InsideSources

Big Tech lobbying group NetChoice criticized a report from the Wall Street Journal that Democrat and Republican state attorneys general plan to launch an antitrust investigation of Big Tech firms like Amazon, Facebook and Google, citing a Zogby poll that found only 5 percent of Americans think the government should take antitrust enforcement action against Big Tech.

News that state attorneys general plan to investigate Big Tech over potential antitrust violations comes on the heels of June announcements from the Department of Justice (DOJ) and Federal Trade Commission (FTC) to investigate Amazon, Apple and Google over antitrust concerns.

According to the Zogby poll cited by NetChoice, 58 percent of 1,200 respondents said while using a platform like Amazon, Facebook or Google, they’d discovered new small businesses or websites.

“These cases brought by state AGs are weak as these platforms have neither market dominance nor engage in anti-competitive behavior,” said Carl Szabo, Vice President and General Counsel at NetChoice in a statement to InsideSources. “It’s clear that tech markets are highly competitive. Within 18 months of launching, Tik Tok achieved over a billion global downloads, Snapchat maintains a strong standing, Spotify is double the size of Apple music, and Walmart remains the largest seller in the world. State AGs should focus on industries where consumer harm actually exists.”

But when asked which company is more innovative — Comcast or Facebook — 47 percent said Facebook and 36 percent said they weren’t sure, suggesting a lack of understanding of the issues at hand. When asked which company was more innovative — Spotify or Time Warner Cable — 45 percent said they weren’t sure.

The National Association of Attorneys General (NAAG) did not respond to InsideSources’ request for comment, but on June 11, 43 attorneys general led by Texas AG Ken Paxton (a Republican) and Iowa AG Tom Miller (a Democrat) filed comments with the FTC calling for a “renewed focus on consumer privacy and data in antitrust enforcement actions against dominant technology platforms that collect and leverage consumer data.”

“Information about how everyday people spend their lives and their money has become extremely valuable, especially when aggregated into large sets and analyzed and packaged for targeted marketing,” Paxton said in a statement at the time of the filing. “But technology platforms often lack the incentive to provide strong privacy protections for consumers, and their dominant position in user data creates barriers to entry for new competitors. State attorneys general and the FTC can work together to protect consumer privacy and competition for free products with vigorous enforcement of state and federal antitrust laws.”

The comments describe how tech platforms’ use of consumer data has become “the internet’s new currency,” suggesting antitrust law may need an updated view of consumer harm in order to take action against companies like Facebook or Google.

“Platforms’ collection of consumer data creates privacy concerns touching on consumer protection. But the scale and volume of the collection of that data also raises competition concerns,” the AGs state in the filing. “Consumer data has become extremely valuable, especially when aggregated into large sets and analyzed and packaged for targeted marketing (and other uses), which is part of the reason technology platforms have quickly grown into some of the most valuable firms in the world.”

But that’s not their only concern. State AGs worry that the economic clout of dominant companies have created an anticompetitive environment for the tech industry.

“The sheer scale of the data collected by dominant platforms can entrench their dominance by creating barriers to entry for new competitors, both because of reinforcing network effects and market research analytics unavailable to other market participants,” they state in the FTC filing.

This environment is not only toxic for startups, but also large companies.

“Even large companies with significant resources face significant barriers to achieving sufficient scale to compete against an incumbent firm that has achieved a dominant position in user data,” the state AGs said. “Microsoft, for example, failed to successfully launch its mobile phone as a platform, and Google+ failed to draw enough users to become a viable competitor to Facebook.”

A spokesperson for Miller declined to comment for this story.

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Big Tech needs our data to offer the products we love so much — from customized Facebook feeds to improved Google search results to recommending Amazon products we’re likely to want or need. But over the last few years, reporters and regulators have learned that Big Tech companies are really bad at protecting that data.

One tech startup — Duality Technologies, founded in 2016 — admits that Silicon Valley has created a privacy problem, but thinks they could also solve the problem instead of resorting to regulators’ plans of breaking up Big Tech.

Duality’s solution? Homomorphic encryption. And some Big Tech companies are already interested in it.

For co-founder and CTO Kurt Rohloff, figuring out how to balance consumer privacy and tech companies’ need for data to provide better goods and services has always been a dilemma.

For example, using people’s medical data to conduct more research on cancer could get us closer to a cure, he said, but how do you make sure you aren’t compromising or exposing very personal medical data in the process?

“Where we’re starting to push on is to enable analytics more broadly while being computed, which is where some companies have started to go,” Rohloff told InsideSources. “A handful of academics and startups and big tech firms are developing a set of technologies called PETs, or privacy enhancing technologies, to allow people to share data privately and pull analytics without impacting privacy.”

