[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




 
                  ONLINE PLATFORMS AND MARKET POWER, 
          PART 3: THE ROLE OF DATA AND PRIVACY IN COMPETITION

=======================================================================

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW

                                 of the

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 18, 2019

                               __________

                           Serial No. 116-59

                               __________

         Printed for the use of the Committee on the Judiciary



                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



        Available http://judiciary.house.gov or www.govinfo.gov

                               __________


                  U.S. GOVERNMENT PUBLISHING OFFICE


39-840                  WASHINGTON : 2020





                       COMMITTEE ON THE JUDICIARY

                   JERROLD NADLER, New York, Chairman

ZOE LOFGREN, California              DOUG COLLINS, Georgia,
SHEILA JACKSON LEE, Texas              Ranking Member
STEVE COHEN, Tennessee               F. JAMES SENSENBRENNER, Jr., 
HENRY C. ``HANK'' JOHNSON, Jr.,          Wisconsin
    Georgia                          STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida          LOUIE GOHMERT, Texas
KAREN BASS, California               JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana        KEN BUCK, Colorado
HAKEEM S. JEFFRIES, New York         JOHN RATCLIFFE, Texas
DAVID N. CICILLINE, Rhode Island     MARTHA ROBY, Alabama
ERIC SWALWELL, California            MATT GAETZ, Florida
TED LIEU, California                 MIKE JOHNSON, Louisiana
JAMIE RASKIN, Maryland               ANDY BIGGS, Arizona
PRAMILA JAYAPAL, Washington          TOM McCLINTOCK, California
VAL BUTLER DEMINGS, Florida          DEBBIE LESKO, Arizona
J. LUIS CORREA, California           GUY RESCHENTHALER, Pennsylvania
MARY GAY SCANLON, Pennsylvania,      BEN CLINE, Virginia
  Vice Chair                         KELLY ARMSTRONG, North Dakota
SYLVIA R. GARCIA, Texas              W. GREGORY STEUBE, Florida
JOE NEGUSE, Colorado
LUCY McBATH, Georgia
GREG STANTON, Arizona
MADELEINE DEAN, Pennsylvania
DEBBIE MUCARSEL-POWELL, Florida
VERONICA ESCOBAR, Texas

        Perry Apelbaum, Majority Staff Director & Chief Counsel
                Brendan Belair, Minority Staff Director

                                 ------                                

                 SUBCOMMITTEE ON ANTITRUST, COMMERCIAL 
                         AND ADMINISTRATIVE LAW

                DAVID N. CICILLINE, Rhode Island, Chair
                    JOE NEGUSE, Colorado, Vice-Chair

HENRY C. ``HANK'' JOHNSON, Jr.,      F. JAMES SENSENBRENNER, Jr., 
    Georgia                              Wisconsin, Ranking Member
JAMIE RASKIN, Maryland               KEN BUCK, Colorado
PRAMILA JAYAPAL, Washington          MATT GAETZ, Florida
VAL BUTLER DEMINGS, Florida          KELLY ARMSTRONG, North Dakota
MARY GAY SCANLON, Pennsylvania       W. GREGORY STEUBE, Florida
LUCY McBATH, Georgia

                       Slade Bond, Chief Counsel
                    Daniel Flores, Minority Counsel






                            C O N T E N T S

                              ----------                              

                            OCTOBER 18, 2019

                           OPENING STATEMENTS

                                                                   Page
The Honorable Jerrold Nadler, Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable James Sensenbrenner, Ranking Member, Subcommittee 
  on Antitrust, Commercial and Administrative Law................     3
Honorable David Cicilline, Chairman, Subcommittee on Antitrust, 
  Commercial and Administrative Law..............................     4

                               WITNESSES

The Honorable Rohit Chopra, Commissioner, Federal Trade 
  Commission
    Oral Testimony...............................................    37
    Prepared Testimony...........................................    40
Tommaso Valletti, Professor of Economics, Imperial College 
  Business School
    Oral Testimony...............................................    48
    Prepared Testimony...........................................    50
Jason Furman, Professor of the Practice of Economic Policy, 
  Harvard Kennedy School
    Oral Testimony...............................................    56
    Prepared Testimony...........................................    58
Roslyn Layton, Visiting Scholar, American Enterprise Institute
    Oral Testimony...............................................    64
    Prepared Testimony...........................................    66

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

A letter by the George Mason University Mercatus Center from The 
  Honorable James Sensenbrenner, Ranking Member, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................     6
A letter by the CTIA, the Internet and Television Association, 
  and the Broadband Association from The Honorable James 
  Sensenbrenner, Ranking Member, Subcommittee on Antitrust, 
  Commercial and Administrative Law..............................    10
A letter by the Electronic Privacy Information Center from The 
  Honorable James Sensenbrenner, Ranking Member, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................    13
A letter by Netchoice from The Honorable James Sensenbrenner, 
  Ranking Member, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................    19
A letter by the CTIA, the Internet and Television Association, 
  and the Broadband Association from The Honorable Ken Buck, 
  Member, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................    93
A letter by 20 child advocacy groups from The Honorable Ken Buck, 
  Member, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................    96
A statement for the record by Ranking Member Doug Collins from 
  The Honorable Kelly Armstrong, Member, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................   106
A statement for the record by Rod Sims, Chair of the Australian 
  Competition and Consumer Commission, from the Honorable David 
  Cicilline, Chairman, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................   122
A statement for the record by Dina Srinivasan from the Honorable 
  David Cicilline, Chairman, Subcommittee on Antitrust, 
  Commercial and Administrative Law..............................   132
A letter by Consumer Reports from the Honorable David Cicilline, 
  Chairman, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................   138
A statement for the record by Maurice Stucke and Ariel Ezrachi 
  from the Honorable David Cicilline, Chairman, Subcommittee on 
  Antitrust, Commercial and Administrative Law...................   141
A statement for the record by Margrethe Vestager, European Union 
  Commissioner for Competition, from the Honorable David 
  Cicilline, Chairman, Subcommittee on Antitrust, Commercial and 
  Administrative Law.............................................   168

                                APPENDIX

A statement for the record by Shoshana Zuboff from the Honorable 
  David Cicilline, Chairman, Subcommittee on Antitrust, 
  Commercial and Administrative Law..............................   176


                 ONLINE PLATFORMS AND MARKET POWER,
         PART 3: THE ROLE OF DATA AND PRIVACY IN COMPETITION

                              ----------                              


                        FRIDAY, OCTOBER 18, 2019

                        House of Representatives

                 Subcommittee on Antitrust, Commercial 
                         and Administrative Law

                       Committee on the Judiciary

                            Washington, DC.

    The subcommittee met, pursuant to call, at 9:41 a.m., in 
Room 2141, Rayburn House Office Building, Hon. David Cicilline 
[chairman of the subcommittee] presiding.
    Present: Representatives Cicilline, Nadler, Johnson, 
Jayapal, Demings, Scanlon, Sensenbrenner, Buck, Gaetz, 
Armstrong, and Steube.
    Staff Present: Madeline Strasser, Chief Clerk; Moh Sharma, 
Member Services and Outreach Advisor; Amanda Lewis, Counsel; 
Joseph Van Wye, Professional Staff Member; Lina Khan, Counsel; 
Slade Bond, Chief Counsel; Daniel Flores, Minority Chief 
Counsel; and Andrea Woodard, Minority Professional Staff.
    Chairman Nadler [presiding]. The subcommittee will come to 
order. Without objection, the chair is authorized to declare 
recesses at any time.
    We welcome everyone to the third in our series of hearings 
investigating competition in digital markets, this one on the 
role of data and privacy in competition.
    I now recognize myself for an opening statement.
    I should state the obvious: I'm not the chairman of the 
subcommittee; I'm the chairman of the full committee. The 
chairman of the subcommittee will be here in a few minutes.
    Digital technologies have provided Americans with a 
remarkable array of services. It has never been easier to share 
news and information, to publish content, and to communicate 
with loved ones all at a moment's notice. But as with 
technological revolutions of the past, this transformation has 
upended the balance of power across our economy. It is 
important for Congress to study and understand how these 
imbalances are affecting Americans, what is causing these 
asymmetries of power, and whether these new and growing 
inequalities are compatible with our democratic values. The 
committee's ongoing oversight of competition in digital markets 
is a key part of this process.
    Today's hearing will examine the role that data plays in 
creating and maintaining inequalities of power and how this 
affects competition. As previous hearings have shown, a growing 
share of commerce and communications is now controlled by a 
small number of companies. Because these platforms are, in 
essence, large intermediaries, they are perfectly positioned to 
closely track each transaction in communication that passes 
through their channels.
    While intermediaries have long collected information on the 
economic activity that flows through their platforms, the large 
firms of the digital economy have unprecedented ability to 
track and surveil users across the internet. This data 
collection includes information not only about a person's 
shopping and reading habits, but also about the time that they 
wake up and go to sleep, a precise location of each hour of the 
day, and the content of their most private communications.
    Because several of these platforms derive the vast majority 
of their revenue through digital advertising, these firms also 
have an incentive to collect as much information as possible so 
they can target consumers with precision. This trove of 
personal information can also be used by companies in even more 
nefarious ways to discriminate based on the user's race, 
gender, or income, or otherwise to intrude on personal privacy.
    In light of these trends, there are at least two questions 
that I hope will be addressed in today's hearing. First, how 
are digital technologies and the constant data collection they 
enable affecting competition? Is there something unique about 
digital markets that enables firms to acquire and maintain 
market power in novel ways?
    In digital markets, maximizing data collection can provide 
a company with a significant competitive advantage. A large and 
constantly growing set of user data allows firms both to 
improve existing products and services and to expand into new 
lines of business, often with a competitive edge. Frequently, 
the most dominating companies in the digital economy are those 
that have captured the most data from as many sources as 
possible.
    In recent years, scholars have described this dynamic as 
leading to winner-take-all markets where the first company to 
establish a competitive lead wins the market, crushing any 
potential competition. In other words, competitors of digital 
markets have a strong incentive to collect as much information 
on users as possible, as quickly as possible, as part of a 
long-term strategy to compete in the marketplace and to achieve 
market dominance.
    This raises serious questions about whether it is good for 
society for unrelenting data collection to be the key dimension 
on which companies are looking to outcompete one another. The 
fact that several major digital platforms make most of their 
profits by selling targeted advertisements heightens those 
incentives.
    The second question that I hope will be addressed in 
today's hearing is how data collection increases the number of 
ways that dominant companies can abuse their market power. Does 
the collection and use of data enable new forms of conduct that 
lawmakers and regulators should recognize as anticompetitive? 
For example, platforms and service intermediaries for commerce 
have critical insight into their rivals' business models, a 
dynamic that raises significant competition concerns.
    With these issues in mind, I look forward to hearing from 
our esteemed panel of witnesses today.
    I yield back the balance of my time, and I now recognize, 
for his opening statement, the distinguished ranking member and 
former chairman of the committee, Mr. Sensenbrenner of 
Wisconsin.
    Mr. Sensenbrenner. Thank you, Mr. Chairman.
    Today, we continue our oversight of the state of 
competition in the tech sector. To date, our primary focus has 
concerned large online platforms. The specific topics we 
address today, the roles that data and data privacy play in 
competition, and the ways in which we can better protect the 
privacy of consumers' online data largely concern these same 
platforms.
    Data is, in many ways, the life blood of the internet. 
Numerous issues are swirling around the use of this data. For 
example, these include allegations that, one, platform's needs 
for very large accumulations of data can operate as a barrier 
to market entry by new platforms. Two, platforms holding large 
databases can leverage that data to compete unfairly with 
third-party competitors that are dependent upon their 
platforms. Three, incumbent platforms have pursued mergers with 
emerging competitors in order to kill off competition for data 
acquisition and market shares.
    It is my hope our hearing can help us determine fact from 
fiction when it comes to these allegations. As I have stressed 
before, antitrust laws do not exist to punish success, but to 
foster it. Congress and antitrust enforcement agencies need to 
be careful not to overreach to extend or apply antitrust laws 
in ways that end up punishing success, suppressing innovation, 
and ultimately, limiting consumer welfare. This applies not 
just to issues concerning competition for data, but also 
applies to issues concerning privacy. If we're going to address 
data and consumers' data privacy through legislation, we must 
get it right.
    I do not say this in a vacuum. Governments in the United 
States and Europe have already begun to lay down laws to 
address these issues. The most prominent example to date is the 
European Union's General Data Protection Regulation, or GDPR. 
Following in its footsteps has been California's recently 
passed California Consumer Privacy Act, or CCPA, which is 
substantially modeled on the GDPR.
    And testimony offered before the Senate Judiciary Committee 
in March by one of our witnesses today, Dr. Roslyn Layton, 
constituted a powerful indictment of the GDPR. However well-
intentioned, the GDPR is already producing substantial 
collateral damage to consumer welfare, innovation, and the 
health of the digital economy. It is likely that the CCPA will 
have the same effects. All of these effects are avoidable. It 
is imperative that we in the United States identify and put in 
place a better means of protecting consumers' privacy online.
    I hope our witnesses today can help us work our way through 
these important issues.
    And before yielding back, let me ask unanimous consent to 
insert in the record a number of statements and submissions to 
the record that I have received. One from the Mercatus Center 
of George Mason University.
    Mr. Cicilline [presiding]. Without objection.
    Mr. Sensenbrenner. Second, a joint statement by the 
national CTA, CTIA, and USTelecom.
    Mr. Cicilline. Without objection.
    Mr. Sensenbrenner. A letter that has been sent to the 
chairman and myself from epic.org.
    Mr. Cicilline. Without objection.
    Mr. Sensenbrenner. A letter for the record from Carl Szabo, 
vice president and general counsel of NetChoice.
    Mr. Cicilline. Without objection.
    Mr. Sensenbrenner. And I now yield back the balance of my 
time.
    [The information follows:]
      

