[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
ONLINE PLATFORMS AND MARKET POWER,
PART 1: THE FREE AND DIVERSE PRESS
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HEARING
BEFORE THE
SUBCOMMITTEE ON ANTITRUST,
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JUNE 11, 2019
__________
Serial No. 116-25
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Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available http://judiciary.house.gov or www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
39-839 WASHINGTON : 2020
COMMITTEE ON THE JUDICIARY
JERROLD NADLER, New York, Chairman
ZOE LOFGREN, California DOUG COLLINS, Georgia,
SHEILA JACKSON LEE, Texas Ranking Member
STEVE COHEN, Tennessee F. JAMES SENSENBRENNER, Jr.,
HENRY C. ``HANK'' JOHNSON, Jr., Wisconsin
Georgia STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida LOUIE GOHMERT, Texas
KAREN BASS, California JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana KEN BUCK, Colorado
HAKEEM S. JEFFRIES, New York JOHN RATCLIFFE, Texas
DAVID N. CICILLINE, Rhode Island MARTHA ROBY, Alabama
ERIC SWALWELL, California MATT GAETZ, Florida
TED LIEU, California MIKE JOHNSON, Louisiana
JAMIE RASKIN, Maryland ANDY BIGGS, Arizona
PRAMILA JAYAPAL, Washington TOM McCLINTOCK, California
VAL BUTLER DEMINGS, Florida DEBBIE LESKO, Arizona
J. LUIS CORREA, California GUY RESCHENTHALER, Pennsylvania
MARY GAY SCANLON, Pennsylvania, BEN CLINE, Virginia
Vice-Chair KELLY ARMSTRONG, North Dakota
SYLVIA R. GARCIA, Texas W. GREGORY STEUBE, Florida
JOE NEGUSE, Colorado
LUCY McBATH, Georgia
GREG STANTON, Arizona
MADELEINE DEAN, Pennsylvania
DEBBIE MUCARSEL-POWELL, Florida
VERONICA ESCOBAR, Texas
Perry Apelbaum, Majority Staff Director & Chief Counsel
Brendan Belair, Minority Staff Director
------
SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND
ADMINISTRATIVE LAW
DAVID N. CICILLINE, Rhode Island, Chair
JOE NEGUSE, Colorado, Vice-Chair
HENRY C. ``HANK'' JOHNSON, Jr., F. JAMES SENSENBRENNER, Jr.,
Georgia Wisconsin, Ranking Member
JAMIE RASKIN, Maryland KEN BUCK, Colorado
PRAMILA JAYAPAL, Washington MATT GAETZ, Florida
VAL BUTLER DEMINGS, Florida KELLY ARMSTRONG, North Dakota
MARY GAY SCANLON, Pennsylvania W. GREGORY STEUBE, Florida
LUCY McBATH, Georgia
Slade Bond, Chief Counsel
Daniel Flores, Minority Counsel
C O N T E N T S
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JUNE 11, 2019
OPENING STATEMENTS
Page
The Honorable David Cicilline, Chairman, Subcommittee on
Antitrust, Commercial and Administrative Law................... 1
The Honorable Kelly Armstrong, Member, Subcommittee on Antitrust,
Commercial and Administrative Law.............................. 4
The Honorable Jerrold Nadler, Chairman, Committee on the
Judiciary...................................................... 10
The Honorable Doug Collins, Ranking Member, Committee on the
Judiciary...................................................... 11
WITNESSES
David Chavern, President, News Media Alliance
Oral Testimony............................................... 15
Prepared Testimony........................................... 18
Gene Kimmelman, President, Public Knowledge
Oral Testimony............................................... 24
Prepared Testimony........................................... 26
Sally Hubbard, Director of Enforcement Strategy, Open Markets
Institute
Oral Testimony............................................... 35
Prepared Testimony........................................... 37
Matthew Schruers, Vice President of Law and Policy, Computer and
Communications Industry Association
Oral Testimony............................................... 56
Prepared Testimony........................................... 58
David Pitofsky, General Counsel, News Corp
Oral Testimony............................................... 69
Prepared Testimony........................................... 71
Kevin Riley, Editor, Atlanta Journal Constitution
Oral Testimony............................................... 79
Prepared Testimony........................................... 81
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
A statement for the record by Ranking Member Sensenbrenner
submitted by the Honorable Kelly Armstrong, Member,
Subcommittee on Antitrust, Commercial and Administrative Law... 6
A statement for the record by Laura Basset and John Stanton
submitted by The Honorable David Cicilline, Chairman,
Subcommittee on Antitrust, Commercial and Administrative Law... 107
A letter for the record by the Electronic Privacy Information
Center from The Honorable David Cicilline, Chairman,
Subcommittee on Antitrust, Commercial and Administrative Law... 111
APPENDIX
A letter for the record by Consumer Reports from The Honorable
David Cicilline, Chairman, Subcommittee on Antitrust,
Commercial, and Administrative Law............................. 118
Supplementary Testimony by Gene Kimmelman, University of
Chicago's George J. Stigler Center Report on Digital Platforms
from The Honorable David Cicilline, Chairman, Subcommittee on
Antitrust, Commercial, and Administrative Law.................. 120
ONLINE PLATFORMS AND MARKET POWER, PART 1: THE FREE AND DIVERSE PRESS
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TUESDAY, JUNE 11, 2019
House of Representatives
Subcommittee on Antitrust, Commercial and
Administrative Law
Committee on the Judiciary
Washington, DC.
The subcommittee met, pursuant to call, at 2:37 p.m., in
Room 2141, Rayburn House Office Building, Hon. David Cicilline
[chairman of the subcommittee] presiding.
Present: Representatives Cicilline, Nadler, Johnson,
Raskin, Jayapal, Demings, Scanlon, Neguse, McBath, Collins,
Gaetz, Armstrong, and Steube.
Also Present: Representative Jackson Lee.
Staff Present: David Greengrass, Senior Counsel; John Doty,
Senior Advisor; Madeline Strasser, Chief Clerk; Moh Sharma,
Member Services and Outreach Advisor; Amanda Lewis, Counsel;
Joseph Van Wye, Professional Staff Member; Lina Khan, Counsel;
Slade Bond, Chief Counsel; Daniel Flores, Minority Chief
Counsel; and Andrea Woodard, Minority Clerk.
Mr. Cicilline. The committee will come to order.
The chair is authorized to declare recesses of the
committee at any time.
We welcome everyone to our first hearing on Online
Platforms and Market Power Focusing on the Free and Diverse
Press.
I now recognize myself for an opening statement.
In recent years, there has been a cascade of competition
problems on the Internet. Concentration in the digital
advertising market has pushed local journalism to the verge of
extinction. The combination of predatory acquisitions, a
growing innovation kill zone, and high network effects and
switching costs appear to have undermined entrepreneurship and
startup rates.
And the sheer dominance of some platforms has resulted in
worse products and significantly less choice leaving people
without a competitive alternative to services that harvest
their data, manipulate their behavior, and monetize their
attention.
In response to these trends, the committee announced last
week that we will conduct a bipartisan investigation into
competition in the online marketplace. The purpose of this
investigation is to document anticompetitive conduct online,
examine whether dominant firms are engaging in anticompetitive
conduct, and assess whether our competition system and current
enforcement levels are adequate to address these problems.
Over the coming months, we will conduct a top-to-bottom
review of online markets through a series of hearings on these
topics, request information that is relevant to the
investigation, and engage in a series of discussions with key
stakeholders and policy experts.
This is the first significant antitrust investigation
undertaken by Congress in decades. In the past, these
investigations, which included studies of monopoly power in the
airline industry, banking, oil and Ma Bell led Congress to
consider whether it needed to make changes to our laws and
agencies. I strongly believe that this investigation is long
overdue.
This subcommittee has a constitutional responsibility to
conduct oversight of our antitrust laws and competition system
to ensure that they are properly working. Congress, not the
courts, agencies, or private companies, enacted the antitrust
laws. And Congress must be responsible for determining whether
they are equipped for the competition problems of our modern
economy.
Today's hearing is the first step in this process for
examining these trends. The free and diverse press is the
backbone of our vibrant democracy. As Justice Louis Brandeis
wrote in 1927, those who want our independence believe that
public discussion is a political duty, that the greatest threat
to freedom is an uninformed citizenry and that the freedom of
thought and speech are indispensable to the discovery and
spread of political truth.
But over the past decade, the news industry has been in a
state of the economic free fall. From 2006 to 2017, advertising
revenue has fallen from $49 billion to $15.6 billion resulting
in mass layoffs of newspapers--mass layoffs or newspapers
folding altogether. This year alone, roughly 2900 reporters and
other news staff have already lost their jobs.
These massive cuts are happening to traditional news
companies and online news sources alike. For example, earlier
this year, The Cleveland Plain Dealer announced another round
of layoffs due to advertising losses reducing its staff by 80
percent from employment levels just 7 years ago. BuzzFeed and
the Huffington Post have also announced significant layoffs.
These are online publishers that have never relied on revenue
from classified sections or subscriptions and are designed to
appeal to readers on social media sites and mobile devices.
This raises a critical question. If online news publishers
can't survive, then who can? During this same period, online
platforms that are gateways to news online have operated with
virtual immunity from the antitrust laws. Since 2007, Google
has acquired several of its competitors in the online
advertising market resulting in significant concentration and a
complete lack of transparency in this market.
And since 2011, another dominant online platform, Facebook,
has acquired two of its rivals, Instagram and WhatsApp, in an
effort to corner the market for social media services and
advertising on these services. Facebook now controls a user
base of 2.7 billion people worldwide, the largest
communications platform in human history. It soon plans to
combine its products into a single platform, a move critics
have suggested Facebook is making to thwart antitrust
enforcement.
As Australia's competition authority noted in its
preliminary report on digital platforms, both Google and
Facebook have substantial market power in a number of markets
that is unlikely to erode over time through new competitive
threats. There have also been numerous reports of these
platforms engaging in anticompetitive conduct such as favoring
their own products or discriminating against rivals that has
gone unchecked by Congress and unchallenged by antitrust
enforcers in the United States.
These trends strongly suggest that the decline of the new
industry is not the inevitable result of the arrival of the
Internet, but is instead a direct consequence of enforcement
choices that have created a market structure where a small
number of platforms are capturing the value created by
journalists and publishers.
This has affected news publishers in two key ways. First,
news publishers rely on Google and Facebook for the vast
majority of traffic online. Even minor changes to the
platform's algorithms can have significant effects on the news
industry overall.
Furthermore, as a result of this immense concentration of
economic power, news publishers, and local news in particular
have little bargaining power with the online platforms
exacerbating the economic crisis for trustworthy news.
Second, these platforms have a dominant position in the
advertising market. Last year, Facebook and Google amassed more
than $60 billion from online advertising, the majority of all
online ad revenue, while controlling 90 percent of the growth
in this market. As David Chavern, the president of the News
Media Alliance, will testify today, this dynamic has resulted
in economic catastrophe for news publishers forcing them to cut
back on their investments and quality journalism.
In response, I have introduced the Journalism Competition
and Preservation Act with Ranking Member Collins to give news
publishers an even playing field to collectively negotiate with
dominant platforms to improve the quality, accuracy,
attribution, and interoperability of news online.
While I do not view this legislation as a substitute for
more meaningful competition online or antitrust scrutiny, it is
clear that we must do something in the short-term to save
trustworthy journalism before it is lost forever. This bill is
a life support measure, not the remedy for long-term health.
Whether it is an online publisher or a local newspaper, we
cannot have a democracy without a free and diverse press. Our
country will not survive if we do not have shared facts, if
corruption is not exposed and rooted out at all levels of
government, and if power is not held to account. This is the
very reason the press is called the fourth estate.
I view today's hearing as an opportunity to continue the
conversation on how to address this crisis. Both I and the
ranking member are open to exploring ways to strengthen the
Journalism Competition and Preservation Act. My hope is that
today's hearing will serve as the starting point in this
discussion.
I thank our panel of extraordinary experts for
participating in today's hearing, and I look forward to hearing
your testimony.
At this time, I yield to Mr. Armstrong for his opening
statement.
Mr. Armstrong. I don't know where the button is over here.
So, no, I appreciate that. And I--at this time, I would ask
unanimous consent to enter Congressman Sensenbrenner's
statement into the record.
Mr. Cicilline. Without objection, so ordered.
