Congressional hearing reveals that tech firms will face greater oversight

Amazon CEO Jeff Bezos testifies 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

It was an extraordinary gathering this week when Jeff Bezos of Amazon, Tim Cook of Apple, Sundar Pichai of Alphabet, and Mark Zuckerberg of Facebook testified virtually before the House Judiciary Antitrust Subcommittee. They represent four of the most influential individuals on the planet, since their firms have the power to shape how people communicate, shop, search, and socialize. In Bezos’s case, it actually was the first time he ever had testified before Congress. As a sign of the importance of the hearing, tech expert Gigi Sohn of Georgetown University called the gathering “tech’s Big Tobacco moment”, an allusion to the highly-publicized 1994 legislative hearing of the tobacco companies for questions about the health risks of their products.

The hearing on online platforms and market power occurred at a time of major change as a public “techlash” threatens the “permissionless innovation” regime that has governed the sector for many years. States and localities are enacting tough privacy rules, banning facial recognition software, restricting Airbnb rentals, and erecting guardrails for the gig economy workforce. As Brookings President John Allen and I announced in our new AI book entitled Turning Point:  Policymaking in the Era of Artificial Intelligence, we sit at a policy inflection point that could push the world in a far different direction than before.

Despite some political distractions, the hearing focused on antitrust issues and competition policy. Legislators expressed concern about market dominance, unfair competition, and predatory practices. With Amazon, there were questions concerning the firm’s relationship with third-party vendors. Apple’s issue was the influence its App Store has over mobile applications and app developers. For Facebook, there were queries about the market ramifications of it acquisitions of Instagram, WhatsApp, and Oculus. In regard to Google and its parent company Alphabet, there were concerns about its search dominance and whether there is preferential treatment of its products over those of competing firms.

Each CEO defended its company’s products and practices, emphasizing the consumer benefits and the competition it faced from other firms. In his written statement, Bezos noted that “eighty percent of Americans have a favorable impression of Amazon” and argued his firm “accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S.” Cook submitted testimony that “Apple does not have a dominant market share in any market where we do business.” In regard to its App Store, the CEO noted that its guidelines “are transparent and applied equally to developers of all sizes and in all categories” and claimed its “commissions are comparable to or lower than commissions charged by the majority of our competitors.”

Pichai argued in his written statement that Google search does not disadvantage the products of other companies and that the firm faces a competitive ad market and “operates in highly competitive and dynamic global markets, in which prices are free or falling and product are constantly improving.” In his written testimony, Zuckerberg defended Facebook’s acquisitions on innovation grounds and claimed his firm enhanced the products and services available on the acquired sites and benefitted consumers. With Instagram, he said the company got help with “stabilizing infrastructure and controlling runaway spam” while with WhatsApp, he said his firm aided it development by “introducing end-to-end encryption and making it free to use.”

But it was apparent many legislators were not persuaded by these justifications. Subcommittee Chair David Cicilline (D-RI) blasted the tech giants for squeezing the competition and engaging in unfair practices.  He said CEOs were “emperors of the online economy” and called for additional oversight and regulation of the tech giants. He pointed out that “concentrated economic power also leads to concentrated political power” and asked whether we should “let ourselves be governed by private monopolies.”

Republicans shared in parts of the tech critique, although they focused more on the censorship of conservative viewpoints and worries about political bias. Congressman James Sensenbrenner (R-WI), for example, complained about political censorship, while Jim Jordan (R-OH) said “Big Tech’s out to get conservatives”. He made Pichai publicly promise not to design Google products or practices that would advantage Joe Biden over Donald Trump in the 2020 presidential campaign.

Based on this legislative hearing and changes in public sentiments, it is likely a new technology era will unfold that will feature greater public oversight, stronger enforcement actions, and wider regulatory reach for the technology sector. If Democrats regain the presidency and take control of the Senate, 2021 will be a year when national legislation very well could move on topics such as privacy, competition, cybersecurity, tax policy, Section 230 reform, and online hate speech. For that reason, the legislative discussions this week are instructive in terms of the policy and regulatory framework that will govern future technology innovation.

Amazon, Apple, Facebook, and Google are general, unrestricted donors to the Brookings Institution. The findings, interpretations, and conclusions posted in this piece are solely those of the author and not influenced by any donation.