                    MR. SENSENBRENNER FOR THE RECORD

=======================================================================

[GRAPHIC] [TIFF OMITTED]


    Mr. Cicilline. I thank the gentleman for yielding back, and 
I thank the chairman of the full committee for opening the 
hearing. I now recognize myself for an opening statement.
    In June, this committee launched a historic bipartisan 
investigation into the state of competition in the digital 
marketplace. The purpose of this investigation is to document 
anticompetitive conduct online, to examine whether dominant 
firms are engaging in anticompetitive conduct, and to assess 
whether our antitrust laws and current enforcement levels are 
adequate to address these problems.
    Since launching the investigation, the committee has held a 
series of bipartisan hearings, briefings, and member 
roundtables as part of this top to bottom review. Most 
recently, we have requested documents, communications, and 
information relevant to the investigation from the four 
dominant platforms.
    On Monday, the committee received the first tranche of 
responses to the requests, tens of thousands of documents, and 
we expect to receive and review additional materials as part of 
this request in the weeks ahead. We'll also continue to hold 
hearings and roundtables and conduct oversight to ensure that 
the goals of the investigation are met.
    As I've said before, this work is essential to the 
committee's legislative mandate and constitutional 
responsibility to conduct oversight of our antitrust laws and 
competition policies to ensure that they're working. Congress, 
not the courts, agencies, or private companies enacted the 
antitrust laws, and Congress must be responsible for 
determining whether current laws or enforcement levels are 
keeping up with the digital markets.
    We have much work ahead of us, but I'm immensely proud of 
the efforts of my colleagues, Chairman Nadler and Ranking 
Members Collins and Sensenbrenner, along with their dedicated 
staff, and look forward to continuing this important bipartisan 
work together.
    Today's hearing is an important opportunity to advance our 
understanding of a key component of competition online, the 
role of data and privacy. Over the past year, several leading 
international competition authorities and antitrust experts 
have published groundbreaking reports that have focused on this 
issue.
    As these reports have noted, data is at the heart of 
competition online. For example, an exhaustive report by the 
Australian Competition and Consumer Commission concluded, and I 
quote, that ``the breadth and depth of user data collected by 
the incumbent digital platforms provides them with a strong 
competitive advantage, creating barriers to rivals entering and 
expanding in relevant markets, and allowing the incumbent 
digital platforms to expand into adjacent markets,'' end quote.
    The United Kingdom's Digital Competition Expert Panel, 
which was chaired by Professor Jason Furman, one of our 
esteemed witnesses here today, similarly reported that large 
troves of data, when combined with network effects, may tip 
markets in favor of a single dominant platform, killing off 
competition.
    Data also plays an important role in the ability of 
startups to attract venture capital to compete with dominant 
firms in these markets. As part of a broader review of 
competition in the digital economy, a panel of experts led by 
Professor Fiona Scott Morton for the Stigler Center at the 
University of Chicago, reported that investors often evaluate 
startups based on their access to data. As they explained, I 
quote, ``a new entrant starved of data, quantitatively and 
qualitatively speaking, relative to a tech giant is at a 
significant competitive disadvantage, and investors will be 
unlikely to invest as they view that data deficit as 
insurmountable,'' end quote.
    This has real consequences for entrepreneurs and startups 
that get locked out of the market and never get a chance to 
compete on the merits to offer new and innovative services. 
There's also broad agreement among antitrust experts that data 
can be abused by platforms for anticompetitive purposes. In 
some instances, these tactics have created an innovation kill 
zone around dominant firms. Whether its Facebook's use of Onavo 
to spy on its competitors, Amazon's ability to identify and 
clone popular products being sold in its marketplace, or the 
weaponization of API to block competitors, we know that the 
abuse of data has serious ramifications for competition.
    This hearing also presents an important opportunity to 
examine the role of privacy and antitrust enforcement and 
competition online. There's a growing consensus among enforcers 
in the United States and abroad that privacy is an important 
dimension of competition online. While many online services 
claim to be free, we know that people pay in the form of their 
personal information and their attention, which are both 
critical for online advertising revenue.
    In a statement submitted for the record for today's 
hearing, Dina Srinivasan notes that market consolidation allows 
dominant platforms to harm consumers, and I quote, by not--not 
by escalating prices, but rather by diminishing quality by 
eroding privacy terms, end quote.
    Furthermore, as the U.K.'s Digital Competition Expert Panel 
has also reported, the misuse of data and harm to privacy is 
not only an indicator of low quality caused by a lack of 
competition, but it also can be used to cement a firm's 
dominance in the market as well. In other words, in a market 
that has vibrant competition, firms have strong incentives to 
respond to consumer demand by improving the privacy safeguards 
for their products. But without competition, incumbents have no 
incentive to deliver users' privacy.
    I recently had the pleasure of discussing this with 
Shoshana Zuboff at the Harvard School of Business, who has 
recently written about the rise of surveillance capitalism. A 
point that she made that struck me is that the pattern of 
automating consumer behavior for more clicks and better 
predictions is itself a market externality. There is no 
consumer demand for this service.
    Americans don't want to have their information 
systematically mined just so they can be shown another 
advertisement or nudged toward a political candidate, but in 
many cases, there is no escape from the surveillance because 
there's no alternative. People are stuck with bad options or no 
options at all, which is evidence of a market failure. 
Furthermore, companies that want to compete by offering 
services and products that do not rely on user surveillance are 
disadvantaged by this business model, which, in turn, 
reinforces the market dominance of the dominant firms. It's 
increasingly clear that the relationship between competition 
and privacy is not either/or. They are mutually reinforcing 
concepts that must be at the forefront as we consider proposals 
to restore the internet to its full promise, and I approach 
today's hearing with these concerns in mind.
    Before closing, I'd like to take one moment to thank 
Commissioner Vestager of the European Commission and Chairman 
Rod Sims of the Australian Competition and Consumer Commission 
for their statements submitted for today's hearing. Chairman 
Sims was originally scheduled to testify at this hearing, but 
due to an unfortunate change in our schedule, he's unable to 
attend today. Nevertheless, I want to thank him and his team 
for all of their hard work in advance of this hearing on this 
issue.
    And now it is my pleasure to introduce today's witnesses 
for today's hearing. Our first witness is the Honorable Rohit 
Chopra, the Democratic commissioner at the Federal Trade 
Commission since 2018. Before joining the FTC, Commissioner 
Chopra was instrumental in establishing the Consumer Financial 
Protection Bureau. He worked on the agency's implementation 
team after the passage of the Dodd-Frank Act in 2010, and 
became the CFPB's first student loan ombudsman. He went on to 
serve as assistant director of the CFPB, and made significant 
inroads towards addressing the student loan crisis in the 
United States.
    He was nominated by President Trump to serve as an FTC 
Commissioner on February 28, 2018, and was confirmed 
unanimously by the Senate on April 26, 2018. Commissioner 
Chopra received his B.A. from Harvard University and his MBA 
from the University of Pennsylvania.
    Our second witness, Mr. Tommaso Valletti, has been a 
professor of economics at the Imperial College of London since 
2007. Before that, he served as the chief competition economist 
for the European Commission for 3 years, where he focused 
extensively on competition and digital markets. He has served 
as a professor of economics and management at the University of 
Rome, where he still serves as a visiting professor of 
economics. Professor Valletti is also currently a research 
fellow at the Centre for Economic Policy Research and the 
Mannheim Centre of Competition and Innovation.
    He received both his masters and Ph.D. from the London 
School of Economics. In addition to his work as an economist, 
Professor Valletti also received his flute diploma from the 
Conservatorio di Musica in Torino.
    [Speaking foreign language.]
    Our third witness is Jason Furman--that was an applause 
line; no--our third witness is Jason Furman, a professor of the 
practice of economic policy at the Harvard Kennedy School. 
Before joining the Kennedy School's faculty in 2017, Professor 
Furman served as chair of the Council of Economic Advisers 
during President Obama's second term. From 2009 to 2013, 
Professor Furman was an assistant to the President and 
principal deputy director of the National Economic Council. He 
currently serves as a nonresident senior fellow at the Peterson 
Institute for International Economics, as well as an adviser on 
digital market units for the U.K. Government.
    Professor Furman received his B.A., M.A., and Ph.D. from 
Harvard University, as well as his master's of science from the 
London School of Economics.
    Our final witness on the panel is Roslyn Layton. Dr. Layton 
is currently a visiting scholar with the American Enterprise 
Institute. She also serves as a visiting researcher at Aalborg 
University and as the vice president of Strand Consult in 
Copenhagen. Before her tenure with AEI, Dr. Layton worked as 
the director of search agency services at IBM Coremetrics. She 
has been published dozens of times in numerous publications, 
including Forbes, the U.S. News & World Report, and The Hill, 
and served on President Trump's transition team in 2016, 
helping to establish his Federal Communications Commission.
    Dr. Layton received her B.A. from American University, her 
MBA from the Rotterdam School of Management, and her Ph.D. from 
Aalborg University.
    We welcome all of the incredibly distinguished witnesses on 
our first panel. Thank you for participating in today's 
hearing. And now if you would please rise, I will begin by 
swearing you in.
    Please raise your right hands. Do you swear or affirm under 
penalty of perjury that the testimony you're about to give is 
true and correct to the best of your knowledge, information, 
and belief, so help you God?
    Let the record show the witnesses answered in the 
affirmative.
    Thank you. You may be seated.
    Please know that each of your written statements will be 
entered into the record in its entirety. Accordingly, I ask you 
summarize your testimony in 5 minutes. To help you stay within 
that time, there's a timing light on your table. When the light 
switches from green to yellow, you have 1 minute to conclude 
your testimony. When the light turns red, it signals your 5 
minutes has expired.
    Commissioner Chopra, you may begin.

