[Senate Hearing 117-730]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-730

                   PROMOTING COMPETITION, GROWTH, AND
                       PRIVACY PROTECTION IN THE
                           TECHNOLOGY SECTOR

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FISCAL RESPONSIBILITY 
                          AND ECONOMIC GROWTH

                                 OF THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

                            DECEMBER 7, 2021
                               __________

                                     
                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                              


            Printed for the use of the Committee on Finance
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
53-261-PDF                WASHINGTON : 2023 


                         COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                 ______

       Subcommittee on Fiscal Responsibility and Economic Growth

                 ELIZABETH WARREN, Massachusetts, Chair

RON WYDEN, Oregon                    BILL CASSIDY, Louisiana
                                     RICHARD BURR, North Carolina

                                  (II)

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Warren, Hon. Elizabeth, a U.S. Senator from Massachusetts, chair, 
  Subcommittee on Fiscal Responsibility and Economic Growth, 
  Committee on Finance...........................................     1
Cassidy, Hon. Bill, a U.S. Senator from Louisiana................     3

                               WITNESSES

Brown, Courtenay, Amazon associate and leader, United for 
  Respect, Newark, NJ............................................     5
Racine, Hon. Karl A., Attorney General, District of Columbia, 
  Washington, DC.................................................     7
Lynn, Barry C., executive director, Open Markets Institute, 
  Washington, DC.................................................     9
Sherman, Justin, fellow and research lead, Data Brokerage 
  Project, Sanford School of Public Policy, Duke University, 
  Durham, NC.....................................................    10
Sacks, Samm, senior fellow, Yale Law School Paul Tsai China 
  Center, New Haven, CT; and cybersecurity policy fellow, New 
  America, Washington, DC........................................    12
Gray, Stacey, senior counsel, Future of Privacy Forum, 
  Washington, DC.................................................    14

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Brown, Courtenay:
    Testimony....................................................     5
    Prepared statement...........................................    35
Cassidy, Hon. Bill:
    Opening statement............................................     3
    Prepared statement...........................................    45
Gray, Stacey:
    Testimony....................................................    14
    Prepared statement...........................................    45
Lynn, Barry C.:
    Testimony....................................................     9
    Prepared statement...........................................    51
    Responses to questions from subcommittee members.............    59
Racine, Hon. Karl A.:
    Testimony....................................................     7
    Prepared statement with attachment...........................    60
Sacks, Samm:
    Testimony....................................................    12
    Prepared statement...........................................    66
Sherman, Justin:
    Testimony....................................................    10
    Prepared statement...........................................    70
Warren, Hon. Elizabeth:
    Opening statement............................................     1
    Prepared statement with attachment...........................    75

                             Communications

Center for Fiscal Equity.........................................    85
Sara Monica LLC..................................................    87

 
                   PROMOTING COMPETITION, GROWTH, AND
                       PRIVACY PROTECTION IN THE
                           TECHNOLOGY SECTOR

                              ----------                              


                       TUESDAY, DECEMBER 7, 2021

                           U.S. Senate,    
         Subcommittee on Fiscal Responsibility     
                               and Economic Growth,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, via webex, in 
Room SD-215, Dirksen Senate Office Building, Hon. Elizabeth 
Warren (chair of the subcommittee) presiding.
    Present: Senators Wyden, Whitehouse, and Cassidy.
    Also present: Democratic staff: Michael Evans, Deputy Staff 
Director and Chief Counsel; Ian Nicholson, Investigator and 
Nominations Advisor; and Joshua Sheinkman, Staff Director. 
Republican staff: Lincoln Foran, Policy Advisor; John O'Neal, 
Trade Policy Director and Counsel; Mayur Patel, Chief 
International Trade Counsel; Gregg Richard, Staff Director; and 
Jeffrey Wrase, Deputy Staff Director and Chief Economist.

OPENING STATEMENT OF HON. ELIZABETH WARREN, A U.S. SENATOR FROM 
MASSACHUSETTS, CHAIR, SUBCOMMITTEE ON FISCAL RESPONSIBILITY AND 
             ECONOMIC GROWTH, COMMITTEE ON FINANCE

    Senator Warren. This hearing will come to order.
    Good morning, and welcome to today's hearing of the 
Subcommittee on Fiscal Responsibility and Economic Growth. I am 
pleased to be working with Ranking Member Cassidy on this 
hearing on promoting competition, growth, and privacy 
protection in the technology sector. Senator Cassidy will be 
joining us remotely. We are going to do a mixed hearing, with 
some people in person and some people remote.
    Under President Biden's leadership, the American economy is 
rebounding. The unemployment rate has dropped from a pandemic 
height of 14.8 percent in April of 2020, to 4.6 percent today; 
5.6 million jobs have been added since President Biden's 
inauguration, more than were added in the first 10 months of 
any administration since we have been keeping records. Child 
poverty is projected to plummet by more than 40 percent, thanks 
to the American Rescue Plan. All of this has occurred despite 
an ongoing pandemic that has plagued us now for nearly 2 years. 
Families have tried to adapt, and those changes have echoed 
throughout our economy.
    Demand has shifted as people have consumed fewer services 
while buying more durable goods like exercise equipment and 
home appliances. The economy has recovered more quickly than 
many businesses projected, and all of this is contributing to 
unexpected bottlenecks in our supply chain and sporadic 
shortages at warehouses. And these factors contribute to the 
price increases for many consumer goods. But they are not the 
only reason that prices have gone up.
    Sure, giant companies will raise prices when they have to, 
but they will also raise prices when they can get away with it. 
And how do we know this? Because when companies are simply 
passing along their increases in costs, then profit margins 
should stay the same. But when companies see a chance to gouge 
customers, particularly while everyone is talking about 
inflation, then those companies raise their prices beyond what 
is needed to cover their increased costs.
    Right now, prices are up at the pump, at the supermarket, 
and online. At the same time, energy companies, grocery 
companies, and online retailers are reporting record profits. 
That is not simply a pandemic issue. It is not simply some 
inevitable economic force of nature. It is greed. And in some 
cases, it is flatly illegal.
    One reason for this price gouging is that fewer and fewer 
markets in America are truly competitive. When several 
businesses are competing for customers, companies cannot use a 
pandemic or a supply chain kink to pad their own profits. In a 
competitive market, the margin above costs stays steady even in 
troubled times. But in a market dominated by one or two giants, 
price gouging is much easier.
    For generations, policymakers and regulators under both 
Democrats and Republicans promoted free-market competition. But 
starting in the 1970s, our government changed course. For 
decades now, regulators and courts have looked the other way 
even as one sector after another has become dominated by one or 
two giants. They rubber-stamp merger after merger without 
regard to the consequences. And when small businesses got wiped 
out, and startups were smothered or bought out, they just did 
not care.
    Today, as a result of increasing consolidation across 
industries, bigger and bigger corporations have more and more 
power to charge their customers any price they want. They also 
wield more and more power to under-invest in things like supply 
chain resiliency and more and more power to hold down wages and 
benefits for workers. And it is getting worse.
    Earlier this month, Federal Trade Commission Chair Lina 
Khan noted that by September of this year, our antitrust 
agencies had already received more merger filings than any 
other year in the previous decade. In fact, they are on track 
in 2021 to receive a 70-percent increase above average filings 
in recent years. Giant corporations are taking advantage of 
this global crisis to gobble up struggling small businesses and 
to increase their power through predatory mergers. I introduced 
my Pandemic Anti-Monopoly Act last year to slow down this 
trend, and to protect workers and small businesses and families 
from being squeezed even more by harmful mergers during this 
crisis. And I will reintroduce it this year, because the need 
is clear.
    The effects of limited competition in our technology sector 
are particularly severe, and that is why I am interested in 
exploring today's hearing. Limited competition in tech is 
having spillover effects across our entire economy. 
Anticompetitive practices in the semiconductor industry have 
exacerbated supply chain issues. Big tech firms have used their 
dominance to inflate prices throughout the online retail 
market, and to subject their workers to inhumane conditions 
during the pandemic.
    And as Ranking Member Cassidy has rightly highlighted in 
his own work, tech firms collect and exploit sensitive personal 
information, often threatening national security, harming our 
emotional health, and discriminating against vulnerable groups.
    It does not have to be like this. With stronger antitrust 
laws and robust enforcement, we can ensure that our economy 
works for American families, not just for the wealthiest 
corporations. Congress could provide better tools to the FTC 
and the Department of Justice to investigate anticompetitive 
mergers and break up the companies that have held our economy 
down. We can also make it easier for the agencies to reject 
such mergers in the first place. By promoting competitive 
markets for consumers and workers, we can foster a stronger 
American economy and a stronger American democracy.
    So I look forward to discussing these issues today. I 
appreciate all of our witnesses who are joining us, and I look 
forward to hearing about your insights and your experiences.
    [The prepared statement of Senator Warren appears in the 
appendix.]
    Next, I am going to turn to Ranking Member Kennedy--
Cassidy; sorry, Senator Cassidy--for your opening remarks. 
Senator Cassidy?

            OPENING STATEMENT OF HON. BILL CASSIDY, 
                 A U.S. SENATOR FROM LOUISIANA

    Senator Cassidy. No problem, Senator Warner [laughing]--no, 
Senator Warren. Good morning. Thank you all for being here at 
today's hearing. And thank you for our witnesses for taking 
time to testify.
    Senator Warren and I have agreed to a bipartisan hearing on 
promoting competition, growth, and privacy protection in the 
technology sector. I will focus my time on the privacy aspect 
of this, and specifically on the data broker industry.
    The data broker industry is relatively unknown to most 
Americans, but its practices and techniques are interwoven into 
our lives. Data brokers build profiles on individuals about 
certain attributes, and then sell that information to those 
whom they see fit, or whoever wishes to purchase.
    For example, I am a big fan of LSU football. I frequently 
search what is related to our new coach, Brian Kelly, upgrading 
from Notre Dame to LSU. That search data is collected and a 
profile is made. I then receive ads about buying LSU football 
tickets, merchandise, et cetera.
    We all experience something similar on the Internet. 
Multiple times a year a company will be the victim of a hack 
that exposes the data of thousands, if not millions, of 
customers. While we go to great lengths to minimize those 
cyber-incursions, we ignore an entire industry that transacts 
in much more detailed and sensitive critical information.
    You will hear today from witnesses that there is very 
little information that data brokers cannot sell, and even less 
data that they are not willing to sell. I believe that few in 
this room would think it a good idea to sell the profiles of 
American service members--but that is what is happening.
    We should have a conversation about what American data we 
think is okay to be bought and sold without the knowledge of 
many Americans; what type of data we think is acceptable to be 
bought and sold, period. Should we allow a list of military 
personnel to be sold to foreign adversaries? Should we allow 
lists of domestic abuse survivors to be sold to domestic 
abusers? We should have a conversation about what data is 
appropriate to collect, what limits should be placed on the 
groups that collect that data, and restrictions on how that 
data is sold or transferred to others. We should have a 
conversation about all the things our foreign adversaries can 
do with this data. That is why we assembled a team of data 
broker experts to talk about the different aspects of data 
brokers, what is regulated and what is not, and how best to 
move forward.
    Thanks again to our witnesses, and I am looking forward to 
discussing the issue.
    [The prepared statement of Senator Cassidy appears in the 
appendix.]
    Senator Warren. Thank you very much. I appreciate it, 
Senator Cassidy.
    So, we have a great set of witnesses here to share their 
views on promoting competition, growth, and privacy protections 
in the American technology sector. I appreciate everyone being 
with us today.
    First, joining us virtually, we have Courtenay Brown. Ms. 
Brown is an Amazon Fresh worker at the company's fulfillment 
center in Avenel, NJ and a leader with United for Respect. She 
is also a veteran of the United States Navy.
    Second, also joining us remotely, we have the Honorable 
Karl Racine, the District of Columbia's first elected Attorney 
General. He is the president of the National Association of 
Attorneys General and the chair emeritus of the Democratic 
Attorneys General Association's executive committee. Previously 
he was a managing partner at Venable Associates, White House 
counsel for President Clinton, and a staff attorney for the 
Public Defender Service of the District of Columbia.
    Third, we have Barry Lynn, who is the executive director of 
the Open Markets Institute. His research focuses on threats of 
the 21st-century monopolies to our democracy, individual 
liberty, security, and prosperity.
    Next, we have Justin Sherman, a co-founder and senior 
fellow at Ethical Tech, an initiative at Duke University 
focused on research at the intersection of technology and 
ethics. Mr. Sherman studies data brokers and the sensitive data 
that they hold on U.S. individuals.
    Following Mr. Sherman, we have Samm Sacks of Yale Law 
School's Paul Tsai China Center and a cyber policy fellow at 
the think tank New America. Ms. Sacks is an expert on cross-
border data flows and studies how the Chinese Government 
collects and uses data.
    And finally, we have Ms. Stacey Gray. Ms. Gray is senior 
counsel at the Future of Privacy Forum. She is a data broker 
expert, and her research centers on the intersection of 
emerging technologies and Federal regulation and enforcement.
    Increasing consolidation throughout the American economy 
undoubtedly contributes to higher prices, worsening working 
conditions, and privacy concerns. The pandemic has not only 
exacerbated these issues, but has also exposed them more 
plainly.
    We can fix this together. We can make our economy work for 
all Americans. I want to thank you all for being with us today. 
I am looking forward to hearing your testimony.
    So, Ms. Brown, we are going to start with you. You are 
recognized for 5 minutes. And tell us what you want us to know.

  STATEMENT OF COURTENAY BROWN, AMAZON ASSOCIATE AND LEADER, 
                 UNITED FOR RESPECT, NEWARK, NJ

    Ms. Brown. Okay; good morning, everyone. Thank you for 
inviting me to share my experience with you today, Senator 
Warren and members of the subcommittee. My name is Courtenay 
Brown, and I live in Newark, NJ. I am currently working at an 
Amazon fulfilment center and have been for 4\1/2\ years. Before 
working at Amazon, I served my country as a service member in 
the United States Navy, and I took the commitment that I made 
to my country then seriously, as well as the commitment I take 
seriously now as a member leader of United for Respect.
    I am here today, Senators, to raise the alarm about 
Amazon's business model, because it is a threat to working 
people, and it is a threat to our economy. One out of every 150 
American workers is an Amazon employee, as well as, in that 
group, there are some former employees. And this multi-billion-
dollar corporation grew on the back of its workers by 
exploiting them. I am looking to you to stand up to 
corporations like Amazon and protect us.
    The job that I do is a much-needed service, especially 
since the COVID-19 pandemic began. As a process guide, I am in 
charge of sorting 35,000 to 50,000 groceries daily for delivery 
to homes in near cities in New Jersey. I am in and out of our 
cooler constantly, stepping in and out of temperatures as low 
as negative 10 degrees, and picking up and setting packages 
down with little to no rest. The work that I do is supposed to 
be done with 30 to 40 people, but we operate with 25 people or 
less every day. Because our work is essential, and our workload 
has increased, we need more hands on deck, not less, so that we 
can take turns getting breaks and getting much-needed rest. But 
Amazon can barely retain its workers.
    Amazon's multi-billion-dollar wealth is made possible by 
offering same-day delivery--anywhere from same-day delivery to 
2-day delivery--and the corporation has achieved this speed and 
scale through their sheer brutality, watching, timing, and 
punishing associates like me and my coworkers for not working 
fast enough, and not allowing associates to take time off to 
adequately rest and recover, and to prevent burnout.
    From the moment we pull into the parking lot, we are 
monitored. And that is every step at the facility that we take, 
and if we fall behind in any way during our 11-hour shift, we 
risk being disciplined, or even losing our jobs. We are pushed 
to our limit, to the point where we cannot even take regular 
bathroom breaks. Often, we have to run to and from the bathroom 
in under 2 minutes, so we do not get in trouble. On top of 
that, the bathrooms are usually pretty gross and they are 
usually broken too.
    The constant pressure and surveillance is why Amazon has 
twice the level of injuries and turnover compared to similar 
jobs. Research has shown that workplace injury rates are higher 
at Amazon facilities with more robotic and automated 
technology. I used to be a trainer, and I saw firsthand how, 
out of 50 new hires, only five would make it to the 1- or 2-
month mark. And many quit soon after due to injuries or over-
exhaustion.
    We are living in a country where machines are getting 
better treatment than people. The machines at my facility 
undergo routine maintenance checks to ensure that they do not 
burn out. Yet the one time I needed to take off to recover from 
my mother's passing back in September, I was only given 2 days 
to do so. Two days to plan a funeral and process my mother's 
death. So I ended up taking a month off of unpaid time, which 
was the only option I had at the time. And this unpaid time was 
only because there was a reduction in the amount of work we 
had. And my sister, she was not as lucky, because she also 
works with me, and she had to literally work the day of her 
death, as well as the day after, come for her funeral, and then 
return to work 2 days later. So the entire funeral was 
literally scheduled around me and my sister's work schedule. 
Imagine going through that while Jeff Bezos made $75 billion 
last year, thanks to me and my co-workers.
    Amazon's high-tech sweatshop caused me to develop plantar 
fasciitus and tendinitis with debilitating pain in my heel and 
ankle from having to stand for long periods of time at work 
with little to no rest. There was once when the pain was so 
severe that I ended up in the emergency room and, because I was 
homeless at the time, I did not have enough time to take off. I 
had to beg doctors and nurses to see me as quickly as possible, 
because I could not afford to lose my job and the opportunity I 
had of becoming leadership.
    This kind of exploitation is not just happening to me. 
People have been working through the pandemic nonstop because 
they will not let us take time off. Often we are so exhausted, 
we break down and cry. A coworker of mine had to stop breast-
feeding her child early due to not receiving the support when 
she had to pump at work. This is the type of environment Amazon 
is perpetuating across the country. Amazon associates have been 
fighting back against these dangerous conditions for years. 
Instead of fixing the problem, Amazon is only doubling down on 
exploitative models.
    Jeff Bezos himself recently told shareholders that he plans 
to use more automated control of workers in the warehouse. The 
worst part is that Amazon is setting up its high-tech 
sweatshops in Black and Brown communities desperate for work. 
Amazon is a big-
numbers company, and they know that there are people who look 
like me who have very limited choices, and they know we cannot 
afford to complain or refuse bad conditions. Amazon takes 
advantage of this desperation. The pandemic has closed a lot of 
businesses in my area, so even someone like me who considers 
looking for another job, I cannot because there are no jobs 
available, or the pay is not enough to make rent and put food 
on the table.
    This committee is considering competition and economic 
growth in the tech sector. When corporations break the rules to 
maximize their profit, they ensure they win by all means 
necessary, including exploiting workers and gutting small 
businesses.
    Senators, I am looking to you to stop corporations like 
Amazon from ruining our economy and dictating the workplace 
standards for hundreds of millions of workers like me. I am 
asking you to help me put an end to inhumane, exploitative 
practices that leave America's workers injured, exhausted, and 
mentally battered each day. Our country needs elected officials 
to side with working people--to side with essential workers, 
not big corporations.
    [The prepared statement of Ms. Brown appears in the 
appendix.]
    Senator Warren. Thank you very much, Ms. Brown. I 
appreciate your coming in and testifying.
    Now we go to Attorney General Racine. You are recognized 
for 5 minutes.

STATEMENT OF HON. KARL A. RACINE, ATTORNEY GENERAL, DISTRICT OF 
                    COLUMBIA, WASHINGTON, DC

    Mr. Racine. Chair Warren, Ranking Member Cassidy, and 
distinguished members of the subcommittee, thank you so much 
for the opportunity to testify before you today. As the first 
independent elected Attorney General of the District of 
Columbia, and also the outgoing president of the bipartisan 
National Association of Attorneys General, one of my most 
important responsibilities is to protect DC consumers from 
corporate wrongdoing, including investigating and, where 
appropriate, filing suit against defendants that illegally 
exercise monopoly power, violate privacy laws, and hurt 
workers.
    We have used our power and authority to sue Amazon in the 
local DC court for using its overwhelming market power--that 
is, 50 to 70 percent of all online sales occur on Amazon's 
platform--to control prices and to restrict agreements with 
third-party sellers that sell on Amazon's marketplace and 
wholesalers that feed Amazon's retail business. In its defense, 
Amazon claims that everything it does in business is all about 
the consumer. Well, our investigation reveals otherwise. Amazon 
indeed is focused, and the evidence is compelling, on one 
thing: its bottom line, even at the expense of consumers like 
the ones it claims to care so much about. In fact, Amazon is 
costing all of us more money by controlling prices across the 
entire electronic mall.
    Like you, Senator Warren, I too am a capitalist. People 
should get paid for their hard work, creativity, and 
entrepreneurship. People should certainly watch their profits 
increase as their business increases. But when companies like 
Amazon unfairly and unlawfully increase the prices on all of 
us, stifle competition, and take advantage of consumers, the 
law must step in and say, ``enough is enough.''
    Back in 2019, Amazon was facing pressure from Congress and 
regulators over anticompetitive behavior, and we know that the 
concern around Amazon and others is as bipartisan as it gets. 
To put regulators at ease, Amazon claimed it removed a 
particular clause in its agreement with third-party sellers 
that prohibits these third-party sellers from offering their 
goods for lower prices or on better terms than competing online 
marketplaces, including the third-party seller's own websites. 
Again, Amazon claimed that it would remove that particular 
clause. Here is the spoiler alert: Amazon deceived Congress and 
consumers with its bait-and-switch, replacing the initial terms 
of the agreement with different titles and different words that 
had the same illegal impact.
    Let me give an example of how this works. If I am a third-
party seller selling, for example, headphones, I do want to 
list my product on Amazon. Why? Because it reaches so many 
people--remember, 50 to 70 percent of the entire electronic 
mall. Well, in order to do so, I have to do the following: sell 
the headphones at a price on the Amazon marketplace that allows 
me to still own a reasonable profit, after incorporating 
Amazon's very high fees and commissions. Then I am barred from 
selling my headphones on any other platform, including my own 
website, at a lower price, even though I could earn a fair 
profit by doing so.
    Put another way, I have to build in those high Amazon fees 
and high Amazon commissions into the price of the headphones 
that I sell. Why? Because Amazon forced me to agree to that 
term in order to access its electronic mall. And if they find 
out, if I sell my headphones even on my own website for a lower 
price, lower than the built-in fees and commissions that Amazon 
requires, guess what? You get kicked off of the Amazon 
marketplace and have sanctions, financial sanctions, imposed on 
you.
    This leaves third-party sellers with two choices. They can 
sell their product on Amazon under these extremely restrictive 
terms that guarantee a profit to Amazon and put third-party 
sellers at risk, or they can only offer their product on other 
marketplaces. But because Amazon controls so much of the 
marketplace, third-party sellers have little choice. These 
agreements impose an artificially high price because, as I have 
explained, all across the online retail space, consumers lose 
in this game as a result of Amazon's agreements.
    But absent these agreements, third-party sellers could 
offer their products for lower prices. That is one of the bases 
for our lawsuits. And Amazon is not just doing this with third-
party sellers. They are also doing it with wholesalers as well. 
So we recently added that count to our lawsuit. First-party 
sellers sell products to Amazon for Amazon to resell at retail 
to consumers. If Amazon lowers its retail prices to match or 
beat the lower price on a competing online marketplace, the 
wholesalers--listen to this--are forced to pay Amazon the 
difference between the agreed-upon profit and what Amazon 
realizes with the lowered retail price. This can lead to 
wholesalers owing Amazon millions of dollars.
    To avoid triggering this agreement, wholesalers have 
increased the prices on their goods on competing online 
marketplaces. In other words, they have agreed to do what 
Amazon wants--that is, to charge consumers more for products 
than they ordinarily would have to pay but for Amazon's illegal 
agreements.
    All of these agreements reduce an online marketplace's 
ability to compete with Amazon's marketplace on price, and 
result in consumers paying artificially high prices. And even 
outside this litigation, small businesses of course have 
complained and complained that Amazon has stolen their business 
ideas and passed them off as Amazon's own.
    Let me give you one brief example----
    Senator Warren. Attorney General, I am going to have to 
stop you here in just a minute. We have just 5 minutes for each 
of our witnesses, but we are going to be able to ask you some 
questions, because I definitely want to hear this. Is that 
okay?
    Mr. Racine. Absolutely, Senator, and I am happy to stop 
right here.
    [The prepared statement of Mr. Racine appears in the 
appendix.]
    Senator Warren. Great. Okay, thank you so much. I 
appreciate it.
    And now, Mr. Lynn, you are recognized for 5 minutes.

        STATEMENT OF BARRY C. LYNN, EXECUTIVE DIRECTOR, 
             OPEN MARKETS INSTITUTE, WASHINGTON, DC

    Mr. Lynn. Chair Warren, Ranking Member Cassidy, members of 
the subcommittee, thank you for inviting me to speak with you 
today on this fundamentally important topic. I am Barry Lynn, 
and I direct the Open Markets Institute, and it is good to see 
you today.
    Political economics is the art of governing how people 
compete with and exercise power over one another. An essential 
truth of human society is that competition among people is 
inevitable. What people can control is whether corporations and 
markets are structured to promote the liberty and well-being of 
the individual, the ability of citizens to make wise decisions, 
and the security and prosperity of individuals and of the 
Nation.
    For two centuries, Americans were masters of engineering 
competition policies to achieve these ends. American citizens 
used anti-monopoly laws to make themselves the most equal and 
free people in the world, and the most prosperous, innovative, 
and powerful. But beginning 4 decades ago, Americans from both 
parties radically altered how we think about and enforce 
competition policy.
    Rather than aim to promote liberty, democracy, and 
community prosperity, policymakers embraced a philosophy that 
said we should aim to promote efficiency only. The result is 
that today Americans face the gravest set of domestic threats 
to liberty and democracy since the Civil War. Today in America, 
as Courtenay made clear, monopolists drive down the people's 
wages while driving up the prices that people must pay. 
Monopolists threaten freedom of the press and of expression. 
Monopolists spy on citizens then use the people's own secrets 
to misinform, incite, and enrage those same citizens for 
profit.
    Monopolists tax, extort, and steal other people's 
businesses. Monopolists destroy better technologies and ideas. 
Monopolists destroy vital industrial capacities. Last year we 
saw this with face masks, this year, with semiconductors. 
Monopolists create dangerous dependencies on powerful foreign 
states. Monopolists strip America's communities of wealth, 
opportunity, independence, security, and hope.
    None of this is new. I, myself, first warned of how the 
platform monopolists threaten freedom of expression and 
democracy more than 11 years ago. I, myself, first warned of 
the dangers of supply chain concentration 19 years ago. But 
there is good news. Americans are swiftly awakening to the 
interlocking set of crises. Today the great majority of 
Americans from across the political spectrum want to see 
monopolists stripped of their powers and, better yet, enforcers 
and legislatures are on the move.
    The Justice Department and the FTC have brought lawsuits 
against Google and Facebook, and in the most democratic anti-
monopoly action in U.S. history, Attorneys General from 49 
States, Puerto Rico, Washington, DC, and Guam launched 
investigations of Google and Facebook and filed three 
additional lawsuits.
    Then there are the smart and urgent efforts to strengthen 
antitrust laws here in the Senate, as with Senator Warren's 
proposal; in the House; and in Europe and around the world. 
Perhaps most important, President Biden has personally 
condemned the pro-
monopoly Chicago School of ``consumer welfare'' philosophy of 
Robert Bork and Richard Posner and restored our Nation's 
traditional focus on protecting the American people and the 
Nation itself from all dangerous concentrations of power and 
control. And in Lina Khan and Jonathan Kanter, President Biden 
has appointed law enforcers smart enough and strong enough to 
get the job done.
    Today's hearing marks an especially important step forward 
in this great struggle. It highlights the pressing need to 
relearn that competition policy is much more than mere 
antitrust law. Rather, competition policy is the combination of 
antitrust with trade policy, corporate governance, Wall Street 
governance, and industrial strategy. Nowhere is this more 
obvious than in addressing America's twin supply chain crises. 
That is why in my written testimony I focus on what lessons we 
can learn from the role monopolists have played in 
concentrating so much risk and power in our production and 
transportation systems, such as with semiconductors.
    And I detail how we can rebuild our industrial system in 
ways that make us truly safe, while also breaking inflation and 
boosting wages. Our opportunity today is not merely to rebuild 
what the monopolists have broken these last 40 years, it is to 
relearn how to use anti-monopoly laws both to imagine and make 
an America far more democratic, just, and forward-looking than 
any of us have dared imagine in a generation.
    [The prepared statement of Mr. Lynn appears in the 
appendix.]
    Senator Warren. Thanks very much, Mr. Lynn. I appreciate 
it.
    Mr. Sherman, you are recognized for 5 minutes.

  STATEMENT OF JUSTIN SHERMAN, FELLOW AND RESEARCH LEAD, DATA 
   BROKERAGE PROJECT, SANFORD SCHOOL OF PUBLIC POLICY, DUKE 
                     UNIVERSITY, DURHAM, NC

    Mr. Sherman. Chair Warren, Ranking Member Cassidy, and 
distinguished members of the subcommittee, thank you for the 
opportunity to testify today about privacy issues facing 
American citizens. I am a fellow with Duke University's Sanford 
School of Public Policy, where I lead a research project 
focused on the data brokerage ecosystem, a multi-billion-dollar 
virtually unregulated industry of U.S. companies aggregating, 
buying, and selling Americans' intimate personal data on the 
open market.
    Data brokers are profiting off the vulnerability and 
insecurity of the U.S. and its citizens. While comprehensive 
consumer privacy law is vital, Congress need not wait to 
resolve this debate to regulate data brokerage. Today I will 
make three points. Congress can strictly control the sale of 
data to foreign companies, citizens, and governments; strictly 
control the sale of data in sensitive categories like genetic 
and health information and location data; and stop companies 
from circumventing those controls by inferring data.
    Our research at Duke University has found data brokers 
widely advertising data on hundreds of millions of Americans, 
their sensitive demographic information, political preferences 
and beliefs, and whereabouts in real-time locations, as well as 
data on first responders, students, government employees, and 
current and former members of the U.S. military. Data brokers 
contract and sell your race, religion, gender, sexual 
orientation, income level, how you vote, what you buy, what you 
search online, and where your kids and grandkids go to school. 
This harms every American, particularly the most vulnerable. 
And I will focus on three examples.
    Data brokers advertise data on millions of current and 
former U.S. military personnel. Criminals have bought this data 
to scam veterans and their families because of the military 
benefits they get from the Federal Government. Foreign states 
could acquire this data to profile military personnel, trick 
them and their families, and undermine national security.
    The Chinese Government's 2015 hack of the Office of 
Personnel Management was one of the worst breaches the Federal 
Government has suffered. In the future there is no need for the 
Chinese Government, or any other foreign intelligence agencies, 
to hack those databases when the data can be bought legally on 
the open market from U.S. companies.
    Data brokers known as ``people search'' websites aggregate 
millions of Americans' public records and make them available 
for search and sale online. Abusive individuals have used this 
data, including highly sensitive information on individuals' 
addresses, whereabouts, and family members, to hunt down and 
stalk, harass, intimidate, and even murder other people--
predominantly women and members of the LGBTQ+ community.
    There is little in U.S. law stopping data brokers from 
collecting, publishing, and selling data on victims and 
survivors of this violence. Data brokers also advertise data on 
millions of Americans' mental health conditions. Companies can 
legally purchase this data from other firms and use it to 
exploit consumers. Criminals already scam senior citizens using 
data broker data. They could similarly buy data on seniors with 
Alzheimer's and dementia to steal away their life savings. 
Foreign governments could even acquire this data for 
intelligence purposes.
    Our research has found that companies selling this data on 
hundreds of millions of Americans conduct relatively little 
``know your customer'' due diligence. And for those that do, it 
is unclear how strong it is in practice. Brokers may also make 
their customers sign nondisclosure agreements, stopping them 
from saying where they obtained U.S. citizens' information.
    As part of talking about data threats to Americans' civil 
rights, U.S. national security, and democracy, we must focus on 
this entire data brokerage ecosystem. There are three steps 
Congress can take now. First, strictly control the sale of data 
broker data to foreign companies, citizens, and governments, 
which currently can entirely legally buy millions of U.S. 
citizens' data directly or through front companies. Second, 
strictly control and even consider outright bans on the sale of 
data in sensitive categories like genetic and health 
information and location data, which is used now to follow, 
stalk, and harm individuals. Third, stop companies from 
circumventing those controls by inferring data, using 
algorithms and other techniques to predict things they have not 
technically collected.
    Congress can and should act now to regulate the data 
brokerage ecosystem and its threats to consumers' civil rights 
and national security. Thank you.
    [The prepared statement of Mr. Sherman appears in the 
appendix.]
    Senator Warren. Thank you, Mr. Sherman.
    And now, Ms. Sacks, you are recognized for 5 minutes.

 STATEMENT OF SAMM SACKS, SENIOR FELLOW, YALE LAW SCHOOL PAUL 
  TSAI CHINA CENTER, NEW HAVEN, CT; AND CYBERSECURITY POLICY 
              FELLOW, NEW AMERICA, WASHINGTON, DC

    Ms. Sacks. Chair Warren, Ranking Member Cassidy, and 
members of the subcommittee, it is such an honor to testify 
today. I am a senior fellow at Yale Law School's Paul Tsai 
China Center and the cybersecurity policy fellow at New 
America. I have spent the last decade as an analyst of China's 
technology and data policies, both in the national security 
community and with the private sector. I also advise 
corporations on China's policies.
    Today I will focus my testimony on China and global cross-
border data flows. While my expertise focuses on China--and I 
will speak specifically about the Chinese Government's efforts 
to acquire data--my views of the most effective solutions 
require that the United States put forward a more comprehensive 
data governance vision with stronger protections for security 
and privacy for all companies.
    Some of these risks are specific to China, but so much of 
this is much bigger. U.S. lawmakers have an opportunity to 
address transnational security threats, while also advancing a 
more secure, ethical, and democratic Internet in its own right.
    The Chinese Government has embarked on an ambitious 
national data strategy with the goal of acquiring, controlling, 
and unlocking the value of data. My written testimony submitted 
for the record has more details on recent plans and directives 
that signal the centralization of Chinese state power of 
information flows within and beyond China's borders.
    The Chinese leadership seeks to control data as both a 
strategic and an economic asset. There are concerning national 
security risks. Beijing is already presumed to have sensitive 
national security information from the theft of personal 
records of roughly 20 million individuals from the U.S. Office 
of Personnel Management, as my colleague Justin Sherman has 
testified. If that location, health, and social media data were 
to be acquired on the open data market--and combined with what 
Beijing already has--China could target individuals in 
sensitive government national security positions and the 
military for manipulation, coercion, and blackmail.
    This is particularly concerning from a counterintelligence 
perspective. As Chinese online services and network 
infrastructure grow in predominance around the world, it is 
possible that the Chinese Government could use this position to 
monitor data processes abroad, just as the United States had 
done--as shown by Edward Snowden--in utilizing data 
transmissions across U.S. intelligence networks.
    We simply do not know what value and harm data created now 
will hold in the future. But we must grapple with the 
implication of the CCP gaining control of information flows 
beyond China's closed Internet ecosystem. I have the following 
recommendations.
    First, the analogy of data as the new oil is false and 
leads to bad policy. It assumes that data is a finite state 
resource and, as such, efforts by both Beijing and Washington 
to hoard and wall off data from each other will only lessen 
national power, not increase it. Instead, Congress should 
mandate stronger cybersecurity protections and basic standards 
for what data can be collected and retained in a comprehensive 
Federal privacy law to protect Americans' sensitive data, not 
just from sophisticated state hackers, but also from the 
unregulated industry of data brokers around the world trading 
in consumer data without transparency or control.
    While comprehensive Federal privacy law moves slowly amid 
much debate, having baseline rules for the data broker industry 
would close off a prime target for exploitation now. Currently, 
there is nothing in our regulatory structure that would prevent 
the Chinese Government from buying American citizens' data. 
That is why bans on Chinese software applications will not make 
us more secure or safe. Even if TikTok, for example, were an 
American-owned company, it could still legally buy that data on 
the open market.
    Given this, American data is shockingly exposed and will 
remain that way as long as restrictions on data flows only 
focus on specific companies deemed adversaries. The United 
States should work with like-minded governments to develop a 
common set of standards and safeguards, perhaps building off of 
the initiatives put forward by the Japanese Government, known 
as ``data free flows with trust.'' And I have some more 
specific recommendations in my written testimony.
    But in conclusion, inaction by the United States in 
offering an affirmative, compelling vision of U.S. data 
governance in its own right will only make the United States 
less secure, less prosperous, less powerful, and allow space 
for Chinese companies controlled by the CCP to flourish.
    Thank you.
    [The prepared statement of Ms. Sacks appears in the 
appendix.]
    Senator Warren. Thank you very much, Ms. Sacks.
    And now, Ms. Gray, you are recognized for 5 minutes.

