Tech competitors are 'blown away' by Congress' CEO grilling and hopeful for antitrust reform

Amazon CEO Jeff Bezos speaks via video conference during a hearing of the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law on "Online Platforms and Market Power", in the Rayburn House office Building on Capitol Hill, in Washington, U.S., July 29, 2020.

Graeme Jennings | Pool via REUTERS

David Heinemeier Hansson said he was "smiling broadly" by the end of Congress' grilling of the four Big Tech CEOs this week.

"I was frankly blown away," said Heinemeier Hansson, co-founder of Basecamp, a central figure in a noisy dispute with Apple over its App Store rules. 

For Heinemeier Hansson, who previously testified before the congressional subcommittee about Big Tech's impact on start-ups, Wednesday's hearing exceeded his "lukewarm expectations" in part by simply being mostly unembarrassing. He recalled past hearings where Facebook CEO Mark Zuckerberg was the lone focal point and it seemed lawmakers were unprepared with the basic facts to confront him.

But at Wednesday's hearing featuring Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Facebook's Zuckerberg and Sundar Pichai, CEO of Google parent company Alphabet, many lawmakers focused their questions on the 1.3 million pieces of evidence the House Judiciary subcommittee on antitrust has collected in the past year of its probe. That rendered the rehearsed testimony from the CEOs less important, according to Heinemeier Hansson, allowing the evidence to speak for itself.

Heinemeier Hansson's optimism was shared by other tech rivals who have aired their grievances with the subcommittee as well as enforcers around the world. Google's most consistent opponent, Yelp's Luther Lowe, said the hearing was a "seismic" event.

Lowe, SVP of public policy, has been steeped in the debate over Google's competition practices for nearly a decade. He has seen numerous regulators consider Yelp's complaints that Google has acted unjustly toward vertical search competitors by ripping off their content or using tactics that discourage users from clicking away from their results and onto other sites. Google, in its 2013 settlement with the Federal Trade Commission that ended an antitrust investigation, agreed not to scrape websites like Yelp for content. Google has maintained that its practices are not anti-competitive.

Google CEO Sundar Pichai testifies before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law during a hearing on "Online Platforms and Market Power" in the Rayburn House office Building on Capitol Hill, in Washington, July 29, 2020.

Mandel Ngan | Pool via Reuters

After Google's then-CEO Eric Schmidt testified to the Senate in 2011 about the company's search practices, Lowe recalled feeling underwhelmed with the scrutiny on Google. But this time, he said, there was a more informed focus on the antitrust issues at play.

"What [Congress] do[es] is they send signals," Lowe said in an interview Thursday. "If the signal in … 2011 was, 'Hey, FTC investigating Google, why are you messing with this great company,' the message yesterday was, 'Why didn't you go after these companies [earlier]?'"

Eddie Lazarus, chief legal officer at Sonos, was slightly more subdued in his optimism. Sonos is suing Google, alleging patent infringement, and has claimed Google and Amazon artificially lower prices on their smart speakers to edge out competing products like those of Sonos. CEO Patrick Spence testified at a subcommittee field hearing earlier this year about the company's competitive practices, as did Heinemeier Hansson and the executives from Tile and PopSocket.

"I felt like the committee hearing was a bit like a strobe light where it would flash on and you'd see something really interesting and then it would flash off and it would kind of move to another [topic]," Lazarus said. "But when you put it all together, you got the picture that something was fundamentally wrong here."

Watching the hearing gave the sense of whiplash, alternating between four CEOs and topics ranging as far as acquisition strategy to censorship. At times, the bipartisan effort of the probe seemed to show cracks, including when Rep. Jamie Raskin, D-Md., lashed out at Republicans for "whining" about conservative bias, pointing to a list of conservative commentators whose work has proliferated across social media platforms.

Congressman Jim Jordan, (R-OH), speaks during a hearing of the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law on "Online Platforms and Market Power", in the Rayburn House office Building on Capitol Hill, in Washington, July 29, 2020.

Graeme Jennings | Pool via Reuters

While questions of censorship and privacy were not directly related to antitrust, they often indicated broader concerns about the power of the platforms over many aspects of their respective markets and American consumers' lives. That consensus might become the building block of bipartisan legislation.

Rep. Kelly Armstrong, R-N.D., said he chose to focus a round of questioning on Google's advertising business because he felt it illustrated a central driving factor of a variety of concerns with the digital platforms.

"Regardless if you think they're censoring conservatives or you think they're squeezing out competitors or whichever part of the criticism [you think it] is, I think it all comes down to the same thing and it's money," Armstrong said. "Usually if you alienate a significant portion of your user base, that harms you economically. And that just isn't the case for these companies."

Armstrong argued that companies like Google hide behind claims of privacy, like its decision to remove support for third-party tracking cookies from its web browser, when their tactics are really about suppressing competition.

Rep. Joe Neguse, D-Colo., vice chair of the subcommittee, said many issues important to members can be viewed through the frame of a larger problem with the concentration of power in the tech sector. He gave the example of disinformation, which he said is a type of "collateral" issue that he is concerned about.

"That type of activity is a byproduct of, in my view, monopoly power — the inability of competitors to be able to emerge, which would then compel these entities and platforms like Facebook to take a more serious and urgent approach," Neguse said.

Rep. Ken Buck, R-Colo., said that optimism for bipartisan action comes in part from the fact that the subcommittee lawmakers have gained trust with one another.

"There are personal relationships being built behind the scenes," he said. "I think that people are working with each other and starting to trust each other more. Impeachment was a difficult point in this particular Congress because people stopped talking to each other for a little while, and I think we're coming out of that now and focusing again on legislative work that needs to be done."

Testimony by Heinemeier Hansson, Sonos' Spence and others earlier this year seemed to play an important role in solidifying some members' views. Buck said in an earlier interview that the hearing helped him "put a face on the stories" about the tech giants' tactics.

"Many of the committee members, both Republican and Democrat, would concede that that hearing was the second most important hearing that this committee has held" in connection to the probe, Neguse said.

Still, the outspoken tech competitors haven't pinned their hopes entirely on the committee's forthcoming report and legislation. But they are optimistic Wednesday's hearing sent a message to the antitrust enforcers currently reviewing the four giants.

"Those reports probably don't amount to anything at all if they stand alone," Heinemeier Hansson said. "But they do not stand alone."

The trove of internal documents released by the committee following the hearing are likely just a fraction of the evidence the FTC and Department of Justice's Antitrust Division have collected in their respective probes. And as they consider whether an enforcement case is warranted against each company, they now have a signal of support from Congress.

"I think a very clear message was sent to the FTC and the Antitrust Division yesterday that insofar as members of the committee are representing different constituencies in America, those different constituencies are very concerned about the power that is being held by a few people in this country," Buck said. "I think that they got that message loud and clear."

Subscribe to CNBC on YouTube.

WATCH: CEOs of American tech giants testified remotely on Capitol Hill today—Here's what they had to say

Source
Check Our More