Technology

Big tech chiefs cast as 21st century robber barons at US hearing

Lawmakers land blows on bosses of Amazon, Apple, Google and Facebook

The hearing displayed plenty of discomfort among the small group of powerful tech bosses. Photograph: AFP via Getty

Thu Jul 30 2020 - 12:31

A six-hour video conference with four of the world's biggest tech bosses was never going to match the drama of a real-life hearing before Congress, and that was before the technical glitches and delays on the line.

But there were plenty of uncomfortable moments for the heads of Amazon, Apple, Alphabet and Facebook, who were often unable to answer questions on a trove of newly unearthed internal documents that showed how the companies chased dominance and then sought to protect it.

Among the most damning revelations was a 2012 email in which Facebook's Mark Zuckerberg acknowledged that he planned to acquire photo app Instagram in order to "neutralise" it. Additional records released by the House judiciary committee showed that Instagram's founder feared at the time that Mr Zuckerberg would go into "destroy mode" if he declined the offer.

House Judiciary Committee members also landed blows on the other three executives, Amazon's Jeff Bezos, Apple's Tim Cook and Google's Sundar Pichai, for a litany of bad behaviours, including trying to clone rivals or deny them services.

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The hearing cast the leaders of 21st century corporate America as modern robber barons, and served as a one-shot opportunity for liberals to make their case that US antitrust law needs urgent change.

"This was a watershed moment. We're not going back," said Barry Lynn, director of the Open Markets Institute and a leading proponent of radical reform. One of his former staffers, Lina Khan, was a pivotal figure in the antitrust subcommittee's investigation, and sat behind chairman David Cicilline during the hearing.

"A huge amount of information came out," Mr Lynn added. "They put new information in the hands of the agencies. They laid a few traps."

The committee has been investigating the market power of big tech for more than a year and is set to publish a final report that may inform new antitrust legislation.

In the nearer term, the hearing also provided glimpses into the sort of evidence and arguments that other investigations, by the Justice department, Federal Trade Commission and state attorneys-general, could pursue against Facebook and Google.

Disinfect the room

The hearing, delayed for an hour by the need to disinfect the room, saw the four executives appear virtually because of Covid-19. The lag in the connection created the awkward exchanges that are familiar to those working from home in 2020. At one point, as the founder of Amazon began speaking, the committee had to nudge him: “Mr Bezos, I believe you’re on mute.”

But such moments only briefly leavened a series of probing and precise questions from lawmakers, as Democrats sought to show how Big Tech intimidated smaller rivals.

Mr Zuckerberg was cast as an aggressive dealmaker who gave companies he viewed as a threat a simple offer: join us, or we will destroy you.

"Facebook is a case study, in my mind, of a monopoly power, because your company harvests and monetises our data, and then your company uses that data to spy on competitors and to copy, acquire and kill rivals," Representative Pramila Jayapal told Mr Zuckerberg.

“You’ve used Facebook’s power to threaten smaller competitors and to ensure that you always get your way these tactics reinforce Facebook’s dominance”, she added.

The Facebook chief executive rejected the characterisations. And he argued that it was “far from obvious” that the company’s acquisitions, Instagram and WhatsApp, would later grow at the speed they did, citing similarly sized companies at the time that went on to fail.

To build its case against Amazon, the committee used previously unseen emails between Amazon executives detailing, in 2010, what appeared to be efforts to aggressively price out, and then buy up, a competitor - in this case, Quidsi, the owner of Diapers. com, which Amazon duly acquired.

"We need to match pricing on these guys no matter what the cost," wrote executive Doug Herrington, according to the documents, which spelt out Amazon's "plan to win" by putting huge price pressures on the smaller company.

Asked about the strategy, Mr Bezos said he didn’t remember. “This is going back in time I think maybe 10 or 11 years or so,” he said.

Bezos’s first appearance

The hearing was the first time Mr Bezos had ever appeared before Congress. And the committee took the opportunity to confront the world’s richest man with what they described as the real-life effects of the business strategies that made his wealth.

Questioning how Amazon treats its more than two million third-party sellers, congresswoman Lisa McBath, a Democrat from Georgia, played Mr Bezos an evocative clip of a bookseller who said she was suspended from the platform without explanation, shattering their livelihood.

“It does not at all to me seem like the right way to treat her,” Mr Bezos conceded after hearing the clip.

Addressing Google, Mr Cicilline, said documents unearthed in the investigation showed its executives warning that rivals with specialised search engines were becoming a “proliferating threat”, and also warning that some of these were getting “too much traffic”.

The company had responded by directing search traffic to its own services and turning itself into a “walled garden that keeps users on Google sites, even if Google doesn’t have the most relevant information”.

Mr Pichai, who was frequently cut off as he sought to parry the attacks, said the company had developed its services only with an eye to improving the customer experience.

In another set of internal emails published by the committee, Google executives were seen discussing a potential acquisition of YouTube starting in 2005, with one speculating it could cost $10-15 million and another three months later saying it had made an informal approach to pay $200 million. It ended up paying $1.65 billion only months later – a price that Democratic committee members suggested showed the importance to Google of taking over a potential rival.

Despite Apple being the world’s largest company by market value, a notably relaxed Mr Cook was questioned the fewest times, and left the hearing less wounded than his peers.

Still, the committee released swaths of internal emails calling into question that all app developers are treated equally, as the company has long claimed. In 2017, Apple agreed to take only a 15 per cent cut - half its usual rate - for the Amazon Prime Video app while the company was accused of “fast tracking” other apps.

Beijing suspicions

Republican members of the committee took the opportunity to strike blows on a range of issues beyond antitrust, including whether Beijing steals intellectual property from US companies. Messrs Cook, Pichai and Bezos all said they had no immediate first-hand knowledge of such theft, whereas Mr Zuckerberg called it “well documented”.

Other lines of questioning, such as whether the platforms stifle rightwing voices, prompted groans from Democrats – although Mr Cicilline did home in on Facebook for failing to remove toxic posts from its platform. “Facebook gets away with [not taking down harmful content] because you’re the only game in town”, Mr Cicilline said.

At the close of the day, Mr Cicilline ended with a statement of intent that sought to mark the hearing as a pivot point. “These companies as exist today have monopoly power,” he declared. “Some need to be broken up, all need to be properly regulated and held accountable.” – Copyright The Financial Times Limited 2020

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