now Facebook is asking people to trust them with their hard-earned paychecks."

"It takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next? Let's run our own bank and our own for-profit version of the Federal Reserve for the world," he continued.

Facebook executives have spent weeks meeting with regulators and lawmakers behind closed doors, and the hearing on Tuesday offered a first glimpse into how few inroads the company seems to have made with skeptical policymakers.

Questions, questions: Another obstacle is the lack of clarity over which regulators would be responsible for overseeing Libra's compliance with federal financial, data privacy and consumer protection laws.

Senate Banking Committee Chairman Mike CrapoMichael (Mike) Dean CrapoA US-UK free trade agreement can hold the Kremlin to account Oversight Republicans demand answers on Capital One data breach On The Money: Fed cuts rates for first time since financial crisis | Trump rips Fed after chief casts doubt on future cuts | Stocks slide | Senate kicks budget vote amid scramble for GOP support MORE (R-Idaho) even floated the possibility that the U.S. needs to establish an entirely new regulatory body to address privacy issues around cryptocurrencies like Libra, an idea floated by Federal Reserve Chairman Jerome Powell last week.

That Crapo, a conservative Republican, suggested a vast expansion of federal oversight reflects the depth of bipartisan concern among lawmakers and regulators.

A few voices of support: But the criticism was not equally fervent on both sides. Several Republicans defended Facebook against the harshest rhetoric from the Democrats, calling Libra an idea with "tremendous potential benefits" and a "commendable" mission.

Facebook has branded Libra as an alternative payment system for the millions of people who do not use traditional banks.

"To announce in advance that we have to strangle this baby in the crib is wildly premature," Sen. Pat ToomeyPatrick (Pat) Joseph ToomeyNSA improperly collected US phone records in October, new documents show Overnight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns MORE (R-Pa.) said. 

Read more on the hearing here.

 

That wasn't the only big hearing too... Over in the Senate...

 

ANTITRUST HOTSEAT: Four of the nation's largest tech companies sought to reassure skeptical lawmakers over their market power as the House ramps up its antitrust investigation into Silicon Valley.

Executives from Apple, Amazon, Facebook and Google testified before the House Judiciary's antitrust subcommittee on Tuesday in a hearing examining the effect that their size has had on small businesses and their ability to innovate.

Each insisted that their platforms help smaller businesses reach customers and that they face stiff competition.

Amazon -- the largest of the four, with a market cap just shy of $1 trillion -- pointed to an "ever-broadening array of competitors" that they face in the retail market and touted their efforts to help third-party sellers on their platforms.

But Nate Sutton, Amazon's associate general counsel, was forced to repeatedly insist to incredulous lawmakers that the company does not use the consumer data it collects to give its own products an advantage over those of third-party sellers.

Hard sell: Rep. David CicillineDavid Nicola CicillineDemocrat calls for public review of T-Mobile-Sprint merger agreement Pelosi: Israel's Omar-Tlaib decision 'a sign of weakness' Lawmakers blast Trump as Israel bars door to Tlaib and Omar MORE (D-R.I.), who as chairman of the subpanel is leading the antitrust investigation, forcefully pressed Sutton about Amazon's conduct towards those vendors.

"Amazon is a trillion-dollar company that runs an online platform with real-time data on millions of purchases and billions in commerce and can manipulate algorithms on its platform and favor its own products," he said

Reminding Sutton that he was under oath, Cicilline asked, "So you collect all of this data of the most popular products and where they're selling, and you're saying you don't use that in any way to change an algorithm to support the sales of Amazon-branded products?"

"Our algorithm such as the buy box is aimed to predict what customers want to buy, and we apply the same criteria whether you're a third-party seller or Amazon to that because we want customers to make the right purchase regardless of whether it's a seller or Amazon," Sutton responded.

The other executives also faced a similarly tough grilling. More here.

 

THIEL SPEAKS, TRUMP LISTENS: President TrumpDonald John TrumpWarren unveils Native American policy plan Live-action 'Mulan' star spurs calls for boycott with support of Hong Kong police Don't let other countries unfairly tax America's most innovative companies MORE Tuesday morning said his administration will "take a look" after billionaire venture capitalist Peter Thiel called for a federal investigation into Google for its alleged ties to China.

"Billionaire Tech Investor Peter Thiel believes Google should be investigated for treason. He accuses Google of working with the Chinese Government," Trump tweeted. "A great and brilliant guy who knows this subject better than anyone! The Trump Administration will take a look!"

Thiel, a Facebook board member and adviser to Trump, reportedly said at a conference on Sunday that the CIA and FBI should ask Google three questions about its relationship with the Chinese military.

