Ctrl + N
State attorneys general are taking a closer look at competition across the tech industry. Today the spotlight will be on Google, but any large technology company is at risk.
More than 40 attorneys general led by Ken Paxton from Texas plan to announce an antitrust investigation into Google later today from the steps of the Supreme Court, my colleague Tony Romm reports. Their investigation will focus on the ways Google maintains its dominance as the top search giant, particularly when it comes to collecting data and advertising.
But the attorneys general made clear they are taking a multipronged approach: Eight states and the District of Columbia announced on Friday that they would open an antitrust probe into Facebook, which has acquired social media platforms Instagram and WhatsApp. And they could also widen their work to include other companies such as Amazon, which is also facing antitrust scrutiny at the federal level and has been criticized for promoting its own products over competitors on a platform it controls.
“I'm quite concerned how they [Amazon] will reap info from other buyers who use their facility and then go into business against those same people,” Keith Ellison, a Democratic attorney general from Minnesota, told Tony. (Amazon CEO Jeff Bezos owns The Washington Post.)
When Tony asked whether states plan to announce a probe of the e-commerce giant, Ellison added: “The AGs are talking about all of Big Tech. … I’ll say Amazon is on the radar screens of a lot of people but not prepared to announce [anything].”
The flurry of activity highlights how states are taking on the charge of policing Big Tech as Washington has been slow to regulate the industry, even in the wake of high profile privacy scandals and revelations that Russian actors exploited social media to influence the 2016 election.
The timing is especially interesting given how lawmakers and the Trump administration have dramatically ramped up antitrust scrutiny of Silicon Valley in recent months -- signaling some states think the federal government is unlikely to actually get anything done.
“They need to be regulated,” Ellison also told Tony, “and my view is, it’s the state AGs job to do it, particularly when the federal government is not necessarily a reliable partner in the area.”
Top competition officials at both the Federal Trade Commission and Department of Justice have said that the states are working cooperatively with the federal government, even as some state attorneys general complain that Washington is moving too slowly, Tony reports.
Now the tech industry is now bracing for an antitrust war on multiple fronts. Just on Friday, Google acknowledged for the first time that it is the target of a federal competition probe as the Justice Department requested records tied to previous antitrust investigations. Facebook has said it is subject to a Federal Trade Commission antitrust investigation. As Congress returns this week for its fall session, both the House and Senate are gearing up for hearings on antitrust issues in the technology sector that will likely increase the public spotlight on the issue.
Though the federal government has the most powerful tools at its disposal when it comes to addressing competition, Tony notes that states have been effective in creating changes within other industries. For example, they forced tobacco companies to pay billions in health claims and to pay for an anti-smoking campaign.
The broad nature of the states' antitrust action — which in the case of the Google investigation includes a huge chunk of America and is bipartisan — could also lend more legitimacy to action at the federal level. As I reported in last week's Technology 202, the state investigations could lend bipartisan credibility to actions that the FTC and DOJ are taking at a time when President Trump has been aggressively attacking Silicon Valley titans.
The companies they say they will cooperate with the state enforcers. “Google’s services help people every day, create more choices for consumers, and support thousands of jobs and small businesses across the country,” Google spokesman Jose Castaneda told Tony. “We look forward to working with the attorneys general to answer questions about our business and the dynamic technology sector.”
For its part, Facebook argued that it's not stifling competition because people have multiple choices for each of the services it provides. “We understand that if we stop innovating, people can easily leave our platform,” said Will Castleberry, the company's vice president of state and local policy. "This underscores the competition we face, not only in the U.S. but around the globe. We will work constructively with state attorneys general and we welcome a conversation with policymakers about the competitive environment in which we operate.”
BITS: China Labor Watch, a nonprofit advocacy group, accused Apple and its manufacturing partner Foxconn of a series of worker violations in Chinese factories, including withholding bonus payments and employing more temporary workers than allowed by Chinese law, my colleague Reed Albergotti reports.
The report drew from observations and documents collected by undercover investigators working at the largest Chinese iPhone factory in Zhengzhou. Apple employed one of the investigators for four years, the group said.
Apple spokeswoman Lori Lodes denied most of the report's accusations, but she acknowledged that Apple did exceed the number of contract workers allowed by the country's law, which can't exceed 10 percent. Contract workers are paid overtime, but they do not receive many other benefits of full-time workers. “We have confirmed all workers are being compensated appropriately, including any overtime wages and bonuses, all overtime work was voluntary and there was no evidence of forced labor,” Lodes said.