[The statement of Mr. Sensenbrenner follows:]
MR. ARMSTRONG FOR THE RECORD
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Mr. Armstrong. And the best thing I can do for all of you
is give you as much time as possible. So with that, I will
yield.
Mr. Cicilline. I thank the gentleman.
The chair now recognizes the chairman of the full
committee, the gentleman from New York, Mr. Nadler, for his
opening statement.
Mr. Nadler. Thank you, Mr. Chairman, for holding today's
hearing.
And before I deliver my statement, let me apologize. I am
going to have to leave afterwards. We have a slight resolution
on the floor I have to deal with.
Over the course of the last 200 years, Congress has
routinely passed laws to protect and advance a free and diverse
press. Whenever new technologies have transformed how Americans
produce and share news, be it the telegraph, the radio, the
telephone, or broadcast television, Congress has sought to
ensure that these new markets were structured to facilitate the
free flow of information and to protect the independence and
financial viability of the press.
Today as the Internet becomes the dominant platform for
accessing news and as this platform grows more and more
concentrated in the hands of just two major companies, the news
media once again faces serious threats. And congressional
action, once again, may be required.
As avenues for accessing news have narrowed in recent
years, advertising revenue, which is the primary means of
support for most news publishers, has steadily declined as
well. And as revenue has fallen, so too has the number of
journalists whose work can be supported by news publications.
Local news outlets have been the most severely affected by
this trend, with nearly 2,000 local news publishers ceasing
operations since 2007. In fact, the majority of counties in the
United States no longer have a publisher of local news at all.
Hundreds of other publishers have been forced to consolidate or
shrink their operations.
This journalism crisis is also a democracy crisis. As
sources of trustworthy news disappear, American civic life
suffers. The majority of local newspapers and television
stations no longer even assign a reporter to cover State and
local government matters.
With a less informed citizenry, communities without quality
local news generally see lower rates of voter turnout. And
cities where newspapers shut down have even seen their
borrowing costs rise suggesting, according to one study, that
diminished transparency may enable governments to engage in
riskier and more inefficient or perhaps more corrupt financing
arrangements.
While there are a number of causes of this multi decade
decline in the news industry, including reduced print
circulation and reduced revenue from classified advertisements,
one of the major concerns that has emerged in recent years is
the power of a small number of gatekeepers over the news and
information that citizens see.
Today, the vast majority of Americans consume their news
online. And two online platforms have immense control over how
Americans access their news sources. A single algorithm change
by one of these private corporations can entirely distort what
information the public shares and consumes and what revenue the
publisher receives.
Moreover, these same platforms dominate the online
advertising market, and they account for nearly all of the
growth in this market in recent years. No single factor has led
to this immense concentration of control, but it is incumbent
on Congress to understand the sources of this problem and to
address it urgently.
The American tradition has long recognized that preserving
an open marketplace of ideas is vital to safeguarding the 1st
Amendment and vital to a Democratic form of government. The
antitrust and antimonopoly laws have been a primary way that
lawmakers and regulators have policed the problem of overly
concentrated markets. When Congress enacted the antitrust laws,
it was with the purpose of protecting economic opportunity and
political equality.
Senator John Sherman, the author of the Sherman Antitrust
Act, referred to the first antitrust law as a bill of rights
and a charter of liberty. Overly concentrated--and he didn't
regard it as simply a question of economic efficiency or
reducing prices. Overly concentrated markets concentrate
economic and political power and stifle competition.
It is important to keep these broad goals of reducing
concentration and promoting competition in mind as we examine
how online platforms impact the free and diverse media. As the
judge reviewing the consent decree breaking up AT&T wrote,
quote, ``in promoting diversity and sources of information, the
values underlying the 1st Amendment coincide with the policy of
the antitrust laws,'' closed quote.
Congress also has a constitutional duty to ensure that
markets are structured in a way that is compatible with our
democratic values. While new technologies may upend how news
and information are shared, it is vital that we maintain open
and competitive markets which will best foster a robust
independent press.
With this in mind, I welcome today's hearing as the
beginning of the committee's investigation of competition in
digital markets, and I look forward to hearing from our panel
of experts.
And I thank the chairman, and I yield back.
Mr. Cicilline. I thank the chairman for yielding back.
The chair now recognizes the ranking member of the full
committee, the gentleman from Georgia, Mr. Collins, for his
opening statement.
Mr. Collins. Thank you, Chairman Cicilline. And thanks for
holding this hearing today. I am glad that you and I have found
some commonality in this and look forward to working together.
This is the first of many hearings and oversight activity
the subcommittee expects to hold over the coming months on the
important antitrust and competition issues in the tech sector.
I firmly support this initiative. The conversations we will
have in our committee are critical as Congress evaluates the
depth, breadth, and importance of these tech issues and whether
any amendments to the antitrust laws are needed. The public
understanding of these issues and the evolving role of tech in
the daily lives of the American people are equally important as
we have these discussions.
If we do identify needs for new legislation, it is
important we keep two principles in mind. First, like the
existing antitrust laws, new legislation be consistent in
keeping the free market free. Proposals to construct broad new
regulatory regimes should be viewed with caution. Experience
shows that regulatory solutions often miss the mark, solve
problems less efficiently than free markets, and can create new
opportunities for anticompetitive companies to suppress
competition through rent seeking. That is especially true when
regulation attempts to take on evolving problems in fast moving
markets like tech. I speak from experience here. I have worked
through these before.
And we have to make sure that we are not looking for an
immediate solution to the soreness in our foot and recognize
that we have a problem with our leg. We need to make sure we
are working this through.
Secondly, big is not necessarily bad. Companies that offer
new innovations, better solutions, and more consumer benefit at
lower prices often become big to the benefit of society,
shockingly. Proposals to break up big companies just because
they are big risk throwing out the baby with the bath water.
And any discussion that simply moves to that discussion first
is not the right way to move.
It is because I embrace these principles that I am excited
to have joined Subcommittee Chairman Cicilline in the
introduction of the Journalism Competition and Preservation
Act. This bill takes head on the problem of local and other
news organizations disappearing from the public square as news
consumption moves increasingly online.
A vibrant press has been critical to the success of our
democracy since the founding of the republic. In the old days,
press organizations were able to thrive based on their
subscription and advertising revenues. But as news consumption
has moved to the Internet, traditional subscriptions are
speedily drying up, and online advertising revenues are
increasingly becoming dominated by online platforms. As a
result, news organizations across the country are rapidly
losing their economic lifeblood and disappearing from the
public square.
If individual news outlets could count on being able to
negotiate fair attribution and advertising revenue agreements
with the online platforms, the bleeding could be stopped. The
problem, however, is that smaller news organizations don't
stand a fair negotiating chance when they try to negotiate
deals with a platform giant. These giants stand as a
bottleneck, a classic antitrust problem but consumers--between
consumers and the producers of news content.
Journalism Competition Preservation Act seeks to solve this
problem simply: By allowing news publications to take the
platforms bottleneck together. Specifically, the bill allows
the publications 4 years in which they can collectively
negotiate with the platforms without fearing antitrust
enforcement against that activity. In other words, the bill
allows news publications to take on an antitrust problem
without worrying that the antitrust laws themselves will stand
in the way.
It does not propose any new regulatory structures. It does
not threaten to break up any company. It does promise to simply
and effectively solve the problem.
Today's hearing provides an excellent opportunity to
examine this bill and other issues related to journalism in an
online environment. These issues include matters as diverse as
a boon in tech mergers and acquisitions to the mushrooming
problem of online outlets that freeze viewpoints out of the
online public square.
As we begin this, for all that are here, and many of you
are here representing a large diverse group, I met with many of
you over the years. Understand from my position as I have
stated clearly the principles that I have laid out. And as we
go forward this, anything that happens should be done when
everyone comes to the table.
Everyone has a chance to share their opinion. Everyone has
a chance to offer what may or may not be good legislative
solutions. It is up to this body to hear honestly from the
people and the companies involved. If we take everybody at face
value, it is the American people at the end of the day that
will benefit.
I promise from my perspective, and our side will not rush
to judgment. We encourage you to decide to not rush to
judgement and companies to participate in a positive solution.
When this body does that, we have seen great things happen.
When we do not, we end up with more problems than we began
with.
With that, I yield back.
Mr. Cicilline. I thank the gentleman for yielding back.
It is now my pleasure to introduce today's witnesses. Our
first witness is David Chavern, the president and CEO of the
News Media Alliance, where he has been since 2015. Mr. Chavern
spent 10 years at the United States Chamber of Commerce in a
number of executive roles, including executive vice president,
chief operating officer, and chief of staff. He is a member of
the board of directors of Transamerica Insurance and serves on
the board of trustees at the University of Pittsburgh, his alma
mater. Mr. Chavern received his bachelor of arts at the
University of Pittsburgh, his MBA from Georgetown University,
and his JD from Villanova University School of Law.
Our second witness is the president and CEO of Public
Knowledge, Gene Kimmelman. Before his time at Public Knowledge,
Mr. Kimmelman served as the director of the Internet Freedom
and Human Rights Project at the New America Foundation and as
the chief counsel for the U.S. Department of Justice Antitrust
Division. He has also served as chief counsel and staff
director for the Antitrust Subcommittee of the Senate Judiciary
Committee as well as the legislative director for the Consumer
Federation of America. Mr. Kimmelman currently serves as an
adjunct professor at Georgetown Washington University School of
Law, a senior fellow at the Silicone Flatirons Center for Law,
Technology, and Entrepreneurship at the University of Colorado
and on the boards of both International Media Support and
Global Partners Digital. He received his BA from a spectacular
university, Brown University in Providence, Rhode Island, and
his JD from the University of Virginia.
Our third witness is Sally Hubbard, the director of
enforcement strategy at the Open Markets Institute. Prior to
her time with Open Markets, Ms. Hubbard was the senior editor
of antitrust enforcement and regulation of tech platforms at
the Capitol Forum. She has also spent 7 years as the assistant
attorney general at the New York State office of the attorney
general's antitrust bureau. Ms. Hubbard earned her bachelor of
arts at the college of William and Mary and her JD at New York
University School of Law.
Our fourth witness on the panel is Matthew Schruers, the
vice president of law and policy at the Computer and
Communications Industry Association. As vice president, he
advises Internet and technology companies on matters including
Internet law, intellectual property competition, and trade.
Additionally, he is an adjunct professor at Georgetown
University Law Center, the Georgetown Graduate School, and the
American University, Washington College of Law. Mr. Schruers
received his BA from Duke University and his JD from the
University of Virginia Law School.
Our fifth witness is David Pitofsky, executive president
and general counsel at News Corp, the son of the dean of
Georgetown Law School when I attended it. Prior to joining News
Corp, Mr. Pitofsky was a partner at Goodwin Procter LLP where
he focused on white collar defense and securities litigation
and enforcement. He has also served as an assistant U.S.
attorney in the Eastern District of New York where he was the
deputy chief of the criminal division. Mr. Pitofsky is a member
of the executive committee of the Federal Bar Counsel and an
officer of the Federal Bar Foundation. He received his BA from
the University of Michigan and his JD from Georgetown
University Law Center.
It is now my pleasure to yield to the gentleman from
Georgia for our final introduction, Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman.
I appreciate this. This is an interesting thing from my--
from being a member of Congress now to be introducing a member
of the press from my own State, which I am please to do.
It is an honor and a privilege to welcome Kevin Riley to
Capitol Hill today. Kevin serves as the editor of the Atlanta
Journal Constitution in my home State of Georgia. As those of
you from Georgia know, the AJC is one of the best in the
business. Even though it is located in Atlanta, I would argue
it is where the entire State of Georgia goes to get their news.
Kevin has served as editor for nearly 10 years now and has
worked in the news industry for nearly 40. In 2001, the
Newspaper Association of America named Riley one of the
industry's 20 under 40 up-and-comers, and he is well-known as
an effective collaborative and innovative leader.
But you know sometimes you need to say a little more. So we
asked one of his reporters, Greg Bluestein of the AJC that
works for Kevin describe how he would describe his boss. I
think it is very telling.