TESTIMONY OF THE HONORABLE ROHIT CHOPRA, COMMISSIONER, FEDERAL 
  TRADE COMMISSION; TOMMASO VALLETTI, PROFESSOR OF ECONOMICS, 
 IMPERIAL COLLEGE BUSINESS SCHOOL; JASON FURMAN, PROFESSOR OF 
 THE PRACTICE OF ECONOMIC POLICY, HARVARD KENNEDY SCHOOL; AND 
 ROSLYN LAYTON, VISITING SCHOLAR, AMERICAN ENTERPRISE INSTITUTE

            TESTIMONY OF THE HONORABLE ROHIT CHOPRA

    Mr. Chopra. Thank you, Mr. Chairman, Ranking Member 
Sensenbrenner, and members of the subcommittee. My name is 
Rohit Chopra, and I serve as the Federal Trade Commissioner.
    Oversight from Congress is a pillar of sound, transparent 
government, and I've been honored to testify many, many times 
before Members of Congress, including before Chairman Elijah 
Cummings, whose energy and passion will be missed by so many of 
us.
    Today's topic could not be more important or timely, as it 
seems almost daily we learn of problems stemming from the lack 
of competition. To this end, I think we need to focus on four 
ways that companies undercut competition: concentration, 
conflicts of interest, contracts, and capture.
    Market power is concentrated with a few giants in so many 
industries. Conflicts of interest allow these dominant firms to 
sometimes rig the market in their favor at the expense of 
upstarts and new businesses that fairly compete. One-sided 
take-it-or-leave-it contracts and online terms of service 
impose self-serving regulations on consumers and small 
businesses. And all too often, the government is too captured 
by those incumbents who use their power to dictate their 
preferred policies.
    In my testimony, I discuss how competition in the 
technology market is structured around data, a valuable asset 
with very unique economic features we need to take into 
account. Our personal data is powering the profits and 
dominance of tech companies that offer basic services like 
email, search, or photo sharing that are not truly free. 
Fortunately, many of my colleagues around the world are also 
pushing forward. Reports from regulators in Australia, the 
United Kingdom, the European Union are must reads for this 
committee and everyone concerned about the future of our 
digital economy.
    In the United States, as you know, our efforts are a work 
in progress, and I agree that we need to take a fresh look at 
our policies and guidance. And as we do, it is important that 
the Federal Trade Commission conduct a rigorous review of 
quantitative market data and an analysis of the financial 
incentives driving market-distorting behavior.
    Since joining the Commission, I have argued that the FTC 
should be using our authority under section 6(b) of our act to 
get the data we need to effectively police these markets and 
report our findings to you and the public.
    When it comes to enforcement, I am more optimistic now that 
scores of States attorneys general, both Republican and 
Democrat, are teaming up to investigate anticompetitive conduct 
in the digital economy. In this moment, it is all hands on 
deck, and I stay in constant communication with them. Decades 
ago, our State AGs played a pivotal role in ending Microsoft's 
choke hold over the future of the internet. And without that 
action, there would likely be no Google, no Facebook, and no 
Amazon.
    While the FTC's recent settlements with Facebook and 
Google's YouTube included fines that made for great headlines, 
they did little to fix the core problems that fueled these 
companies' data abuses. Big fines are not big penalties for the 
world's biggest companies, and as we have seen time and again, 
when a company can simply pay a fine from its ill-gotten gains, 
this isn't a penalty; this is an incentive.
    As Congress, Federal antitrust enforcers, and State 
attorneys general all pursue their investigations, we will need 
to pursue remedies that reduce concentration, eliminate 
conflicts of interest, rescind abusive contract terms against 
small businesses and consumers, and limit capture. For example, 
recent scholarship has revealed that antitrust actions that 
separated lines of business or required interoperability of 
standards or ordered more patents available for public use 
after anticompetitive conduct, all led to massive innovation, 
small business entry, and economic growth. These are useful 
tools in the toolbox for policymakers and enforcers to consider 
when looking to both remedy and prevent harm.
    In conclusion, while some believe that lax enforcement and 
absentee government are the ingredients of innovation, history 
teaches us it's the opposite. Without a vigilant and active 
government promoting competition, markets cannot thrive. 
Sometimes that means providing corporations with benefits like 
limited liability, license contracts, and other opportunities, 
but free and fair markets won't work without meaningful 
consequences for law breakers, and inaction is a price we 
simply cannot afford to pay.
    Thank you, Mr. Chairman.
    [The statement of Mr. Chopra follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. Thank you, Commissioner.
    I now recognize Dr. Valletti for 5 minutes.

                 TESTIMONY OF TOMMASO VALLETTI

    Mr. Valletti. Mr. Chairman, ranking member, and members of 
the subcommittee, good morning, and thank you very much for 
inviting me. My name is Tommaso Valletti, and I am professor of 
economics at Imperial College in London. Between September 2016 
and August 2019, I was the chief competition economist of the 
European Commission. In that role, I led the economic analysis 
of several cases, involving digital platforms, including 
Google, Facebook, Amazon, Apple, Microsoft, and others.
    Today, I would like to make four points. My first point is 
obviously about data. Some commentators have argued that data 
is a new oil. Others have gone to the opposite extreme by 
claiming data is as common as water, as air. These sweeping 
generalizations are not very useful. It is self-evident that 
data is key to digital platforms, and also, only a few 
gatekeepers are in a position to control the tracking and 
linking of behaviors across platforms, online services, and 
websites. They can combine several data sets and create 
superprofiles of individuals. This is the market for individual 
attention where the analysis has to be conducted.
    As an example, if we open, all of us, in this very moment 
our Facebook accounts, if you had one, and we just looked at 
the ads popping up, you would see totally different ads. This 
is completely different from traditional media; there would be 
individual ads.
    Unfortunately, the debate over the practical importance of 
data is not helped by the lack of published empirical studies 
in the field of competition economics. The large digital 
players have not made any data available through independent 
researchers ever. I know already the cynical rebuttal to this, 
paraphrasing Mozart, that one could say, come on, ``cosi fan 
tutte''; they're all like that. This will not be true. I can 
think of telecoms, of pharma, of airlines that can immediately 
name several data sets, often anonymized, that would be 
available to independent researchers to analyze competition in 
those sector. It really is paradoxical we know so little from 
this so-called data economy, which is sitting on unprecedented 
amounts of data.
    My second point concerns the extent to which enforcers 
should consider privacy concerns under competition law. My 
answer is yes. Privacy is at the core of the economics of 
digital platforms, and competition is shaped around it. 
Competition, generally speaking, takes place along several 
dimension, price being only one of them. Quality, choice, 
innovation are also important aspects for competition and for 
consumers. In fact, when dealing with digital platforms, it 
does not make sense to focus on prices as prices have been set 
at zero by choice.
    The business model is to give something away for free in 
order to monetize in other related market; advertising, in 
particular. Hence, quality will often be very relevant focus of 
competition. Lack of competition, conversely, will lead to 
reduced quality. In this case, a reduction in privacy 
protection.
    My third point is that privacy degradation can lead to real 
consumer harm. This can arise in different ways: Data breach, 
identity theft, but also consumer profiling that is not done in 
the interest of consumers. Part of the problem is that digital 
incumbents have the ability to impose terms of service that are 
not well understood but still accepted by consumers because of 
a lack of alternatives. This is already an indication of market 
power.
    Who has actually read lengthy and obscure privacy terms? 
What do they mean? Think of common phrases like ``we may 
collect your information for marketing purposes'' or ``we may 
share your data with trusted businesses.'' Consumers see the 
instant benefits of clicking yes, but cannot assess the 
implications of giving away their data that are bundled by 
design to the service. These practices increase information 
asymmetries and undermine the role played by consumers and by 
competition.
    My last point and my conclusion to all this is that 
antitrust cases involving data and privacy can be run. Lower 
quality can be seen in competition law terms as an exploitative 
conduct. In Europe, this is captured by the current law. In 
other jurisdictions, it is not. Like in the U.S., it is not. 
Still, it would be wrong to ignore exploitative conducts. Data, 
privacy, and competition are not separable. Diminished 
competition on privacy should be considered in any assessment 
of the state of competition and of market power of online 
platforms.
    Lower data protection can also lead to the standard 
category of exclusionary behavior. Here, the chain goes from 
dominance to bad privacy terms. You get a data advantage 
compared to rivals. Money is being made. This money can be used 
to exclude competitors or to leverage into neighboring markets. 
Actually, tying with other digital products can further enforce 
the data advantage of the dominant incumbent by cross-linking 
the data collected across services, creating quite a vicious 
circle. These are conducts that could, in my personal opinion, 
should be investigated.
    Thank you for your time, and I look forward to your 
questions.
    [The statement of Mr. Valletti follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. Thank you, Dr. Valletti.
    I now recognize Dr. Furman for 5 minutes.

                   TESTIMONY OF JASON FURMAN

    Mr. Furman. Thank you, Mr. Chairman, ranking members, and 
members of the committee. My name is Jason Furman. I'm a 
professor of the practice of economic policy at the Harvard 
Kennedy School. I recently chaired the U.K.'s Digital 
Competition Expert Panel, which produced a report unlocking 
digital competition. One of our recommendations was that the 
U.K. establish a digital markets unit, and I'm currently 
serving as an unpaid adviser to the U.K. Government as they 
move forward with accepting that recommendation that my panel 
made.
    Today, of course, I'm testifying with my own views and 
ideas drawing on the report that we did. I thank you for your 
kind comments about it.
    I want to make four points in my testimony. The first is 
that the major digital platforms are highly concentrated and 
that that concentration is likely to persist. It's due to a 
combination of factors: economies of scale and scope, the way 
that data can serve as a barrier to entry, behavioral biases on 
the part of consumers who don't shift the way we think they 
should, the importance of access to capital and brands.
    Many of those individually are present in many markets, but 
the combination of them and the extremes of all of them is 
unique to the digital platforms and makes it very difficult to 
have competition in the market. The question of whether there 
can be competition for the market is a more speculative one, 
but there's a number of reasons, including the persistence of 
the major platforms, to believe that that competition for the 
market will be difficult absent policy changes.
    My second point, which was covered by Tommaso, is that this 
has cost to consumers. The services aren't free. Consumers 
might have been compensated; they're paying in the form of 
data, they're losing out on quality and variety, and the lack 
of competition stunts innovation. The question is what we 
should do about this. Some of the reasons why you have only a 
few platforms is because of the benefits that consumers get 
from scale and scope. You want to preserve the ability of 
consumers to have those benefits. Some of the reason, though, 
is because of unfair competition and because of what's not 
organic growth due to efficiency but mergers that have been 
improved often without very much scrutiny.
    So the key to policy is to preserve the good while enabling 
as much competition, because competition is the source of 
innovation and lets the private sector drive that innovation.
    To that end, my third point, is that merger enforcement 
needs to be more robust in the digital sector. Much of the 
growth we've seen has not been organic growth due to 
efficiency, but has been acquisitions. There have been 
essentially no errors in blocking an acquisition that would 
have been beneficial to consumers, but there probably have been 
errors in allowing acquisitions to go forward that have 
ultimately harmed consumers.
    An approach should include more resources for the DOJ 
Antitrust Division and the FTC so that they have the technical 
expertise to deal with this. That merger analysis can't just 
focus on short-run, static effects, but also on potential 
competition, innovation, and take very seriously data as a 
barrier to entry. And third, the increasingly high bar for 
blocking mergers probably needs to be addressed in a 
legislative manner with some form of shifting the burden of 
proof.
    Finally, my fourth point is that even with all of that, 
merger enforcement, that won't be sufficient to deal with, you 
know, the horses that have already left the barn. Antitrust 
scrutiny can help, but it can also be slow. It can have a hard 
time addressing, you know, behavioral remedies, and that's why 
I proposed in the U.K., and I think it would make sense in the 
United States, the establishment of a digital markets unit. I'm 
agnostic about whether this is a new body or whether it's an 
existing body, like the FTC. What's important is the functions.
    The first would be a code of conduct to ensure no 
anticompetitive conduct that was backed up by enforcement 
authority. The second function would be systems with open 
standards and data mobility, which would enable more entry and 
competition. And the third function would be a greater degree 
of data openness. And I think with this approach, we could 
avoid some of the more extreme market disruptive steps, ensure 
consumers get all the benefits of fair competition, but also 
enable new entrance to compete, enter the market, and even 
deliver further benefits above and beyond what we've seen to 
date.
    Thank you.
    [The statement of Mr. Furman follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. Thank you, Dr. Furman.
    I recognize Dr. Layton for 5 minutes.