           STATEMENT OF STACEY GRAY, SENIOR COUNSEL, 
             FUTURE OF PRIVACY FORUM, WASHINGTON DC

    Ms. Gray. Thank you, Chair Warren, Ranking Member Cassidy, 
and members of the subcommittee, for the opportunity to testify 
today. My work at the Future of Privacy Forum is in U.S. law 
and public policy related to emerging technology and consumer 
privacy regulations. And specifically, I have been asked to 
speak to the topic of data brokers.
    Privacy advocates, the Federal Trade Commission, and 
members of this and other Senate committees, have long called 
for greater transparency and accountability in the data broker 
industry, and regulation is long overdue. Many of the most 
influential reports published almost a decade ago have 
influenced the debate. And since then, much has changed. There 
have been significant advances in machine learning and 
artificial intelligence. Adoption of consumer technology has 
also become universal with 97 percent of U.S. adults using 
smartphones, and most families having, of course, many 
additional devices.
    The legislative landscape has evolved more slowly and has 
largely not kept up. Since 2018, California and two other 
States have passed consumer privacy laws. Three States have 
established limited data broker-specific regulations. And many 
of these have focused on transparency to the establishment of 
data broker registries, while others, such as the California 
Privacy Rights Act, codify broader consumer rights to opt out 
of the sale and sharing of data. Much more work remains to be 
done.
    I would like to make two points regarding data brokers and 
then give recommendations. The first point is that defining the 
very term ``data broker'' has been an ongoing challenge, 
because it encompasses a very broad spectrum of divergent 
companies and business activities. The leading definition 
includes any business that collects and sells personal 
information of a consumer with whom that business does not have 
a direct relationship. Many hundreds of businesses fall under 
this definition and use data for a wide range of purposes--as 
my fellow witness, Mr. Sherman, pointed out--including 
marketing and advertising, people search data bases, fraud 
detection, identify verification, and risk scoring. Some of 
these activities directly benefit consumers, such as the use of 
data to protect a bank account against fraudulent activity, but 
others primarily benefit the purchasers or the users of data, 
such as advertisers, with fewer, or little or no accompanying 
benefits to individuals or society.
    Second, the lack of a direct relationship with consumers, 
characteristic of the data broker industry, is at the heart of 
concerns around privacy, fairness, and accountability, but it 
also presents one of the greatest challenges for crafting 
effective data privacy regulation, and I will briefly explain 
why.
    Any business with a direct-to-consumer relationship--such 
as a restaurant, a hotel, a retailer, even a social media 
network--can collect large amounts of personal information 
about U.S. consumers today, directly or by purchasing it. And 
in some cases, those third-party companies can exercise 
enormous influence in market power, as we have heard. However, 
there is still some degree of accountability to users who are 
aware that the companies exist and can delete accounts, or 
raise alarms.
    In contrast, a business lacking a direct relationship with 
consumers typically does not have the same reputational 
interest, incentives, and in some cases legal requirements, to 
limit the collection of data and protect it against misuse. 
However, a lack of consumer relationship also means that 
businesses engaged even in legitimate data processing, or 
socially beneficial data processing, cannot rely on traditional 
historical privacy mechanisms of notice and choice. Meaningful 
affirmative consent, or opting in, might be impractical or 
impossible for a business to obtain in some cases, while opting 
out after the fact tends to be both an inadequate safeguard and 
impractical for most consumers to navigate.
    We know that consumers can become overwhelmed with choices 
and often lack the knowledge to assess future risks, complex 
technology, or future potential secondary uses. So what does 
this all mean? First and foremost, Congress should pass 
baseline comprehensive privacy regulation that establishes 
clear rules for both data brokers and first-party companies 
that process personal information from U.S. consumers. It 
should address the gaps in the current U.S. sectoral approach 
to consumer privacy, and it should incorporate, but not rely 
solely, on consumer choice.
    A privacy law should also codify clear limits on the 
collection of data and apply accountability measures such as 
transparency risk assessment auditing, limitations on the use 
of sensitive data, and limits on retention.
    In the absence of comprehensive legislation, there are a 
number of other steps Congress can take to address risks 
related to privacy and data brokers, including empowering the 
Federal Trade Commission to continue using its unfair and 
deceptive trade practices authority to fund and staff the 
establishment of a privacy bureau; limiting the ability of law 
enforcement agencies to purchase information from data brokers; 
enacting sectoral legislation for uniquely high-risk technology 
such as biometrics and facial recognition; or updating existing 
Federal laws such as the Fair Credit Reporting Act to more 
effectively cover emerging uses of data.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. Gray appears in the 
appendix.]
    Senator Warren. Thank you very much, Ms. Gray. I appreciate 
all of your testimony here.
    And now I recognize Senator Whitehouse for 5 minutes of 
questions.
    Senator Whitehouse. Thanks very much, Chair Warren. I 
appreciate it. This is a fascinating and important hearing, and 
I am delighted to have these terrific witnesses here.
    Facebook and Google have been profiting off some of the 
worst propagators, I guess you would call it, of climate 
denial. The Center for Countering Digital Hate finds 10 fringe 
sites that fuel 69 percent of climate disinformation on 
Facebook. So with a little bit of focus, they could address 
this problem if it is only 10 major propagators. Google itself 
makes millions from Google ads that it runs alongside climate 
denial content, as if it were legitimate.
    Mr. Lynn, can you talk a bit about how our information 
ecosystem suffers when a handful of companies control what 
people see, and how they perceive reality; what a 
communications monopoly means in a world in which there is so 
much deliberate climate denial propagated by industry?
    Mr. Lynn. Thank you, Senator. It is a fundamentally 
important issue. And what we see today--one way to answer the 
question is to understand that Google and Facebook today are 
the communications corporations of the 21st century. These are 
the AT&Ts and the Western Unions of the 21st century.
    AT&T and Western Union were prohibited by law from 
manipulating how people spoke to one another. Google and 
Facebook--their business model is based on manipulation. The 
reason they take in the data is in order to manipulate you. 
They are massive manipulation machines. The way they make their 
money is by renting out the manipulation machines and calling 
the money that they receive--they call it ``advertising.'' So 
what we have is, in the midst of our society, rather than sort 
of networks that connect people and empower people to speak 
with one another and interact with one another, we have 
machines that are designed to set people into conflict with one 
another, to feed them false information, to determine how 
people vote, and what we have----
    Senator Whitehouse. So they are ready, willing, and able 
tools for false information propagators.
    Mr. Lynn. When they were established, I think the idea was 
that these systems would be used by Proctor & Gamble to sell 
soap and Tide. What they now do, however, is they rent 
themselves out to Vladimir Putin, to climate deniers, to the 
Chinese Communist Party--you know, whoever comes along.
    Senator Whitehouse. Let me switch to data that you are 
talking about, that they have gathered, and ask the witnesses 
who spoke about data privacy and data brokers, what does 
somebody listening to this hearing need to know about what 
companies know about them, what data brokers can extract from 
what companies know about them to sell, and to what extent that 
information can be individualized back to them, potentially by 
foreign bad actors, foreign governments? Mr. Sherman, go ahead.
    Mr. Sherman. Data brokers know everything about pretty much 
every American--where you work, where your kids go to school, 
how much money you make, your race, your religion, your sexual 
orientation--and their entire business model is that they can 
target this to individuals. They sell this data. They offer 
advertising, like Mr. Lynn mentioned, for the purposes of 
targeting specific individuals. And so these profiles are out 
there on the open market for sale.
    Senator Whitehouse. And if you were running a psychological 
warfare operation involving American public officials, or 
American CEOs, or various kinds of decision-makers in American 
society, how valuable a tool would that be if you were a 
foreign government, to be able to look into people's lives and 
understand not only what you directly know, but what 
conclusions you can realistically draw about what their 
shopping habits are and so forth?
    Mr. Sherman. Incredibly valuable for that. You can buy 
databases right now for what people search online, how they 
vote, what they think. And so it is all out there on the open 
market.
    Senator Whitehouse. My time is up. Thank you, Chair Warren.
    If I could, I would just add one question for the record so 
as not to take up too much time. But one of the things we hear 
in the Finance Committee a lot--our chairman has joined us, 
Chairman Wyden, and he is very active on this subject--is that 
if we make big American companies pay a fair share in taxes, 
that will make them uncompetitive against foreign companies. 
And that is the argument our Republican friends always make. 
What they ignore is that when the big American companies do not 
pay a fair tax burden, that gives them competitive advantage 
over smaller American companies. And obviously that plays out 
in this tech world, because you have Apple and Google, who have 
come up with, you know--what do they call them?--the double 
Irish and the Dutch sandwich, and all these peculiar tax tricks 
that they use to avoid paying their fair share. And I would be 
interested in your views, again in writing and not now because 
my time has expired, on how that creates competitive 
disadvantage with potential competitors against them for 
competitive advantage in the U.S., and to what extent it locks 
in, financially, some of their monopolistic power because, 
frankly, they put themselves into a place where they do not 
have to pay taxes, but all their competitors have to--well, all 
their smaller competitors have to.
    Thank you very much. I appreciate the attention to that 
question in writing.
    Senator Warren. Thank you, Senator Whitehouse; a very 
thoughtful question.
    And now, Senator Cassidy, I think you are up.
    Senator Cassidy. Thank you, Madam Chair. Thank you all for 
testifying.
    Mr. Sherman, I cannot help but note we are on Pearl Harbor 
Day, and our country has come to venerate this day, but also to 
honor the service men, women, others in the clandestine 
services, et cetera, who offer themselves to protect us. And we 
rightly make tremendous investment in the VA hospitals and 
other services to include a suite of benefits to help these 
folks who have offered so much.
    But I am struck when you speak about how a data broker can 
sell personal information on active military personnel--I 
assume on veterans as well--to allow a company to basically rip 
them off of these benefits that they would ordinarily receive.
    How and where--how does someone get such information? What 
is the price of one military profile? And is it safe to say 
that companies are getting rich off of using this data to trick 
our service folks into giving their benefits over to the 
company, a marginal benefit for the service person or the 
veteran, but a great benefit for the company, and the taxpayer 
gets ripped off? I have at least three questions in there.
    Mr. Sherman. Data brokers are absolutely profiting off the 
vulnerability and insecurity of the U.S. and its citizens. That 
includes veterans. That includes members of the military. I do 
not have a figure in front of me for the cost of one of those 
profiles, though I can follow up on that, but I will say it is 
very, very easy to find this information online and to purchase 
it.
    Our research has shown that many of these companies 
offering this data--whether it is military personnel, low-
income individuals, whatever it is--do not do much customer 
vetting. They are basically willing to sell to most entities 
with a check and an email address. And so at the end of the 
day, it is all too easy for people to use this, as they have, 
to scam veterans and to create risks to national security.
    Senator Cassidy. Now how do they get this information? How 
do they know that someone is active military, et cetera?
    Mr. Sherman. Because the collection and buying and selling 
of this information is so unregulated, it is very easy for 
these companies to put pieces of information together to figure 
out who you are, much like they might track where you go during 
the day, and what you spend, to figure out how much money you 
and your household make. They might look at where you travel to 
figure out if you are in the military.
    Senator Cassidy. Would the data brokers themselves have 
location data that would obviously indicate that I am spending 
my night on base every night, except for an occasional 
deployment in some place which seems to be a military zone, or 
are they buying this location data from others?
    Mr. Sherman. Likely both. Many companies collect this data 
directly from people's phones, whether you are working on the 
Hill, or in the military, or even in an intelligence agency, 
and they also buy this data from other companies.
    Senator Cassidy. Now I am a physician, so let me toss this 
out, and if one of the other witnesses on data brokers wishes 
to address it, please do. The thought has occurred to me that 
we have HIPAA penalties if I, as a physician, would reveal that 
someone was HIV positive, or had a mental illness. But one of 
you specified that the mental illness is actually well known, 
which makes total sense to me. If you have location data that 
shows that somebody goes to work every day at a place which is 
known to be a mental health clinic or an HIV clinic, a 
treatment clinic, that would mean the person is probably 
employed there. But if they go every 2 weeks, or every month, 
and then they go to a pharmacy afterwards, they could infer 
that the patient has either got HIV or a mental health issue, 
or some other illness. Those are often stand-alone clinics, and 
so they could infer this.
    Is this kind of a correct kind of guess at how all this is 
done? And does this not kind of violate, certainly, the spirit 
that seems almost the letter of the HIPAA regulations? Mr. 
Sherman, please start, and I will ask Ms. Sacks and Ms. Gray to 
comment.
    Mr. Sherman. That is exactly the problem with data brokers, 
Senator. They can basically dance around the very few, very 
limited privacy laws we do have, by proxy data, by running 
algorithms to get that information anyway.
    Senator Cassidy. So this would be what you were speaking of 
as ``inferring.'' They can infer, even if they do not directly 
collect.
    Mr. Sherman. That is correct.
    Senator Cassidy. And they sell that data to those who might 
be interested in marketing to someone who has mental illness or 
HIV, or something such as that?
    Mr. Sherman. Yes, they do that.
    Senator Cassidy. Ms. Gray or Ms. Sacks, do you have any 
further comments on that? Because as a physician, that greatly 
offends me, because the idea that we can infer that which is 
otherwise restricted is--again, it just violates that which I 
always kind of had in my DNA as a physician in terms of 
protecting patient privacy.
    Ms. Gray. I would characterize that the same way, Senator. 
And in fact, this is one of the major problems that needs to be 
addressed through nonsectoral comprehensive privacy 
regulations, because data collected increasingly through apps, 
wearable devices, and fitness devices, and devices like 
bicycles and electric vehicles, can all lead to the types of 
information sharing that you are describing. Some of it is 
directly collected from consumers, and some of it would refer 
to large data sets.
    Senator Cassidy. Your answer implied that my car, which is 
connected to the Internet, theoretically at least could have an 
app that could--theoretically at least, a data broker could 
purchase the information related to my location data from a car 
which is, quote/unquote, ``a smart car,'' although I do not 
know why you would have to do it from an app that was on 
somebody's cellphone. But is all that true?
    Ms. Gray. All of that is true. Much of the commercial 
location data that is in the industry, some from mobile apps 
and some from cars, is tied to device IDs. For example, some of 
it is actually from apps when it claims to measure things like 
driving behavior, and all of that information is very valuable 
for a number of purposes, some of them benign like 
transportation analytics in urban planning, and some of them 
more harmful.
    Senator Cassidy. I will have a second round, but I yield 
back, Madam Chair.
    Senator Warren. All right. Thank you very much, Senator 
Cassidy.
    Senator Wyden?
    Senator Wyden. Thank you, Senator Warren. And I want to 
thank you and Senator Cassidy for getting into these issues. 
Senator Cassidy just mentioned the modern car, and the modern 
car is a computer on wheels. And I have been investigating now 
for years, as chairman of this committee, the sleazy, 
unregulated world of these data brokers. And in several 
instances we blew the whistle on government agencies that were 
too-eager consumers for this information, and we pushed Apple 
and Google to finally get some of the sleaziest data brokers 
out of their stores, and out of their businesses. And I am glad 
we are making progress, but we have a lot more to do.
    I want to start with you, Mr. Sherman. You made an 
important point with respect to how foreign governments can 
acquire Americans' data to run disinformation campaigns, 
identify undercover government personnel, blackmail government 
employees--and I have been working on legislation for some time 
now to deal with this threat, which will be introduced shortly.
    My first question to you, Mr. Sherman: do you agree that 
Congress should enact legislation to strictly limit the exports 
of Americans' personal data to high-risk foreign nations and 
companies to address what, in my view, are demonstrable 
national security threats?
    Mr. Sherman. There is a huge--a huge--national security 
threat here, and Congress does need to control the sale of data 
to foreign companies, citizens, and governments. As you 
referenced, it is all too easy to get that on the open market.
    Senator Wyden. Very good.
    Ms. Gray, we have also been looking at this whole issue of 
how U.S. Government agencies bypass the courts by buying 
American data from data brokers. And so I have introduced 
bipartisan legislation, The Fourth Amendment Is Not for Sale, 
to close these loopholes.
    Do you agree that the governments' exploitation of these 
loopholes is a serious problem? And do you agree that Congress 
ought to close these ever-yawning loopholes by passing our 
legislation?
    Ms. Gray. Absolutely, Senator. The Fourth Amendment Is Not 
for Sale Act is a very strong model. That is exactly what is 
needed right now.
    Senator Wyden. And tell us, if you would, how this connects 
with privacy issues? Because I have also introduced another 
piece of legislation, the Mind Your Own Business Act. Had that 
become law, I am of the view Mr. Zuckerberg would have already 
faced major sanctions for behavior connected to privacy 
violations.
    But how does this whole area connect with privacy? Because 
on the Finance Committee, we are increasingly looking at 
privacy issues. For example, we feel very strongly that the 
wealthy tax cheats right now are about as likely to get audited 
by the government as getting hit by a meteor. We have to do 
more to root out that corruption, but we can do it in a way 
that is consistent with protecting people's privacy. I am a 
privacy hawk. I will put my privacy credentials up against 
anybody in the United States Senate.
    Tell us how this whole field connects with the broader 
expanse of making sure that we protect people's privacy.
    Ms. Gray. Sure. Well, one of the issues is the sheer scale 
and volume of the modern commercial data ecosystem. And it is 
becoming increasingly untenable, I think, to separate the 
related fields of law enforcement and national security uses of 
data and commercial collection and uses of data that originate 
for a particular purpose but end up being used for secondary 
purposes, and being used by government agencies.
    Senator Wyden. It is striking, because I am also on the 
Intelligence Committee, and I have come to the conclusion that 
privacy is a massive economic and national security issue. And 
you cannot just separate these all out in separate boxes. And 
this question on economics and national security and privacy 
are directly linked. I want to thank all of you for your good 
work. I appreciate Senator Cassidy's interest in this. Senator 
Warren has been a long-time leader of making sure that we hold 
these major economic forces in our country, our largest 
companies, accountable.
    And by the way, I was in Sisters, OR, and people were 
asking me about these issues. Being successful and ensuring 
that there is accountability are not mutually exclusive. We can 
do both. Of course we want our businesses to do well. Of course 
we want them to be profitable. But they can also be accountable 
to key American values like protecting people's privacy. And I 
want everybody to know I am so pleased that Senator Warren has 
given us this chance.
    These sleazy, unregulated data brokers, I want to put them 
on notice today: we are going to stay at it until there are 
serious consumer protections. Whether it is The Fourth 
Amendment Is Not for Sale, or other kinds of measures, there is 
going to be accountability in this field.
    Thank you, Senator Warren.
    Senator Warren. And thank you, Senator Wyden. And thank you 
for your long-time leadership in this area. This is how we are 
going to make changes, so thank you. Thank you for all you have 
done.
    I want to talk about another aspect of the issues that we 
have raised today, and that starts over 100 years ago when 
Congress passed our first antitrust laws to protect both local 
businesses and to protect our democracy from powerful dominant 
corporations that would undermine competition, crush workers, 
and gouge consumers.
    But starting in the 1970s, our government reversed course. 
Corporate CEOs and lobbyists pushed the idea that mega-mergers 
and corporate behemoths were actually good. Economists used 
complicated models to say, gee, if we just let big corporations 
get even bigger, they would be more efficient, they would lower 
prices for everyone, and they would compete better on the world 
stage.
    Unfortunately, too often that is not what happened. Take 
the semiconductor industry for an example. Hedge fund managers 
took over our biggest chip manufacturer, Intel. Intel grew its 
market size, cemented its dominant position through 
anticompetitive and predatory practices. Then, having killed 
the competition, the managers were free to weaken Intel's 
fundamentals with impunity. I will give you just one example.
    From 2001 to 2010, instead of spending more money on 
innovation--remember, we are talking about the semiconductor 
industry, right? You have to stay up. Instead of spending more 
money on innovation, on new ideas, on more efficient 
manufacturing here in the United States, Intel's managers spent 
$48 billion on stock buy-backs. They boosted share prices and 
executive pay, while they hollowed out a once-great company.
    So, Mr. Lynn, let me start with you. You know a lot about 
the semiconductor industry. Did consolidation, particularly the 
growth of Intel, lead to greater efficiency?
    Mr. Lynn. No, Senator, the opposite.
    Senator Warren. Did it lead to lower prices?
    Mr. Lynn. Absolutely not, Senator.
    Senator Warren. Then did it at least make Intel a stronger 
competitor on the world stage?
    Mr. Lynn. The opposite, Senator.
    Senator Warren. So in your assessment, what exactly did 
happen as a result of Intel's growing dominance in its sphere?
    Mr. Lynn. First, one of the things--you mentioned $48 
billion that Intel paid out between 2001 and 2010. The 
dominance allowed them to pay out much more between 2010 and 
2020--actually $130 billion over the last 10 years. So the 
looting and sacking of this corporation grew much faster and 
more aggressive over the last 10 years.
    But this results in higher prices for the chips. It results 
in more power--you know, concentration of power over workers. 
And it is not just the people on the assembly line, but it is 
also scientists. It is also the engineers. And these are the 
people that we count on to develop a better future, and we have 
concentrated power over them. So we see less innovation as 
another effect. The other effects include this extreme 
concentration of capacity that we have seen in corporations 
like TSMC in Taiwan. And this extreme concentration--here you 
have all of a certain kind of chip, you have all your eggs in 
one basket--means that the system itself is fragile and subject 
to catastrophic failure.
    What you have is a system that gives other powerful 
countries like China power over the people who depend on that 
capacity--for instance, by threatening to disrupt shipments in 
and out of Taiwan. It leads to these massive shortages, these 
structural shortages that we see that are leading to the 
shutdown of assembly lines all around the world--not just in 
America, but we are talking about Ford, a 50-percent decline in 
production of cars in Q2. We are seeing Toyota, a 40-percent 
decline in production of cars in Q3. This equals vastly higher 
prices for newer cars, vastly higher prices for used cars, 
vastly higher prices for rental cars, and a lot of dirtier cars 
on our streets because we cannot replace them with newer, 
cleaner cars.
    Senator Warren. So consolidation clearly did not strengthen 
our semiconductor industry, but consolidation, or lack of 
competitors in this field, did create this supply chain crisis 
that the pandemic has exposed. And now, as you rightly point 
out, without semiconductor chips, other manufacturers like auto 
companies cannot meet demand. They are furloughing workers at 
the same time that orders are stacking up, all because they 
cannot get the chips that U.S. manufacturers once supplied all 
around the globe.
    And what has been management's response to this? The same 
executives who exacerbated this crisis by failing to properly 
invest in their operations in infrastructure, now are asking 
Congress to bail them out so they can make the investments that 
they should have been making years ago.
    Excessive concentration is a real problem. It is also a 
problem in our domestic logistics and supply chain operations, 
and it applies, obviously, to big tech firms.
    Ms. Brown, I would like to go to you, if I can. During the 
4\1/2\ years that you have worked at Amazon, Amazon has grown 
bigger and bigger. Its profits have skyrocketed. So let me ask. 
In your personal experience, have Amazon's logistical 
operations improved, or have things just gotten worse, and 
particularly with the COVID crisis? Can you speak to that?
    Ms. Brown. Yes, absolutely. It has definitely gotten worse 
as the years have gone on, especially with the pandemic. It is 
all about this pushing out as much as possible frame of mind. 
It used to be about the quality that we are giving our 
customers. That was the number one thing. But now Amazon really 
does not care very much. They do not care about how their 
workers are trained. It is all about speed and quantity. So 
when it comes to my facility with delivering food, you know, we 
deliver broken eggs, crushed bread. We end up sending out a lot 
of spoiled food and everything.
    So a lot of us want to do good work, but it is like really 
frustrating because, you know, we are at a limit for doing such 
things. And for Amazon, they are getting rich. They preach the 
customer obsession, but it is not good for customers at all. 
And it is not good for hardworking people at the facility 
centers either. Workers cannot do their jobs well because 
Amazon wants to make more money, and that is the bottom line 
for them--about as much product as they can get out, and more 
money. And if you attempt to try and do these things like 
giving customers good quality, actually practice customer 
obsession, you end up actually getting written up and then 
eventually terminated. So the bottom line for them is all 
profit.
    Senator Warren. Thank you so much, Ms. Brown.
    Amazon's profits have exploded during the pandemic, even 
though deliveries have been significantly delayed and services 
have become more expensive. In a competitive marketplace, 
Amazon's rivals would be able to compete on these factors--
providing more reliable service, or lower prices, or a better 
work environment. But because there is no competition, 
consumers get higher prices and worse services, while Amazon 
gets even richer.
    Markets can produce lower prices. Markets can produce more 
reliable products. Markets can produce robust supply chains, 
but only if there is competition. When giants are allowed to 
dominate an industry, everyone else pays. Thanks very much.
    Senator Cassidy, I recognize you.
    Senator Cassidy. Thank you.
    Ms. Gray, I will have a series of questions for you right 
now. I finished in my last line of questioning speaking about 
how location data could establish somebody as being HIV 
positive, or having mental illness, or being military 
personnel, et cetera. I understand the organization with which 
you work considers location data to be personal information 
that should be regulated. Can you kind of comment upon that, 
please?
    Ms. Gray. Certainly. Commercial location data of the nature 
of the data that is frequently bought and sold in the data 
broker industry is often tied to, not necessarily name and 
contact information, but device identifiers such as a device ID 
related to a mobile phone. That has led many in the industry to 
claim at times that the data is not personally identifiable, 
that it has been anonymized, or de-identified to a certain 
extent. And while the risk may have been lessened, the facts 
remain that persistent, precise location information over time 
is very straightforward to relate back to an individual person 
because our behaviors and our movements are unique over time. 
And so that is one of the unique challenges specific to the 
commercial location data industry.
    Senator Cassidy. I am sorry. I had to stop my video. My 
computer is about to die. I apologize for that.
    Secondly, related to that, what is the difference between 
suppressing data--I call my data broker. I contact him. I say I 
do not want my data to be marketed, et cetera. How do I ask 
them to get rid of it? And I am told that oftentimes they do 
not get rid of it. They suppress, but suppression is different 
than deletion. Can you elaborate on that, please?
    Ms. Gray. Sure. Sure, Senator. Suppression is an industry 
term that is frequently used for the purpose of describing when 
a company maintains a list of consumers or individuals or 
devices for the purpose of excluding those individuals or 
devices from their products and services, but not necessarily 
deleting the underlying data.
    And there can be a range of reasons to do that. One of 
them, for example, is to comply, in an ongoing manner, with 
deletion or opt-out requests that are required by some of the 
emerging privacy laws. For example, data brokers that 
automatically collect large amounts of information from public 
records may receive a request to delete data from an 
individual, actually delete that data, but be unable to 
continue to delete data on that individual in the future unless 
they retain a limited suppression list.
    Senator Cassidy. In that case, you suggest that that is 
actually a positive thing in which they would be using the 
suppression list to mark this. So is it a positive or a 
negative that data is merely suppressed as opposed to 
eliminated?
    Ms. Gray. I would say, Senator, it depends on the use case. 
There are other higher-risk marketing and advertising use cases 
related to suppression lists. As we heard, for example, some 
marketers wish to exclude certain segments of the population 
from receiving advertisements that may be deemed offensive. For 
example, a list of households associated with the loss of a 
child, or the loss of a pregnancy, may be a list that a 
marketer uses to exclude those households from receiving 
marketing and advertising related to baby products. That is an 
example.
    So it depends on the use. And there is some risk associated 
particularly with those more sensitive categories of 
information just by the maintenance of a suppression list.
    Senator Cassidy. So there is clearly a nuance here. And 
frankly, if we are going to attempt to address that in 
legislation, we would need someone such as you and your 
organization to help elaborate on that nuance. Because it 
actually sounds like it could be a positive thing, although you 
suggest that there is a potential negative as well.
    So with that said, let me ask you about the next thing, 
because I think this is another nuance. In your written 
testimony--I believe it was you who spoke of the fact that this 
big data can be very helpful. You wish to look at, just to give 
an example--I am not sure it ever came to full fruition, but it 
has in other countries--using location data to establish who 
may have been at a conference at which COVID is known to have 
infected people, and so therefore you can do that.
    I know after Mardi Gras in March of 2020, people used 
location data to figure out where everybody went back to from 
New Orleans after Mardi Gras and where people had come from, 
and they were able to establish that COVID came to New Orleans 
from both the Northwest and the Northeast.
    So clearly people are using data in another sense. So what 
is the nuance between using the data appropriately for public 
health purposes, as an example, maybe to let me know how 
congested the highway is, and should I take this route or 
should I take another, as opposed to using it somewhat 
nefariously, if you will?
    Ms. Gray. You are right, Senator, to point out that there 
are essentially good uses and bad uses of this data. For 
example, in the early stages of the COVID-19 pandemic there 
were large commercial data sets held by both first parties, 
including Google, and members of the commercial location data 
broker industry, that provided aggregate analyses of how people 
were moving around to help assist public health efforts.
    So, there are both good and bad use cases. One of the 
nuances here is that, when we talk about fair information 
practices and privacy and having a realm of private life, there 
are increasing concerns around the fact that data is collected 
in the first place--even when it might be later used for good 
or beneficial purposes. There is, nonetheless, a zone of 
private life that I think most agree should not be intruded 
upon.
    In other cases, most consumers are aware that they are 
sharing location data--for example, for a particular service--
and not aware that it may be re-used for a secondary or 
incompatible purpose. And things like commercial research and 
public health purposes are technically incompatible purposes, 
because that is not the reason that the data was necessarily 
provided. And so crafting nuanced exemptions here related to 
sources of data, sensitivity of data, risk related to harms to 
individuals and groups and society, are all part of crafting 
effective regulation here.
    Senator Cassidy. Thank you.
    And I will finish with this and turn it back to you, Madam 
Chair. But I sincerely think, observationally, it cannot be 
disputed, that we can come up with better legislation from a 
hearing such as this that takes information from those who are 
stakeholders and academics and others who analyze and try and 
get those nuances down.
    Again, I ask you to contact my staff afterwards with some 
idea of those nuances. And that is an open invitation to 
everybody on the panel.
    Madam Chair, I turn it back to you.
    Senator Warren. Thank you, Senator Cassidy.
    So, as Attorney General Racine pointed out, Amazon controls 
50 to 70 percent of the $430-billion online market for consumer 
goods. Prices for everything from light bulbs to mattresses to 
motor oil are going up on Amazon. And the question is, why is 
that happening? A huge part of the reason is Amazon's 
deliberate exploitation of its market dominance to squeeze more 
dollars out of consumers and third-party sellers alike. In 
other words, Amazon is taking a big bite out of the middle.
    So one of our witnesses, Attorney General Racine, filed a 
lawsuit this year against Amazon for this very reason. And a 
particular focus of the lawsuit is the impact of something that 
Amazon calls its ``fair pricing policy.''
    And if I can, Attorney General Racine, I would like to 
follow up on the example you gave to illustrate this policy. 
So, let's say if I make earphones and sell them for $100 on my 
own website--I just want to make sure we are clear on all 
this--if I want to sell them on Amazon to access this huge 
marketplace online and extend my reach, I have to pay Amazon's 
fees and agree to their terms. And my understanding is that 
Amazon's fees can be as high as 40 percent of the cost of these 
goods.
    So, thanks to these fees--let's just pick that example--I 
have to increase my prices to ensure that I can still turn a 
profit. So now instead of charging $100 for these earphones, I 
may now have to charge $140. But the worst part is, I now also 
have to charge $140 on my own website, and on every other 
platform where I am trying to sell my headphones. These 
inflated prices crush American consumers.
    So, Attorney General Racine, I want to return to your 
opening remarks. I want to go back over the example you talked 
about, but you also mentioned how Amazon forces wholesalers to 
pay more as well. So I did the consumer part. Can you say a 
little more about how they are doing this with their 
wholesalers as well?
    Mr. Racine. Sure. And you have captured it exactly right, 
Senator, which of course is no surprise to me. With respect to 
wholesalers, Amazon again forces these first-party sellers, I 
will call them, to reach an agreement with them in regards to 
what the price is going to be. And here is the deal. If Amazon 
lowers its retail prices to match or beat a lower price for 
that initial good on the online marketplace, the wholesaler is 
forced to pay Amazon the difference between the agreed-upon 
profit that they made with Amazon and the money that Amazon 
realizes after it lowers the retail price.
    In short, Amazon has profit protection at the cost of the 
first-party seller. I do feel compelled to also mention--and do 
not take my word for it; look at the April 23, 2020, Wall 
Street Journal article written by Dana Mattioli that talks 
about how Amazon has scooped up data from its own sellers, 
these first-party sellers, to launch competing products. So not 
only are they crushing these first-party sellers with these 
unlawful agreements--that is what we allege--but they are also 
using data around the popularity and selling of these products 
to launch competitive products against these first-party 
sellers.
    Amazon cannot win enough without cheating, and that is why 
we are suing them.
    Senator Warren. So this just knocks me out. In a typical 
collusion case like price-fixing, competitors illegally agree 
to charge higher prices. And when they get caught, they can 
actually go to jail under Federal law. But Amazon accomplishes 
the same thing in-house. And its higher fees are inflating 
prices on its own platform as well as in stores and on other 
websites through these anticompetitive contract provisions with 
third-party sellers. And the result is, prices go up for 
millions of Americans, and Americans cannot see it because 
there is no place else to do the price comparison to see what 
is happening here.
    This price increase is entirely hidden from consumers 
because it looks the same wherever they go. And it just shows 
up as inflation.
    Mr. Racine. Can I give you numbers?
    Senator Warren. Please.
    Mr. Racine. I think it is going to make your point. So 
between 2014 and 2020, Amazon's revenue from third-party seller 
fees and charges grew from $11.75 billion to over $80 billion. 
This year, Amazon is estimated to reap over $121 billion in 
fees from third-party sellers. They are doing this because it 
is extremely profitable. They do not care that consumers are 
paying far too much for goods, and they are not doing what they 
say they are doing, which is focusing 100 percent on consumers. 
They are focused 100 percent on utilizing their market power to 
extract every bit of profit that they can.
    Senator Warren. So the question, obviously, you have to ask 
is, how do they get away with this? And what I would like you 
to focus on, if you can, Attorney General Racine, is how 
Amazon's dominant market position contributes to this kind of 
pricing power that has been felt throughout our economy.
    Mr. Racine. I think the example with the headphones that I 
gave, and that you accentuated, frankly, and made better, is 
the best example. And that is, that what Amazon does is, it 
artificially builds its commissions and fees into a product 
that ensures that that embedded profit that it has, frankly, 
continues throughout the electronic mini-mall or major mall in 
such a way that no one, not even you, nor me, the creator of my 
own headphones, can sell my headphones for cheaper than what 
Amazon and we essentially were forced to agree to sell them at.
    And why do we engage in that agreement? Because they own 50 
to 70 percent of the marketplace. Look at it as a toll booth 
keeper. The road only leads to the toll booth. The toll booth 
keeper can raise those prices, and you as the driver have no 
choice but to pay whatever they are asking if you are trying to 
get down that road.
    And we think that is illegal. We appreciate the work of 
this great committee. We are going to make law in the courts, 
and we look forward to helping with respect to legislation.
    Senator Warren. Well, I very much appreciate that. I 
appreciate your point about 50 to 70 percent of the marketplace 
that they already own. And yet, Amazon keeps growing. And they 
do not just grow by sales, they continue to acquire.
    So back in May, Amazon announced its proposed acquisition 
of MGM Studios. That would be an $8.45-billion deal. Now I 
wrote a letter to the FTC Commissioners asking them to review 
the deal thoroughly and to evaluate how the deal might affect 
workers and prices in other markets in the Amazon ecosystem.
    Mr. Lynn, even if the FTC wanted to oppose this huge 
merger, it would be a challenge to successfully block it--
notwithstanding everything that we have already heard from the 
Attorney General, and that others have testified about. Can you 
explain why that is?
    Mr. Lynn. Yes, thank you, Senator.
    Well, first it is going to be very expensive in terms of 
the time, you know, for this limited staff that the FTC has. 
They are going up against the richest corporation in the world, 
the most powerful corporation in the world, a corporation that 
can throw wrench after wrench after wrench into the mechanism.
    It is also very expensive in terms of the expertise they 
have to pay for--economic expertise. They have to put millions 
and millions of dollars, often, into the kitty to pay for 
economists. And this is even with President Biden's 
renunciation of the Bork consumer welfare philosophy. The 
legacy--because of the nature of the law--of the consumer 
welfare philosophy and its focus on efficiency continues to 
shape how the judiciary is going to look at this issue. And 
they have to be ready with this very expensive expertise.
    The third reason is, it is just very difficult to 
communicate with judges in the stylized language of consumer 
welfare, of efficiency. You know, this is an issue of power. It 
is an issue of democracy. It is an issue of human liberty. And 
they are being told that we have to talk about this in terms of 
efficiency.
    Judges are trained to use common sense to enforce the law, 
to ensure the rule of law. And when you are using consumer 
welfare framing, you are speaking nonsense.
    Senator Warren. Well, I really appreciate that.
    You noted earlier that President Biden has selected two 
outstanding experts, Lina Khan and Jonathan Kanter, to lead the 
antitrust efforts at the FTC and at DOJ. These are people who 
believe in competition. And they are going to build strong 
cases. But Congress needs to do its part. We need to make sure 
that they have the resources, and we need to make sure that 
they have the tools to be able to wage these battles. 
Otherwise, we are just going to continue to see companies like 
Amazon squeeze consumers, no matter who is President or no 
matter whatever crisis of the day we are dealing with.
    So, I think it is important that we step up on our side 
too. Thank you.
    Senator Cassidy, back to you.
    Senator Cassidy. Thank you. It appears 5-minute limits are 
off, so I may go a little bit longer.
    Senator Warren. I apologize. Please go as long as you need 
to, Senator Cassidy.
    Senator Cassidy. I have a series of questions for you, Ms. 
Sacks. First, your testimony speaks of the need to have kind of 
a comprehensive arrangement between countries, or blocks, if 
you will, to take the EU as a block, in order to have some sort 
of agreement. I think I am summarizing, although I am sure you 
would find nuance there.
    Now the reason I say this is that I have been told that the 
general data protection regulation of the EU risks making the 
EU a digital colony to the U.S. or China. It is so restrictive 
that the big data sets that are required to enhance research on 
AI are almost impossible to construct. I do not know if that is 
true. You know far more than I do. But nonetheless, that is 
what I am told.
    So, there is something here. How do we allow those sort of 
data sets required for AI to be constructed, the big data 
sets--if you agree that that is the case--and then how do we 
have a governance that would exclude bad actors--and I think 
folks see China, with all their cyber-espionage, as being a bad 
actor--but nonetheless get the fruits of this big data?
    And you had mentioned specifically the Japanese with the 
``data free flow with trust'' paradigm. So I think I have given 
you kind of a lot of directions to go in your answer, and I 
will turn it back to you.
    Ms. Sacks. Thank you, Senator Cassidy.
    I think you put out a key point here, which is that U.S. 
security and prosperity relies on access to large international 
data sets. But as with other areas of the data broker 
legislation that you mentioned with Ms. Gray, this one will 
have nuance to it.
    So how do we allow global data flows, but with the right 
safeguards in place, both at home and internationally? And I 
think that a big, important step here is making sure that we 
get our own house in order first. The transatlantic data flow 
relationship will be key, and it is important that the U.S. put 
forward its own vision of data privacy first, but this should 
not be a copy-and-paste of GDPR. And the topic of this hearing 
focused on antitrust, I think gets at the challenge, which is 
that one of the most important critiques of GDPR is that it may 
only end up serving those companies that are wealthy enough to 
comply with a very heavy burden that comes along with it.
    So it reinforces the concentration of power in big tech, 
while there still may be limitations on meaningful privacy 
protections. I think that the Japanese ``free flow with trust'' 
model is a compelling way to think about how like-minded 
countries can come together to put in place certain standards 
that would allow data to flow with certain conditions in place. 
And perhaps there can be a certification regime drawing on some 
of the privacy protections already outlined in the OECD 
guidelines.
    So there are a number of directions, and this will require 
nuance as well, and I look forward to helping support efforts 
of the committee to do that.
    Senator Cassidy. Now, does that require an international 
treaty? I mean, you are not--I am assuming you may not be an 
international trade attorney, but can we just basically pass 
legislation which is in alignment with others without having a 
formal treaty? Or do you have a sense of how we would go about 
this OCED kind of a collaboration?
    Ms. Sacks. You know, I think this is one that I am going to 
need to get back to you on, on the specific nuts and bolts of 
the various tools that are in place. If it is all right, I will 
follow up with you and your staff after.
    Senator Cassidy. I appreciate that.
    Now, Ms. Sacks, tell me--we have learned that the Chinese 
Government, as an example, could purchase information on U.S. 
military personnel, and presumably location data as well. It 
would be kind of interesting to see where people are deployed, 
would it not, just to see the concentration of force, et 
cetera, what type of force, if you know from other information 
what branch of the military they are in?
    But do other countries have that same sort of lax attitude 
regarding allowing the legal purchase of information upon their 
security forces? So, for example, what about China?
    Ms. Sacks. The Chinese Government is actually moving 
rapidly ahead to lock down more kinds of data that are deemed 
vital to national security, even in the commercial sector. For 
example, they put in place a data security law this fall which 
seeks to put forward a data classification scheme where they 
will move across sectors to define what kind of data would be 
vital to national security. They did this first in the auto 
sector, for example, and data being vital to national security 
has new higher-bar security obligations as well as localization 
requirements around who that data can be shared with.
    Senator Cassidy. Now I think it was you who suggested that 
it could be counterproductive if you wall off your data, and 
that indeed the free flow of data--again, a nuance here--a free 
flow of data is essential to ascending economic power for a 
Nation as a whole, with the economic power, of course, being 
somewhat linked to national security.
    So in your mind, is what they are doing counterproductive? 
I mean, is that something we should also do, or is it 
counterproductive?
    Ms. Sacks. The Chinese Government is shooting itself in the 
foot by, I think, over-classifying the kind of data that it 
deems vital to national security. But in theory, what they are 
trying to do is say that certain kinds of data are vital to 
national security and need to be locked down and other kinds of 
data should flow and circulate in the economy.
    Now, how that is going to happen in practice is another 
story. But I think that there could be something we could learn 
here in terms of defining what is the most sensitive kind of 
data. And Mr. Sherman and Ms. Gray have mentioned location 
data, for example.
    President Biden put forward an executive order in June in 
which he called for creating a framework to assess what the 
security risks are of transactions involving Americans' 
sensitive data and what should be restricted. And in that 
executive order, he said not all data has the same level of 
sensitivity.
    So I think one thing we can do is have a more thoughtful 
process, following on that executive order, around what kind of 
data is vital to national security and should be subject to 
higher protections, and what kind of data is less sensitive and 
should be subject to more international flow and sharing.
    Senator Cassidy. Let me finish with this. Mr. Sherman, is 
there any sort of data that cannot be relinked? So, of course, 
we say we are going to have location data, and we are going to 
be using it for X, Y, and Z purpose; it will be anomymized, it 
will be delinked, because it is very important. Maybe you just 
want to use it to establish crowd flows within a city for city 
planning, et cetera. But is there any data that cannot be 
relinked if you have a robust enough data set by which to 
compare it to?
    Mr. Sherman. As Ms. Gray mentioned, there is a difference 
between data with someone's name or Social Security number 
attached, and data that does not have that attached. But at the 
end of the day, you can re-identify anything.
    As myself and others have now testified, there is so much 
data out there on Americans hoarded by different companies that 
it is all too easy to combine it to identify people by name.
    Senator Cassidy. Okay.
    Madam Chair, I am going to sign off now, because I have to 
transition to come in for votes. But I thank all the witnesses 
for your testimony, including Senator Warren's witnesses whom I 
might have not asked questions of, but I found their testimony 
very interesting. And, Madam Chair, I look forward to 
collaborating with you on such future events.
    Senator Warren. And thank you for being such a great 
partner on this. I really appreciate it, Senator Cassidy. And 
like you, I am delighted with the witnesses that you have 
invited today, to learn from them, and I hope we will have many 
follow-up questions for the record here. So, thank you for your 
partnership. This is just the opening round, and we will keep 
going on this.
    I have one more round of questions I would like to be able 
to ask right now. What I would like to do now is focus a little 
bit on market dominance and the impact on workers.
    For too long our antitrust policies have focused on prices 
and consumers, which are important, but the Amazon example 
shows that we have had weak enforcement of those policies, and 
that has let these big companies increase prices across the 
board.
    We have also talked about how consolidation creates other 
problems, particularly for American workers. You know, whenever 
these companies merge, the corporate executives like to talk 
about the new efficiencies. And what they usually mean by that 
is they are going to lay off workers and cut wages. So, as 
companies grow more dominant, they have more and more power to 
lay off workers and to cut wages with no real consequences for 
themselves, because they know that as industries become more 
consolidated, workers have fewer alternatives. This means that 
employees who are subject to increasingly harsh, dehumanized 
working conditions cannot just move to a better job if there is 
no other available employer. This is called monopsony power, 
and our antitrust laws need to better address this.
    So, Ms. Brown, if I can, I would like to ask you a couple 
of questions here. You work for Amazon Fresh. And lots of 
people order their groceries for delivery within a few hours 
and never think anything more about it. But there is a grueling 
process that happens behind the scenes to accomplish this feat.
    Can you explain how conditions at your warehouse have 
changed during the pandemic?
    Ms. Brown. Absolutely. So, I am going to paint a picture 
for you about what the process looks like. So as soon as you go 
on the website and you click the ``place your order'' button, 
it causes a chain reaction of people running around the 
warehouse to gather everything. So, it is a small team of those 
who will eventually be looking at the numbers and everything 
and passing it down to another slate of people who are then 
running around a warehouse that is bigger than a football 
field, to then gather those items.
    Then it goes to an even smaller team that is usually like 
about five people, to package those items out. And then it goes 
to an even smaller amount of people who are responsible for 
sorting everything, depending on where it is going, on the 
conveyor belt. And then it goes to my people--we work on the 
dock--and we are responsible for sorting thousands of those 
orders every day for 11 hours, making sure they get on the 
truck and making sure they get to the customers as fast as 
possible.
    So now, the human toll in all of this is, basically, we 
have very few to no breaks. We work until our bodies are 
basically past the emergency stop. We delay bathroom breaks. We 
miss lunch. You know, we cannot miss work. And during the 
pandemic, you have a lot of us that--you know, we are burned 
out. So a lot of us, myself included, we would literally take 
like 30 seconds to kind of cry it out for a little bit, and 
then get right back to it. Then when you go home, you do not 
even have the energy to take care of your family, if you have 
kids, or you have family members who are dependent on you. 
Things such as cleaning the house or cooking for yourself 
basically become nonexistent on days that you have to work.
    Senator Warren. So this sounds really grueling. And I know 
that during these challenging times, many people across a lot 
of different industries have considered quitting their jobs and 
finding better employment. However, Amazon is continuing to 
grow like no other company, especially while small retailers 
and small local businesses are closing.
    So let me ask, Ms. Brown, if conditions are this bad at the 
Amazon warehouse, what other employment options do you and your 
coworkers have to be able to support yourselves and your 
families?
    Ms. Brown. Well, Black and Brown people in my particular 
neighborhood, a lot of my coworkers do not really have very 
many options open to us out here in New Jersey. So most other 
jobs out here are warehouse jobs, or retail. And those do not 
pay enough. Amazon pays just a bit more than them. So we are 
stuck being taken advantage of in warehouses like this.
    And this is what they bank on. So they know we have no 
other choice. So they continue with the lack of regulation and 
everything to protect us.
    Senator Warren. So you're right: it is not an accident. You 
know it is the largest employer in your industry, equipped with 
massive power. Amazon can pressure other companies to follow 
suit with its poor labor standards, or they just put those 
companies out of business.
    Now, it was announced last week that the Amazon facility in 
Bessemer, AL, that workers there are entitled to hold a new 
union election. And if that election is successful, this would 
be Amazon's first union ever in the United States. But I want 
to ask about the other side of that: what it is like to 
negotiate with Amazon if you do not have a union on your side.
    Amazon claims--and for this one, I actually want to quote 
Amazon on it--they claim that ``direct connection between 
managers and associates is the most effective way to understand 
and respond to the wants and needs of Amazon employees.''
    Now it is certainly effective for Amazon's bottom line, 
but, Ms. Brown, can you tell us how effective this ``direct 
connection'' that Amazon talks about, negotiating with Amazon 
without a union, has been for you and for your fellow workers?
    Ms. Brown. So, okay, my colleagues and I have been fighting 
for change at Amazon for years. And instead of listening to us 
and working with us to find solutions, they tend to double-down 
and continue to exploit us. So that is why we continue to speak 
out to try to improve working conditions, and for executives to 
take us seriously.
    So going to Amazon, especially when, say you are going to 
be written up or something, is kind of like trying to defend 
yourself in court. It is usually not going to go too well.
    Senator Warren. Well, I am very concerned that the workers 
who are most at risk during this pandemic are more likely to be 
women, are more likely to be people of color--and of course it 
varies depending on the job.
    And so if I can--this is the last thing I want to ask you, 
Ms. Brown--as a Black woman, what have you observed about 
Amazon's treatment of racial minorities and women?
    Ms. Brown. So now Amazon, they will hire any and everyone. 
That is true. But, depending on what race you are, that is 
going to determine whether you can get promoted, and sometimes 
what you are going to be doing. Most of the workers are Black 
and Brown, and very few of us hold high positions in the 
company. And it shows in the promotion process. They will 
promote only enough Black and Brown people so that it looks 
okay, but mostly they hire White managers out of school who 
have never actually worked for Amazon versus hiring, you know, 
the majority of their workforce that is Black and Brown, 
promoting us upwards, in the process. They really do not--when 
they do promote you, the pay is definitely different from those 
who get hired from outside.
    So, if you are a Black or Brown worker, usually when you 
make manager, your internal promotions, you get a lower wage 
compared to one who is going to be coming from outside who is 
going to be getting a higher wage. And for women, you know, it 
is even more scarce to really see us in any kind of leadership 
role, with any of the same responsibility and respect. They 
would rather promote usually a White guy over someone who looks 
like me.
    Senator Warren. Well, I appreciate your testimony and your 
coming in to talk to us about this.
    You know, all of this suggests to me that if we really 
tackle the dominant power issue by fighting abusive employer 
practices, by limiting mergers that would harm workers, and by 
empowering workers to unionize, we could accomplish two 
important goals at the same time. We could strengthen the 
American labor force and the middle class, and we could advance 
racial and gender equity. Vigorous competition enforcement 
would be better for all Americans who work, and better for all 
Americans who purchase goods.
    So, thank you very much for your testimony, Ms. Brown. I 
really do appreciate it.
    And I now ask for unanimous consent that the statement 
received by the subcommittee from the International Brotherhood 
of Teamsters and the Strategic Organizing Center on the 
importance of strong antitrust policy for workers, including in 
the tech sector, be entered into the record.
    [The statement appears in the appendix on p 77.]
    Senator Warren. Without objection, so ordered.
    I think at this moment, the United States is at an 
inflection point. Wealth and income disparities are at levels 
that we have not seen in our lifetimes. The government's lax 
enforcement of antitrust laws during the past few decades is a 
huge part of this problem. Regulators and judges have allowed 
merger after merger, and the result is too little competition 
in the U.S. market.
    Dominant firms in technology are free pretty much to do as 
they please, including on data collection. They raise prices, 
they reduce wages, they threaten our privacy, all so that they 
can boost their profits to their shareholders and make their 
CEOs richer. I am encouraged that the Biden administration is 
committed to stronger enforcement actions across agencies, and 
committed to promoting competition. But Congress has to step up 
and do its part too.
    It is time for Congress to finally update our antitrust 
laws. We should ban all mergers involving huge corporations. 
The biggest companies need to compete on the merits. They need 
to offer better products, better prices, better service, not 
just buy up their rivals and then gouge consumers. And second, 
we have to give our antitrust agencies better tools to break up 
the anticompetitive deals that are most harmful to our economy, 
like Facebook's acquisition of Instagram. And finally, our 
competition policy must safeguard our workforce. Those deal 
synergies that reduce corporate costs often come out of the 
hides of American workers--real people with families to support 
who deserve to work with dignity and are paying a huge cost 
when mergers reduce competition.
    More than 100 years ago, our antitrust laws were not 
designed to promote efficiency or to increase consumer welfare. 
They were designed to protect people from being at the mercy of 
economic kings who could exploit workers and customers at their 
whims. Those laws were also designed to protect our democracy 
from the corrupt influence of giant corporations. Congress 
needs to do its part once again to make our economy more 
competitive.
    So I want to say again, thank you to all of our witnesses. 
I appreciate your being here today. Your testimony has been 
very valuable, and I appreciate your answers.
    For any Senators who wish to submit questions for the 
record, those are due 1 week from today. That is Tuesday, 
December 14th. For our witnesses, you will have 45 days to 
respond to any questions.
    I want to thank you all again.
    And with that, this hearing is adjourned.
    [Whereupon, at 11:33 a.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