Kevin is the type of editor who encourages the reporters to
experiment and try new things by doing it himself. Shortly
after the AJC unveiled a personal journey feature, he wrote a
masterful story about a World War II veteran returning to the
French battlefield for the fist time since the fight helping to
unlock a 69-year-old mystery in the process. And when we
started getting involved in the podcast, Kevin headlined a
season of the Breakdown show focusing on the murders of two
young Atlantans. As we in the newspaper industry face more
demands to tell stories in different ways, Kevin has been on
the forefront of going on TV and radio to share our work.
He goes on to say, I am not just sucking up by saying this.
Kevin is a perfect example of the case to lead.
And I think another one of your reporters Tamar Hallerman
is here as well and probably would say the same thing. The
perfect cases lead by example, and I can't think of a better
compliment.
Earlier this year before we even introduced the Journalism
Competition and Preservation Act, Kevin called to explain how
critical this bill is for the AJC, for communities across
Georgia, and for the entire newspaper industry. Local
journalism is a core part of every community in Georgia and
nationwide, and it is an honor to have a member of our local
media here today.
And I yield back.
Mr. Cicilline. I thank the gentleman.
We welcome all of our very distinguished witnesses and
thank you for participating in today's hearing.
Now, if you would please rise, I will begin by swearing you
in.
Please raise your right hands.
Do you swear or affirm, under penalty of perjury, that the
testimony you are about to give is true and correct to the best
of your knowledge, information, and belief, so help you God?
Thank you.
Let the record reflect that the witnesses answered in the
affirmative.
You may be seated.
Please note that each of your witness statements will be
entered into the record in its entirety. Accordingly, I ask
that you summarize your testimony in 5 minutes. And to help you
stay within that time, there is a timing light on the table.
When the light switches from green to yellow, you have 1 minute
to conclude your testimony. When the light turns red, it
signals your 5 minutes have expired.
Mr. Chavern, you may begin. You are recognized for 5
minutes.
TESTIMONY OF DAVID CHAVERN, PRESIDENT, NEWS MEDIA ALLIANCE;
GENE KIMMELMAN, PRESIDENT, PUBLIC KNOWLEDGE; SALLY HUBBARD,
DIRECTOR OF ENFORCEMENT STRATEGY, OPEN MARKETS INSTITUTE;
MATTHEW SCHRUERS, VICE PRESIDENT, LAW AND POLICY, COMPUTER AND
COMMUNICATIONS INDUSTRY ASSOCIATION; DAVID PITOFSKY, GENERAL
COUNSEL, NEWS CORP; AND KEVIN RILEY, EDITOR, ATLANTA-JOURNAL
CONSTITUTION
TESTIMONY OF DAVID CHAVERN
Mr. Chavern. Thank you. Chairman Cicilline, Chairman
Nadler, Ranking Member Collins, Representative Armstrong, and
members of the subcommittee, thank you for inviting me to
participate in today's hearing.
My name is David Chavern, and I am the president and CEO of
the News Media Alliance, a nonprofit trade association
representing over 2,000 publishers across the United States.
Our members include some of the largest news organizations
covering events around the globe as well as local publishers
focussing on the issues that impact communities and the daily
lives of citizens in every state and congressional district.
The news media has played a key role in our democracy since
its founding. The mission has been to enrich society's
understanding and foster public discourse that is vital to a
healthy democracy. And over the years, the news media has
filled that mission extremely well.
We are also an industry that has fully embraced a digital
future. Publishers offer a wide array of innovative and
compelling online experiences sustained by truly great
journalism. And my membership includes a number of digital only
news publishers.
But the rise of digital news distribution has also
introduced new and potentially existential threats to the news
industry. Specifically the emergence of dominant tech platforms
as intermediaries between publishers and their audiences.
Online platforms serve an important purpose. Today, 93 percent
of Americans get at least some of their news online. These
platforms help users find great journalism. And in doing so,
they have contributed to the enormous growth in news audiences
over the past 2 decades.
In the same way the digital platforms are critical for
online news, online news is critical for the digital platforms.
The public demand for quality journalism is massive and
growing, and that has driven deep engagement with Facebook and
Google. A study we released yesterday estimates that news
content generated some $4.7 billion for Google in 2018.
The platforms and news organizations mutual reliance would
not be a problem if not for the fact that the concentration
among the platforms means that a small number of companies now
exercise an extreme level of control over the news. And, in
fact, a couple of dominant firms act as regulators of the news
industry. Only these regulators are not constrained by
legislative or Democratic oversight.
The result has been to siphon revenue away from news
publishers. This trend is clear if you compare the growth in
Google's total advertising revenue to the decline in the news
industries' ad revenue.
In 2004, Google's U.S. revenue was 2.1 billion while the
newspaper industry accounted for 48 billion in advertising
revenue. In 2017, in contrast, Google's U.S. revenue had
increased over 25 times to 52.4 billion while the newspaper
industry's ad revenue had fallen 65 percent to 16.4 billion.
The effect of this revenue decline in publishers has been
terrible, and they have been forced to cut back on their
investments in journalism. That is a reason why newsroom
employment has fallen nearly a quarter over the last decade.
One question that might be asked is if the platforms are on
balance having such a negative impact on the news media, then
why don't publishers do something about it?
The answer is they cannot, at least under the existing
antitrust laws. News publishers face a collective action
problem. No publisher on its own can stand up to the tech
giants. The risk of demotion or exclusion from the platforms is
simply too great. And the antitrust laws prevent news
organizations from acting collectively. So the result is that
publishers are forced to accept whatever terms and restrictions
are imposed on them.
The Journalism Competition and Preservation Act introduced
by Chairman Cicilline and Ranking Member Collins is an
innovative market-oriented solution to this collective action
problem. Markets work best when both parties have some leverage
to ask for better terms and to credibly withdraw from
negotiations if the other side's demands are unreasonable.
Our goal is actually to find a way to work sustainably with
the online platforms to give Americans the best journalism
possible. Present trends in the news business simply cannot
continue. Without some action to give news publishers a voice
in their future, we will all experience the effects of deep
financial stress in this industry and the loss of great
important journalism in communities across the country.
It is not too much to say that the very fabric of our civic
society is at risk. And this is not a problem that will be
solved by private charity, from individuals, or even the big
platforms themselves. What we need are sustainable business
relationships that return value to the great important
journalists who create the news content on which we all depend.
Again, thank you very much for having me here today.
[The statement of Mr. Chavern follows:]
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Mr. Cicilline. Thank you, Mr. Chavern.
Mr. Kimmelman, you are now recognized for 5 minutes.
TESTIMONY OF GENE KIMMELMAN
Mr. Kimmelman. Thank you, Mr. Chairman, members of the
subcommittee. On behalf of Public Knowledge, I appreciate the
invitation to testify today.
Your opening statements across the--across the board
highlight what I think are the natural economic tendencies of
what has happened in the digital marketplace. We have enormous
sunk cost in platforms that then return scale economies and
scope economies with declining costs. These are network effect
industries. It is not new to our economy. This is a new form of
it. And what we see is a tendency towards a few companies
dominating in that space. It is the natural economics of the
space.
And you have also highlighted the concern about gatekeeper
roles and bottlenecks. And we have a history of this, of
concern about this. And the history includes all of the media
including the newspapers, for abusive power when we have had
too much concentration, too few players in the marketplace, too
few independent voices that stifle a marketplace of ideas.
So we have had these problems in the past with previous
technologies. We are having them again now. In some instances,
antitrust has been the right tool to address them. In some
instances, Congress has stepped in with other policy solutions.
I urge you to consider all of that.
We have massive power here in the marketplace of ideas, and
it stems both on the technology side and on the content and
distribution side. I think all of it needs to be looked at.
It is important to fight against concentrated power and
dominance at all levels of the distribution chain and to
maximize competitive market forces, particularly when they
involve the marketplace of ideas. Clearly we need strong
enforcement of the antitrust laws, and we need to consider new
laws. I appreciate the committee stepping in to begin this
detailed study.
But it is important that, as we attempt to stop these
abuses where we find them, that we don't create new monopoly
power just to take on dominance. It is critical to tackle
dominance head on and not create more monopoly.
The digital marketplace, as we all know, has totally
transformed our lives. It has destroyed all kinds of brick-and-
mortar players, industries, companies, and that includes
classified and display ads in the print business. It is much
broader than just news, news as being important.
What I am afraid we need to confront is the money from that
old model, from that business model, will never come back. It
is gone. I think journalism needs to consider a new business
model, and we should do everything we can with public policy
tools to help. The digital age will require new forms of
creative financing in order to get local news and fight
misinformation in the marketplace. Public support will be
necessary.
I urge you to consider creating some kind of public service
duty of care to deliver trustworthy information, not
subsidizing companies or industries but instead promoting fact-
checking information accuracy services that deliver value and
that can be supported to protect local media and news in
particular.
In a digital platform space, I think what is most important
is to look at those natural economic tendencies towards--
tipping towards dominance, creating barriers to entry that make
it very difficult to foster competition and innovation in the
markets and examine whether anyone is putting their thumb on
the scale either in violation of the antitrust laws or
otherwise principles of fairness in our society.
That is why your inquiry is so important, and I commend
your effort to look carefully both at what the problems are and
what the possible solutions should be.
Consumers themselves are actually reinforcing the problem.
We are on the negative side lazy but mostly just complacent to
do what is simple. That reinforces the power of those who have
our attention in the first place and can find ways to make it
very attractive for us not to consider competitive options, new
options, better news as opposed to just salacious information.
It is important that we look at all policy tools that are
available to address these concerns. Antitrust can do something
to try to improve enforcement. But where you have dominance in
markets, few players, little entry, often you need broader
policy tools. I urge you to consider nondiscrimination,
interoperability where there is bottleneck problems. We have
done this in telecommunications before. We have done it in the
cable industry. This would not be a first for Congress. Now is
the time to consider it for digital platforms.
Thank you.
[The statement of Mr. Kimmelman follows:]
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Mr. Cicilline. Thank you, Mr. Kimmelman.
The chair now recognizes Ms. Hubbard for her opening
statement for 5 minutes.
TESTIMONY OF SALLY HUBBARD
Ms. Hubbard. Chairman Cicilline and members of the
subcommittee, thank you for inviting me to speak with you
today.
In my view as a former antitrust enforcer, the starving of
journalism and the disinformation crisis are both, in good
part, monopoly problems. I have been writing about antitrust
and tech platforms since the summer of 2016 when I noticed that
the tech giants, Google, Apple, Facebook, and Amazon, were all
doing the same types of things that Microsoft had been sued for
nearly 20 years earlier. They were leveraging their market
power to make fair competition impossible.
These tech giants are gatekeepers that also compete against
companies that must get through their gates to reach users.
News publishers must get through Facebook and Google's gates
due to the two platforms' concentrated control over the flow of
information.
But Facebook and Google compete against news publishers for
user attention, data, and ad dollars. They are controlling the
game and playing it too.
Publishers never had a fair shot, nor do they have
bargaining power against the platforms. The platforms can cut
them off with a simple tweak of their algorithms. Facebook and
Google exploit their middleman positions to divert ad revenue
away from publishers and into their own pockets. And the
platforms can hyper target users based on their 360-degree
views of what their users read, think, and do, thanks to their
ability to track users across millions of websites and even
offline.
Last year, Facebook and Google accounted for approximately
85 percent of the growth of more than--of the more than $150
billion digital ad market in the U.S. and the EU according to
Digital Content Next, which is a main trade association for
publishers.
As for disinformation, Facebook and YouTube program their
algorithms to prioritize engagement which amplifies propaganda.
Through surveillance, Facebook and Google learn what messages
people are susceptible to whether ads or propaganda. Then they
rent out these manipulation machines to others for huge profit.
The scale of the manipulation is massive because of
Facebook and Google's dominance. And the platform's lack of
competitive pressure to fix the disinformation problem because
the closest subsidy for Facebook users is Instagram which
Facebook owns. Users need to be able to vote with their feet
and switch to alternatives.
To their credit, Facebook and Google started on their paths
to dominance with innovation. But their monopoly power is not
purely the result of competing on the merits. Facebook has
repeatedly acquired rivals including Instagram and WhatsApp.
And Google's acquisition cemented its market power throughout
the ad ecosystem as it bought up the digital ad market spoke by
spoke including Applied Semantics, AdMob, and DoubleClick.
Together Facebook and Google have bought 150 companies in
just the last 6 years. Google alone has bought nearly 250
companies. Thus far, antitrust enforcers have not stood in
their way nor have they stopped Facebook and Google from
leveraging their monopoly power to exclude competition.
