Tech CEOs face lawmaker questions about their market dominance

Maryland Democrat Jamie Raskin finished his questioning by calling out Republican concerns that large technology companies like those represented in Wednesday's hearing have a liberal bias. 

"If you are opposed [to] electioneering by corporations, as I am, and opposed to Citizens United, then you have no problem. Citizens United is what gave corporations the power to go out and spend money," he said, referencing the 2010 Supreme Court decision that opened the gates to unlimited corporate spending in politics.

"If you don't like the way some companies are spending money, then either start your own company or tell them what is wrong with it. But the idea that electioneering is something you are opposed to strikes me is something that is completely inconsistent with the history and facts," Raskin said.

Federal antitrust enforcers might have been surprised to hear Amazon CEO Jeff Bezos seemingly admit to an allegation laid out by the Wall Street Journal — that, contrary to Amazon's earlier assertions, the company's policies allow it to use private data on third-party sellers to develop its own products.

Representative Kelly Armstrong, Republican of North Dakota, referred to those policies as a loophole, describing the practice as "using nonpublic data to inform private brands even in instances where there are very few third-party sellers."

In some cases, product categories are so narrow that they include as few as two sellers, as Bezos confirmed in the hearing.

Armstrong pressed: "Does Amazon allow the use of aggregate data for third-party products when there are only two sellers of a product?"

"Yes, sir," Bezos replied.

In one example reported by the Journal, more than 95% of sales in one product category came from a single third-party seller. Those sales plummeted after Amazon issued a competing version of the product under its own label.

Following the exchange, an Amazon spokesperson disputed that Bezos's remarks amounted to an admission of improperly using seller data, and said the company was still investigating.

Washington Democrat Pramila Jayapal used her second round of questioning to press Facebook chief Mark Zuckerbeg about the company's efforts to copy features offered by  competitors, including Instagram, which it acquired in 2012. 

Jayapal quoted from internal company emails in which executives discussed plans to prevent smaller companies from gaining a foothold against Facebook. 

"Do you copy your competitors?" she asked.

"We've certainly adapted features that others have introduced," Zuckerberg said.

He could not give a number when Jayapal asked him about the number of companies Facebook has copied. 

Jayapal, a former civil rights activist, also asked about Facebook's acquisition of Instagram after the larger company started developing its own camera tool. Kevin Systrom, one of Instagram's founders, told investors at the time that he feared that Zuckerberg would "go into destroy mode" if Instagram did not acquiesce to Facebook's pursuit.

"Facebook cloned a popular product, approached the company you identified as a competitive threat, and told them if they didn't let you buy them up there would be consequences," Jayapal concluded.

Mary Gay Scanlon, Democrat of Pennsylvania, pressed Amazon CEO Jeff Bezos on the company's 2011 acquisition of Diapers.com. 

Initially, Diapers.com did not want to be purchased, but Amazon captured market share by aggressively cutting prices on baby products on its own site. Sales at Diapers.com eventually slowed and it was forced to sell. Amazon shut down the service several years later.

"I don't remember that at all," Bezos said.

Scanlon also asked about internal Amazon emails in which Bezos spoke about pursuing small companies "the way a cheetah would pursue a sickly gazelle," a quote that has since become notorious.

"I cannot comment on that because I don't remember it," Bezos replied.

"Especially with the pandemic, one of the biggest needs I'm seeing with food drives and giveaways in my district is that families don't have diapers and we have to give them out. I'm really concerned that pricing might be driven up here by this tactic," Scanlon concluded.

The hearing was briefly interrupted when Representatve Jim Jordan interrupted Rep. Mary Gay Scanlon of Pennsylvania, with the latter referring to Jordan's prior comments as "fringe conspiracy theories." 

As Jordan fired back, a member of the committee loudly admonished him for not wearing a mask.

"You want to talk about masks, why would the deputy Treasury secretary unmask Michael Flynn?" Jordan retorted, a reference to former Obama administration officials requesting intelligence reports that revealed the identity of Michael Flynn, the former national security adviser, in 2016 and 2017.

CBS News has reported that the officials were authorized to receive the data and the "unmasking" was approved through NSA's standard process.

Ohio Republican Jim Jordan laid into the CEOs for allegedly censoring conservative voices.

"Big Tech is out to get conservatives. That's not a suspicion, that's not a hunch — that's a fact," he said. 

Jordan listed what he said were several examples of conservative and right-wing media outlets being hard to find on some platforms: President Donald Trump being kicked off Amazon-owned Twitch; Google's ad platforms threatening to ban libertarian-leaning financial blog ZeroHedge and online publication The Federalist; and YouTube restricting videos that conflict with the recommendations of the World Health Organization, "an organization that lied to us," according to Jordan.

