The Technology 202: Revelations from Congress’s antitrust investigation could have an enduring impact

Lawmakers unveiled executives’ own words, recordings of conversations with small businesses and a trove of other evidence at the hearing to bolster accusations that tech companies squash their competitors. 

The investigation could have an enduring impact on how the world regulates the tech industry. The revelations come at a critical moment, as tech companies face antitrust probes both in the United States and Europe – and U.S. lawmakers seek to overhaul existing antitrust laws they say are outdated and ill-equipped to rein in tech companies today. 

Here were some critical findings you probably will hear about again:

Emails, chat records and video recordings – including some remarks and messages directly from Zuckerberg himself – were key to the committee’s accusations that Facebook engaged in anti-competitive behavior. They accused the company of harvesting data about how its users behaved on other consumer apps, and then used that data to “copy, acquire, and kill” any rivals they notice have traction. 

Jerrold Nadler, the New York Democrat who chairs the House Judiciary Committee, brought up a 2012 statements in which Zuckerberg apparently said he sought to acquire Instagram, which at the time was a rival photo-sharing app, out of fear that it could hurt Facebook.  

Zuckerberg, in response, said: “By having them join us, they certainly went from being a competitor in the space of mobile cameras, to an app that we could continue to help grow and help get more people to be able to use and be on our team.” Zuckerberg argued it was far from obvious at the time of the acquisition that Instagram would reach the scale it had today. 

But Nadler argued that if Facebook did snap up the company to neutralize a competitive threat, it would be against antitrust law. He pressed Zuckerberg on whether the company should be broken up. 

Kevin Systrom’s chat logs show he worried about how Facebook might retaliate if he decided not to sell after Zuckerberg expressed interest in buying the photo-sharing app in 2012. 

“Will [Zuckerberg] go into destroy mode if I say no [to an acquisition deal]?” Systrom asked in a message to tech investor Matt Cohler, according to documents published by the committee. 

“Probably,” replied Cohler, who had been an early Facebook employee. He warned that Facebook might target the app more aggressively if its leaders knew Instagram was raising more funding from venture capitalists. 

These chat records were key to the interrogation by Rep. Pramila Jayapal (D-Wash.) of Zuckerberg, in which she pressed him on whether he copied competitors. Watch here: 

Rep. Lucy McBath (D-Ga.) sought to highlight the personal toll of the companies’ policies when she confronted Amazon chief executive Jeff Bezos with a recording of a third-party seller who said she was restricted because she competed with the e-commerce giant in selling textbooks. The small business owner, in the recording played during the hearing, accused Amazon of systematically blocking her company from selling textbooks for months, after her business began to cut into Amazon’s market share. She insisted the restrictions put her business and ability to feed her family in jeopardy, and that she heard no response when attempting to contact the company to get them lifted. (Bezos also owns the Washington Post). 

Here’s the exchange, captured by The Guardian:

Bezos said it was not an acceptable way to treat a partner, but he wasn’t aware of a specific case. “I appreciate that you showed me that anecdote, and I would like to talk to her,” Bezos said. “It does not at all, to me, seem like the right way to treat her.”

Lawmakers sought to make the case that this was not a unique experience. “We have heard so many heartbreaking stories of small businesses who sunk significant time and resources into building a business and selling on Amazon, only to have Amazon poach their best-selling items and drive them out of business,” said David Cicilline (D-R.I.), who chairs the subcommittee that hosted the hearing. 

Bezos also was also pressed by the committee on reports and supporting interviews by congressional investigators that found Amazon employees used data collected from third-party merchants to develop its own competing products. The e-commerce titan testified that he couldn’t guarantee that the company didn’t use proprietary data for this purpose, my colleague Jay Greene wrote. Bezos said the company had a policy against that practice, but it is currently investigating whether those rules had ever been violated. 

Apple executive Eddy Cue once suggested raising the cut Apple would take from subscriptions to apps on its App Store to 40 percent, up from the 30 percent the company initially charged. The committee shared the finding on Twitter: 

Cook insisted the company has never increased its commission fees, as lawmakers pressed him on whether the Apple App Store was too powerful and took too much of a tax from developers. But lawmakers questioned whether the company could do so in the future. Cook said that there was strong competition for app developers that would influence Apple’s pricing. 

Yet the document was key reveal because it highlighted that there has not always been a consensus about this issue among Apple’s top leaders. 

Rep. Val Demings (D-Fla.) grilled Sundar Pichai, the chief executive of Google and its parent company Alphabet, about the company’s practice of combining user data from its services with that from DoubleClick, an advertising company that the search giant acquired in 2007. 

Google had previously told Congress it wouldn’t combine data, Demings said. But then the company did so in 2016. Pichai confirmed that he signed off on the decision. 

“Practically, this decision meant that your company would now combine all of my data on Google, my search history, my information from Google maps, information from my email, my Gmail, as well as my personal identity with the record of almost all of the websites I visited,” Demings said. “That is absolutely staggering.”

Cicilline accused all four companies of wielding monopoly power at the conclusion of his remarks, and he suggested some need to be broken up. He made clear a broader regulatory crackdown is coming for all of them. 

