[House Hearing, 116 Congress] [From the U.S. Government Publishing Office]ONLINE PLATFORMS AND MARKET POWER, PART 4: PERSPECTIVES OF THE ANTITRUST AGENCIES ======================================================================= 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 __________ NOVEMBER 13, 2019 __________ Serial No. 116-63 __________ 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 40-787 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 ---------- NOVEMBER 13, 2019 OPENING STATEMENTS Page The Honorable David Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law................... 1 The Honorable James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law................ 2 The Honorable Jerrold Nadler, Chairman, Committee on the Judiciary...................................................... 3 The Honorable Doug Collins, Ranking Member, Committee on the Judiciary...................................................... 47 WITNESSES The Honorable Joseph Simons, Chairman, Federal Trade Commission Oral Testimony............................................... 6 Prepared Testimony........................................... 8 The Honorable Makan Delrahim, Assistant Attorney General, Antitrust Division, Department of Justice Oral Testimony............................................... 27 Prepared Testimony........................................... 29 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING A statement for the record by the Electronic Privacy Information Center from the Honorable David N. Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law... 68 APPENDIX Responses to Questions for the Record from the Honorable Joseph Simons, submitted by the Honorable David N. Cicilline, Chairman, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 76 Responses to Questions for the Record from the Honorable Joseph Simons, submitted by the Honorable Henry C. ``Hank'' Johnson, Member, Subcommittee on Antitrust, Commercial and Administrative Law............................................. 112 Responses to Questions for the Record from the Honorable Joseph Simons, submitted by the Honorable Pramila Jayapal, Member, Subcommittee on Antitrust, Commercial and Administrative Law... 113 Responses to Questions for the Record from the Honorable Joseph Simons, submitted by the Honorable Ken Buck, Member, Subcommittee on Antitrust, Commercial and Administrative Law... 117 Responses to Questions for the Record from the Honorable Makan Delrahim....................................................... 118 A letter regarding the proposed merger of Fitbit and Google from a group of antitrust and technology experts.................... 146 ONLINE PLATFORMS AND MARKET POWER, PART 4: PERSPECTIVES OF THE ANTITRUST AGENCIES ---------- WEDNESDAY, NOVEMBER 13, 2019 House of Representatives Subcommittee on Antitrust, Commercial and Administrative Law Committee on the Judiciary Washington, DC. The subcommittee met, pursuant to call, at 2:07 p.m., in Room 2141, Rayburn House Office Building, Hon. David Cicilline [chairman of the subcommittee] presiding. Present: Representatives Cicilline, Nadler, Neguse, Johnson, Jayapal, Scanlon, McBath, Sensenbrenner, Collins, Armstrong, and Steube. Also Present: Representative Cline. Staff Present: David Greengrass, Senior Counsel; John Doty, Senior Advisor; Madeline Strasser, Chief Clerk; Moh Sharma, Member Services and Outreach Advisor; Amanda Lewis, Counsel, Antitrust, Commercial and Administrative Law; Joseph Van Wye, Professional Staff Member, Antitrust, Commercial and Administrative Law; Lina Khan, Counsel, Antitrust, Commercial and Administrative Law; Slade Bond, Chief Counsel, Antitrust, Commercial and Administrative Law; Daniel Flores, Minority Chief Counsel; and Andrea Woodard, Minority Professional Staff. Mr. Cicilline. The subcommittee will come to order. Without objection, the chair is authorized to declare recesses at any time. We welcome everyone to the fourth in a series of hearings investigating competition in digital markets, this one focusing on the perspectives of the antitrust agencies. I now recognize myself for an opening statement. We are living through a moment of extreme concentration across our economy. In industry after industry, just a few companies dominate critical markets that affect the day-to-day lives of hardworking Americans. Unchecked by competition, dominant corporations can abuse their market power to raise prices for consumers, lower wages, and stifle entrepreneurship and small businesses, enriching their executives and shareholders at the expense of everyone else. One area where this extreme concentration is most troubling is in the digital economy, where a small number of dominant platforms have become critical intermediaries for the flow of commerce and information. While these platforms have delivered American consumers some benefits, there's growing evidence that these platforms are now using their power to set the terms of the market in ways that enrich them but make it impossible to compete on an even playing field. Each day, the news is full of reports documenting how decisions by this handful of corporations increasingly determine whether a merchant, app developer, or news publisher sinks or swims. Because several of these digital monopolies operate business models premised on the surveillance of Americans, the power they wield over us is by many measures unprecedented. Six months ago, this committee initiated a bipartisan investigation into competition issues in digital markets. This investigation follows a long tradition of congressional investigations into monopoly power, including industry-wide assessments of whether dominant corporations are abusing their market power, whether our laws are working, and how to reverse the rising tide of economic concentration. This investigation is pursuing a similar path, and a key task for the subcommittee is understanding the enforcement record of the antitrust agencies. Over the past decade, the largest technology firms have acquired over 436 companies, many of which were actual or potential competitors, according to a New York Times report by Tim Wu and Stuart Thompson, but not a single one of these acquisitions was challenged by antitrust enforcers. In fact, only a handful of these were closely scrutinized. The last major monopolization case brought by Federal enforcers was Microsoft 20 years ago. While these problems have plagued enforcement across markets and not just in the digital economy, the enforcement gap in these markets has created a de facto antitrust exemption for online platforms. Have the agencies failed to bring cases because of unfavorable case law, requiring congressional action to amend the law? Is this inaction due to a lack of agency resources, or is it due to a lack of will at the agencies to enforce the laws on the books? These are the questions that the subcommittee is looking to answer through its investigation in areas that I hope will be fully addressed during today's hearing. In closing, I want to thank Chairman Simons and Assistant Attorney General Delrahim for their appearance today and look forward to hearing their testimony. And I now recognize the very distinguished gentleman from Wisconsin, Ranking Member Sensenbrenner, for his opening statement. Mr. Sensenbrenner. Well, thank you very much, Mr. Chairman. I want to welcome Mr. Delrahim and Mr. Simons to our hearing today. In the ordinary course of oversight of the antitrust enforcement agencies we conduct annual or biannual oversight hearings to examine the waterfront of issues before these important agencies. But today Assistant Attorney General Delrahim and Chairman Simons have graciously appeared to discuss only one set of issues before us, antitrust issues concerning the tech sector. Like members of this subcommittee, these key government officials recognize the importance of making sure that we get right the applicability of this Nation's antitrust laws for this critical sector of our modern economy. And like us, each of them is in the midst of a searching inquiry into whether our century-old antitrust laws and our government's enforcement of those laws is adequate for the challenges presented by our new digital economy. In our inquiry in the subcommittee, we have thus far looked at whether entities in the tech sector, particularly the largest online platforms, have or have not been accumulating and leveraging market power over competitors and other market participants. Affected entities include fellow tech innovators, news publishers, and app developers who depend upon large online platforms to reach consumers and many others. We have also examined aspects of online data privacy and the role that online data plays in competition, particularly with very large accumulations of consumers' online data. Today we gather to hear the perspectives of the two antitrust enforcement agencies on these and other tech issues. This will help us not only to engage in oversight of these agencies' activities in the tech sector but also to reap the benefit of those agencies' expertise and wisdom as we assess whether or not our antitrust laws and agencies are up to the task or instead need amendment or added resources. While this hearing is narrowly focused, it should be noted that there are a number of issues before the Department of Justice that Members of Congress are monitoring closely. This includes the review of consent decrees, and it is my intention to submit questions for the record on this topic. I encourage our witnesses and all of us to recognize that Congress and the antitrust enforcement agencies need to be careful not to overreach to extend or apply the antitrust laws in ways that end up punishing success, suppressing innovation, and ultimately limiting consumer welfare. I thank the witnesses for coming and yield back. Mr. Cicilline. I thank the gentleman, the ranking member, for yielding back. I now recognize the chairman of the full committee, the gentleman from New York, Mr. Nadler, for his opening statement. Chairman Nadler. Thank you, Mr. Chairman, for convening today's oversight hearing of the antitrust agencies and our competition system. As part 4 of our series of hearings on online platforms and market power, today's discussion is essential to advancing the committee's bipartisan investigation into competition in digital markets. This hearing occurs at a critical moment. There is growing evidence that a handful of dominant platforms now control key arteries of online commerce, content, and communications. A number of important digital markets are now dominated by just one or two firms. For example, Google controls over 90 percent of the global search market, and Facebook captures over 80 percent of all global social media revenues. By some estimates, Amazon controls about half of all online commerce in the United States. While the open internet has