"We all think the free market's great, competition's great. What's not great is censoring people and trying to impact elections," the lawmaker said. "If it doesn't end, there have to be consequences. That's what I'm concerned about and so many Americans are concerned about."

Later in questioning, Jordan pressed Google CEO Sundar Pichai about whether the company would "tailor its service to support [presidential candidate Joe] Biden." After a back-and-forth between Jordan and Pichai, the tech CEO replied, "You have my commitment. It's always been true, and we will continue to conduct ourselves in a neutral way."

Amazon CEO Jeff Bezos, answering his first direct question during the hearing, notably declined to outright deny that the online retailer uses data belonging to third-party sellers.

Pramila Jayapal, a Democrat whose congressional district includes parts of Seattle, where Amazon is based, asked about the company's use of such information to create private-label products that compete with sellers on the platform. Amazon has long denied exploiting detailed data for competitive purposes, though the Wall Street Journal recently reported on examples of the company doing just that.

"I can't answer that question yes or no," Bezos replied to Jayapal's question. "We have a policy against using seller-specific data for our private business, but I can't guarantee that that policy has never been violated."

He later added, "I'm very proud of what we've done for third-party sellers on this platform."

Rep. Matt Gaetz of Florida asked Google CEO Sundar Pichai if the company would pledge to continue working with police departments, noting that some of its employees have requested that the service stop working with law enforcement. The Florida Republican called the request "bigoted" and "anti-police."

Google has provided services such as its G-Suite productivity apps, as well as artificial intelligence, to law enforcement. The employees asked Google to end its work with police departments following the death of George Floyd at the hands of Minneapolis police officers.

Pichai responded, "We have a long track record of working with law enforcement when it is supported by due process and the law." 

Pressed by Gaetz about Google's intentions to continue working with police, the executive said the company is "committed to working with law enforcement" as long as it adheres to due process.

Rep. Jerry Nadler of New York questioned Facebook's approach toward buying competitors, focusing on its 2012 purchase of Instagram.

The $1 billion deal by Facebook to buy the social media platform is "exactly the type of anticompetitive acquisition that the antitrust laws were designed to prevent," Nadler said.  

He added, "It should never have been permitted to happen, and it should never happen again."

Representative Jim Sensenbrenner and Facebook chief Mark Zuckerberg sparred over the issue of free speech, with the Wisconsin Republican asking for evidence that Facebook doesn't discriminate against or suppress conservative views.

"The way the net was put together, in the eyes of Congress, is that everybody should be able to speak their mind," Sensenbrenner said, referring to the internet. He also asked Zuckerberg to explain what the lawmaker mistakenly alluded to as the company's removal of a post by Donald Trump Jr. that promoted taking hydroxychloroquine to treat COVID-19 — a treatment that has not been shown to be effective.

"Congressman, first to be clear, I think what you might be referring to happened on Twitter. So, it's hard for me to speak to that," Zuckerberg replied. He then said that Facebook did ban posts that referred to a proven cure for COVID-19, because there is none. But the social network doesn't prohibit discussion of drug trials, the executive said.

The 34-year-old CEO appeared in front of a wood-paneled white wall that set off his navy suit and blue-and-white polka-dot tie. The videoconferenced hearing took some of the sting out of the verbal sparring that often occurs in congressional hearings.

Subcommittee Chairman David Cicilline began the question-and-answer portion of the hearing by accusing Google of stealing content from small businesses. The Rhode Island Democrat said the alleged efforts are "anticompetitive" and have led to a "walled garden" that keeps users on Google sites.

"I disagree with this characterization," Google CEO Sundar Pichai responded, adding that the search giant supports 1.4 million small businesses.

Among the issues highlighted by Cicilline are allegations that Google stole restaurant reviews from Yelp.

Lawmakers' opening statements laid out the diverging areas of concern for Democrats and Republicans on the antitrust panel.

Subcommittee Chairman David Cicilline of Rhode Island repeatedly hammered on the tech companies' size and influence, painting them as too large for consumers to avoid. He noted that Google controls 90% of the search market and Amazon 70% of online commerce, although other estimates of Amazon's market share put that figure closer to 40%.

"Our founders would not bow before kings, nor should we bow before the emperors of the online economy," Cicilline said, noting that monopolies are "incompatible with democratic ideals."

Ranking member Jim Sensenbrenner indicated he doesn't care how large these companies get — as long as they don't suppress conservative voices.

"Your companies are large, that's not a problem. Your companies are successful, that's not a problem, either," the Wisconsin Republican said. But he called reports that tech companies like Facebook suppress conservative viewpoints "troubling." 