                Prepared Statement of Courtenay Brown, 
            Amazon Associate and Leader, United for Respect
    Thank you for inviting me to share my experience with you today, 
Senator Warren and members of the committee. My name is Courtenay 
Brown, and I live in Newark, NJ. I'm currently working at an Amazon 
fulfillment center and have been for 3\1/2\ years.

    Before working at Amazon, I served my country as a service member 
in the U.S. Navy. In my time of service, I vowed to uphold the core 
values of the Navy, which included the commitment to care for the 
safety, professional, personal, and spiritual well-being of our people. 
It was my duty, and that of my fellow Navy men and women, to work 
together as a team to improve the quality of our work, our people, and 
ourselves.

    I took seriously the commitment I made to my country then, and I 
take it seriously now as a member leader with United for Respect.

    I'm here today, Senators, to raise the alarm about Amazon's 
business model, its threat to working people, and its threat to our 
economy. One out of every 153 American workers is an Amazon employee 
\1\ and this multi-billion-dollar corporation grew on the back of its 
workers by exploiting them. I'm looking to you to stand up to 
corporations like Amazon and protect us.
---------------------------------------------------------------------------
    \1\ https://www.businessinsider.com/amazon-employees-number-1-of-
153-us-workers-head-count-2021-7.

    The job I do is a much-needed service, especially since the COVID-
19 pandemic began. As a process guide, I sort 35,000-50,000 groceries 
for delivery to homes in New York City and New Jersey every day. I'm in 
and out of our cooler constantly, picking up and setting down items as 
heavy as a TV monitor with little to no rest. The work that I do is 
supposed to be done with a team of 30-40 people, but we are operating 
with 28 people or less. Because our work is so essential, we need more 
hands on deck, not less, so that we can take turns getting breaks and 
---------------------------------------------------------------------------
much-needed rest. But Amazon does not retain its workers.

    The work is physically and mentally exhausting, and on top of that, 
we are monitored every single second as we scan items. So pausing even 
to wipe the sweat off our forehead can lead to a write-up as managers 
monitor our locations and times we spend doing work. If we fall behind 
in any way during our 11-hour shift, we risk being disciplined. We are 
pushed to our limit to the point where we can't even take regular 
bathroom breaks. Often we literally have to run to and from the 
bathroom in under 2 minutes so we don't get in trouble. The constant 
pressure and surveillance is one reason why Amazon has twice the level 
of injuries and turnover compared to similar employers.\2\
---------------------------------------------------------------------------
    \2\ https://revealnews.org/article/behind-the-smiles/; https://
www.seattletimes.com/business/amazon/amazons-turnover-rate-amid-
pandemic-is-at-least-double-the-average-for-retail-and-warehousing-
industries/.

    Very few people survive Amazon for more than 6 months. I used to be 
a trainer at Amazon and I saw firsthand how, out of 50 new hires, for 
example, only 5 would make it to the 6-month mark, and many quit soon 
after due to injuries and over-exhaustion. Unfortunately, many are 
often so bruised and battered that they have to turn to disability or 
---------------------------------------------------------------------------
unemployment because they can't work anymore.

    We are living in a country where machines are getting better 
treatment than people. The machines at my facility undergo routine 
maintenance checks to ensure they don't burn out. Meanwhile, research 
has shown that workplace injury rates are higher at Amazon facilities 
with more robotic and automated technology.\3\
---------------------------------------------------------------------------
    \3\ https://humanimpact.org/wp-content/uploads/2021/01/The-Public-
Health-Crisis-Hidden-In-Amazon-Warehouses-HIP-WWRC-01-21.pdf.

    Yet the one time I needed time off to be with my family to recover 
from my mother's passing, I was told I wouldn't be able to get the 
allotted 3 days off for bereavement; I was only getting 2. As you can 
imagine, 2 days to plan for funeral arrangements and process my 
mother's death was not nearly enough, so I had to take a month off 
unpaid because that's the only option I had. A month of unpaid time 
off, while Jeff Bezos made $75 billion \4\ last year thanks to me and 
my coworkers.
---------------------------------------------------------------------------
    \4\ https://www.businessinsider.com/amazon-ceo-jeff-bezos-net-
worth-explodes-in-2020-chart-2020-12.

    Amazon's multi-billion-dollar wealth is made possible by offering 
1- and 2-day delivery, and the corporation has achieved this speed and 
scale through sheer brutality--watching, timing, and punishing 
associates like me and my coworkers for not working fast enough and not 
allowing associates to take time off to adequately recover, rest, and 
---------------------------------------------------------------------------
prevent burnout.

    Amazon's high-tech sweatshop caused me to develop plantar 
fasciitis--a debilitating pain in my heel--because I'm having to stand 
up for long periods of time at work with little to no rest. The burning 
sensation around my heels is so painful that I take what little time I 
have to run to the bathroom just to cry. One time the pain got so 
intolerable I broke down and went to the emergency room. I begged the 
doctors not to keep me longer than a few hours because I had to go back 
to work. I was more concerned that I'd get punished at work for calling 
out than prioritizing my own health. This kind of exploitation isn't 
just happening to me--I know a coworker of mine who wasn't provided the 
accommodations needed to pump her breast milk at work after giving 
birth to her child. This is the type of work environment Amazon is 
perpetuating across the country.

    Amazon associates have been fighting back against these dangerous 
conditions for years. Instead of fixing the problem, Amazon is only 
doubling down on its exploitative model. Jeff Bezos himself recently 
told shareholders that he plans to use more automated control of 
workers in the warehouses.\5\ As Amazon associates, we know what more 
automated control looks like--dehumanizing tactics designed to break 
our bodies.
---------------------------------------------------------------------------
    \5\ https://www.aboutamazon.com/news/company-news/2020-letter-to-
shareholders.

    Amazon has built an empire on our backs, and now other employers, 
like Walmart, are racing to copy it's inhumane, exploitative model that 
---------------------------------------------------------------------------
demands we work nonstop.

    The worst part of all is that Amazon is setting up its high-tech 
sweatshop in Black and Brown communities desperate for work. The 
pandemic has closed a lot of businesses in my area, so even someone 
like me who has considered looking for another job--I can't because 
there are no jobs available or the pay isn't enough to make rent and 
put food on the table.

    This committee is considering competition and economic growth in 
the tech sector. When corporations write the rules to maximize their 
profit, they ensure they win by all means necessary--including 
exploiting workers and gutting small businesses.

    Senators, I'm looking to you to stop corporations like Amazon from 
ruining our economy and dictating the workplace standards for hundreds 
of millions of workers like me. I'm asking you to help me put an end to 
inhumane, exploitative processes that leave America's workers injured, 
exhausted, and mentally battered each day.

    Our country needs elected leaders to side with working people--to 
side with essential workers--not big corporations.

    Thank you.

                               Appendix I

         Public Hearing on: Promoting Competition and Economic 
                    Growth in the Technology Sector

                   United for Respect, December 2021

    We cannot have a thriving economy or democracy when the most 
powerful tech corporations in the world profit, grow, and outcompete 
small businesses by finding innovative ways to exploit working people. 
When success is the result of low-road labor practices, workers, 
communities, and responsible businesses are undermined and left facing 
the consequences.

    Over the past decade, Amazon has grown from a company with 56,000 
workers to one with 1.47 million.\6\, \7\ Amazon is now the 
second largest employer in the United States, and relies on thousands 
more third-party contractors to complete its distribution network.\8\ 
Today, Amazon dominates multiple markets and industries: it's projected 
to capture 41.4 percent of U.S. retail e-commerce in 2021, 40.8 percent 
of the cloud computing market through Amazon Web Services, and 21 
percent of the streaming market with Prime Video.\9\, 
\10\, \11\ Recently, Amazon's CEO of World Consumer 
predicted that by early 2022, Amazon would surpass UPS and FedEx to 
become the U.S.'s largest package delivery service.\12\
---------------------------------------------------------------------------
    \6\ https://s2.q4cdn.com/299287126/files/doc_financials/annual/
269317_023_bmk.pdf.
    \7\ https://ir.aboutamazon.com/news-release/news-release-details/
2021/Amazon.com-Announces-Third-Quarter-Results/.
    \8\ https://www.nbcnews.com/business/business-news/amazon-now-
employs-almost-1-million-people-u-s-or-n1275539.
    \9\ https://www.cnbc.com/2021/06/18/as-e-commerce-sales-
proliferate-amazon-holds-on-to-top-online-retail-spot.html.
    \10\ https://www.wsj.com/articles/amazons-cloud-boss-is-girding-to-
defend-turf-in-the-field-company-pioneered-11636300800.
    \11\ https://www.tvtechnology.com/news/amazon-apple-hbo-max-grow-
us-streaming-shares-in-q3.
    \12\ https://www.cnbc.com/2021/11/29/amazon-on-track-to-be-largest-
us-delivery-service-by-2022-exec-says.html.

    Amazon has achieved this growth and dominance by creating a high-
turnover, high-pressure system that offloads the costs of injuries, 
employment precarity, and deskilling onto the public, workers, and 
their families. This is Amazon's great innovation. Monitored at every 
minute, Amazon warehouse workers and drivers report running to the 
bathroom or even peeing in bottles, suffering from mental stress and 
fatigue, workplace injuries, and being driven to unemployment. With 
turnover of 150 percent, or higher, Amazon itself worries that it will 
churn through the entire workforce in some regions.\13\
---------------------------------------------------------------------------
    \13\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html.

    Amazon's extensive worker surveillance and productivity metrics, 
commonly known as rate and time off task, have been repeatedly linked 
to the high injury rates at its warehouses.\14\, \15\ In 
2020, Amazon reported 27,178 workplace injuries, of which 90 percent 
were serious enough that workers were unable to perform their regular 
duties or were forced to miss work entirely.\16\ Studies have found 
that not only are serious injuries more frequent at Amazon warehouses--
nearly 80-percent higher than for all other employers in the warehouse 
industry--but that they are more severe as well, with injured Amazon 
workers taking, on average, a week longer than the recovery time for 
workers injured in the general warehouse industry.\17\, \18\ 
A study by Human Impact Partners also found that injury rates at Amazon 
warehouses were higher during the peak rush seasons associated with 
holidays, Cyber Monday, and Prime Day.\19\ Similarly, elevated injury 
rates were found at Amazon facilities with higher levels of robotic and 
automated technology.\20\
---------------------------------------------------------------------------
    \14\ https://humanimpact.org/wp-content/uploads/2021/01/The-Public-
Health-Crisis-Hidden-In-Amazon-Warehouses-HIP-WWRC-01-21.pdf.
    \15\ https://thesoc.org/wp-content/uploads/2021/02/
PrimedForPain.pdf.
    \16\ https://thesoc.org/wp-content/uploads/2021/02/
PrimedForPain.pdf.
    \17\ https://thesoc.org/wp-content/uploads/2021/02/
PrimedForPain.pdf.
    \18\ https://thesoc.org/wp-content/uploads/2021/02/
PrimedForPain.pdf.
    \19\ https://humanimpact.org/wp-content/uploads/2021/01/The-Public-
Health-Crisis-Hidden-In-Amazon-Warehouses-HIP-WWRC-01-21.pdf.
    \20\ https://humanimpact.org/wp-content/uploads/2021/01/The-Public-
Health-Crisis-Hidden-In-Amazon-Warehouses-HIP-WWRC-01-21.pdf.

    Amazon has also come to dominate the logistics industry by 
undercutting wages.\21\ A study by Bloomberg found that when Amazon 
opens new facilities, the average warehouse industry wages fall in that 
county, reaching their pre-Amazon level only after 5 years.\22\ The 
same study found Amazon's employee promotion rate to be far below that 
of the industry average, reflecting the high turnover rate and lack of 
advancement opportunities facing most associates.\23\
---------------------------------------------------------------------------
    \21\ https://www.bloomberg.com/news/features/2020-12-17/amazon-
amzn-job-pay-rate-leaves-some-warehouse-employees-
homeless?sref=AuDcg4ag.
    \22\ https://www.bloomberg.com/news/features/2020-12-17/amazon-
amzn-job-pay-rate-leaves-some-warehouse-employees-
homeless?sref=AuDcg4ag.
    \23\ https://www.bloomberg.com/news/features/2020-12-17/amazon-
amzn-job-pay-rate-leaves-some-warehouse-employees- 
homeless?sref=AuDcg4ag.

    Black workers disproportionately bear the brunt of Amazon's model. 
At one of Amazon's largest warehouses in New York, Black workers were 
50-percent more likely to be fired than their White peers.\24\ And 
during the pandemic, Amazon fired several Black workers who spoke out 
about unsafe conditions.\25\ This mirrors findings that Black people 
are more likely to have dangerous jobs, less likely to have their 
concerns heard, and more likely to be retaliated against.\26\ Further, 
Amazon actively discourages the promotion of hourly workers in 
warehouses, the majority of whom are Black and Brown.\27\
---------------------------------------------------------------------------
    \24\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html?referring
Source=articleShare.
    \25\ https://sahanjournal.com/business-economy/amazon-shakopee-
minnesota-protest/.
    \26\ https://www.nelp.org/publication/silenced-COVID-19-workplace/.
    \27\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html.

    Meanwhile, other employers are forced, lest they be undercut, to 
compete using the same methods that economist Daron Acemoglu calls 
``so-so'' tech innovation.\28\ This so-so or low-road innovation 
contributes little to economic growth, while destabilizing the lives of 
working people and lowering wages. This race to the bottom wastes our 
enormous shared technological potential, while exacerbating economic 
inequality.
---------------------------------------------------------------------------
    \28\ https://fairgrowth.house.gov/sites/
democrats.fairgrowth.house.gov/files/documents/
Acemoglu%20Testimony.pdf.

    This is not a natural outcome of progress in the tech sector, but a 
reflection of economic policy decisions that we have the power to 
change. Our current policies incentivize the wrong kind of innovation 
---------------------------------------------------------------------------
and growth, and we must turn that around.

    States are already beginning to take action in this direction. 
Recently, California passed a State bill regulating warehouse 
performance metrics such as those utilized by Amazon.\29\ In 2020, 
Washington State, citing the high workplace injury rates at Amazon 
warehouses, raised the company's Worker Compensation premium rates by 
15 percent and proposed placing fulfillment centers in a risk class of 
their own.\30\ Worker surveillance practices like those Amazon uses to 
monitor associates and drivers, have also led to introduced legislation 
in Massachusetts and Illinois.\31\, \32\ Meanwhile, as 
Reuters reported last month, Amazon has used its massive lobbying and 
policy team to kill or undermine over 36 State bills that would impact 
the company.\33\
---------------------------------------------------------------------------
    \29\ https://www.latimes.com/business/story/2021-09-08/california-
bill-ab701-passes-senate-warehouse-work-metrics-algorithims-regulation.
    \30\ https://www.seattletimes.com/business/because-of-injury-
claims-state-wants-amazons-automated-warehouses-to-pay-higher-workers-
comp-premiums-than-meatpacking-or-logging-operations/.
    \31\ https://www.bostonglobe.com/2021/10/07/opinion/massachusetts-
has-chance-clean-up-our-national-privacy-disaster/.
    \32\ https://inthesetimes.com/article/at-will-just-cause-
employment-union-labor-illinois.
    \33\ https://www.reuters.com/investigates/special-report/amazon-
privacy-lobbying/.

    As this committee studies actions to ensure we have a healthy tech 
sector, it should consider a new generation of economic policies and 
labor rights that prevent tech corporations like Amazon from leveraging 
worker exploitation into growth, and outcompeting rivals by taking the 
low road. Establishing robust worker protections and rebalancing power 
between workers and employers would not only benefit hundreds of 
thousands of Amazon workers, but could reorient the economy and tech 
innovation toward more equitable and sustainable outcomes that lead to 
productive growth. In order to do this, we must establish policies that 
prioritize worker health and safety, protect against predatory 
surveillance and automated management practices, fortify the rights of 
workers to speak out and organize, guard against low-road business 
models, and incentivize innovation that enhances worker well-being and 
shared economic prosperity.

                              Appendix II

                     Worker Letter to Shareholders

        United for Respect and Warehouse Worker Resource Center

                           November 29, 2021

    Dear Amazon Shareholder,

    We are Amazon associates and leaders with United for Respect (UFR) 
and the Warehouse Worker Resource Center (WWRC). We are part of a 
multiracial movement of working people advancing a vision of an economy 
where our work is respected and our humanity recognized. We write to 
you today to share an important letter from Human Impact Partners and 
over 200 public health practitioners calling on Amazon CEO, Andy Jassy, 
to end the inhumane and unsafe workplace quotas and surveillance that 
are currently ubiquitous throughout Amazon's logistics network.

    Based on the findings of a study by Human Impact Partners and the 
WWRC, this letter outlines the dangerous reality we experience going to 
work every day. The high productivity quotas at Amazon facilities, 
commonly known as rate and time off task, have led to injury rates 
twice that of the general warehouse industry, and three times that of 
the average private employer. During peak rush times, and in Amazon's 
most automated facilities, workplace injury rates are even higher.

    As the very people at risk from Amazon's unsafe warehouse 
practices, we urge you to read the letter and consider the included 
recommendations. Common-sense improvements such as doing away with rate 
and time off task, adopting ergonomic standards, and strengthening 
COVID-19 precautions would not only make Amazon facilities safer 
workplaces, but might lessen the worker shortage and high turnover rate 
seen presently at Amazon warehouses. As an Amazon shareholder, you can 
help mitigate any short-sighted mismanagement of human capital at the 
company and support any shareholder proposals that seek to review 
workplace health and safety issues.

    In our capacity as Amazon, UFR, and WWRC worker-leaders, we would 
also welcome the chance to speak directly with you, answer any 
questions, and share our vision of a better and safer Amazon.

    Sincerely,

    United for Respect Member Leaders and the Membership of WWRC

                              Appendix III

                            Joint Statement

          Stop Amazon's Injury Crisis: End Amazon's Dangerous 
                    and Punitive Worker Surveillance

                             June 21, 2021

    Amazon injures and discards \34\ warehouse workers and delivery 
drivers at double the industry average. There were a record \35\ 24,000 
serious injuries at Amazon facilities last year. It is time for 
lawmakers and regulators to step in and end the punitive system of 
constant surveillance that drives the dangerous pace of work at Amazon.
---------------------------------------------------------------------------
    \34\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html?referring
Source=articleShare.
    \35\ https://thesoc.org/amazon-primed-for-pain/.

    Amazon's business model is a calculated exploitation of workers, 
the majority \36\ of whom are Black and Brown. Amazon's punishing \37\ 
system monitors workers' speed or rate, tracks their movements each 
second with a metric called time off task, and imposes a constant 
threat of termination. Amazon claims to simply monitor workflow--but in 
reality, rate and time off task are used to control \38\ physical 
movements and discipline workers, dictate when or if they can use the 
bathroom, and have been used to retaliate \39\ against worker 
organizing. A recent investigation in Washington State concluded \40\ 
that this high-pressure system violates the law.
---------------------------------------------------------------------------
    \36\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html?referring
Source=articleShare.
    \37\ https://logicmag.io/bodies/surviving-amazon/.
    \38\ https://www.theverge.com/2019/4/25/18516004/amazon-warehouse-
fulfillment-centers-productivity-firing-terminations.
    \39\ https://www.nbcnews.com/business/business-news/fired-
interrogated-disciplined-amazon-warehouse-organizers-allege-year-
retaliation-n1262367.
    \40\ https://www.seattletimes.com/business/amazon/amazons-
relentless-pace-is-violating-the-law-and-injuring-warehouse-workers-
washington-state-regulator-says/.

    Discarding workers after they are injured or too exhausted, Amazon 
churned \41\ through over half a million workers in 2019. Amazon's 
model breaks people's bodies, taking their health and sometimes 
livelihoods. The cumulative costs of this exploitative business model 
are offloaded \42\ onto workers, their families, and the public.
---------------------------------------------------------------------------
    \41\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html.
    \42\ https://www.nelp.org/publication/amazons-disposable-workers-
high-injury-turnover-rates-fulfillment-centers-california/.