Weak antitrust enforcement set the stage for these
platforms to extract the fruits of publishers' laborer as much
as monopolies are extracting wealth across most sectors of our
economy. Monopolies are putting the American Dream at risk as
people, including journalists, are not rewarded for their
efforts.
Beginning immediately, antitrust enforcers should prevent
Facebook and Google from acquiring competitive threats and
companies that fortify their monopoly power. They should unwind
anticompetitive deals and divest subsidiaries to open up
competition, and they should stop exclusionary practices.
Antitrust enforcement alone won't solve everything
discussed here today, but we won't be able to solve anything
unless we weaken monopoly's power. It is a necessary but not
sufficient condition. News is a social good that is essential
to hold power account. It was a journalist named Ida Tarbell
that took down the most notorious monopoly in U.S. history,
Standard Oil.
News deserves special protection like it has had throughout
American history through nondiscrimination and interoperability
rules. We also need rules to curb invasive data collection by
default and to give citizens ownership of their data.
The good news is we have been here before, as Gene pointed
out. We have--these are not new challenges. We have stood up to
powerful tech monopolists. Each time we are better for it. We
only see new waves of innovation. We have restored our markets
and removed gatekeepers.
But if we don't act now to change the structure of our
markets, titans will continue to control speech, journalism
will continue to wither, and so will our democracy.
Thank you.
[The statement of Ms. Hubbard follows:]
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Mr. Cicilline. Thank you, Ms. Hubbard.
The chair now recognizes Mr. Schruers for 5 minutes.
TESTIMONY OF MATTHEW SCHRUERS
Mr. Schruers. Thank you, Mr. Chairman, members of the
committee. On behalf of the Computer and Communications
Industry Association, an association of technology, Internet,
and communications firms, I appreciate the opportunity to
appear today.
Let me begin by acknowledging that success brings scrutiny.
Digital technology and the Internet has revolutionized the U.S.
economy and the global economy. The industry leaders are names
recognized around the world. Some of the most prominent brands
we know. We welcome an evidence-driven conversation and
examination of this transformation and the firms that are
leading it.
But declining newspaper prospects are an independent
phenomenon. Firms that date, at the oldest, from the 1990s did
not start this trend in the 1980s. Technology has challenged
some news publishers business models in part by ushering in
extensive new competition, globalizing the advertising market,
and disrupting the dominant local advertising position that
many publishers once had.
Because journalism is important to any democracy, we share
the goal of ensuring that it continues. Digital services play
an important role in doing that. In fact, digital services
provide benefits to three separate constituencies, users, news
producers, and advertisers.
We know users attribute thousands of dollars in value to
free-of-charge online services and turn to them for answers,
entertainment, education, connection, and communication, and
commerce.
These services also provide users with access to a range of
news content across multiple devices and formats in a way that
enables participation which surveys tell us increase civic
engagement and interest in news producers content. News
producers, in turn, receive 10 billion viewers a month from
digital services, traffic which they can monetize with digital
tools.
Many publishers have embraced the Internet using technology
to better engage their audiences. Numerous digital native news
outlets have appeared, and the Bureau of Labor Statistics
estimates that 13,000 employees worked in these digitally
enabled newsrooms in 2017.
Digital services also enable and benefit advertisers. As
the saying goes, an advertiser knows half his ad budget is
wasted. He just doesn't know which half. With technology,
advertisers can now figure out where their budget is best
optimized and where their money actually is, in fact, wasted
and direct funds accordingly. This is increasingly important
for small firms who now have a global reach regardless of the
size of a business.
So how does antitrust law fit into this? U.S. antitrust law
focuses on maximizing consumer welfare, enforcement, seeks
lower prices, higher quality, more innovation. Separate policy
goals are usually pursued elsewhere through legislative means,
and this ensures consistent and apolitical application of the
law.
The law doesn't punish success. Instead, it applies
additional obligations when successful firms possess market
power in a defined market. But these markets aren't defined ad
hoc by arbitrary line drawing. We use economics. We see if
consumers respond to changes in prices given factors like
competition and substitutes. Enforcers then assess whether a
firm can unilaterally raise prices or decrease quality.
I note that some digital firms are sometimes subjectively
identified as, say, being in the search or social media market.
But this is not necessarily a relevant market. Economic
analysis would show us that news publishers and digital
services fight fiercely for ad dollars. And, indeed, that is
one reason why we are here today.
This intense intermedium competition is generally healthy.
And undermining it with antitrust exemptions is unlikely to
achieve the goal we all share. If competitors collude, prices
will be higher, quality will decrease, and innovation will
slow.
And the U.S. experience with antitrust exemptions for
newspapers specifically is not encouraging. Before the
Internet, when broadcast threatened newspapers, which led to
the Newspaper Preservation Act of 1970, we tried this. And it
is widely regarded as having been unsuccessful. Some argue the
MPA actually fostered press monopolies.
So in conclusion, let me remind us all that the Antitrust
Modernization Commission of 2007 looked at many of these issues
and considered them at length. They, as well as antitrust
enforcers from both parties, have criticized antitrust
exemptions.
Now, that being said, we do share the objective of
promoting diverse robust economically sustainable news
production. Proposed alternatives, which are discussed in our
testimony, include tax incentives and deductions, grants, new
nonprofit categories. All of these options deserve
consideration, and CCI welcomes the opportunity to participate
in that conversation.
Thank you.
[The statement of Mr. Schruers follows:]
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Mr. Cicilline. Thank you, Mr. Schruers.
Mr. Pitofsky is recognized for 5 minutes.
TESTIMONY OF DAVID PITOFSKY
Mr. Pitofsky. Chairman Cicilline, members of the
subcommittee, thank you for inviting me to speak with you
today.
My name is David Pitofsky and I am the general counsel of
News Corp, the proud home of news publishers like the Wall
Street Journal and HarperCollins book publishers.
I am here today because the marketplace for news is broken.
Healthy markets incentivize risk, investment, and effort by
rewarding companies that develop superior products.
Unfortunately, in the news business, free writing by dominant
online platforms, which aggregate and then re-serve our
content, has led to the lion's share of online advertising
dollars generated off the back of news going to the platforms.
Many in Silicon Valley dismiss the press as old media
failing to evolve in the face of online competition. But this
is wrong. We are not losing business to an innovator who has
found a better or more efficient way to report and investigate
the news. We are losing business because the dominant platforms
deploy our news content to target our audiences to then turn
around and sell that audience to the same advertisers we are
trying to serve.
The erosion of advertising revenue undercuts our ability to
invest in high quality journalism. Meanwhile, the platforms
have little, if any, commitment to accuracy or reliability. For
them, a news article is valuable if viral not if verified.
To address these challenges, we need meaningful dialogue.
It is, therefore, dispiriting when the platforms claim that
their products only help consumers and publishers ignoring the
mounting facts clearly showing the harms they have inflicted on
the news industry. The fact is news publishers have been busy
innovating online expanding our reach to digital audiences
while the dominant platforms have benefited from our innovation
and premium content.
In part, this is made easier by the platform's control over
the Internet ad tech space. They control the tech
infrastructure, the data, and the tools used to sell and serve
ads online. And at the same time, they also compete against
news publishers for those same ad dollars.
News publishers have no good options to respond to these
challenges. Any publisher that tried to withhold its content
from a platform as part of a negotiating strategy would starve
itself of reader traffic. In contrast, losing one publisher
would not harm the platforms at all since they would have ample
alternative sources for news content.
To escape this prisoner's dilemma, news organizations need
to act collectively, but this is prohibited by antitrust law.
So what is the solution? First, we need more dynamic and
modernized antitrust enforcement. We are hopeful that
reinvigorated antitrust is on the horizon. After a generation
of obsession with price effects without adequate consideration
of the other aspects of consumer and social welfare, including
quality, innovation, and choice, some very recent encouraging
signs of reexamination have occurred.
Second, and in the meantime, news publishers need a
fighting chance. The Journalism Competition and Preservation
Act is well designed to help restore the proper balance between
content generators and distributors on the Internet. This
bipartisan legislation is narrowly tailored both in scope and
duration.
I would like to close by sharing a quote from my late
father, Robert Pitofsky, who you mentioned earlier, Mr.
Chairman. He was a giant in the antitrust law. In academia, in
private practice, and in government where his service
culminated in his term as chairman of the FTC from 1995 to
2001. He recognized the need for antitrust regulators to give a
higher degree of scrutiny to competition matters implicating
1st Amendment concerns. Because of the implications for
Democratic values.
In a November 2000 newspaper article on the topic, he was
quoted as saying, Antitrust is more than economics. And I do
believe that if you have issues in the newspaper business, in
book publishing, news generally, entertainment, I think you
want to be more careful and thorough in your investigation than
if the same problems arose in cosmetics or lumber or coal
mining.
In a Seminole Law Review article from 1979 that has been
happily rediscovered, he wrote, quote, ``It is bad history, bad
policy, and bad law to excluded certain political values in
interpreting the antitrust laws,'' closed quote.
Informed by history, policy, and the political values, the
antitrust laws should protect the pillars both of our economy
and our democracy. And there is no industry more central to our
democracy than the news media.
Thank you.
[The statement of Mr. Pitofsky follows:]
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Mr. Cicilline. Thank you, Mr. Pitofsky.
Mr. Riley is recognized for 5 minutes for his opening
statement.
TESTIMONY OF KEVIN RILEY
Mr. Riley. Chairman Cicilline and members of the
subcommittee, thank you for inviting me here today. I am Kevin
Riley, the editor of the Atlanta Journal Constitution.
A few years ago, journalists at the Atlanta journal
Constitution established that 80 doctors in Georgia had
sexually abused patients, including patients under anesthesia,
and those doctors were still licensed. The newspaper
investigated and found a nationwide problem. Hundreds of
doctors were abusing patients and getting away with it.
The investigation prompted reforms. It was a finalist for
the Pulitzer Prize. And of equal importance, readers of that
investigation told us that is what they want from their
newspaper, that kind of coverage. The victims of those doctors
called our reporters and thanked them for telling their
stories.
About a year before that story, dozens of educators in the
Atlanta public schools had been found guilty of altering
students standardized test scores in the largest cheating
scandal in the Nation's history. The convictions culminated a
year's long journalistic effort by the Atlanta Journal
Constitution.
AJC reporters had noticed that student scores on Georgia's
standardized tests showed extraordinary improvement. They
analyzed the scores. The improvements in some schools defied
statistical possibility. The reporting triggered a State
investigation that found systemwide cheating in 44 Atlanta
public schools; 178 teachers and administrators participated.
The test cheating inflated the scores of thousands of students
giving the false impression of progress. It cheated those
students.
The story would never have been uncovered without the AJC.
Educators would never have faced justice. The system would not
have been fixed. And most important of all, students wouldn't
have been offered the chance to gain the knowledge that they
had been denied.
No other news organization in Atlanta has the capacity for
such deep reporting. No other organization could have withstood
the relentless pressure to back off unleashed by the school
district and the business community. No other news organization
would have stuck with the story for 5 years.
This kind of investigative reporting is hard. It is
upsetting. It is important. It has real impact. And we are
proud of it.
But newspapers do other important stories too. I was
reminded of one last week as I prepared for this testimony.
Let me tell you about the woman Congressman Collins
mentioned. Her name is Shirley Sessions. She is the widow of a
World War II veteran they lived in Carrollton, Georgia. She had
spent decades trying to unearth the story behind her reticent
husband's service. I had been able myself to discover many
details about our husband's time in combat, and I had written
about it.
After her husband died, Ms. Sessions still hungered to know
about his service. She was so enthralled that she journeyed to
France for a reunion of her husband's military unit. I joined
her. Bearing witness while a widow paid an inspiring tribute to
her husband.
And the story I wrote about brought AJC readers along on
her emotional journey. She literally retraced the steps of that
young private, the man who would later be her husband, through
combat in tiny French towns during World War II.
It was the unknown story of a local hero and one that only
the Atlanta Journal Constitution could tell. It would be lost
to history without us.
Ms. Sessions sent me a text as I prepared for this
testimony. She said, in part, Your stories have become a
touchstone in my life. I watched the coverage of D-Day, cried a
lot. But I am more grateful than ever.
We invested a lot of time, money, and effort in these
stories I mentioned. That is what newspapers do. We use our
resources to tell our community stories, the good ones and the
hard ones. Telling them makes our community better.