                   TESTIMONY OF ROSLYN LAYTON

    Ms. Layton. Good morning, and thank you.
    Chairman Nadler, Chairman Cicilline, and Ranking Member 
Sensenbrenner, I'm honored to join these distinguished 
panelists today and to contribute to this important inquiry on 
data and privacy. And I also want to recognize and thank the 
committee staffers for all their work to prepare for this 
hearing. And this testimony represents my own views.
    As Professor Valletti lays out, we know very little about 
the economics of privacy, the number and severity of privacy 
violations, the quantification of harm, and how many violations 
regulation would deter. Without these key points of 
information, it's ill-advised to build a command and control 
regulatory regime which presumes that regulators are in the 
know. The best numbers that I have comes from Sasha Romanosky 
at RAND, who estimates that there are a few hundred information 
privacy violations per year, which is actually a small number 
given the size of the digital economy.
    Given that good policy information's not available, 
regulatory advocates look for other arguments to justify their 
preferred approach, such as competition. Now many well-
intentioned policies are promoted on this premise that they 
will level the playing field, but we must look at the actual 
effects, not just the theory and argumentation, however 
compelling it may be.
    Now, my testimony introduces an engineering concept of 
control points. Just as a linchpin keeps a wheel from sliding 
off an axle, harnessing a control point is a powerful, 
efficient way to govern a system.
    Now, Commissioner Chopra suggests that there's a corporate 
royalty controlling our economy. Well, similarly, there's a 
regulatory royalty controlling our politics.
    The conventional wisdom that the regulation follows market 
failure, the reality is that regulation follows market success. 
It's no surprise that antitrust authorities around the world 
and across the U.S. are looking at the American tech sector, 
because that's where the money is. This is a source of 
political power because it brings revenue to various States 
through litigation fees. And we can see the activities of state 
attorneys general who wish to make national policy by using the 
bully pulpit of their State. Fortunately, Congress can temper 
the self-interested actors so that no one State can dictate the 
commercial terms of our national economy.
    I'm extremely grateful that this Congress is considering 
updating the privacy framework for the digital age. We can 
learn a lot from the European Union, which has had a two-decade 
natural experiment in regulating the tech economy. The long-
term trends and outcomes are clear by looking at the European 
Commission Digital Scoreboard and the Euro stats surveys. While 
large enterprise moves along, small and medium-sized companies 
have a hard time growing. They don't invest in information 
technology and they transact little across borders.
    After 18 months of the GDPR in effect, we can see that the 
largest advertising platforms have gained market share, while 
their fledgling ad tech rivals have lost ground. GDPR imposes a 
set of fixed costs across all enterprises. Only the largest 
players can afford the costly requirements of lawyers' fees, 
chief privacy officers, audits, impact assessments, software 
updates and so on. Less than half of all companies can comply 
with these regulations that cost $3 million per firm. And one-
fifth of companies will never comply. And consumers are no 
better off. Online trust is at its lowest point since 2006.
    In contrast, the United States welcomed 40,000 new internet 
startups last year alone. We have been fortunate to have a 
single national market from our founding and a 220-year 
tradition of carefully constructed bottom up privacy rules that 
were democratically decided and based upon real world harms.
    The CCPA with its 77 regulations on enterprise has 22 more 
obligations than the GDPR. A preliminary cost-benefit analysis 
prepared by the California Department of Justice suggests that 
costs exceed benefits by a factor of 14. It notes $70 billion 
in startup and running cost for compliance. Most of these costs 
go to privacy lawyers and consultants. The consumer benefits 
are estimated generously at a mere $5 billion.
    Now, it's hard to see what's progressive about giving a 
windfall to the privacy bar at the expense of consumers and 
small business. These are companies with 500 employees or less. 
They make up 99 percent of the California businesses. These are 
the companies who are going to bear the brunt of regulations 
which are dreamed up by the regulatory royalty in a mere month.
    Now, the appeal to justify this regulation on human rights 
is part of an attempt to avoid the forthright discussion about 
the costs.
    Now, in closing, there's a right way and there's a wrong 
way to do privacy protection. GDPR and CCPA are the wrong ways. 
Good regulation should cost little to implement. It should be 
easy to understand. I appreciate that this committee is 
considering alternatives. If we're concerned about competition, 
we should stop adopting rules that unwittingly strengthen the 
largest players. In the end, I'm optimistic because the market 
we're talking about today is maybe a third of our national 
economy. The other 70 percent of our economy is where our 
opportunities are. That is where the data revolution has not 
come. That is where we have the opportunities to grow, where we 
can transform lagging industries in health and transportation.
    So the important part is if we want these kind of new 
companies to emerge, we have to--and we want to replace the 
status quo, we have to make sure that we don't kill it in the 
cradle by regulation that stops the innovator at the gate.
    [The statement of Ms. Layton follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    
    Mr. Cicilline. Thank you, Dr. Layton.
    And we'll now proceed under the 5-minute rule. I now 
recognize the chair of the full committee, Mr. Nadler, for 5 
minutes.
    Chairman Nadler. Thank you, Mr. Chairman.
    Professor Valletti, over the last 10 years, the five 
largest tech platforms have acquired over 400 companies 
globally without any real challenge from antitrust enforcers. 
Professor, is there any evidence to suggest that this de facto 
exemption from antitrust scrutiny was a mistake?
    Mr. Valletti. Well, this is my personal opinion, of 
course----
    Mr. Cicilline. Would you please use your microphone?
    Mr. Valletti. Yeah, sorry. This is my personal opinion, of 
course. I do think that there has been a sort of antitrust 
immunity, in general, in the tech sector for far too long. 
Google and Facebook have acquired hundreds of companies, as you 
said, and very few have been vetted. There's some technical 
reasons sometimes. For instance, you notify some mergers only 
by the certain threshold, and the threshold is dictated on the 
turnover of companies in the past 3 years when it comes to 
digital platforms, but also pharmaceutical companies. These 
turnovers are not yet there and so you don't have the tools to 
intervene.
    But yes, I do think we have severely underenforced in the 
merger area, which means not necessarily that those mergers 
were bad, but we should have investigated them for sure.
    Chairman Nadler. Professor Chopra, would you comment on the 
same question?
    Mr. Chopra. Well, I actually wonder quite a bit what would 
our world look like if Google had not bought YouTube or Amazon 
had not bought Zappos or many of these acquisitions that many 
believed could grow on their own to be their own big giant. And 
I agree that underenforcement can really kill innovation and 
kill entry, because when it's harder and harder to break in, 
that's just bad for small business and it's bad for all of us.
    Chairman Nadler. Thank you.
    And, Professor Valletti, what should antitrust enforcers be 
doing to ensure the dominant platforms are not swallowing up 
actual and potential competitors?
    Mr. Valletti. The simplest answer is run cases or open 
cases and investigate. The point is that--there is a response 
that some entrepreneurs want to be bought. This is an exit 
strategy. They want to cash on their own innovation. My point 
is not that this shouldn't happen, but simply that dominant 
companies should not be allowed to buy those. They can be 
bought by someone else.
    So what can be done is to run more cases, open, use 
financial evaluation, run through internet documents. The 
chairman before mentioned Onavo, a spyware that Facebook was 
using to buy some rivals. So there's a lot of things that we 
can do to improve.
    Chairman Nadler. Thank you. And you've also argued that a 
dominant platform can use its privacy policy to entrench its 
dominance. Can you explain how that strategy works?
    Mr. Valletti. So there are different ways. One way could 
be, for instance, a company which is dominant doesn't have 
alternatives. That's why it is dominant, because you cannot 
find alternatives. So this dominant company, you need the 
service, we'll ask you to sign up for whatever they ask you. 
You don't see through the terms, you don't know where your data 
is going, you don't know what's going to happen with your data. 
Your data are going to be used to monetize somewhere else, 
maybe even with yourself in a future period, in the present 
period with--I don't know. If it is something genetic, it will 
be even--your offsprings.
    So money is going to be made from this hypertargeted 
advertising. Once you have money, you can do lots of strategies 
to preserve your dominance.
    Chairman Nadler. Okay. Can you explain why you view privacy 
an appropriate factor to consider under competition law?
    Mr. Valletti. Yes. Because the locals of competition are 
multifaceted. Can be prices, can be innovation, can be quality. 
And since consumers seems okay about privacy, I would say this 
is one of the primary things that a healthy competitive market 
should actually give, healthy privacy to individuals.
    Chairman Nadler. Thank you.
    And, Professor Furman, in your view, is big data creating 
entry barriers that prevent entrepreneurs from raising capital 
and breaking into technology markets?
    Mr. Furman. Yes, I think big data is creating entry 
barriers. And if you tried to guess what the next industry is 
going to be, we've had a succession from IBM to Microsoft to 
Google, et cetera. The next is likely to be AI machine 