This is where homomorphic encryption comes in. Homomorphic encryption allows a tech company to analyze people’s personal data while it is still encrypted. Hypothetically, this enables a tech company like Google to learn from its user data and improve products and services — like Google search results — without ever actually decrypting and seeing personally identifiable information (PII) like your social security number, or your mother’s maiden name.

Facebook’s recent foray into cryptocurrency technology (with the launch of Libra) means Big Tech could be interested in some of the privacy technologies — like homomorphic encryption — associated with blockchain and cryptocurrencies. (Some cryptocurrencies use homomorphic encryption.)

Just last month, Google rolled out a homomorphic encryption tool for its business partners. According to Google’s blog post accompanying the rollout, “This technology can help advance valuable research in a wide array of fields that require organizations to work together without revealing anything about individuals represented in the data.”

Rohloff calls it a “growth” of end-to-end encrypted messaging.

“Different versions of this technology have been around for a decade plus, it’s only been in the past three years that it’s become very active, and it’s become an area of the largest major companies,” Rohloff said. “The early adopters have been in the regulated data industries, like healthcare and finance, where there are very strong regulatory concerns. But what we’re seeing is that a lot of these liability issues and really embarrassing data breaches, like Cambridge Analytica, have been driving companies not necessarily in data-regulated industries to adopt these PETs to better protect themselves from liability and the privacy of their user base.”

The tech industry may still need strict privacy regulation, but Rohloff thinks PETs “could help in some very serious ways.”

“We’re starting to see this in our work in the financial industries,” he said. “Up until now, if big banks wanted to coordinate to fight financial fraud, they’d basically have to sign some very strong legal agreements and then share data in the clear to build up financial fraud cases. Now what we’re starting to deploy is banks’ ability to encrypt their transaction data so they can run joint analytics with no leakage of sensitive information.”

As tech companies continue to gather more data on internet users every second, software engineer Andreas Poyiatzis said its more important than ever that they address privacy concerns — with homomorphic encryption.

“Fast forward few years from now and imagine this fictional scenario: Facebook can use your chat history to give you a personal intelligent agent that can respond to chats in your messenger on your behalf with the exact same writing style as yours,” Poyiatzis wrote in a blog post. “Also, you can give Amazon all your banking details and roll out specifically crafted shopping/grocery lists (now that acquired Whole Foods) that match your financial status and preferences! A new genome company can use your DNA sequence to give you a detailed list of medicines that would work really well on you.”

“As you can see,” he added, “all of these come at a cost. The cost of giving away your privacy, to access all these services.”

Because homomorphic encryption can allow tech companies to continue to improve products and services while retaining user privacy, Poyiatzis thinks it will be the “cornerstone” of the future of privacy.

“PETs allows folks to have better control of data and less centralization of data clearinghouses and less trusted parties for performing joint analytics on data, which philosophically gets at some of the libertarian aspects of cryptocurrency and blockchain and things like that,” Rohloff said.

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As federal lawmakers continue to look for ways to regulate Big Tech, the industry continues to deny the gravity of popularized problems like privacy and technology addiction.

At a hearing hosted by the U.S. Senate Committee on Commerce, Science and Transportation, Sen. Brian Schatz (D-Hawaii) grilled Google over its alleged use of “persuasive technology.”

Persuasive technology is “the idea that computers, mobile phones, websites, and other technologies could be designed to influence people’s behavior and even attitudes,” according to Nanette Byrnes at MIT Technology Review, who wrote in 2015 that “many companies are using technologies that measure customer behavior to design products that are not just persuasive but specifically aimed at forging new habits.”

In the committee hearing, Sen. John Thune (R-S.D.) said he planned to use the hearing to inform legislation “to require internet platforms to give consumers the option to engage w/the platform without having the experience shaped by algorithms.”

“As online content continues to grow, online companies rely increasingly on artificial intelligence (AI) powered automations to display content to optimize engagement. Unfortunately the use of AI algorithms can have an unintended and possibly even dangerous downside,” Thune said, referencing recent news reports from Bloomberg and The New York Times revealing how YouTube “chased” engagement and clicks rather than protecting users by recommending a video of children playing in a pool to users who had been watching sexually explicit videos.

Senators drilled down on how tech giants who rely on algorithms to curate content negatively impact users and American civic engagement as a whole. As several witnesses explained, because algorithms determine so many tech giants’ decisions to take down or promote content, Big Tech absconds responsibility for negative results — like political polarization or censorship.

“Silicon Valley has a premise, that society would be better–more efficient, smarter, more frictionless–if we eliminate steps of human judgment,” Schatz said. “But computers recommended these awful videos in the first place. Companies are letting these algorithms run wild and are leaving humans to clean up the mess. Algorithms are amoral. They eliminate human judgment as part of their business models. We need them to be more transparent and companies need to be more accountable about the outcomes they produce.”

