Big Tech In Washington's Hot Seat: What You Need To Know

Jul 27, 2020
Originally published on July 29, 2020 5:08 am

Updated at 7:17 p.m. ET

Some of the world's most powerful CEOs are coming to Capitol Hill — virtually, of course — to answer one overarching question: Do the biggest technology companies use their reach and power to hurt competitors and help themselves?

Here's what you need to know:

Who: Facebook CEO Mark Zuckerberg, Amazon CEO Jeff Bezos, Apple CEO Tim Cook and Google CEO Sundar Pichai.

What: The tech execs will answer lawmakers' questions in the culmination of a year-long investigation by the House Judiciary Committee's antitrust panel into the tech giants' power that spanned 1.3 million documents and hundreds of hours of hearings and closed-door briefings.

Why: The four companies shape how billions of people communicate, learn, work, shop and have fun. Americans' reliance on these platforms has only intensified as the coronavirus pandemic has kept us in our homes. Plus, the hearing comes as more Democrats and Republicans openly challenge the immense power of Silicon Valley.

What's next: The tech giants are under investigation by regulators in the U.S. and Europe, who could bring lawsuits and even force breakups. Congress' primary role is to write antitrust laws. The conclusions by House lawmakers — expected in a report in the coming weeks — could reshape the tech industry. That is, if the political will exists to take on an economic powerhouse.

The companies:

Amazon by the numbers

  • Accounts for 38% of U.S. online retail sales, according to eMarketer. Along with Google, it's a top site for shoppers to begin product searches
  • Has topped 150 million paying subscribers to its Prime service worldwide
  • Employs a million workers globally, mostly in warehouses

Critics say Amazon abuses its position as the operator of a top online marketplace as well as a merchant on the same platform. They argue that Amazon undercuts competitors by charging lower prices at a loss. Officials in the E.U. are soon expected to reveal the results of their investigation into whether Amazon exploits data it collects from other sellers for its own benefit.

Critics have also targeted Amazon's multitude of business streams, questioning the pace of work and conditions in its warehouses, the size of its grip on delivery networks and cloud computing, the use of its facial recognition technology by law enforcement and the data practices of its Internet-connected devices.

Amazon says in each of it different business lines, it's one of many competitors. In its main business of retail, for example, Amazon often sizes itself against the entire industry rather than just e-commerce. The company's focus on convenience and low prices has won over consumers, who are the main concern of U.S. competition law.

Amazon touts itself as a big job creator with generous pay and a marketplace that supports scores of small and medium-sized businesses, with third-party sellers now accounting for more than half the sales on the platform.

Apple by the numbers

  • Currently the world's most valuable company, with a stock market value of about $1.6 trillion.

  • Has sold nearly 2 billion iPhones since its blockbuster smartphone launched in 2007.

  • While the iPhone is Apple's biggest moneymaker, its services business — including its popular App Store — generated $46 billion last year from downloads, subscriptions and licensing deals.

Critics say Apple uses the App Store to give itself an unfair advantage. In order to reach consumers with iPhones and iPads, app developers must use Apple's system of processing payments. That way, Apple pockets 30% of every purchase.

Yet Apple's own apps, like Apple Maps and Apple Music, do not have to pay any App Store fees. Apple, as part of its terms and conditions, does not allow companies to tell consumers about cheaper ways to download apps outside of the App Store.

This arrangement has led rival Spotify to claim that "Apple acts as stadium owner, referee and player and tilts the playing field in favors of its services."

Apple says it has paid out $155 billion to third-party developers from App Store purchases worldwide since 2008. It also points out that 84% of apps in the App Store are free to download. It claims taking a 30% slice of app sales is required to support the highest level of privacy and security protections.

Apple last week promoted a study it commissioned finding that its 30% commission rate is in line with fees charged at other companies and in other industries for services like videos, podcasts, e-books and audiobooks. An Apple spokesman told NPR that those who complain about the fee are seeking a free ride and "don't want to play by the same rules as everyone else."

Facebook by the numbers

  • More than 3 billion people use Facebook, Instagram, WhatsApp or Messenger at least once a month.

  • Facebook is just behind Google with 23% of the U.S. digital advertising market, according to eMarketer. Facebook brought in almost $70 billion in advertising last year — 99% of its total revenue.

Critics say Facebook has stifled competition by buying upstart social apps like Instagram and WhatsApp. It's also a big player in digital advertising, thanks to the deep trove of data it collects on its users.

Facebook is embroiled in plenty of controversies that aren't directly related to antitrust, such as its role in spreading election and health misinformation, its failures to protect users' data and accusations of political bias. Senior committee aides say they want to keep the hearing "laser-focused" on competition — but Facebook's other problems may prove too tempting for lawmakers to ignore. Some Republicans have pushed to broaden the hearing to address how social media platforms treat conservatives.

The Federal Trade Commission and state attorneys general are also investigating whether Facebook has broken any competition laws.