I share these examples because they illustrate the everyday
challenge faced by local journalists. We must be vigilant to
tell important, well-reported, and thoughtful stories. We must
care that they get wide distribution. That is our job and
crucial to our communities. We are accountable to people like
Ms. Shirley and her neighbors in Carrollton, Georgia.
Almost always, the debate about media and tech is framed
within the discussion of international news brands. But the
greatest peril for our Nation lurks at the local level where a
regional or community newspaper must cope with fast-changing,
technological, and financial matters.
We are the ones who are concerned with our communities,
their government, and their well-being. Our staffs live in our
community. They have a big stake in informing the public.
Social media and technology companies have enormous influence
on the distribution and availability of news. But we should be
worried about losing newspapers. The fountainheads within the
local news ecosystem. It is worth considering stories that
would go untold.
Thank you.
[The statement of Mr. Riley follows:]
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Mr. Cicilline. Thank you, Mr. Riley.
We will now proceed under the 5-minute rule with questions.
And we will begin with the gentleman from Georgia, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman. And thank you,
witnesses, for being here today. And I would like to extend a
particularly warm welcome to the editor of my hometown paper,
Mr. Riley, from the AJC.
The purpose of this hearing is to face an important problem
head on, the media, from local newspapers to major publishers
to online innovators is dying. This is, in some part, because
of a shift in how we consume our news, but it is also because
of the mass availability of information on digital platforms.
While the news media's market presence is increasing, their
revenue is decreasing. This is untenable. No business can
prosper this way and no reasonable investor would want to get
involved. We cannot continue to rely on the good grace of
concentrated wealth to do the right thing.
A free market approach as applied to the duopolistic online
platform gateway and its relationship to a free and diverse
press is not working. Moreover, it poses a direct and pressing
threat to our republic and, therefore, to our freedom.
Something must be done to level the playing field, and I am
looking forward to talking with all of you about potential
solutions to this problem. And I thank the chair for hosting
this very important hearing.
Lastly, I will note that a free press--or that free press
content has a cost, and that price is profoundly expensive and
could price freedom out of the fragile marketplace for freedom.
Mr. Riley, according to a recent Pew study, Americans have
shifted from traditional media sources for local news to the
television and Internet. Interest in local print news in
particular has declined resulting in massive downsizing at
newspapers. In fact, newsroom staff declined by 45 percent from
2008 to 2017.
How has the AJC worked to overcome this challenge?
Mr. Riley. Well, thank you for that question, Congressman
Johnson. And I think that one important point to make about the
statistics that you cite in terms of preference of news sources
is this: We are typical, I think, of most newspapers of our
size and in a market similar to ours in this way, our audience
has never been larger than it is now. When you can combine the
people we have who read the printed newspaper and that audience
that we can garner online in our markets, we have more people
reading the Atlanta Journal Constitution than at any other
point in our history.
The challenge here is sort of simple, which is in what kind
of world do you grow your audience, reach a bigger market, and
somehow face even greater financial challenges than you did
before? Something is out of whack in that equation, and it is
just counterintuitive to how American business works where,
when you invest and you succeed, you reap the benefits of that
investment. That is the missing piece for newspapers.
Mr. Johnson. Thank you.
What are your projections for the AJC? And how has your
digital platform presence--well, you have explained that. Let
me move to my next question.
Mr. Chavern, how many local papers does your organization
represent?
Mr. Chavern. Approximately 2,000, sir.
Mr. Johnson. Is there any requirement that local newspapers
be prioritized on general--on digital platforms?
Mr. Chavern. Prioritized in terms of the search, sir?
Mr. Johnson. Yes. In any respect.
Mr. Chavern. Yeah. They are--there is no requirement that
they be prioritized. But the digital audience, as was noted, is
exploding across the board.
Mr. Johnson. Mr. Pitofsky, one of the major issues in
market dominance today is the ability to use individual's data
in targeted advertising.
How do you--how do the online giants control user data? And
why is this such a powerful phenomenon?
Mr. Pitofsky. Thank you, Congressman.
Advertising has changed profoundly so that rather than
reaching an audience, advertisers now reach individuals. And to
the degree that they are able to get more and more detailed
data about those individuals, they can send them targeted data.
So the more data a company has, the more it can segment the
market, the more it can deliver targeted ads. And the dominant
platforms are light years ahead of other competitors in terms
of the amount of their data, thus their dominance in the
digital ad space.
Mr. Johnson. Thank you.
I yield back.
Mr. Cicilline. I thank the gentleman.
The chair now recognizes the ranking member of the full
committee, Mr. Collins, for 5 minutes.
Mr. Collins. Thank you, Mr. Chairman.
Mr. Chavern, one of the interesting things--that I have
been asked this question a good deal since we actually
introduced it. And I think it is--but I think it is vitally
important, because sometimes we can put things out there. But
at the end of the day, if it is not actually a workable
solution, then, simply, we are just talking about things and,
you know, generating a lot of, you know, basically hype that
doesn't actually end up in solving something. I am not a member
of Congress who believes that we ought to just, you know,
simply throw ideas out there but actually find ideas that can
actually work.
So the question that has come up a great deal about that is
how can we be sure that any agreement that the news
publications negotiate with the online platforms under what we
are proposing in this legislation will be adequate and flexible
enough to endure for a long time in this quickly evolving
market. I believe it is more than just right this minute. How
does it play out 10, 15 years down the road?
Mr. Chavern. Well, thank you, Representative.
Obviously there is never going to be guarantees about
infinite solutions. But I think what there is a real chance for
us to develop an enduring partnership with the platforms.
Again, at the end of the day, the platforms, I view them as
a solution, a potential solution for news and journalism rather
than a problem. And I think the issues are well understood and
pretty well defined. We have issues about revenue. We have
issues about data. We have issues about algorithms and our
brand.
But these are all things that I think are solvable,
achievable. And that I am confident that we could develop a
solution that would greatly support journalism for some
significant period of time. I don't think this is one of those
issues that is not solvable. I think it is imminently solvable.
Mr. Collins. Would you also agree that this is an issue
that both parties, really, in a lot of ways need each other?
That this is not really one upset at the other and the other
upset at--you know, that there is not mutually exclusive
positions here. That the online platforms need the local
content spoken of by others and at the same point in time they
all wind in the local and also need, you know, to have this,
you know, divergent technology, disruptive technology that has
been good in many, many ways.
Do you see that as a symbiotic kind of relationship that
should be instead of an adversarial relationship?
Mr. Chavern. Yeah. Absolutely. I mean, these are amazing
wonderful distribution platforms that, by the way, have allowed
us to grow our digital audience larger than it has ever been in
terms of any audience. And they need good content to engage
their users, and we need access to those users. It is just in
this world where we can't act collectively. That means that we
have this problem of any one publisher really doesn't get a say
in how its content is distributed to those users.
Mr. Collins. One of the things that we came up with last
year in this committee worked, and my friend Hakeem Jeffries
and I worked this for a long time, and that was the Music
Modernization Act, which actually had a very similar kind of
issue where you had the content owner and the disruptive
technology, which has been great for many segments, but there
was a disconnect of many of our rules and many other things
going forward where the content--and I think this is something
that I have emphasized in this committee for years is that
spark, that original idea, that content which both tech
platforms have and also the local platforms do as well, is
something worth protecting.
You can't sort of kill the goose with the golden egg. You
can't go and say the one producing the content is bad and we're
just going to keep taking, keep taking, keep taking, because
one of these days they are not going to exist anymore.
My hometown paper that I have grown up with for years, it
was a 7-day-a-week paper. It had--you know, just 20 years ago,
had, you know, 25-, 30,000 on it. It is down to now only a 5-
day-a-week paper. It could possibly, unfortunately, may go
further.
Most of the district--my district is a one paper per
county. But yet, at the same time, we do have Internet. We do
have broadband issues. That is because of a very terrible
carrier. But there are some other issues that we have there.
But as we look at that, you know, we need to make sure that
both are involved in this. And I think that is the concern that
I have.
I think as we go further in this process, knowing that
there is the online capability, knowing what we have heard so
far in this, this--I want this to be understood. And,
unfortunately, I have had to do a lot of interviews where it
came at me as if this was an adversarial--these whole hearings
are adversarial. Not really. They are just simply saying from
my perspective what do we need to do in a perspective now.
I appreciate all the witnesses here giving this directive,
because when we engage, people win. When we start talking about
this, we win. And I think that is the biggest win that we have
going forward here.
With that, Mr. Chairman, again, thanks for this and thanks
for the partnership on this bill. And let's look forward to
continuing to work together.
I yield back.
Mr. Cicilline. I thank the gentleman for yielding back.
I now recognize the gentlelady from Washington, Ms.
Jayapal, for 5 minutes.
Ms. Jayapal. Thank you, Mr. Chairman. And thank you all for
being here.
I represent a district that includes Seattle. And, you
know, we used to have a number of papers in Seattle. We are
down to one now. And so--and I am also somebody who read the
morning paper, like the actual paper for a very long time.
But digital technology is amazing. And I am continually
astounded by the proliferation of information that feels like
it is at our fingertips. I have watched my child grow up
immersed in the digital world. They know no other world. And
they have access to a breadth of information that I think could
never have been imagined several decades ago.
My district is a hub of innovation. We have a lot of the
tech companies right there in the district. And there are these
exciting new ways that I think we are finding to use technology
and share information.
However, I will tell you that many of my constituents who
work for those very tech companies want us to make sure that we
are utilizing that technology with appropriate regulations.
A very small number of companies exert a great deal of
control over what news and information each of us sees when we
go online or we use our phones. And those companies do have
sophisticated systems that track what we do, where we are
located, what we are interested in. It never ceases to amaze me
if I go to a shopping site and I plug in something, and then
the very next day I have five of that same thing constantly
coming back at me to see if I will buy it.
So we know that our information is being monetized, that
these companies are selling access to our attention to
advertisers and using their own proprietary algorithms to
determine what information and articles we see and what we
don't see. And it is easy to forget that when we do a very
quick Google search for news about a particular topic or we
click on an article and our Facebook feeds. It is easy to
forget that when we go online or into our phones looking for
good information, we are actually being controlled by those
corporations and the algorithms that are being used.
So, Ms. Hubbard, let me start with you. You were an
assistant attorney general for New York State's antitrust
division. You have also worked as a journalist.
Which online platforms would you say are most impacting the
public's access to trustworthy sources of journalism and why?
Ms. Hubbard. Thank you for the question, Congresswoman.
I think in terms of disinformation, the platforms are
having the most impact are Facebook and YouTube. And that is
because of their business models which are to prioritize
engagement, engaging content because of the human nature that,
you know, survival instinct. We tend to tune in to things that
much us fearful or angry.
And so by prioritizing engagement, these platforms are
actually prioritizing disinformation as well. It serves their
profit motives to keep people on the platforms as long as
possible to show them ads and collect their data. And because
they don't have any competition, they are free to pursue these
destructive business models without having any competitive
constraint. They have also lacked regulation. Normally,
corporations are not permitted to just pursue profits without
regard to the consequences.
Ms. Jayapal. So let's go to that question of regulation.
The Federal Trade Commission has repeatedly declined to
interfere as Facebook and Google have acquired would-be
competitors.
Since 2007, Google has acquired Acquired Semantics, Double
Click, and AdMob. And since 2011, Facebook has acquired
Instagram and WhatsApp.
What do these acquisitions mean for consumers of news and
information? I think sometimes antitrust is seen, and In
regulation is seen as something that is out there. But this has
very direct impact for consumers.
Can you explain what that means as these companies have
acquired more and more?
Ms. Hubbard. Sure.
So in my view, those--all of the acquisitions that you just
mentioned were illegal under the Clayton Act which prohibits
mergers that may lessen competition.
Looking back, it is clear that all of those mergers did
lessen competition. And when you lessen competition, the harms
to consumers are not just high prices, which are harder to see
in the digital age. But it is loss of innovation. It is loss of
choice and loss of control.
So when we approve antitrust mergers, consumers are harmed.
Ms. Jayapal. And do you think that the FTC--what do you
think about the FTC's current work around these? Do you think
the FTC should be doing more and how?
Ms. Hubbard. I definitely think the FTC should be doing
more. I think there is a possibility of unwinding some of the
mergers that are now obviously illegal now that we have the
evidence, particularly Facebook's acquisition of WhatsApp.