    Black workers disproportionately bear the brunt of Amazon's model. 
At one of Amazon's largest warehouses in New York, Black workers were 
50 percent \43\ more likely to be fired than their White peers. And 
during the pandemic, Amazon fired \44\ several Black workers who spoke 
out about unsafe conditions. This mirrors findings \45\ that Black 
people are more likely to have dangerous jobs, less likely to have 
their concerns heard, and more likely to be retaliated against. 
Further, Amazon actively \46\ discourages the promotion of hourly 
workers in warehouses, the majority of whom are Black and Brown.
---------------------------------------------------------------------------
    \43\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html?referring
Source=articleShare.
    \44\ https://sahanjournal.com/business-work/amazon-shakopee-
minnesota-protest/.
    \45\ https://www.nelp.org/publication/silenced-COVID-19-workplace/.
    \46\ https://www.nytimes.com/interactive/2021/06/15/us/amazon-
workers.html.

    Warehouse workers and delivery drivers cannot wait for Amazon to 
fix its broken system. To ensure Amazon's model does not become the 
standard for our entire economy, regulators and lawmakers must 
---------------------------------------------------------------------------
intervene:

        -  End rate and time off task tracking: State and Federal 
        electeds should enact laws that ban this surveillance-driven 
        discipline and control to ensure that workers are protected 
        from abusive conditions.

        -  Update OSHA standards and enforcement to end rate and time 
        off task: As evidence mounts that Amazon's model creates an 
        unsafe workplace, State and Federal OSHA programs should 
        enforce existing standards and create new rules that address 
        practices like rate and time off task that monitor workers and 
        increase the pace of work.

        -  Investigate Amazon's abuses: Agencies tasked with 
        safeguarding workers should investigate Amazon for these 
        widespread and longstanding abuses, including: injuries, 
        retaliation, and discrimination.

    For years, workers have spoken out and protested \47\ against these 
conditions. Most recently, in Bessemer, AL, Black warehouse workers 
\48\ led a unionization effort, citing \49\ the punishing conditions 
created by Amazon's system of surveillance, control, and threat of 
termination.
---------------------------------------------------------------------------
    \47\ https://www.theverge.com/2019/10/3/20897119/amazon-workers-
walk-out-protest-part-time-work-minnesota.
    \48\ https://www.vox.com/the-highlight/22320009/amazon-bessemer-
union-rwdsu-alabama.
    \49\ https://www.vox.com/the-highlight/22320009/amazon-bessemer-
union-rwdsu-alabama.

    Last year, civil society organizations stood with workers and 
called \50\ upon Congress to ban this type of punitive worker 
surveillance, citing the dangerous impacts on workers' physical and 
mental health, potential to undermine workers' right to organize, and 
long-term deskilling and wage decline of these jobs.
---------------------------------------------------------------------------
    \50\ https://athenaforall.medium.com/end-worker-surveillance-
d99aa7cd3850.

    Finally forced to admit to ongoing injury problems, Amazon is 
nevertheless doubling down on its extractive model. In his final letter 
\51\ to shareholders, Jeff Bezos stated that Amazon would begin to use 
artificial intelligence to direct workers from one task to the next. 
But using technology to maintain absolute control over workers' tasks 
and workflow will only escalate Amazon's injury crisis. Decades of 
research show that when workers do not have autonomy and control at 
work, they are more likely to be injured and experience mental strain 
\52\ and depression.\53\ Later, Amazon announced wellness programs and 
funding for injury research, but it refuses \54\ to do the one thing 
that would stop widespread injuries: eliminate rate and time off task.
---------------------------------------------------------------------------
    \51\ https://www.vice.com/en/article/z3xeba/amazons-new-algorithm-
will-set-workers-schedules-according-to-muscle-use.
    \52\ https://www.jstor.org/stable/
2392498#metadata_info_tab_contents.
    \53\ https://www.researchgate.net/publication/
324557829_Job_Strain_Long_Work_Hours_and
_Suicidal_Ideation_in_US_Workers_A_Longitudinal_Study.
    \54\ https://www.seattletimes.com/business/amazon/amazon-to-
maintain-pace-of-warehouse-work-despite-regulators-citation/.

    Amazon will soon \55\ be the largest private employer in the United 
States, and if lawmakers and regulators fail to take action, its 
dangerous and extractive model will become the standard in warehousing, 
logistics, and retail. As other retailers implement similarly 
exploitative strategies,\56\ this dangerous trend will further degrade 
working conditions for tens of millions of people across the country. 
The result will be a punishing, untenable reality for all working 
people, and Black and Brown people will pay \57\ the highest cost.
---------------------------------------------------------------------------
    \55\ https://www.cnbc.com/2021/06/11/amazon-to-overtake-walmart-as-
largest-us-retailer-in-2022-jpmorgan.html.
    \56\ https://www.techtimes.com/articles/261243/20210609/walmart-
free-phones-employees-used-surveillance-workers-expert.htm.
    \57\ https://www.epi.org/blog/workers-of-color-are-far-more-likely-
to-be-paid-poverty-level-wages-than-white-workers/.

    We call on lawmakers and regulators do everything in their power to 
end rate and time off task, ensuring Amazon cannot use this punitive 
system of surveillance to cycle through entire workforces in 
---------------------------------------------------------------------------
communities throughout the country.

    In Solidarity,

Athena Coalition                    Government Accountability Project
Action Center on Race and the 
Economy                             Green America
(ACRE)                              Institute for Local Self-Reliance
Awood Center                        Jobs With Justice
AI Now                              LAANE
Civil Liberties Defense Center      Make the Road New York
Color of Change                     Make the Road NJ
Constitutional Alliance             MediaJustice
Demos                               Movement Alliance Project
Fight for the Future                MPower Change
Free Press                          National Employment Law Project
New York Communities For Change     Stand Up Nashville
OLE                                 Surveillance Technology Oversight 
                                    Project (STOP)
Open Markets Institute              SumOfUs
Partnership for Working Families    Transit Riders Union
Presente.org                        United for Respect
Public Citizen                      Warehouse Worker Resource Center
Restore the Fourth Minnesota        Warehouse Workers for Justice
Secure Justice                        

                              Appendix IV

                            Joint Statement

           Put Workers over Profits: End Worker Surveillance

                            October 14, 2020

    Farhiyo Warsame, a warehouse worker, was targeted, surveilled, and 
fired by Amazon after speaking up about unsafe conditions at work, 
according to the Awood Center. Amazon tracked Farhiyo's time in between 
each small task and used the accumulated extra seconds to justify 
threats for her eventual termination. Through this ``rate'' and ``time 
off task'' tracking system, Amazon would have you believe it monitors 
work productivity--but in reality, this system is used to control the 
physical movements of workers, dictate when or if they can use the 
bathroom, discipline workers and, in the end, has been used repeatedly 
to retaliate against workers. It enforces an unreasonable pace of work 
that leads to the unusually high number of injuries at Amazon.

    Today, workers are subjected to an unprecedented level of workplace 
surveillance and control. From voice monitoring to tracking 
applications, these systems are being introduced into workplaces that 
are already stacked against low-wage workers, creating an environment 
ripe for exploitation. Surveillance gives corporations more power over 
workers. When combined with automation that dictates the pace and type 
of work, it results in a more dangerous, punishing, and precarious 
workplace. It can also lead to lower wages, deskilling of jobs, mental 
health stresses, the potential for racial discrimination, and a 
chilling effect on organizing. Workers urgently need legal protections 
that prevent these harms and end exploitative practices, including 
Amazon's rate and time off task monitoring.

    The use of surveillance to exploit workers has a long history in 
the United States, going back to the plantation and then in 
manufacturing, where Taylorism and other systems of ``scientific 
management'' established control over workers' every move. The trend 
has worsened dramatically in recent years, and laws and regulatory 
agencies have failed to catch up.

    Meanwhile, with few protections for workers, corporate employers 
have been able to grow profits by demanding and enforcing dangerous 
speeds, controlling each physical movement of a worker, and maximizing 
opportunities to make workers replaceable and expendable.

    New technologies that monitor and control workers represent a 
radical transfer of power from workers to corporations. At Amazon 
warehouses, workers report that a scanner tells you exactly where to 
go, gives you seconds to get there, and then orders you what to do 
next. Your entire workload and every task you complete is managed in 
seconds. If you take longer than the seconds you are given, the time is 
added to your time off task. If you go to the bathroom or take a rest, 
this is also added to time off task. At the end of the day, if your 
productivity falls below a moving threshold, you are disciplined, and 
eventually fired.

    Amazon's contract delivery drivers face similar monitoring, with 
dispatchers pressuring drivers to deliver increasing volumes of 
packages in a single shift--even if that means drivers must speed or 
skip bathroom breaks to meet delivery quotas. At Amazon, this is paired 
with intelligence systems and practices to monitor potential organizing 
activity outside of work.

    This level of monitoring and control has no place in our economy. 
Corporate employers say that these technologies make workplaces more 
efficient and are necessary to be competitive, but those claims do not 
hold up to scrutiny. Instead, we find:

    Individual productivity monitoring is used to enforce a dangerous 
pace of work. Within Amazon warehouses, the pervasive and punitive 
nature of tracking rate and time off task for each worker results in 
nearly double the injury rate and greater job precarity, as compared to 
the sector. While Amazon claimed that they stopped disciplining workers 
for productivity during the pandemic, the practice continued. This type 
of monitoring is designed for workers to fail.

    Worker surveillance disproportionately harms Black and brown 
workers. Black and Brown workers are more likely to be in low-wage 
jobs, less likely to be listened to when they raise concerns, and more 
likely to face retaliation. Additionally, algorithmic decision-making 
can dramatically reinforce and exacerbate racial disparities, 
particularly where people impacted have no recourse or power. For many 
of these workers, the level of monitoring is akin to discriminatory 
police surveillance in their communities.

    Surveillance is being used punitively, rather than to keep workers 
safe. Corporations are adopting new workplace technologies for the sole 
purpose of disciplining individual workers, even in areas where 
technology could be used to improve working conditions. When Amazon 
developed new technologies to determine if workers were within six feet 
of one another, they then immediately used this information to 
discipline and then fire workers.

    Surveillance is being used to retaliate against workers and 
undermine their protected rights to speak out and take collective 
action. With limitless surveillance at an employer's fingertips, 
targeting a particular worker is trivial--illegal retaliation is easily 
obscured. Amazon has used monitoring of time off task and social 
distancing to retaliate against workers after they spoke up about 
safety concerns. Surveillance of workers is not limited to the 
workplace, and it was recently reported that Amazon monitored private 
social media groups of Amazon Flex drivers, and tried to recruit an 
intelligence analyst to investigate labor organizing activities.

    Pervasive surveillance and automated control increase corporate 
profits on the backs of workers, by reducing wages and deskilling jobs. 
While some technologies, such as supermarket scanners, allow companies 
to raise profits by using workers more efficiently, surveillance 
technologies raise profits by the cruder mechanism of increasing the 
exploitation of workers. The supermarket scanner allows each worker to 
serve more customers with the same level of effort, but surveillance 
technologies can dangerously accelerate the pace of work. The costs of 
injury and burnout are then offloaded onto families and the workers 
compensation system, rather than being internalized by the company.

    During the pandemic, corporate employers have expanded workplace 
surveillance in ways that can compromise worker privacy and autonomy, 
and are using those tools for worker discipline and control. Employers 
have a legal duty to provide a safe working place (e.g., by slowing 
work speeds and providing handwashing breaks). Instead, Amazon 
developed a punitive social distance surveillance system that it gave 
to other corporate employers.

    In response, State and Federal Governments should enact protections 
against workplace surveillance--ending predatory practices, such as 
Amazon's rate and time off task monitoring. These protections should 
prioritize worker health and safety, fortify the rights of workers to 
speak out and organize, guard against low-road business models, require 
transparency in the use of new technologies, protect against new forms 
of tech-driven racial discrimination, and incentivize innovation that 
enhances worker well-being. Workers deserve better than models of 
exploitation developed on plantations and in factories over 100 years 
ago.

    In Solidarity,

Athena                              Media Mobilizing Project
Action Center on Race and the 
Economy                             MediaJustice
The Awood Center                    MPower Change
Center on Privacy and Technology at 
Georgetown Law                      National Employment Law Project
Civil Liberties Defense Center      New America's Open Technology 
                                    Institute
Color of Change                     New York Communities For Change
Constitutional Alliance             Open Markets Institute
Council on American-Islamic 
Relations (CAIR)                    Our Data Bodies
Coworker.org                        Partnership for Working Families
Demand Progress                     Public Citizen
Demos                               Restore The Fourth Minnesota
Fight for the Future                RootsAction.org
Free Press                          Secure Justice
Government Accountability Project   SEIU California
Greater New York Labor-Religion 
Coalition                           Stand Up Nashville
Instituto de Educacion Popular del 
Sur de California                   SumOfUs
Jobs With Justice                   Surveillance Technology Oversight 
                                    Project (S.T.O.P.)
Just Futures Law                    United for Respect
LAANE                               Warehouse Worker Resource Center
Make the Road New York              Working Partnerships USA
                                    X-Lab

                               Appendix V

                            Joint Statement

  Silencing of Whistleblowers in the Workplace Is a Threat to Public 
                                 Health

    Given the immediate public health risks, we are calling for an 
urgent expansion and improved enforcement of legal protections for 
workers who speak out and take collective action against dangerous 
workplace conditions that risk exacerbating the spread of COVID-19 in 
communities. Workers themselves are in the best position to raise 
health and safety concerns, and if these concerns are ignored, or 
worse, if workers are retaliated against, it not only impacts those 
workers and their families, but risks accelerating the current public 
health crisis.

    Over the last few weeks, Amazon fired at least six workers who had 
spoken out about unsafe working conditions in warehouses. In addition 
to these firings, other workers at Amazon have reported receiving 
arbitrary work-related warnings as a result of speaking out or 
participating in walkouts, and they fear that they are being set up for 
termination. Given that Amazon is the second largest private employer 
in the United States and is significantly expanding its workforce 
during the crisis, this apparent pattern of retaliation is alarming.

    Thousands of warehouse, delivery, and grocery workers are on the 
front lines of this fight, risking contracting and spreading COVID-19 
every day in order to provide essential goods. This risk 
disproportionately falls on communities of color, who are more likely 
to hold these jobs and more vulnerable to the virus, as a result of the 
systemic racism that undermines health in these communities. These 
essential workers are calling for common-sense measures in line with 
CDC guidance: implementation of 6 feet of distance between all 
individuals in the facility, personal protective equipment for all, 
time for handwashing, temporarily closing and cleaning exposed 
facilities to allow for quarantine, independent and transparent 
reporting, and paid leave policies to help exposed and sick workers to 
stay home.

    Instead of adopting policies to protect workers, corporations are 
increasingly adopting invasive surveillance technologies to penalize 
and monitor lower-wage workers. This already predatory surveillance 
could too easily be turned against protected concerted activity and 
workers voicing concerns. We know that the mere presence of pervasive 
surveillance is likely to silence dissent, but not to protect health.

    People who take action and speak out are not only exercising their 
legally protected right to protest and organize collectively for safe 
working conditions, but also acting in the national interest and 
protecting public health. Large facilities like warehouses, factories, 
and meatpacking plants employ thousands of people and grocery stores 
are major points of social interaction--if necessary precautions are 
not taken, COVID-19 could easily spread throughout communities. The 
right to demand better health and safety measures needs to be protected 
in order to limit the spread of COVID-19.

    The current crisis has elevated workplace whistleblowing and 
collective action to a matter of national health and additional 
protection and enforcement measures are urgently necessary.

    In solidarity,

Athena Coalition                    New America Center on Education and 
                                    Labor
Access Now                          New America's Open Technology 
                                    Institute
Action Center on Race and the 
Economy                             New York Communities for Change
AI Now Institute                    Ohio Valley Environmental Coalition
Alternate ROOTS                     Open Markets Institute
Black Alliance for Just Immigration Open MIC (Open Media and 
                                    Information
Center on Privacy and Technology at 
Georgetown Law                      Companies Initiative)
Color of Change                     Partnership for Working Families
Community Justice Exchange          People Demanding Action
Constitutional Alliance             People for the American Way
Council on American-Islamic 
Relations (CAIR)                    PeoplesHub
Defending Rights and Dissent        Project Censored
Demand Progress Education Fund      Project on Government Oversight
Ella Baker Center                   Public Citizen
Fight for the Future                RootsAction.org
Freedom of the Press Foundation     RYSE Center
Global Action Project               Secure Justice
Government Accountability Project   Surveillance Technology Oversight 
                                    Project (STOP)
Instituto de Educacion Popular del 
Sur de California                   The Awood Center
Just Futures Law                    The Civil Liberties Defense Center
Line Break Media                    The Tully Center for Free Speech
Make the Road New Jersey            United for Respect
Make the Road New York              United We Dream
Media Mobilizing Project            Warehouse Worker Resource Center
MediaJustice                        Whistleblower and Source Protection 
                                    Program at ExposeFacts
MPower Change                       Law Project (NELP)
                                    Woodhull Freedom Foundation
Muslim Advocates                    XLab
National Employment                 National Immigration Law Center

                                 ______
                                 
               Prepared Statement of Hon. Bill Cassidy, 
                     a U.S. Senator From Louisiana
    Good morning, and thank you all for being here for today's hearing. 
Thank you to our witnesses for taking time to testify today.

    Senator Warren and I have agreed to a bipartisan hearing on 
promoting competition, growth, and privacy protection in the technology 
sector. I will be focusing my time on the data broker industry.

    The data broker industry is relatively unknown to the common 
American, but its practices and techniques are interwoven into many 
aspects of their lives. Data brokers build profiles on individuals 
about certain attributes and then sell that information to whom they 
see fit. For example, as a big fan of LSU football, I frequently search 
topics related to LSU football; that search data is collected. A 
profile is made to say I am a fan of LSU football, and I will then 
receive ads about buying LSU football tickets, merchandise, and more. 
We have all experienced something similar to this, and we experience it 
almost everyday.

    Multiple times a year a company will be the victim of a hack that 
exposes the data of thousands of customers. While we go to great 
lengths to minimize these cyber incursions, we ignore an entire 
industry that transacts in much more detailed and sensitive personal 
information. As you will hear from some of our witnesses, there is very 
little information data brokers can't sell and even less data that they 
aren't willing to sell. I believe that few people in this room would 
think it is a good idea to sell the profiles of millions of American 
service members, but that's just what they are doing.

    We should have a conversation about what American data we think is 
okay to be bought and sold without the knowledge of many Americans, and 
what type of data we think is acceptable to be bought and sold period. 
Should we allow a list of military personnel to be sold to foreign 
adversaries? Should we allow lists of domestic abuse survivors to be 
sold to domestic abusers?

    We should have a conversation about what data is appropriate to 
collect, what limits should be placed on the groups that data is 
collected on, and restrictions on how that data is sold or transferred 
to other parties.

    We should have a conversation about all of the things our foreign 
adversaries can do with this data.

    That's why we have assembled a team of data broker experts to talk 
about the different aspects of data brokers: what's regulated, what's 
not, and how to best move forward.

    Thanks again to our witnesses. I'm looking forward to discussing 
these issues.

                                 ______
                                 
          Prepared Statement of Stacey Gray, Senior Counsel, 
                        Future of Privacy Forum
    Chair Warren, Ranking Member Cassidy, and members of the 
subcommittee, thank you for the opportunity to testify today on the 
important issue of consumer privacy in the technology sector. 
Specifically, I've been asked to discuss the subject of data brokers 
and consumer privacy, an important and highly relevant topic as 
Congress continues to work towards enacting a Federal comprehensive 
data privacy law.

    As a senior counsel at the Future of Privacy Forum,\1\ I work on 
public policy related to the intersection of emerging technologies, 
business practices, and U.S. consumer privacy regulation. The Future of 
Privacy Forum is a 501(c)(3) non-profit organization, based in 
Washington, DC, specializing in consumer privacy and dedicated to 
helping policymakers, privacy professionals, academics, and advocates 
around the world find consensus around responsible business practices 
for emerging technology.
---------------------------------------------------------------------------
    \1\ https://www.fpf.org. The views expressed in this testimony are 
my own, and do not represent the views of FPF's supporters or Advisory 
Board. See Future of Privacy Forum, Advisory Board, https://fpf.org/
about/advisory-board/; Supporters, https://fpf.org/about/supporters/.

    Let me begin by observing that attention to this topic is not new. 
Privacy advocates, the Federal Trade Commission, and members of the 
Finance Committee and other Senate Committees \2\ have long called for 
greater transparency, accountability, and regulation of the data broker 
industry. This includes reports from the Government Accountability 
Office (GAO) in 2013,\3\ the Federal Trade Commission (FTC) in 2014,\4\ 
and the research and advocacy of academic scholars and leaders, 
including Pam Dixon of the World Privacy Forum,\5\ and my fellow 
witnesses here today.
---------------------------------------------------------------------------
    \2\ Majority Staff Report for Chairman Rockerfeller, ``A Review of 
the Data Broker Industry: Collection, Use, and Sale of Consumer Data 
for Marketing Purposes,'' Committee on Commerce, Science, and 
Transportation, Office of Oversight and Investigations (December 18, 
2013), available at http://educationnewyork.com/files/
rockefeller_databroker.pdf.
    \3\ Government Accountability Office, ``Information Resellers: 
Consumer Privacy Framework Needs to Reflect Changes in Technology and 
the Marketplace,'' GAO-13-663 (September 2013), https://www.gao.gov/
assets/gao-13-663.pdf.
    \4\ Federal Trade Commission, ``Data Brokers: A Call for 
Transparency and Accountability'' (May, 2014), https://www.ftc.gov/
system/files/documents/reports/data-brokers-call-transparency-
accountability-report-federal-trade-commission-may-2014/
140527databrokerreport.pdf.
    \5\ World Privacy Forum, https://www.worldprivacyforum.org/.

    Since many of these reports were published almost a decade ago, 
much has changed. There have been significant advances in machine 
learning, the ability of systems to learn, adapt, and generate 
inferences from large datasets, with varying accuracy. Adoption of 
consumer technology has also become nearly universal, with 97 percent 
of U.S. adults now owning a smartphone,\6\ and most adults owning 
several additional devices--a fact which has led to fragmentation in 
marketing industries, and incentives for many businesses to collect 
even more data to attribute and measure behavior across devices.\7\
---------------------------------------------------------------------------
    \6\ Pew Research Center, ``Mobile Fact Sheet'' (April 7, 2021), 
https://www.pewresearch.org/internet/fact-sheet/mobile.
    \7\ Jules Polonetsky and Stacey Gray, Future of Privacy Forum, 
Cross-Device: Understanding the State of State Management (2015), 
https://fpf.org/wp-content/uploads/2015/11/FPF_FTC
_CrossDevice_F_20pg-3.pdf.

    The legislative landscape is also evolving. Since 2018, California 
and two other States have passed non-sectoral consumer privacy 
legislation,\8\ and three States have established limited data broker-
specific regulation--California,\9\ Nevada,\10\ and Vermont.\11\ Some 
State efforts have focused on transparency, through the establishment 
of Data Broker Registries, while others, such as the California Privacy 
Rights Act, codify consumer rights to opt out of the sale of data and 
limit the use of sensitive information. Much more work remains to be 
done.
---------------------------------------------------------------------------
    \8\ See California Consumer Privacy Act, Cal. Civ. Code 
Sec. 1798.100 (2018); California Privacy Rights Act, Cal. Civ. Code 
Sec. 1798.100 (2020); Virginia Consumer Data Protection Act, Va. Code 
Ann. Sec. 59.1-571 (2021); Colorado Privacy Act, Colo. Rev. Stat. 
Sec. 6-1-1301 (2021).
    \9\ Data Broker Registration, Cal. Civ. Code Sec. Sec. 1798.99.80-
88 (2020).
    \10\ In 2021, Nevada updated its existing law governing operators 
of online services, providing consumer rights specific to qualifying 
data brokers. See Heather Sussman and David Curtis, Orrick, ``Nevada 
Expands Online Privacy Law; Goes for Brokers'' (July 1, 2021), https://
www.orrick.com/en/insights/2021/07/Nevada-Expands-Online-Privacy-Law-
Goes-for-Brokers.
    \11\ Vermont Data Broker Regulation, 9 V.S.A. Sec. 2430 (2018).

    In the context of this evolving landscape, I'd like to make two 
substantive points regarding the data broker industry, and then provide 
---------------------------------------------------------------------------
three recommendations.

    1. First: Defining the term ``data broker'' is a challenge for many 
regulations, because it encompasses a broad spectrum of divergent 
companies and business activities. The GAO has used the phrase 
``information resellers,''\12\ and the leading definition from current 
State law includes any commercial entity that ``collects and sells [or 
licenses] the personal information of a consumer with whom the business 
does not have a direct relationship.''\13\
---------------------------------------------------------------------------
    \12\ Government Accountability Office, ``Information Resellers: 
Consumer Privacy Framework Needs to Reflect Changes in Technology and 
the Marketplace,'' GAO-13-663 (September 2013), https://www.gao.gov/
assets/gao-13-663.pdf.
    \13\ Under the Vermont Data Broker Regulation, a Data Broker is ``a 
business, or unit or units of a business, separately or together, that 
knowingly collects and sells or licenses to third parties the brokered 
personal information of a consumer with whom the business does not have 
a direct relationship.'' 9 V.S.A. Sec. 2430(4)(A).

    Businesses that fall under this definition, including the 170 
businesses registered and currently ``active'' in Vermont's Data Broker 
Registry,\14\ or the 490 businesses currently registered in 
California,\15\ use data for a wide range of purposes. Some of the 
information these businesses collect and sell is quite sensitive and 
closely linked to individuals, while other information is less 
sensitive or de-identified to some degree. Both registries, and most 
current definitions of data broker, exclude business activities that 
are regulated by the Fair Credit Reporting Act (FCRA) \16\ (i.e., 
consumer reporting agencies and the use of credit reports for 
eligibility decisions in employment, insurance, and housing) or the 
Gramm-Leach Bliley Act (GLBA) \17\ (i.e., financial institutions).
---------------------------------------------------------------------------
    \14\ Vermont Secretary of State, Corporations Division, ``Data 
Broker Search'' (last visited December 3, 2021), https://
bizfilings.vermont.gov/online/DatabrokerInquire/DataBrokerSearch.
    \15\ State of California Department of Justice, Office of the 
Attorney General, ``Data Broker Registry'' (last visited December 3, 
2021), https://oag.ca.gov/data-brokers.
    \16\ Fair Credit Reporting Act, 15 U.S.C. Sec. 1681.
    \17\ Gramm-Leach-Bliley Act, 15 U.S.C. Sec. 6801.

    Commercial purposes that can fall outside of FCRA and GLBA include, 
---------------------------------------------------------------------------
but are not limited to:

        Marketing and advertising--Likely the largest category of 
typical ``data broker'' activities by revenue is for marketing and 
advertising,\18\ including direct mail, online, and mobile advertising. 
Advertisers have long had the ability to purchase and curate lists of 
audiences (such as by demographics, zip code, or inferred 
interests).\19\ Increasingly, data brokers and other large tech 
companies are interested in using web, mobile, and offline data to 
generate detailed predictions related to consumer purchasing intent, 
future behavior, psychological profiles,\20\ lifestyle,\21\ or 
sensitive information such as political affiliation or health 
conditions.\22\ Many advertising technology (ad tech) providers also 
use data to offer measurement for ad attribution, conversion, and 
related metrics.
---------------------------------------------------------------------------
    \18\ See Federal Trade Commission, ``Data Brokers: A Call for 
Transparency and Accountability'' (May 2014) at 23, https://
www.ftc.gov/system/files/documents/reports/data-brokers-call-
transparency-accountability-report-federal-trade-commission-may-2014/
140527databrokerreport.pdf.
    \19\ In many cases, risks related to data depend on its use. For 
example, an audience list associated with ``Interest in Motorcycles'' 
could be used to send direct mail discounts from a local motorcycle 
repair shop, but could also be used by an insurance company to infer 
that individuals or households engage in risky behavior. Id. at vi.
    \20\ See, e.g., AnalyticsIQ, ``What We Do: Consumer Data'' (last 
visited December 3, 2021). https://analytics-iq.com/what-we-do.
    \21\ See, e.g., Experian's Mosaic  USA (December 2018) (last 
visited December 3, 2021), https://www.experian.com/assets/marketing-
services/product-sheets/mosaic-usa.pdf.
    \22\ Justin Sherman, ``Data Brokers and Sensitive Data on U.S. 
Individuals'' Duke Sanford Cyber Policy Program (August 2021), https://
sites.sanford.duke.edu/techpolicy/wp-content/uploads/sites/17/2021/08/
Data-Brokers-and-Sensitive-Data-on-US-Individuals-Sherman-2021.
pdf.

        Appending and matching services--Many businesses provide 
matching services that allow companies to link, or append additional 
information, to their existing lists of customers.\23\ In some cases, 
businesses offer specialized, isolated matching services, or ``clean 
rooms,'' that allow for external partners to link datasets without 
sharing underlying data, often for reasons of data ownership or 
protecting privacy. For example, a health-care institution might use a 
matching service to send information about clinical trials to patients 
with specific health conditions, without disclosing patient information 
to researchers.
---------------------------------------------------------------------------
    \23\ See 2020 NAI Code of Conduct (Network Advertising Initiative), 
page 8-B, ``audience matched advertising,'' https://thenai.org/wp-
content/uploads/2021/07/nai_code2020-1.pdf.

        People Search Databases--People search databases are online 
search tools that provide free or paid access to information that can 
be found in public records, such as a person's home address, previous 
addresses, names of family members, DMV information, court records, and 
criminal records.\24\
---------------------------------------------------------------------------
    \24\ Examples of people search companies include Whitepages 
(whitepages.com); Truthfinder (truthfinder.com), BeenVerified (https://
www.beenverified.com/), and Spokeo (https://www.spokeo.com/). See also, 
Adi Robertson, ``The Long, Weird History of Companies that Put Your 
Life Online,'' Wired (March 21, 2017), https://www.theverge.com/2017/3/
21/14945884/people-search-sites-history-privacy-regulation, and Yael 
Grauer, ``How to Delete Your Information From People-Search Sites,'' 
Consumer Reports (August 20, 2020), https://www.
consumerreports.org/personal-information/how-to-delete-your-
information-from-people-search-sites-a6926856917.

        Fraud detection--Many companies offer commercial fraud 
detection services to institutions such as banks, health-care 
institutions, and online retailers, to protect consumers and businesses 
against fraudulent activities.\25\ Such services typically rely on a 
wide variety of data from public and private records, such as 
purchasing behavior, online behavior, or real-time behavioral data from 
devices.\26\
---------------------------------------------------------------------------
    \25\ According to data released by the Federal Trade Commission, 
more than 2.1 million fraud reports were filed by consumers in 2020. 
Consumers reported losing more than $3.3 billion to fraud in 2020, up 
from $1.8 billion in 2019. Nearly $1.2 billion of losses reported last 
year were due to imposter scams, while online shopping accounted for 
about $246 million in reported losses from consumers. Federal Trade 
Commission, ``New Data Shows FTC Received 2.2 Million Fraud Reports 
from Consumers in 2020'' (February 4, 2021), https://www.ftc.gov/news-
events/press-releases/2021/02/new-data-shows-ftc-received-2-2-million-
fraud-reports-consumers.
    \26\ See, e.g., Tax N. et al. (2021), ``Machine Learning for Fraud 
Detection in E-Commerce: A Research Agenda.'' In: Wang G., Ciptadi A., 
Ahmadzadeh A. (eds.) Deployable Machine Learning for Security Defense. 
MLHat 2021. Communications in Computer and Information Science, vol 
1482. Springer, Cham. https://doi.org/10.1007/978-3-030-87839-9_2.

        Identity verification--The ability to accurately verify 
identity, or that an individual is who they say they are, is a key 
component of digital services across many sectors.\27\ Including for 
the estimated 1 billion people globally who do not have proof of 
identity and are thus prevented from accessing government services or 
excluded from basic financial services, individual ``digital 
footprints'' can offer opportunities for alternative approaches to 
digital identity verification.\28\
---------------------------------------------------------------------------
    \27\ See Noah Katz and Brenda Leong, Future of Privacy Forum, 
``Now, on the Internet, Everyone Knows You're a Dog: An Introduction to 
Digital Identity'' (August 3, 2021), https://fpf.org/blog/now-on-the-
internet-everyone-knows-youre-a-dog/. Notably, identity verification 
can also be an important responsibility for businesses in responding to 
consumer requests to access, delete, and control data under emerging 
consumer privacy laws. See, e.g., Jennifer Ellan and Steven Stransky, 
``The new CCPA draft regulations: Identity verification,'' 
International Association of Privacy Professionals (June 30, 2020), 
https://iapp.org/news/a/the-new-ccpa-draft-regulations-identity-
verification.
    \28\ Vyjayanti T. Desai, Anna Diofasi, and Jing Lu, ``The global 
identification challenge: Who are the 1 billion people without proof of 
identity?'', World Bank (April 25, 2018), https://blogs.worldbank.org/
voices/global-identification-challenge-who-are-1-billion-people-
without-proof-identity.

        Alternative risk scoring--Historically, credit scores provided 
by consumer reporting agencies (CRAs) include predictions of 
creditworthiness based on past loan repayment history and related 
information. A growing number of fintech and data broker companies have 
begun using data from other sources, such as rental history or payment 
of utility bills, to make similar predictions about risk.\29\ Sometimes 
known as ``alternative risk scoring,'' this can be used to extend lines 
of credit to consumers that are ``thin-file,'' or have little to no 
formal credit history. However, such risk scoring has raised concerns 
about privacy, fairness, bias, and accuracy, when it involves 
predictions from data such as web browsing, search history, or social 
media. Alternative risk scoring is governed by FCRA when used for 
individual eligibility decisions, such as firm offers of credit, but in 
some cases may fall outside of the protections of FCRA, for example 
when involving household data or lead generation.\30\
---------------------------------------------------------------------------
    \29\ See generally, Consumer Financial Protection Bureau, ``CFPB 
Explores Impact of Alternative Data on Credit Access for Consumers Who 
Are Credit Invisible'' (February 16, 2017), https://
www.consumerfinance.gov/about-us/newsroom/cfpb-explores-impact-
alternative-data-credit-access-consumers-who-are-credit-invisible/.
    \30\ For an exploration of the boundaries of the Fair Credit 
Reporting Act, see generally, Testimony of Pam Dixon Before the U.S. 
Senate Committee on Banking, Housing, and Urban Affairs: Data Brokers, 
Privacy, and the Fair Credit Reporting Act (June 11, 2019), https://
www.banking.senate.gov/imo/media/doc/Dixon%20Testimony%206-11-19.pdf; 
and Sahiba Chopra, ``Current Regulatory Challenges in Consumer Credit 
Scoring Using Alternative Data-Driven Methodologies,'' 23 Vanderbilt 
Journal of Entertainment and Technology Law 625 (2021), https://
scholarship.law.vanderbilt.edu/cgi/
viewcontent.cgi?article=1044&context=jetlaw.

        Socially Beneficial Research Initiatives--Commercial data 
contributes to a growing number of research initiatives that seek to 
harness data in support of socially beneficial goals, such as public 
health tracking, humanitarian efforts, disaster relief, and medical 
research. In 2020, FPF established an annual Award for Research Data 
Stewardship, recognizing collaborations between company and academic 
researchers that allow researchers to access commercial data with 
privacy and ethical safeguards.\31\
---------------------------------------------------------------------------
    \31\ See Future of Privacy Forum Blog, FPF Issues Award for 
Research Data Stewardship to Stanford Medicine and Empatica, Google and 
Its Academic Partners (June 28, 2021), https://fpf.org/press-releases/
fpf-issues-2021-award-for-research-data-stewardship/.

    Some data broker activities provide clear benefits to consumers, 
such as the use of data for public health, or to protect financial 
accounts against fraudulent activity. Others primarily benefit the 
purchasers or users of the data, such as advertisers, with little or no 
accompanying benefit (or perceived benefit) to individuals. A key to 
effective regulation will be to draw nuanced distinctions based on 
sources of data, purposes of processing, limitations on sharing and 
sale, data sensitivity, and the potential for risk and harm to 
---------------------------------------------------------------------------
individuals and groups.

    2. Second: The lack of a direct relationship with consumers that 
characterizes most ``data brokers'' is both at the heart of concerns 
around privacy, fairness, and accountability, while also presenting the 
greatest challenge for data privacy regulation.