learning, and the companies best poised to take advantage of 
that are the ones that are the large incumbents now. So the 
wave of disruption----
    Chairman Nadler. They're larger because they have the data.
    Mr. Furman. Because they have the data, exactly, which is 
what's needed for this next stage in the economy.
    Chairman Nadler. And that may lead to my next question, 
which is, why is data still a barrier to entry even though it's 
nonrivalrous?
    Mr. Furman. It's nonrivalrous, but there are companies that 
keep that data and keep that data to themselves. They have 
economies of scale. There's things you can do once you have 
large amounts of data that are even much, much more than you 
could do with a medium or a small amount of data. And I think a 
lot of that is a function of public policy choices we've made 
about what data is and is not open.
    Chairman Nadler. To compete with them, a new entrant would 
have to assemble its own data starting from way back?
    Mr. Furman. Yes, they would, Congressman.
    Chairman Nadler. Thank you very much.
    I yield back.
    Mr. Cicilline. The gentleman yields back.
    Votes have been called. We're going to have the gentleman 
from Colorado, Mr. Buck, be recognized for 5 minutes, then 
we'll adjourn, with the indulgence of the witnesses, and come 
back immediately after votes. And we apologize for the 
interruption.
    Mr. Buck.
    Mr. Buck. Thank you.
    And I want to thank the chair of the committee and the 
chair of the subcommittee for holding this hearing. I really 
appreciate this opportunity.
    Dr. Layton, couple of quick questions, and I'm going to go 
real basic because that's about my understanding of this area. 
If I am sitting in front of my desktop and I want to go to the 
U.S. House of Representatives' website, I type in something on 
my browser, U.S. House, up pops the area. I click on that, and 
a resolver--I want to make sure my friends understand I used 
the word ``resolver,'' not revolver. I'm not trying to get into 
a gun debate here, but a resolver then takes me to the website 
that I'm looking for. And my understanding is that recently we 
have had a change in that to add encryption to the area.
    Can you explain why the change was necessary and where 
we're going with that?
    Ms. Layton. So I think the issue that you're talking about 
is the DNS over HTTPS protocol. It's a new standard being 
proposed by Google and Mozilla. Just let me frame this, this 
issue. I've discussed it in my testimony, but I think that it's 
a great example of where we have a challenge with our privacy 
regulation between the person's right to privacy and the 
public's right to know.
    So we've seen from GDPR and other things like this that a 
number of valuable resources that we've had on the internet for 
law enforcement, for copyright protections, for public 
information, they have been masked and clouded because of 
techniques taken on by regulation. But in this particular case 
where you're looking at what's called the DoH, the D-O-H, is 
that in an effort to encrypt the traffic, which people want to 
do to protect their privacy, it is changing the architecture of 
the internet, which used to be very distributed and modular. So 
a number of parties would perform this redirect task that you 
talk about----
    Mr. Buck. When you say a number of parties, we're talking 
about tens of thousands.
    Ms. Layton. Tens of thousands, CBNs--and they're very 
important, because individuals can put certain settings and 
preferences, whether they want to block malicious content, and 
also, law enforcement uses these things to find various 
criminals and so on. But all of that would be subsumed into--
would be--all of that information that number of parties use 
today would be lost.
    Now, the reason it's done, because Google and Mozilla want 
to be able to get marketing data in that process and pull that 
control point, as I describe, into their own network, where 
normally it would reside outside of their network. So this is 
just a coding tweak that can upset that entire balance that 
we've built up to date over all these decades.
    Mr. Buck. So would we no longer have tens of thousands of 
providers in this particular area?
    Ms. Layton. I think it would eliminate the CBN industry 
overnight, I mean, just by one mere coding tweak. So it's quite 
staggering how much a simple click like that can--or not a 
click, but a coding tweak can change it. Now, there are some 
users who may like it, who they want to have--I want my whole 
experience to be in Google; fair enough. But the other, for all 
of those----
    Mr. Buck. They have that choice now, don't they?
    Ms. Layton. Well, they have a default now; you're 
absolutely right. You can choose safe search, you can choose 
these different settings. But what we're making worse off are 
all of the law enforcement, parents, families who are trying to 
set up permissions to protect their own privacy and their own--
you know, their own preferences.
    Mr. Buck. Okay. And how many--do we have any idea how many 
of these providers there will be in the future? Will it just be 
three or four or will we once again----
    Ms. Layton. Well, I mean, the sort of--I mean, you can 
imagine, you could have a kind of world where, you know, Google 
consumes the internet just because of the way that things are 
coded. I mean, more and more things could be encrypted. Seventy 
percent of the internet is encrypted today largely because 
consumers want to have, you know, more privacy. But prior to 
encryption, large platforms can look at the data that's there 
and they are able to use that to get the marketing information.
    So I don't have the number of how many DNS resolvers are 
available today, but there would be many fewer. It is one of 
the services offered by ISPs. It's offered by a number of other 
parties out there.
    Mr. Buck. Mr. Chopra, any thoughts on that?
    Mr. Chopra. Well, Congressman Buck, I think you're raising 
some important questions about who gets to decide this. If it's 
when we just have one or two browsers that dominate the market 
and can make coding tweaks maybe for self-serving purposes, 
that's something we have to be wary of. Conflicts of interest 
with this level of market power have to be top of mind, because 
it's not just about our economy. Like Dr. Layton said, it 
raises questions about how do we protect children, how do we 
enforce our laws?
    And to me, I think these types of regulations should be 
decided by Congress, not necessarily a company with a conflict 
of interest.
    Mr. Buck. Okay. Thank you very much for your time.
    And I yield back.
    Mr. Cicilline. I thank the gentleman.
    The chair will now recognize the gentleman from Georgia 
who's anxious to ask questions before the break.
    Mr. Johnson. Thank you, Mr. Chairman.
    And I thank the witnesses for being here today, especially 
Mr. Valletti. Dr. Valletti, long journey, thank you.
    Many big tech companies have touted their data portability 
as the reason they can't be anticompetitive, but few, if any, 
are truly interoperable.
    Professor Furman, interoperability is different from 
portability, isn't it?
    Mr. Furman. Yes, it is. It enables you to operate--multi-
home operate on multiple systems simultaneously.
    Mr. Johnson. And would you agree that one of them promotes 
more competition than the other?
    Mr. Furman. Yes. I think the technical details about how--I 
use the word systems with open standards and data mobility. 
There's ways to do that that really enable switching and multi-
homing and ways to do it that frustrate the ability to do that.
    Mr. Johnson. How can interoperability promote competition?
    Mr. Furman. It enables consumers to have more choices, to 
switch more easily, to use multiple services. It also enables 
new entrants to come in and build on a lot of the things and 
networks that you've already accumulated on the incumbents.
    Mr. Johnson. And, Doctor, what would it look like to have a 
social media platform be truly interoperable? And do you 
believe that that can happen without government intervention?
    Mr. Furman. I'll give you an example of one that is truly 
interoperable right now, which is email. If email had been 
invented by a single company, it would have had its own 
protocols and you could only email other people who used that 
same company's email and you couldn't use people that used 
different email systems. I don't worry when I email someone 
about what company they're on, whether they're on the email 
system or not. That's a true form of interoperability that 
enables more choice and more competition.
    Mr. Johnson. That's a great example.
    Commissioner Chopra, one could argue that privacy 
violations and other monopolistic behavior is incentivized by 
the ad-based model; meaning that more data a company has--the 
more data that a company has, the more data a company can 
collect and the more dominant it can become.
    Can you speak to some of the compounding problems with the 
ad-based model?
    Mr. Chopra. Well, one of the objections I had to the FTC's 
settlement with Facebook for the company's early and repeated 
violations of a law enforcement order was their desire to 
maintain their dominance by collecting more and more and more 
data because, guess what, it gets more valuable as you get 
more. I talk about this in my testimony. And we need to start 
thinking, not just about ticky-tack privacy rules, but what's 
the reason why companies invade our privacy. And one of those 
reasons is the behavioral advertising model, which is not of an 
ad we all get, but it's an ad targeted at one person and it's 
often manipulative.
    And so we have to think about how these businesses are 
incentivized and structured if we want to get to the root cause 
of massive surveillance in our economy today.
    Mr. Johnson. Thank you.
    And, Mr. Chairman, I'll, in the interest of time, yield 
back so that my other colleagues will have an opportunity.
    Mr. Cicilline. I thank the gentleman.
    I want to recognize Mr. Buck for a unanimous consent 
request before we recess.
    Mr. Buck. Thank you, Mr. Chairman.
    I ask unanimous consent to have two letters entered into 
the record addressing the issues associated with centralizing 
domain name systems, the first from CTIA and CTA and USTelecom 
and the second from 20 different child advocacy groups.
    Mr. Cicilline. Without objection.
    [The information follows:]
      

