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July 30, 2020

Big Tech CEOs Avoid the Big Question

Alex Woodie

Members of Congress grilled four big tech CEOs yesterday. While there were some verbal fireworks and accusations of political bias, the hearing largely failed to address the elephant in the room: the significant competitive advantages tech giants have built using big data and AI.

The fearsome foursome–Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Apple’s Tim Cook, and Google’s Sundar Pichai–appeared virtually yesterday in the House Judiciary Committee, which has been investigating the companies and their business practices for years.

Much of the proceeding was devoted to whether the tech firms, which account for four-fifths of the famous FAANG group (minus Netflix), are running monopolies that hurt consumers. The companies account for four of the five most valuable firms in the world (Microsoft is currently number one) and are worth in excess of $4 trillion.

For instance, Zuckerberg was grilled on whether Facebook’s 2012 acquisition of Instagram for $1 billion gave it an unfair advantage in social media. The CEO responded that the deal was approved by the government, and that Facebook has invested substantially in Instagram.

Bezos was asked what preceded Amazon’s 2011 acquisition of Diapers.com. Congresswoman Mary Gay Scanlon, a Democrat from Pennsylvania, recounted how Amazon aggressively slashed prices of products that competed with Diapers.com and eventually forced the company to sell itself to Amazon, which shut the service down several years later. She noted an email Bezos sent in which he talked about pursuing acquisitions “the way a cheetah would pursue a sickly gazelle.” Bezos said he did not recall the incidents leading up to the acquisition.

Pichai, the CEO of Google parent Alphabet, was grilled for his company’s purported bias against conservative groups. “Big tech is out to get conservatives,” said Ohio Republican Jim Jordan, who claims to have been “shadow-banned” from Twitter (a company that did not participate in yesterday’s testimony). In one bizarre exchange, Florida Republican asked Pichai why his campaign emails were finding their way into Gmail’s spam drawer. “There is nothing in the algorithm that has to do with political ideology,” Pichai responded.

Cook was questioned about his company’s policies for regulating apps on the Apple App Store, and whether it steals intellectual property from competitors. In 2018, the company rolled out Screen Time, an app for monitoring and restricting access to apps on Apple devices. In the weeks that followed, Apple removed or restricted 11 of the 17 most popular parental control apps from the App Store, according to the New York Times. Cook said those apps were removed for security reasons, and asserted that there is “vibrant” competition for parental control apps.

But the line of questioning largely left out one big topic: data and AI. Outside of one exchange with Bezos about Amazon’s purported use of third-party seller data to inform an Amazon-branded product, there was scant discussion about whether the FANG companies (minus Netflix and Microsoft) were abusing monopolistic power through the collection and analysis of vast amounts of data generated by consumers.

The big tech firms have huge treasure troves of information about consumers all over the world, and they use it to power sophisticated AI systems that give them a huge competitive advantage. There’s nothing illegal about using data and AI to build a competitive advantage, and clearly it has been good for Facebook, Apple, Amazon, and Google, which have grown tremendously in the past decade and are emulated by thousands of firms that are seeking to build their own AI systems powered by big data.

But whether it’s currently illegal is not the point. The whole purpose of the Judiciary subcommittee’s bipartisan investigation is to determine whether existing competition and anti-trust laws are adequate for regulating tech giants as they currently exist, or whether new laws and regulations are required. It’s becoming to look increasingly that they are not.

Congress is weighing whether new laws and regulations are required to address big tech (Shubinsky/Shutterstock)

David Richards, the CEO of distributed computing firm WANdisco, noted the shortcoming in yesterday’s testimony.

“What is missing from the recent antitrust hearings is an explanation of what their algorithms do in simple terms,” Richards tells Datanami. “No one really knows how these companies store, use and manipulate data and information to generate huge profits. These secrets create monopolies that stifle competition and real innovation where the public loses and big tech wins big.”

Richards backs an enforcement measure to break the companies up. Specifically, he supports carving Amazon Web Services off into its own company, which, with a worth of $500 billion, would be one of the top 10 most valuable companies in the world. “I believe it’s only a matter of time before these companies are regulated like public utilities,” he says.

Sri Ambati, the CEO and founder of H2O.ai, supports the democratization of AI and allowing people to control their own data, instead of letting a few giant technology companies control it.

“The ad economy, the casino, is owned by a few players. What we want to do is democratize that and allow you to be at the center of that, a strong player in that economy, with the ability to rise up to the top and not be beholden to the ill-gotten gains that the casinos has,” Ambati told Datanami recently. “I wouldn’t put any of the current netizens, or the digital warlords, on the side of playing well, because they don’t have to play well….There’s no economic advantage to doing that.”

Instead of letting big tech use a government-funded invention (the Internet) to monopolize data, every consumer should be in charge of their own data, and should be allowed to profit off that data, Ambati says.

“You pay taxes, you have the right to drive on the street,” he says. But right now, we have “the equivalent of, I park my car on the street and it turns out the street is owned by Google or Facebook. The equivalent of that is what’s happening in the digital world.”

(Koshiro K/Shutterstock)

Raj De Datta, the CEO and co-founder of Bloomreach, says business models that combine advertising with the collection and usage of personal information is “totally immoral.”

“[T]his core model of doing both together, a practice these tech giants live-by, should be illegal,” De Datta tells Datanami. “…[N]o consumer would ever consent or agree to the level of data collection and usage that’s ultimately profiting these companies in return.”

Even if these hearings result in new mandates and privacy provisions, De Datta says, it’s not going to change how these companies operate and profit. “There’s no problem with personalization and no problem with advertising, but they can’t live in the same company–it’s a conflict of interest.”

Whether the tech giants are ultimately broken up is anybody’s guess. They certainly have an outsize influence on consumers, particularly as the COVID-19 pandemic has forced people out of public life and into cyberspace. Even if the company’s data practices were investigated as much as whether they stifle competition or certain political voices, it’s clear that big tech is on the radar of lawmakers in Washington D.C.

“This hearing has made one fact clear to me: these companies as exist today have monopoly power,” said subcommittee Chairman David Cicilline, a Democrat from Rhode Island. “Some need to be broken up, all need to be properly regulated and held accountable.”

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