Theft, censorship and the emperors of the online economy: Tech CEOs go on defense – POLITICO

Amazon CEO Jeff Bezos the world's richest man, making his long-awaited first-ever appearance before a congressional hearing faced no questions at all for nearly two hours, before offering an inconclusive answer on whether the company uses data to undermine its third-party merchants. Amazon is still facing allegations that one of its executives misled Congress about that same issue last year.

The virtual testimony comes at a time of rising legal jeopardy for the major tech companies, who are the subject of antitrust and consumer-protection probes in Washington, multiple U.S. states and Europe.

Subcommittee Chairman David Cicilline (D-R.I.) set the tone early, with an opening statement vowing to check the power of the "emperors of the online economy." But so did Ohio Rep. Jim Jordan, the top Republican on the full Judiciary panel, who laid out a long series of alleged slights against conservatives by top social media companies and later got into a shouting match after a Democrat accused him of promoting fringe conspiracy theories.

See live highlights from the hearing below.

Amazon is making more money from sellers fees because more third-party sellers are using its services, CEO Jeff Bezos told lawmakers, countering the idea that his company is unfairly profiting from the merchants.

But the Amazon CEO acknowledged that the marketplace algorithm may indirectly favor those who pay the company to fulfill orders.

Rep. Mary Gay Scanlon (D-Pa.) cited a new report by the Institute for Local Self-Reliance that found Amazon brought in nearly $60 billion from seller fees last year 21 percent of Amazons total revenue and that the e-commerce giant keeps about 30 percent of each sale. That amount is up from 19 percent of each sale five years ago.

Bezos said the increased amount is because sellers are spending more money with Amazon by using additional services such as Fulfillment by Amazon, where the company stores and ships products on behalf of third-party sellers.

When you see these fees going up, sellers are choosing to use more of our services we make available, he said. Previously they were shipping their own products from their own fulfillment centers so they would have had costs doing that. Now they are doing that through Fulfilment by Amazon.

Bezos also acknowledged that the Buy Box which preselects the seller for when a user clicks on a product indirectly favors sellers who use the Fulfilled by Amazon services.

Indirectly, I think the Buy Box does favor products that can be shipped with Prime, he said. The Buy Box is trying to pick the offer that we predict the customer would most like. That includes price, that includes delivery speed, and if youre a Prime member, it includes whether the item is eligible for Prime."

In response to questions from Rep. Lucy McBath (D-Ill.) about stolen and counterfeit goods, Bezos said he believes that Amazon requires sellers to provide a real name and address, but wasnt sure whether a phone number is required. He also said he didnt know how many resources Amazon devotes to seller verification.

Amazon CEO Jeff Bezos took a rare swipe against a core feature of his Silicon Valley competitors late in todays hearing, singling out social media as destructive for free expression.

What I find a little discouraging is that it appears to me that social media is a nuance destruction machine, Bezos said. And I dont think thats helpful for a democracy.

Bezos offered his critique while testifying by videoconference, alongside the head of social media giant Facebook.

He was responding to House Judiciary ranking member Jim Jordan (R-Ohio), who was invoking the idea of cancel culture and the notion of online mobs that shout down unfashionable opinions. The lawmaker was assessing whether lawmakers were concerned about the polarizing idea, which some question as overblown.

I am concerned in general about that, Bezos told Jordan.

Other tech CEOs also appeared sympathetic to Jordans cancel culture worries.

Apple CEO Tim Cook noted he wasnt all the way up to speed on the idea but expressed concern: If youre about where somebody with a different point of view talks, and theyre canceled, I dont think thats good. I think its good for people to hear from different points of view and decide for themselves.

Im very worried about some of the forces of illiberalism that I see in this country that are pushing against free expression, Facebook CEO Mark Zuckerberg told Jordan, without identifying specifics.

Google CEO Sundar Pichai simply noted the interest in building platforms to allow freedom of expression. John Hendel

The Chinese government steals U.S. technologies, Facebook CEO Mark Zuckerberg said making him the only one of the four tech CEOs willing to say that plainly in response to a question from Rep. Greg Steube (R-Fla.).

I think its well-documented that the Chinese government steals technology from American companies, Zuckerberg said.

Apple CEO Tim Cook said he had no personal knowledge about Chinese technology theft.

Google CEO Sundar Pichai initially followed Cooks line, but later corrected the record to confirm that in 2009 China stole Google information in a well-publicized cyberattack.

Amazon CEO Jeff Bezos, who answered last, acknowledged that he had read many reports about technology theft by Beijing, but had no first-hand experience beyond knock-off products sold on Amazon.

