Jeff Bezos, Tim Cook, Sundar Pichai and Mark Zuckerberg will defend their companies before the House Antitrust Subcommittee Wednesday in a hearing that will make tech industry history, no matter what happens.
Given that the tech giants are accustomed to answering to no one in particular, collecting four of them on a substantive topic is notable in its own right. Remarkably, Wednesday will mark the first time Amazon’s CEO has faced lawmakers in a public hearing — and they’re bound to have plenty of questions for the take-no-prisoners online retail behemoth.
For Apple and Cook, who prefer to stay above the public-facing political fray, it’s the first time before Congress in years. Facebook and Google have both been called to Congressmore recently, but lawmakers have still barely scratched the surface of two companies that have completely reshaped modern life.
If you’re just catching up, read our explainer about why this whole thing is happening at all and what to expect. You can also read the opening statements from Apple, Amazon, Facebook and Google and skip them tomorrow so you can spend more time with your Nespresso or whatever it is we’re all doing to get by these days. The statements provide a good idea of how the companies will play defense against regulators keen to install some safety features before we barrel into a fresh decade of unchecked growth.
There are a lot of unknowns heading into the hearing. Will lawmakers extract any useful revelations or will it be five hours of “let us get back to you on that?” Could tech executives manage to be even more evasive now that they’re appearing remotely via video chat? Will some subcommittee members lead the hearing so far into off-topic territory that we learn nothing about the business practices that scaled an industry of market-owning giants? And most importantly: On a scale of one to supervillain, what kind of vibes will Bezos give off?
We hope to know the answers to all of these questions and more — possibly even a question from a lawmaker or two — as we cover Wednesday’s events closely. If you’re interested in watching it go down yourself, you can tune into the livestream right here (well, up there) on Wednesday July 29 at 12PM ET.
While the opening statements are just a glimpse of the hearing’s potential topics, they do provide a useful outline for the strategy each company will use to fend off accusations that their businesses have grown on such an enormous scale due to anticompetitive behavior. In recent hearings, tech executives have mostly managed to stick to safe, well-rehearsed lines, so if any moments deviate from these scripts those will likely be the most interesting or useful bits of testimony.
In their opening statements, the chief executives of each company make some similar arguments — for example, all four claim that their companies, despite their size and power, still face intense competition, especially in global markets. Amazon and Apple also argue that their ecosystems have created millions of job for third-party businesses that use their platforms.
But the CEOs also take slightly different approaches to how they present their opening statements. Jeff Bezos, Amazon’s chief executive officer, and Sundar Pichai, the CEO of Alphabet and Google, go into their personal backgrounds. Meanwhile, both Apple CEO Tim Cook and Facebook’s Mark Zuckerberg make an appeal to U.S. patriotism. In their respective statements, Cook calls Apple an “uniquely American company” and Zuckerberg declares Facebook a “proudly American company.”
Amazon plays up job creation
Though Amazon is the largest online retailer in America, Bezos will argue that it is a small player in the global retail market, with Amazon accounting for “less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S.” Among domestic competitors, Bezos focuses on Walmart, stating that it is “a company more than twice Amazon’s size,” and also names newer competitors like Shopify and Instacart.
Bezos also dwells on the small and medium-sized retailers that sell products on Amazon’s platform, estimating that third-party businesses on Amazon have created over 2.2 million new jobs around the world.
Facebook goes all-in on America vs. China
Zuckerberg also argues that Facebook still faces intense competition, especially in other countries. Though Zuckerberg doesn’t reference any specific company or app, he calls out competition from the Chinese tech industry, telling lawmakers that “China is building its own version of the internet focused on on very different ideas, and they are exporting their vision to other countries.”
While Facebook has been criticized for acquiring companies like Instagram and WhatsApp, Zuckerberg says that those services improved under his company’s ownership.
Google names its competitors
Even though Google Search is the dominant search engine in the U.S., Pichai will claim that his company is facing down a large roster of rivals, including services that aren’t specifically search engines. For example, he cites Amazon’s Alexa, Twitter, WhatsApp, SnapChat, and Pinterest as alternative sources of information and says consumers turn to e-commerce sites like Amazon, eBay and Walmart for information about products.
Google’s ad business is also expected to be in the spotlight during the hearings. Pichai argues that advertisers have “an enormous amount of choice” for platforms, including Twitter, Instagram, Pinterest, Comcast and others, that means advertising costs have lowered by 40% over the last decade.