    Any business with a direct-to-consumer relationship, big or small, 
such as a retailer, restaurant, hotel, or social media network, can 
collect personal information about U.S. consumers directly, indirectly, 
or through purchasing and appending it. In some cases, those ``first-
party'' companies can exercise enormous influence and market power.\32\ 
However, there is still a degree of public accountability to users who 
are aware of who such companies are and can delete accounts or raise 
alarms when practices go too far. In addition, first-party companies 
can directly present users with controls and tools to manage their data 
in an app, on a web site, through direct email communications, or other 
means.\33\
---------------------------------------------------------------------------
    \32\ Charlotte Slaiman, ``Data Protection Is About Power, Not Just 
Privacy,'' Public Knowledge (March 3, 2020), https://
www.publicknowledge.org/blog/data-protection-is-about-power-not-just-
privacy.
    \33\ In some cases, the ability of advertisers to purchase data 
from data brokers can undermine the efforts of first-party platforms to 
create greater transparency and control for users. See, e.g., Privacy 
Risks with Facebook's PII-based Targeting: Auditing a data broker's 
advertising interface (FTC PrivacyCon), https://www.ftc.gov/system/
files/documents/public_events/1223263/panel05_privacy_risks_fb_pii.pdf.

    In contrast, a business lacking a direct relationship with 
consumers does not always have the same reputational interests, 
business incentives, or in some cases legal requirements, to limit the 
collection of consumer data, process it fairly, and protect it against 
exfiltration. In States such as California, where privacy law codifies 
the right to access, delete, or opt out of the sale or sharing of data, 
consumers typically are not aware of what companies within the ``data 
broker'' category may process their information, how to reach them, or 
how to manage the hundreds of opt-out requests that would be necessary 
to control the disclosure of their information.\34\
---------------------------------------------------------------------------
    \34\ See Maureen Mahoney, ``California Consumer Privacy Act: Are 
Consumers' Digital Rights Protected?'', Consumer Reports (October 1, 
2020), https://advocacy.consumerreports.org/wp-content/uploads/2020/09/
CR_CCPA-Are-Consumers-Digital-Rights-Protected_092020_vf.pdf.

    At the same time, a lack of a consumer relationship means that 
businesses engaged in legitimate or socially beneficial data processing 
often cannot rely on traditional mechanisms of notice and consent. 
Affirmative consent, or ``opt-in,'' may be impossible or impractical 
for a business to obtain, while ``opting out'' after the fact tends to 
be impractical for consumers to navigate. For this reason, consumer 
advocates and academics have long observed the problems of legal 
regimes that rely solely on consent: consumers can become overwhelmed 
with choices, and may lack the knowledge to assess future risks, 
complex technological practices (such as predictive analytics, machine 
learning, or AI), or future secondary uses.\35\ These risks are 
especially acute in the data broker industry.
---------------------------------------------------------------------------
    \35\ See e.g., Neil Richards and Woodrow Hartzog, ``The Pathologies 
of Digital Consent,'' 96 Wash. U. L. Rev. 1461 (2019), available at 
https://openscholarship.wustl.edu/law_lawreview/vol96/iss6/11.

    What does this mean? In some cases, consumer choice remains an 
appropriate component of consumer privacy frameworks; a lack of consent 
should prevent data processing in many circumstances. But choice cannot 
be the sole safeguard in consumer privacy rules. In other cases, data 
processing should not occur even with a person's consent, for example 
if the processing is inherently high-risk or harmful.\36\
---------------------------------------------------------------------------
    \36\ Many proposals for Federal privacy frameworks advanced by both 
industry and consumer advocacy groups have included categories of 
``prohibited'' data practices that organizations processing personal 
information would be barred from engaging in, even with individual 
consent. See e.g., Center for Democracy and Technology, CDT's Federal 
Baseline Privacy Legislation Discussion Draft (December 13, 2018) (last 
visited December 3, 2021), https://cdt.org/insights/cdts-federal-
baseline-privacy-legislation-discussion-draft/ (proposing that Federal 
law prohibit per se ``unfair data processing practices,'' such as 
certain forms of biometric information tracking, precise geospatial 
information tracking, and probabilistic cross-device tracking); compare 
to, e.g., Privacy For America, ``Principles for Privacy Legislation'' 
(last visited December 3, 2021), https://www.privacyforamerica.com/
overview/principles-for-privacy-legislation/ (an industry-led proposal 
containing prohibitions on data misuse that would include (1) banning 
the use of data to make certain eligibility decisions outside outside 
existing sectoral laws, (2) banning the use of data to charge higher 
prices for goods or services based on certain personal traits, and (3) 
outlawing the use of personal information for stalking or other forms 
of substantial harassment).

    In some circumstances, we should recognize there are socially 
beneficial uses of large datasets that cannot, for reasons of 
practicality or accuracy, hinge on consumer choice. For example, 
commercial research in the public interest may include allowing 
independent researchers to evaluate the effect of large platforms on 
mental health; understanding the effect of COVID-19 and public health 
efforts; enabling disaster relief, and mitigating bias and 
discrimination in AI.\37\
---------------------------------------------------------------------------
    \37\ See Future of Privacy Forum and Anti-Defamation League, ``Big 
Data: A Tool for Fighting Discrimination and Empowering Groups'' (July 
2014), https://fpf.org/wp-content/uploads/2014/09/Big-Data-A-Tool-for-
Fighting-Discrimination-and-Empowering-Groups-FINAL1.pdf.

    In these cases, privacy law can offer other tools for protecting 
consumers, including: limits on collection of data; transparency; 
accountability; risk assessment and auditing; limitations on the use of 
sensitive data; and limitations on high-risk automated processing for 
---------------------------------------------------------------------------
making important decisions regarding individuals' life choices.

    3. Recommendations:

    First and foremost, Congress should pass baseline comprehensive 
privacy legislation that establishes clear limitations and rules for 
both data brokers and first-party companies that process individuals' 
personal information. Its primary purpose should be to address the gaps 
in the current U.S. sectoral approach to consumer privacy, which has 
resulted in incomplete legal protections. Currently, personal 
information collected within certain sectors, such as credit reporting, 
finance, and health care, are subject to longstanding Federal 
safeguards, while commercial data outside of these sectors remains 
largely unregulated even when the data may be equally sensitive or 
high-risk.\38\
---------------------------------------------------------------------------
    \38\ For example, medical records held by hospitals and covered by 
the Health Insurance Portability and Accountability Act (HIPAA) are 
subject to Federal privacy and security rules. However, equally 
sensitive commercial information or inferences about health conditions 
is largely unregulated when processed by app developers, search 
engines, or marketing and advertising firms, outside of the Federal 
Trade Commission's longstanding section 5 authority.

    In the absence of comprehensive legislation, there are a number of 
steps Congress can take to address risks related to consumer privacy 
and data brokers. Legal protections specific to the industry (alone or 
as part of a comprehensive law) could play a useful role, for example, 
through a national registry or opt-out system that would build on, or 
standardize the work of California and Vermont. In practice, however, a 
comprehensive law that is not specific to particular technologies or 
business models will be most effective, fair, and interoperable with 
---------------------------------------------------------------------------
global frameworks such as the General Data Protection Regulation.

    Other legal approaches include: (1) limiting the ability of law 
enforcement agencies to purchase information from data brokers, 
including information purchased as a workaround to evade the 
constitutional limitations on those agencies when seeking information 
directly; (2) enacting sectoral legislation for uniquely high risk 
technologies, such as facial recognition; or (3) updating existing 
laws, such as the Fair Credit Reporting Act, to more effectively cover 
emerging uses of data, for example in alternative consumer risk 
scoring.

    Second, Congress should empower the Federal Trade Commission to 
continue using its longstanding authority to enforce against unfair and 
deceptive trade practices, through funding of enforcement, research, 
and consumer education; greater numbers of staff and the establishment 
of a Privacy Bureau, and civil fining authority to effectively police 
businesses.

    And finally, legislators should ensure that, within reasonable 
limits, privacy regulation does not prevent the use of data for 
socially beneficial purposes that are in the public interest, such as 
identifying bias and discrimination, contributing to a fair and 
competitive marketplace, holding large platforms accountable through 
independent research, and contributing to generalizable scientific, 
historical, and statistical research and knowledge.

    Thank you for this opportunity, and I look forward to your 
questions.

                                 ______
                                 
       Prepared Statement of Barry C. Lynn, Executive Director, 
                         Open Markets Institute
       america's monopoly crisis--democracy and security at risk
    Five and a half years ago, Senator Warren awakened Americans to the 
extreme and fast-growing threat posed by the concentration of power and 
control across almost all sectors of the U.S. economy. ``Consolidation 
and concentration are on the rise in sector after sector,'' Senator 
Warren said in the June 29, 2016, speech, when she became the first 
leading policymaker to recognize America's monopoly crisis. 
``Concentration threatens our markets, threatens our economy, and 
threatens our democracy.''

    Since then Americans have witnessed a long series of real advances 
in the fight against concentration and consolidation. These include:

        Learning how monopolization lies at the root of most of the 
great problems we face today--including low wages, high prices, broken 
health care, sharp declines in entrepreneurship, and political 
extremism.

        Getting leading journalists and policymakers in both parties 
to recognize the problem and to propose legislation to fix it.

        Getting law enforcers in Washington and in almost every State 
of the Nation to bring powerful lawsuits against Google and Facebook, 
perhaps the most powerful and far-reaching corporations in human 
history.

        Relearning how to use traditional antimonopoly tools such as 
common carrier law and other rules designed to ensure that monopolists 
treat every American the same.

    Then in July President Joe Biden resoundingly restored antimonopoly 
law to its necessary and original role as one of the main tools we use 
to protect our democracy and individual liberties. And in doing so, the 
President also bluntly renounced the ``Chicago School'' philosophy of 
Robert Bork and other ``Neoliberal'' radicals, with its focus solely on 
restricting the use of antimonopoly law solely increasing efficiency 
theoretically to promote the ``welfare'' of the ``consumer.'' Further, 
President Biden then demanded that all agencies and departments of 
government--not merely those with traditional antitrust authorities--
join the fight against today's extreme and dangerous concentration of 
power and control in the hands of a few.

    What we are witnessing is one of the most important intellectual 
and political awakenings in American history, on a par with the 
awakening that took place in the years just before and after the 
Declaration of Independence. Or rather, we are witnessing a reawakening 
to the true promise, purpose, and principles of our democratic 
republic.

    In place of the dangerous determinism of the Neoliberal Chicago 
School philosophy, with its insistence on the necessity, scientific 
inevitability, and fundamental goodness of bigness and concentrated 
control, Americans are returning to our traditional common-sense 
approach to regulating power and competition in ways that help us build 
a more democratic, just, sustainable, and innovative society. This in 
turn is empowering us to develop our own selves, families, and 
communities more fully and completely, which was one of the essential 
goals of the Founding.

    Unfortunately, the task before us remains immense and daunting. The 
power and control that has been concentrated in the hands of Google, 
Facebook, Amazon, and other autocratic corporations over the last 40 
years poses perhaps the most extreme threat to our democracy that we 
have faced since the Civil War. And the rise of the Internet and other 
new technologies over this period means our task today is not merely to 
restore the approaches of the past, but to adapt them to new structures 
and ways of communicating and doing business.

    The good news is that Senator Warren's hearing today provides us 
with a vitally important chance to speed and broaden our efforts to 
reestablish the basic balances and controls that are essential if we 
are to preserve our democracy and fundamental liberties. The 
opportunity lies in the fact that today's hearing is the first to focus 
on the role that monopolization has played in creating the complex 
supply chain and production crises that so threaten our economic and 
industrial security today.

    This focus on the supply chain crisis is important in three key 
ways.

    First, the extreme and growing nature of the threats posed to our 
production systems illustrate in an easy-to-understand way how 
monopolization directly threatens the security of our Nation, our 
communities, and our families, not only by cutting jobs and creating 
higher prices but by creating the potential for a catastrophic 
breakdown of vital production systems and/or various forms of conflict 
with China and other nations.

    Second, the fact that the supply chain crisis is the result of 
radical neoliberal changes to multiple regulatory regimes in the 1980s 
and 1990s--including antimonopoly, trade, corporate governance, and 
finance and banking--demonstrates clearly the need to strategically 
integrate multiple regulatory regimes into a single coherent whole.

    Third, the fact that all of these threats we face today were 
predicted 15 or even 20 years ago demonstrates the costliness of delay 
and the urgency to take radical and comprehensive action immediately.

    Properly studied and embraced, the lessons of our supply chain 
crises will also teach us how to speed and expand all of our 
antimonopoly efforts--including those aimed at the platform 
monopolists--to a point where we can assure ultimate victory. The 
lessons of our supply chain crises can also help to teach us how to 
integrate our efforts here in the United States with those of our 
closest industrial and political allies, in ways that will further 
empower us to establish the foundations for a safe and sustainable 
international system able to support our democracies and prosperity 
through the long haul of the 21st century.
                 the origins of the supply chain crisis
    The first step to understanding today's supply chain crises, is to 
recognize that the structures of the production systems on which the 
United States relies today differ radically from the structures of the 
production systems that served our Nation in the past.

    For most of the decades after the Second World War, right until the 
last years of the 20th century, most production of products and 
components around the world was widely distributed in multiple 
locations around the world.

    First, production was compartmentalized within the borders of the 
nation-state. In the case of products such as automobiles, electronics, 
metals, and chemicals, for instance, every industrial nation largely 
produced what it consumed, and then competed with other industrial 
nations to sell finished goods to smaller nations, and to nations that 
were less industrialized.

    Second, within most industrialized nations, manufacture of products 
such as automobiles, electronics, metals, and chemicals was separated 
into multiple vertically integrated corporations. In the United States, 
for instance, antimonopoly practice aimed to ensure that at least four 
corporations competed to make any particular product. Much the same was 
true of Japan and of Europe as a whole.

    Production within corporations was then often further 
compartmentalized by the distribution of the capacity to manufacture of 
key components and end products among two or more different factories.

    As a result, for most of the 20th century, when something went 
wrong in one factory or one industrial region somewhere in the world, 
the overall effects of the disruption were limited to one of many 
companies. Further, the widespread distribution of manufacturing 
capacity and skills meant that when one company experienced a major 
problem, it could turn to its competitors for help in keeping its own 
assembly lines moving and in repairing whatever damage it had suffered.

    Then on September 21, 1999, an earthquake in Taiwan revealed that 
in at least one industry--semiconductors--the structure of production 
had been changed in revolutionary ways.

    The 7.3 magnitude earthquake killed more than 2,500 people and 
disrupted life and business across Taiwan. But for the first time in 
human history, the efforts of an earthquake in one nation were felt 
almost immediately all around the entire world. The quake disrupted 
power at Taipei's international airport, which in turn prevented the 
Just-in-Time shipment of semiconductors from the industrial city of 
Hsinchu to factories around the world. As a result, within just a few 
days, computer assembly plants in California, Texas, and elsewhere 
began to shut down. The quake, in other words, had triggered the 
world's first industrial crash.

    Luckily the Taiwanese foundries where the semiconductors were 
produced had suffered only minor damage and both production and 
transportation of semiconductors were swiftly restored. But the quake 
demonstrated in blunt fashion that at least with the manufacture of one 
important type of semiconductor, production was no longer 
compartmentalized in any real way. On the contrary, production was now 
concentrated in a single place in the world, largely under the control 
of a single corporation.

    Looked at another way, all the industrial nations of the world, and 
all the industrial corporations, had allowed all of this one 
particularly ``egg'' to be put in a single basket.

    In the years that followed, such extreme industrial concentration 
swiftly went from being the exception to the rule. Under the trading 
rules established in the mid-1990s by the Uruguay Round of the GATT, 
industrial nations began to offshore more and more capacity to other 
nations, in a process that at the time was called globalization. At the 
same time industrial corporations that had long insisted on producing 
in house the basic components that went into their finished products 
began to outsource production to other companies.\1\
---------------------------------------------------------------------------
    \1\ https://prospect.org/features/detroit-went-bottom-up/.

    Within a relatively short time, this combination of outsourcing and 
offshoring resulted in the concentration of production of many other 
vital goods in one or two places on the globe, much in the way the 
production of certain semiconductors had been concentrated in Hsinchu. 
Today we see such concentration in the production of many if not most 
of the components that go into computers and other electronics, but 
also in products ranging from pharmaceutical ingredients to Vitamin C 
to piston rings to pesticides to silicon ingots. In many instances we 
have also seen extreme concentration of the capacity to assemble the 
---------------------------------------------------------------------------
components into finished products.

    Beginning 20 years ago, I and a few other students of the 
international production system began to warn about a suite of dangers 
posed by this revolutionary shift from a highly distributed and 
compartmentalized system of production to a system marked by extreme 
concentration of both capacity and of control. We warned that this 
concentration of capacity was making the production system as a whole 
ever more subject to catastrophic cascading failure, due to the loss of 
access to one industrial region or even just one factory.

    We also warned that this new concentration of capacity had created 
the opportunity for nation-states or even factions within nation-states 
to exercise various forms of coercion over other nations and individual 
corporations that depended on the production that had been concentrated 
within their borders.

    We also warned that this extreme concentration of capacity and 
monopolization of control would likely result in higher prices, lower 
quality, and lower levels of overall production of many individual 
goods and components, as the new monopolists became less focused on 
serving their customers and more focused on extracting outsize profits. 
And we warned that that concentration and monopolization threatened to 
result in less innovation in key products and processes.

    During these same years, however, many leading economists, 
journalists, and policymakers began to defend the new concentration of 
production as a more efficient way to manufacture products. Some also 
defended this new concentration of production as a way to ensure that 
nation-states did not go to war with one another. And thus the warnings 
were ignored, for more than 20 years.
       the origins of the transportation and distribution crisis
    Today in America we also face a second, distinct crisis, closely 
related to the first. This is the breakdown of the main transportation 
systems on depend on for the shipment of both finished products and 
components to factories and stores around the world. The origins of 
this crisis lie in the same neoliberal intellectual revolution that 
overthrew America's antimonopoly laws, back in the 1980s and 1990s.

    For most of U.S. history, the Federal, State, and local governments 
devoted great attention to ensuring the safety, efficiency, 
reliability, and affordability of transportation and distribution 
services. The goal was to ensure that individuals always got what they 
needed when they needed it. And that companies would always be able to 
get the supplies they needed and be able to deliver finished goods.

    One result was a set of highly sophisticated systems to regulate 
the private corporations that handled America's ocean shipping, 
railroads, and air service. A second result was direct oversight of the 
construction of highways, canals, inland waterways, ports, and 
airports, and of such supporting infrastructures as pipelines and fuel 
depots. It also included extensive and complex systems for regulation 
of food marketing, processing, and warehousing.

    In the 1980s and 1990s, however, U.S. regulators at all levels 
retreated in often dramatic fashion from these long-time tasks. They 
did so under pressure from the same laissez faire arguments used to 
overthrow antimonopoly law; i.e., that it was more efficient just to 
let the ``market'' regulate investment in transportation and the 
behavior of transportation corporations.

    The result, when combined with the revolutionary changes taking 
place during these same years in the international system of 
production, was a revolutionary reordering of every one of the 
transportation and distribution systems that tie Americans to one 
another and to the other nations of the world. This reordering played 
out largely as a concentration of power and control over America's 
transportation system in the hands of a few giant corporations and 
foreign nation-states, and the concentration of physical risk through 
the construction of super large ships, super long rail trains, and 
super large ports and inland shipping facilities.

    Beginning about 15 years ago, I and a few others began to warn 
about the radical concentration of capacity and ownership in 
steamships, railroads, warehousing, trucking, food processing, and 
retail was undermining the stability of the systems we rely on for the 
transportation, processing, storage, and distribution of many of the 
goods and foods on which we depend. We said the concentration of 
capacity and control was making our food and fuel systems ever more 
subject to potentially catastrophic cascading failure.

    Over these years, the United States and other nations also 
experienced a number of events that demonstrated that the 
``deregulation'' of transportation and distribution services was indeed 
creating a variety of new threats to the security of the American 
people and the proper functioning of the American economy as a whole.

    These events include massive and long lasting disruptions to rail 
service in the United States after the merger of the Union Pacific and 
Southern Pacific railroads in 1996 and after CSX and Norfolk Southern 
divvied up control of Conrail beginning in 1999. It also includes a 
series of disruptions caused by strikes and lockouts of stevedores at 
West Coast ports. And it includes the hyper consolidation of the 
steamship industry itself into three closely interlocking cartels, in 
ways that have made it far easier for these foreign-controlled 
corporations to exploit the American public and U.S. businesses.

    Perhaps the single most dramatic warning took place in late 2012 
when Hurricane Sandy flooded automobile and rail tunnels running 
between Manhattan and New Jersey and also disrupted fuel supplies to 
the region as a whole. For centuries, warehouses and other storage 
centers within the boundaries of the city had kept weeks of food within 
near reach of the people it was destined to feed. Within 24 hours of 
Sandy's passage, however, it became clear that this was no longer true. 
The extreme consolidation of food service, food warehousing, and food 
transportation over the preceding decades--combined with the 
introduction of Just-In-Time practices in food warehousing--had 
stripped out most of this buffer. The result was that New Yorkers had 
become almost entirely dependent on an uninterrupted flow of trucks 
from facilities located as much as 200 miles away, and now that flow 
had been interrupted.\2\
---------------------------------------------------------------------------
    \2\ https://www.reuters.com/article/idUS417782027820131028.

    Luckily, in the days after Sandy, New Yorkers did not panic and 
major disruptions were averted. But in the decade since, no one at the 
city, State, or Federal governments have taken a single step to address 
---------------------------------------------------------------------------
this danger.

    On the contrary, over these same years, those few economists and 
policymakers who looked at these issues largely defended the new 
concentration of capacities, power, and control as a more efficient way 
to serve American people.
               systemic breakdowns and cascading effects
    Since the beginning of the COVID-19 pandemic nearly 2 years ago, 
both the production system and the transportation system have broken 
down, in ways that have created widespread disruptions to our economy 
and to our lives. Although distinct from one another, the breakdowns in 
the production and transportation systems have, time and again, also 
interacted in ways that greatly exacerbated the overall effects.

    In the case of our production systems, the concentration of 
manufacturing capacity for key inputs and final products has repeatedly 
resulted in the breakdown of the ability to ensure that we have what we 
need, when we need it. We saw this in dramatic fashion in the early 
days of the Pandemic when there was a shocking lack of sufficient N95 
masks and other personal protection equipment to protect even the most 
vulnerable of front line workers. This despite the fact that Americans 
had often first developed these products and had long led the world in 
manufacturing them.

    The lack of sufficient masks and other PPE resulted in a cascading 
series of problems. It resulted in unnecessary deaths, including among 
health-care workers. It resulted in widespread panic and a general 
sense of dysfunction and confusion, as governments and institutions 
fought over what supplies existed. It led to the unnecessary disruption 
in the production of other vital goods. One dramatic example was the 
widespread shutdowns of processing within America's highly concentrated 
livestock industries--resulting in severe shortages of beef, chicken, 
and pork at different times and in different places around the country.

    Perhaps single best illustration of the far-reaching nature of the 
threats posed by today's extreme concentration of industrial capacity 
is in semiconductors.

    Over the course of the 22 years since the earthquake in Taiwan 
first revealed the extreme concentration of the capacity to produce 
certain types of semiconductors, the problem has become only worse. As 
was true in 1999, the world today remains just as vulnerable to 
disruption by earthquake or other disaster, as there has been no effort 
whatsoever to distribute capacity or ownership. Worse, monopolistic 
manufacturers like Taiwan Semiconductor Manufacturing Corporation 
(TSMC) have become increasingly tempted to exploit their chokepoint for 
profit.

    The result, which has played out across the industrial world over 
the last 18 or so months, has been a slow but steady choking off of 
production in an ever widening range of industries.

    In the United States, the failure by TSMC to invest sufficient 
funds to meet demand for its products has resulted in shortages of 
goods ranging from appliances to farm machinery to medical devices. The 
most far-reaching disruptions have take place within the automobile 
industry, where the shortages of semiconductors has forced automakers 
around the world to radically cut production. In the second quarter of 
2021, for instance, Ford reported that it has lost about 50 percent of 
planned production for the period.\3\ In October, Toyota reported that 
third quarter production was down nearly 40 percent compared to a year 
earlier,\4\ and Volkswagen reported that production had fallen 30 
percent below projections.\5\ In recent days, the problems appear to 
have spread into iPhone production.\6\
---------------------------------------------------------------------------
    \3\ https://techcrunch.com/2021/07/28/ford-expects-semiconductor-
rebound-new-vehicle-demand-to-increase-2021-profits/.
    \4\ https://www.reuters.com/world/asia-pacific/global-supply-
constraints-deal-heavy-blow-japanese-firms-2021-10-28/.
    \5\ https://www.reuters.com/business/autos-transportation/europes-
top-carmakers-count-cost-chip-crunch-2021-10-28/.
    \6\ https://www.barrons.com/articles/apple-stock-chip-shortage-
iphones-51638543940.

    Such massive shortfalls in production, in turn, trigger a variety 
of other harms across the industrial system. These include fewer jobs 
and smaller paychecks at vehicle manufacturers; higher prices for new 
cars, used cars, and rental cars; less work for suppliers and dealers 
and their employees, and more pollution as individuals are unable to 
---------------------------------------------------------------------------
replace older cars.

    Meanwhile, a largely separate set of events has triggered massive 
disruptions within the transportation and distribution systems on which 
we rely to keep our shelves stocked and our factories running. This 
includes the disruption to shipping through the Suez Canal earlier this 
year when the container ship Everclear got stuck. And it includes the 
backing up of container shipping across the Pacific when the Union 
Pacific railroad ran out of space to offload containers at its yards in 
Chicago.

    Here too the result of extreme concentration of capacity and 
control was a dangerous series of secondary effects, including empty 
shelves in stores, factories that have been slowed or even shut down, 
higher prices, and fewer jobs.
                competition policy as industrial policy
    Many people contend that America's supply chain crisis is nothing 
more than a temporary effect of changes in consumption during the 
pandemic, with people spending less on restaurants and more on the 
purchase of manufactured goods and building supplies. The economist 
Paul Krugman, for instance, recently made the case that the supply 
chain crisis is the result of nothing more than a temporary surge in 
demand for particular goods, and that the problem will soon ease. Or as 
he put it, ``Why the skew? It's not a mystery: We've been afraid to 
indulge in many of our usual experiences and bought stuff to 
compensate.''\7\
---------------------------------------------------------------------------
    \7\ https://www.nytimes.com/2021/10/19/opinion/vaccine-mandates-us-
ports-supply-chain.
html.

    There is certainly some truth to the idea that the COVID-19 
pandemic has resulted in large changes to what we buy and when. But to 
contend that America's twin supply chain crises will simply work 
themselves out is embarrassingly naive. In the case of both the 
production system and the transportation and distribution system, we 
see overwhelming evidence that the problems derive foremost from the 
---------------------------------------------------------------------------
concentration both of physical capacity and of control.

    The monopolists who control these systems have stripped out all the 
slack, and then some. As a result, when something goes awry, the 
effects are swiftly amplified and transmitted across the economy as a 
whole.

    Our first task in addressing America's industrial crisis is, 
therefore, to recognize that we are dealing with two separate but 
interlinking problems. Our second task is to identify what is common to 
both the choke pointing of production and transportation, and what 
makes the two problems unique.

    What is common is that both problems derive from the same radical 
changes in thinking about how to regulate the U.S. and international 
political economies, beginning in the early 1980s. The Neoliberals of 
the 1980s and the 1990s aimed foremost at concentrating control and 
profits in the hands of the few. And they pursued this same basic goal 
in both the production and transportation systems.

    What separates the two problems from one another are the particular 
regulatory regimes that neoliberals altered to achieve their ends, and 
the particular regulatory regimes we must now alter if we are to solve 
the problems.

    In the case of the production system, the revolutionary 
restructuring was the result of radical changes to four distinct 
regulatory regimes--antitrust, trade, corporate governance, and 
finance. It was the combination of these four that cleared the way for 
the extreme concentration of production in one or a few places that we 
see today.

    A recent article in the Washington Monthly by Open Markets reporter 
Garphil Julien provides a good description of how these four changes 
combined in ways that resulted in the severe degradation of the U.S. 
semiconductor industry. Julien reports, for instance, how Intel 
executives extracted almost $180 billion from the corporation--in the 
form of stock buybacks and dividends--between 2001 and 2020.\8\
---------------------------------------------------------------------------
    \8\ https://washingtonmonthly.com/2021/12/01/to-fix-the-supply-
chain-mess-take-on-wall-street/.

    In the case of the transportation and distribution systems that 
serve the United States, today's problems derive mainly from radical 
changes in how we regulate these essential networks, as the Neoliberal 
era changes aimed to achieve what, in essence, was a de facto 
privatization of industries that had been largely governed to serve the 
public interest. The problems that have resulted were then made worse 
by the radical relaxation of antitrust enforcement in retailing and 
food processing, which led to an ever more extreme concentration of 
---------------------------------------------------------------------------
reach, power, and control in corporations such as Walmart and Tysons.

    A recent article in the Washington Monthly by Open Markets policy 
director Phillip Longman provides a good example of how this process 
played out in the U.S. railroad industry. As Longman details, railroad 
executives have cut services dramatically over the last decade.\9\ And 
as Martin Oberman, chair of the Surface Transportation Board made clear 
recently, during this same period these railroads extracted more than 
$190 billion in stock buybacks and dividends from the railroads, much 
of which should have been reinvested in maintaining and improving 
service.\10\
---------------------------------------------------------------------------
    \9\ https://washingtonmonthly.com/magazine/november-december-2021/
amtrak-joe-vs-the-modern-robber-barons/.
    \10\ https://ajot.com/insights/full/ai-stbs-oberman-says-u.s-
railroads-reduced-service-raised-rates-and-derived-191-billion-in-
dividends-and-buybacks-since-2010.

    Another good example of who the deregulation of the transportation 
and distribution systems was designed to serve is the recent surge in 
profits among members of steamship cartel. According to the maritime 
consultancy Drewry, container lines are on course to earn as much as 
$100 billion in profits this year, which is 15 times their profits in 
2019.\11\ What looks like a crisis to the American people looks like a 
fantastic opportunity to those who engineered the problem.
---------------------------------------------------------------------------
    \11\ https://maritimemag.com/en/drewry-forecasts-80-billion-profit-
in-2021-for-container-lines/.

    Solving the monopoly crisis within the production system that 
serves the United States will therefore require integrating antitrust 
with trade, corporate governance, and financial policy. Solving the 
monopoly crisis within the transportation and distribution industries, 
meanwhile, will require radical changes to how the United States 
regulates the steamship, railroad, warehousing, and distribution 
industries, as well as far more aggressive antitrust enforcement in 
retailing and food processing to break dangerous concentrations of 
---------------------------------------------------------------------------
capacity and control.

    Perhaps most important is to recognize that there are no easy 
fixes, that at least some of the disruptions we are experiencing today 
will continue for years. Indeed, it is vital to approach this challenge 
as a long-term project that will require the government to develop a 
coherent and sophisticated industrial strategy that aims to rebuild the 
capacity, resiliency, skills, and innovation systems within such 
industries as semiconductors and railroads, and that then carefully 
protects such investments from being appropriated by Wall Street 
raiders.
            on the precipice--after a 20-year failure to act
    Today's twin supply chain crises were easily foreseeable 15 even 20 
years ago. Time and again the U.S. Government was warned. Time and 
again the U.S. Government failed to take action. It is vital that we 
view the disruptions of the last 2 years as our last warning, and move 
immediately to take comprehensive and radical action to restructure 
both how we make the goods we need, and how we move them from factory 
to home.

    Because as bad as the present set of problems is, we can imagine 
far worse crises. This includes the sudden and catastrophic seizing up 
of the system as a whole. And it includes attempts by foreign powers--
China most likely--to exploit these dependencies and fragilities in 
ways that allow these nations to concentrate power over individual 
American businesses and over the American people as a whole.

    This is an issue I have lived, in a very personal way, for 20 
years.

    In June 2002, I published a long essay in Harper's titled ``Unmade 
in America: The True Cost of a Global Assembly Line.'' In that essay I 
detailed how the September 1999 earthquake in Taiwan demonstrated how 
the extreme and growing concentration of capacity within the 
international system had made our international assembly lines subject 
to catastrophic collapse and was fast giving the government in China 
dangerous levels of control over the production of goods vital to the 
security of the American people and the Nation as a whole.

    That article immediately caught the attention of the U.S. national 
security community, and was cited extensively in the first annual 
report of the U.S.-China Security Review Commission, released in July 
2002. The Harper's article also changed perceptions in the business 
community, when Yale School of Management Dean Jeffrey Garten, writing 
in BusinessWeek, called on the Bush administration to investigate the 
dangers I described.

    In 2005 I expanded my reporting on the twin supply chain crises 
into a mainstream book for Doubleday, titled ``End of the Line: The 
Rise and Coming Fall of the Global Corporation.'' That book was widely 
debated, including in the Financial Times and The Wall Street Journal, 
and in a special section of The Economist. It also led to direct 
conversations with high-level officials within the Treasury and 
Commerce Departments; the CIA; the Department of Defense; the White 
House; the U.K. Ministry of Defence; Japan's Ministry of Economy, 
Trade, and Industry; with multiple leading members of Congress; and 
with think tank scholars and academics around the world.

    During this period, my own warnings were supplemented by those of 
other close students of the industrial system, including Intel's then 
CEO Andy Grove, Xilinx Semiconductor CEO Willem Roelandts, and the 
epidemiologist Michael Osterholm.

    Over the years, these initial warnings were repeatedly borne out by 
real world events. This includes disruptions caused by the shutdown of 
borders after September 11th, the SARS epidemic, the explosion of a 
volcano in Iceland, the great financial crash of 2008, and most 
dramatically by the massive Tohoku earthquake in northern Japan in 
March 2011.

    During these years, I further developed my own analysis of the 
origins and nature of the problem, in my 2010 book Cornered: The New 
Monopoly Capitalism and the Economics of Destruction, and in a series 
of articles for mainstream publications and specialized journals. 
Recently my team at the Open Markets Institute cohosted an event with 
the Organisation for Economic Co-operation and Development to discuss 
the early lessons of the disruptions caused by the early stages of 
COVID in 2020.

    Yet until the Biden administration, every U.S. Government of the 
last 2 decades has failed to develop a coherent plan to address these 
risks. As a result, 5 years after the Trump administration first began 
to impose tariffs on Chinese and other imports and embargoed shipments 
of key components to Huawei and other Chinese corporations, the 
concentration of capacity in a few places continues to worsen.

    Despite all the headlines about America ``decoupling'' from China, 
the fact is that U.S. corporations continue to shift more key capacity 
into China than out of China. This is true of leading manufacturers 
such as Apple.\12\ And it is true of the wider array of manufacturers 
generally, as Nick Lardy of the Peterson Institute made clear 
recently.\13\
---------------------------------------------------------------------------
    \12\ https://www.theguardian.com/technology/2021/jun/03/apple-uses-
more-suppliers-from-china-than-taiwan-for-first-time-data-shows.
    \13\ https://www.piie.com/blogs/china-economic-watch/foreign-
investments-china-are-accelerating-despite-global-economic.
---------------------------------------------------------------------------
                            the opportunity
    Last summer, I published an article in Foreign Affairs magazine, 
titled ``Antimonopoly Power: The Global Fight Against Corporate 
Concentration.''\14\
---------------------------------------------------------------------------
    \14\ https://www.foreignaffairs.com/articles/world/2021-06-22/
antimonopoly-power.

    In that piece I describe how to use competition policy principles 
to guide the construction of an entirely new system of production for 
the United States and our industrial and democratic allies. I described 
how we can construct international industrial and transportation 
systems that distribute all risk and all power in ways that ensure that 
no natural or political disaster can ever again break the supply of the 
goods and services we need to live safely and happily here in America, 
---------------------------------------------------------------------------
and cooperatively with the other nations of the world.

    I am sure there are other ways to achieve these same goals.

    I look forward to working with Senator Warren and the other members 
of this subcommittee to do so swiftly. And to do so in ways that 
reinforce our democracy, liberty, and community here in America.

    Thank you for this opportunity. I look forward to working with you 
in the days to come.
                           additional reading
      End of the Line: The Rise and Coming Fall of the Global 
Corporation, Barry Lynn, Doubleday, New York, August 2005.

      Cornered: The New Monopoly Capitalism and the Economics of 
Destruction, Barry Lynn, Wiley, 2010.

      ``Built to Break: The International System of Bottlenecks in the 
Era of Monopoly,'' Barry Lynn, Challenge Magazine, March/April 2011.

