[House Hearing, 116 Congress] [From the U.S. Government Publishing Office]ONLINE PLATFORMS AND MARKET POWER, PART 3: THE ROLE OF DATA AND PRIVACY IN COMPETITION ======================================================================= 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 __________ OCTOBER 18, 2019 __________ Serial No. 116-59 __________ 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 39-840 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 ---------- OCTOBER 18, 2019 OPENING STATEMENTS Page The Honorable Jerrold Nadler, Chairman, Committee on the Judiciary...................................................... 1 The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law................ 3 Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law.............................. 4 WITNESSES The Honorable Rohit Chopra, Commissioner, Federal Trade Commission Oral Testimony............................................... 37 Prepared Testimony........................................... 40 Tommaso Valletti, Professor of Economics, Imperial College Business School Oral Testimony............................................... 48 Prepared Testimony........................................... 50 Jason Furman, Professor of the Practice of Economic Policy, Harvard Kennedy School Oral Testimony............................................... 56 Prepared Testimony........................................... 58 Roslyn Layton, Visiting Scholar, American Enterprise Institute Oral Testimony............................................... 64 Prepared Testimony........................................... 66 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING A letter by the George Mason University Mercatus Center from The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law................... 6 A letter by the CTIA, the Internet and Television Association, and the Broadband Association from The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law.............................. 10 A letter by the Electronic Privacy Information Center from The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law................... 13 A letter by Netchoice from The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 19 A letter by the CTIA, the Internet and Television Association, and the Broadband Association from The Honorable Ken Buck, Member, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 93 A letter by 20 child advocacy groups from The Honorable Ken Buck, Member, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 96 A statement for the record by Ranking Member Doug Collins from The Honorable Kelly Armstrong, Member, Subcommittee on Antitrust, Commercial and Administrative Law................... 106 A statement for the record by Rod Sims, Chair of the Australian Competition and Consumer Commission, from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 122 A statement for the record by Dina Srinivasan from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law.............................. 132 A letter by Consumer Reports from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 138 A statement for the record by Maurice Stucke and Ariel Ezrachi from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law................... 141 A statement for the record by Margrethe Vestager, European Union Commissioner for Competition, from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 168 APPENDIX A statement for the record by Shoshana Zuboff from the Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law.............................. 176 ONLINE PLATFORMS AND MARKET POWER, PART 3: THE ROLE OF DATA AND PRIVACY IN COMPETITION ---------- FRIDAY, OCTOBER 18, 2019 House of Representatives Subcommittee on Antitrust, Commercial and Administrative Law Committee on the Judiciary Washington, DC. The subcommittee met, pursuant to call, at 9:41 a.m., in Room 2141, Rayburn House Office Building, Hon. David Cicilline [chairman of the subcommittee] presiding. Present: Representatives Cicilline, Nadler, Johnson, Jayapal, Demings, Scanlon, Sensenbrenner, Buck, Gaetz, Armstrong, and Steube. Staff Present: 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 Professional Staff. Chairman Nadler [presiding]. The subcommittee will come to order. Without objection, the chair is authorized to declare recesses at any time. We welcome everyone to the third in our series of hearings investigating competition in digital markets, this one on the role of data and privacy in competition. I now recognize myself for an opening statement. I should state the obvious: I'm not the chairman of the subcommittee; I'm the chairman of the full committee. The chairman of the subcommittee will be here in a few minutes. Digital technologies have provided Americans with a remarkable array of services. It has never been easier to share news and information, to publish content, and to communicate with loved ones all at a moment's notice. But as with technological revolutions of the past, this transformation has upended the balance of power across our economy. It is important for Congress to study and understand how these imbalances are affecting Americans, what is causing these asymmetries of power, and whether these new and growing inequalities are compatible with our democratic values. The committee's ongoing oversight of competition in digital markets is a key part of this process. Today's hearing will examine the role that data plays in creating and maintaining inequalities of power and how this affects competition. As previous hearings have shown, a growing share of commerce and communications is now controlled by a small number of companies. Because these platforms are, in essence, large intermediaries, they are perfectly positioned to closely track each transaction in communication that passes through their channels. While intermediaries have long collected information on the economic activity that flows through their platforms, the large firms of the digital economy have unprecedented ability to track and surveil users across the internet. This data collection includes information not only about a person's shopping and reading habits, but also about the time that they wake up and go to sleep, a precise location of each hour of the day, and the content of their most private communications. Because several of these platforms derive the vast majority of their revenue through digital advertising, these firms also have an incentive to collect as much information as possible so they can target consumers with precision. This trove of personal information can also be used by companies in even more nefarious ways to discriminate based on the user's race, gender, or income, or otherwise to intrude on personal privacy. In light of these trends, there are at least two questions that I hope will be addressed in today's hearing. First, how are digital technologies and the constant data collection they enable affecting competition? Is there something unique about digital markets that enables firms to acquire and maintain market power in novel ways? In digital markets, maximizing data collection can provide a company with a significant competitive advantage. A large and constantly growing set of user data allows firms both to improve existing products and services and to expand into new lines of business, often with a competitive edge. Frequently, the most dominating companies in the digital economy are those that have captured the most data from as many sources as possible. In recent years, scholars have described this dynamic as leading to winner-take-all markets where the first company to establish a competitive lead wins the market, crushing any potential competition. In other words, competitors of digital markets have a strong incentive to collect as much information on users as possible, as quickly as possible, as part of a long-term strategy to compete in the marketplace and to achieve market dominance. This raises serious questions about whether it is good for society for unrelenting data collection to be the key dimension on which companies are looking to outcompete one another. The fact that several major digital platforms make most of their profits by selling targeted advertisements heightens those incentives. The second question that I hope will be addressed in today's hearing is how data collection increases the number of ways that dominant companies can abuse their market power. Does the collection and use of data enable new forms of conduct that lawmakers and regulators should recognize as anticompetitive? For example, platforms and service intermediaries for commerce have critical insight into their rivals' business models, a dynamic that raises significant competition concerns. With these issues in mind, I look forward to hearing from our esteemed panel of witnesses today. I yield back the balance of my time, and I now recognize, for his opening statement, the distinguished ranking member and former chairman of the committee, Mr. Sensenbrenner of Wisconsin. Mr. Sensenbrenner. Thank you, Mr. Chairman. Today, we continue our oversight of the state of competition in the tech sector. To date, our primary focus has concerned large online platforms. The specific topics we address today, the roles that data and data privacy play in competition, and the ways in which we can better protect the privacy of consumers' online data largely concern these same platforms. Data is, in many ways, the life blood of the internet. Numerous issues are swirling around the use of this data. For example, these include allegations that, one, platform's needs for very large accumulations of data can operate as a barrier to market entry by new platforms. Two, platforms holding large databases can leverage that data to compete unfairly with third-party competitors that are dependent upon their platforms. Three, incumbent platforms have pursued mergers with emerging competitors in order to kill off competition for data acquisition and market shares. It is my hope our hearing can help us determine fact from fiction when it comes to these allegations. As I have stressed before, antitrust laws do not exist to punish success, but to foster it. Congress and antitrust enforcement agencies need to be careful not to overreach to extend or apply antitrust laws in ways that end up punishing success, suppressing innovation, and ultimately, limiting consumer welfare. This applies not just to issues concerning competition for data, but also applies to issues concerning privacy. If we're going to address data and consumers' data privacy through legislation, we must get it right. I do not say this in a vacuum. Governments in the United States and Europe have already begun to lay down laws to address these issues. The most prominent example to date is the European Union's General Data Protection Regulation, or GDPR. Following in its footsteps has been California's recently passed California Consumer Privacy Act, or CCPA, which is substantially modeled on the GDPR. And testimony offered before the Senate Judiciary Committee in March by one of our witnesses today, Dr. Roslyn Layton, constituted a powerful indictment of the GDPR. However well- intentioned, the GDPR is already producing substantial collateral damage to consumer welfare, innovation, and the health of the digital economy. It is likely that the CCPA will have the same effects. All of these effects are avoidable. It is imperative that we in the United States identify and put in place a better means of protecting consumers' privacy online. I hope our witnesses today can help us work our way through these important issues. And before yielding back, let me ask unanimous consent to insert in the record a number of statements and submissions to the record that I have received. One from the Mercatus Center of George Mason University. Mr. Cicilline [presiding]. Without objection. Mr. Sensenbrenner. Second, a joint statement by the national CTA, CTIA, and USTelecom. Mr. Cicilline. Without objection. Mr. Sensenbrenner. A letter that has been sent to the chairman and myself from epic.org. Mr. Cicilline. Without objection. Mr. Sensenbrenner. A letter for the record from Carl Szabo, vice president and general counsel of NetChoice. Mr. Cicilline. Without objection. Mr. Sensenbrenner. And I now yield back the balance of my time. [The information follows:] MR. SENSENBRENNER FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. I thank the gentleman for yielding back, and I thank the chairman of the full committee for opening the hearing. I now recognize myself for an opening statement. In June, this committee launched a historic bipartisan investigation into the state of competition in the digital marketplace. The purpose of this investigation is to document anticompetitive conduct online, to examine whether dominant firms are engaging in anticompetitive conduct, and to assess whether our antitrust laws and current enforcement levels are adequate to address these problems. Since launching the investigation, the committee has held a series of bipartisan hearings, briefings, and member roundtables as part of this top to