Apple points to smartphone competition
Cook says that the “smartphone market is fiercely competitive,” with rivals like Samsung, LG, Huawei and Google, and that all of Apple’s product categories, including the iPhone, do not have a dominant market share in any of the markets where it does business.
Like Bezos, Cook’s statement also argues that Apple’s ecosystem has helped create jobs. He says that the App Store now hosting more than 1.7 million apps, only 60 of which were developed by Apple, and “more than 1.9 million American jobs in all 50 states are attributable to Apple.”
The big tech hearing with the House Judiciary’s Antitrust Subcommittee will begin Wednesday at 12PM ET and we’ll be following along over the course of the day so check back for coverage of the most noteworthy moments. For reference, the full opening statements can be found below.
After reportedly spending a year and a half working on a cloud service meant for China and other countries, Google cancelled the project, called “Isolated Region,” in May due partly to geopolitical and pandemic-related concerns. Bloomberg reports that Isolated Region, shut down in May, would have enabled it to offer cloud services in countries that want to keep and control data within their borders.
According to two Google employees who spoke to Bloomberg, the project was part of a larger initiative called “Sharded Google” to create data and processing infrastructure that is completely separate from the rest of the company’s network. Isolated Region began in early 2018 in response to Chinese regulations that mean foreign tech companies that want to enter the country need to form a joint venture with a local company that would hold control over user data. Isolated Region was meant to help meet requirements like this in China and other countries, while also addressing U.S. national security concerns.
Bloomberg’s sources said the project was paused in China in January 2019, and focus was redirected to Europe, the Middle East and Africa instead, before Isolated Region was ultimately cancelled in May, though Google has since considered offering a smaller version of Google Cloud Platform in China.
After the story was first published, a Google representative told Bloomberg that Isolated Region wasn’t shut down because of geopolitical issues or the pandemic, and that the company “does not offer and has not offered cloud platform services inside China.”
Instead, she said Isolated Region was cancelled because “other approaches we were actively pursuing offered better outcomes. We have a comprehensive approach to addressing these requirements that covers the governance of data, operational practices and survivability of software. Isolated Region was just one of the paths we explored to address these requirements.”
Alphabet, Google’s parent company, broke out Google Cloud as its own line item for the first time in its fourth-quarter and full-year earnings report, released in February. It revealed that its run rate grew 53.6% during the last year to just over $10 billion in 2019, making it a more formidable rival to competitors Amazon and Microsoft.
France’s top court for administrative law has dismissed Google’s appeal against a $57M fine issued by the data watchdog last year for not making it clear enough to Android users how it processes their personal information.
The State Council issued the decision today, affirming the data watchdog CNIL’s earlier finding that Google did not provide “sufficiently clear” information to Android users — which in turn meant it had not legally obtained their consent to use their data for targeted ads.
“Google’s request has been rejected,” a spokesperson for the Conseil D’Etat confirmed to TechCrunch via email.
“The Council of State confirms the CNIL’s assessment that information relating to targeting advertising is not presented in a sufficiently clear and distinct manner for the consent of the user to be validly collected,” the court also writes in a press release [translated with Google Translate] on its website.
It found the size of the fine to be proportionate — given the severity and ongoing nature of the violations.
Importantly, the court also affirmed the jurisdiction of France’s national watchdog to regulate Google — at least on the date when this penalty was issued (January 2019).
The CNIL’s multimillion dollar fine against Google remains the largest to date against a tech giant under Europe’s flagship General Data Protection Regulation (GDPR) — lending the case a certain symbolic value, for those concerned about whether the regulation is functioning as intended vs platform power.
While the size of the fine is still relative peanuts vs Google’s parent entity Alphabet’s global revenue, changes the tech giant may have to make to how it harvests user data could be far more impactful to its ad-targeting bottom line.
Under European law, for consent to be a valid legal basis for processing personal data it must be informed, specific and freely given. Or, to put it another way, consent cannot be strained.
In this case French judges concluded Google had not provided clear enough information for consent to be lawfully obtained — including objecting to a pre-ticked checkbox which the court affirmed does not meet the requirements of the GDPR.
So, tl;dr, the CNIL’s decision has been entirely vindicated.
Reached for comment on the court’s dismissal of its appeal, a Google spokeswoman sent us this statement:
People expect to understand and control how their data is used, and we’ve invested in industry-leading tools that help them do both. This case was not about whether consent is needed for personalised advertising, but about how exactly it should be obtained. In light of this decision, we will now review what changes we need to make.