Tristan Harris, co-founder and executive director of the Center for Humane Technology, told senators this phenomenon is “not happening by accident, it’s happening by design.”

“In the race of attention, companies have to get more of it by becoming more and more effective,” he said. “Companies compete on whose algorithms more accurately predict what will keep users there the longest. Because YouTube wants to maximize watch time, it tilts the entire ant colony of humanity towards crazytown.”

For example, he said, YouTube recommended anorexia videos to teenage girls who watched “diet” videos on the platform.

Maggie Stanphill, director of the Google User Experience at Google, used her testimony to describe Google’s commitment to the wellbeing of its users and repeated the company’s claim that its core values are privacy, transparency, and user control.

“We believe technology should play a helpful, useful role in all people’s lives, and we’re committed to helping everyone strike a balance that feels right for them,” she said. “This is why last year, as a result of extensive research and investigation, we introduced our Digital Wellbeing Initiative: a set of principles that resulted in tools and features to help people find their own sense of balance. Many experts recommend self-awareness and reflection as an essential step in creating a balance with technology.”

Some of the ways this initiative helps Google users is by initiating “Do Not Disturb” and “Wind Down” functions on Android phones (which Apple also provides on iPhones), which help to limit blue light emissions (which can disrupt sleep and damage skin) and phone use so that users can disconnect in a healthy way.

On YouTube, Stanphill said, Google provides opt-in “Take a Break” reminders for those who have been watching videos for extended periods of time.

At a Hoover Institution event in May, tech experts and tech industry members discussed how Google favors its own in-house products, directs users toward the Google experience and tries to keep them there as long as possible because it profits Google by providing the company with more user data to enhance its products and share with advertisers.

Schatz pointed out at the hearing that, because lawmakers only have limited anecdotal and circumstantial evidence about how tech giants use their algorithms, they want more transparency.

When Schatz asked Stanphill if Google uses persuasive technology to keep users using Google products as much as possible, Stanphill said, “We do not use persuasive technology.”

Schatz then asked, “Mr. Harris, is that true?”

Harris said it’s complicated.

“Dark patterns are not core to the whole family of companies, including YouTube,” Stanphill said. “We build our products with privacy, transparency and control for the users, and we build a lifelong relationship with the user, which is primary. That’s our trust.”

To which Schatz replied, “I don’t understand what any of that meant.”

According to Harris, the problem isn’t so much the algorithms themselves as it is the lack of accountability and transparency behind them, which may require regulation.

“The founder of Netscape said software is going to eat the world,” Harris said. “What he meant by that was, software can do everything more efficiently. So we’re going to let it eat up our elections, our health, our transportation, our media…and the problem was, it was eating the world without taking responsibility for it.”

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Maine just passed a new privacy law, but it only applies to internet service providers (ISPs), not the content platforms themselves. Now privacy advocates worry it’s not enough to protect consumers.

“The problem is that the proposed law does not even cover the major internet entities where users spend 99 percent of their time online — namely Google, Facebook, Amazon, Apple, Microsoft, Netflix, or even the Chinese giants Tencent, Alibaba, and Baidu,” American Enterprise Institute (AEI) visiting tech scholar Roslyn Layton wrote for Forbes. “Instead it applies only to internet services providers (ISPs), which represent a small fraction of internet activity.”

The new privacy law requires ISPs to obtain customers’ explicit consent before they repurpose, share or sell customers’ personal data. The language of the law echoes the Obama administration’s Federal Communications Commission’s 2016 ISP privacy rules, which Congress repealed in March 2017.

The most common criticism of the 2016 FCC rules was that they didn’t differentiate between an ISP using sensitive vs. non-sensitive information. The Maine law does make this distinction, specifically banning ISPs from repurposing, sharing or selling sensitive data that can be used to personally identify a customer.

Layton said the law doesn’t make sense because the companies with unfettered access to sensitive data are the edge providers like Google, she argues, not the ISPs.

“Data brokers, online advertisers, health and financial companies — all of them would get a free pass under this proposed legislation for no policy reason anyone can discern,” she wrote.

Natasha Duarte, a policy analyst for the Center for Democracy & Technology (CDT), told InsideSources it is right to question why Maine didn’t include edge providers and other tech companies in this privacy law, but some privacy protections are better than none at all.

“Ideally everyone would have consistent privacy protections,” she said. “It doesn’t necessarily matter who has the information, people want to be protected. CDT certainly supports a federal privacy law that covers both ISPs and all other companies that collect personal information, online and offline.”

The Maine law itself, she said, is “pretty straightforward” and important because so many consumers don’t get to choose an ISP due to a concentrated broadband market. With edge providers and apps, there’s more choice.

“In some cases we may be able to make a choice about what apps we use and what email providers we use, but I don’t want to overstate how much those are our choice and often we don’t have privacy choices among those edge providers, but there are at least some options,” she said. “With ISPs, a lot of people have only one or two high-speed broadband providers in their area. They get access to a lot of very sensitive info, the websites we go to, our location, things like what we can be looking at which can reveal health information and sexual orientation. So it’s very sensitive information that needs to be protected.”

Internet access is also paramount for success in today’s economy, which puts consumers in a tricky position because ISPs require them to share personal data in order to receive internet access.

“We also cannot choose not to have them collect this information in the first place because in order to facilitate access to the internet they have to have access to certain info like our usage, our location, what services we’re using,” Duarte explained. “We also have limited options in terms of obscuring or limiting what info they collect about us. Customers don’t have any real bargaining power to change the terms of the contract but have to pay every month of they like the privacy practices of their ISP or not.”

But because edge providers are some of the prime offenders when it comes to sharing and selling consumers’ personal data, a law targeting ISPs may not really help consumers.

“Maine consumers certainly would be surprised to learn that it does nothing to protect them from search companies selling their browsing history, dating services allowing advertisers to target them based on their relationship history, or smart TVs listening to their conversations,” she wrote. “And they would be especially skeptical of legislative promises to take the issue up and fix the rest of the privacy problem sometime down the road.”

According to a press release from Maine Gov. Janet Mills, the law will take effect on July 1, 2020.

“I think the main takeaway is, asking people for permission before you repurpose and share their data is the bare minimum that people deserve from ISPs that they rely on and pay every month,” Duarte said. “We would like to see more restrictions on how data is used when it’s collected,  but this is a good step forward in terms of protecting people.”

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The Department of Justice plans to open an antitrust investigation into Apple and Google while the Federal Trade Commission plans to investigate Amazon, according to multiple news reports. The House Judiciary committee also announced it will open a bipartisan investigation into whether Big Tech suppresses competition.

“The open internet has delivered enormous benefits to Americans, including a surge of economic opportunity, massive investment, and new pathways for education online,” Judiciary Chairman Jerrold Nadler (D-N.Y.) said in a statement. “But there is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content, and communications.”

The FTC investigated Google for antitrust violations in 2013 and, despite releasing a 160-page report finding that Google uses anti-competitive tactics that harm consumers and the internet ecosystem, did not take action against the company.

2020 presidential contender Elizabeth Warren and President Donald Trump both spoke out against Apple, Google and other Big Tech companies over the past year, with Warren calling for breaking up Big Tech and Trump threatening antitrust investigations.

But Big Tech lobbying groups and some economists insist that companies like Amazon, Apple, Google and Facebook don’t violate antitrust law based on the current understanding of consumer welfare.

(Under the current understanding of consumer welfare, economists assume that if monetary prices for goods and services are falling, then that can only be a good thing — even if falling prices are accompanied by market consolidation and fewer choices for consumers. Some economists also say consumers pay for Big Tech services with their personal data, which has led to privacy violations and the current debate over writing a federal privacy law.)

“The Justice Department’s investigation of Google will come to the same conclusion as the FTC’s did in 2013 — that there is no antitrust case,” said Carl Szabo, vice president and general counsel for Big Tech lobbying group NetChoice, of which Google and Facebook are members. “It’s illogical that the DOJ is investigating competitors in the same market for monopoly behavior. Amazon, Apple and Google all compete with each other in a vibrant and competitive marketplace,” he said in a statement to InsideSources.

On Apple’s website, the company recently set up a page listing ways its App Store encourages competition among app developers and benefits consumers.

“We believe competition makes everything better and results in the best apps for our customers,” Apple said, almost as if speaking directly to federal lawmakers and regulators. “We also care about quality over quantity, and trust over transactions. That’s why, even though other stores have more users and more app downloads, the App Store earns more money for developers. Our users trust Apple — and that trust is critical to how we operate a fair, competitive store for developer app distribution.”

Aram Sinnreich, chair of communication studies at American University, said an antitrust investigation could jolt Big Tech into self-regulating and halting anticompetitive practices.

“Antitrust scrutiny on its own if nothing else is a good red flag to encourage companies to act more competitively and divest themselves of businesses that might invite regulatory action,” Sinnreich told InsideSources. “I think antitrust by the FTC is a good idea, that doesn’t necessarily mean the government will decide to break the company up.”

Despite Apple’s protests to the contrary, Sinnreich believes Apple does behave anticompetitively in its App Store because its business model encourages it — Apple works hard to dissuade any Apple customer from switching brands.

“I can’t get a new brand phone unless I find a place to store all the 15,000 photos I’ve taken over the years [with an iPhone],” Sinnreich said. “Their role in streaming distribution, combine that with their role in facial recognition and biometrics, it begins to get really problematic.”

Apple’s not alone in the scrutiny: tech experts and economists say the same about Amazon and Google.

“[Big Tech companies] do behave anticompetitively and are not concerned with maintaining a robust landscape of software providers,” Sinnreich said. “They use that landscape for free market research and then they adopt whatever is popular and undercut the market for the third parties that developed the technology in the first place.”

But not everyone agrees Big Tech should be broken up, even those who criticize Big Tech’s role in the marketplace. At a tech event hosted by the Hoover Institution in May, experts on both the right and the left discussed how we may not have a proper regulatory framework to deal with Big Tech because the internet evolved so rapidly.

President Donald Trump just announced 5 percent tariffs on Mexican imports in an effort to curb Mexican immigration to the U.S., and China just doubled its tariffs on U.S. goods to 25 percent, much to the dismay of the tech sector.

Trade groups and lobbyists say the trade wars will dramatically weaken the U.S. tech industry.

“Mexico is not only one of our top trading partners, it’s the number one export market for American consumer technology sector products – $41 billion worth of U.S. consumer tech sector goods in 2017, almost double that of our next highest export market,” the Consumer Technology Association said in a May 31 statement. “If Mexico reciprocates with tariffs of its own, our country’s employers and workers will end up paying twice over for the administration’s misguided trade policies.”

Information Technology Industry Council President Jason Oxman also condemned the tariffs in a statement, calling them “not an appropriate tool to address serious immigration challenges.”

“Their use in this context undermines the high-standard, market-opening trade rules that allow the United States to compete globally and lead in innovation, and if enacted, would threaten economic growth,” he said.

But Big Tech companies like Apple, Google and Microsoft and consumer electronics retailers like Amazon, Best Buy, Target, Walmart and others are actually in pretty good shape to withstand external shocks like tariffs.

RapidRatings CEO James Gellert told InsideSources that given the financial health of these companies (rated by RapidRatings), the trade war shouldn’t impact their outlook too much.

RapidRatings rates public companies’ financial health on a scale of 0-100. Companies closer to 100 are more financially sound, while companies closer to zero or below 60 are at greater risk to default.

“If you go back to the core concept that financial health ratings are indicative of companies’ resilience and positioning, then a company like Best Buy is in pretty good shape,” Gellert told InsideSources. “Alphabet and Apple are all in relatively good shape. The core health is the other thing to look at, particularly a shock from a trade war when you don’t know how long it will last.”

The financial health of retailers like Amazon, Best Buy and Target hovers around a 71, which means they are well-positioned to withstand a trade war. That doesn’t mean tariffs won’t do some damage, but it does mean the financially healthier companies could siphon business away from competitors who raise prices in order to offset the tariff costs.

“They have to absorb it and it will impact their margins and EPS,” Gellert said. “So without question tariffs will hurt these companies from a stock perspective to some degree and weaken the company, but you’d rather be looking at a company that’s really strong.”

Some analysts worry Apple will need to dramatically raise prices of iPhones in order to offset tariff costs, but the concern may be hyperbolic given Apple’s financial condition.

Because of the back-and-forth tariffs, tech suppliers from other countries, particularly in Asia and South America, are increasingly attractive to U.S. tech companies and retailers. Ironically, a few Chinese tech suppliers recently set up shop in Mexico according to Latin America Reports, hoping to avoid the effects of the China-U.S. trade war.

But Gellert doesn’t think the Mexico tariffs will have quite the same impact as the China tariffs — furthermore, it’s not the big companies like Apple and Microsoft or the retailers like Best Buy and Target that will suffer, it’s the smaller companies farther down the supply chain.

The only Big Tech company that might really suffer is Qualcomm, which RapidRatings rates at a 59. Ultimately it’s not the tariffs that really damage company, Gellert said, because healthy companies are able to withstand those kinds of external shocks.

“When you look at a multi-year trend, you have to realize there are things happening inside of the company that are weakening it, and that needs to be assessed when it’s under stress,” Gellert said.

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2020 presidential contender Elizabeth Warren put up a billboard in San Francisco yesterday calling for the break up of Big Tech and urging voters to join her antitrust crusade. But a Big Tech trade group representing e-commerce businesses — NetChoice — called Warren’s billboard a “populist rant” without substance.

The message on Warren’s billboard is simple and straightforward: “Break Up Big Tech,” with a photo of the Massachusetts senator and a text number to connect to her campaign.  As if following Warren’s lead, advocacy group Freedom from Facebook, an offshoot of the Open Markets Institute, flew a banner reading “Break up Facebook! Save Silicon Valley!” over Facebook’s shareholders meeting in Menlo Park, California on Thursday.

“I think what we’re starting to see is weaponization of antitrust law,” Carl Szabo, vice president and general counsel for NetChoice, told InsideSources. “We have over 100 years of antitrust law and enforcement and it’s always done on an objective base. You look at the market and competition and anticompetitive activities and then you do your conclusion. What we’re hearing from people like Elizabeth Warren is they want to move to a subjective test: ‘I don’t like that business, therefore it should be broken up.’ What’s ironic is in their efforts to allegedly protect consumers, many of the calls we’ve heard to break up tech would harm [consumers].”

Breaking up Big Tech divides economists and tech experts. Some dismiss antitrust arguments like Warren’s as unsubstantial, but others say the tech sector is evolving too quickly for the old standards of consumer welfare and antitrust law to keep up.

At an event hosted by the Hoover Institution on May 2, Sen. Josh Hawley (R-Mo.) joined economists and tech experts in slamming tech giants like Facebook and Google for systemically buying up their competition, manipulating regulatory policy to benefit their companies, and claiming to protect users’ personal data while selling and sharing it with third-party advertisers to boost the bottom line.

“The biggest monopolies are in the technology sector,” Open Markets Institute Deputy Director Sarah Miller told InsideSources. “We’ve been advocating for the FTC to break up Facebook since the Cambridge Analytica scandal broke, putting some focus on what is now broadly seen as a mistaken decision to allow Facebook to acquire Instagram and WhatsApp among other smaller competitors and companies.”

Lawmakers and economists discussed separating Instagram and WhatsApp from Facebook, but as one economist said, trying to undo a merger is a bit like trying to “unscramble an egg.” But that isn’t stopping advocacy groups from drilling their point home.

“This year we wanted to emphasize that Facebook’s monopoly power is fundamentally warping Silicon Valley and its ability to be a [powerhouse] for innovation,” Miller said. “We’re seeing more innovators and entrepreneurs in the tech sector — most recently Chris Hughes — saying Facebook is a monopoly and really is destroying Silicon Valley as we know it.”

Szabo says proof that competition is robust within the tech industry is the fact that consumers prices continue to fall. Two-day delivery was “unfathomable a decade ago,” he said.  Plus, Amazon is only the third-largest retailer and half its e-commerce revenue comes from third-party sellers, so how could it be a “monopoly”?

Some argue that while consumers don’t pay to use Facebook and Google with a monetary price, they do pay too high a price with their personal data. Szabo thinks consumers should just use a different service.

“If you’re using a social network, there’s a multitude of different choices,” Szabo told InsideSources. “There’s Facebook, Twitter, Nextdoor, Reddit. If you don’t want to use one search engine, there are many other search engines. There’s Google, Bing, Duck Duck Go, Yahoo. The market is robust with alternatives and that’s really what empowers consumers.”

But just because there may be other choices doesn’t mean one company should be allowed to get away with harmful or anticompetitive practices, Miller points out.

“Big Tech is a version of Big Tobacco, they’re not necessarily out to make the world a more beautiful place, they’re out to make money,” she said.

Progressives were once very friendly with Big Tech — the Obama administration fostered a cozy relationship with Silicon Valley, resulting in a revolving door between ex-Obama administration officials and Big Tech. Silicon Valley still gives hundreds of thousands of dollars to Democrats (more than Republicans) every year — except Elizabeth Warren.

“Sen. Warren (D-Mass.) has a track record of taking on corporate power, which implies follow-through,” Miller said. “She first talked about tech monopolies back in 2016, she was the first one to talk about it in 2016 and the first person to set forward a detailed plan for restructuring the tech sector. She’s been the pace-setter. Her track record suggests she’s serious about it.”

And that’s what scares Big Tech: other Democratic candidates like Sen. Kamala Harris (D-Calif.) and former vice president and senator Joe Biden skirt around the idea of breaking up Big Tech, but Warren said exactly what she’s going to do and her track record with Wall Street following the 2008 financial crisis suggests she won’t back down.

“It does concern us” going into the 2020 race, Szabo said, because he doesn’t think there’s a legitimate antitrust case against Big Tech in the first place. From Big Tech’s perspective, it’s a smear campaign.

“Weaponization of antitrust is essentially handing an enormous amount of political power to whomever controls the White House to attack businesses with whom they disagree,” Szabo said. “Handing over such power to the government should concern all Americans regardless of political affiliation.”

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Some Republicans — like senators Marsha Blackburn (R-Tenn.), Josh Hawley (R-Mo.) and Ted Cruz (R-Texas) — are outspoken over problems they see with Big Tech, but others aren’t so sure using antitrust enforcement against Facebook and Google is a good idea.

“Google is bigger now than Standard Oil was when it was broken up,” Cruz said at a Senate Judiciary Committee hearing Tuesday.

Senators Lindsey Graham (R-S.C.) and Mike Lee (R-Utah), meanwhile, pushed back on proposals to break up Silicon Valley heavyweights.

In response to multiple witnesses describing Big Tech’s anticompetitive practices, Graham said, “Well my job is to make sure we have a viable industry after all this is over.”

Witness Brian O’Kelley, founder and former CEO of AppNexus (an advertising platform bought by AT&T), told Graham and the committee members that Big Tech companies have gotten really good at fooling consumers into thinking they have a choice to opt out of sharing their personal information when using an online service.

“Everyone has become pretty used to clicking ‘yes’ [to Terms and Conditions], and I worry that’s the illusion of choice, but not real choice,” he said.

But Graham didn’t buy O’Kelley’s argument.

“You agree that no choice is bad?” he asked.

“If you gave me the choice of being robbed when I walk out of here today, I’m going to say no,” O’Kelley explained. “Why don’t we make robbery illegal?”

To which Graham replied: “Whatever.”

Lee suggested maybe privacy advocates exaggerate privacy concerns and abuses by arguing that private companies misusing data isn’t as bad as governments misusing data. He also pointed out that companies like Google and Facebook created products that consumers want — so why should regulators break them up?

“In the absence of anticompetitive conduct, is there anything about that that amounts to an antitrust violation?” he asked.

One witness, Freshfields Bruckhaus Deringer LLP Counsel Jan Rybnicek, thinks Big Tech isn’t harming consumers — and that breaking up Big Tech will harm them.

“Not only is this proposal putting the cart before the horse as no clear market failure has yet been identified, but the solution itself is unworkable,” he said. “The proposal may sound simple in theory but it is anything but that in practice. For one, it is not clear exactly what these companies would be broken up into and how they would operate afterwards. …In recent years there have been calls to dramatically reshape the antitrust laws to address what critics perceive to be an under-enforcement problem, including with respect to digital platforms and digital advertising.”

But Yale University’s Professor of Economics Fiona Scott Morton said there is an overwhelming amount of economic research and evidence that build a strong antitrust case against Big Tech companies like Amazon, Google and Facebook.

The problem isn’t how big the tech companies are, she said, but how they’ve suppressed and snuffed out competition in the advertising market to establish dominance and limit consumer choice.

“If there were more competition in the marketplace, we wouldn’t be so concerned about this problem,” she said.

O’Kelley told the committee that over the past 20 years, the biggest tech companies (like Google and Facebook) have used anticompetitive practices and manipulated regulatory policies to widen profit margins.

O’Kelley and Morton both reminded the committee that consumer harms, like privacy abuses, are just a symptom of anticompetitive behavior. Antitrust isn’t about “bigness,” and it isn’t about breaking up companies just because they’ve harmed consumers.

“The biggest loophole right now is advertising-supported companies seem to be free to consumers, so if we only look at the consumer price, you can do any advertising-based merger [or acquisition],” O’Kelley said, “and if you’re Facebook and Google, you can acquire hundreds of companies and see no antitrust enforcement.”

Hawley said it seems more online startups put money towards advertising dollars to work with Google’s and Facebook’s algorithms rather than toward the products they’re developing, which suggests Google and Facebook control the ad market.

According to O’Kelley, Google’s prioritization of its own in-house products and the ad market forced him to sell AppNexus to AT&T.

“They had so many different pieces to compete, that we could not compete,” he said. “Waiting for regulators to catch up, I had to sell my company. We have to figure out how to keep different businesses separate, Google can’t share data across them. YouTube should be open to any advertising platform. There search data should be available to any platform or no platform. I think that’s a very clear way to break them up or force them to act fairly.”

Despite Graham’s and Lee’s skepticism towards antitrust, enough Republicans are on board with antitrust that they might help push an update to antitrust law — like the one introduced by Sen. Amy Klobuchar (D-Minn.).

Sen. Richard Blumenthal (D-Conn.) said he thinks regulators and lawmakers should deal with Big Tech in two ways: first through antitrust enforcement to address the underlying anti-competitive behaviors, and secondly through a federal privacy law to deal with some of the effects of those anticompetitive behaviors.

“It’s not against the law to be big, it’s against the law to use that power in a predatory way, which is what they have done, by buying out innovators, suffocating competition, by controlling the ecosystem,” he said at Tuesday’s hearing. “We need both antitrust enforcement and new privacy protection. We need them both. I think antitrust enforcement has an enormously important effect, I saw it myself in Microsoft litigation that I was instrumental in bringing. I think the same is true here.”

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Senators Mark Warner (D-Va.) and Elizabeth Warren (D-Mass.) have reintroduced legislation to force credit reporting agencies (CRAs) to pay a baseline $100 penalty for every piece of consumers’ personal data they compromise.

The bill is a direct response to the Equifax data breach. As the senators noted in the press release, under this bill, “Equifax would have had to pay at least a $1.5 billion penalty for their failure to protect Americans’ personal information.”

The bill, the Data Breach Prevention and Compensation Act, would also establish a cybersecurity office at the Federal Trade Commission (FTC) “tasked with annual inspections and supervision of cybersecurity at CRAs.”

The stark penalties and regular reviews could incentivize financial services companies to invest in good cybersecurity and avoide breaches of their users’ personal information. Cybersecurity is a growing problem in several industries as companies digitize, collecting ever-increasing amounts of data on their users and customers, and then storing that data in the cloud, which many experts fear is too easily compromised.

Warner and Warren introduced the bill right before the Senate Banking, Housing and Urban Affairs committee hearing on privacy and data collection on Tuesday, where members of the committee slammed financial services and social media companies alike for playing fast and loose with consumer data.

“Equifax put 150 million Americans’ info out there, they took a small dip in the stock market, and the fact that they haven’t paid a penalty or a fine is outrageous,” Warner said at the hearing.

Maciej Ceglowski, founder of Pinboard, a web service that allows you to organize and keep track of your bookmarked webpages, told senators at the hearing that tech companies across financial services and social media industries need regulation because they’ve broken consumers’ and regulators’ trust.

“As a small businessman in a big industry, I fear we are losing the trust of our users,” he said. “People are being asked to make irrecoverable decisions about their online lives over and over again. The pattern that I’ve seen in my industry is one of deceit. We’re not honest about what we collect, what we use it for, and we are ashamed, frankly, of our business models. You’ll never get someone from Google or Facebook to speak honestly about what they’re doing with your data.”

U.S. regulation doesn’t incentivize businesses to innovate in a consumer-friendly way, he said, which only feeds the problem.

“They don’t like regulation and see a way around it,” he said. “We don’t like banking regulation, so we invent cryptocurrency. We don’t like anti-discrimination regulation, so we use machine learning and blame the algorithm.”

Even the European Union’s GDPR, often heralded as a consumer-friendly privacy regulation, may not be truly consumer friendly. Silicon Valley wants GDPR-like rules in the U.S., but Ceglowski said that might not be the best route for U.S. consumers.

GDPR is “a weapon by those who don’t want their data practices examined,” he said, because websites and tech companies “bludgeon” consumers with hundreds of notifications with opt-in requirements to track or collect potentially sensitive data. When they’re bombarded with all those notifications, he said, they’re not going to read them, which means tech companies still control the process and consumers still can’t really avoid tracking or data collection.

But Warner and Warren’s bill could force tech companies to change how they handle consumers’ data.

Lindsay Gorman, an adjunct fellow with the Center for Strategic and International Studies (CSIS) and CEO of Politech Advisory, previously worked on Warner’s tech policy staff and said this bill is “definitely a test case for other industries.”

“I think it’s pretty good, it’s tackling one problem,” Gorman told InsideSources. “Legislation that shores up cybersecurity when there may not be a compelling business case for leaks and hacks to be reported and no business interest to doing that, we really need an incentive. There’s also a collection action problem. Our cybersecurity is only as strong as the individual players, like Equifax. There are massive vulnerabilities, in healthcare, the automotive sector. I think this is one way of trying to incentivize investment in cybersecurity that might not be at the top of a company’s priority list.”

As industries like financial services, healthcare and auto continue to digitize, she said, they’re not necessarily thinking about cybersecurity or protecting consumers’ data. This bill incentivizes investment, which is good not only for the cybersecurity industry, but for the companies and consumers they serve.

“It’s not because [some companies] are doing anything wrong in the present, but because it hasn’t really been part of the threat model,” Gorman said. “Hospitals care deeply about protecting private medical data, but when you have 23andMe and DNA companies storing ostensibly personal information, a lot of them are startups. Have they invested in cybersecurity and the resources they need? I think that’s a bit open.”

The bill also shows another side of how Warren, a 2020 presidential candidate, may address tech-related issues if she wins the White House. Warren already said she wants to use antitrust law to break up Big Tech, but this bill shows Silicon Valley isn’t the only industry she plans to rebuke and rein in if she perceives harm to consumers.

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