"Number one, how many foreign intelligence agencies have infiltrated your Manhattan Project for AI?" he asked. "Number two, does Google's senior management consider itself to have been thoroughly infiltrated by Chinese intelligence?"

He concluded: "Number three, is it because they consider themselves to be so thoroughly infiltrated that they have engaged in the seemingly treasonous decision to work with the Chinese military and not with the U.S. military?"

Thiel reportedly questioned if Google is "making the sort of bad, short-term rationalistic [decision] that if the technology doesn't go out the front door, it gets stolen out the back door anyway." He was likely referencing Google's work in China, which was recently criticized by top defense officials speaking before Congress.

Read more on Thiel and Trump here.

 

GOOGLE DENIES ALLEGATIONS: A Google executive on Tuesday denied allegations that the company works with the Chinese military, one day after President Trump said that his administration would investigate claims of improper ties between China and Google.

Karan Bhatia, Google's vice president of global government affairs and public policy, emphasized during a Senate hearing that Google has little business in China and denied the company has any ties to its military.

Sen. Richard Blumenthal (D-Conn.), a member of the Senate Judiciary Committee, asked Bhatia if Google has found "any evidence of infiltration of your management or your private data by Chinese intelligence."

"Absolutely not, senator," Bhatia said.

He said the company has never consulted with China about any of Google's contracts with the U.S. government and denied allegations that it has turned a blind eye to a leak of its "private data" to Chinese intelligence.

"Absolutely not," Bhatia maintained. "We take extremely seriously the threat of any penetration of our systems."

More on Google's response here.

 

WOE IS ME: A bipartisan group of senators is pressing the Federal Trade Commission (FTC) about a reported $5 billion settlement with Facebook, raising concerns that the penalty is insufficient to hold the social media giant accountable for its privacy debacles.

Sens. Ed MarkeyEdward (Ed) John MarkeyOvernight Energy: Trump sparks new fight over endangered species protections | States sue over repeal of Obama power plant rules | Interior changes rules for ethics watchdogs To cash in on innovation, remove market barriers for advanced energy technologies Democrats, environmentalists blast Trump rollback of endangered species protections MORE (D-Mass.), Josh HawleyJoshua (Josh) David HawleyGovernment regulation of social media would kill the internet — and free speech Juan Williams: We need a backlash against Big Tech Twitter unlocks McConnell's campaign account after GOP boycott MORE (R-Mo.) and Richard Blumenthal (D-Conn.) wrote to the FTC on Tuesday following reports that the agency had approved the settlement last week with Republicans carrying a 3-2 party-line vote.

"The public expects the Commission to put consumers first and to take all necessary steps in your power to remedy Facebook's privacy problems," the senators wrote in their letter. "We are highly disappointed to learn that the Commission has apparently failed to reach a strong, bipartisan agreement, sending the wrong message to tech companies."

The three senators, and other Facebook critics in Congress, have argued that a large fine, even a record $5 billion one, would be insufficient to address privacy violations at such a large company.

The FTC and Facebook both declined to comment.

What lawmakers want to know: The lawmakers on Tuesday sent a list of questions to the agency asking it to detail how it reached the figure and the other terms in the settlement. 

They asked whether Facebook CEO Mark ZuckerbergMark Elliot ZuckerbergFacebook users in lawsuit say company failed to warn them of known risks before 2018 breach Social media never intended to be in the news business — but just wait till AI takes over Facebook exploring deals with media outlets for news section: report MORE had been interviewed as part of the investigation and whether he or any other executives would be named in the FTC's complaint. They also demanded to know whether Facebook would have to submit to restrictions on its data collection practices. 

Read more on the letter here. 

 

More on the settlement...

 

DO YOU EVEN LIFT?: The roughly $5 billion reported settlement between Facebook and the Federal Trade Commission (FTC) to close an investigation into the Cambridge Analytica data scandal is angering Democrats and tech industry critics who see it as a weak punishment.

Details of the settlement have not been made public by the agency, but The Wall Street Journal and other outlets reported on Friday that Republican FTC commissioners approved the deal in a 3-2 party-line vote last week.

The biggest tech critics in Congress, who had long pushed for tough penalties on Facebook over its handling of consumer data, made it clear that the settlement terms fell short of their expectations.

"The FTC just gave Facebook a Christmas present five months early," Rep. David Cicilline (D-R.I.) said in a statement. "It's very disappointing that such an enormously powerful company that engaged in such serious misconduct is getting a slap on the wrist."

The fine would also be the largest the federal government has ever handed to a tech company. The previous record, issued in 2012 against Google, was $22.5 million.