GDPR came into force in 2018, updating long standing European data protection rules and opening up the possibility of supersized fines of up to 4% of global annual turnover.
However actions against big tech have largely stalled, with scores of complaints being funnelled through Ireland’s Data Protection Commission — on account of a one-stop-shop mechanism in the regulation — causing a major backlog of cases. The Irish DPC has yet to issue decisions on any cross border complaints, though it has said its first ones are imminent — on complaints involving Twitter and Facebook.
On the GDPR one-stop shop mechanism — and, indirectly, the wider problematic issue of ‘forum shopping’ and European data protection regulation — the French State Council writes: “Google believed that the Irish data protection authority was solely competent to control its activities in the European Union, the control of data processing being the responsibility of the authority of the country where the main establishment of the data controller is located, according to a ‘one-stop-shop’ principle instituted by the GDPR. The Council of State notes however that at the date of the sanction, the Irish subsidiary of Google had no power of control over the other European subsidiaries nor any decision-making power over the data processing, the company Google LLC located in the United States with this power alone.”
In its own statement responding to the court’s decision, the CNIL notes the court’s view that GDPR’s one-stop-shop mechanism was not applicable in this case — writing: “It did so by applying the new European framework as interpreted by all the European authorities in the guidelines of the European Data Protection Committee.”
Privacy NGO noyb — one of the privacy campaign groups which lodged the original ‘forced consent’ complaint against Google, all the way back in May 2018 — welcomed the court’s decision on all fronts, including the jurisdiction point.
Commenting in a statement, noyb’s honorary chairman, Max Schrems, said: “It is very important that companies like Google cannot simply declare themselves to be ‘Irish’ to escape the oversight by the privacy regulators.”
A key question is whether CNIL — or another (non-Irish) EU DPA — will be found to be competent to sanction Google in future, following its shift to naming its Google Ireland subsidiary as the regional data processor. (Other tech giants use the same or a similar playbook, seeking out the EU’s more ‘business-friendly’ regulators.)
French digital rights group, La Quadrature du Net — which had filed a related complaint against Google, feeding the CNIL’s investigation — also declared victory today, noting it’s the first sanction in a number of GDPR complaints it has lodged against tech giants on behalf of 12,000 citizens.
Waymo has added an additional $750 million to the $2.25 billion funding round that it first announced in March, bringing the total size of the financing (its first from investors outside of Alphabet) to $3 billion. The extension comes from new investors including those managed by T. Rowe Price, Perry Creek Capital, Fidelity Management and Research Company and others.
The extension, like the original round itself, will be used by Waymo to invest in its workforce, product development and operating its Waymo One ride-hailing service, as well as its Waymo Via cargo and goods transportation service.
Waymo’s move to bring in external funding is seen as a way for the autonomous driving company to inject fresh capital into its program, as well as bring on new strategic partners, like Magna and AutoNation, which participated in the previously announced tranche. While the ongoing COVID-19 pandemic has resulted in a temporary setback when it comes to its testing and service deployment programs, Waymo notes in a new blog post from CEO John Krafcik that the crisis actually underscores the need for its technology.
“COVID-19 has underscored how fully self-driving technology can provide safe and hygienic personal mobility and delivery services,” Kracik notes in the post. “We’re grateful these partners share our mission to make it safe and easy for people and things to get where they’re going.”
Today after the bell, Alphabet, parent company of Google, reported its Q1 2020 performance. The company’s $41.16 billion in revenue for the three-month period came in ahead of expectations, besting analyst estimates of $40.33 billion. However, its earnings per share came in under expectations, with the street anticipating $10.38 in per-share profit, while Alphabet delivered a slimmer $9.87 in per-share income.
Shares of Alphabet rose around 2.8% in after-hours trading after shedding 3.3% in regular trading.
Inside Alphabet’s earnings report was a warning of sorts, with its CFO Ruth Porat noting a decline in later-quarter business, saying “performance was strong during the first two months of the quarter,” but that in “March [Alphabet] experienced a significant slowdown in ad revenues.”
Google generates the bulk of Alphabet’s revenue and profit, which are, in turn, largely generated by advertising incomes. Indeed, the company’s advertising revenue from search, YouTube, and its network generated 82% of its revenue in the first three months of the year.
Alphabet’s various skunkworks projects, dubbed “Other Bets,” generated less revenue than in the year-ago quarter, bringing in just $135 million in Q1 2020, down from a year-ago result of $170 million. Off of that revenue decline, Other Bets saw its operating loss rise from a mere $868 million to $1.12 billion.
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