"Conservatives are consumers too," Sensenbrenner said.

President Donald tweeted on Wednesday that if Congress fails to "bring fairness to Big Tech," he'll use executive orders to do so.

While Mr. Trump didn't specify what he meant by "fairness," the president has railed against Twitter in recent weeks, accusing it and other tech companies of censorship for labeling some of his tweets as containing misleading information.

"In Washington, it has been ALL TALK and NO ACTION for years, and the people of our Country are sick and tired of it!" Mr. Trump tweeted

Twitter in May added a fact-checking label to a tweet by Mr. Trump, the first time the platform had used such a label for his tweets. Some conservatives also claim that Twitter and other social media platforms are biased against their viewpoints.

The hearing is now delayed until 1 p.m. ET, according to the House Judiciary Committee. 

Tech company stocks — which have driven their CEOs' massive wealth — have done exceptionally well during the coronavirus pandemic.

The worst-performing stock among the big four — Alphabet — has gained twice as much value as the S&P 500. The most successful of the four, Amazon, has seen its share price surge 50% since March — that return is 10 times better than the overall market. 

The explosive growth of Amazon, Facebook and other technology giants has helped buoy the personal fortunes of their founders Bezos's wealth is now pegged at $178 billion, making him the world's richest person, according to the Bloomberg Billionaires Index. Zuckerberg's $88 billion fortune makes him the third-richest person, following Microsoft co-founder Bill Gates. 

Pichai may be worth more than $900 million, according to TheStreet, while Cook is worth more than $600 million, according to Business Insider. 

The wealth of these top tech executives has fueled a growing national discussion about income inequality, with some lawmakers such as Senator Elizabeth Warren, D.-Massachusetts, calling for a wealth tax. Advocates for higher taxes on the rich point to the market dominance of Amazon, Facebook and others as contributing to widening income disparities. 

"Congress is right to investigate possible antitrust violations by Amazon and Facebook, which may be contributing to the incredible growth in the wealth of those companies' founders during our national emergency," said Frank Clemente, executive director of the advocacy group Americans for Tax Fairness, in a statement before the hearing.

After Mark Zuckerberg's last appearance before Congress, in October 2019, Democratic representatives sent the Facebook CEO more than 100 follow-up questions regarding the company's efforts around civil rights, its data collection practices and its relationship with Cambridge Analytica. CBS News has obtained his written responses, dated December 30, 2019, which have not been previously published. Read them here.

Opening statements posted Wednesday morning tell the official origin stories of the four tech companies and highlight their positive impact on the economy.

Jeff Bezos described his upbringing as the child of a teenage mother and a Cuban refugee father, drawing a parallel between the early struggles Bezos faced and what he described as Amazon's drive to constantly innovate. 

"The initial start-up capital for Amazon.com came primarily from my parents, who invested a large fraction of their life savings in something they didn't understand," he said, noting that Amazon was not profitable until the end of 2001.

"I walked away from a steady job into a Seattle garage to found my startup, fully understanding that it might not work."

He also called out a former Amazon employee who trained for a different job with the company and two women who started businesses selling on the site as a way to highlight what he called Amazon's impact on the community. 

Sundar Pichai hit on similar themes, speaking about not having access to a computer as a child growing up in India and highlighting many tools that Google makes available for free.

Tim Cook's statement paints Apple's app store as revolutionary for software developers, an improvement on distribution channels available when it launched in 2008—primarily CDs. Since that time, the app store hasn't raised or added fees, Cook said. "Clearly, if Apple is a gatekeeper, what we have done is opened the gate wider," he said. 

Mark Zuckerberg's statement highlighted Facebook's work during the coronavirus pandemic, including tamping down misinformation about the virus and creating a tool for people to help community members. He reiterated earlier calls for Congress to regulate online discourse. 

Read all four statements in full here.

Although the four technology giants face different issues, all are accused by critics of exploiting their market dominance in ways that reduce competition and harm consumers. 

They "feel free to crush anyone on their platform that's offering very good competition against them. This has happened again and again," Eleanor Fox, a law professor at New York University who specializes in antitrust and competition policy, told CBS News this week, summarizing the case against Big Tech. "They get huge amounts of data from the businesses on the platform, they take more data than they need to conduct business, and they use that to find out what is the new best thing and then they appropriate that thing. They use it to suppress innovative competition of the businesses using the platform."

Amazon's Bezos — the world's richest person and head of an ecommerce empire as well as ventures in cloud computing, personal "smart" tech, groceries and beyond — initially declined to testify before the House panel unless he could appear with the other CEOs. He'll likely face questioning over a Wall Street Journal report that found Amazon employees used sensitive, confidential data collected from sellers on its online marketplace to develop competing products. At a previous hearing, an Amazon executive denied such accusations.

