Internal divides cloud tech industry’s antitrust defense

Steven OverlyIn July, the head of a leading tech lobbying group published a warning against overly broad antitrust investigations that “could jeopardize American companies’ leadership” — a message that came amid rising regulatory heat on the group’s members Apple, Amazon, Google and Facebook.

But it soon became clear that some in the Information Technology Industry Council didn’t want to risk being seen as defending the four embattled tech giants.

During a conference call days later, members of ITI’s executive committee reminded CEO Jason Oxman that the group’s members don’t all share the same views on the brewing antitrust battle in Washington, two people familiar with the conversation said. They urged the association’s leadership not to go beyond the talking points of Oxman’s blog post.

The brushback highlights a byproduct of the tech backlash in Washington: Even as some of the industry’s biggest names confront mounting questions about their size and power, they can’t always rely on backup from the trade groups they’ve showered with money over the years.

The result has been only a muted response from ITI, whose executive committee includes companies like IBM, Oracle and Salesforce that aren’t facing antitrust scrutiny — and, in some cases, have had major beefs against their bigger rivals.

ITI’s leaders are “responding to what I’m sure is enormous pressure from four companies in particular” to defend them, one of the people who described the call said,while balancing a “desire of the other companies to not get in the middle of someone else’s antitrust debate.”

The Internet Association, the industry’s most prominent trade group in Washington, has stayed even quieter on the antitrust issue in the face of discord among its members, which include Google and its antagonists Yelp and TripAdvisor, as well as Amazon and rival eBay. Yelp has lodged complaints with competition regulators in the U.S. and Europe for years arguing that Google prioritizes its own products in search results.

“IA operates on consensus, which enables us to speak in a unified voice on a wide range of policies that are critical to the future of the internet,” including online liability and privacy issues, said the group’s spokesperson Noah Theran. “Because of this, IA does not engage on competition policy.”

But another industry official said tech could use some solidarity. The growing antitrust talk in Washington has “taken on an anti-tech tone in general” that affects the entire industry, the person said, and large trade groups are justified in “raising those questions” about whether the antitrust reviews are going too far.

The issue is playing out as the tech giants rack up a growing list of investigations by Congress, the Trump administration and the states. The House antitrust panel, the Justice Department, the Federal Trade Commission and a number of state attorneys general are looking into whether the companies are using their size to unfairly compete in their respective markets. The issue has also loomed large on the Democratic campaign trail, as Sens. Elizabeth Warren and Bernie Sanders pledge antitrust enforcers in their prospective administrations would break up the nation’s tech behemoths into smaller companies.

ITI has waded gingerly into the antitrust debate, trying to avoid picking sides in a fight that some members view as a threat to the entire tech sector and others see as aimed at four specific companies. In public statements and in private meetings with lawmakers, the group has stuck to arguing that antitrust reviews should be narrowly focused rather than demonizing big companies simply for their size or attacking the tech industry as a whole.

“Because antitrust law is such an important body of law, particularly for large companies who we happen to represent, it’s important to us to play that education role without getting involved in any disputes that our member companies may have,” Oxman said in an interview.

Such disputes have multiplied in recent years.

Oracle has fought high-profile battles against both Google, which it sued over alleged patent violations in the search giant’s Android operating system, and Amazon, which it accused of benefiting from a tainted bidding process for a $10 billion Pentagon cloud computing contract. All three companies are members of ITI.

And top executives don’t always hide the tensions. In a recent Recode interview, Reddit CEO Steve Huffman gleefully welcomed government scrutiny of his fellow IA members and competitors Google and Facebook.

Sheila Krumholz, executive director of the Center for Responsive Politics, said the tech sector’s divisions are not uncommon among industries with a growing presence in Washington, as lobbying on a wider range of policy matters reveals issues where companies’ desires are not identical.

“In those instances, the industry association may have to choose between taking sides — and risk creating rifts within their membership — or sitting on the sidelines of an intra-industry debate,” she said. “It’s bound to frustrate companies that pay money to an entity to represent their interests when that entity can’t or won’t go to bat for them.”