All four CEOs passed on the opportunity to suggest how Congress could better help defend U.S. companies abroad, against either technology theft or excessive regulation. Leah Nylen and Ryan Heath

Rep. David Cicilline (D-R.I.), who heads the Houses probe into tech giants, accused Facebook of tolerating a fountain of misinformation that benefits the companys engagement-driven business model even on topics as deadly as the coronavirus.

Theres no competition forcing you to police your own platform, the House antitrust subcommittee chairman told CEO Mark Zuckerberg. During the greatest public health crisis of our lifetime, dont you agree that these articles viewed by millions on your platform will cost lives?

The lawmaker cited articles that drew millions of views on sites like Facebook while making claims about Covid-19, including those describing President Donald Trumps musings about placing disinfectants inside the body or allegations that coronavirus hype is a political hoax.

Cicilline said Facebook allows such content to reap advertising dollars. But Zuckerberg countered that this kind of noxious material is not helpful for our business.

It is not what people want to see, and we rank what we show in Feed based on what is going to be most meaningful to people and what is going to create long-term satisfaction, Zuckerberg said.

Zuckerberg defended Facebooks policy of taking down bogus information that could cause imminent harm and its attempt to highlight authoritative guidance. But Cicilline brought up a Monday video from the conservative website Breitbart, which dismissed the necessity of masks and called hydroxychloroquine a Covid-19 cure and which experienced soaring Facebook traffic over several hours before Facebook removed it.

A lot of people shared that, Zuckerberg said. And we did take it down because it violates our policies.

After 20 million people saw it after a period of five hours? Cicilline countered. Doesnt that suggest, Mr. Zuckerberg, that your platform is so big that even with the right policies in place, you cant contain deadly content? John Hendel

Apple CEO Tim Cook speaks via video conference during the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law hearing. | Graeme Jennings/Getty Images

Apple didnt consider the impact on its own parental control app when it removed some of the most popular apps that limit screentime from its App Store, CEO Tim Cook told lawmakers.

Apple introduced its own Screen Time app, which allows parents to limit how much time kids spend on their phones, in September 2018. After that, the company removed a number of competing apps. Qustodio and Kidslox, two of the leading parental control apps, have filed a complaint with the European Commission about their removal.

Cook said Apple removed the apps because of privacy concerns.

We were worried about the safety of kids, Cook said in response to questions by Rep. Val Demings (D-Fla.).

Demings asked Cook why the company removed many of the most popular screentime apps but not Absher, an app created by the Saudi Arabian government that uses the same technology.

It sounds like you applied different rules to the same apps, Demings said.

Cook said he wasnt familiar with Absher, but said the App Store has about 30 parental control apps after it changed its policy last year. Rep. Lucy McBath (D-Ga.), who returned to the issue later in the hearing, noted that Apple eventually allowed the apps back into the App Store after six months without requiring major changes.

We apply the rules to all developers equally, Cook said. I see Screen Time as just an alternative. Theres vibrant competition for parental controls out there. Leah Nylen

Facebook has certainly adapted features from competing services, CEO Mark Zuckerberg acknowledged Wednesday, but he denied it has threatened to copy start-ups if they wouldnt sell to his company.

But Rep. Pramila Jayapal (D-Wash.) expressed skepticism about his answer, reading from text messages between Zuckerberg and Instagram co-founder Kevin Systrom and messages between Systrom and a venture capitalist. She asked Zuckerberg whether he threatened Systrom and Snap CEO Evan Spiegel by saying he would clone their products if they didnt sell to Facebook. The company bought Instagram in 2012, but Snap rebuffed offers to sell to the social network.

The House subcommittee also posted those documents to its website Wednesday.

Im not sure what you would mean by threaten, Zuckerberg said, referring to the companys effort to build an app called Facebook Camera. It was public we were building a camera app at the time. That was a well-documented thing.

It was clear this was a space we were going to compete in one way or another, he said. I dont think those are a threat in any way.

Jayapal reminded Zuckerberg he was under oath while testifying.

In closing her questioning, Jayapal said she didnt believe threats should be a normal business practice.

Facebook is a case study in monopoly power, in my opinion, because your company harvests and monetizes our data and then your company uses that data to spy on your competitors and copy, acquire and kill rivals, she said. Youve used Facebooks power to threaten smaller competitors and ensure you always get your way. These tactics reinforce Facebooks dominance. Leah Nylen

House Judiciary Democrats lost a big potential GOP ally if they had any hopes of bipartisan recommendations to update antitrust law as part of their probe into tech giants.

I have reached the conclusion that we do not need to change our antitrust laws, Rep. Jim Sensenbrenner (R-Wis.), the top Republican on the antitrust subcommittee, said hours into the hearing on alleged bad behavior by Google, Apple, Amazon and Facebook. Theyve been working just fine. The question here is the question of enforcement of those antitrust laws.

