US opens tech antitrust inquiry with look at threat to news media

In its first hearing about the power held by Google, Facebook, Amazon and Apple, US lawmakers focused on the decline of the news industry. PHOTO: REUTERS

WASHINGTON (NYTIMES) - A United States congressional investigation into the power of big tech companies began on Tuesday (June 11) with bipartisan concern from lawmakers that the government's lax oversight of the industry may be doing more harm than good.

In its first hearing about the power held by Google, Facebook, Amazon and Apple, US lawmakers focused on the decline of the news industry. They said they were troubled that the online digital advertising market, which is dominated by Google and Facebook, had siphoned off too much revenue from news organisations.

"Concentration in the digital advertising market has pushed local journalism to the verge of extinction," said Representative David Cicilline.

The hearing was the start of the House Judiciary Committee's inquiry into possible anti-competitive behaviour by big tech companies, part of a rising wave of federal scrutiny of the industry.

The House committee plans several hearings, depositions and interviews with competitors over the next 18 months. In addition, the Justice Department and the Federal Trade Commission (FTC), the two top antitrust agencies, recently divided antitrust oversight over Apple, Amazon, Facebook and Google.

The close reviews could lead to years of troubles for the companies, through lawsuits or new laws. European regulators have already taken a tough stance against the companies, investigating how they handle user data, police speech and limit competition.

Mr Cicilline, who is leading the Judiciary Committee's investigation, said he would explore a variety of issues. He said the committee would look into whether the dominant social network, Facebook, had harmed consumers with its handling of data, for example. He said it also planned to look into whether Amazon had hurt smaller retailers.

The House investigation will look into whether the Justice Department and FTC have adequately enforced antitrust laws. Mr Cicilline said Facebook's acquisitions of WhatsApp in 2014, for instance, now appeared anti-competitive, even though federal regulators had approved it.

"I have very serious concerns about the FTC's commitment to these issues," Mr Cicilline told reporters after the hearing.

Tuesday's hearing gave publishers a microphone after years of complaining about the big tech platforms. The News Media Alliance, a trade group representing 2,000 news organisations, including The New York Times, has long argued that Facebook and Google have become the biggest online advertising companies at the expense of publishers, which now rely on the platforms to find audiences.

Leaders of the committee have pushed for passage of a Bill that would give news organisations the ability to band together to negotiate greater compensation from online services that distribute their news. Lawmakers of both parties pointed out how some of their local newspapers had shut down in recent years.

"Smaller news organisations don't stand a fair negotiating chance when they try to negotiate deals with the platform giants," said Representative Doug Collins, a co-author of the Bill with Mr Cicilline. "These giants stand as a bottleneck - a classic antitrust problem - between consumers and the producers of news content."

Mr David Pitofsky, the general counsel of News Corp, which owns The Wall Street Journal, said that "the marketplace for news is broken". Online platforms are "free riding" by selling ads tied to News Corp's content without paying to create it, he said. Those ads take money away from publishers' individual sites, Mr Pitofsky said, because advertisers now prefer services that aggregate news.

News Corp supports Mr Cicilline and Mr Collins' Journalism Competition and Preservation Act. The law would exempt the publishers from antitrust rules for four years, protecting them from charges of price collusion.

"We are not losing business to an innovator who has found a better or more efficient way," Mr Pitofsky said.

Mr Cicilline said that 2,900 reporters and other news staff had lost their jobs this year, and that news ad revenue had dropped to US$15.6 billion (S$21.2 billion) in 2017 from US$49 billion in 2006.

Mr Matt Schruers, a vice-president at the Computer and Communications Industry Association, said at the hearing that his tech industry trade group accepted additional scrutiny because of the size of the companies being reviewed by Congress. And he said the industry wanted to encourage good journalism.

But Mr Schruers said giving antitrust exemptions to publishers was risky and could ultimately harm consumers and the economy.

Google, in a statement, said: "We've worked for many years to be a collaborative and supportive technology and advertising partner to the news industry as it works to adapt to the new economics of the Internet." Facebook did not respond to a request for comment.

Lawmakers also heard from Mr David Chavern, the chief executive of the News Media Alliance. He encouraged lawmakers to support the proposed antitrust exemption for publishers.

And Mr Kevin Riley, the editor of The Atlanta Journal-Constitution, testified that if the news industry continued on its current trajectory, many important local stories would not be adequately covered.

"Social media and technology companies have enormous influence on the distribution and availability of news," Mr Riley said in his prepared remarks. "But we should be worried about losing newspapers, the fountainheads within the local news ecosystem."

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