There have been public documents showing that Facebook had
identified WhatsApp as a competitive threat using its VPN
technology. And that it also deceived the European commission
and likely--I don't know if it told anything different to U.S.
regulators, but it has been fined for deceiving the European
Commission saying it couldn't share data from what--between
WhatsApp and Facebook.
So I do think that the FTC needs to do much more in this
regard.
Ms. Jayapal. Thank you.
I see my time has expired.
I yield back.
Mr. Cicilline. I thank the gentlelady.
I now recognize the gentleman from North Dakota, Mr.
Armstrong, for 5 minutes.
Mr. Armstrong. Thank you, Mr. Chair. And I especially
appreciate Mr. Riley talking about small town papers, because
if large publishers are having this problem, you can about
imagine how adversely affected smaller publishers that do
business in North Dakota are by this issue.
And my first grown-up job was coaching our summer American
Legion baseball team. And I learned two things very early in
life when dealing with the press and dealing with the kids of
parents. One, you never get in trouble for what you don't say.
And, two, you should always criticize in private and praise in
public. So I have carried those with me for a long time, and so
I appreciate that.
But just earlier we had heard--so Mr. Chavern and Mr.
Pitofsky and Mr. Kimmelman talked about antitrust. And so we
assume that we know there is--that there exists a competition
problem in the market. But we already have longstanding remedy,
and that is antitrust enforcement, if necessary. And I think
there might be a little disagreement about whether that is
actually sufficient. So supporters of this bill will argue that
we need an exemption from antitrust laws which allows them to
come together to negotiate terms.
Why should we enact the Journalist Completion Act as
opposed to just enforcing antitrust law? And I will just start
with Mr. Chavern.
Mr. Chavern. Thank you very much.
You know, the current antitrust laws protect Google and
Facebook from us, interestingly, which is both wrong and ironic
from our perspective.
What we are suggesting is, really, what we view as the
lightest touch option on the table in terms of giving us the
power just to stand up for ourselves.
And also, I have to note, there is a real urgency in the
industry currently. This is an industry that really can't wait
years and years for antitrust solutions. We are at a crisis
point now. And what we are asking for is relatively simple,
relatively straightforward. We are not asking the government to
regulate anyone or tax anyone. We are just really asking to be
left alone to defend ourselves.
Mr. Armstrong. Thank you.
Mr. Kimmelman.
Mr. Kimmelman. So I do think antitrust can help. I think we
have had a lapse in antitrust. Ms. Hubbard referred to it. I
don't know about the specific cases. It is always easier in
hindsight to say something was anticompetitive. Hard to tell at
the time. But there is no doubt that we have had
underenforcement and we need stronger enforcement.
I do not believe it solves this problem. It certainly
doesn't solve an immediate crisis. But I do worry that you
should look very carefully at whether the kind of negotiation
that Mr. Collins was talking about and the way it would happen
is what would actually happen in the marketplace. I am not at
all sure that is how it would work. I am not at all sure who is
a news content creator. You have wonderful news creators here
in front of you today. There are tabloids. There are a lot of
purveyors of mis--there are a lot of bad people out there too.
So I just think this is very complicated. You ought to take
a very careful look at what would actually create a better
marketplace dynamic. I actually believe there are better ways
to do this, but it requires a different approach.
Mr. Armstrong. And Mr. Pitofsky.
Mr. Pitofsky. Yes. I would say that antitrust has been
interpreted relatively narrowly for the last 40 years. And
these markets are presenting new challenges, that it is going
to take time. And this committee's investigation is helping
move in that direction of understanding how these new markets
work.
So, for example, when some of these mergers were approved,
some of the people objecting raised privacy concerns. But the
regulators felt that privacy was not an area that antitrust
could cover.
I think as we have had experience with these platforms, we
understand that privacy is an aspect of product quality. All of
the users of these tools have expectations that those tools
carry privacy that is in their interest. And antitrust just
hasn't really stretched its muscles in a long time to
understand those kinds of quality issues. And it is going to
take a while. The facts are complicated. The law is
complicated. Judicial precedence need reexamination. And so the
bill is a good short-term remedy while the larger issues are
tackled.
Mr. Armstrong. Ms. Hubbard, do you want to talk?
Ms. Hubbard. I agree with Mr. Pitofsky. I caution what--I
worry about what Mr. Kimmelman is saying, that sometimes when
we say things are too complicated, it is a way of not doing
anything. And that is what we have been saying in this space
for a long time where we have seen regulators around the world
and enforcers around the world address this problem.
And we have just been sitting back worrying it is too
complicated. And I think it is important to take action quickly
and not keep kind of viewing complication as a reason to do
nothing.
Mr. Armstrong. And I agree with that. I don't think too
complicated is ever an answer. But I would also say, and this
is not an apples-to-apples comparison. But we are going to get
to watch this play out a little bit, because the EEU just
adopted really strict Internet rules. And one of the goals was
to increase and remove barriers entry.
But by holding the platforms themselves liable for
copyright violations, they may have--the cure may actually be
worse for them than the disease. And time will tell. But
automatic filter programs and scrubber programs that--such as
YouTube uses, because you mentioned YouTube earlier, are
incredibly expensive to run. And so--and plus--I mean, least in
the EEU, it is not quite the same.
And I am sorry for going over.
Mr. Cicilline. That is okay.
Mr. Armstrong. I didn't do an opening statement.
Mr. Cicilline. I am not trying to gavel you down yet.
Mr. Armstrong. But, I mean, while they pass the rules, each
member country is going to have promulgate their own laws in
association with those rules which can cause all kinds of
problems in that companies are going to have to operate in that
patchwork of different laws or just follow the most strict laws
of any of those countries. Or probably the worst-case scenario
is not do business in some of those countries.
So when you come from a small State and knowing that States
like California and New York will dictate a marketplace, you
always get concerned about that.
So I agree with you. But we are going to get to watch it.
Ms. Hubbard. Can I respond really quickly that we do have a
tool that we have had for a very long time, which is the
antitrust laws. So before you were looking at kind of different
solutions that Europe is pursuing, we used the antitrust laws
against Microsoft, it led to innovation. Many people say if it
weren't for our antitrust enforcement against Microsoft, Google
would never actually have been able to come onto the scene.
So it is not actually a novel problem or novel tool, so we
have these tools.
Mr. Armstrong. No. And I agree, which is why I asked the
antitrust question to start the questioning process.
Sorry about that.
Mr. Cicilline. No. No.
I now recognize the gentlelady from Florida, Mrs. Demings,
for 5 minutes.
Mrs. Demings. Thank you so much, Mr. Chairman, and thank
you to all of us--all of you for being here with us today.
Mr. Chavern, we talked about many newspaper publishers have
seen significant growth in digital subscriptions, but yet they
continue to struggle, and many have shut down which is truly
unfortunate. Would you please talk a little bit about why the
news industry continues to struggle despite the increase in
online readership and digital subscriptions?
Mr. Chavern. Certainly. Thank you. Again, the audience--our
audiences both growing and moving very quickly to online
spaces, and those spaces are dominated by just a few companies
that take the vast bulk of the advertising revenue, determine
everything about the experience you get with your news
publisher.
Again, I call them our regulators because they get to
decide what news is delivered to who and when. How the news is
delivered to me is different than the news delivered to you,
and whether we can monetize it and on what terms.
Mrs. Demings. I think it is so important for everyone to
hear your words on that topic. Please go ahead.
Mr. Chavern. They are incredible and powerful advertising
engines that do great targeted advertising often around our
content, and they take the bulk of the digital advertising
revenue. So, really, the rules of the game for online
engagement of news are set up against content creators,
publishers, and--but again, one of the things we do know is
that people love news. The audience is bigger than ever. It
drives a lot of engagement, and certainly the platforms know
this.
Mrs. Demings. Interesting what we define as news these
days, but please go ahead.
Mr. Chavern. The platforms know this. They know that people
go online to consume that product, and then they get to make
money monetizing them to our detriment.
Mrs. Demings. Thank you.
Ms. Hubbard, some researchers have estimated that for every
dollar an advertiser spends on digital ads, only $0.30 go to
the publisher meaning that ad tech mediaries could be capturing
around 70 percent of all digital ad spending. What, if
anything, does the 70 percent figure tell us about the market?
I would love to hear from you about that.
Ms. Hubbard. Yeah. As an enforcer, I would say--as a former
enforcer, I would say that 70 percent cut shows that there is
extraction that is happening, and it is not--there is not fair
bargaining power between the press and the tech platforms
because that is not, you know, a fair price. It is a monopoly
rent, really.
Mrs. Demings. And why is the fair bargaining power so
important to this industry and to the consumers?
Ms. Hubbard. Right. So as I said, you know, throughout the
economy, when you don't have--when you have such concentrated
markets, there is a lack of bargaining power. That means that
everyone else has to play by the terms of the dominant
companies, and we are talking about the press here which is so
critical to our democracy. We do not want them playing by the
terms of dominant companies. It is, you know, critical that
they have bargaining power and can have a fair deal with
getting this important content to the world.
Mrs. Demings. And finally, Mr. Riley. You know, the 20-
second sound bites are fine, and being able to click on a lot
of different things which many times, they really don't have
the same effect as a headline does, but there is just something
about reading the newspaper. I believe you get not half of the
story, you get more of the whole story. And I heard an editor
say once and the other big benefit is that you may bump into
another story that you had no intentions on reading. I think an
informed America is a better equipped and a smarter America.
Could you tell me what is lost when a local or regional
newspaper goes out of business, and what effect does that have
on the local community? You have shared two very powerful
stories with us today, but when a newspaper goes out of
business, what is that effect on a local community?
Mr. Riley. Well, let me try to explain it this way. You
know, there were several references to the engagement of
citizens and voting and that sort of thing, but let me give a
real world Georgia example, you know. We cover the State. We
have a big group of reporters who cover the State legislature
in Georgia when it is in session. And I try to go down there
each year and spend a day with our reporters and editors who do
that so that, you know, I can meet the legislators and really
get a good idea of the work.
Well, I have been down there, and sometimes it feels like
we--our reporters are the only ones there, and what is happened
is it has gotten too expensive to send reporters from Macon or
Valdosta or Columbus, Georgia. And what kind--that is not good.
That is not good for our democracy. That is not good for
Georgia. That is not good for any of those communities because
of what is happening in the industry. And I'll be honest you
with you. It is not good for us because the competition, we
like to see them around, and it would make us better, and we
would all be better. The state would be better, and all those
local communities would be better. And that is a kind of real
world example. And all of this discussion about these
complicated issues, that's how it really plays out.
Mrs. Demings. Thank you so much. I am out of time.
Mr. Chair, I yield back.
Mr. Cicilline. I thank the gentlelady.
I would just advise the witnesses on the panel they have
called votes. We only have two. So we are going to have Mr.
Gaetz, the gentleman from Florida, do his questioning and then
we'll briefly adjourn, go vote quickly and come right back, and
I apologize for the inconvenience. Mr. Gaetz is recognized for
5 minutes.
Mr. Gaetz. Thank you, Mr. Chairman. And I believe that we
are presented with an historic opportunity here where right
wing populists and left wing populists have joined together
under Chairman Cicilline's leadership to attempt to change the
way consumers interface with major technology platforms. In a
committee that so often sees division, it is nice to be working
towards such an important goal, and it truly is historic that
we are working together.
Mr. Chairman, it seems as though there are three ways that
the consumer experience can be altered. Initially, technology
companies can voluntarily choose to be more transparent with
consumers about their data and information, and they could
choose to act in better faith with partners in the news
industry.
The second way is that through investigations and hearings
like this, we would be able to animate the Department of
Justice to engage in a more rigorous enforcement of existing
antitrust laws.
And then the third option would be a legislative option. So
obviously someone's voluntary action is self-evident, but Mr.
Pitofsky, if our goal here were the second of sort of the three
legs of the stool I outlined, to animate the Department of
Justice in their antitrust enforcement, what specific guidance
would you give in that light?
Mr. Pitofsky. I think that the committee's goal of
investigating is a very good first step. There is a lot of
opacity in these markets. There is a lot that is not understood
about fees that are taken out through the ad tech stack, about
how the algorithms work, about how they are structured, if they
are, in fact, structured to benefit consumers as the platforms
say, or if they are structured with the intent of blocking
competition. So I think the most important first step is for
the committee to really dig into the facts and bring some
transparency.