delivered enormous benefits to Americans, waves of anticompetitive consolidation in digital markets have had devastating effects on key elements of our democracy and economy, such as a free and diverse press. It also threatens the survival of a key element of our economy, the American startup. Empirical evidence suggests that the trends of increasing consolidation of market power in digital markets pose a threat to technology startups and to innovation in the U.S. economy. For example, it has been reported that seed funding for technology startups, the initial round of investment in a startup, has declined significantly just from 2015 to 2018. I am deeply concerned about the antitrust agencies' lax merger enforcement, which has permitted these harmful levels of concentration and the rise of market power in the digital economy. In addition to rising consolidation, there have also been allegations of anticompetitive conduct in digital markets. For instance, as more small and medium-sized businesses become reliant on the dominant platforms to reach consumers, they have increasing concerns that discriminatory or exclusionary conduct by the platforms could destroy their business over the course of just a few days or months. Despite mounting evidence of illegal monopolization activities by some of the dominant platforms and numerous cases brought by international enforcers, U.S. enforcers appear to be paralyzed. It has been decades, decades, since the Department of Justice or the Federal Trade Commission has brought a significant monopolization case in the tech sector. This is not just a criticism of the current administration. It has been decades since a significant monopolization case has been brought in the tech sector. Tim Wu, a professor at Columbia University, testified before the Judiciary Committee in July that the Department of Justice court challenges against AT&T, IBM, and Microsoft, quote, ``were foundational in terms of shaking up industry and creating room for new firms to grow,'' unquote. I am encouraged by reports of the agencies' current investigations into the dominant tech platforms, but the decline in enforcement over the past several decades is extremely troubling--a decline, I should add, that has occurred across all industries, not just in the technology sector. I find it hard to believe that companies in all sectors have simply ceased engaging in illegal monopolization rather than the more likely explanation, which is that the agencies have been and are underenforcing the antitrust laws. There may be a number of reasons for underenforcement by the agencies with respect to both anticompetitive conduct and to merger review, including unfavorable case law, insufficient enforcement will, and inadequate agency resources, all of which I look forward to having examined at today's hearing. One problem Congress can most directly address is ensuring that the agencies charged with antitrust enforcement have sufficient funding. Unfortunately, appropriations of these agencies have declined over the last decade in spite of the increase in merger activity and an increase in the complexity of investigations. In real terms, agency funding in 2019, this year, was nearly 20 percent lower than in 2010. It is vital that the antitrust agencies have the resources they need to do their jobs. I doubt that the gentlemen in front of me will disagree with that statement, at least. While ultimately it is the responsibility of the antitrust enforcement agencies to enforce the law, Congress has an obligation to assess whether existing antitrust laws and competition policies and the will to enforce those laws and policies are adequate to address the competition issues facing our country and to take action if they are found to be lacking. Over the past 6 months, the committee's bipartisan investigation into competition in the online marketplace has explored these questions in the context of digital markets. It is essential that we continue this important work through today's hearing and throughout this Congress as we seek to address competition problems in digital markets for the benefit of American consumers, small businesses, and workers. With that, I look forward to hearing from our witnesses today, and I thank them for their participation. I yield back. Mr. Cicilline. I thank the gentleman for yielding back. It's now my pleasure to introduce today's witnesses. Our first witness, Joseph Simons, was sworn in as Chairman of the Federal Trade Commission in 2018. Prior to joining the Commission, Chairman Simons was a partner at Paul, Weiss, Rifkind, Wharton & Garrison and co-chair of their Antitrust Group. He's held multiple positions at the FTC throughout his career, including assistant director for evaluation, associate director for mergers, and director of the Bureau of Competition. Chairman Simons received his A.B. from Cornell University and his J.D. from Georgetown University Law Center, a fine, fine institution. Our second witness is Makan Delrahim, assistant attorney general for the Antitrust Division of the United States Department of Justice. Prior to his confirmation in 2017, Mr. Delrahim assisted President Trump's transition team and was briefly deputy White House counsel. He previously served in the DOJ's Antitrust Division in 2003 as deputy assistant attorney general under President George W. Bush. Before his time in the executive branch, Mr. Delrahim was chief of staff and chief counsel to the Senate Judiciary Committee under Chairman Orrin Hatch. Mr. Delrahim received his B.S. from the University of California, Los Angeles and his J.D. from the George Washington University School of Law. We welcome our distinguished witnesses and thank them 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? You may be seated. Let the record show the witnesses answered in the affirmative. Please note that each of your written statements will be entered into the record in its entirety. Accordingly, I ask that 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 that your 5 minutes have expired. Chairman Simons, you may begin. TESTIMONY OF THE HONORABLE JOSEPH SIMONS, CHAIRMAN, FEDERAL TRADE COMMISSION; AND THE HONORABLE MAKAN DELRAHIM, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF JUSTICE, ANTITRUST DIVISION TESTIMONY OF JOSEPH SIMONS Mr. Simons. Chairman Cicilline, Ranking Member Sensenbrenner, and members of the subcommittee, thank you for the opportunity to appear before you today. I am pleased to talk about the Commission's current competition enforcement activities and policy priorities, particularly with regard to digital platforms. I'm also very happy to appear alongside my esteemed colleague, Assistant Attorney General Makan Delrahim. Please know that the written statement that I submitted is on behalf of the Commission. My oral statement and responses to your questions today are my own and do not necessarily represent the views of the Commission or any individual commissioner, other than me. First, I want to thank the committee for its work in areas that are core to our mission, such as pay for delay settlements and drug companies' abuse of the regulatory processes to thwart competition. I also very much appreciate your support in addressing recent court challenges to our 13(b) authority, which is critical. Today, I want to briefly highlight the recent FTC competition enforcement matters and developments at the agency. In particular, the agency has taken notable actions to prevent anticompetitive mergers and conduct, including in digital markets, that are of interest to this committee and others. Over the past 2 years, the Commission has had 43 merger enforcement actions, including seven in litigation for which we are undefeated. These cases have implications across the U.S. economy in markets for specialized software, medical devices, industrial chemicals, and familiar consumer staples. With respect to conduct, the FTC recently voted unanimously to bring a monopolization case involving vertical restraints on a digital platform. The FTC's complaint against Surescripts alleges that Surescripts is a monopolist in two multisided platforms, one connecting doctors to pharmacies and one connecting doctors to PBMs. The complaint alleges that Surescripts used exclusive contracts and similar arrangements to protect its dominant positions in both markets. In another matter, last year the Commission ruled that 1- 800 Contacts had unlawfully entered into agreements with rivals to restrict the scope of truthful, nondeceptive online advertising. As the Commission learned through its earlier research program on advertising restrictions, agreements among competitors to restrict otherwise lawful advertising often reduces competition. The FTC continues to monitor closely the behavior of participants in similar markets. In an effort to deepen our focus on technology markets and make it a real emphasis, our Bureau of Competition shifted internal resources earlier this year to establish a Technology Enforcement Division. This dedicated group is investigating competition in U.S. technology markets and will recommend enforcement action where warranted. For example, as Facebook recently publicized, our Technology Enforcement Division has commenced an antitrust investigation into some of Facebook's business practices. Finally, we continue our robust policy work, including hearings on Competition and Consumer Protection in the 21st Century. We held quite a number of hearings focused on various parts of the technology sector, such as multisided platforms, algorithms, artificial intelligence, and data security. We expect to begin releasing output soon, including technology platform guidance. We are committed to using our resources efficiently to protect consumers and to promote competition, to anticipate and respond to changes in the marketplace, and to meet current and future challenges. Thank you for your time, and I look forward to your questions. [The statement of Mr. Simons follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Chairman. I now recognize Mr. Delrahim for 5 minutes. TESTIMONY OF MAKAN DELRAHIM Mr. Delrahim. Thank you, Chairman Cicilline, Ranking Member Sensenbrenner, Chairman Nadler, and distinguished members of this subcommittee. Thanks for inviting me to be before you today at this oversight hearing. We begin by thanking the subcommittee for continuing the bipartisan support of the Antitrust Division's work to protect competition on behalf of American consumers, workers, and entrepreneurs. I also want to thank you for your leadership and oversight of some of the most challenging issues of today, such as the competitive impact of online platforms. We have submitted a longer statement for the record. In the interest of time, I just wanted to highlight a couple of the issues just for your benefit and the committee's benefit here. Recently, just this past week, we announced