That could start in about a month, when the committee is expected to issue a wide-ranging report on the findings of its investigation. 

Cicilline told me after the hearing he thought the tech executives’ testimony supported many of the findings of the lengthy investigation. “They’re engaged in behavior that’s anticompetitive, which favors their own products and services, which monetizes and weaponizes data, which compromises the privacy of their users and which creates a competitive disadvantage for companies attempting to enter the marketplace,” he said as reporters gathered around him on the Hill.

It remains to be seen whether Republicans get on board with the Democrats’ plans. Though the investigation began as a bipartisan endeavor, significant partisan divisions have broken out. The panel’s top Republican, Jim Sensenbrenner (R-Wis.), said he didn’t think it was time to overhaul antitrust laws, but rather to examine how the Federal Trade Commission and Justice Department are enforcing the rules already on the books. 

Programming note: The Technology 202 will not publish on Friday, July 31. I’ll be on vacation next week, but the newsletter will be back in your inbox with a great lineup of guest hosts.

“I’ll just cut to the chase. Big Tech is out to get conservatives,” Rep. Jim Jordan (Ohio), the top Republican on the House Judiciary Committee, said in his opening remarks.

Rep. Matt Gaetz (R-Fla.) asked Zuckerberg about specific incidents in which Facebook executives allegedly may have played down conservative viewpoints, Elizabeth Dwoskin reports.

Gaetz asked whether content moderators and other employees were ever fired because of their policies. Gaetz cited documents from former right-leaning Facebook executive and Oculus creator Palmer Luckey that suggested the company asked him to suppress his political beliefs.

Zuckerberg wouldn’t comment on Luckey but said firing someone for political beliefs would be inappropriate. 

Google CEO Sundar Pichai defended his company’s search tool against claims of bias against conservatives, Rachel Lerman reports.

Rep. Greg Steube (R-Fla.) alleged that Google had removed a conservative site from the search results and only stored it before the hearing. Pichai said he would look into the specific issue but said, “We approach our work with a deep sense of responsibility in a nonpartisan way.”

Steube also suggested that Google might intentionally mark conservative emails as spam. “There’s nothing in the algorithm which has anything to do with political ideology,” Pichai said.

Democrats derided Republicans’ allegations. Rep. Jaime Raskin (D-Md.) accused his conservative colleagues of having a “persecution complex.”

Both had plants that elevated their otherwise modest Web camera backgrounds, style columnist Robin Givhan writes. Zuckerberg on the other hand “looked as though he were delivering his testimony from the interior of a nuclear reactor.”

But it was Pichai who won the best-dressed. Robin writes: 

“Google’s Sundar Pichai was the sleekest of the lot in both appearance and setting. He wore an elegant charcoal suit and matching tie and was well-framed behind a desk that sat in an office that looked like it had been inspired by the West Elm catalogue. He sat with perfect posture, and when he spoke, his gestures were emotive but not frantic. He tended to steeple his fingers as he attempted to answer the House Judiciary subcommittee members’ meandering questions that teetered between privacy issues and conspiracy theories.”

Givhan also captured some of the fireworks of the hearing that resulted from Jordan’s outburst over alleged conservative bias: “So he started yelling again. And he was told to put on his mask. And, well, oh, boy, it was as childish as it all sounds, and one couldn’t help but wonder whether some of our representatives are drinking the hand sanitizer instead of using it for good hygiene.” 

For instance, both Pichai and Zuckerberg claimed that users were in control of their data. When Demings questioned Pichai over the company’s decision to combine its existing trove of data with the data of another ad network it acquired, Pichai said consumers benefited from simpler control settings. But Geoffrey points out that more control settings don’t always mean ones that are easy for consumers to use. And Pichai evaded the question of whether more data helped Google profit.  

Cook also made the argument that Apple’s iPhone gives users and developers more choice. But the company has also made it difficult for users to switch over to Android, Geoffrey notes.  

Tech companies also argued that they aren’t too big. Bezos rebutted monopoly allegations by pointing out Amazon makes up less than 4 percent of U.S. retail. But Amazon accounts for nearly 40 percent of online shopping, which has become ever more profitable during the pandemic, as Geoffrey notes.

The bottom line: “It is effectively impossible to use the Internet without using in one way or another the services of these four companies,” Nadler said in his opening remarks. 

It may have been Bezos’s first hearing, but he came prepared. His snacking gave us this memeable moment:

Then there was this parody that shows what it would have looked like if Zuckerberg had prepared some of his infamous barbecue for the hearing:

The inquiry focuses on whether the Chinese company China’s Byte Dance’s acquisition of the U.S.-based Musical.ly, which was folded into TikTok, creates too much danger of the Chinese government spying on U.S. citizens’ data, Katy Stech Ferek at the Wall Street Journal reports. The president recently threatened to ban the app over similar concerns.

TikTok is trying to allay concerns by opening up its computer code for U.S. regulators and privacy experts to probe for anything improper, Tony Romm reports.

• Apple, Google, Amazon and Facebook will all release their quarterly earnings today.
• RightsCon will take place online on July 27-31.

No good pandemic-era hearing is complete without a blooper reel of tech glitches. Turns out members of Congress aren’t the only ones who have difficulties with the mute button: