Why the tech giants may suffer lasting pain from their Hill lashing

Wednesday's much-anticipated antitrust hearing subjected four of the tech industry's most powerful CEOs to hours of aggressive questioning Republicans and Democrats alike.

But it also may have revealed something far more lasting: A Congress that has largely soured on Silicon Valley is beginning to figure out how to hold it to account, compiling piles of documents that could back up allegations that the industry's biggest companies aren't playing by the country's competition rules.

That could be the most lasting implication for Facebook's Mark Zuckerberg, Amazon's Jeff Bezos, Google's Sundar Pichai and Apple's Tim Cook, whose companies are being increasingly challenged by lawmakers in Washington and beyond.

Want the full play-by-play? Check out POLITICO’s live coverage. With that, here are five top takeaways of what we learned Wednesday.

1) Democrats came ready, and with plenty of evidence

The House antitrust subcommittee has spent a year on this investigation — collecting emails and confidential presentations, locating chat records, and reassuring small competitors that it’s safe to tell them of their stories of the Big Four. And some of the subcommittee’s top Democrats came prepared with that evidence, in a coordinated effort to poke holes in Zuckerberg's, Bezos', Pichai's and Cook’s contentions that they compete fully in the letter and spirit of U.S. antitrust law.

Take Rep. Pramila Jayapal’s (D-Wash.) back-and-forth with Zuckerberg over whether he’d threatened Instagram co-founder Kevin Systrom before eventually buying the company for a billion dollars in 2012. Jayapal pulled up a chat between Systrom and an investor in which the Instagram co-founder floated the possibility that Zuckerberg “will go into destroy mode if I say no.”

When Zuckerberg disputed the congresswoman’s characterization of those events, Jayapal swung back with a classic bit of congressional theater: “I'd like to remind you that you’re under oath.” Underscoring the point, the subcommittee published a cache of its investigative materials, including the full Systrom chat log, midway through the hearing — a way of extending the five-hour-plus hearing’s shelf-life even longer.

In the same vein, committee members hit Bezos with emails illuminating Amazon's motivation for buying the smart doorbell company Ring; wrote Bezos in that correspondence, "To be clear, my view here is we are buying market position — not technology."

2) Republicans are more interested in tech bias than antitrust

The hearing got off to a bang when Rep. Jim Jordan (R-Ohio) brought out his outdoor voice to recite a litany of alleged examples of anti-conservative bias, including on the part of Twitter, whose CEO Jordan had made a show of attempting to invite to the hearing.

Perhaps anticipating Jordan would have a go at hijacking the hearing, was primed to shut him down: He quickly swatted away Jordan’s attempt to enlist a fellow Republican not on the subcommittee to question the CEOs on their threats to “freedom.”

That put to rest any notion that the tech executives were facing a unified bipartisan front ready to drill down on antitrust abuses.

Jordan later tried again, attempting to go to the ropes with Google CEO Pichai over whether his company would play fair during the 2016 election. Pichai seemed somewhat befuddled by Jordan’s line of questioning, eventually promising that, yes, Google would play things neutral. Pichai was let off the hook when the right to question passed to Rep. Mary Gay Scanlon (D-Pa.), who opened with a shot at "fringe conspiracy theories."

Jordan objected, loudly, but the hearing moved on.

Republicans did get traction here and there. Rep. Kelly Armstrong (R-N.D.), for example, got into a robust exchange with Pichai on the ins-and-outs of how the company’s ad tools interact with the YouTube platform it owns. When Pichai said the company’s approach was more sensitive to users' data-security concerns than other models, Kelly shot back that Google was using privacy as “a cudgel to beat down the competition.”

But even Rep. Ken Buck (R-Colo.), who has recently carved out a lane as a thoughtful conservative critic of Silicon Valley, touched on how Amazon engages with competitors before veering off onto a round of getting each of the CEOs to commit to not sell products produced using “slave labor.”

And while the hearing produced few of the full-out tech gaffes that Congress has become known for, top subcommittee Republican Jim Sensenbrenner notched one when he asked Zuckerberg about why presidential son Donald Trump Jr.'s social media account was recently taken down for a short time over a controversial hydroxychloroquine video. But that controversy involved Trump's Twitter account, not Facebook. (Zuckerberg sidestepped the platform misidentification, using it as a moment to point out that Facebook is pointedly pro-“free expression.”)

3) Facebook’s still vulnerable

Zuckerberg was the target of perhaps the day’s toughest questioning, not simply from Jayapal but other from Democrats who homed in on Facebook’s billion-dollar acquisition of Instagram in 2012. Their premise: that Zuckerberg saw the photo-sharing platform not as a neat startup that would round out Facebook's own image-sharing tools but a potential existential threat — one whose absorption, then, potentially violated U.S. competition law.

New York Democrat Jerry Nadler, the chairman of the full Judiciary Committee, laid into Zuckerberg on the topic, again using internal communications in making his case. Nadler pointed out that according to documents in the subcommittee’s hands, Zuckerberg was prompted to dig out his checkbook because he worried that “Instagram could “meaningfully hurt us without becoming a huge business,” and that by buying the still-small company, “what we’re really buying is time.”

Buying up a competitor simply so it will stop competing is potentially a no-no under U.S. antitrust law, Nadler pointed out, to which Zuckerberg responded that the Federal Trade Commission knew his thinking about Instagram way back in 2012, and those antitrust enforcers still signed off on the deal. But Cicilline was unpersuaded, telling Zuckerberg that "the failures of the FTC in 2012 of course do not alleviate the antitrust challenges that the chairman described.”

The shorter version: Just because that one corner of the federal apparatus approved the deal some eight years ago doesn’t mean Zuckerberg is out of the woods. And deals that are made can be unmade.

Facebook has bought scores of companies, of course, but Instagram is different. The visual-first platform, hugely popular in its own right, is key to Zuckerberg’s vision for the future of Facebook — especially as it’s a way of attracting a Facebook-phobic younger audience that otherwise is flocking to the Chinese-owned upstart TikTok. Washington peeling Instagram away from Zuckerberg’s empire might be unlikely, but it’s also a future that the CEO isn’t eager to contemplate. And the House antitrust subcommittee made plain that it’s a possibility it wants Zuckerberg to worry about.

4) Jeff Bezos took lots of heat, and didn't always seem ready

This was, somewhat amazingly, Amazon CEO Jeff Bezos’ first ever time testifying before Congress, despite the enormous wealth and power he enjoys. (When Bezos was sworn in today, he was ranked No. 1 on Forbes’ list of the world’s richest people, with $180 billion under his control. As a point of comparison, the wealthiest member of House of Representatives, Rep. Greg Gianforte (R-Mont.), was worth about one-thousandth that.)

And for a time, it looked like it would be a easy day for Bezos. Seemingly because of technical difficulties with his Cisco Webex feed, Bezos wasn’t called on for questions until long after the hearing that begun. But when the technical details were sorted out, Bezos was in for it.

Some of the toughest queries came from Cicilline himself, on a topic that the chairman has been pursuing for many months now: whether Amazon uses the data of independent sellers on its platform to figure out how to best sell its own products. (The committee has questioned whether another Amazon witness misled the panel on this very point a year ago.) Bezos declined repeatedly to dig into the details, often arguing that he simply didn’t know the relevant information, even though it's common for CEOs to prep thoroughly for these sort of high-profile Q&As.

After Bezos responded "I can't answer that question yes or no" when Jayapal asked whether Amazon has ever used information extracted from the experiences of its on-platform independent sellers to plan its own offerings, Cicilline followed up incredulously: “You said that you can’t guarantee that the policy of not sharing third-party seller’s data with Amazon’s own line [of products] hasn’t been violated. You couldn’t be certain. Can you please explain that to me?”

Said Bezos: “We are investigating that, and I do not want to go beyond what I know right now.”

At another point in the hearing, Bezos said he was unfamiliar with a startup that was featured in the opening anecdote of a Wall Street Journal story on the company's dealings with smaller competitors that appeared last Thursday.

Don’t expect Cicilline to let this one go. He’s known to keep his teeth dug into topics that have grabbed his attention, and he’s made clear that he takes strong offense to how Amazon has handled this key question.

5) Congress still has no clear bipartisan antitrust agenda

Cicilline has said from the start of his tech investigation back last summer that he’s eager to keep it a bipartisan affair, and somewhat remarkably he has mostly met that goal. Still, it became clear Wednesday that the subcommittee's Republicans are not on board with making major changes to antitrust law to counter Silicon Valley’s power — a stalemate that could give the beleaguered tech giants a legislative win by default.

Some GOP lawmakers also explicitly rejected the idea that, as the oft-heard saying goes, “big is bad.”

“I have reached the conclusion that we do not need to change our antitrust laws,” said Sensenbrenner, the top Republican on the subcommittee, who would be a crucial ally for any bipartisan drive to make transformational changes. “They’ve been working just fine. The question here is the question of enforcement of those antitrust laws.”

That still leaves Cicilline a plenty-big lane to have some impact on the country’s competition policy, though he will to navigate carefully to make sure that pre-election bickering doesn't rip apart the policy recommendations he has said he’ll release by the end of the year.

On the other hand, the November election could yield him another path to victory, by offering an antitrust legislative roadmap to the next presidential administration — if that president is Joe Biden.

Leah Nylen and John Hendel contributed to this report.

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U.S. coronavirus death toll reaches 150,000, highest in the world

Health experts predict the number could reach 200,000 in less than two months. 

The United States COVID-19 deaths topped 150,000 on Wednesday, the highest in the world, according to Johns Hopkins University.  

Brazil and Great Britain reportedly rank 2nd and 3rd in coronavirus related deaths. 

As of July 23, there are 4 million confirmed infections in the U.S, USA Today reports.

California, Texas and Florida saw record-breaking death tolls this week, while Tennessee and Arkansas set records for both deaths and news cases. 

Read More: NBA player Michael Porter Jr. says that COVID-19 is being used for ‘population control’

The first known COVID-19 death in America was Feb. 6. Health experts predict the death count could reach 200,000 in less than two months. 

The increase in cases and deaths is attributed to states easing restrictions and reopening too soon.

“We were not careful and it became like a domino effect,” Dr. Anne Rimoin, epidemiologist and director of UCLA’s COVID-19 Rapid Response Initiative, told USA TODAY.

“Everybody rushed back to normal when what we really needed to be doing was doubling down,” Rimoin said. “We are not doing enough to suppress the spread of the virus.”

Coronavirus cases are reportedly surging in 11 cities: Cleveland, Columbus, Ohio; Indianapolis, Las Vegas, Miami, Minneapolis, Nashville, Tennessee; New Orleans, Pittsburgh and St. Louis.

“What started out very much as a southern and western epidemic is starting to move up the East Coast into Tennessee, Arkansas, up into Missouri, up across Colorado, and obviously we’re talking about increases now in Baltimore,” said Dr. Deborah Birx of the White House coronavirus task force.

“So this is really critical that everybody is following this and making sure they’re being aggressive about mitigation efforts,” she continued.

Read More: 14 members of the same Texas family test positive for coronavirus after party

#KeepingThemHonest, @andersoncooper describes "a self-proclaimed wartime President who… makes no mention of the 150,000 American lives lost in the battlefield that he himself is absent from." https://t.co/TbU7jCko7E pic.twitter.com/xPx94E3kgJ

— Anderson Cooper 360° (@AC360) July 30, 2020

An earlier report on theGrio noted that the Trump administration will pay Pfizer nearly $2 billion for a December delivery of 100 million doses of a COVID-19 vaccine the pharmaceutical company is developing, Health and Human Services Secretary Alex Azar announced Wednesday, per The Associated Press.

The U.S. could buy another 500 million doses under the agreement, Azar said.

“Now those would, of course, have to be safe and effective” and approved by the Food and Drug Administration, Azar said during an appearance on Fox News.

Pfizer Inc. and BioNTech SE announced separately that the agreement is with HHS and the Defense Department for a vaccine candidate the companies are developing jointly. It is the latest in a series of similar agreements with other vaccine companies.

The agreement is part of President Donald Trump’s Operation Warp Speed vaccine program, under which multiple COVID-19 vaccines are being developed simultaneously. The program aims to deliver 300 million doses of a safe and effective COVID-19 vaccine by January 2021.

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Jeff Bezos’s antitrust grilling was a reminder of Amazon’s power over its sellers

Amazon CEO Jeff Bezos testifies remotely Amazon before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law hearing on “Online Platforms and Market Power”  | Photo by GRAEME JENNINGS/POOL/AFP via Getty Images

Jeff Bezos was calm and polite in his first Congressional appearance. But he did nothing to quiet a huge concern.

The world’s richest man, Jeff Bezos, testified before US Congress members for the first time on Wednesday, but he said little to assuage one of their biggest concerns: that Amazon’s grip on online retail gives it the power to make or break small merchants on a whim.

Bezos, along with the CEOs of Apple, Google, and Facebook, appeared via videoconference before a bipartisan group of 15 US House members who have been investigating the four tech giants over the last year. The stated goal of this antitrust subcommittee’s investigation has been to document whether these corporate titans abuse their power in industries ranging from retail to social networking, and to evaluate whether the country’s antitrust laws are modern enough to guard against such abuses.

“Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represent the powers of a private government,” Rep. David Cicilline (D-RI), the chair of the subcommittee, said in his opening remarks at what was a five-plus hour hearing.

For Bezos, much of the questioning from lawmakers focused on how Amazon competes against, and profits from, the 1.7 million small- and mid-sized merchants who help stock Amazon’s digital shelves. Amazon boasts that 60 percent of its retail sales now come courtesy of these sellers, rather than from Amazon stocking and reselling goods itself.

But some Amazon sellers have complained over the years that as Amazon’s market share in US online commerce has increased — to about 40 percent today, which is about seven times more than the next competitor — the company has squeezed and otherwise harmed them in new and different ways because they have no viable online alternatives.

According to Cicilline, Amazon sellers have told the subcommittee that “[Amazon has] never been a great partner, but you have to work with them.”

One concern has been the data Amazon uses from its own merchants to help inform what products to develop under its own private-label brands, such as Amazon Basics. In April, the Wall Street Journal published a report stating that Amazon employees have used data from individual sellers to help Amazon decide which private-label products to pursue. That contradicts what a top Amazon lawyer, Nate Sutton, told Congress earlier this year when he said that Amazon’s policy is to only use data on a product when there are at least two sellers selling it.

On Wednesday, Bezos told Rep. Pramila Jayapal (D-WA), who represents Amazon’s hometown of Seattle, that the company’s investigation into violations of the policy outlined in the Journal report was ongoing. “I’m not satisfied that we have gotten to the bottom of it, and we’ll keep looking at it,” he said.

And Jayapal made her point clear: “So you might allow third-party sellers onto your platform. But if you’re monitoring the data to make sure that they’re never going to get big enough that they can compete with you, that is the concern that the committee has.”

Bezos argued that other retailers don’t even have such a policy, which is completely beside the point — no other US retailer operates a marketplace even close to the size of Amazon’s. But worse, Bezos not providing an update on the investigation just means that the concern over these potentially anticompetitive practices remains unsettled.

The lawmakers also questioned Bezos on what some view as an increasing cut of sales that Amazon takes from small merchants. According to a recent study by the Institute for Local Self-Reliance, a nonprofit that advocates for a strong economy built on independent businesses versus giant corporations, Amazon collected 30 percent in fees on average in 2019 from a given sale that a seller made. That number was up from 19 percent five years earlier, according to the ILSR estimates. Some sellers have said Amazon’s cut is even higher than that. In an episode of the Land of the Giants: The Rise of Amazon podcast last summer, one Amazon toy seller told Recode that Amazon now collects fees that equate to nearly half of each of his company’s sales, when including the cost to advertise his products on the site.

Bezos’s defense of these increases centered on the value he says Amazon is providing in exchange for these fees. The CEO talked up Amazon’s advertising platform as a way for businesses to get discovered — but some sellers and brands see it more as a tax simply to do business on the platform. But the CEO did little to put to rest the open question of whether small businesses on Amazon can be successful without giving his company a bigger and bigger cut of their earnings.

Bezos also mentioned how Amazon’s warehousing program Fulfillment by Amazon (FBA), allows merchants to store, ship, and have customer service taken care of, through Amazon. In order for most sellers to qualify their goods for Amazon Prime delivery, they have to pay for FBA storage. And Bezos admitted that Amazon’s algorithm that determines in real time which seller wins a given sale, indirectly factors in whether a seller is a customer of FBA. This admission could offer additional ammunition to critics who argue that Amazon is using its control over the largest US e-commerce marketplace to essentially force its merchants into paying for more and more services, such as FBA.

Then there’s the frequency with which Amazon changes its policies and the algorithms that power its platform in ways that can make or break its merchants’ businesses, essentially overnight. One Congress member told Bezos the story of a textbook seller on Amazon who says her business was kicked off of the platform without notice or explanation after her business had grown large. Seemingly arbitrary suspensions by Amazon are not a new complaint.

Bezos said he was “surprised” to hear about such a story and that he would like to speak to the seller. But he also countered with a defense that he believes such treatment is not “systemic” at Amazon.

For Bezos, this was his first time testifying on Capitol Hill, at least in part because Amazon has, for the most part, been a good thing for millions of online shoppers. As I’ve written before, Amazon offers buyers incredible convenience, good prices, fast delivery, and a vast selection. And US antitrust enforcers typically favor companies that treat consumers well and keep prices low, while typically targeting business practices or mergers that they believe will harm consumers, such as by raising prices for a product or service.

But Amazon is now worth $1.5 trillion, and Bezos is the world’s richest man. Along the way, media and regulatory scrutiny has intensified. The Federal Trade Commission has been probing various Amazon business practices over the last year to see if Amazon has violated existing antitrust laws. And the House antitrust subcommittee will next issue its own report concluding its investigation that could argue for new or modified antitrust legislation that can account for the harm to innovation and competition that some legislators say is done by tech giants like Amazon, even while they seemingly treat consumers well.

Even if Bezos didn’t shut down lawmakers concerns about potentially anticompetitive practices, his first Congressional testimony at times came across as the most authentic of the CEOs at the hearing. At the same time, he on several occasions politely dismissed anecdotal seller complaints presented during the hearing as one-offs, rather than being core to Amazon’s DNA.

And therein lies one of his problems. Even if Bezos is right and Amazon only rarely abuses its position over its own sellers, the complaints shared during the hearing show that the company has grown so big and powerful that even abuses of neglect have the power to crush the small businesses that power Amazon’s success — but also are so dependent on the platform that it can crush them without even noticing.

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Ruth Bader Ginsburg undergoes medical procedure at hospital

Justice Ruth Bader Ginsburg has undergone a nonsurgical medical procedure in New York City and expects to be released from a hospital there by the end of the week, the Supreme Court said Wednesday night.

The court said in a statement that the 87-year-old Ginsburg underwent a minimally invasive procedure to “revise a bile duct stent” at Memorial Sloan Kettering Cancer Center. The stent had originally been placed last August, when Ginsburg was treated for a cancerous tumor on her pancreas.

The statement said that, according to Ginsburg's doctors, “stent revisions are common occurrences and the procedure, performed using endoscopy and medical imaging guidance, was done to minimize the risk of future infection.”

The procedure follows another one earlier this month at Johns Hopkins Hospital in Baltimore to clean out the stent. Ginsburg had gone to the hospital after experiencing fever and chills and was treated for a possible infection.

The statement from the court Wednesday said that Ginsburg “is resting comfortably and expects to be released from the hospital by the end of the week.”

Ginsburg, the oldest justice on the nine-member court, announced earlier this month that she is receiving chemotherapy for a recurrence of cancer. The liberal justice, who has had four earlier bouts with cancer, said her treatment so far has succeeded in reducing lesions on her liver.