                        MR. BUCK FOR THE RECORD

=======================================================================

[GRAPHIC] [TIFF OMITTED]

    Mr. Cicilline. The committee will stand in recess and come 
back into session immediately after votes. And I thank the 
witnesses for their indulgence.
    [Recess.]
    Mr. Cicilline. Ms. Jayapal.
    Ms. Jayapal. Thank you, Mr. Chairman. Thank you all for 
your very, very informative testimony.
    You've all touched on this, but a common refrain that we 
hear from tech companies is, during the course of this 
committee's investigation but also just on my own because I 
have many of them in my district, is that they can't possibly 
be violating antitrust laws. And the primary argument is that 
it's because many of their products are either cheap or free, 
and, therefore, consumers are inherently benefiting. Now, you 
all have, in different ways, talked about this. To me, the big 
question, of course, is free really free? And consumers, I 
think, it's increasingly clear are paying for the products that 
they use. They're paying in data. They're paying in privacy 
that they give up and often don't know that they're giving up. 
And then, of course, the big tech companies then use that data 
to build these massive empires of information about consumers 
which then give them spectacular advantage over newcomer 
businesses, allow these companies to scrutinize every aspect of 
people's lives, create and sell the products that have the best 
chance of being successful in the marketplace. It's almost a 
bulletproof advantage.
    Dr. Valletti, you mentioned the acquisitions and the 
history of acquisitions. As of 2018, Facebook had made 67 
unchallenged acquisitions, Amazon had made 97 unchallenged 
acquisitions, and Google had made 214 mostly unchallenged 
acquisitions, and you presided over the EC's--EU's 
investigation of Google, Amazon, and Facebook. Two questions. 
What kinds of access do these companies have to information 
about consumers as a result of those acquisitions? And then you 
talked about the thresholds being one of the potential problems 
for why investigations aren't opened. Do the thresholds of 
investigation need to change if we are to challenge some of 
these acquisitions?
    Mr. Valletti. Thank you very much for the question, 
Congresswoman. Do the thresholds have to change? I'm very 
pragmatic. To the extent people have the powers to look into 
those acquisitions, that's fine by me, whatever is the method. 
I'm even in favor, in fact, of changing a little bit the 
structure of presumptions. When it comes to very strategic 
platforms with such a humongous market power, I would wonder 
whether, instead of asking the authorities to prove that there 
is something anticompetitive and then they could rebut with 
efficiencies, to change it and say: You guys are not going to 
merge with anybody unless you prove to us that this is going to 
create efficiency. So I would change a little bit the burden of 
proof.
    In terms of investigations we are in, I cannot disclose 
information about any case, but my understanding of those cases 
is that some of the claims--we hear a lot of times the 
competition is one click away. There is all these fantastic 
options available. I didn't see that in the data at all. I 
didn't see anybody going and clicking on search results on page 
2, so everybody being stuck with the defaults and--in the 
installations, so I saw a lot of stickiness. The fact that some 
of us may actually make other choices doesn't represent the 
average consumer there. So it's ironic that somebody come from 
academia, the ivory tower, has to tell these companies: Look, 
there's a difference between theory and practice. In theory, 
they can do that, but in practice, consumers never actually act 
on those choices. They just follow defaults.
    Ms. Jayapal. Thank you.
    Commissioner Chopra, several of the dominant platforms 
serve both as critical gatekeepers while also competing with 
the businesses that are dependent on those platforms. Amazon, 
for example, runs a third party marketplace, but then it has 
its own private label goods. And both in committee and when I 
met with them recently, they really testified that this dual 
structure doesn't pose any conflicts of interest and say that 
it's common for retailers to offer private label products 
alongside third party products. What do you say to that, and 
what's your response to that?
    Mr. Chopra. Well, I think that we hear these analogies of 
comparing it to grocery store cereals and the white label 
cereal, and it just doesn't work. I am so worried when I hear 
from investors and venture capitalists who say I'm not even 
going to fund a business that needs to distribute through these 
platforms because, guess what? As soon as it takes off, it will 
be copied, and all the business will be steered elsewhere, and 
that worries me for all of those small firms who want to enter. 
So we need to look deeply, and that's why I mentioned section 
6(b) of the FTC Act to scrutinize the big picture. Of course, 
individual companies, we will look. If there's anticompetitive 
conduct, we have to go after it and fix it, but writ large 
across these markets, we all need to understand how this works 
so that we can figure out how to maintain our economy that is 
vibrant and thriving.
    Ms. Jayapal. And related to that, just--my time has 
expired, but related to that, what are the tools the FTC is not 
using that you could be using?
    Mr. Chopra. Well, there are so many things that Congress 
has equipped us with, and one of the pieces that I hope we will 
use much more aggressively and thoughtfully is competition 
rulemaking. It doesn't need to put any burden on any company, 
but it can clarify the law about what's legal and what's not so 
that we don't have to spend millions of dollars on paid 
economists and litigators that slow down decisions and 
ultimately may have harmed a lot of people in the process. We 
need to resuscitate the use of that tool.
    Ms. Jayapal. Thank you very much.
    I yield back.
    Mr. Cicilline. I thank the gentlelady.
    I now recognize Mr. Armstrong for 5 minutes.
    Mr. Armstrong. Oh, fantastic. Thank you. I appreciate it.
    Mr. Cicilline. Walk into the room, and we immediately thank 
you, Mr. Armstrong.
    Mr. Armstrong. Yeah.
    Ms. Layton, I just want to talk a little about data 
portability, and you say that it's overrated. Can you just 
explain that a little bit?
    Ms. Layton. So I think that we have the premise of number 
portability. We know from the telecom world when you have--you 
know, you're going to go from one mobile carrier to another, 
you want to take your phone number. That's fine. But I think 
when you look at the internet world where you have multiple 
kinds of platforms, so if you have social network data, that 
doesn't--from Facebook, it doesn't necessarily map to Amazon. 
So there's--the data is not really valuable to another 
platform.
    The bigger thing, I think, and something that's come up in 
this hearing, I think we're overrating the value of data 
overall because as a person who worked in the analytics 
industry, I had interfaced with, you know, 2,000 companies that 
they actually after time, the data degrades. And if you are an 
innovator, it's less interesting for you to get a platform's 
data. If you're going to innovate, you want to do something new 
and different. So data portability is kind of the answer to 
heal all ills I think is overrated. I've also seen this in some 
of the economist studies of, you know, in GDPR as well, is that 
users also don't want value data portability.
    Mr. Armstrong. And I think that's--you know, and I've said 
that too. The basic framework is you should have control over 
your own data. But since I've been here, I've learned way more 
about this than before I became a member of Congress. It's part 
of the reason--I mean, it's fairly complicated as to what is 
there, and I think that's part of the reason. Like when you say 
consumers don't really necessarily see this as a benefit, is it 
because they don't understand what it is or because of how you 
said----
    Ms. Layton. Well, for one thing, there are switching costs. 
I mean, I think it's a fair point that other panelists have 
raised, but I guess what I'd say is the value to having--you 
know, if we think that we should have five major search engines 
and five--you know, that this is--somehow that makes it 
competitive, what we--what makes competition in this industry 
is new technology, doing something better and different and 
more efficiently.
    And so where I think we should focus on is that the 
innovators look at the other parts of the economy where the 
opportunities are. They're greenfields, in fact. It's not like 
the way that it is today will be this way forever.
    Mr. Armstrong. And then, I guess, when we talk about data 
portability, we're talking about it moving, right, I mean, in 
some form. And in other areas, there's an entire market niche 
of whether it's insurance, litigation, bills of lading, free on 
board, those types of issues. So, when you're dealing with this 
data portability, has anybody looked at the liability shift as 
we move from one person to the other? Because if there's a 
breach, which is--I mean, part of the privacy concern is breach 
of data, and it usually ends up with a credit card company or a 
bank, but if it's portable, I mean, more than one person is 
handling that data as it moves from--whether it's Microsoft, 
Amazon, Facebook to somebody else.
    Ms. Layton. Yeah. That's--that is a fair point.
    Mr. Valletti. If I may just----
    Mr. Armstrong. Yeah. And then my question is, along with 
that portability portion, is the cost of compliance not for 
large companies who, quite frankly, we've seen this--and I want 
to ask you a question about a Dodd-Frank analogy before I'm 
done. I mean, larger companies aren't necessarily scared of 
regulation. What they want is regulatory certainty. Smaller 
companies that employ four or five people, when you're dealing 
with data portability, now have a compliance cost associated 
with that. While we're trying to regulate this, we have to be 
very concerned that we don't regulate--we don't have the 
inverse effect where the cost of--the cost of regulation makes 
it prohibitive.
    Mr. Valletti. So I just want to jump in on this since it's 
been mentioned a few times is the European experience with GDPR 
and Californian solution now. Let me clarify first that this is 
very new, so having empirical evidence is a longshot because 
it's just been happening for a short period. GDPR, also, let's 
remind ourselves it's been introduced because it is a 
fundamental principle of privacy that individuals want to 
ensure. So any time we do a cost-benefit analysis, surely, we 
want to see the impact on firms, but, also, there is a benefit 
that we get if GDPR within the privacy regulation is enforced 
properly.
    And the second point is I'm very skeptical when I hear some 
of these numbers, which are typically coming from, you know, 
institutions which are funded by Google, Facebook. European 
evidence is that Google and Facebook lost after on the 
advertising side after the introduction of GDPR. So it is a 
cost of compliance, but whether it's only the small firms, the 
narrative that you hear is from the big guys, not from the 
small guys.
    Mr. Armstrong. Well, except I'm going to bring an analogy 
back, and I'm just going to ask Mr. Chopra this. So when I go 
talk--we don't have big banks. We don't have, with the 
exception of some national companies, big business in North 
Dakota. I mean, we are a small business State. The single 
biggest thing I've heard, and this has been long before I've 
been here, in the decade or the 11 years since Dodd-Frank was 
introduced, is in our realm to regulate what we do think were 
really bad actors--and they were--Dakota Community Bank is 
caught up in that. So are there any lessons we can learn from 
how we did Dodd-Frank when we do this so in our quest to do 
whatever it is, we don't sweep up the little guys in 
regulation? I mean, if you have 37 compliance officers on the 
fifth floor and you go to 40, it's not the end of the world. If 
you have two employees, and you have to go to five employees, 
you may no longer have a local bank, so----
    Mr. Chopra. Yeah. One thing I would really urge you to 
think about is complicated rules. They actually benefit those 
who have a lot of lawyers and lobbyists to get around it and 
lobby for exemptions. In my testimony, I talked about the 
importance of bright line rules and even bans because, you know 
what? When I--I've had those same conversations with community 
bankers. They will say: If I'm banned from doing it, fine, 
because that's really easy to understand. But if it's so 
complicated, guess what? The largest banks in the world, they 
find their way in and get their exemptions. They win, and the 
small guys lose, and that's not a system or a country I want to 
live in.
    Mr. Furman. Mr. Chairman, I don't know if there's time for 
me to add to that because----
    Mr. Cicilline. No, no----
    Mr. Furman [continuing]. Time.
    Mr. Cicilline. As long as Mr. Armstrong is interested.
    Mr. Furman. Okay. Mr. Armstrong, I think you make a very 
important point, and I think you're absolutely right about 
worrying about the small businesses. I think sometimes in 
regulation, it's tricky because there's a tradeoff. So 
something that might be harmful for any size business to do, 
you make the rule, it's easier for the large one to comply than 
the small one, and you end up entrenching the incumbents.
    In this area about competition, you can make sure that 
doesn't happen because if you're talking about rules, a code of 
conduct as I've proposed for digital markets unit to do--that 
you can't keep people off your platform; you have to let them 
on other platforms; you can't prioritize your own products--
those rules would only apply to companies that I would just 
designate as having strategic market status. Only apply to the 
very largest companies.
    If you're a small company and you want to prioritize your 
own products, you want to keep people off your platform, you 
want to make rules about what other platforms they go, you can 
do any of that. We're only worried about, if you have some 
bottleneck power, abusing it.
    Mr. Cicilline. Thank you, Dr. Furman.
    I now recognize----
    Mr. Armstrong. Can I have unanimous consent just to put 
Ranking Member Collins' statement into the record?
    Mr. Cicilline. Without objection.
    [The statement of Mr. Collins follows:]
      

                      MR. ARMSTRONG FOR THE RECORD

=======================================================================

[GRAPHIC] [TIFF OMITTED]

