'More dangerous than Bin Laden': Tech giants under fire in Washington

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'More dangerous than Bin Laden': Tech giants under fire in Washington

By Matthew Knott

New York: With the US seized by debate about whether it is acceptable for a president to tell non-white congresswomen to "go back" to their countries of origin, many Americans were in despair about the state of their national discourse this week.

But one group may have felt grateful that the public's attention was focused on Donald Trump's tweets: the executives of the country's biggest tech companies. The "big four" players in the US tech industry - Facebook, Google, Apple and Amazon - this week faced a blizzard of inquiries on Capitol Hill into their market power, expansion plans and political leanings.

Senator Sherrod Brown of the Senate Banking Committee, right, and Senator Mike Crapo, chairman of the Senate Banking Committee, listen during a hearing about Facebook's cryptocurrency plan.

Senator Sherrod Brown of the Senate Banking Committee, right, and Senator Mike Crapo, chairman of the Senate Banking Committee, listen during a hearing about Facebook's cryptocurrency plan.Credit: Bloomberg

The incendiary headings came at a critical moment for 'Big Tech'.  Next week, Facebook, Google and  Amazon will deliver quarterly earnings reports that will be closely watched by investors on Wall Street and in Australia, with markets hovering near record highs.

Meanwhile, the Morrison government is poised to imminently release findings from the competition regulator's long running digital platforms inquiry. It is widely tipped to include tough measures to regulate tech giants that may gain global traction.

From shining lights to punching bags

Until recently, the tech giants were seen as shining examples of American capitalism and ingenuity. But they have recently become convenient punching bags for politicians from both sides of politics.

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Republicans believe the big tech firms, which have their headquarters in ultra-progressive cities such as Seattle and San Francisco, are inherently biased against conservatives. Meanwhile Democrats blame platforms such as Facebook and Twitter for helping spread Russian disinformation they believe helped cost Hillary Clinton the 2016 election.

While Trump's tweets make it hard for other stories to break through, it was not for lack of trying from the members of Congress involved in this week's hearings. At times the politicians seemed to be competing with each other to see who could land the most combative question.

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Brad Sherman, a Democrat congressman from California, went the furthest on Wednesday, local time, when he argued that Facebook's new cryptocurrency project, Libra, may cause more damage to Americans than September 11 mastermind Osama bin Laden.

"We’re told by some that innovation is always good," Sherman said. "The most innovative thing that happened this century is when Osama bin Laden got the innovative idea of flying two airplanes into towers.

Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over

US Senator Sherrod Brown

"That’s the most consequential innovation. Although this may do more to endanger America than even that."

At Senate hearings scrutinising the Libra proposal a day earlier, Democratic Senator Sherrod Brown was almost as hostile.

"Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over, and called every arson a learning experience," Brown said.

"We would be crazy to give them a chance to experiment with people’s bank accounts, to use powerful tools they don't understand like monetary policy to jeopardise hardworking Americans' ability to provide for their family."

Trump tweeted last week that the Libra, "will have little standing or dependability", and that he was not a fan of cryptocurrencies like Bitcoin. US Federal Reserve Chairman Jerome Powell said that Facebook's proposal "raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability".

Facebook was represented at the hearings by David Marcus, the head of the company's new digital currency division Calibra. Marcus was aware of the need to appear humble and conciliatory given Federal Trade Commission last week fined Facebook US$5 billion ($7.1 billion) for mishandling users’ personal information.

He said the company would not proceed with its plan to launch Libra next year until it receives full government approval.

"We know we need to take the time to get this right," Marcus said.

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"I know we have to earn people's trust for a very long period of time."

He stressed the consumer benefits that could come from the online currency - including allowing people to shift money around the world without paying exorbitant transaction and currency conversion fees.

Some senators did defend Facebook, with Republican Pat Toomey saying "to strangle this baby in the crib is wildly premature".

Later that day, representatives from the "big four" tech firms appeared before a House Judiciary Committee investigation into competition in the digital marketplace. The subcommittee is examining the tools the federal government has to rein in the dominance of monopoly firms in the online commerce and communication sectors.

"In an effort to promote and continue this new economy, Congress and antitrust enforcers allowed these firms to regulate themselves with little oversight," Democrat David Cicilline said at the beginning of the hearings. "But as a result, the internet has become increasingly concentrated, less open and growingly hostile to innovation and entrepreneurship."

Amazon, in particular, faced questions about whether it was stifling competition by selling its own branded products as well as goods from third-party vendors.

Amazon associate general counsel Nate Sutton said Amazon does not alter its algorithms to ensure that Amazon products appear higher in the platform’s search function. He added the company has only a four per cent share of the US retail market.

Amazon and Facebook are facing increasingly loud calls, especially on the Democratic side of politics, for the government to intervene either by tightly regulating them or by breaking them up into separate companies.

Democratic presidential contender Elizabeth Warren has released a detailed plan to break up the tech giants, an idea backed by rival candidate Bernie Sanders.

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At a separate hearing of the Senate Judiciary Committee, Republican senator Josh Hawley grilled Google's vice president for government affairs and public policy, Karan Bhatia over the company's attempts to break into China.

Bhatia revealed that Google had abandoned Project Dragonfly, its controversial project investigating options for a censored search engine in China.

"Clearly, our trust and patience in your company and your monopoly has run out," Hawley said.

"My point is this — you’ve been more than happy to engage in ideological censorship in the largest market in the world. You have been more than happy to partner with the most repressive authoritarian regime on the planet, all for profits, whatever it is that’s good for Google."

After the hearings Hawley tweeted: "Congratulations to ⁦@Google⁩ on becoming the most dishonest company to appear before Congress."

For all the bipartisan bluster at the various hearings, it is unclear what, if any, action will be taken to reduce the market dominance of the big tech firms.

Tech sector analyst Dan Ives told Yahoo this week that the investigations will likely produce a lot of noise but not structural change to the tech giants' business models.

Given the polarised nature of Washington, the prospect of major bipartisan legislation passing both the House and Senate appears unlikely. And any moves by regulatory agencies to break up the companies would take years and inevitably face drawn-out legal challenges.

Particularly on the Republican side of the aisle, the tech giants also benefit from an aversion to heavy-handed government intervention in the private sector.

"Just because a business is big doesn't mean it's bad," Republican congressman James Sensenbrenner said at the hearings this week.

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