But Facebook admitted in its most recent earnings report in April that it expected to pay as much as $5 billion to settle the investigation. And critics say that will be a drop in the bucket for a company whose first-quarter revenue this year was $15 billion and that reportedly has more than $40 billion in cash reserves.

Facebook's stock even rose on Friday after the reports, suggesting markets saw little to fear from the fine, although much of the gains were lost during trading on Monday.

More on why the reported settlement is proving so controversial here.

 

NO THANK YOU: Amazon is offering customers $10 if they install a browser tool that allows the online retail giant to track their internet activity. 

To get the money, users need to install the Amazon Assistant comparison-shopping tool, which gives the prices of Amazon products when they come across the same product on another site, an Amazon spokesperson told The Hill in a statement Tuesday, confirming an earlier Reuters report.

The $10 offer is a promotion for Prime Day, a two-day Amazon promotion featuring special deals that ends Tuesday night.

Users will receive $10 off an order of at least $50 if they install the tool on or before Prime Day, the spokesperson said. 

Amazon Assistant has more than 7 million users on Google Chrome and Mozilla Firefox, Reuters reported. 

"This data is often used for training machine learning models to do better ad targeting," Electronic Frontier Foundation technologist Bennett Cyphers told Reuters. "But in the U.S., there aren't really restrictions on what you can do with this kind of data."

Reuters reported that new customers only receive the $10 if they install the assistant from a particular webpage, have Amazon Prime and make a purchase through the assistant by Aug. 2. 

 The Amazon spokesperson said that the company only collects information from websites customers view "where we may have relevant product or service recommendations," adding that it does not connect the information to their Amazon account except when they interact with the assistant tool. 

"Customer trust is paramount to Amazon and we take customer privacy very seriously," the spokesperson said.  "The use of Amazon Assistant will always comply with our Privacy Policy and About Amazon Assistant Privacy notice."

Read more here.

 

NO WAY: Lawmakers in the House and Senate introduced legislation Tuesday to keep Chinese telecommunications group Huawei out of U.S. fifth generation (5G) networks and prevent U.S. companies from doing business with the company many have deemed a national security threat. 

The Defending America's 5G Future Act would prevent Huawei from being removed from the Commerce Department's "entity list" without an act of Congress. Being included on this list is seen as a death sentence, as it bans U.S. companies from doing business with that entity. 

The bill would also give Congress the power to block administration waivers for U.S. companies to do business with Huawei.

Further, the legislation would codify President Trump's May executive order, which empowers the Trump administration to block foreign tech companies deemed a national security threat from doing business in the U.S. 

Huawei was added to the entity list in May, though the Commerce Department granted a 90-day extension before this went into effect to give American companies time to adjust. 

However, the move was thrown into question when President Trump announced at the Group of 20 summit in Japan last month that U.S. companies would be allowed to sell equipment to Huawei if there were no national security concerns involved, prompting a wave of bipartisan criticism of this decision on Capitol Hill. 

Commerce Secretary Wilbur Ross subsequently announced that his department will issue licenses to U.S. companies to sell products to Huawei in cases where there is no national security risk.

Read more here. 

 

BYE BYE, BOTS: Sen. Dianne FeinsteinDianne Emiel FeinsteinTrump administration urges Congress to reauthorize NSA surveillance program The Hill's Morning Report - More talk on guns; many questions on Epstein's death Juan Williams: We need a backlash against Big Tech MORE (D-Calif.) on Tuesday introduced a bill to prohibit candidates, campaigns and political organizations from using social media bots, arguing the measure is necessary to clamp down on deceptive political advertising online.

The Bot Disclosure and Accountability Act intends to mitigate "the deceptiveness of social media bots, which impersonate human activity online" and the "effectiveness of efforts by foreign entities to influence United States elections." 

The measure aims to regulate "the use of social media bots in political advertising, which is intended to deceive voters and suppress human speech," the legislation states.

"We know Russia used social media to influence the 2016 election, particularly the deployment of bots that provide content to fake accounts," Feinstein said in a statement. 

"These bots were used for one purpose: to deceive voters. This bill prohibits bots from being used in any effort that seeks to subvert future elections," she added.

Read more here. 

 

AN OP-ED TO CHEW ON: U.S. military satellites are vulnerable to hacking, but Space Force could help

 

A LIGHTER CLICK: Strangely therapeutic to watch

 

NOTABLE LINKS FROM AROUND THE WEB: 

Cyberattacks inflict deep harm at technology-rich schools (AP)

Lithuania bolsters its cybersecurity, catching the attention of other nations (Fifth Domain) 

Indiana county meets $130,000 ransomware demand, despite advice against payment (CyberScoop)