      ``Systemic Supply Chain Risk,'' Yossi Sheffi and Barry C. Lynn, 
The Bridge, Fall 2014. The first article in which an engineer 
recognized the systemic nature of international production arrangements 
and the potential for cascading crashes.

      ``War, Trade, and Utopia,'' Barry Lynn, The National Interest, 
Winter 2006. A straightforward discussion of the politics of industrial 
interdependence and dependence in a system marked by extreme 
concentrations of industrial capacity.

      ``The New China Syndrome: American Business Meets Its New 
Master,'' Barry Lynn, Harper's, November 2015.

      ``Unmade in America: The True Cost of a Global Supply Chain,'' 
Barry Lynn, Harper's, June 2002.

      ``How the United States marched the semiconductor industry into 
its trade war with China,'' Chad P. Bown, Peterson Institute for 
International Economics, December 2020.

      ``How Detroit Went Bottom-Up: Outsourcing Has Made the 
Automotive Industry So Co-Dependent and Fragile that One Company's 
Downfall Is Every Company's Concern,'' Barry Lynn, The American 
Prospect, September 2009.

      ``Amtrak Joe vs. the Modern Robber Barons,'' Phillip Longman, 
Washington Monthly, November 2021.

      ``To Fix the Supply Chain Mess, Take on Wall Street,'' Garphil 
Julien, Washington Monthly, December 2021.

      ``New York's Looming Food Disaster,'' Sidhartha Mahanta, 
Atlantic City Lab, October 21, 2013.

      ``A Year After Sandy, Food and Fuel Supplies Are as Vulnerable 
as Ever,'' Sidhartha Mahanta, Reuters, October 28, 2013.

      ``The Old-School Answer to Global Trade,'' Beth Baltzan, The 
Washington Monthly, April 2019.

      ``Preparing for the Next Pandemic,'' Michael T. Osterholm, 
Foreign Affairs, July/August 2005.

      ``The Fragility That Threatens,'' Barry Lynn, Financial Times, 
October 17, 2005.

                                 ______
                                 
          Questions Submitted for the Record to Barry C. Lynn
             Questions Submitted by Hon. Sheldon Whitehouse
    Question. Big tech companies have been among the most aggressive 
tax dodgers, pioneering offshore tax tricks with names like the 
``double Irish'' and ``Dutch sandwich.''

    What is the relationship between market power and large-scale tax 
avoidance?

    Answer. Bigness equals the ability to reach into more locations and 
to play those locations off one another. Bigness equals more 
complexity, hence more ways to hide or disguise profits. Bigness equals 
greater ability to force governments to bend to your will.

    Question. Many big tech companies--with the help of armies of 
lawyers and accountants--have exploited our tax laws to avoid paying 
their fair share. Smaller domestic companies that cannot avail 
themselves of these tax avoidance strategies may face a proportionally 
larger tax bill.

    How might the abuse of tax loopholes by big tech companies put 
smaller domestic companies at a competitive disadvantage?

    Answer. Big corporations already have many huge advantages over 
smaller businesses. They have more cash on hand to weather hard times. 
It's easier for them to get credit. They pay less for their supplies. 
They control more information. They have more power over government at 
the local, State, and Federal levels. For independent businesses in 
America, having to pay higher taxes relative to income is but one more 
disadvantage. But sometimes it is the factor that finally breaks the 
back of those enterprises.

    Question. Before the passage of the Trump tax law, a handful of 
giant tech companies collectively stashed hundreds of billions in 
profits in offshore tax havens. The Trump law rewarded this offshore 
tax avoidance by allowing companies to pay less than half of the tax 
rate they would have previously owed on those profits.

    Instead of using the Trump tax windfall to invest in their workers, 
their businesses, or research and development, many businesses rewarded 
wealthy shareholders with massive stock buybacks. One study found that, 
in the year the law took effect, corporations spent 154 times as much 
to buy back stock as they spent on worker bonuses and wage hikes.

    How might market concentration and monopoly profits have 
contributed to the decision by companies to choose stock buybacks over 
productive investments in their businesses and workers?

    Answer. In a competitive market, companies have to deliver. If not, 
they lose their customers to a rival who offers a better good or 
service. This means that in competitive markets, most companies will 
invest more in their factories and stores, in their workers, and in 
innovation. But Monopoly means never having to say you're sorry, no 
matter how badly you fail. Monopolists, in other words, don't have to 
deliver because their customers can't leave them for a rival. This 
frees monopolists from the need to invest in their factories and 
stores, in their workers, and in innovation. Instead, monopolists can 
charge their customers monopoly profits for bad service, then turn all 
that money over to financiers in the form of dividends and stock 
buybacks.

    Question. The Build Back Better Act includes critical reforms to 
level the playing field for domestic businesses by reversing incentives 
from the Trump tax law to shift profits overseas.

    How might other aspects of our current tax laws encourage market 
concentration?

    Answer. Over the years, Americans have devised many tax strategies 
to weaken or break the incentive to create a monopoly. The first such 
strategy was to tax the estates of the wealthy at a higher rate than 
smaller estates, and to require families to divide inheritances equally 
among all their children. Another simple approach is to tax large 
corporations at higher level than smaller corporations in the same line 
of business. In recent years, however, many of the taxation strategies 
designed to level the playing field for smaller companies have been 
overturned, making it easier for monopolists to pull ahead of their 
independent rivals. This in turn increases the incentive to make and 
keep a monopoly.

                                 ______
                                 
              Prepared Statement of Hon. Karl A. Racine, 
                 Attorney General, District of Columbia
    Chairwoman Warren, Ranking Member Cassidy, and distinguished 
members of the subcommittee, thank you for the opportunity to testify 
before you today to discuss how my office is enforcing antitrust laws 
and stopping anti-competitive behavior from tech giants.

    As the first independently elected Attorney General of the District 
of Columbia--and also the outgoing president of the bipartisan National 
Association of Attorneys General--part of my job is to bring creative 
and novel lawsuits in the public interest.

    That is why we were the first Attorney General office to bring an 
antitrust lawsuit against Amazon alleging that it is illegally 
controlling prices through restrictive agreements with third-party 
sellers that sell on Amazon's marketplace and wholesalers that feed 
Amazon's retail business.

    Amazon claims that everything it does in business is about the 
consumer. Well, even just a cursory look--and certainly our 
investigation--reveals otherwise. Amazon is focused on one thing only: 
its bottom line, even at the expense of consumers--like the ones it 
claims to care so much about. In fact, Amazon is costing all of us more 
money by controlling prices across the entire market.

    As you have said before, Senator Warren--I too, am a capitalist. A 
fair profit is more than fair. A great profit is more than fair. And 
people should get paid for entrepreneurship and hard work. But when 
companies use their market power to reduce competition and take 
advantage of consumers under the guise of creating efficiencies, 
regulators must step in.

    Right now, many families are hurting. They're trying to keep a roof 
over their heads, food on the table, and clothes on their back. And if 
they're lucky, maybe afford a few Christmas presents. But Amazon's 
pricing policies contribute to making that unattainable.

    Now, let me give you a little bit of background on how we decided 
Amazon isn't acting fairly, why we're suing them, and why consumers 
deserve better.

    Back in 2019, Amazon was facing pressure from Congress and 
regulators over anticompetitive behavior. To put regulators at ease, 
Amazon claimed it removed a clause in its agreements with third-party 
sellers known as its Price Parity Provision (or PPP)--that prohibited 
third-party sellers from offering their goods for lower prices or on 
better terms on competing online marketplaces, including the third-
party sellers' own websites.

    Spoiler alert: Amazon did a bait-and-switch by replacing the Price 
Parity Provision with something nearly identical. Amazon called it the 
Fair Pricing Policy (or FPP), which was incorporated into Amazon's 
agreements with third-party sellers.

    The Fair Pricing Policy, like the original Price Parity Provision, 
effectively prohibited third-party sellers from offering their products 
for lower prices or under better terms on a competing online platform--
including their own--by allowing Amazon to impose sanctions on those 
third-party sellers that did so.

    Let me give an example of how this works. If I'm a third-party 
seller selling headphones and I want to list my product on Amazon, I 
must do the following: sell the headphones at a price on the Amazon 
marketplace that allows me to still earn a reasonable profit after 
incorporating Amazon's high fees and commissions. Then, I'm barred from 
selling my headphones on any other platform, including my own website, 
at a lower price, even though I could earn the same profit by doing so. 
And if I do, I--the third-party seller--could get kicked off of Amazon 
or have other significant sanctions imposed on me.

    This leaves third-party sellers with two choices. They can sell 
their product on Amazon under these restrictive terms. Or they can only 
offer their product on other marketplaces. But because Amazon controls 
between 50-70 percent of all online sales, third-party sellers have 
little choice but to accept Amazon's terms.

    These agreements impose an artificially high price floor across the 
online retail marketplace. By charging such high fees--as much as 40 
percent of the product price--Amazon is inflating the prices for 
consumers on its platform and competing platforms. For example, if I'm 
selling a pair of headphones for $100 on Amazon, up to $40 dollars of 
that price is to cover Amazon's fees. Plain and simple, this is 
inflation.

    And consumers lose in this scheme. As a result of Amazon's 
agreements, consumers think they're getting the lowest prices on 
Amazon's marketplace because they don't see any lower prices on other 
online marketplaces. But, absent these agreements, third-party sellers 
could offer their products for lower prices on other online 
marketplaces.

    And Amazon isn't just doing this with third-party sellers, they're 
doing it with wholesalers as well--so we added that to our lawsuit too. 
First-party sellers sell products to Amazon for Amazon to resell at 
retail to consumers. And we've found that Amazon requires wholesalers 
to guarantee a certain minimum profit to Amazon on those products. This 
agreement is called the Minimum Margin Agreement (MMA).

    This is how it works: if Amazon lowers its retail prices to match 
or beat a lower price on a competing online marketplace, the 
wholesalers are forced to pay Amazon the difference between the agreed-
upon profit and what Amazon realizes with the lowered retail price. 
This can lead to wholesalers owing Amazon millions of dollars.

    To avoid triggering this agreement, wholesalers have increased the 
prices to and on competing online marketplaces. The Minimum Margin 
Agreement, like the Price Parity Provision and the Fair Pricing Policy, 
reduce competing online marketplaces' abilities to compete with 
Amazon's marketplace on price and result in consumers paying 
artificially high prices.

    And even outside of this litigation, small businesses have 
complained that Amazon has stolen their business ideas and passed them 
off as Amazon's own. All of this can stunt innovation.

    With this suit, we hope the Court will put a stop to Amazon's use 
of illegal price restraints. And we hope to recover damages and 
penalties to deter similar conduct by Amazon and other companies in the 
District as well as across the country.

    We also hope that our lawsuit will encourage other Attorneys 
General in other States to find creative and impactful ways to rein in 
the abuses of big tech and stand up for consumers.

    Thank you, and I look forward to your questions.

                                 ______
                                 
          Follow-Up Written Statement by Hon. Karl A. Racine, 
                 Attorney General, District of Columbia
    Chairwoman Warren, Ranking Member Cassidy, and distinguished 
members of the subcommittee, thank you for the opportunity to testify 
before you on December 7th to discuss how my office is enforcing 
antitrust laws and stopping anticompetitive behavior from tech giants.

    My office was the first Attorney General office in the country to 
bring an antitrust lawsuit against Amazon, alleging that it is 
illegally controlling prices through restrictive agreements with third-
party sellers that sell on Amazon's marketplace and wholesalers that 
feed Amazon's retail business.

    Below is a quick recap of why my office brought an antitrust 
lawsuit and why it's important for consumers:

        1.  As a result of these agreements (the Price Parity 
        Provision, the Fair Pricing Policy and the Minimum Margin 
        Agreement), third-party sellers and wholesalers cannot offer 
        their products for lower prices on a competing online 
        platform--including their own--or else Amazon will impose 
        sanctions on the seller. These agreements are artificially 
        inflating prices, stifling innovation, and harming consumers.

        2.  Because Amazon controls between 50 to 70 percent of all 
        online retail sales, third-party sellers and wholesalers have 
        little choice but to offer their products on and to Amazon and 
        accept their anticompetitive terms.

        3.  We are asking the court to put a stop to Amazon's use of 
        illegal price restraints and recover damages and penalties to 
        deter similar conduct in the future.

    In addition, I respectfully raise one more issue for this 
subcommittee's awareness. According to an April 2020 article from The 
Wall Street Journal (see below), Amazon employees have used data about 
independent sellers on the company's platform to develop competing 
products--a practice that is at odds with Amazon's stated policies.

    To be sure, our office has fielded complaints from small businesses 
about this insidious business practice. For example, a company called 
Snap + Style began as an app that allows people to snap a picture of an 
article of clothing and then get advice on additional clothes that 
would match the photographed wardrobe item. The company contracted with 
Amazon to sell its services on Amazon's ubiquitous Internet mall. After 
experiencing success on the Amazon cyber-mall, Snap + Style faced 
extraordinary competition from a company with a nearly identical 
technology, and eventually saw its early business success dry up. That 
competitor was the largest storefront on the Internet itself--Amazon. 
Yes, Amazon brazenly started competing against its client by 
effectively inverting the client's name from Snap + Style to its 
brand--StyleSnap.

    Monopoly and economic principles 101 tell us that such power 
crushes creativity, entrepreneurship, and small business. More examples 
of this type of conduct are stated in the previously referenced Wall 
Street Journal article below.

                                 ______
                                 

              From The Wall Street Journal, April 23, 2020

              Amazon Scooped Up Data From Its Own Sellers 
                      to Launch Competing Products

                            By Dana Mattioli

Amazon.com Inc. employees have used data about independent sellers on 
the company's platform to develop competing products, a practice at 
odds with the company's stated policies.

The online retailing giant has long asserted, including to Congress, 
that when it makes and sells its own products, it doesn't use 
information it collects from the site's individual third-party 
sellers--data those sellers view as proprietary.

Yet interviews with more than 20 former employees of Amazon's private-
label business and documents reviewed by The Wall Street Journal reveal 
that employees did just that. Such information can help Amazon decide 
how to price an item, which features to copy or whether to enter a 
product segment based on its earning potential, according to people 
familiar with the practice, including a current employee and some 
former employees who participated in it.

In one instance, Amazon employees accessed documents and data about a 
best-
selling car-trunk organizer sold by a third-party vendor. The 
information included total sales, how much the vendor paid Amazon for 
marketing and shipping, and how much Amazon made on each sale. Amazon's 
private-label arm later introduced its own car-trunk organizers.

``Like other retailers, we look at sales and store data to provide our 
customers with the best possible experience,'' Amazon said in a written 
statement. ``However, we strictly prohibit our employees from using 
nonpublic, seller-specific data to determine which private label 
products to launch.''

Amazon said employees using such data to inform private-label decisions 
in the way the Journal described would violate its policies, and that 
the company has launched an internal investigation.

Nate Sutton, an Amazon associate general counsel, told Congress in 
July:\1\ ``We don't use individual seller data directly to compete'' 
with businesses on the company's platform.
---------------------------------------------------------------------------
    \1\ https://www.wsj.com/articles/congress-puts-big-tech-in-
crosshairs-11563311754?mod=article
_inline.

It is a common business strategy for grocery chains, drugstores and 
other retailers to make and sell their own products to compete with 
brand names.\2\ Such private-label items typically offer retailers 
higher profit margins than either well-known brands or wholesale items. 
While all retailers with their own brands use data to some extent to 
inform their product decisions, they have far less at their disposal 
than Amazon, according to executives of private-label businesses, given 
Amazon's enormous third-party marketplace.
---------------------------------------------------------------------------
    \2\ https://www.wsj.com/articles/how-kirkland-signature-became-one-
of-costcos-biggest-success-stories-1505041202?mod=article_inline.

The coronavirus pandemic has enabled Amazon to position itself as a 
national resource capable of delivering needed goods to Americans 
sheltering in place,\3\ garnering it goodwill in Washington. The 
company continues, however, to face regulatory inquiries into its 
practices that predate the crisis.
---------------------------------------------------------------------------
    \3\ https://www.wsj.com/articles/amazon-to-hire-100-000-warehouse-
and-delivery-workers-amid-coronavirus-shutdowns-
11584387833?mod=article_inline.

Last year, the European Union's top antitrust enforcer said that it was 
investigating whether Amazon is abusing its dual role as a seller of 
its own products and a marketplace operator \4\ and whether the company 
is gaining a competitive advantage from data it gathers on third-party 
sellers.
---------------------------------------------------------------------------
    \4\ https://www.wsj.com/articles/european-union-probing-amazon-s-
treatment-of-merchants-using-its-platform-
1537367673?mod=article_inline.

The Justice Department, Federal Trade Commission and Congress also are 
investigating large technology companies,\5\ including Amazon, on 
antitrust matters. Amazon is facing scrutiny over whether it unfairly 
uses its size and platform against competitors and other sellers on its 
site. Amazon disputes that it abuses its power and size, noting that it 
accounts for a small proportion of overall U.S. retail sales, and that 
the use of private-label brands is common in retail.
---------------------------------------------------------------------------
    \5\ https://www.wsj.com/articles/justice-department-to-open-broad-
new-antitrust-review-of-big-tech-companies-
11563914235?mod=article_inline.

Amazon has said it has restrictions in place to keep its private-label 
executives from accessing data on specific sellers in its marketplace, 
where millions of businesses from around the globe offer their goods. 
In interviews, former employees and a current one said those rules 
weren't uniformly enforced. Employees found ways around them, according 
to some former employees, who said using such data was a common 
---------------------------------------------------------------------------
practice that was discussed openly in meetings they attended.

``We knew we shouldn't,'' said one former employee who accessed the 
data and described a pattern of using it to launch and benefit Amazon-
products. ``But at the same time, we are making Amazon-branded 
products, and we want them to sell.''

Some executives had access to data containing proprietary information 
that they used to research best-selling items they might want to 
compete against, including on individual sellers on Amazon's website. 
If access was restricted, managers sometimes would ask an Amazon 
business analyst to create reports featuring the information, according 
to former workers, including one who called the practice ``going over 
the fence.'' In other cases, supposedly aggregated data was derived 
exclusively or almost entirely from one seller, former employees said.

Amazon draws a distinction between the data of an individual third-
party seller and what it calls aggregated data, which it defines as the 
data of products with two or more sellers. Because of the size of 
Amazon's marketplace, most products have many sellers. Viewing the data 
of aproduct with a number of sellers wouldn't give it insight into 
proprietary seller information because the figures would show lots of 
different seller behavior.

Amazon said that if there is only one seller of an item, and Amazon is 
selling returned or damaged versions of that item through its Amazon 
Warehouse Deals clearance account, Amazon considers that ``aggregate'' 
data--and hence is permissible for its employees to review.

Amazon's private-label business encompasses more than 45 brands with 
some 243,000 products, from AmazonBasics batteries to Stone & Beam 
furniture. Amazon says those brands account for 1% of its $158 billion 
in annual retail sales, not counting Amazon's devices such as its Echo 
speakers, Kindle e-readers and Ring doorbell cameras.

Former executives said they were told frequently by management that 
Amazon brands should make up more than 10% of retail sales by 2022. 
Managers of different private-label product categories have been told 
to create $1 billion businesses for their segments, they said.

Amazon has a history of difficult relationships with sellers, 
especially those that choose not to sell their products on its site.\6\ 
While some of the issues have involved counterfeit goods or frustration 
about lack of pricing control on their products, another concern for 
some is that Amazon would use data they accumulate to copy the products 
and siphon sales.
---------------------------------------------------------------------------
    \6\ https://www.wsj.com/articles/nike-to-stop-selling-directly-to-
amazon-11573615633?mod=
article_inline.

Because 39% of U.S. online shopping occurs on Amazon, according to 
research firm eMarketer, many brands feel they can't afford not to sell 
on the platform. In a recent survey from e-commerce analytics firm 
Jungle Scout, more than half of over 1,000 Amazon Marketplace sellers 
said Amazon sells its own products that directly compete with the 
---------------------------------------------------------------------------
seller's products.

``We had a brand say they wanted to sell exclusively on Walmart,\7\ and 
when we proposed Amazon, they said they don't want to risk private-
label copying of their product,'' said Kunal Chopra, the CEO of etailz, 
which helps vendors sell across platforms.
---------------------------------------------------------------------------
    \7\ https://www.wsj.com/market-data/quotes/WMT.

Early last year, an Amazon private-label employee working on new 
products accessed a detailed sales report on a car-trunk organizer 
manufactured by a third-party seller called Fortem, a four-person, 
Brooklyn-based company run by two 29-year-olds. That employee showed 
the report to the Journal. More than 33,000 units of the organizer were 
sold during the 12 months covered in the report, according to a copy 
reviewed by the Journal. The report has 25 columns of detailed 
---------------------------------------------------------------------------
information about Fortem's sales and expenses.

Fortem accounted for 99.95% of the total sales on Amazon for the trunk 
organizer for the period the documents cover, the data indicate. Oleg 
Maslakou, one of Fortem's founders, said ``no one is selling the Fortem 
organizer besides us and Amazon Warehouse Deals,'' a resale clearance 
account of returned or damaged goods from Fortem. ``You hit us with a 
big surprise,'' he said after reviewing the data Amazon's private-label 
employee had on his brand.

Amazon said that there was one other seller of Fortem's trunk organizer 
during the period of the data the Journal reviewed. It wouldn't comment 
on how many days that seller was active or how many sales it made. The 
Journal reached the other seller of the Fortem trunk organizer, who 
said for the period of time, he sold only 17 units of the item. 
Fortem's own sales and a slight number of its own damaged goods and 
returns sold through Amazon's Warehouse Deals account accounted for 
nearly 100% of the more than 33,000 sales of the unit during the 
period, the data show.

The data in the report reviewed by the Journal showed the product's 
average selling price during the preceding 12 months was about $25, 
that Fortem had sold more than $800,000 worth in the period specified, 
and that each item generated nearly $4 in profit for Amazon. The report 
also detailed how much Fortem spent on advertising per unit and the 
cost to ship each trunk organizer, according to the documents and 
former Amazon employees who explained their contents.

``We would work backwards in terms of the pricing,'' said one of the 
people who used to obtain third-party data. By knowing Amazon's profit-
per-unit on the third-party item, they could ensure that prospective 
manufacturers could deliver a higher margin on an Amazon-branded 
competitor product before committing to it, said another person who 
accessed the data.

Fortem launched its trunk organizer on Amazon's Marketplace in March 
2016, and it eventually became the number one seller in the category on 
Amazon. In October 2019, Amazon launched three trunk organizers similar 
to Fortem's under its AmazonBasics private-label brand.

The Fortem trunk organizer detailed in the documents is still a 
bestseller in the category, Amazon noted. Fortem spends as much as 
$60,000 a month on Amazon advertisements for its items to come up at 
the top of searches, said Mr. Maslakou.

Pulling data on competitors, even individual sellers, was ``standard 
operating procedure'' when making products such as electronics, 
suitcases, sporting goods or other lines, said the person who shared 
the Fortem documentation. Such reports were pulled before Amazon's 
private label decided to enter a product line, the person said.

``Customers' shopping behavior in our store is just one of many inputs 
to Amazon's private-label strategy,'' said Amazon. Other factors 
include fashion and shopping trends and suggestions from manufacturers, 
it said.

Amazon employees also accessed sales data from Austin-based Upper 
Echelon Products, according to the data reviewed by the Journal. Its 
office-chair seat cushion is a popular seller on Amazon. An Amazon 
private-label employee pulled a year's worth of Upper Echelon data when 
researching development of an Amazon-branded seat cushion, according to 
the person who shared the data.

An Amazon employee pulled the data early last year. Last September, 
AmazonBasics launched its own version.

After the Journal disclosed the contents of the sales report to Travis 
Killian, CEO of seven-person Upper Echelon, he said: ``It's not a 
comfortable feeling knowing that they have people internally 
specifically looking at us to compete with us.''

Amazon said there were more than two dozen sellers of the Upper Echelon 
seat cushion during the period, but declined to specify how many units 
those sellers sold. Mr. Killian said if that were the case, he isn't 
sure how the private-label data on his seller account provided to the 
Journal matched his internal sales data so perfectly.

In traditional retail, a company such as Target \8\ Corp. or Kroger \9\ 
Co. places a weekly purchase order with the brands on its shelves. It 
subsequently owns the inventory, setting the price and discounts.
---------------------------------------------------------------------------
    \8\ https://www.wsj.com/market-data/quotes/TGT.
    \9\ https://www.wsj.com/market-data/quotes/KR.

Because of the limitations of shelf space, traditional retailers stock 
far fewer products than Amazon's hundreds millions of items. Typically, 
they create private-label products to compete in generic categories 
such as paper towels, rather than copycat versions of items created by 
smaller entrepreneurs, private-label executives said. Amazon said the 
vast majority of its private-label sales are staples such as batteries 
---------------------------------------------------------------------------
and baby wipes.

The majority of Amazon's sales--58%--come through third-party sellers, 
primarily small and medium-size firms that list their items for sale on 
Amazon's Marketplace platform. (Amazon also buys items directly from 
manufacturers and sells them directly in ``first-party'' sales.)

Amazon started making its own products in 2007 with its Kindle e-
reader, and it has steadily added new categories and other private-
label brand names. Some of its private-label products,\10\ such as 
batteries, have been home runs. Investment firm SunTrust Robinson 
Humphrey estimates Amazon is on track to post $31 billion in private-
label sales by 2022, or nearly double retailer Nordstrom \11\ Inc.'s 
2019 revenues.
---------------------------------------------------------------------------
    \10\ https://www.wsj.com/articles/amazon-tests-pop-up-feature-
touting-its-lower-priced-products-11552655614?mod=article_inline.
    \11\ https://www.wsj.com/market-data/quotes/JWN.

                                 ______
                                 
 Prepared Statement of Samm Sacks, Senior Fellow, Yale Law School Paul 
    Tsai China Center; and Cybersecurity Policy Fellow, New America
    Chair Warren, Ranking Member Cassidy, and members of the 
subcommittee, thank you for the opportunity to testify today.

    I am a senior fellow at Yale Law School's Paul Tsai China Center 
and a cybersecurity policy fellow at New America. I have worked as an 
analyst of Chinese data and technology policies for the last decade, in 
the U.S. national security community, and in the private sector. I also 
advise corporate clients on China's technology policies.

    Today I will focus my testimony on data security in the context of 
the U.S.-China relationship and global cross-border data flows.

    While my expertise focuses on China--and I will first speak 
specifically about the Chinese Government's approach to acquiring and 
extracting value from data--my view is that the most effective 
solutions for the United States require a more comprehensive approach 
to regulating data security and privacy. Some of these challenges 
require tools that are specific to risks posed by China, but these 
issues are bigger than China. Setting basic standards on what data can 
be collected and retained by all companies will help protect U.S. 
personal and other sensitive data, regardless of whether the risk comes 
from a state-sponsored hacker, a data broker, or a private company 
transferring the data to China. U.S. lawmakers have an opportunity to 
address transnational security threats while also advancing a more 
secure, ethical, and democratic global Internet in its own right.
                     china's national data strategy
    1.  The Chinese Government has embarked on an ambitious national 
data strategy with the goal of acquiring, controlling, and extracting 
value from large volumes of data.

    In addition to China's two landmark laws that took effect this fall 
(the Data Security Law and Personal Information Protection Law \1\), 
Beijing has elevated the concept of data as an economic and strategic 
asset,\2\ centralizing state power over information flows within and 
outside of China's borders:
---------------------------------------------------------------------------
    \1\ For translation and analysis of the Data Security Law, Personal 
Information Protection Law, and related regulations and directives, 
please see the Stanford Cyber Policy Center's DigiChina Project, 
https://digichina.stanford.edu/.
    \2\ The concept of data as a strategic resource is not new in 
China. It appears in the Big Data White Papers (2014, 2016, 2018) 
published by an influential think tank under the Ministry of Industry 
Information Technology (MIIT), as well as in the Big Data Strategy 
(2017). The 13th Five Year Plan (2016-2020) calls for ``fully 
implementing the promotion of the big data development initiatives and 
accelerating the sharing of data resources and development of 
applications, to assist in industrial transformation and upgrading. . . 
. ''

        -  An April 2020 directive issued by the State Council and 
        Central Committee of the Chinese Communist Party (CCP) 
        designates data as the fifth factor of production--after land, 
        labor, capital, and technology.\3\ At the National People's 
        Congress in March 2021, the outline of the 14th Five-Year plan 
        called for ``improving the market of data factors,'' and 
        stressing the need to unlock the value of data to fuel the 
        digital economy.\4\
---------------------------------------------------------------------------
    \3\ Ouyang Shijia, ``New guideline to better allocate production 
factors,'' April 10, 2020, China Daily, https://www.chinadaily.com.cn/
a/202004/10/WS5e903fd7a3105d50a3d15620.html.
    \4\ Sina Online, ``What Is the Meaning of the `14th Five-Year Plan' 
Outline (Draft) to Improve the Market of Data Elements?'', March 5, 
2021, https://finance.sina.com.cn/china/2021-03-05/doc-
ikftssaq1688850.shtml.

        -  On November 30th of this year, China's Ministry of Industry 
        and Information Technology released the 14th Five Year Plan 
        (2021-2025) for China's big data industry. The plan defines big 
        data as a strategic emerging industry, slated for greater state 
        support to unlock the value of data. State supporting measures 
        focus on expanding ``international cooperation'' between 
        Chinese and foreign ``big data services'' companies in standard 
        setting and research and development (R&D), and encourage 
        multinationals to set up R&D centers in China. By 2025, the 
        plan calls for China to set up new mechanisms to facilitate 
        China's role in data trading and cross-border transfers and 
        ``encourages Chinese firms to offer big data services in Belt 
---------------------------------------------------------------------------
        and Road Initiative (BRI) countries and regions.''

    Beijing is also taking steps to centralize state control over data 
by breaking down silos or data islands across different government 
ministries and between the government and private companies, which have 
long plagued the government's ability to aggregate and coordinate data. 
Barriers to data sharing are due to a variety of reasons. Chinese 
companies are reluctant to share their data as valuable commercial 
intellectual property, while government agencies often push back 
against one another's access requests, guarding their data as a form of 
political power.\5\
---------------------------------------------------------------------------
    \5\ Yuan Yang and Nian Liu, ``Alibaba and Tencent refuse to hand 
loans data to Beijing,'' Financial Times, September 18, 2019, https://
www.ft.com/content/93451b98-da12-11e9-8f9b-77216ebe1f17; Martin 
Chorzempa, Paul Triolo, Samm Sacks, ``China's Social Credit System: A 
Mark of Progress or a Threat to Privacy?'', Peterson Institute for 
International Economics Policy Brief, June 2018, https://www.piie.com/
publications/policy-briefs/chinas-social-credit-system-mark-progress-
or-threat-privacy; Samm Sacks testimony before Senate Judiciary 
Committee hearing ``Dangerous Partners: Big Tech and Beijing,'' March 
4, 2020, https://www.
judiciary.senate.gov/imo/media/doc/Sacks%20Testimony.pdf; Amba Kak and 
Samm Sacks, ``Shifting Narratives and Emerging Trends in Global Data 
Governance Policy,'' AI Now and Yale Law School Paul Tsai China Center 
Policy Report, August 21, 2021, https://law.yale.edu/sites/default/
files/area/center/china/document/shifting--narratives.pdf.

    An article by the Tencent Research Institute argues for 
facilitating more data flows to China's large tech platforms. Citing an 
International Data Corporation (IDC) estimate, the article states that 
``by 2025, the proportion of the world's data held by [China] will 
increase from 23.4 percent in 2018 to 27.8 percent, making China the 
first in the world. The open use of data resources will determine 
whether our country can seize the initiative in a new round of 
international competition and guarantee national data security through 
the development and growth of the digital industry.''\6\
---------------------------------------------------------------------------
    \6\ Chen Weixuan et al., ``Data Production Factors in the Framework 
of Macroeconomic Growth: History, Theory and Prospects,'' Tencent 
Research Institute, June 12, 2020, https://tisi.org/14625.

    What are the implications for the United States of China's domestic 
and international efforts to acquire and make use of data as a 
---------------------------------------------------------------------------
strategic asset?

    2.  Understanding China's motivations and different scenarios for 
how aggregated datasets could be used by the Chinese Government is 
vital for creating effective U.S. policy.

    There are concerning potential uses of U.S. personal data from a 
national security perspective. Beijing is already presumed to have 
sensitive national security information from the theft of personnel 
records of roughly 21 million individuals from the U.S. Office of 
Personnel Management; travel information from a cyberattack on Marriott 
hotels covering roughly 400 million records; and credit data from 
Equifax on roughly 145 million people.\7\ If additional sources of 
personal data such as location, social media, or pattern of life data 
were to be acquired or bought openly through unregulated data brokers 
and combined with what Beijing has already acquired through cyber-
theft, Chinese security services could use it to target individuals in 
sensitive government national security positions or military personnel 
for manipulation, blackmail, or other forms of coercion. This is 
particularly concerning from a counterintelligence perspective for 
individuals with security clearances or those with access to critical 
infrastructure.
---------------------------------------------------------------------------
    \7\ ``China's Collection of Genomic and Other Healthcare Data from 
America: Risks to Privacy and U.S. Economic and National Security,'' 
National Counterintelligence and Security Center Fact Sheet, February 
2021.

    As Chinese online services and network infrastructure gain in 
prominence around the world, it is also possible that the Chinese 
Government could filter or monitor data processes abroad, just as the 
United States had done, as shown by Snowden, in utilizing data 
transmissions across U.S. networks for intelligence gathering. We also 
simply do not know what value and harm data created today will have in 
the future, regardless of who has access to it. As we move toward a 
world in which people have online profiles built on aggregated data, we 
must ask: what are the implications of the CCP gaining effective 
control of information flows beyond China's closed Internet system? 
What are the implications as the CCP takes even more drastic steps to 
close off the loopholes that to this day keep even the Great Firewall 
relatively porous and circumventable \8\ (e.g., stricter enforcement of 
restrictions on virtual private networks (VPNs) or shifting from a 
blacklist to a whitelist approach to permissible websites so technical 
controls can keep pace with online content deemed threatening)?
---------------------------------------------------------------------------
    \8\ Magaret Roberts assesses China's Great Firewall relies on 
``friction-based censorship'' that ``works through distraction and 
diversion. It nudges--but does not force--most users away from unsavory 
material. This framing of censorship, Roberts says, helps explain why, 
even though China's Great Firewall is porous and can be circumvented, 
the number of people who `jump the wall' using a virtual private 
network (VPN) remains relatively low. People are not necessarily afraid 
of legal or political consequences of using a VPN, but rather the 
process of doing so is deemed too bothersome or offers too little value 
for the effort in most people's day-to-day lives.'' Stanford Freeman 
Spogli Institute, March 6, 2020, https://fsi.stanford.edu/news/
china%E2%
80%99s-great-firewall-built-friction-based-censorship-says-margaret-
roberts.

    At the same time, the Chinese Government's use of data is not 
monolithic. Different actors are seeking data not just for security and 
surveillance, but also as fuel for the digital economy and other basic 
administrative functions. Outside observers of China often view 
Beijing's actions solely through the lens of security, neglecting the 
economic development drivers that play an important role. China's Data 
Security Law makes explicit that security and development must be 
balanced in China's data-governance system. These two competing 
priorities have shaped China's cyber bureaucracy for years. This 
longstanding internal source of friction and negotiation has 
contributed, at least in part, to the Chinese Government not 
necessarily enforcing to date the strictest or most conservative 
security-oriented readings of Chinese cybersecurity laws and 
regulations. An entire early chapter of the Data Security Law was 
dedicated to this balance, indicating a recognition by Chinese 
authorities that state power hinges not only on security of data, but 
also on its commercial use, and that China must therefore find an 
effective way to leverage both at once. This duality also is driving an 
ambitious national effort to classify all data resources held by 
government and industry by category and grade (``categorized and graded 
protection system for data''). The goal is to distinguish less 
sensitive data for circulation to fuel the economy from data that 
---------------------------------------------------------------------------
should be locked down with tighter security restrictions.