bottom review. Most recently, we have requested documents, communications, and information relevant to the investigation from the four dominant platforms. On Monday, the committee received the first tranche of responses to the requests, tens of thousands of documents, and we expect to receive and review additional materials as part of this request in the weeks ahead. We'll also continue to hold hearings and roundtables and conduct oversight to ensure that the goals of the investigation are met. As I've said before, this work is essential to the committee's legislative mandate and constitutional responsibility to conduct oversight of our antitrust laws and competition policies to ensure that they're working. Congress, not the courts, agencies, or private companies enacted the antitrust laws, and Congress must be responsible for determining whether current laws or enforcement levels are keeping up with the digital markets. We have much work ahead of us, but I'm immensely proud of the efforts of my colleagues, Chairman Nadler and Ranking Members Collins and Sensenbrenner, along with their dedicated staff, and look forward to continuing this important bipartisan work together. Today's hearing is an important opportunity to advance our understanding of a key component of competition online, the role of data and privacy. Over the past year, several leading international competition authorities and antitrust experts have published groundbreaking reports that have focused on this issue. As these reports have noted, data is at the heart of competition online. For example, an exhaustive report by the Australian Competition and Consumer Commission concluded, and I quote, that ``the breadth and depth of user data collected by the incumbent digital platforms provides them with a strong competitive advantage, creating barriers to rivals entering and expanding in relevant markets, and allowing the incumbent digital platforms to expand into adjacent markets,'' end quote. The United Kingdom's Digital Competition Expert Panel, which was chaired by Professor Jason Furman, one of our esteemed witnesses here today, similarly reported that large troves of data, when combined with network effects, may tip markets in favor of a single dominant platform, killing off competition. Data also plays an important role in the ability of startups to attract venture capital to compete with dominant firms in these markets. As part of a broader review of competition in the digital economy, a panel of experts led by Professor Fiona Scott Morton for the Stigler Center at the University of Chicago, reported that investors often evaluate startups based on their access to data. As they explained, I quote, ``a new entrant starved of data, quantitatively and qualitatively speaking, relative to a tech giant is at a significant competitive disadvantage, and investors will be unlikely to invest as they view that data deficit as insurmountable,'' end quote. This has real consequences for entrepreneurs and startups that get locked out of the market and never get a chance to compete on the merits to offer new and innovative services. There's also broad agreement among antitrust experts that data can be abused by platforms for anticompetitive purposes. In some instances, these tactics have created an innovation kill zone around dominant firms. Whether its Facebook's use of Onavo to spy on its competitors, Amazon's ability to identify and clone popular products being sold in its marketplace, or the weaponization of API to block competitors, we know that the abuse of data has serious ramifications for competition. This hearing also presents an important opportunity to examine the role of privacy and antitrust enforcement and competition online. There's a growing consensus among enforcers in the United States and abroad that privacy is an important dimension of competition online. While many online services claim to be free, we know that people pay in the form of their personal information and their attention, which are both critical for online advertising revenue. In a statement submitted for the record for today's hearing, Dina Srinivasan notes that market consolidation allows dominant platforms to harm consumers, and I quote, by not--not by escalating prices, but rather by diminishing quality by eroding privacy terms, end quote. Furthermore, as the U.K.'s Digital Competition Expert Panel has also reported, the misuse of data and harm to privacy is not only an indicator of low quality caused by a lack of competition, but it also can be used to cement a firm's dominance in the market as well. In other words, in a market that has vibrant competition, firms have strong incentives to respond to consumer demand by improving the privacy safeguards for their products. But without competition, incumbents have no incentive to deliver users' privacy. I recently had the pleasure of discussing this with Shoshana Zuboff at the Harvard School of Business, who has recently written about the rise of surveillance capitalism. A point that she made that struck me is that the pattern of automating consumer behavior for more clicks and better predictions is itself a market externality. There is no consumer demand for this service. Americans don't want to have their information systematically mined just so they can be shown another advertisement or nudged toward a political candidate, but in many cases, there is no escape from the surveillance because there's no alternative. People are stuck with bad options or no options at all, which is evidence of a market failure. Furthermore, companies that want to compete by offering services and products that do not rely on user surveillance are disadvantaged by this business model, which, in turn, reinforces the market dominance of the dominant firms. It's increasingly clear that the relationship between competition and privacy is not either/or. They are mutually reinforcing concepts that must be at the forefront as we consider proposals to restore the internet to its full promise, and I approach today's hearing with these concerns in mind. Before closing, I'd like to take one moment to thank Commissioner Vestager of the European Commission and Chairman Rod Sims of the Australian Competition and Consumer Commission for their statements submitted for today's hearing. Chairman Sims was originally scheduled to testify at this hearing, but due to an unfortunate change in our schedule, he's unable to attend today. Nevertheless, I want to thank him and his team for all of their hard work in advance of this hearing on this issue. And now it is my pleasure to introduce today's witnesses for today's hearing. Our first witness is the Honorable Rohit Chopra, the Democratic commissioner at the Federal Trade Commission since 2018. Before joining the FTC, Commissioner Chopra was instrumental in establishing the Consumer Financial Protection Bureau. He worked on the agency's implementation team after the passage of the Dodd-Frank Act in 2010, and became the CFPB's first student loan ombudsman. He went on to serve as assistant director of the CFPB, and made significant inroads towards addressing the student loan crisis in the United States. He was nominated by President Trump to serve as an FTC Commissioner on February 28, 2018, and was confirmed unanimously by the Senate on April 26, 2018. Commissioner Chopra received his B.A. from Harvard University and his MBA from the University of Pennsylvania. Our second witness, Mr. Tommaso Valletti, has been a professor of economics at the Imperial College of London since 2007. Before that, he served as the chief competition economist for the European Commission for 3 years, where he focused extensively on competition and digital markets. He has served as a professor of economics and management at the University of Rome, where he still serves as a visiting professor of economics. Professor Valletti is also currently a research fellow at the Centre for Economic Policy Research and the Mannheim Centre of Competition and Innovation. He received both his masters and Ph.D. from the London School of Economics. In addition to his work as an economist, Professor Valletti also received his flute diploma from the Conservatorio di Musica in Torino. [Speaking foreign language.] Our third witness is Jason Furman--that was an applause line; no--our third witness is Jason Furman, a professor of the practice of economic policy at the Harvard Kennedy School. Before joining the Kennedy School's faculty in 2017, Professor Furman served as chair of the Council of Economic Advisers during President Obama's second term. From 2009 to 2013, Professor Furman was an assistant to the President and principal deputy director of the National Economic Council. He currently serves as a nonresident senior fellow at the Peterson Institute for International Economics, as well as an adviser on digital market units for the U.K. Government. Professor Furman received his B.A., M.A., and Ph.D. from Harvard University, as well as his master's of science from the London School of Economics. Our final witness on the panel is Roslyn Layton. Dr. Layton is currently a visiting scholar with the American Enterprise Institute. She also serves as a visiting researcher at Aalborg University and as the vice president of Strand Consult in Copenhagen. Before her tenure with AEI, Dr. Layton worked as the director of search agency services at IBM Coremetrics. She has been published dozens of times in numerous publications, including Forbes, the U.S. News & World Report, and The Hill, and served on President Trump's transition team in 2016, helping to establish his Federal Communications Commission. Dr. Layton received her B.A. from American University, her MBA from the Rotterdam School of Management, and her Ph.D. from Aalborg University. We welcome all of the incredibly distinguished witnesses on our first panel. Thank you for participating in today's hearing. And 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're about to give is true and correct to the best of your knowledge, information, and belief, so help you God? Let the record show the witnesses answered in the affirmative. Thank you. You may be seated. Please know that each of your written statements will be entered into the record in its entirety. Accordingly, I ask you summarize your testimony in 5 minutes. To help you stay within that time, there's a timing light on your 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 has expired. Commissioner Chopra, you may begin. TESTIMONY OF THE HONORABLE ROHIT CHOPRA, COMMISSIONER, FEDERAL TRADE COMMISSION; TOMMASO VALLETTI, PROFESSOR OF ECONOMICS, IMPERIAL COLLEGE BUSINESS SCHOOL; JASON FURMAN, PROFESSOR OF THE PRACTICE OF ECONOMIC POLICY, HARVARD KENNEDY SCHOOL; AND ROSLYN LAYTON, VISITING SCHOLAR, AMERICAN ENTERPRISE INSTITUTE TESTIMONY OF THE HONORABLE ROHIT CHOPRA Mr. Chopra. Thank you, Mr. Chairman, Ranking Member Sensenbrenner, and members of the subcommittee. My name is Rohit Chopra, and I serve as the Federal Trade Commissioner. Oversight from Congress is a pillar of sound, transparent government, and I've been honored to testify many, many times before Members of Congress, including before Chairman Elijah Cummings, whose energy and passion will be missed by so many of us. Today's topic could not be more important or timely, as it seems almost daily we learn of problems stemming from the lack of competition. To this end, I think we need to focus on four ways that companies undercut competition: concentration, conflicts of interest, contracts, and capture. Market power is concentrated with a few giants in so many industries. Conflicts of interest allow these dominant firms to sometimes rig the market in their favor at the expense of upstarts and new businesses that fairly compete. One-sided take-it-or-leave-it contracts and online terms of service impose self-serving regulations on consumers and small businesses. And all too often, the government is too captured by those incumbents who use their power to dictate their preferred policies. In my testimony, I discuss how competition in the technology market is structured around data, a valuable asset with very unique economic features we need to take into account. Our personal data is powering the profits and dominance of tech companies that offer basic services like email, search, or photo sharing that are not truly free. Fortunately, many of my colleagues around the world are also pushing forward. Reports from regulators in Australia, the United Kingdom, the European Union are must reads for this committee and everyone concerned about the future of our digital economy. In the United States, as you know, our efforts are a work in progress, and I agree that we need to take a fresh look at our policies and guidance. And as we do, it is important that the Federal Trade Commission conduct a rigorous review of quantitative market data and an analysis of the financial incentives driving market-distorting behavior. Since joining the Commission, I have argued that the FTC should be using our authority under section 6(b) of our act to get the data we need to effectively police these