    Mr. Cicilline. I now recognize the distinguished gentlelady 
from the State of Florida, Mrs. Demings, for 5 minutes.
    Mrs. Demings. Thank you so much to the distinguished 
gentleman from Colorado.
    I want to thank you, Mr. Chairman, and thank you to all of 
you for being with us today. Thank you for your patience as we 
went to cast our votes.
    I want to start with Mr. Chopra. In several of your 
statements and dissents, you've argued that the core problem 
that leads to dominant platforms--that leads dominant platforms 
to engage in serial privacy violations is their business model, 
which relies on monetizing user data and incentivizes Facebook 
and Google, for example, to engage in constant surveillance. 
What problems do you see with the behavioral advertisement 
business models?
    Mr. Chopra. Well, I think we're seeing more and more 
evidence that behavioral advertising, again--that is, 
advertising to a demographic of one--exposes us to a whole lot 
of risks, including manipulation and shenanigans in our 
democracy. It is very, very profitable, though. Facebook earned 
$55 billion in revenue, Google even more. The advertising 
business is big, and I'm concerned that that behavioral 
advertising model is inconsistent with how we have thought 
about immunity online. Right now, we give broad immunities 
under section 230 of the Communications Decency Act. I support 
that immunity, but I don't know if it's consistent with this 
behavioral ad model and surveillance.
    Mrs. Demings. So, Mr. Chopra, what do you see as the 
solution? What role can--how can Congress play a greater role 
in dealing with this problem?
    Mr. Chopra. Well, part of it, obviously, is through better 
privacy protection. I'll just speak about how I looked at the 
Facebook order violations, the repeated and early violations of 
that order. That settlement not only completely let executives 
off the hook, and they paid a small fine, and their stock went 
up. There's no substantive limitations on their use and sharing 
of data. And for repeat offenders, there needs to be some bans 
on this type of behavior because, if they're going to break the 
law, we have to look at the economic incentive that is driving 
it.
    Mrs. Demings. I think you said earlier that when you have 
billions and billions of dollars, $5 billion in a settlement is 
like--it's not much incentive to change your behavior. Is 
that----
    Mr. Chopra. That's right. When you--when these--these big 
fines are not big penalties for big companies, and I worry it's 
not a penalty; it's an incentive.
    I also want to urge Congress to think about how do we beef 
up individual liability. In the FTC's Facebook settlement, we 
did not depose Mr. Zuckerberg or Ms. Sandberg, but guess what? 
They got full immunity in the settlement. And if the court 
approves that, what kind of standard are we setting? And I just 
think that's fundamentally wrong.
    Mrs. Demings. Dr. Valletti, I want to ask you about that, 
but some have argued that heightened concerned about digital 
monopolies is misguided given that companies like IBM, Yahoo, 
MySpace, and BlackBerry were all once viewed as dominant but, 
ultimately, were taken over by new firms. And I know we kind of 
talked a little bit without naming the specific companies 
earlier, but could you just kind of--do you agree with that 
view, or what's your feelings about that?
    Mr. Valletti. It's almost an act of faith. Do we believe in 
dynamic competition? Sure, as a principle, but then I see the 
empirical evidence. When it comes to some selected platforms--I 
have in mind search; I have in mind social networks; I have in 
mind, perhaps, electronic marketplaces--this dominance has been 
going on for almost a decade. And so is that long enough to 
ever worry? I think, yes. I mean, in the long run, we are all 
dead, but I hope we will fix some problems before we are dead.
    Mrs. Demings. Well, thank you for that bit of hope and 
sunshine. In light of your--I'm going to move on to Dr. Furman.
    In your view, how readily available is high quality data to 
new entrants? If an entrepreneur wants to launch a new search 
engine, for example, what challenges can he or she expect to 
face in light of Google's existing dominance? And I know we 
have kind of talked about this space, you know, protecting 
privacy, competition, but I just want to make sure it's clear 
to not just the people in Congress but to the listening public 
as well, who are directly being impacted by the decisions made.
    Mr. Furman. Yes, Congresswoman. Google has a very good 
algorithm. Google also has a huge amount of data about how 
consumers search to train that algorithm. A bright kid in a 
garage could come up with a good algorithm, but they wouldn't 
have anything like that type of data in order to make it work 
nearly as well as Google works today.
    Mrs. Demings. Thank you.
    And, Mr. Chair, if I could just--I'd also like to hear from 
Ms. Layton, just any response to either of the questions that I 
asked that you would just like to respond to.
    Ms. Layton. Well, thank you. I appreciate that opportunity. 
I would agree with Dr. Furman that, when we look at artificial 
intelligence, that this is a greenfield. He's absolutely 
correct that a scientist sitting in the garage or in the lab 
could come up with a life-changing or transformative kind of 
algorithm.
    In contrast to the other panelists, I don't believe that 
data is a bottleneck because of having been a person working in 
the industry, that the data that you collect, it degrades over 
time. So, if you're a new innovator, you will look for the 
spaces where you can--where there are opportunities. It's less 
interesting to look in the past. You want to look to the future 
to say: How would I--where could be a place where I would add 
value in the future? Healthcare. It is one of the most 
inefficient industries. It takes up one-fifth of our GDP. That 
is where we need to have data to make it more efficient and 
lower the cost.
    So what I would like us to do is to look forward. I don't 
want us to adopt regulations that deter today's scientists from 
making tomorrow's innovations because they have to have all 
these permissions and releases from everyone. Now, they may not 
look at personal data. There's other areas where there's no 
personal data involved, you know, quantum computing, astronomy, 
and so on. And they may go in those fields, but probably the 
biggest area where we can create the benefit is on human 
health. And so, for example, in Iceland, they have this amazing 
registry of genomic data that was collected over many decades. 
GDPR is putting all of that up in the air. Can you find the 
cancer treatments? Can you look at a lot of the new 
innovations? We don't know now because that was not collected 
under the GDPR environment. So, there again, that is a question 
that I would have. So health is an area where we need to see, 
are we putting the bottleneck on the innovation?
    Mrs. Demings. Thank you so much.
    Thank you, Mr. Chairman.
    Mr. Cicilline. Thank you. The gentlelady yields back.
    I now recognize myself for 5 minutes.
    Commissioner Chopra, one of the questions that we are 
grappling with in this investigation is whether or not our 
antitrust agencies like the FTC have fallen short as an 
effective sort of cop on the beat in this digital marketplace 
and whether or not that is due to insufficient legal authority, 
whether it's due to weak leadership, or as I like to refer to 
it, the need for enthusiastic and creative leadership. Is it 
partly the result of regulatory capture? What is your view? 
What should we be thinking about as we look at this 
insufficient or sort of inadequate enforcement of our antitrust 
agencies, particularly FTC? What do you see as the source of 
that?
    Mr. Chopra. Mr. Chairman, one of the things I reflect on a 
lot is, how did the FTC miss much of the subprime mortgage 
crisis that originated in the nonbank sector. The FTC was 
really the only cop on the beat there, and we saw what 
happened. So one of the things that I think I took away from 
what I've learned on that is, number one, we need to use the 
tools we have much more energetically. Two, we need to be much 
more analytical and not think in the world of theoretical 
economic models but real evidence and look at how markets 
actually work. So, of course, we can use more authority; we can 
use more resources. But the number one thing we need to do is 
energetically use the tools we have.
    And for you to think about, and Dr. Valletti mentioned this 
too. Should we be thinking about changing presumptions? Should 
the largest firms on the planet, should the burden be on them 
to show why their merger or their roll up of tons of companies 
is in that interest? So there's ways you can change the way 
courts are acting, and I urge you to do that, but I also urge 
you to conduct oversight that makes sure agencies are using 
every tool you have equipped us with.
    Mr. Cicilline. Great. In February, Commissioner, you gave 
remarks to a conference at the University of Colorado where you 
said, and I quote: ``Competition enforcement actions like the 
Bell Labs consent decree created the conditions for scores of 
startups to innovate and flourish. While we often focus on the 
cost of action and regulation, we should also be asking 
ourselves about the cost of inaction,'' end quote.
    Do you believe enforcers or lawmakers should be considering 
remedies like the one imposed on Bell Labs, particularly since 
a lot of the focus of this investigation has been the impact of 
this market concentration on innovation startups, kind of the 
opportunity to make the next--space for the next great 
technology platform?
    Mr. Chopra. Yeah. I appreciate that. One of your areas of 
inquiry in the investigation is whether spinoffs or 
divestitures of firms may be useful, you know. Some 
colloquially call it breaking up. But there are many other 
remedies we need to think hard about. Should we be opening up 
intellectual property that has been abused by dominant firms, 
and how much could that incubate a new activity? There are 
many--there's all sorts of history about how we have pursued 
this and the benefits from it. Can we look to separate lines of 
business to end those conflicts of interest and create more 
economic activity? So we should work with you on all of that, 
but the discussion must be bigger than breakups. But, of 
course, breakups must be in the tool kit as well.
    Mr. Cicilline. I'm going to stay with you, Commissioner, 
because we're going to do a second round because, obviously, I 
couldn't question some of the other witnesses, but I want to 
transition to some of the recent privacy settlements at the FTC 
that I have criticized publicly. You recently dissented, along 
with Commissioner Slaughter, in the FTC settlement with 
Facebook. You stated that the settlement gives Facebook a lot 
to celebrate which was similar to what I said. Can you explain 
what your concerns are with the settlement? I know that you 
said in part that the $5 billion settlement was insufficient 
because it didn't address Facebook surveillance and 
manipulation-based business model, which is what incentivized 
Facebook to engage in order--to engage in the violations in the 
first place. What do you think the effective remedies would 
look like? What was your criticism of that, and what do you 
think the effective remedies would look like?
    Mr. Chopra. So I think of this in multiple buckets. First, 
we should start with that this is the case of recidivism, 
repeat offender, so it's not just a first time oops. And in my 
view of the evidence, it was clear that there were multiple 
early violations, and there was knowledge of those. I think of 
it, number one, where is the individual accountability? The 
officers and directors who called the shots to violate the law 
so that they could put money in their own pockets, without 
individual liability, you will not see the level of deterrence 
you need, and the Federal Rules of Civil Procedure in our 
courts bind officers and directors to Federal enforcement 
orders.
    Two, what is the actual conduct relief that goes at the 
core economic incentives? And to me, there should have been 
some real thought on actually banning some of the worst data 
collection use and sharing practices. And we have to think--of 
course, monetary relief is important, but U.S. consumers did 
not get a penny of that, so I'm not sure that headline $5 
billion is going to do much.
    Mr. Cicilline. Thank you, Commissioner. My time has 
expired.
    I now recognize the gentleman from--oh, I'm sorry. The 
gentlelady from Pennsylvania, Ms. Scanlon.
    Ms. Scanlon. Thank you very much. I want to thank all our 
witnesses for joining us today and for your testimony.
    You know, consumer privacy is an important issue for all of 
us, both as individuals and as Representatives for our 
constituents, but the way that data is collected and used by 
the large platforms obviously impacts the ability of consumers 
to maintain their privacy and the options they have to make 
informed decisions about their online activity.
    Dr. Valletti, I wondered if you could expand a little bit 
on the third point that you made regarding privacy degradation 
leading to an objective detriment to consumers. And I think you 
said that imposing terms of service with weak privacy 
protection that is not well understood but is accepted by 
consumers because of a lack of alternatives, it has to do with 
market power. Can you just talk about that a little bit and any 
perceived remedies that you might suggest?
    Mr. Valletti. So, on objective consumer harm, as I write in 
my written piece, it can be, you know, risk of data breach, 
identity theft, but interesting, also, consumer profiling, 
which is not done in the interest of a consumer, for instance, 
discrimination scoring or being shown more expensive results.
    So, if you are, in this moment, your dishwasher breaks 
down, and you are going to type ``dishwasher repair in my 
area,'' you're going to be shown one--most likely, one result 
with a nice graphic interface because it is a real-time auction 
that most likely Google will be doing, and who are they going 
to select? The one that pays the most because they get--they 
get a fee. We have lost--we have lost the original function of 
the internet to offer us choices because as I said, 
behaviorally speaking, consumers don't go to page 2, to page 3, 
and they don't--you just are hooked up. These devices are meant 
to keep us online as much as possible. So they learn about us, 
and then we buy whatever is the thing which is offered to us, 
and there is an underlying auction happening. There's only one 
platform that we know for that.
    Of course, if you're looking for a car, that's a choice 
that would take a much longer kind of period, and so it's a bit 
different.
    And for remedies, the most important thing I would start 
from is really try to think carefully about privacy, so having 
privacy regulations, which is done in the interest of American 
people, and it's American institutions that should come up with 
a solution.
    Mr. Chopra. Congresswoman, with your permission, just one 
point. When Facebook started, there was another social media 
platform called MySpace.
    Ms. Scanlon. I remember.
    Mr. Chopra. And one of the--one of the reasons Facebook was 
able to unseat MySpace was partially on privacy and control of 
data, that you will be able to control who sees your 
information. We should want firms to compete on privacy. These 
changes to terms of service hidden in the fine print where they 
can collect more and more data and unilaterally impose these 
terms, that is a price hike. We are paying with our data, that 
valuable data, and more competition will also be critical to 
how we think about protecting privacy.
    Ms. Scanlon. I'm wondering in other contexts we've seen 
that you can change the dynamic by having an opt-in rather than 
an opt-out. Is there any possibility of doing something like 
that in this sphere? So, for example, having to opt out of a 
savings plan rather than opting in.
    Mr. Chopra. Well, we do know behavioral defaults are highly 
influential, and, typically, right now, companies get to take 
everything from you, and you have to figure out a way to opt 
out. It's, like, kind of like a full-time job with all the 
websites you have. So shifting the burden to companies I think 