    As China grows in prosperity, and its leadership seeks to assert 
state control over data for both strategic and economic gain, the 
United States must also develop a comprehensive vision and regulation 
to maintain leadership. Leading Chinese data scholar Dr. Hong Yanqing 
writes that ``China should also consider how to enable Chinese 
enterprises to control and use more data globally. After all, the 
United States can extend its `arm' because its enterprises are all over 
the world.'' Hong observes that Chinese tech companies need access to 
global data flows, and that if the United States and the European Union 
are able to align on digital policies, China will be at a disadvantage 
of creating split products for different markets (for example, 
Bytedance segmenting its global and Chinese versions of the apps TikTok 
and Douyin). He adds that this approach ``prevents Chinese ICT 
companies from upgrading services by using a global data pool and 
limits the gains from the economies of scale. Once the United States 
and the European Union reach an agreement, at least their enterprises 
can avoid data localization and segregating storage, which puts Chinese 
ICT enterprises at a disadvantage.''\9\
---------------------------------------------------------------------------
    \9\ Hong Yanqing, ``Game of Laws: Cross-Border Data Access for Law 
Enforcement Purposes,'' trans. Yale Law School Paul Tsai China Center, 
originally published in Global Law Review in Chinese. This article is 
the result of a special 2018 project by the Ministry of Justice, ``Big 
Data and Cybersecurity Legislation'' (18SFB1005), in which the author 
participated, https://law.yale.edu/sites/default/files/area/center/
china/document/game_of_laws-7.pdf.

    Inaction by the United States will result in failure to create the 
interoperable coalition on data that Chinese leaders fear. Stalled 
progress on Privacy Shield and a global vision for data flows like APEC 
Cross-Border Privacy Rules underscore the challenges ahead.
                            recommendations
    To be effective, U.S. policy should be based on an accurate 
understanding of why data matters. The analogy of data as the new oil 
is false, and leads to bad policy that treats data as a finite and 
zero-sum resource that is only valuable in large volumes. Matt Sheehan 
writes that five dimensions are crucial for machine learning data 
today: quantity, depth, quality, diversity, and access.\10\ This 
understanding of data's value matters because it means that policies by 
Beijing or Washington that seek to hoard or wall off data as a national 
resource from the other could have unintended consequences that lessen 
national power, rather than increase it.
---------------------------------------------------------------------------
    \10\ Matt Sheehan, ``Much Ado About Data: How America and China 
Stack Up,'' Macro Polo, June 16, 2019, https://macropolo.org/ai-data-
us-china/?rp=e.

    Lack of regulation in the United States makes Americans' sensitive 
data vulnerable to privacy and security harms not only from 
sophisticated state-backed cyber intrusions, but also from the 
unregulated industry of data brokers around the world trading in 
consumer data without transparency or controls. Setting basic standards 
on what data can be collected and retained by all companies will help 
protect U.S. personal data, regardless of where the risk originates. 
Developing a comprehensive Federal privacy law that includes 
restrictions on data brokers is vital to this effort, along with the 
creation of strong enforcement mechanisms. Inaction by the United 
States means ceding leadership and influence in setting international 
---------------------------------------------------------------------------
standards to both Europe and China in setting international standards.

    Without higher standards for data security and privacy, U.S. 
citizen data held by unregulated private companies are more vulnerable 
to breaches by hackers from China or from being sold to third-parties 
openly buying, aggregating, and selling consumer data. For example, 
Equifax's many security issues are well-documented, such as the 
company's failure to patch known vulnerabilities that ultimately left 
exposed the data of 145 million Americans. But the hack was also 
conducted by a foreign government entity with sophisticated hacking 
capabilities and access to considerable state resources. Companies 
should not have access to such a volume of personal data that it 
creates a target to be hacked or transmitted to China.

    This reality is also why bans on Chinese software applications are 
not an effective way to secure Americans' data. Even if TikTok were 
American-owned, for example, it could still legally sell data to data 
brokers that could transmit it to China's security services.

    Given this, American data is shockingly exposed and will remain 
that way so long as restrictions on data flows only focus on specific 
companies from countries deemed adversaries.

    Debate over a range of issues will make progress on a federal 
privacy law slow. In the meantime, having baseline rules for the data 
broker industry would contribute to closing off vectors that make 
American's data vulnerable to exploitation by a range of actors.

    We must also keep in mind that U.S. actions to respond to data 
security risks posed by the Chinese Government are not occurring in a 
vacuum. Our policy approach should be tailored to take into account the 
fact that technology competition with China will not only play out in 
the United States and China, but also in other parts of the world from 
India to Europe. How we respond to Chinese companies operating in the 
United States has ramifications on whether other countries are willing 
to accept our vision of data governance.

    The ability of U.S. firms to maintain a high rate of innovation 
depends upon access to global markets, talent, and, perhaps most 
important, datasets. But rising data sovereignty policies around the 
world are an increasing obstacle to the ability of U.S. companies to 
operate internationally, beyond China. These policies are an effort by 
nation-states to ensure control over data by prohibiting transfers of 
data out of the country or seeking to limit foreign access to certain 
kinds of data. In this context, U.S. actions will be a reference and a 
roadmap for other governments that are concerned about U.S. companies 
and the U.S. government getting access to their citizens' data.

    The United States should work with like-minded governments to 
develop a common set of standards that would allow data to flow--
building off of the concept of ``data free flows with trust'' put 
forward by Japan.\11\ A multilateral approach should be based on 
creating a system of incentives for compliance. The United States could 
lead the way in setting up a certification system that would extend 
benefits to countries whose data regimes and companies meet certain 
clear criteria for data protection. The OECD privacy guidelines, for 
example, could serve as a reference in creating a baseline for 
commercial data flows.\12\
---------------------------------------------------------------------------
    \11\ ``Data Free Flow with Trust (DFFT): Paths towards Free and 
Trusted Data Flows,'' World Economic Forum, https://www.weforum.org/
whitepapers/data-free-flow-with-trust-dfft-paths-towards-free-and-
trusted-data-flows.
    \12\ ``The OECD Privacy Framework,'' Organisation for Economic Co-
operation and Development, 2013, https://www.oecd.org/sti/ieconomy/
oecd_privacy_framework.pdf.

    We need to address national security risks where they exist, but 
that should be done as one part of a broader U.S. initiative for 
comprehensive data privacy and higher cybersecurity standards for all 
companies --whether domestic or foreign. Failure to offer a compelling 
vision for U.S. data governance will make the United States less 
secure, less prosperous, and less powerful, and allow more space around 
---------------------------------------------------------------------------
the world for companies controlled by the CCP to flourish.

                                 ______
                                 
 Prepared Statement of Justin Sherman, Fellow and Research Lead, Data 
  Brokerage Project, Sanford School of Public Policy, Duke University
    Chair Warren, Ranking Member Cassidy, and distinguished members of 
the subcommittee, I appreciate the opportunity to testify about privacy 
issues facing American citizens.

    I am a fellow at Duke University's Sanford School of Public Policy, 
where I lead a research project focused on the data brokerage 
ecosystem. We study the virtually unregulated industry and practice of 
data brokerage--the collection, aggregation, analysis, buying, selling, 
and sharing of data--and its impacts on civil rights, national 
security, and democracy. I am also affiliated with the Atlantic Council 
and with American University Washington College of Law, where I work on 
cybersecurity, Internet policy, and geopolitical issues.

    Data brokerage is a threat to civil rights, to U.S. national 
security, and to democracy. The entire data brokerage ecosystem--from 
companies whose entire business model is data brokerage, to the 
thousands of other advertisers, technology giants, and companies that 
also buy, sell, and share Americans' personal data--profits from 
unregulated surveillance of every American, particularly the most 
vulnerable. While I support a strong, comprehensive consumer privacy 
law, Congress must not wait to resolve the debate over such a law to 
regulate the data brokerage industry.

    There are three steps Congress should take now:

        Strictly control the sale of data collected by data brokers to 
foreign companies, citizens, and governments;
        Strictly control the sale of data in sensitive categories, 
like genetic and health information and location data; and
        Stop data brokers from circumventing those controls by 
``inferring'' data.
                       the data brokerage problem
    Today, and for several decades, thousands of companies have 
surreptitiously collected data from public and private sources about 
each and every American. Often, these companies will use tools to 
``infer'' additional data about each American. These companies then 
repackage and resell that data on the open market, with very few 
controls. This is the data brokerage ecosystem.

    Data brokerage is a virtually unregulated practice in the United 
States (except for two, limited State laws and some narrowly targeted 
Federal regulations discussed below). Brokered data is used to target 
consumers, marginalized communities, veterans, military service 
members, government employees, first responders, students, and 
children. Too often, this targeting is exploitative.

        Military personnel: Data brokers advertise data about millions 
of U.S. military personnel. Criminals have acquired this data to run 
educational scams against veterans because of Federal military 
benefits.\1\ Foreign governments could acquire this data to profile 
military personnel, track them and their families, and otherwise 
undermine U.S. national security. The Chinese Government's 2015 hack of 
the Office of Personnel Management was one of the most damaging data 
breaches the Federal Government has suffered--yet, in the future, there 
is no need for the Chinese Government or any other foreign intelligence 
agency to even hack many U.S. Government databases when the data can be 
legally purchased from American data brokers, who problematically 
appear to do very little customer vetting.
---------------------------------------------------------------------------
    \1\ Tariq Habash and Mike Saunders, ``The Predatory Underworld of 
Companies that Target Veterans for a Buck,'' Student Borrower 
Protection Center, February 1, 2019, https://protectborrowers.org/the-
predatory-underworld-of-companies-that-target-veterans-for-a-buck/.

        Survivors of domestic violence: Data brokers known as ``people 
search websites'' aggregate millions of Americans' public records and 
make them available for search and sale online. Abusive individuals 
have used this data--including highly sensitive information on 
individuals' addresses, whereabouts, property filings, contact details, 
and family members--to hunt down and stalk, harass, intimidate, and 
even murder other individuals, predominantly women and members of the 
LGBTQ+ community.\2\ There is little in U.S. law stopping data brokers 
from collecting, publishing, and selling this data on victims and 
survivors of intimate partner violence.
---------------------------------------------------------------------------
    \2\ This goes back decades. See, e.g., Supreme Court of New 
Hampshire. Helen Remsburg, Administratrix of the Estate of Amy Lynn 
Boyer v. Docusearch, Inc., d/b/a Docusearch.Com and a (2003). Also see: 
National Network to End Domestic Violence, ``People Searches and Data 
Brokers,'' last accessed December 2, 2021, https://nnedv.org/mdocs-
posts/people-searches-data-brokers/.

        Individuals with mental health conditions: Data brokers 
advertise data on millions of Americans' mental health conditions. 
Companies can legally purchase this data from other firms, 
circumventing existing health privacy laws, and use it to exploit 
consumers. Criminals could acquire this data to run scams against 
senior citizens with Alzheimer's and dementia.\3\ Foreign governments 
could even acquire this data for intelligence purposes. Once again, 
there is little evidence data brokers conduct robust customer 
screening.
---------------------------------------------------------------------------
    \3\ Criminals have already used broker data to facilitate elder 
scams. See, e.g., U.S. Department of Justice, ``List Brokerage Firm 
Pleads Guilty To Facilitating Elder Fraud Schemes,'' Justice.gov, 
September 28, 2020, https://www.justice.gov/opa/pr/list-brokerage-firm-
pleads-guilty-facilitating-elder-fraud-schemes.

    Our research at Duke University has found data brokers widely and 
publicly advertising data regarding millions of Americans' sensitive 
demographic information, political preferences and beliefs, and 
whereabouts and real-time locations, as well as data on first 
responders, government employees, and current and former members of the 
U.S. military.\4\ Data brokers gather your race, ethnicity, religion, 
gender, sexual orientation, and income level; major life events like 
pregnancy and divorce; medical information like drug prescriptions and 
mental illness; your real-time smartphone location; details on your 
family members and friends; where you like to travel; what you search 
online; what doctor's office you visit; and which political figures and 
organizations you support. All of this is aggregated, analyzed, and 
packaged into datasets for sale with such titles as ``Rural and Barely 
Making It,'' ``Ethnic Second-City Strugglers,'' ``Retiring on Empty: 
Singles,'' ``Tough Start: Young Single Parents,'' ``Credit Crunched: 
City Families,'' ``viewership-gay,'' ``African American,'' ``Jewish,'' 
``working class,'' ``unlikely voters,'' and ``seeking medical 
care.''\5\ All of this information is typically collected without any 
consumer notice or consumer consent.
---------------------------------------------------------------------------
    \4\ Justin Sherman, Data Brokers and Sensitive Data on U.S. 
Individuals (Durham: Duke University Sanford School of Public Policy, 
August 2021), https://sites.sanford.duke.edu/techpolicy/report-data-
brokers-and-sensitive-data-on-u-s-individuals/.
    \5\ U.S. Senate Committee on Commerce, Science, and Transportation. 
A Review of the Data Broker Industry: Collection, Use, and Sale of 
Consumer Data for Marketing Purposes. Washington, DC: Senate Committee 
on Commerce, Science, and Transportation, December 18, 2013. https://
www.commerce.senate.gov/services/files/0d2b3642-6221-4888-a631-
08f2f255b577, ii; U.S. Federal Trade Commission. A Look At What ISPs 
Know About You: Examining the Privacy Practices of Six Major Internet 
Service Providers. Washington, DC: Federal Trade Commission, October 
21, 2021. https://www.ftc.gov/system/files/documents/reports/look-what-
isps-know-about-you-examining-privacy-practices-six-major-internet-
service-providers/p195402_isp_6b_staff
_report.pdf, 22.

    Hundreds of data brokers make selling this data their entire 
business model, and thousands more companies, from small businesses to 
technology giants, buy, sell, and share data as part of this ecosystem. 
The entities using this data include banks, credit agencies, insurance 
firms, Internet service providers, predatory loan companies, online 
advertisers, U.S. law enforcement and security agencies, and 
perpetrators of domestic violence--not to mention the foreign 
governments, criminals, terrorist organizations, and violent 
individuals that could potentially acquire the data. There are single 
data brokers alone that advertise thousands of individual data points 
on billions of people around the world. Large brokers also spend 
millions of dollars lobbying against strong U.S. Federal privacy 
legislation that would undercut their business models.\6\
---------------------------------------------------------------------------
    \6\ Alfred Ng and Maddy Varner, ``The Little-Known Data Broker 
Industry Is Spending Big Bucks Lobbying Congress,'' The Markup, April 
1, 2021, https://themarkup.org/privacy/2021/04/01/the-little-known-
data-broker-industry-is-spending-big-bucks-lobbying-congress.

    The harms are well-documented. Scammers have acquired data to run 
educational scams against veterans, military service members, and their 
families.\7\ Abusive individuals have used people search websites--
where data brokers scrape public records and publish Americans' 
addresses and other information on the Internet--to hunt down and 
stalk, intimidate, harass, and even murder individuals trying to escape 
them.\8\ Financial firms have used brokered data to market products to 
consumers that ``limit or obscure their access to loans, credit, and 
financial services.''\9\ GPS location data companies have secretly 
tracked citizens attending protests and demonstrations and identified 
their ages, genders, ethnicities, and other sensitive demographic 
characteristics--all of which they can legally sell.\10\ Health 
insurance companies have aggregated millions of Americans' medical 
diagnosis, test, prescription, and socioeconomic data--as well as 
sensitive demographic information like race, education level, net 
worth, and family structure--to market their products and, possibly, 
calculate how much they can charge consumers.\11\ Law enforcement and 
security agencies have purchased data broker data on U.S. citizens, 
ranging from home utility data to real-time locations, without 
warrants, public disclosure, and robust oversight.\12\ The data law 
enforcement and other customers use may not even be updated, complete, 
or accurate.\13\ The list of known harms goes on. And with all this 
data, companies can easily identify individuals by name.
---------------------------------------------------------------------------
    \7\ Habash and Saunders, ``The Predatory Underworld of Companies 
that Target Veterans for a Buck.''
    \8\ Sherman, Data Brokers and Sensitive Data on U.S. Individuals.
    \9\ Testimony of Pam Dixon before the U.S. Senate Committee on 
Banking, Housing, and Urban Affairs, ``Data Brokers, Privacy, and the 
Fair Credit Reporting Act,'' June 11, 2019, https://
www.banking.senate.gov/imo/media/doc/Dixon%20Testimony%206-11-19.pdf, 
1.
    \10\ Zak Doffman, ``Black Lives Matter: U.S. Protesters Tracked By 
Secretive Phone Location Technology,'' Forbes, June 26, 2020, https://
www.forbes.com/sites/zakdoffman/2020/06/26/secretive-phone-tracking-
company-publishes-location-data-on-black-lives-matter-protesters/.
    \11\ One such company has alleged it does not use this data for 
pricing. Marshall Allen, ``Health Insurers Are Vacuuming Up Details 
About You--And It Could Raise Your Rates,'' ProPublica, July 17, 2018, 
https://www.propublica.org/article/health-insurers-are-vacuuming-up-
details-about-you-and-it-could-raise-your-rates.
    \12\ Drew Harwell, ``ICE investigators used a private utility 
database covering millions to pursue immigration violations,'' The 
Washington Post, February 26, 2021, https://www.
washingtonpost.com/technology/2021/02/26/ice-private-utility-data/; 
Joseph Cox, ``How an ICE Contractor Tracks Phones Around the World,'' 
VICE, December 3, 2020, https://www.vice.com/en/article/epdpdm/ice-dhs-
fbi-location-data-venntel-apps.
    \13\ See, e.g., United States District Court, Central District of 
California, Gerardo Gonzalez et al. vs. Immigration and Customs 
Enforcement et al. (2019), https://www.courthousenews.com/wp-content/
uploads/2019/09/Gonzalez.v.ICE_.detainer.final_.order_.9.27.pdf.

    The potential harms are also numerous. Domestic extremists could 
acquire real-time GPS location data to target politicians at home. 
Foreign governments could acquire Americans' data to run disinformation 
campaigns, uncover spies, blackmail U.S. Government employees, and 
conduct other kinds of intelligence and military operations. Criminal 
organizations will continue purchasing this data to run scams and 
phishing campaigns.\14\ Individuals will continue using address, 
whereabouts, and GPS data to stalk and commit violence against fellow 
citizens. Companies will continue buying data on consumers and then 
make decisions and target advertisements based on sensitive demographic 
characteristics like race, ethnicity, gender, sexual orientation, 
religion, income level, family structure, political affiliation, and 
immigration status. Not to mention, threat actors can simply hack into 
the data brokers, online advertising firms, and other entities housing 
this highly sensitive data.
---------------------------------------------------------------------------
    \14\ See, e.g., U.S. Federal Trade Commission, ``FTC Charges Data 
Brokers with Helping Scammer Take More Than $7 Million from Consumers' 
Accounts,'' FTC.gov, August 12, 2015, https://www.ftc.gov/news-events/
press-releases/2015/08/ftc-charges-data-brokers-helping-scammer-take-
more-7-million.

    Companies can collect this data on Americans directly, whether 
those individuals know it or not; indirectly, by purchasing or 
licensing the data or by plugging into data sources like online 
advertising networks or third-party software development kits (SDKs); 
and by running algorithms to predict (what they often call ``infer'') 
sensitive information about individuals, from income level to sexual 
---------------------------------------------------------------------------
orientation.

    Based on our research at Duke University, the companies selling 
this data on the open market conduct varying degrees of know-your-
customer due diligence: some appear to conduct some due diligence 
before initiating a data purchase agreement, some appear to conduct a 
little due diligence, and some appear to conduct none at all. For those 
that appear to conduct some due diligence, it is unclear how 
comprehensive that vetting is in practice. Further, based on the 
copious evidence of data brokerage-linked harms (from domestic violence 
to consumer exploitation), there is very little to suggest data brokers 
implement controls to prevent harmful uses of their data once sold. 
Data brokers may also require clients to sign nondisclosure agreements 
preventing them from identifying where they obtained U.S. citizens' 
data.

    As part of talking about the power of Big Tech, the dangers of 
modern surveillance, and data threats to Americans' civil rights, U.S. 
national security, and democracy, we must focus on this entire data 
brokerage ecosystem.
                           the regulatory gap
    Data brokerage is a virtually unregulated practice. While there are 
some narrow controls around the collection, aggregation, buying, 
selling, and sharing of certain types of data--such as with the Health 
Insurance Portability and Accountability Act (HIPAA) and covered health 
providers, or with the Family Educational Rights and Privacy Act 
(FERPA) and covered educational institutions--these regulations are 
very limited and easily circumventable. It is remarkably easy to 
collect, aggregate, analyze, buy, sell, and share data on Americans, 
even millions at a time, without running into any legal barriers, 
regulatory requirements, or mandatory disclosures.

    Two State laws mention data brokers: one in California and one in 
Vermont.\15\ However, these laws are limited and insufficient to 
prevent the harms identified for four main reasons--and, therefore, 
this committee should lead and enact legislation to regulate the data 
brokerage ecosystem.
---------------------------------------------------------------------------
    \15\ These are, respectively, California Civil Code Sec. 1798.99.80 
and Vermont Statute 9 V.S.A. Sec. 2430.

    First, both State laws focus merely on disclosure. They do not put 
meaningful restrictions on data collection, aggregation, or analysis or 
on the buying, selling, and sharing of data by companies classified as 
``data brokers.'' Instead, they focus on requiring those companies to 
register with the State, after which basic company information (e.g., 
the company's name) is published in a registry on the respective State 
government's website.\16\ The Vermont law also imposes a few basic 
technical requirements to protect the security of what it describes as 
individuals' ``personally identifiable information,'' though this is 
aimed at preventing data breaches instead of putting controls on data 
sales.\17\
---------------------------------------------------------------------------
    \16\ The California registry can be found at: https://oag.ca.gov/
data-brokers. The Vermont registry can be found at: https://
bizfilings.vermont.gov/online/DatabrokerInquire/DataBroker
Search.
    \17\ Vermont Statute 9 V.S.A. Sec. 2447. Data broker duty to 
protect information; standards; technical requirements.

    Second, these laws define data brokers (generally) as only those 
companies buying and selling data on people with whom they do not have 
a direct business relationship. This definition excludes every single 
company that buys, sells, and shares data on its own customers from 
coverage under a ``data broker'' law. In practice, if this definition 
were paired with substantive controls, much of the data brokerage 
ecosystem would escape regulation. This definition is also insufficient 
because some firms occupy gray areas vis-a-vis these laws: for example, 
Oracle has registered as a data broker in both States, but it appears 
to buy and sell data it did not directly collect from consumers--as 
well as data it may collect directly but through subsidiaries. The same 
could be argued with respect to online advertisers, which frequently 
have direct interactions with consumers but often in ways consumers do 
not recognize or understand.\18\
---------------------------------------------------------------------------
    \18\ For more on how these laws provide lessons for writing a 
Federal privacy legislation, see: Justin Sherman, ``Federal Privacy 
Rules Must Get `Data Broker' Definitions Right,'' Lawfare, April 8, 
2021, https://www.lawfareblog.com/federal-privacy-rules-must-get-data-
broker-definitions-right.

    Third, even with the given definitions of data brokers, the two 
State laws do not target the underlying ecosystem--the collecting, 
aggregating, analyzing, buying, selling, and sharing of Americans' 
data. The practice of buying and selling data with virtually no 
restrictions enables consumer exploitation, civil rights abuses, and 
direct threats to U.S. national security, but it is not meaningfully 
controlled by these laws. And even with a legal focus on specific 
``data broker'' entities, many firms that engage in data brokerage are 
not captured in the laws, due to last-minute definitional changes 
obtained by industry lobbyists prior to State-level enactment: 
companies that buy and sell data on their direct customers; third-party 
code providers that plug into apps and websites to collect data on 
unwitting individuals; companies that run real-time bidding networks 
for online advertisements, where dozens of companies get access to data 
---------------------------------------------------------------------------
on consumers whom they could target with paid ad access.

    Lastly, these laws rely on the notion that some data is clearly 
personally identifiable while other data is not. There is a difference 
between data with an individual's name attached and data which does not 
have a name attached, but that line is increasingly blurring. The sheer 
volume of data that exists on any given American--including for sale on 
the open market--means individuals, companies, and government agencies 
can easily combine datasets together to unmask or ``reidentify'' the 
person behind a piece of information. For instance, researchers 
unmasked supposedly anonymized ride data for New York City taxi drivers 
and could then calculate drivers' incomes.\19\ Basing laws too much on 
this distinction does not recognize the complicated reality, where 
simply removing a name or Social Security number from a dataset does 
not meaningfully protect individuals' privacy. This distinction can 
also allow companies to circumvent the narrow legal restrictions that 
do protect individuals' data, because they can buy, sell, and share 
Americans' information without a name attached and simply acquire other 
identifying data or perform their own reidentification separately.
---------------------------------------------------------------------------
    \19\ Marie Douriez et al., ``Anonymizing NYC Taxi Data: Does It 
Matter?'', 2016 IEEE International Conference on Data Science and 
Advanced Analytics, October 2016, https://ieeexplore.ieee.org/document/
7796899.
---------------------------------------------------------------------------
                       the congressional response
    Congress has an opportunity to regulate the data brokerage 
ecosystem, protecting Americans' civil rights, U.S. national security, 
and democracy in the process. While a strong, comprehensive consumer 
privacy law is important, Congress must not wait to resolve the debate 
on such a law to regulate the data brokerage industry.

    There are three steps Congress can take now:

    Strictly control the sale of data collected by data brokers to 
foreign companies, citizens, and governments. Currently, there is 
virtually nothing in U.S. law preventing American companies from 
selling citizens' personal data--from real-time GPS locations and 
health information to data on military personnel and government 
employees--to foreign entities, including those entities which pose a 
risk to U.S. national security. As a result, it is far too easy for a 
foreign government to set up a front company through which it can 
simply buy highly sensitive data on millions of Americans, including 
members of Congress, Federal Government employees, and military 
personnel. In response, Congress should develop a set of strict 
controls on data brokers' sales of data to foreign companies, citizens, 
and governments--weighing outright prohibitions in some cases (e.g., on 
selling data on government employees and military personnel) and 
conditional restrictions in others (e.g., banning sale to a particular 
end user determined, through a robust security review process, to have 
requisite links to a foreign military or intelligence organization). As 
more and more U.S. citizen data is available for sale on the open 
market, this set of restrictions would better protect national security 
and also protect against exploitation of American consumers by foreign 
corporations.

    Strictly control the sale of data in sensitive categories, like 
genetic and health information and location data. Congress should also 
consider banning the sale of certain categories of data altogether. 
While many kinds of data can be used in harmful ways, some categories 
are arguably more sensitive than others. For instance, individuals' 
genetic information is highly sensitive. Location data is also a very 
dangerous kind of data. With GPS data, law enforcement agencies 
operating without adequate oversight as well as foreign intelligence 
organizations, terrorist groups, criminals, and violent individuals 
could acquire this data to follow people around as they visit bars, 
restaurants, medical centers, divorce attorneys, police stations, 
religious buildings, military bases, listed and unlisted government 
facilities, their relatives' homes, and their children's schools. Based 
on tracking U.S. citizens as they walk, travel, shop, sit, and sleep, 
organizations and individuals intent on doing harm can also derive 
other sensitive information about Americans' health, income, lifestyle, 
and more. Congress should develop a list of sensitive data categories 
that each correspond to bans on sale or other controls.

    Stop data brokers from circumventing those controls by 
``inferring'' data. If data brokers are prevented from collecting, 
aggregating, buying, selling, and sharing certain kinds of data and/or 
selling it to and sharing it with certain entities, they may still get 
data using their third vector--analyzing data and making ``inferences'' 
from it. For instance, if data brokers were prohibited specifically 
from buying and selling Americans' GPS location histories, a company 
could still, in line with current practice, mine individuals' spending 
histories, WiFi connection histories, phone call logs, and other 
information to derive the data that is supposed to be controlled in the 
first place, without technically ``collecting'' GPS location itself. 
Congress should stop data brokers from circumventing controls by 
implementing additional prohibitions around ``inferring'' categories of 
sensitive information about individuals. This will tackle the third 
main way data brokers currently get their data--and prevent companies 
from circumventing controls to keep exploiting Americans.

    The data brokerage ecosystem perpetuates and enables civil rights 
abuses, consumer exploitation, and threats to U.S. national security 
and democracy. It operates with virtually no regulation. Rather than 
waiting to resolve the debate over a strong, comprehensive consumer 
privacy law--which is also sorely needed--Congress can and should act 
now to regulate data brokerage.

                                 ______
                                 
             Prepared Statement of Hon. Elizabeth Warren, 
                   a U.S. Senator From Massachusetts
    Good morning, and welcome to today's hearing of the Subcommittee on 
Fiscal Responsibility and Economic Growth. I'm pleased to be working 
with Ranking Member Cassidy on this hearing on ``Promoting Competition, 
Growth, and Privacy Protection in the Technology Sector.'' Senator 
Cassidy will be joining us remotely. We're going to do a mixed hearing 
with some people in person and some people remote.

    Under President Biden's leadership, the American economy is 
rebounding. The unemployment rate has dropped from a pandemic height of 
14.8 percent in April 2020 to 4.6 percent today.\1\ Five point six 
million jobs \2\ have been added since President Biden's inauguration--
more than was added during the first 10 months of any administration 
since we've been keeping records. Child poverty is projected to plummet 
by more than 40 percent \3\ thanks to the American Rescue Plan.
---------------------------------------------------------------------------
    \1\ https://www.bls.gov/news.release/pdf/empsit.pdf.
    \2\ https://www.dol.gov/newsroom/releases/osec/osec20211105.
    \3\ https://www.urban.org/sites/default/files/publication/104626/
how-a-permanent-expansion-of-the-child-tax-credit-could-affect-
poverty_1.pdf.

    All of this has occurred despite an ongoing pandemic that has 
plagued us for nearly 2 years. Families have tried to adapt, and those 
changes have echoed throughout our economy. Demand has shifted \4\ as 
people have consumed fewer services while buying more durable goods 
like exercise equipment and home appliances. The economy has recovered 
more quickly \5\ than many businesses projected and all of this is 
contributing \6\ to unexpected bottlenecks in our supply chains and 
sporadic shortages in warehouses.
---------------------------------------------------------------------------
    \4\ https://www.bls.gov/opub/mlr/2021/beyond-bls/COVID-19-causes-a-
spike-in-spending-on-durable-goods.htm.
    \5\ https://www.nytimes.com/2021/04/06/business/imf-outlook-global-
economy.html.
    \6\ https://www.businessinsider.com/why-store-shelves-are-empty-
supply-chain-crisis-shortages-2021-10.

    And these factors contribute to price increases for many consumer 
---------------------------------------------------------------------------
goods. But they are not the only reasons prices have gone up.

    Sure, giant companies will raise prices when they have to. But they 
will also raise prices when they can get away with it. And how do we 
know this? Because when companies are simply passing along increases in 
their costs, then profit margins should stay the same. But when 
companies see a chance to gouge consumers, particularly while everyone 
is talking about inflation, then those companies raise their prices 
beyond what's needed to cover their increased costs.

    Right now prices are up at the pump,\7\ at the supermarket,\8\ and 
online. At the same time, energy companies,\9\ grocery companies, and 
online retailers \10\ are reporting record profits. That's not simply a 
pandemic issue. It's not simply some inevitable economic force of 
nature. It's greed--and in some cases, it is flatly illegal.
---------------------------------------------------------------------------
    \7\ https://www.nytimes.com/2021/11/23/business/biden-oil-reserves-
gas-prices.html.
    \8\ https://www.today.com/food/groceries/how-to-save-money-on-
groceries-rcna36938.
    \9\ https://www.cnn.com/2021/10/29/energy/exxonmobil-chevron-
profits/index.html.
    \10\ https://www.cnbc.com/2021/11/30/amazon-touts-record-sales-
amid-weak-start-to-holiday-shopping-season.html.

    One reason for this price gouging is that fewer and fewer markets 
in America are truly competitive. When several businesses are competing 
for customers, companies can't use a pandemic or a supply chain kink to 
pad their own profits. In a competitive market, the margin above costs 
stays steady, even in troubled times. But in a market dominated by one 
---------------------------------------------------------------------------
or two giants, price gouging is much easier.

    For generations, policymakers and regulators under both Democrats 
and Republicans promoted free-market competition. But starting in the 
1970s,\11\ our government changed course. For decades now regulators 
and courts have looked the other way even as one sector after another 
has become dominated by one or two giants. They rubber-stamp merger 
after merger without regard to the consequences, and when small 
businesses got wiped out and startups were smothered or bought out, 
they just didn't care.
---------------------------------------------------------------------------
    \11\ https://hbr.org/2017/12/the-rise-fall-and-rebirth-of-the-u-s-
antitrust-movement.

    Today, as a result of increasing consolidation across industries, 
bigger and bigger corporations have more and more power to charge their 
customers any price they want. They also wield more and more power to 
under-invest in things like supply chain resiliency, and more and more 
---------------------------------------------------------------------------
power to hold down wages and benefits for workers.

    And it's getting worse. Earlier this month, Federal Trade 
Commission Chair Lina Khan noted \12\ that by September of this year, 
our antitrust agencies had already received more merger filings than 
any other year in the previous decade. In fact, they are on track in 
2021 to receive a 70 percent increase above average filings in recent 
years.
---------------------------------------------------------------------------
    \12\ https://www.ftc.gov/system/files/documents/public_statements/
1598131/statement_of_
chair_lina_m_khan_joined_by_rks_regarding_fy_2020_hsr_rep_p110014_-
_20211101_final_0.pdf.

    Giant corporations \13\ are taking advantage of this global crisis 
to gobble up struggling small businesses and to increase their power 
through predatory mergers. I introduced my Pandemic Anti-Monopoly Act 
\14\ last year to slow down this trend and to protect workers and small 
businesses and families from being squeezed even more by harmful 
mergers during this crisis, and I will reintroduce it this year because 
the need is clear.
---------------------------------------------------------------------------
    \13\ https://publicknowledge.org/acquisitions-in-the-time-of-covid-
big-tech-gets-bigger/.
    \14\ https://www.warren.senate.gov/newsroom/press-releases/warren-
ocasio-cortez-to-introduce-pandemic-anti-monopoly-actread-one-pager-
here.

    The effects of limited competition in our technology sector are 
particularly severe, and that is why I'm interested in exploring 
today's hearing. Limited competition in tech is having spillover 
effects across our entire economy. Anticompetitive practices \15\ in 
the semiconductor industry have exacerbated \16\ supply-chain issues. 
Big Tech firms have used their dominance to inflate prices \17\ 
throughout the online retail market and to subject their workers to 
inhumane conditions \18\ during the pandemic. And as Ranking Member 
Cassidy has rightly highlighted in his own work, tech firms collect and 
exploit \19\ sensitive personal information--often threatening national 
security,\20\ harming our emotional health,\21\ and discriminating \22\ 
against vulnerable groups.
---------------------------------------------------------------------------
    \15\ https://www.wsj.com/articles/ftc-charges-broadcom-with-
illegal-monopolization-proposes-consent-order-11625248681.
    \16\ https://www.wsj.com/articles/the-world-relies-on-one-chip-
maker-in-taiwan-leaving-everyone-vulnerable-11624075400.
    \17\ https://www.vox.com/recode/22810795/amazon-marketplace-prime-
report.
    \18\ https://www.npr.org/2021/02/17/968568042/new-york-sues-amazon-
for-COVID-19-workplace-safety-failures.
    \19\ https://theconversation.com/the-ugly-truth-tech-companies-are-
tracking-and-misusing-our-data-and-theres-little-we-can-do-127444.
    \20\ https://www.forbes.com/sites/joetoscano1/2021/12/01/data-
privacy-issues-are-the-root-of-our-big-tech-monopoly-dilemma/
?sh=5d3aba083cfd.
    \21\ https://www.wsj.com/articles/facebook-knows-instagram-is-
toxic-for-teen-girls-company-documents-show-11631620739.
    \22\ https://algorithmwatch.org/en/automated-discrimination-
facebook-google/.

    It doesn't have to be like this. With stronger antitrust laws and 
robust enforcement, we can ensure that our economy works for American 
families, not just for the wealthiest corporations. Congress could 
provide better tools to the FTC and the Department of Justice to 
investigate anticompetitive mergers and break up the companies that 
have held our economy down. We could also make it easier for the 
agencies to reject such mergers in the first place. By promoting 
competitive markets for consumers and workers, we can foster a stronger 
---------------------------------------------------------------------------
American economy and a stronger American democracy.

    So I look forward to discussing these issues today. I appreciate 
all of our witnesses who are joining us, and I look forward to hearing 
about your insights and experiences.