markets and report our findings to you and the public. When it comes to enforcement, I am more optimistic now that scores of States attorneys general, both Republican and Democrat, are teaming up to investigate anticompetitive conduct in the digital economy. In this moment, it is all hands on deck, and I stay in constant communication with them. Decades ago, our State AGs played a pivotal role in ending Microsoft's choke hold over the future of the internet. And without that action, there would likely be no Google, no Facebook, and no Amazon. While the FTC's recent settlements with Facebook and Google's YouTube included fines that made for great headlines, they did little to fix the core problems that fueled these companies' data abuses. Big fines are not big penalties for the world's biggest companies, and as we have seen time and again, when a company can simply pay a fine from its ill-gotten gains, this isn't a penalty; this is an incentive. As Congress, Federal antitrust enforcers, and State attorneys general all pursue their investigations, we will need to pursue remedies that reduce concentration, eliminate conflicts of interest, rescind abusive contract terms against small businesses and consumers, and limit capture. For example, recent scholarship has revealed that antitrust actions that separated lines of business or required interoperability of standards or ordered more patents available for public use after anticompetitive conduct, all led to massive innovation, small business entry, and economic growth. These are useful tools in the toolbox for policymakers and enforcers to consider when looking to both remedy and prevent harm. In conclusion, while some believe that lax enforcement and absentee government are the ingredients of innovation, history teaches us it's the opposite. Without a vigilant and active government promoting competition, markets cannot thrive. Sometimes that means providing corporations with benefits like limited liability, license contracts, and other opportunities, but free and fair markets won't work without meaningful consequences for law breakers, and inaction is a price we simply cannot afford to pay. Thank you, Mr. Chairman. [The statement of Mr. Chopra follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Commissioner. I now recognize Dr. Valletti for 5 minutes. TESTIMONY OF TOMMASO VALLETTI Mr. Valletti. Mr. Chairman, ranking member, and members of the subcommittee, good morning, and thank you very much for inviting me. My name is Tommaso Valletti, and I am professor of economics at Imperial College in London. Between September 2016 and August 2019, I was the chief competition economist of the European Commission. In that role, I led the economic analysis of several cases, involving digital platforms, including Google, Facebook, Amazon, Apple, Microsoft, and others. Today, I would like to make four points. My first point is obviously about data. Some commentators have argued that data is a new oil. Others have gone to the opposite extreme by claiming data is as common as water, as air. These sweeping generalizations are not very useful. It is self-evident that data is key to digital platforms, and also, only a few gatekeepers are in a position to control the tracking and linking of behaviors across platforms, online services, and websites. They can combine several data sets and create superprofiles of individuals. This is the market for individual attention where the analysis has to be conducted. As an example, if we open, all of us, in this very moment our Facebook accounts, if you had one, and we just looked at the ads popping up, you would see totally different ads. This is completely different from traditional media; there would be individual ads. Unfortunately, the debate over the practical importance of data is not helped by the lack of published empirical studies in the field of competition economics. The large digital players have not made any data available through independent researchers ever. I know already the cynical rebuttal to this, paraphrasing Mozart, that one could say, come on, ``cosi fan tutte''; they're all like that. This will not be true. I can think of telecoms, of pharma, of airlines that can immediately name several data sets, often anonymized, that would be available to independent researchers to analyze competition in those sector. It really is paradoxical we know so little from this so-called data economy, which is sitting on unprecedented amounts of data. My second point concerns the extent to which enforcers should consider privacy concerns under competition law. My answer is yes. Privacy is at the core of the economics of digital platforms, and competition is shaped around it. Competition, generally speaking, takes place along several dimension, price being only one of them. Quality, choice, innovation are also important aspects for competition and for consumers. In fact, when dealing with digital platforms, it does not make sense to focus on prices as prices have been set at zero by choice. The business model is to give something away for free in order to monetize in other related market; advertising, in particular. Hence, quality will often be very relevant focus of competition. Lack of competition, conversely, will lead to reduced quality. In this case, a reduction in privacy protection. My third point is that privacy degradation can lead to real consumer harm. This can arise in different ways: Data breach, identity theft, but also consumer profiling that is not done in the interest of consumers. Part of the problem is that digital incumbents have the ability to impose terms of service that are not well understood but still accepted by consumers because of a lack of alternatives. This is already an indication of market power. Who has actually read lengthy and obscure privacy terms? What do they mean? Think of common phrases like ``we may collect your information for marketing purposes'' or ``we may share your data with trusted businesses.'' Consumers see the instant benefits of clicking yes, but cannot assess the implications of giving away their data that are bundled by design to the service. These practices increase information asymmetries and undermine the role played by consumers and by competition. My last point and my conclusion to all this is that antitrust cases involving data and privacy can be run. Lower quality can be seen in competition law terms as an exploitative conduct. In Europe, this is captured by the current law. In other jurisdictions, it is not. Like in the U.S., it is not. Still, it would be wrong to ignore exploitative conducts. Data, privacy, and competition are not separable. Diminished competition on privacy should be considered in any assessment of the state of competition and of market power of online platforms. Lower data protection can also lead to the standard category of exclusionary behavior. Here, the chain goes from dominance to bad privacy terms. You get a data advantage compared to rivals. Money is being made. This money can be used to exclude competitors or to leverage into neighboring markets. Actually, tying with other digital products can further enforce the data advantage of the dominant incumbent by cross-linking the data collected across services, creating quite a vicious circle. These are conducts that could, in my personal opinion, should be investigated. Thank you for your time, and I look forward to your questions. [The statement of Mr. Valletti follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Dr. Valletti. I now recognize Dr. Furman for 5 minutes. TESTIMONY OF JASON FURMAN Mr. Furman. Thank you, Mr. Chairman, ranking members, and members of the committee. My name is Jason Furman. I'm a professor of the practice of economic policy at the Harvard Kennedy School. I recently chaired the U.K.'s Digital Competition Expert Panel, which produced a report unlocking digital competition. One of our recommendations was that the U.K. establish a digital markets unit, and I'm currently serving as an unpaid adviser to the U.K. Government as they move forward with accepting that recommendation that my panel made. Today, of course, I'm testifying with my own views and ideas drawing on the report that we did. I thank you for your kind comments about it. I want to make four points in my testimony. The first is that the major digital platforms are highly concentrated and that that concentration is likely to persist. It's due to a combination of factors: economies of scale and scope, the way that data can serve as a barrier to entry, behavioral biases on the part of consumers who don't shift the way we think they should, the importance of access to capital and brands. Many of those individually are present in many markets, but the combination of them and the extremes of all of them is unique to the digital platforms and makes it very difficult to have competition in the market. The question of whether there can be competition for the market is a more speculative one, but there's a number of reasons, including the persistence of the major platforms, to believe that that competition for the market will be difficult absent policy changes. My second point, which was covered by Tommaso, is that this has cost to consumers. The services aren't free. Consumers might have been compensated; they're paying in the form of data, they're losing out on quality and variety, and the lack of competition stunts innovation. The question is what we should do about this. Some of the reasons why you have only a few platforms is because of the benefits that consumers get from scale and scope. You want to preserve the ability of consumers to have those benefits. Some of the reason, though, is because of unfair competition and because of what's not organic growth due to efficiency but mergers that have been improved often without very much scrutiny. So the key to policy is to preserve the good while enabling as much competition, because competition is the source of innovation and lets the private sector drive that innovation. To that end, my third point, is that merger enforcement needs to be more robust in the digital sector. Much of the growth we've seen has not been organic growth due to efficiency, but has been acquisitions. There have been essentially no errors in blocking an acquisition that would have been beneficial to consumers, but there probably have been errors in allowing acquisitions to go forward that have ultimately harmed consumers. An approach should include more resources for the DOJ Antitrust Division and the FTC so that they have the technical expertise to deal with this. That merger analysis can't just focus on short-run, static effects, but also on potential competition, innovation, and take very seriously data as a barrier to entry. And third, the increasingly high bar for blocking mergers probably needs to be addressed in a legislative manner with some form of shifting the burden of proof. Finally, my fourth point is that even with all of that, merger enforcement, that won't be sufficient to deal with, you know, the horses that have already left the barn. Antitrust scrutiny can help, but it can also be slow. It can have a hard time addressing, you know, behavioral remedies, and that's why I proposed in the U.K., and I think it would make sense in the United States, the establishment of a digital markets unit. I'm agnostic about whether this is a new body or whether it's an existing body, like the FTC. What's important is the functions. The first would be a code of conduct to ensure no anticompetitive conduct that was backed up by enforcement authority. The second function would be systems with open standards and data mobility, which would enable more entry and competition. And the third function would be a greater degree of data openness. And I think with this approach, we could avoid some of the more extreme market disruptive steps, ensure consumers get all the benefits of fair competition, but also enable new entrance to compete, enter the market, and even deliver further benefits above and beyond what we've seen to date. Thank you. [The statement of Mr. Furman follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Dr. Furman. I recognize Dr. Layton for 5 minutes. TESTIMONY OF ROSLYN LAYTON Ms. Layton. Good morning, and thank you. Chairman Nadler, Chairman Cicilline, and Ranking Member Sensenbrenner, I'm honored to join these distinguished panelists today and to contribute to this important inquiry on data and privacy. And I also want to recognize and thank the committee staffers for all their work to prepare for this hearing. And this testimony represents my own views. As Professor Valletti lays out, we know very little about the economics of privacy, the number and severity of privacy violations, the quantification of harm, and how many violations regulation would deter. Without these key points of information, it's ill-advised to build a command and control regulatory regime which presumes that regulators are in the know. The best numbers that I have comes from Sasha Romanosky at RAND, who estimates that there are a few hundred information privacy violations per year, which is actually a small number given the size of the digital economy. Given that good policy information's not available, regulatory advocates look for other arguments to justify their preferred approach, such as competition. Now many well- intentioned policies are promoted on this premise that they will level the playing field, but we must look at the actual effects, not just the theory and argumentation, however compelling it may be. Now, my testimony introduces an engineering concept of control points. Just as a linchpin keeps a wheel from sliding off an axle, harnessing a control point is a powerful, efficient way to govern a system. Now, Commissioner Chopra suggests that there's a corporate royalty controlling our economy. Well, similarly, there's a regulatory royalty controlling our politics. The conventional wisdom that the regulation follows market failure, the reality is that regulation follows market success. It's no surprise that antitrust authorities around the world and across the U.S. are looking at the American tech sector, because that's where the money is. This is a source of political power because it brings revenue to various States through litigation fees. And we can see the activities of state attorneys general who wish to make national policy by using the bully pulpit of their State. Fortunately, Congress can temper the self-interested actors so that no one State can dictate the commercial terms of our national economy. I'm extremely grateful that this Congress is considering updating the privacy framework for the digital age. We can learn a lot from the European Union, which has had a two-decade natural experiment in regulating the tech economy. The long- term trends and outcomes are clear by looking at the European Commission Digital Scoreboard and the Euro stats surveys. While large enterprise moves along, small and medium-sized companies have a hard time growing. They don't invest in information technology and they transact little across borders. After 18 months of the GDPR in effect, we can see that the largest advertising platforms have gained market share, while their fledgling ad tech rivals have lost ground. GDPR imposes a set of fixed costs across all enterprises. Only the largest players can afford the costly requirements of lawyers' fees, chief privacy officers, audits, impact assessments, software updates and so on. Less than half of all companies can comply with these regulations that cost $3 million per firm. And one- fifth of companies will never comply. And consumers are no better off. Online trust is at its lowest point since 2006. In contrast, the United States welcomed 40,000 new internet startups last year alone. We have been fortunate to have a single national market from our founding and a 220-year tradition of carefully constructed bottom up privacy rules that were democratically decided and based upon real world harms. The CCPA with its 77 regulations on enterprise has 22 more obligations than the GDPR. A preliminary cost-benefit analysis prepared by the California Department of Justice suggests that costs exceed benefits by a factor of 14. It notes $70 billion in startup and running cost for compliance. Most of these costs go to privacy lawyers and consultants. The consumer benefits are estimated generously at a mere $5 billion. Now, it's hard to see what's progressive about giving a windfall to the privacy bar at the expense of consumers and small business. These are companies with 500 employees or less. They make up 99 percent of the California businesses. These are the companies who are going to bear the brunt of regulations which are dreamed up by the regulatory royalty in a mere month. Now, the appeal to justify this regulation on human rights is part of an attempt to avoid the forthright discussion about the costs. Now, in closing, there's a right way and there's a wrong way to do privacy protection. GDPR and CCPA are the wrong ways. Good regulation should cost little to implement. It should be easy to understand. I appreciate that this committee is considering alternatives. If we're concerned about competition, we should stop adopting rules that unwittingly strengthen the largest players. In the end, I'm optimistic because the market we're talking about today is maybe a third of our national economy. The other 70 percent of our economy is where our opportunities are. That is where the data revolution has not come. That is where we have the opportunities to grow, where we can transform lagging industries in health and transportation. So the important part is if we want these kind of new companies to emerge, we have to--and we want to replace the status quo, we have to make sure that we don't kill it in the cradle by regulation that stops the innovator at the gate. [The statement of Ms. Layton follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Dr. Layton. And we'll now proceed under the 5-minute rule. I now recognize the chair of the full committee, Mr. Nadler, for 5 minutes. Chairman Nadler. Thank you, Mr. Chairman. Professor Valletti, over the last 10 years, the five largest tech platforms have acquired over 400 companies globally without any real challenge from antitrust enforcers. Professor, is there any evidence to suggest that this de facto exemption from antitrust scrutiny was a mistake? Mr. Valletti. Well, this is my personal opinion, of course---- Mr. Cicilline. Would you please use your microphone? Mr. Valletti. Yeah, sorry. This is my personal opinion, of course. I do think that there has been a sort of antitrust immunity, in general, in the tech sector for far too long. Google and Facebook have acquired hundreds of companies, as you said, and very few have been vetted. There's some technical reasons sometimes. For instance, you notify some mergers only by the certain threshold, and the threshold is dictated on the turnover of companies in the past 3 years when it comes to digital platforms, but also pharmaceutical companies. These turnovers are not yet there and so you don't have the tools to intervene. But yes, I do think we have severely underenforced in the merger area, which means not necessarily that those mergers were bad, but we should have investigated them for sure. Chairman Nadler. Professor Chopra, would you comment on the same question? Mr. Chopra. Well, I actually wonder quite a bit what would our world look like if Google had not bought YouTube or Amazon had not bought Zappos or many of these acquisitions that many believed could grow on their own to be their own big giant. And I agree that underenforcement can really kill innovation and kill entry, because when it's harder and harder to break in, that's just bad for small business and it's bad for all of us. Chairman Nadler. Thank you. And, Professor Valletti, what should antitrust enforcers be doing to ensure the dominant platforms are not swallowing up actual and potential competitors? Mr. Valletti. The simplest answer is run cases or open cases and investigate. The point is that--there is a response that some entrepreneurs want to be bought. This is an exit strategy. They want to cash on their own innovation. My point is not that this shouldn't happen, but simply that dominant companies should not be allowed to buy those. They can be bought by someone else. So what can be done is to run more cases, open, use financial evaluation, run through internet documents. The chairman before mentioned Onavo, a spyware that Facebook was using to buy some rivals. So there's a lot of things that we can do to improve. Chairman Nadler. Thank you. And you've also argued that a dominant platform can use its privacy policy to entrench its dominance. Can you explain how that strategy works? Mr. Valletti. So there are different ways. One way could be, for instance, a company which is dominant doesn't have alternatives. That's why it is dominant, because you cannot find alternatives. So this dominant company, you need the service, we'll ask you to sign up for whatever they ask you. You don't see through the terms, you don't know where your data is going, you don't know what's going to happen with your data. Your data are going to be used to monetize somewhere else, maybe even with yourself in a future period, in the present period with--I don't know. If it is something genetic, it will be even--your offsprings. So money is going to be made from this hypertargeted advertising. Once you have money, you can do lots of strategies to preserve your dominance. Chairman Nadler. Okay. Can you explain why you view privacy an appropriate factor to consider under competition law? Mr. Valletti. Yes. Because the locals of competition are multifaceted. Can be prices, can be innovation, can be quality. And since consumers seems okay about privacy, I would say this is one of the primary things that a healthy competitive market should actually give, healthy privacy to individuals. Chairman Nadler. Thank you. And, Professor Furman, in your view, is big data creating entry barriers that prevent entrepreneurs from raising capital and breaking into technology markets? Mr. Furman. Yes, I think big data is creating entry barriers. And if you tried to guess what the next industry is going to be, we've had a succession from IBM to Microsoft to Google, et cetera. The next is likely to be AI machine learning, and the companies best poised to take advantage of that are the ones that are the large incumbents now. So the wave of disruption---- Chairman Nadler. They're larger because they have the data. Mr. Furman. Because they have the data, exactly, which is what's needed for this next stage in the economy. Chairman Nadler. And that may lead to my next question, which is, why is data still a barrier to entry even though it's nonrivalrous? Mr. Furman. It's nonrivalrous, but there are companies that keep that data and keep that data to themselves. They have economies of scale. There's things you can do once you have large amounts of data that are even much, much more than you could do with a medium or a small amount of data. And I think a lot of that is a function of public policy choices we've made about what data is and is not open. Chairman Nadler. To compete with them, a new entrant would have to assemble its own data starting from way back? Mr. Furman. Yes, they would, Congressman. Chairman Nadler. Thank you very much. I yield back. Mr. Cicilline. The gentleman yields back. Votes have been called. We're going to have the gentleman from Colorado, Mr. Buck, be recognized for 5 minutes, then we'll adjourn, with the indulgence of the witnesses, and come back immediately after votes. And we apologize for the interruption. Mr. Buck. Mr. Buck. Thank you. And I want to thank the chair of the committee and the chair of the subcommittee for holding this hearing. I really appreciate this opportunity. Dr. Layton, couple of quick questions, and I'm going to go real basic because that's about my understanding of this area. If I am sitting in front of my desktop and I want to go to the U.S. House of Representatives' website, I type in something on my browser, U.S. House, up pops the area. I click on that, and a resolver--I want to make sure my friends understand I used the word ``resolver,'' not revolver. I'm not trying to get into a gun debate here, but a resolver then takes me to the website that I'm looking for. And my understanding is that recently we have had a change in that to add encryption to the area. Can you explain why the change was necessary and where we're going with that? Ms. Layton. So I think the issue that you're talking about is the DNS over HTTPS protocol. It's a new standard being proposed by Google and Mozilla. Just let me frame this, this issue. I've discussed it in my testimony, but I think that it's a great example of where we have a challenge with our privacy regulation between the person's right to privacy and the public's right to know. So we've seen from GDPR and other things like this that a number of valuable resources that we've had on the internet for law enforcement, for copyright protections, for public information, they have been masked and clouded because of techniques taken on by regulation. But in this particular case where you're looking at what's called the DoH, the D-O-H, is that in an effort to encrypt the traffic, which people want to do to protect their privacy, it is changing the architecture of the internet, which used to be very distributed and modular. So a number of parties would perform this redirect task that you talk about---- Mr. Buck. When you say a number of parties, we're talking about tens of thousands. Ms. Layton. Tens of thousands, CBNs--and they're very important, because individuals can put certain settings and preferences, whether they want to block malicious content, and also, law enforcement uses these things to find various criminals and so on. But all of that would be subsumed into-- would be--all of that information that number of parties use today would be lost. Now, the reason it's done, because Google and Mozilla want to be able to get marketing data in that process and pull that control point, as I describe, into their own network, where normally it would reside outside of their network. So this is just a coding tweak that can upset that entire balance that we've built up to date over all these decades. Mr. Buck. So would we no longer have tens of thousands of providers in this particular area? Ms. Layton. I think it would eliminate the CBN industry overnight, I mean, just by one mere coding tweak. So it's quite staggering how much a simple click like that can--or not a click, but a coding tweak can change it. Now, there are some users who may like it, who they want to have--I want my whole experience to be in Google; fair enough. But the other, for all of those---- Mr. Buck. They have that choice now, don't they? Ms. Layton. Well, they have a default now; you're absolutely right. You can choose safe search, you can choose these different settings. But what we're making worse off are all of the law enforcement, parents, families who are trying to set up permissions to protect their own privacy and their own-- you know, their own preferences. Mr. Buck. Okay. And how many--do we have any idea how many of these providers there will be in the future? Will it just be three or four or will we once again---- Ms. Layton. Well, I mean, the sort of--I mean, you can imagine, you could have a kind of world where, you know, Google consumes the internet just because of the way that things are coded. I mean, more and more things could be encrypted. Seventy percent of the internet is encrypted today largely because consumers want to have, you know, more privacy. But prior to encryption, large platforms can look at the data that's there and they are able to use that to get the marketing information. So I don't have the number of how many DNS resolvers are available today, but there would be many fewer. It is one of the services offered by ISPs. It's offered by a number of other parties out there. Mr. Buck. Mr. Chopra, any thoughts on that? Mr. Chopra. Well, Congressman Buck, I think you're raising some important questions about who gets to decide this. If it's when we just have one or two browsers that dominate the market and can make coding tweaks maybe for self-serving purposes, that's something we have to be wary of. Conflicts of interest with this level of market power have to be top of mind, because it's not just about our economy. Like Dr. Layton said, it raises questions about how do we protect children, how do we enforce our laws? And to me, I think these types of regulations should be decided by Congress, not necessarily a company with a conflict of interest. Mr. Buck. Okay. Thank you very much for your time. And I yield back. Mr. Cicilline. I thank the gentleman. The chair will now recognize the gentleman from Georgia who's anxious to ask questions before the break. Mr. Johnson. Thank you, Mr. Chairman. And I thank the witnesses for being here today, especially Mr. Valletti. Dr. Valletti, long journey, thank you. Many big tech companies have touted their data portability as the reason they can't be anticompetitive, but few, if any, are truly interoperable. Professor Furman, interoperability is different from portability, isn't it? Mr. Furman. Yes, it is. It enables you to operate--multi- home operate on multiple systems simultaneously. Mr. Johnson. And would you agree that one of them promotes more competition than the other? Mr. Furman. Yes. I think the technical details about how--I use the word systems with open standards and data mobility. There's ways to do that that really enable switching and multi- homing and ways to do it that frustrate the ability to do that. Mr. Johnson. How can interoperability promote competition? Mr. Furman. It enables consumers to have more choices, to switch more easily, to use multiple services. It also enables new entrants to come in and build on a lot of the things and networks that you've already accumulated on the incumbents. Mr. Johnson. And, Doctor, what would it look like to have a social media platform be truly interoperable? And do you believe that that can happen without government intervention? Mr. Furman. I'll give you an example of one that is truly interoperable right now, which is email. If email had been invented by a single company, it would have had its own protocols and you could only email other people who used that same company's email and you couldn't use people that used different email systems. I don't worry when I email someone about what company they're on, whether they're on the email system or not. That's a true form of interoperability that enables more choice and more competition. Mr. Johnson. That's a great example. Commissioner Chopra, one could argue that privacy violations and other monopolistic behavior is incentivized by the ad-based model; meaning that more data a company has--the more data that a company has, the more data a company can collect and the more dominant it can become. Can you speak to some of the compounding problems with the ad-based model? Mr. Chopra. Well, one of the objections I had to the FTC's settlement with Facebook for the company's early and repeated violations of a law enforcement order was their desire to maintain their dominance by collecting more and more and more data because, guess what, it gets more valuable as you get more. I talk about this in my testimony. And we need to start thinking, not just about ticky-tack privacy rules, but what's the reason why companies invade our privacy. And one of those reasons is the behavioral advertising model, which is not of an ad we all get, but it's an ad targeted at one person and it's often manipulative. And so we have to think about how these businesses are incentivized and structured if we want to get to the root cause of massive surveillance in our economy today. Mr. Johnson. Thank you. And, Mr. Chairman, I'll, in the interest of time, yield back so that my other colleagues will have an opportunity. Mr. Cicilline. I thank the gentleman. I want to recognize Mr. Buck for a unanimous consent request before we recess. Mr. Buck. Thank you, Mr. Chairman. I ask unanimous consent to have two letters entered into the record addressing the issues associated with centralizing domain name systems, the first from CTIA and CTA and USTelecom and the second from 20 different child advocacy groups. Mr. Cicilline. Without objection. [The information follows:] MR. BUCK FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. The committee will stand in recess and come back into session immediately after votes. And I thank the witnesses for their indulgence. [Recess.] Mr. Cicilline. Ms. Jayapal. Ms. Jayapal. Thank you, Mr. Chairman. Thank you all for your very, very informative testimony. You've all touched on this, but a common refrain that we hear from tech companies is, during the course of this committee's investigation but also just on my own because I have many of them in my district, is that they can't possibly be violating antitrust laws. And the primary argument is that it's because many of their products are either cheap or free, and, therefore, consumers are inherently benefiting. Now, you all have, in different ways, talked about this. To me, the big question, of course, is free really free? And consumers, I think, it's increasingly clear are paying for the products that they use. They're paying in data. They're paying in privacy that they give up and often don't know that they're giving up. And then, of course, the big tech companies then use that data to build these massive empires of information about consumers which then give them spectacular advantage over newcomer businesses, allow these companies to scrutinize every aspect of people's lives, create and sell the products that have the best chance of being successful in the marketplace. It's almost a bulletproof advantage. Dr. Valletti, you mentioned the acquisitions and the history of acquisitions. As of 2018, Facebook had made 67 unchallenged acquisitions, Amazon had made 97 unchallenged acquisitions, and Google had made 214 mostly unchallenged acquisitions, and you presided over the EC's--EU's investigation of Google, Amazon, and Facebook. Two questions. What kinds of access do these companies have to information about consumers as a result of those acquisitions? And then you talked about the thresholds being one of the potential problems for why investigations aren't opened. Do the thresholds of investigation need to change if we are to challenge some of these acquisitions? Mr. Valletti. Thank you very much for the question, Congresswoman. Do the thresholds have to change? I'm very pragmatic. To the extent people have the powers to look into those acquisitions, that's fine by me, whatever is the method. I'm even in favor, in fact, of changing a little bit the structure of presumptions. When it comes to very strategic platforms with such a humongous market power, I would wonder whether, instead of asking the authorities to prove that there is something anticompetitive and then they could rebut with efficiencies, to change it and say: You guys are not going to merge with anybody unless you prove to us that this is going to create efficiency. So I would change a little bit the burden of proof. In terms of investigations we are in, I cannot disclose information about any case, but my understanding of those cases is that some of the claims--we hear a lot of times the competition is one click away. There is all these fantastic options available. I didn't see that in the data at all. I didn't see anybody going and clicking on search results on page 2, so everybody being stuck with the defaults and--in the installations, so I saw a lot of stickiness. The fact that some of us may actually make other choices doesn't represent the average consumer there. So it's ironic that somebody come from academia, the ivory tower, has to tell these companies: Look, there's a difference between theory and practice. In theory, they can do that, but in practice, consumers never actually act on those choices. They just follow defaults. Ms. Jayapal. Thank you. Commissioner Chopra, several of the dominant platforms serve both as critical gatekeepers while also competing with the businesses that are dependent on those platforms. Amazon, for example, runs a third party marketplace, but then it has its own private label goods. And both in committee and when I met with them recently, they really testified that this dual structure doesn't pose any conflicts of interest and say that it's common for retailers to offer private label products alongside third party products. What do you say to that, and what's your response to that? Mr. Chopra. Well, I think that we hear these analogies of comparing it to grocery store cereals and the white label cereal, and it just doesn't work. I am so worried when I hear from investors and venture capitalists who say I'm not even going to fund a business that needs to distribute through these platforms because, guess what? As soon as it takes off, it will be copied, and all the business will be steered elsewhere, and that worries me for all of those small firms who want to enter. So we need to look deeply, and that's why I mentioned section 6(b) of the FTC Act to scrutinize the big picture. Of course, individual companies, we will look. If there's anticompetitive conduct, we have to go after it and fix it, but writ large across these markets, we all need to understand how this works so that we can figure out how to maintain our economy that is vibrant and thriving. Ms. Jayapal. And related to that, just--my time has expired, but related to that, what are the tools the FTC is not using that you could be using? Mr. Chopra. Well, there are so many things that Congress has equipped us with, and one of the pieces that I hope we will use much more aggressively and thoughtfully is competition rulemaking. It doesn't need to put any burden on any company, but it can clarify the law about what's legal and what's not so that we don't have to spend millions of dollars on paid economists and litigators that slow down decisions and ultimately may have harmed a lot of people in the process. We need to resuscitate the use of that tool. Ms. Jayapal. Thank you very much. I yield back. Mr. Cicilline. I thank the gentlelady. I now recognize Mr. Armstrong for 5 minutes. Mr. Armstrong. Oh, fantastic. Thank you. I appreciate it. Mr. Cicilline. Walk into the room, and we immediately thank you, Mr. Armstrong. Mr. Armstrong. Yeah. Ms. Layton, I just want to talk a little about data portability, and you say that it's overrated. Can you just explain that a little bit? Ms. Layton. So I think that we have the premise of number portability. We know from the telecom world when you have--you know, you're going to go from one mobile carrier to another, you want to take your phone number. That's fine. But I think when you look at the internet world where you have multiple kinds of platforms, so if you have social network data, that doesn't--from Facebook, it doesn't necessarily map to Amazon. So there's--the data is not really valuable to another platform. The bigger thing, I think, and something that's come up in this hearing, I think we're overrating the value of data overall because as a person who worked in the analytics industry, I had interfaced with, you know, 2,000 companies that they actually after time, the data degrades. And if you are an innovator, it's less interesting for you to get a platform's data. If you're going to innovate, you want to do something new and different. So data portability is kind of the answer to heal all ills I think is overrated. I've also seen this in some of the economist studies of, you know, in GDPR as well, is that users also don't want value data portability. Mr. Armstrong. And I think that's--you know, and I've said that too. The basic framework is you should have control over your own data. But since I've been here, I've learned way more about this than before I became a member of Congress. It's part of the reason--I mean, it's fairly complicated as to what is there, and I think that's part of the reason. Like when you say consumers don't really necessarily see this as a benefit, is it because they don't understand what it is or because of how you said---- Ms. Layton. Well, for one thing, there are switching costs. I mean, I think it's a fair point that other panelists have raised, but I guess what I'd say is the value to having--you know, if we think that we should have five major search engines and five--you know, that this is--somehow that makes it competitive, what we--what makes competition in this industry is new technology, doing something better and different and more efficiently. And so where I think we should focus on is that the innovators look at the other parts of the economy where the opportunities are. They're greenfields, in fact. It's not like the way that it is today will be this way forever. Mr. Armstrong. And then, I guess, when we talk about data portability, we're talking about it moving, right, I mean, in some form. And in other areas, there's an entire market niche of whether it's insurance, litigation, bills of lading, free on board, those types of issues. So, when you're dealing with this data portability, has anybody looked at the liability shift as we move from one person to the other? Because if there's a breach, which is--I mean, part of the privacy concern is breach of data, and it usually ends up with a credit card company or a bank, but if it's portable, I mean, more than one person is handling that data as it moves from--whether it's Microsoft, Amazon, Facebook to somebody else. Ms. Layton. Yeah. That's--that is a fair point. Mr. Valletti. If I may just---- Mr. Armstrong. Yeah. And then my question is, along with that portability portion, is the cost of compliance not for large companies who, quite frankly, we've seen this--and I want to ask you a question about a Dodd-Frank analogy before I'm done. I mean, larger companies aren't necessarily scared of regulation. What they want is regulatory certainty. Smaller companies that employ four or five people, when you're dealing with data portability, now have a compliance cost associated with that. While we're trying to regulate this, we have to be very concerned that we don't regulate--we don't have the inverse effect where the cost of--the cost of regulation makes it prohibitive. Mr. Valletti. So I just want to jump in on this since it's been mentioned a few times is the European experience with GDPR and Californian solution now. Let me clarify first that this is very new, so having empirical evidence is a longshot because it's just been happening for a short period. GDPR, also, let's remind ourselves it's been introduced because it is a fundamental principle of privacy that individuals want to ensure. So any time we do a cost-benefit analysis, surely, we want to see the impact on firms, but, also, there is a benefit that we get if GDPR within the privacy regulation is enforced properly. And the second point is I'm very skeptical when I hear some of these numbers, which are typically coming from, you know, institutions which are funded by Google, Facebook. European evidence is that Google and Facebook lost after on the advertising side after the introduction of GDPR. So it is a cost of compliance, but whether it's only the small firms, the narrative that you hear is from the big guys, not from the small guys. Mr. Armstrong. Well, except I'm going to bring an analogy back, and I'm just going to ask Mr. Chopra this. So when I go talk--we don't have big banks. We don't have, with the exception of some national companies, big business in North Dakota. I mean, we are a small business State. The single biggest thing I've heard, and this has been long before I've been here, in the decade or the 11 years since Dodd-Frank was introduced, is in our realm to regulate what we do think were really bad actors--and they were--Dakota Community Bank is caught up in that. So are there any lessons we can learn from how we did Dodd-Frank when we do this so in our quest to do whatever it is, we don't sweep up the little guys in regulation? I mean, if you have 37 compliance officers on the fifth floor and you go to 40, it's not the end of the world. If you have two employees, and you have to go to five employees, you may no longer have a local bank, so---- Mr. Chopra. Yeah. One thing I would really urge you to think about is complicated rules. They actually benefit those who have a lot of lawyers and lobbyists to get around it and lobby for exemptions. In my testimony, I talked about the importance of bright line rules and even bans because, you know what? When I--I've had those same conversations with community bankers. They will say: If I'm banned from doing it, fine, because that's really easy to understand. But if it's so complicated, guess what? The largest banks in the world, they find their way in and get their exemptions. They win, and the small guys lose, and that's not a system or a country I want to live in. Mr. Furman. Mr. Chairman, I don't know if there's time for me to add to that because---- Mr. Cicilline. No, no---- Mr. Furman [continuing]. Time. Mr. Cicilline. As long as Mr. Armstrong is interested. Mr. Furman. Okay. Mr. Armstrong, I think you make a very important point, and I think you're absolutely right about worrying about the small businesses. I think sometimes in regulation, it's tricky because there's a tradeoff. So something that might be harmful for any size business to do, you make the rule, it's easier for the large one to comply than the small one, and you end up entrenching the incumbents. In this area about competition, you can make sure that doesn't happen because if you're talking about rules, a code of conduct as I've proposed for digital markets unit to do--that you can't keep people off your platform; you have to let them on other platforms; you can't prioritize your own products-- those rules would only apply to companies that I would just designate as having strategic market status. Only apply to the very largest companies. If you're a small company and you want to prioritize your own products, you want to keep people off your platform, you want to make rules about what other platforms they go, you can do any of that. We're only worried about, if you have some bottleneck power, abusing it. Mr. Cicilline. Thank you, Dr. Furman. I now recognize---- Mr. Armstrong. Can I have unanimous consent just to put Ranking Member Collins' statement into the record? Mr. Cicilline. Without objection. [The statement of Mr. Collins follows:] MR. ARMSTRONG FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. I now recognize the distinguished gentlelady from the State of Florida, Mrs. Demings, for 5 minutes. Mrs. Demings. Thank you so much to the distinguished gentleman from Colorado. I want to thank you, Mr. Chairman, and thank you to all of you for being with us today. Thank you for your patience as we went to cast our votes. I want to start with Mr. Chopra. In several of your statements and dissents, you've argued that the core problem that leads to dominant platforms--that leads dominant platforms to engage in serial privacy violations is their business model, which relies on monetizing user data and incentivizes Facebook and Google, for example, to engage in constant surveillance. What problems do you see with the behavioral advertisement business models? Mr. Chopra. Well, I think we're seeing more and more evidence that behavioral advertising, again--that is, advertising to a demographic of one--exposes us to a whole lot of risks, including manipulation and shenanigans in our democracy. It is very, very profitable, though. Facebook earned $55 billion in revenue, Google even more. The advertising business is big, and I'm concerned that that behavioral advertising model is inconsistent with how we have thought about immunity online. Right now, we give broad immunities under section 230 of the Communications Decency Act. I support that immunity, but I don't know if it's consistent with this behavioral ad model and surveillance. Mrs. Demings. So, Mr. Chopra, what do you see as the solution? What role can--how can Congress play a greater role in dealing with this problem? Mr. Chopra. Well, part of it, obviously, is through better privacy protection. I'll just speak about how I looked at the Facebook order violations, the repeated and early violations of that order. That settlement not only completely let executives off the hook, and they paid a small fine, and their stock went up. There's no substantive limitations on their use and sharing of data. And for repeat offenders, there needs to be some bans on this type of behavior because, if they're going to break the law, we have to look at the economic incentive that is driving it. Mrs. Demings. I think you said earlier that when you have billions and billions of dollars, $5 billion in a settlement is like--it's not much incentive to change your behavior. Is that---- Mr. Chopra. That's right. When you--when these--these big fines are not big penalties for big companies, and I worry it's not a penalty; it's an incentive. I also want to urge Congress to think about how do we beef up individual liability. In the FTC's Facebook settlement, we did not depose Mr. Zuckerberg or Ms. Sandberg, but guess what? They got full immunity in the settlement. And if the court approves that, what kind of standard are we setting? And I just think that's fundamentally wrong. Mrs. Demings. Dr. Valletti, I want to ask you about that, but some have argued that heightened concerned about digital monopolies is misguided given that companies like IBM, Yahoo, MySpace, and BlackBerry were all once viewed as dominant but, ultimately, were taken over by new firms. And I know we kind of talked a little bit without naming the specific companies earlier, but could you just kind of--do you agree with that view, or what's your feelings about that? Mr. Valletti. It's almost an act of faith. Do we believe in dynamic competition? Sure, as a principle, but then I see the empirical evidence. When it comes to some selected platforms--I have in mind search; I have in mind social networks; I have in mind, perhaps, electronic marketplaces--this dominance has been going on for almost a decade. And so is that long enough to ever worry? I think, yes. I mean, in the long run, we are all dead, but I hope we will fix some problems before we are dead. Mrs. Demings. Well, thank you for that bit of hope and sunshine. In light of your--I'm going to move on to Dr. Furman. In your view, how readily available is high quality data to new entrants? If an entrepreneur wants to launch a new search engine, for example, what challenges can he or she expect to face in light of Google's existing dominance? And I know we have kind of talked about this space, you know, protecting privacy, competition, but I just want to make sure it's clear to not just the people in Congress but to the listening public as well, who are directly being impacted by the decisions made. Mr. Furman. Yes, Congresswoman. Google has a very good algorithm. Google also has a huge amount of data about how consumers search to train that algorithm. A bright kid in a garage could come up with a good algorithm, but they wouldn't have anything like that type of data in order to make it work nearly as well as Google works today. Mrs. Demings. Thank you. And, Mr. Chair, if I could just--I'd also like to hear from Ms. Layton, just any response to either of the questions that I asked that you would just like to respond to. Ms. Layton. Well, thank you. I appreciate that opportunity. I would agree with Dr. Furman that, when we look at artificial intelligence, that this is a greenfield. He's absolutely correct that a scientist sitting in the garage or in the lab could come up with a life-changing or transformative kind of algorithm. In contrast to the other panelists, I don't believe that data is a bottleneck because of having been a person working in the industry, that the data that you collect, it degrades over time. So, if you're a new innovator, you will look for the spaces where you can--where there are opportunities. It's less interesting to look in the past. You want to look to the future to say: How would I--where could be a place where I would add value in the future? Healthcare. It is one of the most inefficient industries. It takes up one-fifth of our GDP. That is where we need to have data to make it more efficient and lower the cost. So what I would like us to do is to look forward. I don't want us to adopt regulations that deter today's scientists from making tomorrow's innovations because they have to have all these permissions and releases from everyone. Now, they may not look at personal data. There's other areas where there's no personal data involved, you know, quantum computing, astronomy, and so on. And they may go in those fields, but probably the biggest area where we can create the benefit is on human health. And so, for example, in Iceland, they have this amazing registry of genomic data that was collected over many decades. GDPR is putting all of that up in the air. Can you find the cancer treatments? Can you look at a lot of the new innovations? We don't know now because that was not collected under the GDPR environment. So, there again, that is a question that I would have. So health is an area where we need to see, are we putting the bottleneck on the innovation? Mrs. Demings. Thank you so much. Thank you, Mr. Chairman. Mr. Cicilline. Thank you. The gentlelady yields back. I now recognize myself for 5 minutes. Commissioner Chopra, one of the questions that we are grappling with in this investigation is whether or not our antitrust agencies like the FTC have fallen short as an effective sort of cop on the beat in this digital marketplace and whether or not that is due to insufficient legal authority, whether it's due to weak leadership, or as I like to refer to it, the need for enthusiastic and creative leadership. Is it partly the result of regulatory capture? What is your view? What should we be thinking about as we look at this insufficient or sort of inadequate enforcement of our antitrust agencies, particularly FTC? What do you see as the source of that? Mr. Chopra. Mr. Chairman, one of the things I reflect on a lot is, how did the FTC miss much of the subprime mortgage crisis that originated in the nonbank sector. The FTC was really the only cop on the beat there, and we saw what happened. So one of the things that I think I took away from what I've learned on that is, number one, we need to use the tools we have much more energetically. Two, we need to be much more analytical and not think in the world of theoretical economic models but real evidence and look at how markets actually work. So, of course, we can use more authority; we can use more resources. But the number one thing we need to do is energetically use the tools we have. And for you to think about, and Dr. Valletti mentioned this too. Should we be thinking about changing presumptions? Should the largest firms on the planet, should the burden be on them to show why their merger or their roll up of tons of companies is in that interest? So there's ways you can change the way courts are acting, and I urge you to do that, but I also urge you to conduct oversight that makes sure agencies are using every tool you have equipped us with. Mr. Cicilline. Great. In February, Commissioner, you gave remarks to a conference at the University of Colorado where you said, and I quote: ``Competition enforcement actions like the Bell Labs consent decree created the conditions for scores of startups to innovate and flourish. While we often focus on the cost of action and regulation, we should also be asking ourselves about the cost of inaction,'' end quote. Do you believe enforcers or lawmakers should be considering remedies like the one imposed on Bell Labs, particularly since a lot of the focus of this investigation has been the impact of this market concentration on innovation startups, kind of the opportunity to make the next--space for the next great technology platform? Mr. Chopra. Yeah. I appreciate that. One of your areas of inquiry in the investigation is whether spinoffs or divestitures of firms may be useful, you know. Some colloquially call it breaking up. But there are many other remedies we need to think hard about. Should we be opening up intellectual property that has been abused by dominant firms, and how much could that incubate a new activity? There are many--there's all sorts of history about how we have pursued this and the benefits from it. Can we look to separate lines of business to end those conflicts of interest and create more economic activity? So we should work with you on all of that, but the discussion must be bigger than breakups. But, of course, breakups must be in the tool kit as well. Mr. Cicilline. I'm going to stay with you, Commissioner, because we're going to do a second round because, obviously, I couldn't question some of the other witnesses, but I want to transition to some of the recent privacy settlements at the FTC that I have criticized publicly. You recently dissented, along with Commissioner Slaughter, in the FTC settlement with Facebook. You stated that the settlement gives Facebook a lot to celebrate which was similar to what I said. Can you explain what your concerns are with the settlement? I know that you said in part that the $5 billion settlement was insufficient because it didn't address Facebook surveillance and manipulation-based business model, which is what incentivized Facebook to engage in order--to engage in the violations in the first place. What do you think the effective remedies would look like? What was your criticism of that, and what do you think the effective remedies would look like? Mr. Chopra. So I think of this in multiple buckets. First, we should start with that this is the case of recidivism, repeat offender, so it's not just a first time oops. And in my view of the evidence, it was clear that there were multiple early violations, and there was knowledge of those. I think of it, number one, where is the individual accountability? The officers and directors who called the shots to violate the law so that they could put money in their own pockets, without individual liability, you will not see the level of deterrence you need, and the Federal Rules of Civil Procedure in our courts bind officers and directors to Federal enforcement orders. Two, what is the actual conduct relief that goes at the core economic incentives? And to me, there should have been some real thought on actually banning some of the worst data collection use and sharing practices. And we have to think--of course, monetary relief is important, but U.S. consumers did not get a penny of that, so I'm not sure that headline $5 billion is going to do much. Mr. Cicilline. Thank you, Commissioner. My time has expired. I now recognize the gentleman from--oh, I'm sorry. The gentlelady from Pennsylvania, Ms. Scanlon. Ms. Scanlon. Thank you very much. I want to thank all our witnesses for joining us today and for your testimony. You know, consumer privacy is an important issue for all of us, both as individuals and as Representatives for our constituents, but the way that data is collected and used by the large platforms obviously impacts the ability of consumers to maintain their privacy and the options they have to make informed decisions about their online activity. Dr. Valletti, I wondered if you could expand a little bit on the third point that you made regarding privacy degradation leading to an objective detriment to consumers. And I think you said that imposing terms of service with weak privacy protection that is not well understood but is accepted by consumers because of a lack of alternatives, it has to do with market power. Can you just talk about that a little bit and any perceived remedies that you might suggest? Mr. Valletti. So, on objective consumer harm, as I write in my written piece, it can be, you know, risk of data breach, identity theft, but interesting, also, consumer profiling, which is not done in the interest of a consumer, for instance, discrimination scoring or being shown more expensive results. So, if you are, in this moment, your dishwasher breaks down, and you are going to type ``dishwasher repair in my area,'' you're going to be shown one--most likely, one result with a nice graphic interface because it is a real-time auction that most likely Google will be doing, and who are they going to select? The one that pays the most because they get--they get a fee. We have lost--we have lost the original function of the internet to offer us choices because as I said, behaviorally speaking, consumers don't go to page 2, to page 3, and they don't--you just are hooked up. These devices are meant to keep us online as much as possible. So they learn about us, and then we buy whatever is the thing which is offered to us, and there is an underlying auction happening. There's only one platform that we know for that. Of course, if you're looking for a car, that's a choice that would take a much longer kind of period, and so it's a bit different. And for remedies, the most important thing I would start from is really try to think carefully about privacy, so having privacy regulations, which is done in the interest of American people, and it's American institutions that should come up with a solution. Mr. Chopra. Congresswoman, with your permission, just one point. When Facebook started, there was another social media platform called MySpace. Ms. Scanlon. I remember. Mr. Chopra. And one of the--one of the reasons Facebook was able to unseat MySpace was partially on privacy and control of data, that you will be able to control who sees your information. We should want firms to compete on privacy. These changes to terms of service hidden in the fine print where they can collect more and more data and unilaterally impose these terms, that is a price hike. We are paying with our data, that valuable data, and more competition will also be critical to how we think about protecting privacy. Ms. Scanlon. I'm wondering in other contexts we've seen that you can change the dynamic by having an opt-in rather than an opt-out. Is there any possibility of doing something like that in this sphere? So, for example, having to opt out of a savings plan rather than opting in. Mr. Chopra. Well, we do know behavioral defaults are highly influential, and, typically, right now, companies get to take everything from you, and you have to figure out a way to opt out. It's, like, kind of like a full-time job with all the websites you have. So shifting the burden to companies I think would be a great way to really reduce the burden on all of us. And, actually, if consumers want to share their data proactively and really want to renew that, let them tell that company and give them permission. Ms. Scanlon. Okay. I've also had conversations with my kids and other constituents about the power over consumer data, putting that back in the hands of consumers, and the example that they like to talk to me about is moving your music library possibly from Apple to Spotify. Mr. Furman, can you talk about the idea of implementing data portability and whether that's something that we should be exploring? Mr. Furman. Yes. I think absolutely you should be exploring that, and it's not just downloading your data; it's really being able to port and move it over in a simple and transparent manner. The companies are making some progress in doing this through steps like the Digital Transfer Project. I think, in part, they're making that progress because they think regulation is coming, and they're responding to it. And to do this is not just simply passing a law and say you have to do it. You have to roll up your sleeves a little bit and go use case through use case, figure out how to balance the different concerns. But if you can do that, create a lot of value for consumers and more competition. Ms. Scanlon. Okay. Thank you. I yield back. Mr. Cicilline. I thank the gentlelady. I now recognize the gentleman from North Dakota, Mr. Armstrong. Mr. Armstrong. Thank you, Mr. Chairman. And I think Mr.-- the chairman actually does have a MySpace account. Mr. Cicilline. I am that old; is that what you're saying? Mr. Armstrong. So Ms.--Dr. Layton, you seemed like you wanted to respond to that question, so I'll just give you a little chance. Ms. Layton. Well, thank you for that. And I just wanted to say, Ms. Scanlon, on the point--to let me piggyback on Dr. Valletti. He does have a paper looking at the prices for options. I think it's very interesting. I'm a person who--I managed 10 search engine marketers and have experience in this, and I think there's a fallacy to think that just because the ad appears at the top of the page in Google search, that it's the highest bid. Frequently, the best--that is the lowest paid bid because what is driving the price is very much the quality of the ad. It's how well it's written, whether the landing page where the ad goes to is relevant. So what Google is actually rewarding is the quality of advertising. And, also, he brings an interesting case. A plumbing service wants to create an ad. Well, that is also an issue of who amongst the plumbing industry is organized to invest in Google. You know, and it could be this also reflects that the competition of the plumbing side. And the other part is, if you're the consumer, you want to have the information. That ad format actually gives you a lot of things to look at. So I only say that it isn't--it's not a fact that the highest, top level ads pay the most. In some fields, like asbestos, those key words could be worth $5,000 a click. The plaintiffs' bar, they're very clever around using that. But there's many other areas that are not used at all, and the clicks could be assent, so it's hard to generalize that. You actually have to look at the data. Mr. Armstrong. And then I'm going to move into something a little different because, in your Senate testimony, you stated that GDPR has a risk identifying with respect to convicted felons successfully removing information from crimes in search engines, and your footnote on that stated that the Finnish court decision concluded the right to be forgotten provides convicted murderers the right to have publicly available information removed from Google listings. And I'm going--before I let you answer this for a second, I want to say I support Ban the Box. I think it's fantastic. I have some thoughts on that when we're done, but we also have a First Amendment. So let's take First Amendment issues aside. And just can you expound on that a little bit? Ms. Layton. Yeah. So, again, you know, we don't translate the GDPR perfectly to the United States for those particular reasons, but we can--and, also, right to be forgotten has been pushed back by the European courts. But this issue about people being able to expunge data that they don't like, well, you know, maybe it's a nice idea in theory, but it--we have--in the United States, we have a respect for the public's right to know. So, for example, what you've seen in the European Union are dirty politicians who have bad articles about them. They get removed from the media. They get removed from the Google searches. Murderers, child predators, you know, all of these terrible characters are able to weaponize the GDPR for those reasons. Mr. Armstrong. And I think that's one of the things with Ban the Box. We need to understand as Members of Congress is that still only gets you past the first stage. And you can ban anything from Google. You can ban it from a Facebook search, but I can tell you, my private investigator would find it in 3 seconds. So, if you go into the second stage of an interview and you're doing work for the Federal Government, you have to have a certain insurance designation, any kind of--as simple as a hazmat commercial driver's license. These are good concepts, but I think sometimes we use the availability of information as a scapegoat. What we really need--if we're serious about this, and I think if you're 19 and have a nonviolent felony on your record, the world we live in now compared to two generations ago is so different. You can never outrun that conviction. You just simply can't. If it happened in Dickinson, North Dakota, in 1970, you could move to Madison, Wisconsin, and start your life over because nobody from Madison, Wisconsin, was going to drive to the Stark County Courthouse and look up records. But we use this availability of information a little bit as a scapegoat because, like I said, any job you're applying for that has any kind of insurance issue, regulatory issue, framework issue is going to find it anyway. So we need to address the fact, like, with companies, with insurance companies and say: Listen, we support this from a congressional level. There's broad bipartisan support. We also have to change insurance culture and hiring culture and allowing those things to happen and the fact that it's not a Google--it doesn't hit on a Google search doesn't mean it's not going to exist. Ms. Layton. I agree. Mr. Valletti. I think we are mixing a few things here. One thing is, you know, GDPR. One thing is right to be forgotten. The first step is for you to understand what you interpret as privacy. It is a boundary between your private self and the outside world. What do you think you want to share only with your family, with your community, with your friends, or not even with them? When it comes to digital space, this idea that there is notice and choice, that we have borrowed from other industries is not out there any longer, so these boundaries are so blurred that you must look into that. You must have recognition of the problem. Mr. Armstrong. And I agree with that because, when we were talking about opt in and opt out, shortly after there was some congressional testimonies before I was here. You started seeing these windows pop up on your social media platform and yes and no. And whenever I talk to a high school or college age group of kids after that happened, I would ask them, did any of you check no? And not a single---- Mr. Chopra. Because you can't check no. Mr. Armstrong. Not a single hand goes up. So how people define privacy in the next generation is also something that is changing dramatically. Mr. Cicilline. I thank the gentleman. I recognize myself for 5 minutes. I just want to build upon that point that Commissioner Chopra made about this notion of consent would be--you know, trying to find out what you're consenting to would be a full- time job. And I think, as it turns out, even if you devoted your time to it as a full-time job, you still would run into the situation in which you have these sort of take-it-or-leave- it contracts where basically if you don't agree to a certain amount of collection, you just don't get the service. So, you know, the consumer or the user in this context doesn't really have the power even if you devoted full-time to navigating and trying to--and you wonder why we don't create the kind of consent we require in most other contexts, if it's medical consent, if it's consent to withdraw a not guilty plea and enter a plea in court. It's the knowing consent. It's actually the person knowing what they're consenting and affirmatively consenting and why we have allowed a kind of complete turning on its head where everyone is presumed to consent to the total collection of everything about them unless they can find some way to object to it. It's kind of curious, so I think this is a really important area for us to look at. Dr. Valletti, I want to just turn to you for a moment. Google has 2 billion users on Android, and Facebook has over 2 and a half billion users. And what we hear very often is that, you know, these services are very popular, and people really have no problem with the kind of corporate surveillance and these loose privacy controls. And isn't the fact that these numbers are so great evidence that there's not really a problem, that the popularity of these services proves that we really don't need to worry about this. What do you say to that argument? Mr. Valletti. The services are very popular. It's evident they are very good services but that nobody cares. One of the points I make in my written piece is also that consumers are not put in a position to understand what the cost might be because they cannot make comparisons. They don't see where the data is going. They don't know when something is coming back against them because they just don't know, and they cannot make comparisons because there is a lack of competition. Going back to your original remark, you're probably aware that, earlier this year, Germany had a case against Facebook, and this is on appeal in the court now. But it exactly said that the consent--that the customers who want to be on Facebook had to give also to cross link data with WhatsApp and Instagram, which belong to the same company. They said you didn't tell them what you were going to do. You cannot do it unless you inform them in some appropriate way, and if you do not--if they don't consent, you cannot deny access to the service to Facebook because you don't need that consent to supply the primary service. Mr. Cicilline. Thank you. In July, as part of this investigation, Google testified before this subcommittee that it faces, and I quote, ``formidable competition around the world,'' end quote. Google stated that users can choose from a menu of search providers, including Bing, DuckDuckGo, and Yahoo. Dr. Valletti, in light of your work with the European Commission, do you agree that there is intense competition in online search, whether it be in Europe or in the United States? Mr. Valletti. It's a very general statement. So I will be more precise when it comes to, say, general search, this competition is not there in Europe; 93 percent of European searches are done by one search engine. And this possibility that consumers have to do something else, to change the defaults, to change the pre-installment of these behavior biases we already mentioned several times, they are clear in the data; I do see people actually sticking all the time and never changing the default. Mr. Cicilline. Dr. Furman? I have a couple questions for you. You can respond to that quickly, though. Mr. Furman. Just one quick point to add. You wouldn't-- Google wouldn't pay so much money to be the default search engine on things like iOS if it was really easy for consumers to switch. Mr. Cicilline. Right. And so, Dr. Furman, what role do you think information asymmetries play in how we should understand digital markets? Corporations routinely have more information than regulators and the public, but digital platforms seem to enjoy an astronomical advantage. How should this affect antitrust enforcement and competition policy, if at all? Mr. Furman. First of all, I think the enforcers need more resources. The CMA and the U.K. have actually created a digital unit with excellent staff in terms of data analytics and the like. And we also need to design policies around data openness that reduce some of that asymmetry between some of the big platforms, their competitors, and the public and regulators. Mr. Cicilline. I think many of you have made this point. Competition and privacy can be complements such that more competition can incentivize firms to provide users with more privacy, but they can also be at odds, such as that encouraging interoperability and data portability could expose user data to a broader set of corporations. So how should enforcers and policymakers in the Congress strike this balance? Mr. Furman. I think the answer to that is going to be on a case-by-case basis. First of all, as you said, a lot of cases, they really are complements. A lot of cases, only one of them is implicated; the other one barely is. But you need to have both objectives. You can't just think about privacy and completely ignore competition, and you can't just think about competition and completely ignore privacy. That's part of why you would want to establish a unit, a body of regulators, something that would have both of those objectives. Mr. Cicilline. Ms. Layton, I want to know if you wanted to respond to any of what I've asked. No. Okay. Mr. Chopra. Mr. Chairman, I would just add that when there's so few dominant players, that opens up more abuses of privacy. And I'm worried that our economy in this sphere is just drifting toward the Chinese model where there's just a massive amount of information on people collected without their consent and can be used to manipulate. And I just reject this argument that if we want to compete with China, we need to have our companies look like them. The beauty of our country is when new entrants come in and challenge the dominant ones. I just don't want that system. Mr. Cicilline. I agree. At this time, I'd ask unanimous consent that the following statements be introduced in the record: a written statement from the Australian Competition and Consumer Commission Chair Rod Sims discussing his investigation into the digital platforms. Without objection. [The information follows:] MR. CICILLINE FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. A written statement from Dina Srinivasan discussing the intersection of competition and privacy. Without objection. [The information follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. A letter from the Consumer Reports detailing their priorities in examining data and privacy in competition. Without objection. [The information follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. A written statement from Maurice Stucke and Ariel Ezrachi on the digital platform economy's effects on antitrust and privacy policy. Without objection. [The information follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. And a statement from the European Union Commissioner for Competition, Margrethe Vestager, with her expertise on the digital economy. Without objection. [The information follows:] MR. CICILLINE FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. And, with that, I will conclude the hearing with gratitude for our extraordinary witnesses, and thank you for being here today and for contributing significantly to our ongoing investigation. And, with that, the committee is adjourned. [Whereupon, at 12:05 p.m., the subcommittee was adjourned.] APPENDIX ======================================================================= [GRAPHIC] [TIFF OMITTED] [all]