the formation of the Procurement Collusion Strike Force. It's an effort with U.S. attorneys across the country, the FBI, the Department of Defense's DCIS, as well as a number of inspectors general, and our efforts there are to detect, prevent, and prosecute criminal activity, especially when taxpayers are the victims at all levels of the government. I will place some of the other general matters of our statement in the record. We will, with your permission, supplement the previous statement. But I wanted to highlight a few of those, but I want to get into the issue that is germane to your particular interest in this hearing, which is the online platforms and our activity there. Related to that, I should also mention that we--that the United States sought and was granted the privilege of hosting for the first time the ICN's, the International Competition Network's annual conference. This is the most important conference of global competition enforcement agencies, and our host status for the 2020 ICN will allow the Antitrust Division and the Federal Trade Commission to showcase our ideals by promoting fundamental due process as well as a broad range of important policy issues, including digital platform competition and cartel enforcement at this event next May. Now on to the Department's activities in digital platform markets. I know the subcommittee continues to focus on the way that consumers engage with online platforms. I'm pleased to report that the division is hard at work reviewing business practices by market-leading online platforms, which we announced in July. To date, Facebook and Google have both publicly disclosed investigations by the division. These companies are not the only focus of our review. They are, however, an important part because of the significant role they play in the lives of so many American citizens and because they occupy a unique role in the modern era of personalized advertising supported by user data. The work we are doing is focused in part on understanding how personalized advertising transactions work and their competitive dynamics. We're looking at how these dynamics create value for advertisers, content creators, and the American consumers who use these advertising-supported platforms. By understanding these competitive dynamics, we can determine if the market leaders have monopoly power, how do they exercise such monopoly power, and whether the source of that power is from merits-based competition or if the source of that power is exclusionary or anticompetitive conduct. Other online platforms make money in other ways, and we are reviewing those other business models as well. The common thread is this: Online platforms bring together users who access information services on the platform with third party providers, products, services, or advertisement. We're concerned with the ways that the platform operators can manipulate the conditions for competition. In some instances, the platform operators may have the incentive to improve the platform for the benefit of all of those users. In other instances, the platform operator also may compete against users of the platform and may have an incentive to disadvantage or exclude competitors. Of course, the division did not begin its work investigating online platforms when we announced the reviews in July. Indeed, we've had a section dedicated to industries governed by information technology and network effects for more than 20 years. It was this section that in 2008 investigated and decided to file suit against Google and Yahoo for an agreement that would have eliminated Yahoo as an independent source of online search advertising. This tech section coordinated its investigation with 15 States and Canada, and ultimately, the parties dropped their plans for the agreement rather than face a lawsuit in this field. That section also dealt with online zero price business models and in 2012 litigated and won an injunction against H&R Block and TaxACT, that merger. The challenge was in part based on evidence that TaxACT was a maverick online startup that threatened the behemoth incumbent with a freemium business model in the market for online tax preparation services. The division also investigated and secured a settlement in Google ITA in 2015. That settlement resolved allegations in the complaint that Google's merger with a producer of airfare pricing and shopping systems would harm competition among online flight search platforms, resulting in reduced choice and less innovation for consumers. Although I'm not able to discuss the particulars of our ongoing investigations, I think these examples of past cases, along with some recent public remarks, can assure you that the Antitrust Division will ask the right questions as we investigate whether any platform acquired or maintained its monopoly power through anticompetitive conduct. I look forward to your questions. [The statement of Mr. Delrahim follows:] [GRAPHIC] [TIFF OMITTED] Mr. Cicilline. Thank you, Mr. Delrahim. Before we begin the questioning, I recognize the ranking member of the full committee, Mr. Collins, for his opening statement. Mr. Collins. Thank you, Mr. Chairman. I appreciate it. And thanks for being here. This is, again, one of the bright spots, and I appreciate the chairman and ranking member on our side, and also the full committee chairman, that we can continue this. This is something that's needed to be done and, Mr. Delrahim and others, I thank you for being here. This antitrust investigation is continuing to be one of the bright spots on this committee's agenda this term, and the importance of digital technology in our constituents' lives grows every day. The tech sector is one of the greatest forces for innovation and wealth creation in the world and our economy. Rarely in history have we witnessed such a transformative change in how we go about our lives. Much of that change is very much for the good, but not all. Among these changes are the ways that companies compete, both fairly and unfairly, to provide goods and services to consumers. It is, therefore, critical that we work on a bipartisan basis to understand whether our current antitrust laws or our antitrust enforcement agencies are able to keep up with the task of the tech sector in the present time. We will have accomplished something important together if we can determine whether our antitrust laws need updating for the digital economy or whether the antitrust agencies need Congress' help to assure vigorous antitrust enforcement in the tech sector. From the start of our inquiry, I made it clear that overarching principles are guiding me in this inquiry. First, while some tech companies have become very big, and big is not necessarily bad, companies that offer new innovations, better solutions, and more consumer benefit at lower prices often become big, and they benefit society. Proposals to break up big companies just because they are big risk throwing out the baby with the bathwater and are simply punishing success. Second, just like existing antitrust laws, proposals for new legislation should aim to keep the free market free. Proposals to construct broad new regulatory regimes should be viewed with caution. Experience shows that regulatory solutions often miss the mark, solve problems less efficiently than free markets, and can create new opportunities for anticompetitive companies to suppress competition through rent seeking. That is especially true when the regulations attempt to take on evolving problems in fast-moving markets. The principle is particularly important to me as we seek a better way to protect privacy of consumers' online data. I announced in July of this year that I would be introducing legislation this term to achieve better protection, and I'm working hard on that legislation, and it is strongly animated by the principles that I have just laid out. Other proposals, like laws adopted in Europe and California, threaten to entrench the market power of large incumbent tech companies under the cloak of protecting online data privacy. I want us to instead enact new Federal law that better protects privacy without making it harder for new and small innovative companies to enter the market, jostle with the giants, and strive to become the blockbuster companies of tomorrow. We've got to keep that pipeline open. The heads of the antitrust agencies before us today also have stated principles they believe should guide antitrust inquiries into the tech sector, and I'm looking forward again to hearing your thoughts. We have talked many times before about this, and I appreciate that as we go forward. Again, this is what we need to be doing, and I think we have had long conversations in this arena, and I believe that the disruptors in our economy, many of these in the tech sector, have brought forth many, many good things. But I think we're also dealing in an new age and a new environment, and this is a good look forward. Where are we right now? Mr. Delrahim, we've talked many times about many things, and especially through music last year. Again, I appreciate your concern there. I still reiterate I'm looking forward as we move forward on consent decrees and others that that is not something that can be done without a lot of discussion and talk as we move forward. So I do appreciate that. And thanks for being here. And again, Mr. Chairman, this is really a good time, and I appreciate your continued interest in this, and yield back. Mr. Cicilline. Thank you, Mr. Collins. We will now proceed under the 5-minute rule. I recognize the gentleman from Georgia, Mr. Johnson, for 5 minutes. Mr. Johnson. Thank you, Mr. Chairman. And thank you, Mr. Delrahim and Mr. Simons, for coming today to testify. The concentration of power in the digital marketplace is something that should concern every American, and your agencies are on the front line in addressing unlawful uses of market dominance. Digital companies are acquiring their competitors at an alarming rate. Few, if any, platforms are truly interoperable, and the collection of and capitalization on user data has reached unprecedented heights. I'm also concerned that barriers to bringing antitrust cases have grown too high for the average American. Since the 1980s, case law has snowballed to create evidentiary standards that prevent harmed individuals from commencing meritorious suits with any hope of success. I'm looking forward to talking with you all today about the manipulation of market power through data and the FTC's efforts to enforce our laws. Mr. Delrahim, a year ago you argued in a speech that, quote, ``data, even large amounts of it, may not act as an entry barrier in every digital market,'' end quote. Specifically, you said, quote, ``while there has been a temptation to use data as a proxy for price when determining the anticompetitive effects of a merger or conduct,'' end quote, that the value of