The subcommittees probe has been led by Chairman David Cicilline (D-R.I.), who has been preparing a report to conclude the long investigation. GOP buy-in would strongly bolster its conclusions, including potential recommendations for updates to antitrust law.

Notably, Sensenbrenner seemed to support the probe itself and said hes been working with the chairman for over a year on this bipartisan investigation. His support runs counter to some Republicans who have disparaged Democratic handling of the probe.

But Congress shouldnt toss out a century of precedent, added the retiring House Republican. He said lawmakers should instead pressure antitrust regulators like the Federal Trade Commission, an agency that has faced accusations of going lightly on companies like Facebook and Google. John Hendel

Tempers flared more than two hours into the hearing after Rep. Mary Scanlon (D-Pa.) began her questioning with a dismissal of what she called fringe conspiracy theories of House Judiciary ranking member Jim Jordan (R-Ohio).

That prompted an outburst from Jordan, who had just pressed Google on whether its biased toward Democratic presidential hopeful Joe Biden and said he had internal evidence of the search giants interest in encouraging Latino voters in 2016.

The only problem: It was no longer Jordans time to speak, as Democrats immediately reminded him as they shouted him down.

Mr. Jordan, you do not have the time! antitrust subcommittee Chairman David Cicilline (D-R.I.) declared amid gavel slamming.

When someone told him to wear a mask, Jordan sought to bring up the unmasking in the surveillance sense of former Trump White House national security adviser Michael Flynn.

When someone comes after my motives for asking questions, I get a chance to respond, Jordan said before letting the hearing proceed.

For the record, Google CEO Sundar Pichai maintained that his company is apolitical. John Hendel

Amazon CEO Jeff Bezos said the company is still investigating whether employees may have used data it acquires from its third-party sellers to launch competing products an issue that has prompted allegations that the company misled House lawmakers a year ago.

We have a policy against using seller-specific data to aid our private label business. I cant guarantee you that that policy has never been violated, Bezos said in response to questions from Rep. Pramila Jayapal (D-Wash.), whose district includes Amazon headquarters. If we found someone violated the policy, we would take action against them.

The Wall Street Journal reported this year that Amazon employees frequently looked at seller data to help determine what products the company should offer, contrary to what an Amazon executive told the House a year ago. Jayapal also quoted a former Amazon employee as telling the panel that seller data is a candy shop. Everyone can have access to anything they want.

Bezos also acknowledged that while company policy might prevent employees from looking at a specific sellers information, they could look at aggregate data. Jayapal and The Wall Street Journal story noted that Amazon workers took advantage of that by pairing a successful seller with one who had little business to gain insights into particular products.

You have access to data that other sellers do not have, Jayapal said. The whole goal of this committees work is to make sure that there are more Amazons, that there are more Apples, that there are more companies that get to innovate and small businesses get to thrive. ...That is why we need to regulate these marketplaces so that no company has a platform so dominant that it is essentially a monopoly. Leah Nylen

The first batch of questions saw the CEOs collectively struggle to directly answer lawmakers, who came armed with well-researched questions and strong opinions a shift in gear from previous congressional tech hearings.

The one exception was Jeff Bezos, who escaped all questions for the first hour.

As Facebook CEO Mark Zuckerberg defended his companys management of Instagram, citing the Federal Trade Commissions original decision not to challenge the companys 2012 merger with Instagram, hearing chairman David Cicilline (D-R.I.) dismissed Zuckerberg, saying the failures of the FTC in 2012 do not alleviate Facebooks current antitrust challenges.

Google CEO Sundar Pichai tried to fend off questions by citing examples of individual vendors using Google to grow their business, before Cicilline cut him off for not answering the question.

Rep. Ken Buck (R-Colo.) reeled off a list of possible links and alignment between Google and the Chinese Communist Party, leaving Pichai to say only that Google had only a very limited presence in China. He repeated that answer to Rep. Matt Gaetz (R-Fla.), who repeated charges by tech investor Peter Thiel that Googles China links are treason, and concerns from Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, who said in 2018 that Googles artificial intelligence work in China puts the U.S. military at a competitive disadvantage. Ryan Heath

Apple CEO Tim Cook rejected allegations that the companys App Store rules for developers are enforced arbitrarily and argued that the company must compete with rivals to interest developers in building apps for its iPhone and iPad.

We treat every developer the same. We have open and transparent rules, Cook said under questioning from Rep. Hank Johnson (D-Ga.). Those rules apply evenly to everyone.

Cook said the majority of apps sold through the App Store, 84 percent, pay no fees. The remainder pay either a 30 percent or 15 percent commission, he said.

Johnson noted that Amazon has an agreement with Apple to allow users to bypass the iPhones in-app payment service, and its 30 percent fee, and instead use the credit card on file in their Amazon account for the Amazon Prime Video app. Cook said that would be available to anyone meeting the conditions, though he didnt outline what those conditions are.