Mr. Gaetz. That transparency objective is a virtuous one,
one that I believe in. What specific types of allegations would
you want the Department of Justice to lay out to achieve that
outcome?
Mr. Pitofsky. Well, to coin a phrase, I think I would
follow the money at this point. The engine of these platforms
is the advertising that they sell, and the amount, the paucity
of competition, the fact that they are able to extract so much
from that ad tech stack suggests something fundamentally broken
in the lack of competition in those markets which are the key
profit generators of the business, so I think I would go with
the ad tech first.
Mr. Gaetz. That is very helpful.
Mr. Chavern, I am going to ask you about the third leg of
the stool, the legislative options that we have available to
us. And I know we can enforce our antitrust statutes, but
another element of the Communication Decency Act applies to
major technology platforms and doesn't apply to the people you
represent, Section 230.
Section 230, as I understand it, and I am happy to be
corrected by others, would say that if a technology platform is
a neutral public platform that they enjoy certain liability
protections that newspapers don't enjoy, that Newscorp doesn't
enjoy with its assets. And so does it make the anticompetitive
posture of technology platforms more pronounced that they have
access to this special liability protection that the people you
represent don't have access to?
Mr. Chavern. Absolutely. There is a huge disparity,
frankly, when our content's delivered through these platforms.
We get the liability, and they get the money, so that is a good
deal from that end. You know, we are responsible for what we
publish. Publishers can and do get sued. On the other hand, the
platforms are allowed to deliver and monetize this content with
complete lack of responsibility. I think that is a disparity
that will have to be addressed. I think Section 230 had a
reason, a raison d'etre at the beginning. I think--particularly
with regard to the massive platforms, I think it is time to
relook at that.
Mr. Gaetz. Thank you.
And Mr. Chairman, that is very instructive testimony, I
think, because as we look at the ways to rebalance the scale,
there is legislation that you have introduced with Mr. Collins
to give the people before us the ability to band together in
that negotiating practice.
But I hope we wouldn't exclude from our gaze the other
statutory advantages that are baked into these business models
that, as Mr. Chavern says, shift liability to one particular
segment of the industry while at the same time giving others
liability protection in absence of the transparency that Mr.
Pitofsky noted that would demonstrate that they are worthy of
that liability protection.
And so I am not--I agree with Mr. Chavern that I am sure
there was a virtuous reason for Section 230. There is likely an
incarnation of Section 230 that would fulfill that initial
obligation. But in the absence of the transparency that
requires these platforms to show that they are a neutral
platform, that they are not putting their thumb on the scale
either in the way they operate their business or in the way
they can control content, I just think that is an important
part of the legislative function.
And I would finally add I am grateful that the President
has tried to enhance the voluntary actions of some technology
platforms by pointing out where he sees bias in that. And so
again, among those three things, I look forward to our great
work, and I yield back to the chairman.
Mr. Cicilline. You are doing very well with that final
comment, Mr. Gaetz. No. You are absolutely right, and I want to
assure you that this investigation is intended to look at a
broad range of practices on these platforms and a broad range
of remedies, so I look forward to working with you on that as
well.
And we will just stand in recess very briefly.
[Recess.]
Mr. Cicilline. The meeting will come to order. I now
recognize the gentlelady from Georgia, Mrs. McBath, for 5
minutes.
Mrs. McBath. Thank you so much, Mr. Chairman. I would like
to say to everyone that is here testifying today, thank you so
much. We really appreciate you being here. And because I do
represent Georgia's 6th Congressional District, I would like to
give a warm welcome, a special thank you to a fellow Georgian,
Mr. Riley.
Mr. Riley, your written testimony examines the decline in
competition in the Georgia press. What has that meant for the
information that Georgians are going to receive, Georgian
citizens, about their government at all levels?
Mr. Riley. Thank you for the question, Congresswoman. And
in a way, I guess you could probably answer it after that
spirited campaign in the 6th District. I think it was clear
that, you know, the Atlanta Journal Constitution--we devoted an
awful lot of our folks to covering that.
And I mention that because, see, I think that is what can
be lost, you know, crucial elections where other news
organizations may not be in a position in different parts of
Georgia to exhaustively cover a campaign, to vet the
candidates, to deal with the controversies, to sort through
potentially misleading television ads, that sort of thing.
And I also think that it creates a situation where we are
not competing with each other as news organizations as much.
And as has been acknowledged, I mean, everyone is better off
with true competition, and I mention that as well because that
is what has made the American press such a powerful part of our
democracy for our country's existence. We have always had a
healthy, vibrant press, and I think that we can point to that
and recognize it is part of the reason our country has enjoyed
so much success.
Mrs. McBath. Thank you. So, Mr. Riley, I heard from editors
and journalists that they really value their brand reputation,
and I understand a lot about brand, and that leaders can trust
their content. And, of course, we all know that in our online
world, misinformation is always a click away.
What are some of the ways that online platforms could help
the AJC maintain that relationship with its readers and help
readers know that they are getting information from a reliable
source?
Mr. Riley. Well, I am going to offer you a brief answer to
that and then suggest Mr. Chavern jump in because he has spent
a lot of time on this issue. But one of the things that is
important to us as a media organization is that it is clear
when users of any service come to our content that it is clear
to them that it is from the Atlanta Journal Constitution and
all that that means to people in terms of its accuracy, its
fairness, and how well presented that it is. And when it is
confusing to anyone about the source of content, we do invite
that idea of misinformation and people struggling to get to the
truth.
Mrs. McBath. Thank you.
And would you like to add to that, please?
Mr. Chavern. Sure. There has always been crazy conspiracy
theories. They usually were delivered to us by a crazy uncle
over the dining room table, and you knew that was different
than what was in the newspaper and what was on TV. And the
internet platforms, often these--all the indicators about brand
are suppressed, and that is not only bad for my members and the
publishing business because we are in the trust business. It is
bad for the public because they lose signals about where
information is coming from. So brand suppression is a serious
issue that we--that does need to be addressed with the
platforms.
Mrs. McBath. Thank you.
And Mr. Pitofsky, some have argued that reforms to preserve
local journalism could have the effect of causing higher prices
for advertisers, including small businesses. Do you buy that
argument? Why or why not?
Mr. Pitofsky. I don't buy that argument. I think the lack
of competition in the ad tech space for digital advertising is
raising prices for advertisers. And if there was more
competition in the space, the various platforms competing with
each other would need to give--offer better deals to one
another.
I don't know if you have seen--if you have it here that
Uber and Lyft are constantly sending notifications to their
riders of special deals, and that is healthy competition. That
is them having to give better deals to their customers to get
their business. I think that is what we would see if we
introduced more competition into the ad tech space.
Mrs. McBath. Thank you.
And for any of you, are there reforms that could preserve
and promote journalism, also ensuring that small businesses
have access to affordable advertising, and any one of you I
would love to hear from.
Mr. Schruers. If I may, Congresswoman. So as my testimony
notes, leaders in industry have already committed hundreds of
millions of dollars to supporting advertising initiatives and
provide tools that are currently allowing news publishers to
monetize their content.
The rate at which that revenue is usually split is 70/30. I
know that was cited previously in the hearing, saying that news
publishers are receiving 30 percent. The figure is right. Who
is getting the amount is wrong. The split is traditionally 70
percent going to the news publishers, and that is substantiated
by a U.K. government report cited in my testimony as well as a
number of other publicly available sources.
All that being said, we recognize that more can be done to
promote news journalism, and as our testimony suggests, there
is a variety of sources, of solutions including tax treatment
for incentives, deductions as well as non-profit status, and,
of course, grants beyond what our industry has been providing
to various programs for journalism promotion.
Mrs. McBath. Thank you so much.
I yield the balance of my time.
Mr. Cicilline. I thank the gentlelady, and I recognize the
gentleman from Colorado, Mr. Neguse.
Mr. Neguse. Thank you, Mr. Chairman, and thank you for
hosting this bipartisan hearing. I certainly appreciate the
bipartisan nature of the questions and certainly appreciate the
witnesses testifying today on such an important topic.
A thriving and diverse press, as we all know, is the
gateway for so many of our communities to learn about and
participate in our political discourse. In a world in which
three out of four Americans now access their news online
through two platforms, multiple newspapers are being forced to
merge or shut down. Local newspapers have seen the biggest
negative impact as we have heard from many of our witnesses
today. Since 2007, we have lost nearly 1800 newspapers, 500
from rural communities. One of those was my State's very own
Rocky Mountain News, Colorado's oldest newspaper, which closed
down in 2009.
And we also know from empirical studies that when
communities are left with no local newspaper, there is a direct
correlation to lack of communication and government
accountability. So that is why again today's hearing is so
important, and certainly the testimony and the questions that
have been posed underscore that fact.
Mr.--is it Sures?
Mr. Schruers. Schruers thank you.
Mr. Neguse. Mine is a tough one. It is Neguse.
Mr. Schruers. I feel your pain.
Mr. Neguse. Thank you for being here. I have a couple
questions for you, sir.
First, I want to talk about your comments regarding
antitrust exemptions. I reviewed your testimony. My sense,
based on your testimony, I will quote you, note a couple of
things. You say attempts to exempt certain industries from
complying with these antitrust protections have negatively
affected consumers and the economy as a whole.
You later talk about the fact that while you agree that
there need to be potential solutions that antitrust exemptions
have been proven to be, quote, an inadvisable solution to the
business model challenges of these publishers.
So I take it from your testimony, you are not a fan of
antitrust exemptions. Am I safe in presuming that you would
then agree also that the firms you represent, the companies you
represent, that they are also are subject to the antitrust laws
because obviously, a variety of them have made arguments in the
past that they were not. Is that a fair----
Mr. Schruers. The firms we represent are subject to
antitrust enforcement just like any other that doesn't benefit
from an exemption.
Mr. Neguse. And I presume you would oppose any effort
legislatively to try to draw up an exemption for those firms.
Fair to say?
Mr. Schruers. CCIA has never supported antitrust exemptions
of any kind. In fact, we argued against them during the
antitrust monetization commission that I cite in my testimony.
Mr. Neguse. Thank you. The second point I would like to
follow up on was regarding the ad revenue piece because I just
want to clarify for my own understanding and the record, and I
missed the exchange regarding the 70/30 split. My understanding
from your testimony is the example they are citing relates to
Google. Does that same ratio apply to the other companies, or
is that----
Mr. Schruers. Thank you for the question, Congressman. So
Google has publicly stated that on a few occasions. The
Cairncross report that I identify cites revenue splits between
other major internet services that are at 70 and above,
depending on the particular product that is being used by
different platforms. And in some case, it is 85 or even 100
percent of the revenue is retained by the news publisher, so it
varies greatly by the platform.
I know of no revenue split whereby the news publisher only
receives 30 percent. I am not saying there aren't some, but
these reports that are cited----
Mr. Neguse. I have limited time, and I appreciate your
answer. I would be interested, and perhaps we can follow up on
this after the hearing, in getting a detailed breakdown of the
revenue sharing across firms because I just--it is painting
with a broad brush. Citing one single example I think is not
advisable.
The last piece. I would just--so on page 3 of your
testimony, your written testimony, you talk about the benefits.
The fact that social media platforms in particular have offered
unique functionalities and features which have redefined user
involvement. Quote, users may share and amplify the reach of
news stories and help, quote, road test journalists' story
ideas, and you talk about that in a favorable sense.
The footnote--and I went up because I was struggling to
understand who would promote this idea that road testing
journalists' ideas or journalists' stories, I should say, is a
good approach to journalism. You cite a study that was called
The Future Newsroom, University of Melbourne, September 2017.
It is on page 3, footnote 9.
And in the parenthetical, you state this study essentially
stands for the proposition noting publications use of Twitter
to road test story ideas where high engagement was taken as a
sign to publish a story.
Mr. Schruers. Yes.
Mr. Neguse. Do you know who commissioned the study?
Mr. Schruers. I do not, no.
Mr. Neguse. So I would encourage you to look it up--
Facebook commissioned the study. I Googled that and found on
page 2 that it was commissioned, and I am not--I say that only
because a lot of the discussion we have had in this committee
over the course of the last several months, as you may well
know, has been around election interference by a foreign
adversary in 2016. And so much of that related to social media
disinformation and precisely these types of actions where
engagement on Twitter is used to proliferate or even propagate
stories that happen to be false.