would be a great way to really reduce the burden on all of us. 
And, actually, if consumers want to share their data 
proactively and really want to renew that, let them tell that 
company and give them permission.
    Ms. Scanlon. Okay. I've also had conversations with my kids 
and other constituents about the power over consumer data, 
putting that back in the hands of consumers, and the example 
that they like to talk to me about is moving your music library 
possibly from Apple to Spotify.
    Mr. Furman, can you talk about the idea of implementing 
data portability and whether that's something that we should be 
exploring?
    Mr. Furman. Yes. I think absolutely you should be exploring 
that, and it's not just downloading your data; it's really 
being able to port and move it over in a simple and transparent 
manner. The companies are making some progress in doing this 
through steps like the Digital Transfer Project. I think, in 
part, they're making that progress because they think 
regulation is coming, and they're responding to it. And to do 
this is not just simply passing a law and say you have to do 
it. You have to roll up your sleeves a little bit and go use 
case through use case, figure out how to balance the different 
concerns. But if you can do that, create a lot of value for 
consumers and more competition.
    Ms. Scanlon. Okay. Thank you. I yield back.
    Mr. Cicilline. I thank the gentlelady.
    I now recognize the gentleman from North Dakota, Mr. 
Armstrong.
    Mr. Armstrong. Thank you, Mr. Chairman. And I think Mr.--
the chairman actually does have a MySpace account.
    Mr. Cicilline. I am that old; is that what you're saying?
    Mr. Armstrong. So Ms.--Dr. Layton, you seemed like you 
wanted to respond to that question, so I'll just give you a 
little chance.
    Ms. Layton. Well, thank you for that.
    And I just wanted to say, Ms. Scanlon, on the point--to let 
me piggyback on Dr. Valletti. He does have a paper looking at 
the prices for options. I think it's very interesting. I'm a 
person who--I managed 10 search engine marketers and have 
experience in this, and I think there's a fallacy to think that 
just because the ad appears at the top of the page in Google 
search, that it's the highest bid. Frequently, the best--that 
is the lowest paid bid because what is driving the price is 
very much the quality of the ad. It's how well it's written, 
whether the landing page where the ad goes to is relevant. So 
what Google is actually rewarding is the quality of 
advertising.
    And, also, he brings an interesting case. A plumbing 
service wants to create an ad. Well, that is also an issue of 
who amongst the plumbing industry is organized to invest in 
Google. You know, and it could be this also reflects that the 
competition of the plumbing side. And the other part is, if 
you're the consumer, you want to have the information. That ad 
format actually gives you a lot of things to look at. So I only 
say that it isn't--it's not a fact that the highest, top level 
ads pay the most. In some fields, like asbestos, those key 
words could be worth $5,000 a click. The plaintiffs' bar, 
they're very clever around using that. But there's many other 
areas that are not used at all, and the clicks could be assent, 
so it's hard to generalize that. You actually have to look at 
the data.
    Mr. Armstrong. And then I'm going to move into something a 
little different because, in your Senate testimony, you stated 
that GDPR has a risk identifying with respect to convicted 
felons successfully removing information from crimes in search 
engines, and your footnote on that stated that the Finnish 
court decision concluded the right to be forgotten provides 
convicted murderers the right to have publicly available 
information removed from Google listings. And I'm going--before 
I let you answer this for a second, I want to say I support Ban 
the Box. I think it's fantastic. I have some thoughts on that 
when we're done, but we also have a First Amendment. So let's 
take First Amendment issues aside. And just can you expound on 
that a little bit?
    Ms. Layton. Yeah. So, again, you know, we don't translate 
the GDPR perfectly to the United States for those particular 
reasons, but we can--and, also, right to be forgotten has been 
pushed back by the European courts.
    But this issue about people being able to expunge data that 
they don't like, well, you know, maybe it's a nice idea in 
theory, but it--we have--in the United States, we have a 
respect for the public's right to know. So, for example, what 
you've seen in the European Union are dirty politicians who 
have bad articles about them. They get removed from the media. 
They get removed from the Google searches. Murderers, child 
predators, you know, all of these terrible characters are able 
to weaponize the GDPR for those reasons.
    Mr. Armstrong. And I think that's one of the things with 
Ban the Box. We need to understand as Members of Congress is 
that still only gets you past the first stage. And you can ban 
anything from Google. You can ban it from a Facebook search, 
but I can tell you, my private investigator would find it in 3 
seconds. So, if you go into the second stage of an interview 
and you're doing work for the Federal Government, you have to 
have a certain insurance designation, any kind of--as simple as 
a hazmat commercial driver's license. These are good concepts, 
but I think sometimes we use the availability of information as 
a scapegoat. What we really need--if we're serious about this, 
and I think if you're 19 and have a nonviolent felony on your 
record, the world we live in now compared to two generations 
ago is so different. You can never outrun that conviction. You 
just simply can't. If it happened in Dickinson, North Dakota, 
in 1970, you could move to Madison, Wisconsin, and start your 
life over because nobody from Madison, Wisconsin, was going to 
drive to the Stark County Courthouse and look up records. But 
we use this availability of information a little bit as a 
scapegoat because, like I said, any job you're applying for 
that has any kind of insurance issue, regulatory issue, 
framework issue is going to find it anyway.
    So we need to address the fact, like, with companies, with 
insurance companies and say: Listen, we support this from a 
congressional level. There's broad bipartisan support. We also 
have to change insurance culture and hiring culture and 
allowing those things to happen and the fact that it's not a 
Google--it doesn't hit on a Google search doesn't mean it's not 
going to exist.
    Ms. Layton. I agree.
    Mr. Valletti. I think we are mixing a few things here. One 
thing is, you know, GDPR. One thing is right to be forgotten. 
The first step is for you to understand what you interpret as 
privacy. It is a boundary between your private self and the 
outside world. What do you think you want to share only with 
your family, with your community, with your friends, or not 
even with them?
    When it comes to digital space, this idea that there is 
notice and choice, that we have borrowed from other industries 
is not out there any longer, so these boundaries are so blurred 
that you must look into that. You must have recognition of the 
problem.
    Mr. Armstrong. And I agree with that because, when we were 
talking about opt in and opt out, shortly after there was some 
congressional testimonies before I was here. You started seeing 
these windows pop up on your social media platform and yes and 
no. And whenever I talk to a high school or college age group 
of kids after that happened, I would ask them, did any of you 
check no? And not a single----
    Mr. Chopra. Because you can't check no.
    Mr. Armstrong. Not a single hand goes up. So how people 
define privacy in the next generation is also something that is 
changing dramatically.
    Mr. Cicilline. I thank the gentleman. I recognize myself 
for 5 minutes.
    I just want to build upon that point that Commissioner 
Chopra made about this notion of consent would be--you know, 
trying to find out what you're consenting to would be a full-
time job. And I think, as it turns out, even if you devoted 
your time to it as a full-time job, you still would run into 
the situation in which you have these sort of take-it-or-leave-
it contracts where basically if you don't agree to a certain 
amount of collection, you just don't get the service. So, you 
know, the consumer or the user in this context doesn't really 
have the power even if you devoted full-time to navigating and 
trying to--and you wonder why we don't create the kind of 
consent we require in most other contexts, if it's medical 
consent, if it's consent to withdraw a not guilty plea and 
enter a plea in court. It's the knowing consent. It's actually 
the person knowing what they're consenting and affirmatively 
consenting and why we have allowed a kind of complete turning 
on its head where everyone is presumed to consent to the total 
collection of everything about them unless they can find some 
way to object to it. It's kind of curious, so I think this is a 
really important area for us to look at.
    Dr. Valletti, I want to just turn to you for a moment. 
Google has 2 billion users on Android, and Facebook has over 2 
and a half billion users. And what we hear very often is that, 
you know, these services are very popular, and people really 
have no problem with the kind of corporate surveillance and 
these loose privacy controls. And isn't the fact that these 
numbers are so great evidence that there's not really a 
problem, that the popularity of these services proves that we 
really don't need to worry about this. What do you say to that 
argument?
    Mr. Valletti. The services are very popular. It's evident 
they are very good services but that nobody cares. One of the 
points I make in my written piece is also that consumers are 
not put in a position to understand what the cost might be 
because they cannot make comparisons. They don't see where the 
data is going. They don't know when something is coming back 
against them because they just don't know, and they cannot make 
comparisons because there is a lack of competition.
    Going back to your original remark, you're probably aware 
that, earlier this year, Germany had a case against Facebook, 
and this is on appeal in the court now. But it exactly said 
that the consent--that the customers who want to be on Facebook 
had to give also to cross link data with WhatsApp and 
Instagram, which belong to the same company. They said you 
didn't tell them what you were going to do. You cannot do it 
unless you inform them in some appropriate way, and if you do 
not--if they don't consent, you cannot deny access to the 
service to Facebook because you don't need that consent to 
supply the primary service.
    Mr. Cicilline. Thank you. In July, as part of this 
investigation, Google testified before this subcommittee that 
it faces, and I quote, ``formidable competition around the 
world,'' end quote. Google stated that users can choose from a 
menu of search providers, including Bing, DuckDuckGo, and 
Yahoo.
    Dr. Valletti, in light of your work with the European 
Commission, do you agree that there is intense competition in 
online search, whether it be in Europe or in the United States?
    Mr. Valletti. It's a very general statement. So I will be 
more precise when it comes to, say, general search, this 
competition is not there in Europe; 93 percent of European 
searches are done by one search engine. And this possibility 
that consumers have to do something else, to change the 
defaults, to change the pre-installment of these behavior 
biases we already mentioned several times, they are clear in 
the data; I do see people actually sticking all the time and 
never changing the default.
    Mr. Cicilline. Dr. Furman? I have a couple questions for 
you. You can respond to that quickly, though.
    Mr. Furman. Just one quick point to add. You wouldn't--
Google wouldn't pay so much money to be the default search 
engine on things like iOS if it was really easy for consumers 
to switch.
    Mr. Cicilline. Right. And so, Dr. Furman, what role do you 
think information asymmetries play in how we should understand 
digital markets? Corporations routinely have more information 
than regulators and the public, but digital platforms seem to 
enjoy an astronomical advantage. How should this affect 
antitrust enforcement and competition policy, if at all?
    Mr. Furman. First of all, I think the enforcers need more 
resources. The CMA and the U.K. have actually created a digital 
unit with excellent staff in terms of data analytics and the 
like. And we also need to design policies around data openness 
that reduce some of that asymmetry between some of the big 
platforms, their competitors, and the public and regulators.
    Mr. Cicilline. I think many of you have made this point. 
Competition and privacy can be complements such that more 
competition can incentivize firms to provide users with more 
privacy, but they can also be at odds, such as that encouraging 
interoperability and data portability could expose user data to 
a broader set of corporations. So how should enforcers and 
policymakers in the Congress strike this balance?
    Mr. Furman. I think the answer to that is going to be on a 
case-by-case basis. First of all, as you said, a lot of cases, 
they really are complements. A lot of cases, only one of them 
is implicated; the other one barely is. But you need to have 
both objectives. You can't just think about privacy and 
completely ignore competition, and you can't just think about 
competition and completely ignore privacy. That's part of why 
you would want to establish a unit, a body of regulators, 
something that would have both of those objectives.
    Mr. Cicilline. Ms. Layton, I want to know if you wanted to 
respond to any of what I've asked. No. Okay.
    Mr. Chopra. Mr. Chairman, I would just add that when 
there's so few dominant players, that opens up more abuses of 
privacy. And I'm worried that our economy in this sphere is 
just drifting toward the Chinese model where there's just a 
massive amount of information on people collected without their 
consent and can be used to manipulate. And I just reject this 
argument that if we want to compete with China, we need to have 
our companies look like them. The beauty of our country is when 
new entrants come in and challenge the dominant ones. I just 
don't want that system.
    Mr. Cicilline. I agree.
    At this time, I'd ask unanimous consent that the following 
statements be introduced in the record: a written statement 
from the Australian Competition and Consumer Commission Chair 
Rod Sims discussing his investigation into the digital 
platforms.
    Without objection.
    [The information follows:]
      

                      MR. CICILLINE FOR THE RECORD

=======================================================================

[GRAPHIC] [TIFF OMITTED]

    Mr. Cicilline. A written statement from Dina Srinivasan 
discussing the intersection of competition and privacy.
    Without objection.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. A letter from the Consumer Reports detailing 
their priorities in examining data and privacy in competition.
    Without objection.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. A written statement from Maurice Stucke and 
Ariel Ezrachi on the digital platform economy's effects on 
antitrust and privacy policy.
    Without objection.
    [The information follows:]
    
    [GRAPHIC] [TIFF OMITTED]
    
    Mr. Cicilline. And a statement from the European Union 
Commissioner for Competition, Margrethe Vestager, with her 
expertise on the digital economy.
    Without objection.
    [The information follows:]
      

                      MR. CICILLINE FOR THE RECORD

=======================================================================

[GRAPHIC] [TIFF OMITTED]

    Mr. Cicilline. And, with that, I will conclude the hearing 
with gratitude for our extraordinary witnesses, and thank you 
for being here today and for contributing significantly to our 
ongoing investigation.
    And, with that, the committee is adjourned.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]
      

                                APPENDIX

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[GRAPHIC] [TIFF OMITTED]


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