[House Hearing, 116 Congress] [From the U.S. Government Publishing Office] ONLINE PLATFORMS AND MARKET POWER, PART 1: THE FREE AND DIVERSE PRESS ======================================================================= 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 __________ 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 _________ 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 ---------- 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 ---------- 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 ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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 ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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 ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]