And I guess what I would just--I would caution that I
don't--I think there is reason to be concerned about this
notion that road testing and using the engagement on Twitter as
a sign as to whether or not the stories should be further
published, that that is the true test of success or a barometer
of success I just think is not a tenable position, in my view,
and I am happy to give Mr. Riley and Mr. Pitofsky a chance to
respond to that question.
Mr. Cicilline. The time of the gentleman has expired, but
the witnesses may answer the question.
Mr. Riley. I am not familiar with the study, and I do know
that a lot of times in some of the social media platforms, on
the same story, people will experiment with different headlines
or invite users to make suggestions. To me, that is sort of a
tangent to the core thing that we really worry about with local
journalism which is getting out there, finding out what is
really going on, digging deep into it, and making sure we get
it to an audience. But again, I am not familiar with the study.
Mr. Pitofsky. I would just add that some of your earlier
questions pointed out a factual dispute in the room which is
the percentage of fees that goes to the publishers versus the
platforms which is a critical fact. I would encourage the
committee as part of its investigation to look there because it
is a profound question, and there is a lot of disagreement. I
think you are going to find the statistics are closer to the
ones cited by the Congresswoman earlier in the proceedings.
Mr. Cicilline. I thank the gentleman. I now recognize
myself for 5 minutes.
Mr. Schruers, I want to start with you. Google captures 88
percent of the U.S. online search market, 94 percent of all
searches on smartphones, 78 percent of the search ad tech
market, and 59 percent of the third party display ad market. I
take it you agree that these don't, at least on their face,
appear to be competitive markets?
Mr. Schruers. Which precise market are we talking about?
Mr. Cicilline. Well, let's start with searches on
smartphones, 94 percent of the market controlled by one
platform. You would agree that is not competitive under any
definition?
Mr. Schruers. Well, I think I would say 94 percent of a
relevant market would be something worthy of considering, but I
think----
Mr. Cicilline. The mobile search ad market is not a
relevant market?
Mr. Schruers. I think the relevant market in that case
would be what economists would tell us compete with that. And I
know that searching on my phone in the browser, I can also
search on my phone by asking Siri. I can search talking to the
digital assistant smart speaker in my room.
There are a lot of places that users today can go to get
answers that extend beyond the browser search experience, and
these are increasingly pageless tools that don't require a
search engine. And so, you know, I think economists might not
agree that desktop search is a discrete market.
Mr. Cicilline. I don't actually know any economist who
doesn't agree that that is not a competitive market. I guess I
am asking you. Do you agree that that is not a competitive
market when it is operating at 94 percent of the market share?
Mr. Schruers. I think 94 percent of the market share, of a
market, of a relevant market is something worth consideration.
I guess is question is whether that is a market.
Mr. Cicilline. International competition authorities have
found that Google has given preferential treatment to its own
services in the online shopping and online search markets. Do
you see or do you at least acknowledge a risk of self-
preferential treatment in the digital ad market?
Mr. Schruers. So the--well, let me start by saying I think
that is a reference to the European case, and obviously,
European antitrust law is not the same as U.S. antitrust law,
and as I understand it, is actually stricter on the question of
self-preferencing.
Mr. Cicilline. I am asking whether or not the kind of self-
preferential treatment, whether or not that, in fact, is--there
is a risk of that in this market and whether there currently is
any way for a publisher to identify this self-preferential
treatment?
Mr. Schruers. So I don't have sufficient information about
the internal decision-making of any of our companies to speak
to precisely that issue, but I would be concerned about a rule
that says, for example, that the grocery store can't put its
own grocery store brand products at eye level in the store
because that is where they find more things----
Mr. Cicilline. I don't think I was contemplating a rule
that does that. It would be helpful, though, as this
investigation is undertaken that we, at least, agree to a
common set of facts. And we will discuss solutions later on in
the process, but I think sort of the fact finding and evidence
gathering is really important.
You encouraged caution when enforcing antitrust against big
tech platforms, but in many ways I think caution is what we
have had for the last decade which I think has resulted in the
emergence of advertising monopolies, and I think many of us
think it is time to try something different, in any event.
But Ms. Hubbard, I would ask you. The Press Gazette
recently reported that a single algorithm change at Google
resulted in Google directing traffic to the mail online that
caused it to fall by 50 percent. Nick Thompson, the editor of
Wire, shared that a single tweek by Facebook caused Facebook-
based traffic to Wire to drop by 90 percent.
How does this power dynamic, the fact that a platform can
effectively shut off a publisher's traffic, affect the
independence of the press, and you know, the ability of people
to access trustworthy and reliable news?
Ms. Hubbard. Well, clearly it is a monopoly problem because
no one company should have the ability to decide which
publications can exist and which ones can't. And this ability
to turn off basically the traffic to any publisher is hugely
problematic from a democracy standpoint because it basically is
a shield from criticism. There are a lot of people who are
never--a lot of journalists are not even going to have the
courage to speak out and criticize big tech in the first place
knowing that this can be done.
Mr. Cicilline. Thank you.
Mr. Kimmelman, several media leading economists have
commented that antitrust enforcers have been too permissive of
mergers that involve a loss of competition among nascent rivals
of potential competitors. For example, Dr. Carl Shapiro of the
University of California Berkeley has noted that Google's
acquisition of Double Click in 2007 and Facebook's acquisition
of Instagram in 2012 are examples of mergers that involved the
loss of competition.
Do you agree? And if so how can merger enforcement be
tightened to address these concerns? And also, you note in your
written testimony that we can't rely on antitrust alone to
adjust the problems of platform power, and I wonder if you
would share what tools you think Congress has traditionally
used to promote competition in communication markets and what
we ought to be thinking about as we confront these challenges?
Mr. Kimmelman. So Mr. Chairman, I do think that potential
competition is an area of dramatic underenforcement. When I was
at the Justice Department, we did raise concerns about
Comcast's purchase of NBCU at the time and raised the question
of impact on online video distribution. It was not the first
time, but it was very seldom that that tool was used. I think
antitrust enforcers need to use it much more aggressively.
I think going back and looking at those transactions, there
probably are some that ought to be reviewed now to determine
whether they were rightly decided, whether there is a basis
under antitrust law to revisit those, but potential competition
is critical.
And I would say most importantly in the marketplace of
ideas where you have communication platforms that are the most
critical way in which we get content for our news and
information, we ought to be most careful to be promoting as
many entrants, as much potential competition as possible.
Mr. Cicilline. Thank you. I just want--excuse me.
Mr. Chavern, I just have one final question. You know, I
think you made reference to the increasing number of people
that obtain their news from digital services. You know,
participation by subscription, lots of interesting engagement
in news, so a huge increase in consumer and in customer use of
your product but declining revenues. But I think Mr. Schruers
has said that is just the way it is. That is just the market.
That is just sort of the moment we are in. What is your
response to that?
Mr. Chavern. Present trends can't continue. If we continue
on this path, we are going to lose vast amounts of quality
journalism, particularly in communities all around the country.
That is not just a bad business outcome. That is utterly
destructive through our civic society and can't be allowed to
happen. And what we have asked for is a chance, a chance for a
different kind of future, and we need that future collectively.
Mr. Cicilline. Thank you, Mr. Chavern.
I would like to ask unanimous consent to allow a member of
the--not a member--a member of the full Judiciary Committee but
not a member of the subcommittee who has joined us, the
gentlelady from Texas, be allowed to ask a question.
Without objection, so ordered.
Ms. Jackson Lee. Mr. Chairman, let me thank you for the
journey that you have started this subcommittee on, and out of
your courtesies, I hope to be able to join you as you make this
journey. Forgive me for my delay, but I was in the Rules
Committee which is a long process dealing with ongoing
amendments.
I have served on the full committee for a pretty long time
and have served on this committee in the past, and my
recollection might serve me. I might have even been ranking
member at some point in time, but it is an important committee,
but there is important work as we speak. And so I will try to
be focused in my questions but to read a statement that I think
will guide my questioning.
A small number of digital platforms appear to have outsized
control over access to trustworthy news online. And I am a
partaker of the National--the NNPA which is the Association of
African American Newspapers, newspapers that have an enormous
history back to reconstruction periods after slavery as the
vehicle of information for many. I am familiar in a diverse
community like Houston that speaks 98 languages that there are
many papers that reflect different communities, newspapers,
maybe online as well, but they seem to be adhering to
newspapers.
So--and then in the last election, of course, and 2018 and
2016, we know the conspicuous invasion of the foreign
adversaries who utilize online tools to mislead voters, to
utilize Russian bots which we expect to occur in the coming
2020 elections. So we are putting ourselves in a very difficult
challenge if we don't look at the source of news.
And then as I see the gentleman from the Atlanta Journal
Constitution, I know that the paper newspapers are online. We
understand that. But I think I would ask this question of
everyone, and I think--was that Mr. Chavern who as I came in
said that we can't last this way. And so I am going to ask the
question as we begin this journey of how do we deal with online
digital.
I know that Mr.--Chairman Cicilline who I compliment will
also have some overlapping digital privacy issues which we are
dealing with in Homeland Security. But I want to have everyone
answer if they would, the Achilles heel of dealing with online
truth and a correction that they would want to see this
committee engage in.
And Mr. Chavern, are you the first because I can't see your
placard there. And if everyone would take that question, maybe
the Atlanta Journal might want to comment on what it is doing
to newspapers even though I know you may be online as most are.
Go ahead, sir. Thank you.
Mr. Chavern. Just briefly, the answer is more quality and
more responsibility. My members produce quality journalism for
which they are responsible. If the platforms have a problem
with quality information, and they do, the answer is more
content from quality publishers. We need a sustainable
partnership. We could have one. We can have one. It is
achievable, but the platforms have been unwilling to do that to
date, and that is why we are here.
Ms. Jackson Lee. Thank you.
Sir.
Mr. Kimmelman. Congresswoman, I totally agree that we need
quality content. I think that we have a problem both in online
platforms that comes from every user of those platforms and
every media company that is not doing careful, trustworthy
curation of information. It comes all across the marketplace
with the same incentives for the most salacious material.
I would urge you to consider as you do your fact gathering
and investigation to consider whether you need legislation to
recreate some public service duty for everyone online, whether
it be a news media company, a newspaper, or a platform to
deliver trustworthy information and create the financial
incentives to produce that. That would give the marketplace
better information, better signaling of what is fact and what
is fiction, and hopefully it would create the kind of money
that we are hearing from local newspapers they need to sustain
themselves.
Ms. Jackson Lee. Thank you. Is it Ms. Hubbard?
Ms. Hubbard. Yes. Thank you.
Ms. Jackson Lee. Thank you.
Ms. Hubbard. Thank you, Congresswoman.
So as I said earlier, I think competition is--would help
with this disinformation problem because consumers right now
don't have an option of choosing a platform that doesn't boost
disinformation with its engagement algorithms.
Facebook and YouTube both use these engagement algorithms
that actually boost the propaganda and disinformation. So
consumers need to be able to vote with their feet, and the same
with publishers so that Facebook--so that YouTube and Google
actually have a risk of losing profits. And they are motivated
to fix this problem by not losing profits.
And the other thing I would like to add quickly is privacy
regulation would also help because it is this 360-degree view
of users collecting their data across the web that allows this
information agent to then precisely target people based on the
data collected about them.
So if we collected less data about people, especially not
in ways that they would never expect, there would be less
ability to hypertarget them with this information.
Ms. Jackson Lee. Thank you.
Mr. Cicilline. Thank you. The time of the gentlelady has
expired.
I am now going to ask unanimous consent to add a number of
letters and statements to the record regarding the
subcommittee's recently announced investigation into major
technology firms' potential anticompetitive behavior. A
statement from Consumer Reports expressing their support of the
investigation. Without objection. A joint statement from Laura
Basset and John Stanton, two journalists who were laid off by
the Huffington Post and Buzzfeed respectively, without
objection, and a letter from EPIC, the Electronic Privacy
Information Center, without objection.
[The information follows:]
MR. CICILLINE FOR THE RECORD
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Mr. Cicilline. This concludes today's hearing. I want to
say thank you again to our very distinguished witnesses for
their testimony.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing is adjourned.
[Whereupon, at 5:09 p.m., the subcommittee was adjourned.]
APPENDIX
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