The Apple CEO also argued that the company must compete to attract developers, who could offer apps for Googles Android, Microsofts Windows or XBox or Nintendos Playstation.

Theres a competition for developers just like theres a competition for customers, Cook said. Its so competitive I would describe it as a street fight for market share in the smartphone business. Leah Nylen

Were starting to see some fruits of the subcommittees year-plus investigation, and its got Zuckerberg on the defensive.

The Facebook CEO and New York Democrat Jerry Nadler went back and forth over internal company emails in which, Nadler said, Zuckerberg told a colleague back in 2012 that it was buying the photo-sharing Instagram because it could meaningfully hurt us without becoming a huge business.

Zuckerbergs thinking at the time could become a critical piece of evidence if it bolsters the idea that Facebook was abusing its dominance and deep coffers to eliminate budding rivals. Facebooks buying up of Instagram has become a key focus for critics of the company, with Sen. Elizabeth Warren (D-Mass.) and others saying the deal should be unwound. Thats a threat for Facebook: Instagram has become wildly popular in its own right, and is central to Zuckerbergs plan to keep a toe hold with younger generations who are otherwise flocking to sites like TikTok.

Did you mean that consumers might switch from Facebook to Instagram? Nadler asked.

Congressman, started Zuckerberg, attempting to make the case that no one at the time saw Instagram has a general social network app, rather than a really good photo-sharing app. Nadler pressed on: Yes or no: Did you mean that?

Then Nadler went for the kill, asking what Zuckerberg meant when he wrote that what were really buying is time, adding, Mr. Zuckerberg: Mergers and acquisitions that buy off potential competitive threats violate the antitrust laws.

Zuckerberg tried again, insisting that the Federal Trade Commission knew how Facebook was thinking about Instagram back when it signed off on the merger almost a decade ago. Thats when antitrust subcommittee David Cicilline (D-R.I.) jumped in: I would remind the witness that the failures of the FTC in 2012 of course do not alleviate the antitrust challenges that the chairman described.

Translation: Dont think this is over just because that agency down the road said it was.Nancy Scola

A top House Republican used his questioning to press Facebook CEO Mark Zuckerberg over a recent content moderation squabble involving Donald Trump Jr., the presidents son, with Twitter.

It was reported that Donald Trump Jr. got taken down for a period of time because he put something up on the efficacy of hydroxychloroquine, Rep. Jim Sensenbrenner (R-Wis.), the top Republican on the Judiciary antitrust subcommittee. Although Sensenbrenner said he wouldnt take the medication, the lawmaker said, I think this is a legitimate matter of discussion.

Why has that happened? Sensenbrenner asked Zuckerberg.

Congressman, first, to be clear, I think what you might be referring to happened on Twitter, so its hard for me to speak to that, the Facebook CEO said. But I can talk to our policies about this.

Zuckerberg said Facebook would take down any claim a proven cure for Covid-19 exists when there is none, given the potential imminent risk for harm, although he said the social platform would allow free discussion about drug trials and what people may think more generally about a treatments prospects.

Our goal is to offer a platform for all ideas, Zuckerberg told Sensebrenner. Frankly I think weve distinguished ourselves as one of the companies that defends free expression the most. John Hendel

Google CEO Sundar Pichai denied that the search giant steals content from other websites and rejected reports alleging that the company steers users to its own products and sites rather than sources elsewhere on the web.

We have always focused on providing users the most relevant information, Pichai said in response to pointed questions from House Judiciary antitrust subcommittee chair David Cicilline (D-R.I.), who said the panel had seen evidence about Google taking content from other websites and placing more ads on its search results. The vast majority of queries on Google, we dont show ads at all.

Cicilline cited an investigation by The Markup that showed Google has devoted more space on the first page of search results to its own products -- which earn the company more revenue that if users go to other webpages. Pichai said that Google only shows ads when consumers are seeking to buy products and argued that they compete with other e-commerce platforms, like Amazon, where consumers often go directly to try to find products.

When I run the company Im really focused on giving users what they want, Pichai said. We see vigorous competition, whether it be travel or real estate, and we are working hard to innovate.

The Federal Trade Commissions investigation into Google in the early 2010s found Google scraped content from other websites, including Yelp and TripAdvisor. The company agreed to allow other companies to opt out of having their content scraped through 2017. Leah Nylen

One surprise so far in the hearing: Facebook CEO Mark Zuckerberg, who generally likes to stick fairly religiously to a script in his public appearances, went far afield from his written testimony including strongly arguing that his 2-billion-member social network is an underdog when you look at the behemoths hes testifying alongside.

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Theft, censorship and the emperors of the online economy: Tech CEOs go on defense - POLITICO

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