Lawmakers from both political parties have suggested Amazon's earlier statements could be misleading and might even constitute perjury. But Bezos has said, "We don't use individual seller data to directly compete with them." Amazon has pushed back against the Journal's allegations, but has started an internal investigation.

Facebook's Zuckerberg is more experienced on Capitol Hill. He endured over five hours of grilling last fall by another House committee to discuss hate speech, privacy, misinformation and Facebook's widely criticized plan for a new digital currency. He also met privately with key lawmakers and with President Donald Trump, who has repeatedly criticized big tech companies and asserted without evidence that they are biased against him.

Following George Floyd's death and protests against racial injustice, Facebook's handling of hate speech has recently drawn more fire than issues of competition and privacy, especially after the company's refusal to take action on inflammatory posts by Mr. Trump that spread misinformation about voting by mail and, critics said, encouraged violence against protesters. Zuckerberg has said the company aims to allow as much free expression as possible unless it raises the imminent risk of specific harms or damage.

Pichai faced his own congressional interrogation in 2018 over online privacy and data protection, the danger of digital monopolies, alleged bias against conservative viewpoints and censorship by China. The Goolgle chief acknowledged some points, but avoided the yes or no answers that lawmakers demanded. EU regulators already have concluded that Alphabet-owned Google manipulated its search engine to gain an unfair advantage over other online shopping sites in the ecommerce market and fined Google a record $2.7 billion. Google has disputed the findings and is appealing.

The bipartisan probe is the first time Congress is taking a hard look at an industry that, for over a decade, enjoyed haloed status and a light touch from federal regulators.

Critics question whether the companies stifle competition and innovation and pose a danger to society. The Judiciary panel collected testimony from mid-level executives of the four firms, competitors and legal experts, as well as pored over more than a million internal documents from the companies.

A key question: Whether existing competition policies and century-old antitrust laws are adequate for overseeing the tech giants, or if new legislation and more funding for enforcement are needed.

Subcommittee Chairman Representative David Cicilline, a Rhode Island Democrat, has called the four companies monopolies, although he says breaking them up should be a last resort. With other Democrats, Cicilline has floated the idea of an antitrust moratorium that would block big corporations from acquiring smaller companies during the coronavirus pandemic. Republicans call the idea misguided and akin to socialism.

Facebook's fiercest critics in Congress, including liberal Democrat Senator Elizabeth Warren and conservative Republican Senator Josh Hawley, have put breaking up large tech companies on the table. And presumed Democratic presidential nominee Joe Biden has said breakups of the giants should be considered.

The tech companies now face legal and political offensives on multiplying fronts, from Congress, the Trump administration, federal and state regulators, and European watchdogs. The Justice Department and the Federal Trade Commission have been investigating the four companies' practices, including the earlier acquisitions of smaller firms. Attorneys general in all 50 states have also launched investigations of Google and of Facebook.

Wednesday marks the first time the four tech CEOs appear together before Congress — and the first time Amazon head Jeff Bezos speaks to U.S. legislators. 

The hearing also caps a year-long investigation into the companies' business practices, though some antitrust experts said the appearance before lawmakers may turn out to be less revealing than many viewers might hope.

"It's mostly theater. There are few genuine facts left to gather," Daniel Crane, a law professor at the University of Michigan who focuses on antitrust, told the Associated Press. But their tone will be important, he noted.

"Are they willing to admit that there's a problem with Big Tech's market power, or is it denial mode? Will they recommend innovative private solutions, or retreat into defending themselves as champions of consumer interests who play it fair?"

Antitrust experts note that Congress may need to tackle regulation of tech companies from several different angles.

"What we're seeing here is the emergence of a real multidimensional problem. The platforms raise not just economic problems, but social issues," Diana Moss, president of the American Antitrust Institute, told CBS News this week. "Antitrust is absolutely a tool when it comes to competition issues, but it may not be the best tool for privacy."

Investors have largely shrugged off technology CEOs' prior appearances before Congress, but this time may be different, according to analysts at Wedbush Securities.

"[T]he Street will be laser focused on this next step in the Big Tech vs. Beltway UFC battle," analysts at the investor advisory firm wrote this week in a report, adding, "The antitrust storm clouds appear to be building in the Beltway against Big Tech looking ahead into the rest of 2020."

Google parent Alphabet, Amazon, Apple and Facebook are all scheduled to report their quarterly earnings on July 30, the day after their testimony. The results, covering the months of April, May and June, will indicate just how well America's digital giants did during a period when many consumers shunned physical stores and shifted most of their activities online.