Tech companies have shelled out big money to myriad trade associations in Washington, D.C., that frequently serve as their first defenders when lawmakers and regulators come hollering. The groups are deeply engaged in fending off or shaping potential regulation, including data privacy legislation and proposals to amend the critical law that shields websites from liability over user-generated content. They’ve also, at times, backed lawsuits on issues like net neutrality where their members are more aligned.

“The associations are useful on issues where the industry is more united,” said Lee Drutman, a senior fellow at New America and author of “The Business of America is Lobbying.” “There’s a strategic value in maintaining a broad association because lawmakers generally are more likely to respond when the industry is united than when it is divided.”

But the groups’ silence on antitrust is all the more striking given the recent pileup of investigations and lawmaker complaints. The DOJ said last month its antitrust review is focusing on dominant companies in online search, social media and e-commerce — a not-so-veiled reference to Google, Facebook and Amazon, respectively.

The FTC is also conducting an antitrust probe into “social networking or social media services, digital advertising, and/or mobile or online applications” at Facebook, the social media behemoth disclosed in a recent regulatory filing. The agency has also subpoenaed sales data from third parties who sell goods on Amazon as part of a potential probe of the e-commerce juggernaut, trade publication MLex reported last month.

Amazon, Apple, Facebook and Google are not without resources, even as some of their associations keep a low profile. The four firms shelled out $25 million in the first six months of the year on nearly 300 in-house and outside lobbyists to shape policy on Capitol Hill and within regulatory agencies, according to the Center for Responsive Politics. They also spread money around Washington think tanks and advocacy groups that often amplify their policy positions. Some of those organizations, such as the Competitive Enterprise Institute and the Information Technology and Innovation Foundation, are coming to the companies’ defense.

As the antitrust heat rises, the small, right-leaning trade association NetChoice, which counts Facebook and Google as members, has emerged as one of the tech industry’s most vocal defenders. Carl Szabo, the vice president and general counsel of the three-person operation, said antitrust falls well within the group’s mission to “keep the internet open for free expression and free enterprise.”

After the DOJ announced its review, NetChoice called on the department to “resist the siren song of populism and only investigate actual evidence of consumer harm.” It also slammed House Democrats as “hypocritical” for complaining about the power of tech companies while seeking an antitrust exemption for big news publishers to negotiate collectively with Google and Facebook over ad sales.

Industry trade groups shouldn’t shy away from the fight, Szabo said.

“I would hope that all associations and all business would oppose a movement away from objective, data-based analysis of antitrust and all associations and businesses would oppose the weaponization of antitrust,” Szabo said. “While such actions may help them today, it can definitely be used against them tomorrow.”

The head of the Consumer Technology Association, Gary Shapiro, has also defended the big tech companies, as has the Computer and Communications Industry Association. Both groups represent Facebook, Google and Amazon, among others. A CCIA representative testified at a House hearing that any antitrust review should consider the industry’s benefits to consumers and the economy.

CCIA President Ed Black said his group has made competition issues a focus for 47 years and at times lost members that disagreed with its stances on pending mergers or antitrust lawsuits.

“It’s one of the reasons most trade associations have not gone into antitrust issues,” Black said. “We’ve had somewhat of the field to ourselves because we’re willing to take the risk to defend innovation.”

This article was originally published at Politico on August 13, 2019. Reprinted with permission.

About the Author: Steven Overly covers technology policy and politics for POLITICO with a special focus on the industry’s effort to influence decisions in Washington. He previously spent seven years as a reporter and editor at The Washington Post. Steven holds a degree in journalism from the University of Maryland, College Park, and a master’s degree from Columbia University, where he studied as a Knight-Bagehot Fellow in Economics and Business Journalism. A native of the Washington metro region, Steven currently resides in the District.
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Madeline Messa

Madeline Messa is a 3L at Syracuse University College of Law. She graduated from Penn State with a degree in journalism. With her legal research and writing for Workplace Fairness, she strives to equip people with the information they need to be their own best advocate.