consumer data, quote, ``should not be confused with price.'' But just last week in a speech at Harvard Law School, you indicated that large amounts of data can entrench dominant players in digital markets and cuts out emerging competitors. You said that data is, quote, ``analogous to a new currency,'' end quote, and that antitrust enforcers need to be vigilant about the collection, aggregation, and commercial use of consumer data, end quote. Has your view on the role of data in the digital marketplace changed since your speech last year? Mr. Delrahim. Mr. Johnson, thanks for the question. I think both of those statements, I stand by them. I think, one---- Mr. Johnson. They tend to be inconsistent. Mr. Delrahim. Well, let me explain. Let me explain. I don't think that you can directly correlate data with a particular price, partly because data has multiple dimensions to it. For example, just the user data, your data or my data, could be collected by numerous people here in what we term as a nonrivalrous asset, meaning that its value does not diminish by the number of people who would have it. If I had a $10 bill, by the time I gave it to the second person, a dollar to the second person, it would be only worth $8. However, usage data is different, and that's something we're trying to grapple with looking at that. By that, I mean your data from 2015 to 2017, your viewing habits, your purchases is not something that could be replicated by a new entrant who could start in 2019. So your usage data has a completely different value, it is much more unique than your user data, so we have to be careful about what kind of data and how we look at it, which is why this, what you guys are doing in the oversight, is so critical, and what we continue to do to learn in this industry, the competitive impact of data, is so important. Mr. Johnson. Thank you. Do you believe that antitrust enforcers' past reluctance to view concentrated control over data as an entry barrier has been a mistake? Mr. Delrahim. You know, I think it would be unfair for me to critique my predecessors' involvement of these. Every single transaction has different dimensions, and, frankly, our understanding of the marketplace. This is a fast-evolving market, and I think what the agencies know today may not be what they knew 10 years ago. Mr. Johnson. Let me ask you this as my time is running out. Mr. Delrahim. Sure. Mr. Johnson. Do you believe that the FTC, Mr. Simons, do you believe that the FTC has an overbearance on a policy that indicates to me that you feel like the risk of litigation is something that is a primary consideration in deciding whether or not to file a complaint in the case of a merger or in anticompetitive conduct? Mr. Cicilline. The gentleman's time has expired. Mr. Simons. So we find ourselves in a situation where we're resource constrained. So when you live in that kind of environment, you want to be careful about the complaints you do file. You don't want to file---- you want to focus on the ones that have a better chance of success and also the ones that have the most impact. So in that sense, we are concerned about litigation risk, and if we had more resources, we could bring more cases. Mr. Johnson. Thank you. I yield back. Mr. Cicilline. I now recognize the ranking member of the subcommittee, Mr. Sensenbrenner. Mr. Sensenbrenner. Thank you, Mr. Chairman. Last week I was in Berlin and Brussels talking about privacy, talking about competition, expressing my fear that the Europeans, led by the Germans, are attempting to use their laws on this as a way of, number one, forcing us to adopt their laws rather than enforcing ours; and secondly, being used very subtly as a protectionist mechanism for European data platforms. Let me start out by saying that basically U.S. antitrust law was designed to protect consumers. European antitrust law is designed to protect the competition. I cast my vote with the consumers, and I think that 100 years ago our predecessors in Congress got it right. We have to improve and reform both our enforcement in an increasingly globalized economy as well as dealing with the policy differences that the United States and our foreign competitors have had. Let me say that I have expressed repeatedly that Europe's General Data Protection Regulation, or GDPR, has been designed to squeeze out competitors and help entrench large incumbents, and it has enervated innovation. Are either of your agencies looking at that, particularly leading up to this international conference that will be held here next May? Mr. Simons. So we're very focused on the privacy issue, and in particular we've encouraged Congress to consider and adopt Federal privacy legislation. But one of the things we're very focused on and concerned about in that effort is the issues that you've just raised with respect to GDPR in Europe. We're very concerned that adopting a program like that could end up doing exactly the opposite of what we're trying to do with our competition mission, which is to entrench the large dominant platforms at the expense of the smaller competitors and the new entrants. By requiring opt-in consent on such a widespread basis, you put the consumer in a situation where the consumer is probably only likely to consent--confine that opt-in consent to so many competitors in the marketplace, and of course, the dominant ones would be the most likely to be able to get the consent. And also they're consumer facing. So, for example, data brokers who aren't consumer facing would have a difficult time potentially getting that kind of opt-in consent and competing in the marketplace. And those are the folks that are providing, I think, at least in our country, data to new entrants and to smaller competitors as a kind of a substitute for what Google and Facebook collect. Mr. Sensenbrenner. Well, you know, let me express my concern that if the Europeans turn that screw too tightly, it's going to have a very bad impact on transatlantic commerce, which will end up having a result of a recession or worse on both sides of the Atlantic. Now, I don't think from what I heard in Europe last week that they really have considered that very much. More importantly, they really don't care as long as the European platforms get a leg up on the American platforms. So when we're dealing with these issues, I think we have to be very, very careful that the unintended consequence of what we're doing is not to end up encouraging protectionist policies on the part of our foreign competitors in the name of, quote, antitrust enforcement, or, quote, privacy protection. You know, I agree with you, we need to have a Federal privacy law, which would make my arguments in Europe a lot more persuasive, I would say, but at the same time we've got to be very careful not only in what we want to accomplish, but making sure that it's limited to what we want to accomplish rather than having a lot of unintended consequences which hurt consumers on both sides of the Atlantic. And with that statement, I yield back. Mr. Cicilline. I thank the gentleman. I now recognize the distinguished gentlelady from Washington, Ms. Jayapal. Ms. Jayapal. Thank you, Mr. Chairman. And thank you both for being here. I wanted to start in a slightly different direction, and I'll direct these questions to you, Assistant Attorney General Delrahim, and that is to discuss no-poach agreements, which are, as you know, agreements that employers make with each other in which they agree not to recruit each other's employees. And these agreements have been found to inhibit competition among employers, which, in turn, harms workers. The FTC and the DOJ's joint guidance states that competition among employers for employees, quote, ``helps actual and potential employees through higher wages, better benefits, and terms of employment.'' Three years ago, the Department of Justice's Antitrust Division took a formal public instance that no-poach clauses are, per se, illegal, correct? Mr. Delrahim. Correct. Ms. Jayapal. And that joint FTC-DOJ guidance explicitly states from an antitrust perspective, and this is a quote, firms that---- Mr. Delrahim. Let me just clarify. Ms. Jayapal. Yeah. Mr. Delrahim. What we call naked no-poach. These are horizontal no-poach agreements. So there could be some variations to that. And these are vertical arrangements. Sometimes we see those in the franchise systems. Ms. Jayapal. Well, I am going to that. And the joint FTC- DOJ guidance explicitly states from an antitrust perspective firms that compete to hire or retain employees are competitors in the employment marketplace regardless of--and this speaks to what you were just saying--whether the firms make the same products or compete to provide the same services, which seems extremely clear. But I've been a bit concerned that the DOJ recently has started to wobble away from that very clear position. And your Department actually actively argued in favor of more lax standards for franchise employers that use no-poach agreements. And I'm specifically going to refer you to a brief that your Department filed in Stigar v. Dough Dough in the Eastern District of my State, Washington State, arguing that franchise companies should be held to a different standard than other kinds of employers when they use no-poach agreements. Is that what you were arguing? Mr. Delrahim. We were arguing based on the law, and I'm happy to explain. Ultimately, we want to protect competition and the worker, and I'm happy to explain our reasoning for that. We argued in multiple cases, including the Duke-North Carolina, where we took an unprecedented step, for the per se treatment of that when the defendants, not only were they arguing for rule of reason treatment, but also seeking State action immunity. So we did that. Not only did we argue, but we intervened in that. In the franchise matters, we argued not so much that they're per se illegal, but that the rule of reason should apply when it's inside that system. And the reason for that is--some of you may know my background. I worked in my father's gas station for 8 years. Ms. Jayapal. Let me just, just because I have very little time, let me just---- Mr. Delrahim. But this is really important for the workers that you're concerned about as we are. Ms. Jayapal. Right. And here is my question, I guess, is why the Department would choose to use this discretion that you have in situations, and in fact to the point where our attorney general in my home State of Washington actually had to submit a brief where they again explicitly clarified that no-poach agreements were per se illegal and that the distinction that you were making or that your Department was making was not consistent with past positions. The American Antitrust Institute actually wrote a paper directly disagreeing with your Department's stance on this issue. And so I guess the question I have is, when the agency is supposed to protect workers, and I believe that that's what you have been trying to do, from the harms of anticompetitive corporate behavior, why expend significant energy and precious resources in filing these briefs that allow large franchising corporate chains to get away with using no-poach agreements under, I would argue, under pretty flimsy justifications, having read some of the documents in this case? Because at the core of this is the fact that millions of workers are affected when employers make these agreements that undermine competition, and they, and we, I am really hoping that your agency intervenes on behalf of these workers. I want to give you just 5 seconds. And then I do have a question for Mr. Simons, if you want to say anything, very brief. Mr. Delrahim. Well, if I could ask the chairman, this requires more than a 5-second response, and I do not want to leave your constituents and this committee with the wrong impression that somehow that there's a distinction. I would like to explain--this stuff is, you know, it's complicated--but why it actually--our position actually benefits the exact worker that you are concerned about and the attorney general of Washington is concerned about--that's not what the case law is--and how our arguments actually protect those workers, not the reverse. So I'm happy to explain that. Would you like me to do that now? Ms. Jayapal. My time has expired, unfortunately, but I'm happy to take any information that you have on this. Mr. Delrahim. Mr. Chairman, can I just quickly explain why this is so important? Let me just give you one analogy, and this is Jiffy Lube. So if you're a franchisor and you have a franchise system and you have the folks who would invest, let's say, $350,000 to buy a Jiffy Lube franchise, and they would like to--and they invest that. So these are hardworking people employing locals. And if they want to train the new mechanic to do whatever they do, oil changes, the other car repairs, they need to train that and make sure that the competitor within that--the other Jiffy Lube 5 miles down the road is not going to now after 6 weeks of training and the investments that they make to train that employee and probably have paid them, that that person is going to compete. So within reason, and we said this is why it's a rule of reason, not a per se illegality, it's important for them to have that assurance, that small business owner. Why? Because if they don't, and if the attorney general from Washington's rule is in place for those vertical restraints, what do you think will happen with that new small business owner? What they will do is say, you know what, employee? You go train yourself before I pay you and put you on the payroll, or I won't pay to train you to come in. This is a critical issue---- Mr. Cicilline. I've let you go over 2 minutes. Ms. Jayapal. Yeah. And, Mr. Chairman, I just want to say that I think that this is a very important issue because it is a rewrite of previous Department policy and a different direction that the Department is going in making this new distinction. Thank you, Mr. Chairman. I yield back. Mr. Cicilline. I now recognize the gentleman from North Dakota, Mr. Armstrong, for 5 minutes. Mr. Armstrong. Thank you, Mr. Chairman. Mr. Simons, you said just earlier that consumers will only do a limited amount of opt-ins, when we're talking about that. And I'm curious about that, particularly because if they're standardized like a lot of them are on a platform, I mean, I would think after you've done 10, you won't care if you do 30. So I'm just interested in the rationale behind that. Mr. Simons. I mean, that's possible, but the other thing that might happen is people might not want their information spread so widely. It increases the risk of a breach. Mr. Armstrong. And I think that's an important part, and I'm actually going to disregard the privacy part when I ask these questions because that is one of--I mean, the flip side to sharing data is more people have my data. Mr. Simons. Right. Exactly. Mr. Armstrong. And I think that is an area where we continue to go. Mr. Delrahim, you gave a speech in Israel, and it discussed how not all data is alike. And I'm generally curious as to what types of data are more susceptible to being used in an anticompetitive manner. Because I think from somebody like me who doesn't---- Mr. Delrahim. Sure. Mr. Armstrong [continuing]. I mean, understand this, which I think is most consumers, like, data is this one all- encompassing word, but it's very different, correct? Mr. Delrahim. It is. It is very different. It takes many forms. And we have to take a look at that and its actual competitive impact. And as we look at the GDPR regime that Mr. Sensenbrenner raised, in addition to what Chairman Simon said, the other thing we look at is whether that regulatory regime actually creates barriers to new entry, is the cost of that collection, and whereas an incumbent may have already gathered certain data. But as I mentioned to Mr. Johnson, there is user data, there's usage data, and there's different qualities and attributes for each sets of data. Mr. Armstrong. And then I'm going to actually let you continue talking about the Washington versus--the franchise deal because, I mean, in a completely different sector, this is something we saw happen an incredible amount in North Dakota, which when our economy was growing is small businesses having employees taken by larger businesses after they invest. I mean, I think one thing that particularly with any specific skill set is the first 3 months, 6 months to a year when you're training a highly skilled employee, the investment you're putting into them from a business perspective far outweighs the return you get. So you're relying on that employment to pay off in year 2, year 3, year 4. And I know 5 seconds wasn't enough, so I'm going to allow you some time to answer it. Mr. Delrahim. The chairman was generous enough to allow me more than 5 seconds, which I did. But I think you raised a point that I think is really important, because we have to take a look at each of these restraints. Again, not a horizontal. We argued, we filed in the Wabtec case in Pennsylvania, we filed in the Duke-North Carolina case, a number of these, where we have gone in aggressively saying that this should be per se illegal. However, when it is within the system like franchise, as I explained, the rule of reason should apply. Are these reasonable restraints? If you're saying that you can never leave for the next 6 years once I train you, well, I think a judge could find that unreasonable. However, there's limits and there's a test that our Supreme Court has put down, and I would submit what we have submitted is well within what the laws and the precedents, legal precedents are. Mr. Armstrong. And then would you expound on how that actually protects workers? Mr. Delrahim. It absolutely protects workers because it provides that small business owner the incentive to actually invest and train that employee. So the new employee who wants to enter the workforce can now get trained by that franchise owner because for those first 6 weeks that they're learning how to do a tune up or a brake you don't want them to walk across the street to the other competitor. And so those, within reason, can be--and every case is different. Every franchise, every restraint will be--should be treated differently. They should not be banned as per se illegal all the time because some plaintiffs' class has brought that case. Mr. Armstrong. And then so that's where you mean the reasonable test comes in. Mr. Delrahim. Yes. There's a set of tests in its duration and its effect, and we look at those, as do the courts. And there's a set of case law that guides the factors that go into analysis. Mr. Armstrong. And then I guess this can be for either one of you, but I'll ask Mr. Simons. As we talk about data sharing and how this creates a competitive edge, I ignored it for 4 minutes and 30 seconds. But how do we factor that privacy concern into this conversation? Mr. Simons. So you mean on the competition side? Mr. Armstrong. Well, if somebody has my data and we're requiring them to share my data, that means two people have my data. Mr. Simons. Right. So there's a tradeoff. I mean, you just have to balance one against the other. And if it's voluntary in terms of who shares--you know, whether the consumer's data is shared or not, that leaves it up to the consumer. Mr. Armstrong. So you're saying voluntary on the front end. Mr. Simons. Yeah. I mean---- Mr. Armstrong. It has to be voluntary---- Mr. Simons. I mean, a consumer can make a judgment--maybe there's an issue with how informed the consumer is--but the consumer can make a judgment about, do I want to be able to port all my data from one player to another, and now my data is in two places, and did I just double the risk of my data being breached? Mr. Armstrong. Wouldn't they do that on the front end, right? I mean---- Mr. Simons. Yes. Mr. Armstrong. On whatever service they're getting, they're going to do it---- Mr. Simons. Yes. Mr. Armstrong [continuing]. That's the first question they're going to get. Mr. Simons. Right. Mr. Armstrong. Thank you. Mr. Cicilline. I now recognize the gentleman from Colorado, Mr. Neguse, for 5 minutes. Mr. Neguse. Thank you, Mr. Chairman. Thank you for your leadership in hosting this important hearing. And thank you to both the witnesses for your testimony today. I just want to deviate from my prepared remarks for a minute because I'm struggling to follow this last exchange between Representative Armstrong and Mr. Simons. Help me understand your argument that informed consent--that essentially providing a GDPR-type condition here in the United States, that that would somehow put at risk data privacy. I'm not---- Mr. Simons. And it's just something to consider. It's a factor to consider. And so the consideration is by requiring the consumer to opt--let me give you an example. Let's suppose, and this is a little bit stylized, but let's suppose you have a situation where you've got data that's not very sensitive at all, and you have data that's very sensitive. And let's suppose also that the data that's not very sensitive is data that's very kind of useful for doing targeted advertising, okay? And so if you had an opt-in for both of those categories, the sensitive and the nonsensitive, you might end up in a situation where a consumer is just, for whatever reason, maybe it's just inertia, they don't want to automatically give consent to every business that they come across on the internet, right. Because a lot of--like, for example, for smaller players and for new entrants for sure, they don't have a reputation maybe that's recognizable to the average consumer. So you're immediately reluctant to---- Mr. Neguse. But how does that harm data privacy to the extent that a consumer decides---- Mr. Simons. Oh. It