Facebook says it faces plenty of competition from apps like TikTok, in social media, and Google, in advertising. Its acquisitions of Instagram and WhatsApp were scrutinized by regulators at the time. When critics like Massachusetts Sen. Elizabeth Warren call for breaking up Facebook, Zuckerberg points to China as the greater threat to users' privacy and American innovation. The CEO has also called for more regulation of election security, privacy, data and harmful content online.

Google by the numbers

  • Google and YouTube, both owned by parent company Alphabet, rank among the most visited websites in the world

  • More than 90% of searches happen on Google — that means billions of searches every day

  • Google controls 29% of the U.S. digital advertising market, according to eMarketer. Google sold $135 billion in ads last year, including $15 billion on YouTube

Critics say Google has enormous power over how people find information — showing up at the top of search results can make or break a company. Smaller rivals such as Yelp accuse Google of favoring its own products, from Google Maps to YouTube.

It also has a lot of power in the complex world of digital advertising. Publishers say that's hurt their businesses, and critics worry that marketers end up paying more to get their ads in front of customers.

The Justice Department and state attorneys general are also investigating Google. They're expected to sue the company in the coming months, kicking off a big legal battle.

Google says its services create choice for users and for small businesses and that it "engag[es] in robust and fair competition." It also points to a 2013 investigation by the Federal Trade Commission that found Google didn't violate competition laws in how it displays search results.

Editor's note: Amazon, Apple, Google and Facebook are among NPR's financial supporters.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

AILSA CHANG, HOST:

It's being called Techpalooza (ph). Some of the world's most powerful CEOs - we're talking Facebook's Mark Zuckerberg, Amazon's Jeff Bezos, Tim Cook of Apple and Sundar Pichai of Google - all of them will be testifying before Congress tomorrow. These companies are already under investigation by regulators in the U.S. and Europe. They are punching bags for politicians on the left and the right. NPR's Shannon Bond looks at how Big Tech has become a big target. And we should say here that Apple, Amazon, Google and Facebook are all financial supporters of NPR.

SHANNON BOND, BYLINE: It's rare for titans of industry to line up together for a grilling under oath before Congress. In 1994, it was Big Tobacco.

(SOUNDBITE OF ARCHIVED RECORDING)

RON WYDEN: Let me ask you first - and I'd like to just go down the row - whether each of you believes that nicotine is not addictive.

BOND: During the financial crisis, it was the big three automakers. The CEOs of Ford, Chrysler and General Motors arrived by private jet.

(SOUNDBITE OF ARCHIVED RECORDING)

BRAD SHERMAN: I'm going to ask the three executives here to raise their hand if they flew here commercial. Let the record show no hands went up.

BOND: But tech companies, they haven't faced this kind of tough questioning since the U.S. government sued Microsoft for using its power to squash competition. That was back in the '90s. So what's with the spotlight on Big Tech now? Historian Margaret O'Mara says for years, it seemed like Silicon Valley could do no wrong.

MARGARET O'MARA: I think one of the reason that the critics fell so out of love with tech was because they were so deeply in love with it before.

BOND: These firms were warmly welcomed in Washington as paragons of American innovation. That allowed them to grow quickly and become indispensable. Nicol Turner Lee directs the Brookings Institution's Center for Technology Innovation.

NICOL TURNER LEE: Tech companies are now finding themselves sort of as the connector, changing the way that people across the world live, learn, earn, even love, right?

BOND: The pandemic has made it even more obvious how deeply technology is embedded in our lives. People are ordering more stuff from Amazon, using Google's video chat, streaming shows and movies on Apple TV. CEO Mark Zuckerberg says more than 3 billion people now use one of Facebook's apps every month.

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MARK ZUCKERBERG: We know that people especially rely on social apps in times of crisis and in times when we can't be together in person.

BOND: But that same technology intrudes on every part of our lives from our relationships to our elections. Critics worry these big companies are abusing their power. Here's how Kirsten Daru, an executive at a tech startup called Tile, explained it in another congressional hearing back in January.

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KIRSTEN DARU: You might be the best team in the league, but you're playing against a team that owns the field, the ball, the stadium and the entire league. And they can change the rules of the game in their own favor at any time.

BOND: That's the crux of the complaints. The tech giants use their size to bully rivals, whether it's the terms of Apple's app store, who shows up in Google search, how Amazon treats merchants who sell on its site or Facebook's habit of buying smaller competitors like Instagram and WhatsApp. The companies say they play fairly. Rhode Island Democrat David Cicilline disagrees. He's leading this congressional investigation of tech. Here's what he told this program last summer.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

DAVID CICILLINE: The Internet is broken. We are living in a monopoly moment. Our constituents expect us to fix this and to get this marketplace working right.

BOND: On Wednesday Cicilline will take those complaints to the most powerful men in tech. Now, like everything in the time of the pandemic, this hearing is going to be kind of weird. The CEOs are appearing remotely by video. Historian O'Mara says that's a big change from the usual spectacle of executives, lawmakers and press in a wood-paneled hearing room.

O'MARA: They're not having to walk in in their suit and tie and, like, raise their hands. And there's not going to be that picture.

BOND: Instead, it will be the year's most high-powered videoconference.

Shannon Bond, NPR News. Transcript provided by NPR, Copyright NPR.