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'A disgrace': Former employee blasts Fed’s workplace culture

A former Federal Reserve employee laid out a scathing critique of the lack of diversity and inclusion at the central bank and the economics profession more broadly — and drew a sympathetic reaction from Fed Chair Jerome Powell.

Claudia Sahm, who worked at the Fed for more than a decade before leaving in 2019, alleged in a 6,000-word blog post on Tuesday night that an unnamed official at the central bank, who she called her “tormentor,” demeaned her expertise and made her feel like she didn’t deserve to be an economist.

Sahm also said another official, former New York Fed President Bill Dudley, privately questioned whether she deserved to be credited for the so-called Sahm Rule, an indicator she developed to more quickly identify the start of a recession. Dudley did not immediately respond to a request for comment.

Her post, which includes anecdotes from other people’s experiences, touches on a broad range of themes, including sexism, racism and elitism. “Do you know how many Black economists work at the Fed?” she wrote. “One out of 406. Economics is a disgrace.”

Powell, asked at a monetary policy press conference on Wednesday about the post, said women at the Fed have experienced “pain and injustice." He said he had not yet read Sahm's piece.

Sahm also talks about her battles with mental illness. She said a friend at the central bank helped her keep her job after she had a breakdown from stress in 2011 but failed to tell her that she could file a complaint about her “tormentor” with the U.S. Equal Employment Opportunity Commission.

“I stopped going to people,” she said. “It was always my fault. It was always explained away.”

She refers to anecdotes from others, including a female economist at the Fed, who allegedly “was asked by male colleagues at lunch if she ‘satisfied’ her husband.”

“I mainly share my experiences here,” Sahm said. “I am NOT special. Many have similar experiences, in some cases worse. I have written documents to back these incidents up. It is awful to have these records in my email inbox, my Twitter, my text messages. Do not tell me, good men are economists too. I do not care. You did not protect the victims. You did not protect me.”

Powell emphasized that the Fed has made it a “very high priority to have as diverse and inclusive an organization as we can,” and that progress has been made.

“Without having had a chance to think about it, read it, understand it, I’ll just say a couple things,” said Powell, who has led the Fed since early 2018. “It’s fair to acknowledge that there’s been a lot of pain and injustice and unfair treatment that women have experienced in the workplace, not just among economists, but among economists and at the Fed.”

“Like every other organization, the Fed could’ve done more and should’ve done more,” he added.

Powell argued that attracting top talent means fostering a diverse workplace where people feel free to speak up and disagree respectfully.

“We’re doing a lot. I’m sure we can do more,” he said.

In a tweet following the press conference, Sahm noted that she worked with Powell since he joined the Fed board in 2012. “He cares,” she said.

Sahm has triggered some backlash by directly criticizing well-known economists, including former Treasury Secretary Larry Summers.

Summers famously suggested in 2005 that part of the reason women are under-represented in top STEM positions is because “in the special case of science and engineering, there are issues of intrinsic aptitude, and particularly of the variability of aptitude, and that those considerations are reinforced by what are in fact lesser factors involving socialization and continuing discrimination.”

“Summers continues to demean women" economists, Sahm alleged. “I had an early career woman come to me recently with an inexcusable interaction with him. Larry, it is not women’s IQ, it’s yours that is the problem.”

This renewed criticism of Summers comes as he is reportedly advising presumed Democratic presidential nominee Joe Biden on economic policy.

Asked to comment on Sahm’s post, an aide to Summers passed along a quote from one of his former PhD students that also cited other female mentees of Summers, including Facebook executive Sheryl Sandberg.

“I read Claudia’s blog with interest, as I think we can all agree there are large problems in the field that need to be addressed,” said Natasha Sarin, now at the University of Pennsylvania. “That said, the picture of Larry she paints could not be further from the truth. Larry is the reason I am an economist — like Claudia, I was told at various stages in my career that I wasn’t talented enough to make it in this field. Larry always told me, in his characteristically blunt way, that that was nonsense.”

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