doesn't necessarily harm data privacy so much, but what the harm is, is to competition. Because in my stylized example, you might have a situation where you don't really have harm from the nonsensitive data being used without opt-in consent to the consumer, but you have harm to competition because the small players and the new entrants are less likely to get access to it. Mr. Neguse. Has the FTC done any kind of empirical study to demonstrate whether or not the new GDPR regulations implemented in Europe have resulted in a dilution of concentration of market power of various email providers and so on and so forth? Mr. Simons. It would be an increase in concentration. We haven't done any ourselves, but other people are doing analysis, and the preliminary work suggests that it's concentrating share in the dominant platforms. Mr. Neguse. So if you could provide---- Mr. Simons. Sure. Be happy to. Mr. Neguse [continuing]. The specific study that you're referring to, that would be helpful for this committee to consider, obviously. Mr. Simons. There's a few of them, but it's preliminary. Mr. Neguse. Well, and given that last point then, I think it would be important for us to contextually remember that since it doesn't seem as though there's finality to that just quite yet. Mr. Simons. No. There's not finality. Mr. Neguse. I do want to just talk briefly about the settlement with Facebook earlier this year and give you an opportunity to kind of explain the methodology that the FTC used to reach the regulatory settlement that you reached. Obviously, as I'm sure you're aware, there are a number of us in both Chambers of the Congress who were deeply disappointed, in our view, with the terms of the settlement, a $5 billion settlement. As you know, Facebook generated about $56 billion in revenue just last year, in calendar year 2018. So by my estimates, the settlement would entail about a month's worth of revenue for Facebook. Mr. Simons. Yeah, about 9 percent. Mr. Neguse. About 9 percent. Mr. Simons. About 23 percent of their profits. Mr. Neguse. Well, yeah, in a single year. And again, there are a number of other aspects of the settlement that I'd like to get to, and my time is limited. But if you could perhaps explain the methodology as to how you reached that outcome. Mr. Simons. Yeah. So, first of all, let me say that I'm very disappointed that you all are disappointed. And let me try to explain why I think what we did was a terrific outcome for consumers. So we have--first of all, I think the settlement alone stands as very--as very aggressive and much more than anything anyone else around the world has done. They haven't even come remotely close. In fact, if you took all the enforcement actions from all the privacy authorities around the world and combined them, they wouldn't even get close. So that's one. Two, even if we wanted to do more, we don't have the authority to do more. We do not have the authority to impose fines or on our own increase the injunctive relief. We have to go to court. So what we did is we negotiated long and very hard with Facebook to get the best relief we could get in a settlement and compare--then compare that to what we would have gotten if we had gone to court. It would have taken several years to go to court. We may have won, we may have lost. But even if we had won---- Mr. Neguse. I appreciate that. Let me reclaim my time. Mr. Simons. Even if we had won, we would not have come anywhere close to what we---- Mr. Neguse. Sure. I'll reclaim my time. Sir, I wanted to give you a chance to be able to explain. I have limited time. And I appreciate your explanation. And what I was going to say is that ultimately one point that I think you and I both agree on is that the tools that the FTC has under existing statute, in my view, and I suspect perhaps in yours, could be strengthened. And given the trend lines that are moving in this direction and the challenges that your agency faces in terms of dealing with these particular disputes, I would think that this committee could provide some leadership on that front. And so I look forward to having more conversations in that regard. Mr. Simons. I would be thrilled to do that. Mr. Cicilline. And I'll just let the committee know we're going to do a second round, so you'll have some opportunity to follow up. I now recognize myself for 5 minutes. Chairman Simons, in a letter for today's hearing, Marc Rotenberg, the president of EPIC, states, and I quote, that it's increasingly clear that data protection, competition, and innovation are all on the same side in a healthy internet economy. The critical challenge now for the committee is to ensure that the Federal Trade Commission fulfills its mission and safeguards these interests. The current path is not sustainable. And, Chairman Simons, how do you respond to concerns that the FTC has failed to act in response to numerous antitrust and privacy complaints over the past decade and has effectively ignored the obvious cost to personal privacy that has resulted from consolidation in the digital marketplace over this period? And do you agree that market consolidation in digital markets is coming at the expense of strong user privacy? Mr. Simons. Well, first of all, I reject that argument. Mr. Cicilline. Which argument? Mr. Simons. Well, the one you just stated from EPIC. So first of all, on the privacy side, we have a hundred- year-old statute that was not in any way designed to anticipate the privacy issues that we face today. My predecessors at the FTC did an amazing job inventing essentially out of whole cloth a privacy regime that is the most aggressive in the world. So I think if you want us to do more on the privacy front, then we need help from you. We've done as much as we can do with the tools we have. What I was trying to explain before was that we do not have authority even remotely approaching what GDPR has, what the California Act has as well. So if you want us to do more, you need to give us the authority. In terms of---- Mr. Cicilline. So I---- Mr. Simons. I'm sorry. Go ahead. Mr. Cicilline. So I take it from that, you do agree with the last statement that I made, that market consolidation in digital markets is, in fact, coming at the expense of strong user privacy. You're just suggesting you need some additional tools to respond to that. Mr. Simons. Well, what I've said before is that the privacy issue was a critical issue to the U.S., to our country, and it involves very significant social and societal values. And in order to do privacy the right way, it has to be done with those values in mind, and you need--that needs to be---- Mr. Cicilline. My question was a simple one. You are seeing in your work that, in fact, user privacy has been harmed as a result of this market consolidation in the digital marketplace. You just said that part of the reason is, if we want you to do more to protect user privacy, you need additional tools. Mr. Simons. Right. Mr. Cicilline. So I take it that's made on some observations you're making about the marketplace. Mr. Simons. Well, we have ongoing investigations involved in the digital marketplace, and so that's under study. I mean, not study, they're under investigation. It's not a study. Mr. Cicilline. Thank you. Mr. Delrahim, in a speech that was referenced that you gave on Friday you quote Professor Shoshana Zuboff, who I've had the opportunity to meet with, and you say, in speaking of her research and her recent book, you say that she has termed the commercialization of predicting human behavior and the accompanying encroachment on privacy as a form of surveillance capitalism or the unilateral claiming of private human experience as free raw material for translation into behavioral data. And so as we consider ways to protect America's privacy, particularly in light of how these protections may reinforce market power, shouldn't we think about addressing this underlying business model on behavioral advertising? I mean, some have suggested we should ban it completely. Some folks, like Roger McNamee, have recently made statements about sort of recognizing the control of your data as a human right. And isn't that sort of the underlying problem that we have to address in some way in our responding to the work of Professor Zuboff and this behavioral data collection? Mr. Delrahim. Well, Mr. Chairman, you know, that's an important issue. That's a big public policy debate outside of antitrust. As I've explained, privacy and data protection could be a quality element for the purposes of antitrust, and if you have competition between different platforms, then you could compete on some of those avenues, particularly where there's a revealed preference by the user that they value privacy, and I think more and more consumers do. As for a broader debate of whether or not we should, you know, ban that type of marketplace, as Professor Zuboff advocates, or place some limits or at least some disclosures, I think that's a debate for this body to have. I just enforce the laws that you write. Mr. Cicilline. But do you view that there is, in the consideration of competition and the effectiveness of the market, whether there's competition, that the impact on privacy is a factor? I think you already said that. Mr. Delrahim. Absolutely. Mr. Cicilline. How do you think that about that issue in your competition enforcement work? Mr. Delrahim. Well, we look at it, and there is--you know, what I'm happy about, with respect to some of this public discussion about antitrust, is there's this misconception that somehow, you know, the standards by which we enforce the laws is limited to price effects or just quantity effects, and it's not. The courts have repeatedly said quality, innovation, choice are elements of this, of antitrust, and the consumer welfare standard. It's just that I think we have to hone our skills, as well as familiarize the judges more with it because we haven't had many cases on those, certainly not as many as we readily prove with price effects. So I think we have to take a look and describe these types of harms as the Division has done in other cases. Mr. Cicilline. Thank you. My time is expired. I now recognize Mr. Armstrong, the gentleman from South Dakota, for 5 minutes. Mr. Armstrong. Still North Dakota. Mr. Cicilline. Still North Dakota. Mr. Armstrong. There's been suggestions that companies with large data repositories be forced to share that data with smaller competitors, especially since data is nonrivalrous. That seems, to me, like an extreme intervention from the government. I'm going to just start with, do those proposals concern you? Mr. Simons. Yeah. So it's nonrivalrous in the sense that you can duplicate it without diminishing the other--you know, the initial copy. The problem is it may be expensive and costly to produce the data set in the first place. So one example of that that we've had in our enforcement involves title plants. So it's all publicly available, right, because that's where-- you know, the title plants are collecting title information and they're getting it from public sources either online or they go to the courthouse and have to get it. So it's expensive, though, to create that title plant in the first place. And if you made the person who creates the title plant in the first place duplicate it for free, then what's the incentive to create it in the first place? Mr. Armstrong. Do you---- Mr. Delrahim. I agree with that. You know, look, that's not to say that somehow the laws would not allow us to force that. We have a high burden to meet, should we want to force data sharing, but I agree with Chairman Simons that we should be very wary about doing that. Now, if there's a merger and you have two data sets, and we look at those as assets, and there's an overlap where they would have too much data, then that's one where we could say, you must sell this off--one of the sets off before we allow the merger to go through. But as far as a company who has invested and gathered that data through investment and hard work, we should be, you know, very careful to not force that sharing upon them as the Supreme Court has warned us in the past. Mr. Armstrong. And again, I'm just prefacing this, that this is not even discussing the privacy part of that conversation, which is a whole different issue. And I think that's important in that when we talk about this, we always have to make sure that--again, that privacy is part of that conversation. Because forcing somebody to sell their data or share their data is running into that as well. Mr. Delrahim. Unless they acquired it illegally, and that's a whole different story. Mr. Armstrong. Well, then we're talking criminal law, and then I can actually probably sound fairly smart about it. So when dealing with artificial intelligence and machine learning often the benefits of innovation, an increase with larger data sets, that provides a benefit to consumers in a lot of instances, and we're going to continue to go down this road. How do we approach large collection of data in the sense that it harms consumers or is used anticompetitively but also in certain circumstances can benefit consumers? Mr. Delrahim. Mr. Chairman? Mr. Simons. So I think it's very fact-specific. It depends on the circumstances, and you have to weigh one against the other. Mr. Armstrong. Which gets into our problem, is if you get to be so fact-specific that it's a little difficult for us to-- I mean, we have to give you guys the tools--I agree with Mr. Neguse when he left--but also at the same time, at some point in time, we have to draw some kind of bright line laws. I mean, that's regardless of where you're at in any situation. At some point in time, we have to find some area where the regulation hits a certain point. Mr. Simons. Well, our whole statute and the whole statutory regime is based on reasonableness. And so reasonableness means fact-dependent. Mr. Delrahim. Well, you look at the effects and you look at the harms. I think that's what we--you know, in balancing that, at least for competition. That's not to say that should you come up with some kind of a regime that affects that. But we should be very careful because there are some--lots of consumer benefits, lots of efficiencies, lots of transactions. We just had our trilateral meeting in Ottawa just a few weeks ago, where, you know, the Canadian enforcement officials, the Mexican enforcement officials, Mr. Chairman and I, had the privilege of attending. And, you know, to my surprise at least, the president of the antitrust authority in Mexico said she welcomed for the first time Amazon's entry into their market. They liked that because it lowered the price to the consumers, because Walmart had such a big market share in Mexico. So I think we have to be careful about the possible positive effect some of these technologies could have. We have to just make sure that we're eliminating the harm that they'll create. Mr. Armstrong. Well, and I agree, and I agree with the reasonableness and fact-specific, but also, at some point in time, if there isn't some guiding, I mean, roadmap, then-- reasonableness is a great word because it sounds great, but reasonableness can vary significantly depending on who is hearing the case, and it's hard to continue to build a company or to start innovation if your sole basis is, well, we'll cross that bridge when we get there. Mr. Simons. Yeah. So one of the things we've done in the past and we're going to do in the future is put out guidelines or commentaries that try to explain what are the things we look at, and give the, you know, the private bar and business community a better sense of what is--what is over the line versus what is not over the line. Mr. Armstrong. Thank you. Mr. Cicilline. Thank you. The gentleman's time is expired. I recognize the gentleman from Georgia, Mr. Johnson, for 5 minutes. Mr. Johnson. Thank you. In the digital marketplace where data is the currency and one player has developed not just a corner on the market, but is the market, and the cost of acquiring the data has long since been exceeded by the profit, by the multibillion dollar profits that have been made, how can you promote competition in that digital marketplace if allocation of data from the only market player is off the table? Mr. Simons. Well, you want to make sure that they acquired their position lawfully, because if they didn't--if they didn't---- Mr. Johnson. It's a given that they--well, I mean, assuming that the data was acquired in a legally permissible manner. Mr. Simons. If it's acquired in a legally permissible manner and it's used in a legally permissible manner, then---- Mr. Johnson. But would anticompetitive---- Mr. Simons. No. Well, if it's used for an anticompetitive purpose, then we could go after it, and we would. Mr. Johnson. Okay. All right. Okay. Mr. Simons, Facebook has repeatedly misrepresented how it uses individuals' data, and I worry whether the FTC's settlement releases Facebook for misrepresentations that the public is only now learning about. For example, TechCrunch reported in September that Facebook had publicly exposed the phone numbers of 133 million U.S. users. Assuming Facebook had not told users it would be exposing their phone numbers this way, and assuming Facebook exposed their numbers before the settlement was finalized in June, would Facebook's misconduct be released from liability under the settlement agreement? Mr. Simons. It would be released under the settlement agreement to the same extent it would be released if we went to litigation and won. No difference. Mr. Johnson. In August, Bloomberg reported that Facebook had paid contractors to transcribe users' audio chats. Did the FTC settlement release Facebook from liability for that conduct? Mr. Simons. I'm sorry, could you repeat that? I didn't catch that. Mr. Johnson. Facebook paid contractors to transcribe users' audio chats. Did the settlement release Facebook from liability for that conduct? Mr. Simons. It released Facebook from order violations that occurred prior to June 12 that did not continue past June 12. It did not release Facebook from Section 5 violations that we didn't already know about. Mr. Johnson. Just yesterday, CNET reported that when some users scroll through Facebook's app on their iPhones, Facebook activates users' cameras and starts watching them. Did the FTC settlement release Facebook from liability for that---- Mr. Simons. I can just say what I just said and also remark that it's inappropriate for me to comment on whether or not we're conducting nonpublic investigations and---- Mr. Johnson. Well, no, I'm just asking whether or not---- Mr. Simons. And that's all part--that's all part of---- Mr. Johnson [continuing]. That misconduct had been exempted by the settlement agreement. Mr. Simons. I don't know enough to know the answer to that question because I don't know enough to know--I don't have enough facts to know. Mr. Johnson. Does the FTC---- Mr. Simons. But let me say one thing--and I'm sorry to interrupt you--which is that you can be assured that if there's something in the press that raises a privacy issue, our staff is either already looking at it or we'll immediately start looking at it when they see the media report. Mr. Johnson. Okay. But yet you need more manpower in order to be able to respond to these complaints that seem to proliferate continuously? Mr. Simons. Yes. We could use more resources, definitely. Mr. Johnson. Thank you. Does the FTC list anywhere the full universe of known order violations and known Section 5 violations for which the FTC granted the release to Facebook? Mr. Simons. No. Mr. Johnson. You do not list those offenses? Mr. Simons. I'm sorry, maybe I didn't understand your question. Mr. Johnson. Yeah. Does the FTC list anywhere the full universe of known order violations and known Section 5 violations for which you granted Facebook a release? Mr. Simons. I believe they're in the complaint. Mr. Johnson. In the complaint. All right. Thank you. Mr. Cicilline. The gentleman yields back. I now recognize the gentlelady from Georgia, Mrs. McBath, for 5 minutes. Mrs. McBath. Thank you, Mr. Chairman. And thank you all for being here today. And I want to discuss what your work means for consumers. In our past hearings, we've talked about the consumer welfare standard, the idea that antitrust enforcement should focus on helping our consumers. We've discussed how that approach can sometimes overlook other effects such as employee mobility in the wages. But what's striking to me is that even with this standard that is supposed to be putting consumers first, consumers are still losing out. They're still far behind. A recent New York Times piece reported that consolidation is estimated to cost the typical American household about $5,000 per year, and with few competitors, huge companies can keep charging us all more without more worrying that we'll actually--that we will actually take our business elsewhere, actually be able to do that without considering that we can take our business elsewhere. One place that we've seen this is with the merger of Ticketmaster and Live Nation. Anyone who's bought a ticket online can tell you that the price that you see at first is often much less than what you'll pay at the time--by the time all the fees are included and all the fees that are added on. So in 2016, the New York State attorney general said that, and I quote, these fees constitute evidence of abuse of monopoly power, end quote. So my question today is for you, Mr. Delrahim. Your office recently acknowledged that it's investigating whether Live Nation flouted the 2010 consent decree it agreed to when merging with Ticketmaster. Reporting by The New York Times suggests that Live Nation has actually retaliated against venues that use ticket platforms other than Ticketmaster, violating the consent decree and undermining competition. So behavioral remedies like this consent decree are essentially a promise that a company won't abuse its increased market power following a merger. In your view, is this a cautionary tale about the wisdom of using behavioral remedies? Mr. Delrahim. Absolutely, Congresswoman, it is. And I gave a speech almost 2 years ago about the problems with behavioral remedies. Now, to assure you we have tried to do certain things, we have--all of our consent decrees the last 2 years have four new provisions in there that make them actually more enforceable. That particular consent decree is still active, and other than acknowledging what I acknowledged at the previous hearing, I won't comment on it. Mrs. McBath. Okay. Also, you've been deeply critical of the use of behavioral remedies in the past, observing that they are merely temporary fixes for an ongoing problem. Yet the Division's proposed remedy for the Sprint-T-Mobile merger, includes a long list of things that T-Mobile must do. These include offering operational support, handling billing support, and meeting specific traffic management requirements. And the Division says that its settlement requires the merged entity to divest to Dish, yet the success of the remedy is contingent on all of these behavioral conditions. How can you square this with your stated commitment to structural remedies? Mr. Delrahim. Well, Congresswoman, as you just mentioned, the actual remedy itself is structural. There's transition agreements to effectuate and maximize the success of such structural remedy, just as we did in Bayer-Monsanto where we divested about $11 billion of assets. But through that period, Bayer and Monsanto had to provide transition services to BASF, and I've never said that those should be somehow shied away from. But the actual ultimate remedy, like we had in Comcast-NBCU or Live Nation-Ticketmaster or some of the host of some of these, we should be careful. We should be something of a last resort. If there's a structural remedy available, that's what we should be going for. Mrs. McBath. Okay. Thank you. And, Mr. Simons, the FTC held a workshop earlier this year to address concerns about the online ticket sales. At that event, numerous participants called on the FTC to mandate transparent upfront pricing. What is the FTC doing to address this call to action? Mr. Simons. We're still putting together the results of the workshop, and so the staff will make a recommendation to us. Mrs. McBath. And may we have a live update or may we have access to that information to this committee once that's made available? Mr. Simons. The committee can ask for, you know, can ask for anything, and we're very responsive. Mrs. McBath. Okay. So then for the record, I'm asking that you make that---- Mr. Simons. Well, I mean, the chairman---- Mrs. McBath [continuing]. Available to the committee. Mr. Simons. Yeah. If the chairman wants it, then we give it. It's done very simple. Mrs. McBath. Okay. Thank you. My time is expired. Mr. Cicilline. Thank you. And that gives me a moment to say thank you, Chairman Simons. Your staff has been terrific in providing technical assistance on our drug pricing effort to reduce prescription drug prices, so---- Mr. Simons. And we are thrilled to do it. Mr. Cicilline. Thank you. Thank you for that. I now recognize myself for 5 minutes. I want to turn, as you both know, Google is under-- currently, under really immense antitrust scrutiny by State and Federal enforces as well as this subcommittee. And notwithstanding the scrutiny, Google has nevertheless announced a series of data-driven transactions over the past several months, including its multibillion dollar acquisition of Fitbit and Looker. As I've said before, Google's proposed acquisition of Fitbit would threaten to give it yet another way to surveil users and entrench its monopoly power online. Earlier today, a coalition of public interest organizations, including Open Markets, Public Citizen, and EPIC, sent a letter to the FTC urging it to block Google's deal to buy Fitbit. As they note, ``the hubris of the executive team to pursue an acquisition of this size, a proposed $2.1 billion, while under Federal and State antitrust investigations is astonishing,'' end quote. So I'd ask you, Chairman Simons and Mr. Delrahim, do you think we need to consider a merger moratorium for dominant platforms during the course of these ongoing investigations? Mr. Delrahim. Well, Mr. Chairman, I think there's a lot that can be done short of a merger moratorium. I think by doing that, we might risk actually harming consumers, because there could be--there could be mergers and transactions that could be procompetitive. That is not to say that if they're gaining more market share in the same defined market---- Mr. Cicilline. So how about a qualified moratorium, a moratorium unless it was demonstrated that it was procompetitive? Mr. Delrahim. Flipping the---- Mr. Cicilline. It seems like your answer is no, but it seems like in this context where there is significant harm being imposed upon consumers, it seems like something worth considering, but I take it you disagree? Mr. Delrahim. I don't necessarily disagree. I don't have a clear administration position on that, but we'd be delighted to explore that with you or, look, there's burdens of proof that you can play with as well, if people have certain market power. Mr. Cicilline. Chairman Simons. Mr. Simons. And we're looking at the uncon--we're looking at consummated mergers as part of our Technology Enforcement Division mandate. Mr. Cicilline. Thank you. Chairman Simons, I'm particularly concerned about the FTC's investigative process and whether the FTC makes best efforts to identify the full extent of the violations, especially when it comes to assessing individual liability. And so my first question is, did the FTC depose Mark Zuckerberg or Sheryl Sandberg rather than other senior employees or outside counsel who may lack decisionmaking authority at Facebook as part of the investigation into Facebook's 2012 consent decree violation? Mr. Simons. It's inappropriate for me to talk about the specific details of the investigation that haven't--in a public forum that haven't been released before. Mr. Cicilline. An investigation that's concluded? Mr. Simons. Yes. So, for example, we don't turn over the-- we don't make public the---- Mr. Cicilline. I'm not asking you to make public--I'm just asking were they deposed, did an action happen? Did the FTC depose Mr. Zuckerberg or Sheryl Sandberg as part of that, rather than--or did they depose either of them? Mr. Simons. Oh, okay. So I understand actually that was been public already, so, no, we did not. Mr. Cicilline. Okay. Did the FTC depose any high level executive at Facebook as part of this investigation? Mr. Simons. That's not public. Mr. Cicilline. Well, at the FTC's press conference, Jim Kohm, Associate Director of the Enforcement Division of the Bureau of Consumer Protection, suggested that the FTC used its power to depose Mark Zuckerberg as leverage to secure a larger settlement sum. He said, and I quote, ``part of getting this tremendous result is we didn't need to depose him, but we could use that to get more protections for the public.'' And so my question is, is it FTC practice to use depositions as a bargaining chip to secure a higher settlement sum? And if the purpose of a deposition is to gather more facts, isn't it problematic to trade that away? How can the FTC determine what would constitute an appropriate settlement if the FTC hasn't finished gathering all the relevant facts particularly from the executives of the company? Mr. Simons. So we looked at millions and millions of pages of documents, and even if you--even if we didn't look at his specific files, there would be emails between him and somebody else. And we would have the somebody else's files, right, and their documents. Mr. Cicilline. You can understand why this would be of concern to the public, that we would have traded away the right to question the decisionmaker at Facebook in a piece of litigation that you are trying to determine if they violated a consent decree. Mr. Simons. Well, so we know they violated a consent--the consent order, and then that's why--that's why we prepared a complaint and were prepared to sue them. And the settlement that we reached, in my mind at least, I was assuming that if we'd gone to litigation or investigated more--we were already investigating plenty and it was taking a long time, and I wanted the consumers protected. I didn't want this to go on forever. So my own view was that even if we had discovered several more or a handful or even a lot more violations of the consent order, we still wouldn't have gotten nearly the relief we got if we had gone to court. Mr. Cicilline. So let me just ask my last question, Mr. Chairman, in 2008, the FTC approved Google's acquisition of DoubleClick, despite many red flags that the deal raised for user privacy and which groups like EPIC pointed out. At the time of the transaction, Google made certain privacy commitments that it broke within a few years. And again, with this notion of repeat offenders, when reviewing transactions, how does the FTC factor in a history of misrepresentations and broken promises by one of the merging parties? Mr. Simons. Yeah. So one thing is clear, they don't get the benefit of the doubt. We assume the worst. Mr. Cicilline. Okay. Mr. Simons. And we conduct ourselves accordingly. Mr. Cicilline. I want to thank our witnesses. I hope you understand that the passion of this subcommittee and these questions are because these are issues we care deeply about, and we're reflecting the concerns of our constituents on all of these issues, and I hope this will continue to be an ongoing conversation because you both play a very important role in this work. This concludes today's hearing. Thank you again to our witnesses. Without objection, all members will have 5 legislative days to submit additional written questions for the witnesses or additional materials for the record. And before I gavel out, I'd just ask unanimous consent that a letter from the Electronic Privacy Information Center be made a part of the record and a letter to Chairman Simons and Commissioners Chopra, Phillips, Slaughter, and Wilson be made part of the record. Without objection, the hearing is adjourned. [The information follows:] MR. CICILLINE FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] [Whereupon, at 3:32 p.m., the subcommittee was adjourned.] APPENDIX ======================================================================= [GRAPHIC] [TIFF OMITTED] MS. JAYAPAL FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] MR. BUCK FOR THE RECORD ======================================================================= [GRAPHIC] [TIFF OMITTED] [all]