Foxconn also admitted to hiring more contract workers than it is permitted to under Chinese law, but it denied engaging in other practices such as forced labor or withholding worker bonuses in a statement to Reed.
The advocacy group says Apple is engaging in problematic labor costs as it seeks to curb costs to head off expenses related to tariffs on its products. “Apple is now transferring costs from the trade war through their suppliers to workers and profiting from the exploitation of Chinese Workers,” the report reads.
NIBBLES: Microsoft President Brad Smith came out against a decades-old legal shield that provides tech companies immunity for the content people post on their websites, known as Section 230 of the Communications Decency Act. Smith's remarks highlight that the tech industry's interests in Washington aren't monolithic, and it will likely put the Washington tech giant at odds with Silicon Valley social media companies that have business models that are more reliant on the law.
“Section 230 had a place and time, but that time is now over,” Smith told my colleague Jay Greene in a recent interview.
While both Republicans and Democrats have expressed concerns with the law, Smith is the rare CEO to come out against it. The Internet Association, a lobbying group that represents tech giants — including Microsoft, Facebook, and Google — has argued that gutting the law would stymie innovation. But Smith, who has also become a familiar face on the Hill advocating for policy solutions to issues in the industry surrounding privacy, artificial intelligence and cybersecurity, says tech companies need to do more to stop their tools from being used for bad deeds.
“Digital technology has become both a tool and a weapon, and we need to address that head on,” Smith told Jay. “And part of addressing it head on starts with really understanding the different ways in which it’s either serving humanity or being weaponized.”
BYTES: Joichi Ito, director of the MIT Media Lab, stepped down on Saturday following increased scrutiny over his role in concealing financial ties between the lab and convicted sex offender Jeffrey Epstein, Marc Tracy and Tiffany Hsu at the New York Times report. His resignation follows a New Yorker investigation released Friday that detailed how Epstein directed contributions to the lab far exceeding the amounts previously disclosed by the Massachusetts Institute of Technology.
Despite being “disqualified” by MIT as a donor, the Media Lab continued to accept funds from Epstein, Ronan Farrow at the New Yorker found. “The effort to conceal the lab’s contact with Epstein was so widely known that some staff in the office of the lab’s director, Joi Ito, referred to Epstein as Voldemort or 'he who must not be named,' " Ronan reports.
Emails obtained by the New Yorker credited Epstein with facilitating high-profile donations, including a $2 million donation from Bill Gates. “Any claim that Epstein directed any programmatic or personal grant making for Bill Gates is completely false,” a representative for Bill Gates told the Times. Ito also resigned from the boards of the MacArthur Foundation, the John S. and James L. Knight Foundation and the New York Times Company.
— News from the private sector:
The nearly half-million U.S. businesses that will have to comply with a new California privacy law protecting consumer data are scrambling to make their digital operations compliant by Jan. 1, the Wall Street Journal's Patience Haggin reports. Because companies store customer data across multiple platforms, many are rushing to find tools that can help them collect all the data in one place.
“You have to find a way to capture all that information and track it so you know what’s happening with that information,” said Dan Koslofsky, associate general counsel for privacy and data security at the Gap, told Patience. “And that’s a pretty significant undertaking for most companies.”
The law will probably will hit data vendors and digital advertisers the hardest, Patience reports, but it could also provide new business for firms such as Microsoft, which is one of several firms developing compliance software.
While many of the biggest companies affected by the law had a head start in taking similar preparations to comply with the European Union's General Data Protection Regulation that went into effect last year, smaller California companies that pushed off fixes waiting for California lawmakers to iron out details may not make the 2020 deadline — a concern for some businesses given the up to $7,500 fine per violation.
— More news from the public sector:
— Tech news generating buzz around the Web:
— Coming soon:
- Apple will host a special iPhone event on Tuesday at 10am PT in Cupertino, Calif.
- The Senate Judiciary Subcommittee on Intellectual Property will host a hearing on how to make the patent system stronger on Wednesday at 2:30 p.m.
- The House Antitrust Subcommittee will hold a hearing on the role of data and privacy in competition as a part of its series of hearings about online platforms and market power on Thursday at 9:00 a.m.
- The Senate Judiciary will host an oversight hearing on the enforcement of antitrust laws on September 17 at 2:30 p.m. EST
- The Senate Judiciary will host a hearing to “explore issues relating to competition in technology markets and the antitrust agencies’ efforts to root out anticompetitive conduct.” on September 24