                                 ______
                                 
        Statement of the International Brotherhood of Teamsters 
                  and the Strategic Organizing Center
    The International Brotherhood of Teamsters is America's largest, 
most diverse union. We represent 1.4 million hardworking men and women 
throughout the United States, Canada and Puerto Rico. We started in 
1903 as a merger of the two leading team driver associations. As we 
say, ``these drivers were the backbone of America's robust economic 
growth, but they needed to organize'' to get their fair share from too-
powerful corporations. The Strategic Organizing Center is a democratic 
federation of labor unions representing millions of working people. We 
strive to ensure that every worker has a living wage, benefits to 
support their family and dignity in retirement, and we advocate not 
just for jobs, but for good jobs: safe, equitable workplaces where all 
employees meaningfully participate in the decisions affecting their 
employment. Our organizations are concerned with ensuring corporate 
power does not overshadow the authority, autonomy and well-being of 
workers--or anyone else--in our country, and we believe that antitrust 
law has a vital role to play in that effort. We thank you for holding 
today's hearing and hope you will use this time to examine the impact 
of anticompetitive behavior in the technology sector on labor market 
and workers.

    We are not the first to observe troubling trends in our economy. 
These include a decline in real wages in spite of significant 
productivity growth, a huge and growing gap between the wealthy and the 
rest of us, an increasingly fissured workforce that allows employers to 
shift labor costs--and deny responsibility for the safety and economic 
security of the workers that create their wealth--onto others. They 
also include the disproportionate impact these trends have on workers 
who are people of color and on reinforcing racism in our economic 
structure. The concentration of power of large corporations across the 
economy is of significant concern because this concentration drives and 
exacerbates all of these trends. We are particularly concerned about 
the largest digital platform companies because they are able to 
exercise unprecedented power in our economy in ways that negatively 
impact workers, consumers and other economic players--and the very 
structure of the economy itself. Unions--and workers' authority as 
union members to negotiate employment terms with their employer--are a 
potent counterweight to concentrated corporate power in labor markets, 
but we also recognize the paramount importance of the overall structure 
of the economy and ways that corporate power is dispersed: the very 
subject that antitrust law was meant to address.

    During this period of growing corporate consolidation, antitrust 
laws have weakened dramatically--not because Congress has changed the 
laws, but because the courts have. A defining feature of court-made, 
``modern'' antitrust law is its singular focus on the consumer welfare 
standard, under which courts have deemed consumer price increases the 
primary cognizable competitive harm. This fundamental misinterpretation 
of both the purpose and the language of antitrust law ignores myriad 
other forms of harm including declining quality, diversity, innovation, 
choice, and anticompetitive concentration in supply markets, including 
labor markets--which in turn has allowed these additional competitive 
harms to manifest in our economy along with highly concentrated 
corporate power.

    It is against this backdrop that we join the growing chorus that 
considers the hollowing-out of competition law over the past several 
decades at least partly responsible for the increase in corporate might 
and the corresponding decline in virtually every other source of power 
in our economy--workers over their jobs, consumers over choice and 
privacy, and small businesses over where and at what price they sell 
their goods. We strongly advocate vigorous antitrust reform to both 
restore needed protections for competition among diverse participants 
in the economy, and address the challenges that new, uniquely dominant 
digital platform companies present. We also believe that our Nation's 
antitrust laws must be updated to address the current economic 
realities--including that consumer welfare, or price, should not be the 
sole touchstone of competitive harm, and further, to foreclose judicial 
distortion of the law. We urge this reform to ensure that antitrust law 
plays the role that Congress intended by leveling the playing field for 
workers, consumers, small businesses and other market participants in 
our economy.

    As explained further below, our concerns are driven by evidence of 
increased corporate concentration across the economy and the effects of 
this concentration on all market participants, and workers in 
particular, as well as the rise of extraordinarily powerful digital 
platform companies with unique characteristics that current antitrust 
law is ill-suited to address. This statement outlines our specific 
concerns regarding the current state of antitrust law, and details 
specific aspects of antitrust law and jurisprudence that we believe are 
the most in need of reform to protect and promote a robust, competitive 
economy, including fair and competitive labor markets where workers 
have a fair shot at family-supporting wages, safe working conditions 
and a job they can be proud of.
      concentration on the rise in both product and labor markets
    The U.S. has a market concentration problem. In terms of product 
markets, over the last 2 decades approximately 75 percent of U.S. 
industries have become more concentrated.\1\ Since 1980, in a variety 
of sectors across the economy, the four largest firms have 
significantly increased their share of sales.\2\ With respect to 
efficiency and innovation, this is a cause for concern. The entry rate 
of new firms into the U.S. market has fallen sharply, particularly 
since 2007,\3\ while firm exit rates have remained relatively flat.\4\ 
In other words, the number of firms in various industries is declining, 
and existing producers are gaining share while new entrants find it 
increasingly difficult to challenge the established dominant players. 
This implies a lack of economic dynamism and increased market 
concentration.
---------------------------------------------------------------------------
    \1\ See Gustavo Grullon, Yelena Larkin, and Roni Michaely, Are U.S. 
Industries Becoming More Concentrated?, Review of Finance, Swiss 
Finance Institute Research Paper No. 19-41 (October 25, 2018) at 1, 
available at https://ssrn.com/abstract=2612047.
    \2\ See Ufuk Akcigit and Sina Ates, Slowing Business Dynamism and 
Productivity Growth in the United States, Federal Reserve Bank of 
Kansas City publication (October 8, 2020) at 4, 31 note 31, 45, 
available at https://www.kansascityfed.org/documents/4952/
aa_jh_201008.pdf. The sectors are manufacturing, retail trade, 
wholesale trade, services, utilities and transportation, and finance. 
Id. See also David Dayen, Monopolized: Life in the Age of Corporate 
Power at 3 (2020) (noting that in the markets for airlines, commercial 
banking, and phone, wireless, cable, and Internet services, four 
companies control the market).
    \3\ See John Haltiwanger, Entry, Innovation and Productivity Growth 
in the U.S. Economy, Federal Reserve Bank of Dallas publication (May 
31, 2018) at 9, available at https://www.dallasfed.org/-/media/
Documents/research/events/2018/18ted-haltiwanger.pdf.
    \4\ Id.

    Over the past decade, empirical evidence has demonstrated that the 
majority of local labor markets in the U.S. are also overly 
concentrated. Research indicates that 20 percent of all U.S. workers 
work in highly-concentrated labor markets,\5\ and that, across all U.S. 
labor markets, the average measurement of labor market concentration 
well exceeds the Federal Trade Commission and Department of Justice's 
own guidelines.\6\ Labor market concentration--or labor monopsony, the 
corollary of monopoly in the supplier or labor market--may 
significantly impact the wages and working conditions of workers. Labor 
monopsony power, alongside persistent trends including declining labor 
mobility,\7\ can lead to negative outcomes for U.S. workers. A range of 
studies have shown that workers in highly concentrated labor markets 
receive suppressed wages,\8\ less non-wage compensation in the form of 
health benefits,\9\ and are more likely to be subject to labor rights 
violations.\10\ Further, such negative impacts fall much more heavily 
on workers who are people of color, so labor market concentration also 
exacerbates the existing problems of inequality and ongoing racism 
affecting our economy.
---------------------------------------------------------------------------
    \5\ See Jose Azar, Ioana Elena Marinescu, Marshall Steinbaum, and 
Bledi Taska, Concentration in US Labor Markets: Evidence from Online 
Vacancy Data, NBER at 2 (August 10, 2018), available at https://
www.nber.org/system/files/working_papers/w24395/w24395.pdf.
    \6\ See Jose Azar, Ioana Elena Marinescu, and Marshall Steinbaum, 
Labor Market Concentration, NBER at 2 (December 10, 2018), available at 
https://www.nber.org/system/files/working_papers/w24147/w24147.pdf.
    \7\ See Damien Azzopardi, Fozan Fareed, Mikkel Hermansen, Patrick 
Lenain, and Douglas Sutherland, The decline in labor mobility in the 
United States: Insights from new administrative data, OECD (December 
14, 2020), available at https://www.oecd-ilibrary.org/docserver/
9af7f956-
en.pdf?expires=1615398612&id=id&accname=guest&checksum=19D81A08C345C3299
8
FCE5FBCBBBE60B.
    \8\ Azar, Marinescu, and Steinbaum, supra note 6.
    \9\ See Yue Qiu and Aaron J. Sojourner, Labor-Market Concentration 
and Labor Compensation, IZA Institute of Labor Economics (January 8, 
2019), available at https://ssrn.com/abstract=
3312197.
    \10\ See Ioana Elena Marinescu, Yue Qiu, and Aaron J. Sojourner, 
Wage Inequality and Labor Rights Violations, IZA Institute of Labor 
Economics (August 13, 2020), available at https://ssrn.com/
abstract=3673495.

    Further, research suggests that monopolizing employers do not pass 
on cost savings they receive from reduced wages to consumers.\11\ 
Instead, dominant employers tend to retain savings from lower 
wages.\12\ At the same time, lower wages can increase consumer prices 
because employers purchase less of the input (labor), which results in 
higher marginal costs per product, and thus higher prices.\13\
---------------------------------------------------------------------------
    \11\ See Alan James Devlin, ``Questioning the Per Se Standard in 
Cases of Concerted Monopsony,'' Hastings Business Law Journal, Vol. 3, 
No. 223, 2007 at 224 (July 6, 2009) (citing statements by DOJ antitrust 
division officials regarding the consumer price impact of monopolies), 
available at https://repository.uchastings.edu/cgi/
viewcontent.cgi?article=1106&context=
hastings_business_law_journal.
    \12\ Id. at 231.
    \13\ Id.

    In spite of the problems caused by labor market concentration, 
labor market antitrust litigation against employers is extremely rare. 
Since 1960, there have been fewer than 100 labor market cases compared 
to over 2,300 product market antitrust cases.\14\ Fully half the labor 
market cases that have been brought under section 1 of the Sherman Act 
have addressed only the niche employment setting of sports leagues.\15\ 
At the same time, not a single labor market case brought under section 
2 of the Sherman Act has survived summary judgment.\16\ This 
``litigation gap'' is exacerbated by the lack of attention to labor 
market effects in the Department of Justice and Federal Trade 
Commission's current Horizontal Merger Guidelines.\17\ Indeed, no 
merger has ever been blocked based on increased labor market 
concentration.
---------------------------------------------------------------------------
    \14\ See Eric A. Posner, Why the FTC Should Focus on Labor 
Monopsony, Pro Market (November 5, 2018), available at https://
promarket.org/2018/11/05/ftc-should-focus-labor-monopsony/.
    \15\ See Ioana Elena Marinescu and Eric A.Posner, Why Has Antitrust 
Law Failed Workers?, 105 Cornell L. Rev. 1343, 1365 (2020), available 
at https://ssrn.com/abstract=3335174.
    \16\ Id. at 1371.
    \17\ Horizontal Merger Guidelines (revised April 8, 1997). 
Department of Justice/Federal Trade Commission, available at https://
www.justice.gov/atr/horizontal-merger-guidelines-0.

    The lack of antitrust enforcement and successful cases regarding 
labor markets is another illustration--an even more extreme one--
indicating that current antitrust jurisprudence is the product of 
judicial interpretation rather than congressional intent. There is 
broad agreement that the Clayton Act provides for review of the effects 
of mergers on labor markets as well as on product markets. Indeed, 
Congress's intention to protect labor markets from the harms of 
monopsony power has been clear since the inception of U.S. antitrust 
policy: One of the reasons Senator John Sherman gave for legislating 
against monopoly was that ``[i]t commands the price of labor without 
fear of strikes, for in its field it allows no competitors.''\18\
---------------------------------------------------------------------------
    \18\ See Congressional Record 2457 (1890), available at https://
appliedantitrust.com/02_
early_foundations/3_sherman_act/cong_rec/21_cong_rec_2455_2474.pdf.

    Contrary to Sherman's intent, courts have generally failed to 
properly adjudicate or even recognize labor claims under antitrust law. 
With limited exceptions, including piecemeal victories against certain 
``no poaching'' agreements,\19\ the courts have proven largely 
unreceptive to labor monopsony claims, and instead over the years have 
eroded important antitrust precedents beneficial to labor.\20\ This 
contradicts not only the original intention of key laws meant to 
protect fairness in the economy, but also severely limits the ability 
of workers to vindicate important rights through antitrust law.
---------------------------------------------------------------------------
    \19\ See Marinescu and Posner, supra note 16.
    \20\ See Marshall Steinbaum, ``Antitrust, the Gig Economy, and 
Labor Market Power,'' Law and Contemporary Problems at 49 (June 12, 
2019), available at https://scholarship.law.duke.edu/cgi/
viewcontent.cgi?article=4918&context=lcp.

    This history explains why, to be meaningful, any antitrust reform 
must not only be written clearly and with enough specificity to prevent 
courts from subverting its meaning and intent, but must also be 
emphatically clear that competition in labor markets as well as product 
markets is protected.
        rise of digital economy requires new law and enforcement
    In addition to concerns related to the broader U.S. economy, the 
rise of dominant digital companies present unique issues and threats to 
competition and people's welfare. Companies including Amazon, Apple, 
Facebook and Google are increasingly dominant across a number of 
markets including e-commerce, online search, online advertising and 
cloud computing. It has been projected, for example, that Amazon's 
market share will account for 50 percent of the entire e-commerce 
market in 2021.\21\ Many sources have documented how these companies 
have utilized their dominance in ways that harm consumers, small 
businesses, and workers as these platforms seek to expand, including 
self-preferencing over businesses competing on their platforms, data 
collection and use practices that may harm consumers, and the decline 
in diversity in such industries as publishing because of consolidated 
control.\22\ Meanwhile, the Amazon Web Services (AWS) segment of 
Amazon's business controls 32 percent of the cloud computing market, 
greater than the share held by AWS's three largest competitors 
combined.\23\ While many industries are dominated by only four 
corporate players, in the Big Tech arena a single company often 
dominates the market: for example in social media (Facebook), Internet 
search (and search advertising) (Google), or e-commerce (Amazon).\24\
---------------------------------------------------------------------------
    \21\ Projected retail e-commerce GMV share of Amazon in the United 
States from 2016 to 2021, Statista (December 1, 2020), available at 
https://www.statista.com/statistics/788109/amazon-retail-market-share-
usa/.
    \22\ See Investigation of Competition in Digital Markets, 
Subcommittee on Antitrust, Commercial, and Administrative Law of the 
House Committee on the Judiciary (2020); Petition for Investigation of 
Amazon.com, Inc., submitted to Federal Trade Commission (2020), 
available at http://www.changetowin.org/wp-content/uploads/2020/02/
Petition-for-Investigation-of-Amazon.pdf. Regarding the impact of 
Amazon's 65-percent market share in e-books over diversity in 
publishing, see Lina M. Khan, ``Amazon's Antitrust Paradox,'' 126 Yale 
L.J. 710, 766 (2017), available at https://www.yalelawjournal.org/note/
amazons-antitrust-paradox.
    \23\ Cloud Infrastructure Spend Grows 46 percent in Q4 2018 to 
Exceed U.S.$80 Billion for Full Year, CANALYS (February 4, 2019), 
available at https://www.canalys.com/newsroom/cloud-market-share-q4-
2018-and-full-year-2018.
    \24\ Dayen, supra note 2.

    Such consolidation of control over product markets begets control 
over corresponding labor markets. The example of Amazon is again 
illustrative of this phenomenon. Following unrelenting expansion of its 
business, Amazon now employs approximately 1.3 million workers 
worldwide,\25\ the majority in the U.S. The company's growth within 
labor markets is both record breaking \26\ as well as diverse in terms 
of the categories of workers affected. Indeed, from white collar 
technology workers to blue collar warehousing workers, Amazon is an 
increasingly powerful employer. For example, it is now estimated that 
Amazon employs fully one-third of all warehousing workers in the 
U.S.\27\ As a consequence of Amazon's power in warehousing labor 
markets, there are reports that in areas where the company has 
established warehouses, wages for warehouse workers have declined.\28\
---------------------------------------------------------------------------
    \25\ See Form 10-K for Amazon, Inc. filed with the U.S. Securities 
and Exchange Commission, February 3, 2021, at 4, available at https://
www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872421000004/
amzn-20201231.htm.
    \26\ Michael Mandel, A Historical Perspective on Tech Job Growth, 
Progressive Policy Institute, (January 13, 2017), available at https://
www.progressivepolicy.org/wp-content/uploads/2017/08/
PPI_TechJobGrowth_V3.pdf.
    \27\ According to Bureau of Labor Statistics estimates, the 
warehousing and storage sector counted a total of 1,194,400 employees 
in June 2020. The total number of Amazon warehousing and storage 
workers was approximately 425,000 as of June 2020, or 36 percent of the 
sectoral total.
    \28\ See, e.g., ``Amazon Has Turned a Middle-Class Warehouse Career 
Into a McJob,'' Bloomberg, December 17, 2020, available at https://
www.bloomberg.com/news/features/2020-12-17/amazon-amzn-job-pay-rate-
leaves-some-warehouse-employees-homeless; ``Unfulfillment Centre: What 
Amazon does to wages,'' The Economist, January 20, 2018, available at 
https://www.
economist.com/united-states/2018/01/20/what-amazon-does-to-wages.

    The power of dominant tech companies in labor markets has also 
contributed to--and accelerated--the fissuring of the American 
workplace. Fissuring has allowed corporations to treat large portions 
of their workforces as non-employees, and to shift responsibility for 
their workforce's work conditions, safety and well-being out of their 
sphere of corporate liability.\29\ We find this trend highly 
problematic as it not only shifts responsibility away from corporations 
but also reduces worker power to secure decent wages and working 
conditions and address workplace abuses. We believe that this 
increasing labor market dominance and fissuring by large digital 
companies should not go unchecked.
---------------------------------------------------------------------------
    \29\ See David Weil, The Fissured Workplace (Harvard University 
Press 2014).

    The need for updated tools to regulate dominant digital companies 
has been written about elsewhere at length,\30\ but we note that 
dominant digital companies have several unique features for which 
current antitrust law--particularly in its current anemic, price-
focused form--is ill-suited. Features of these companies include 
platform or other utility-like structures that generate network 
effects: the platform becomes more and more valuable as more people use 
it. These network effects accumulate and multiply until a tipping point 
is reached, beyond which entry by new competitor platforms is 
difficult. As a result, these markets become essentially winner-take-
all. Second, in part because of the potential network effects, these 
companies' corporate strategies turn on growth--acquisition of market 
share--and not profit. Similarly, companies also focus on expanding 
their business lines, including through acquisitions whose aim is to 
eliminate nascent competition. Finally, for digital platform companies, 
the acquisition and use of data play a key role in both the value of 
the company and how it can exercise dominance and exclude others from 
markets. Relatedly--because companies invariably have been able to 
acquire data for free--digital companies' services are often ``free'' 
to consumers, which makes traditional consumer welfare-price analysis 
inapplicable.
---------------------------------------------------------------------------
    \30\ See, e.g., Khan, ``Amazon's Antitrust Paradox,'' 126 Yale L.J. 
710.

    Because of the unique features of these platform companies, 
antitrust reform must develop new tools suited to these types of firms. 
These tools must include: recognizing harms beyond consumer welfare/
price and traditional profit-driven strategies for growth; recognizing 
the value of consumer data acquisition and use in exchange for 
supposedly ``free'' services; and grappling with the ability of such 
companies to exercise dominance and squelch new entry and competition 
at lower-than-monopoly levels of market share, because of the network 
---------------------------------------------------------------------------
effect features of such platforms.

    With the dominance of large digital platform companies comes 
equally problematic power in labor markets: In the high tech industry, 
tech companies dominated by colluding to prevent competition among high 
tech employees for jobs.\31\ Google workers have complained en mass 
regarding sexual harassment and anti-union as well as race-related 
dismissals.\32\
---------------------------------------------------------------------------
    \31\ ``Judge Koh OKs $415M Google, Apple Anti-Poaching Deal,'' 
Law360, Sept. 3, 2015, available at https://www.law360.com/articles/
677683/judge-koh-oks-415m-google-apple-anti-poaching-deal.
    \32\ ``Hundreds of Google Employees Unionize, Culminating Years of 
Activism,'' New York Times (January 4, 2021), available at https://
www.nytimes.com/2021/01/04/technology/google-employees-
union.html#::text=OAKLAND%2C%20Calif.,staunchly%20anti%2Dunion%20Silico
n%20
Valley.

    In addition, the extraordinary growth of Amazon's direct and 
indirect employment, as discussed above, has impacted labor markets. 
Amazon's dominance in employment has brought reports that Amazon's 
warehouses result in declining warehouse wages in areas where they 
locate.\33\ The New York Attorney General believes Amazon has so 
blatantly ignored State COVID safety protocols in New York that she has 
sued Amazon under general public safety laws, seeking injunctive relief 
including disgorgement of profits.\34\ Amazon continues to exercise its 
power to substantially increase fissuring of the workplace, including 
by pushing employment responsibility onto hundreds of small delivery 
businesses that it effectively controls, and by using thousands of 
delivery/logistics drivers who not only are without traditional 
employment protections as independent contractors, but are also subject 
to unrelenting delivery load and speed demands that may compromise 
safety.\35\ Similarly, it has created a whole new army of Prime Now 
shoppers who pick and delivery groceries, again as ``gig workers'' with 
none of the traditional protections of employment.
---------------------------------------------------------------------------
    \33\ See supra note 29 and accompanying text.
    \34\ James v. Amazon.com, Inc. (NY Sup. Ct., Feb. 16, 2021). See 
also Palmer v. Amazon, 20-cv-02468-BMC (E.D.N.Y. June 20, 2020) (public 
nuisance suit brought against Amazon alleging that Amazon's failure to 
protect workers adequately from COVID created a public nuisance, a 
common law tort that endangered public safety). The suit was dismissed 
on the grounds that OSHA preempts State claims regarding workplace 
safety. Palmer, Slip Op. (November 2, 2020). See also Smalls v. Amazon, 
20-05492 (E.D.N.Y., November 12, 2020) (class action Federal civil 
rights case alleging that Amazon violated civil rights statutes by 
failing to protect a workforce that has a majority of people of color 
from the dangers of COVID.) Smalls is still pending in Federal court in 
the Eastern District of New York.
    \35\ ``Amazon's Next-Day Delivery Has Brought Chaos and Carnage to 
America's Streets,'' BuzzFeed, August 31, 2019, available at https://
www.buzzfeednews.com/article/carolineodonovan/amazon-next-day-delivery-
deaths.

    In addition, such corporations are able to mount vigorous corporate 
backlash against workers who attempt to exercise their right to 
organize. At Amazon, the company tried to recruit ``labor spies and 
anti-union analysts with background in Federal intelligence work,''\36\ 
to surveille its direct employees for union activity. The company even 
allegedly conducted anti-union surveillance of its independent 
contractor Flex drivers, manifesting an ``Orwellian'' program that 
allegedly monitored as many as 43 driver Facebook accounts for hints of 
union sympathies.\37\ The company is also pursuing a highly-funded, 
vicious union-busting campaign at Amazon's 6,000-worker warehouse 
facility in Bessemer, AL where workers are voting on union 
representation this month.\38\
---------------------------------------------------------------------------
    \36\ ``12 Facts About Morgan Lewis, Amazon's Powerful Anti-Union 
Law Firm,'' LaborOnline, Feb. 18, 2021 (citing report that Amazon 
posted-and then deleted-a job listing for an 'intelligence analyst' to 
monitor workers' efforts to unionize, Business Insider, September 1, 
2020), available at http://www.lawcha.org/2021/02/02/12-facts-about-
morgan-lewis-amazons-powerful-anti-union-law-firm/.
    \37\ ``Amazon Flex Driver Fights Attempt to Arbitrate Privacy 
Claims,'' Law360, March 1, 2021 (detailing Amazon Flex driver's class 
allegations that Amazon ``purportedly hired intelligence experts to use 
automated tools and monitoring software to track and intercept drivers' 
social media activity.''), available at https://www.law360.com/
articles/1359635/amazon-flex-driver-fights-attempt-to-arbitrate-
privacy-claims.
    \38\ ``Amazon Is Paying Nearly 10K a Day to Anti-Union 
Consultants,'' The Sludge opinion, March 8, 2021, available at https://
readsludge.com/2021/03/08/amazon-is-paying-nearly-10k-a-day-to-anti-
union-consultants/; ``Amazon fights aggressively to defeat union drive 
in Alabama, fearing a coming wave,'' Washington Post, March 9, 2021, 
available at https://www.
washingtonpost.com/technology/2021/03/09/amazon-union-bessemer-
history/.
---------------------------------------------------------------------------
                  recommendations for antitrust reform
    For reasons discussed above, we urge vigorous antitrust reform. 
Meaningful reform should include the following:

      (a)  Eliminate rule of reason: Eliminate the highly open-ended 
and problematic ``rule of reason'' decision-making, in favor of a 
clear, simple rules against abuse of market power, to prevent courts 
misinterpreting the law or imposing additional barriers to antitrust 
protections in the future.\39\ As this implies, parties should be 
permitted to prove an antitrust violation by showing anti-competitive 
harm from a dominant firms' conduct in a labor or product market. Firms 
should not be able to defend, or rebut, evidence of abusive conduct by 
offering a pro-competitive justification. Piecemeal or partial rules 
that permit certain pro-competitive justifications, or that allow other 
``rule of reason'' defenses provide too great an opening for continued 
judicial law-making and subversion of antitrust protections.
---------------------------------------------------------------------------
    \39\ The last 40 years of courts weakening antitrust laws in 
response to Robert Bork's The Antitrust Paradox is the most commonly 
cited example of judicial activism in antitrust (Khan, supra note 30 at 
717-721), but judicial attempts to subvert the purpose--as well as 
specific provisions--of antitrust law have been endemic since antitrust 
laws were first enacted. Khan relates how Congress outlawed predatory 
pricing starting in 1914, only to pass several new statutes outlawing 
the same practice as courts repeatedly held those statutes allowed 
predatory pricing conduct, until finally ``by the mid-twentieth 
century, the Supreme Court recognized and gave effect'' to the 
statutory prohibition on predatory pricing. Id. at 723-24.

      (b)  Include labor markets in merger reviews: For merger review, 
establish labor market-related filing triggers, and require 
consideration of the effects on labor market concentration of all 
---------------------------------------------------------------------------
mergers reviewed.

      (c)  Prohibit anti-competitive worker restraints: Prohibit 
outright anticompetitive worker restraints such as noncompetes and no 
poach restrictions. Such restrictions directly interfere with workers' 
mobility and limit their ability to compete for different jobs with 
better wages or other terms of employment. These restraints exacerbate 
inequality and the imbalance between corporate and worker power, 
distorting competition in labor markets. Similarly, unfair and anti-
competitive mandatory arbitration clauses should be made illegal and 
unenforceable.

      (d)  Provide for labor monopsony claims clearly and expressly: 
Expressly provide for labor monopsony claims under antitrust laws by 
including abuse of labor market power and exclusionary conduct in labor 
markets in antitrust laws and legal standards. These changes should be 
done using clear and express language so that courts may not refuse to 
apply antitrust laws to labor monopsony behavior.

      (e)  Establish an appropriate threshold for labor market power: 
Establish a lower market share threshold at which a firm is presumed to 
have market power. Evidence suggests that a special feature of labor 
markets is that they become significantly less competitive at lower 
levels of concentration than product markets; we thus urge a 20 percent 
threshold for labor markets.\40\
---------------------------------------------------------------------------
    \40\ See Investigation of Competition in Digital Markets, 
Subcommittee on Antitrust, Commercial, and Administrative Law of the 
House Committee on the Judiciary (2020) at 393 (``It is the view of 
Subcommittee staff that the 30 percent threshold established by the 
Supreme Court in Philadelphia National Bank is appropriate, although a 
lower standard for monopsony or buyer power claims may deserve 
consideration by the Subcommittee.''), available at https://
judiciary.house.gov/uploadedfiles/
competition_in_digital_markets.pdf?utm_campaign=4493-519.

      (f)  Expand antitrust exemption to include gig/fissured worker 
organizing: Organizing activity by workers classified as independent 
contractors should be exempt from antitrust laws just as employee 
organizing is exempt. Independently classified workers must be 
permitted to engage in collective activity to improve their working 
---------------------------------------------------------------------------
conditions.

      (g)  Address special problems posed by Big Tech for a healthy, 
competitive economy: Revise antitrust laws to address the unique 
characteristics of digital platform companies in ways that recognize 
the value to such companies of growth in market share over profits in 
the areas of predatory pricing, mergers and recognition of cognizable 
competitive harms; the threat posed by vertical integration and cross-
business-line self-preferencing and exclusionary conduct; and the 
outsized power such firms can exercise over workers and over the 
fissuring of the workplace when they become dominant economic actors.

    We believe that the structure of our economy matters. In order to 
have a fair chance at a good job, good wages, and chance to have a 
choice and negotiate these conditions--as well as a choice about what 
we buy, where we live, who has our information--it matters who has 
power in our economy and in our system. In all of these areas, as 
discussed above, we believe the power of individuals has been 
declining, and the power of the large corporation has increased. And it 
is increasingly clear that corporate concentrations of power harm 
consumers, workers and other market participant as well as the economy 
itself in a multitude of ways--from wage inequality to corporate 
influence on politics to innovation.

International Brotherhood of 
Teamsters                           The Strategic Organizing Center
25 Louisiana Avenue, NW             1900 L Street, NW #900
Washington, DC 20001                Washington, DC 20036

Iain Gold                           Joan Moriarty
202-437-0963                        (917) 208-5978
[email protected]                  [email protected]

                                    Marka Peterson
                                    (202) 215-6115
                                    [email protected]

                                 ______
                                 

                             Communications

                              ----------                              


                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    Statement of Michael G. Bindner

Chair Warren and Ranking Member Cassidy, thank you for the opportunity 
to submit these comments for the record to the subcommittee on this 
topic.

The technology sector has certainly been an attractive target for those 
who seek to create a wealth tax, which is why we believe the 
subcommittee is addressing this topic. Whether this sector produces 
long-term wealth for its owners is questionable, however. Founders are 
often leveraged and cash flow comes, not from revenue, but from 
continued capitalization. When making comments on wealth and social 
media, I always ask the following question:

``How often do you buy a product that is advertised on the platform?''

Me neither. When I buy things, I go to Amazon and similar sites and 
browse. When I buy airline tickets, I go to the carrier's webpage or a 
page where I can compare prices. On some media sites, I may follow an 
ad from one influencer to another, but commercial ads are simply an 
annoyance, not an opportunity to buy something outside of my budget.

The jury on commercial advertising success in this sector is still out. 
Any regulation of such advertising is, or should be, the job of the 
Federal Trade Commission. Advertising in such an environment is no 
different than advertising in other broadcast or print media. If there 
are gaps in the law, they can be easily filled by the appropriate 
committee, which this is not.

Social media is by nature monopolistic. Our generation finds old 
classmates, paramours and even disconnected relatives in one place, 
rather than across multiple platforms. Should the inability to stay 
afloat without capital infusions be realized, many of us will search 
for different platforms as a group, using old fashioned technologies 
like the telephone to decide where to land. True social groups are not 
really a productive market for most advertising. Indeed, in order to 
remain friends, political debates often run out of steam.

Of late, it is the political advertisements that are attracting the 
most attention. There is very real concern about online sedition--
although seditionists who use public sites are not the sharpest of 
tacks in the desk drawer.

If it were not for the lives lost and the potential for real mayhem, 
the Insurrection would have been comical. It was based on Mr. Eastman's 
rather wishful reading of the 12th Amendment. Once alternative slates 
became an impossibility, the winner had to be the current President. 
Even with all of the contested state delegations omitted, Biden still 
had more electoral votes. A clear reading of the Amendment states that 
the House counts only a majority of valid electors. Invalidating 
electors reduces the total.

Even if a Kangaroo Kongress had found a way to kill or detain members 
to get a majority to their liking, the rule of law is too strong in 
this nation and its military for the traitors to have succeeded. The 
organizers would have simply been elected immediately rather than after 
the current FBI and congressional investigations (including the Ethics 
Committee) finish their work. Our democracy was never in real danger--
although members of Congress certainly were.

Most social media politics is not that blatantly stupid or dangerous. 
The real ``muscle'' of the militia movement is currently rotting in the 
District of Columbia jail. Most will realistically face long prison 
terms, as will certain members of the legislature who were in any way 
part of the master conspiracy. Existing law will punish the guilty, as 
will the Ethics Committees.

Having eliminated commerce, capital finance and sedition as concerns in 
the technology sector, it is time to address what is left and why there 
is little that can be done by this, or any other committee.

Issues of competition, growth and privacy must be considered around the 
issues of political speech and advertising. Platforms have, of late, 
been policing themselves (Twitter) or are shut down (Parler) when 
extremists become dangerous. Any discussions along these lines are 
probably best discussed by the Intelligence Committees and their staff. 
A new minority leader, with new staff, on the minority side of the 
other chamber can be trusted to get down to business.

The avenues for Congress to regulate political advertising have been 
foreclosed by the Constitution and the Courts. The content of political 
speech on social media cannot be touched. The same applies to issues 
and independent campaigns. That social media leaves a trail that could 
prove that some independent campaigns are more linked to the main 
campaign than is allowable is a positive.

The FEC needs adequate staffing to follow such leads--and a more robust 
membership model. The current structure would be comical if it did not 
endanger our democracy. The FEC must also build stronger relationships 
to the intelligence community to avoid a repeat of 2016. I suspect more 
shoes will drop soon.

The questions of the privacy of data in this context consist of voter 
identification, get out the vote and fundraising data. When funds are 
raised for a candidate's political committee, information must be 
public. For dark money committees, more sunshine is desperately needed.

President Obama's campaign perfected the tools for using technology in 
2008. The Trump campaign merely followed the existing playbook. Any 
campaign that does not target using the same methods should not bother 
filing papers to get on the ballot.

Regulations on soliciting contributions and volunteers are problematic. 
The real gold in electoral politics are good donor and volunteer lists. 
The kind of donors and activists who are most in demand already know 
that their information is as valuable to future campaigns as it is for 
the ones they are currently working on.

Adding ``fine print'' to donations--or possibly a video to be watched 
before making a contribution or volunteering would be worthwhile to let 
first time donors know what they are truly signing up for it. I wish 
you luck getting such measures passed. No one wants to be the first to 
warn potential donors, although in the long run, it may be a selling 
point for reform minded candidates.

As long as the Supreme Court takes a broad view of what constitutes 
political speech (and measures to regulate it constitutionally have as 
much chance to pass as those on flag burning--and neither should pass), 
there is little that Congress can do to regulate political speech on 
the Internet.

As long as there are monied interests in politics, these issues will 
arise. The problem is capitalism itself. The truth is, even if 
capitalism is entirely replaced by a more cooperative economy, the 
governance of political speech should still be off the table--
especially as authoritarian capitalism is in its eventual death throes. 
Eventually, workers will beat them at their own game.

I hope these comments have raised issues not previously discussed in 
this debate--which if taken to heart should end it.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff. A YouTube video of these comments will be shared 
with the committee under separate cover.

                                 ______
                                 
                             Sara Monica LLC

                              P.O. Box 168

                           Dunellen, NJ 08812

                           www.SaraMonica.com

                          [email protected]

                        Statement of Sara Maher

Amazon's Incentives for Employees' Inefficiencies

A secondary incentive for Amazon to force their employees to work 
unrealistic fast paces, beyond the benefit Amazon receives from the 
amount processed, is the additional profits Amazon illegally gains 
through the inefficiencies of the work that can't be done properly or 
correctly due to the restrictive time demands and unrealistic quotas. 
Most notably in 1) FBA guaranteed returns mail fraud, 2) FBA 
overcharges, non-reimbursements and phantom inventory, 3) vetting of 
counterfeits screening.

Amazon profits from what slips through the cracks when the employees 
are forced to work so fast that they must let things slip through the 
cracks to make their quotas. Amazon gives the impression that they're 
working efficiently to prevent errors, but the unrealistic working pace 
sets the system up for failures. Amazon's sweat shop pace actually 
hinders the process being done efficiently and carefully, allowing 
Amazon to illegally profit immensely from those failures. Amazon abuses 
and uses its employees as proxies for these illegal practices.

First, take another look at the insightful and truthful comments from 
Courtenay Brown about Amazon's ``High tech sweat shops'', and going 
forward you'll realize that Amazon is financially incentivized to be 
dysfunctional by design.

Courtenay Brown's quotes,

        Now Amazon doesn't care about how their workers are trained, 
        it's all about speed and quantity . . .

        Workers cannot do their jobs well because Amazon wants to make 
        more money . . . A lot of us want to do good work, but it's 
        really frustrating because, you know, we're at a limit.

         Workers cannot do their jobs well because Amazon wants to make 
        more money. That's the bottom line for them. As much product as 
        they can get out and more money.

        And most importantly, And you attempt to try and do, you know, 
        these things like give customers good quality, actually 
        practice customer obsession, you get written up and terminated, 
        so it's all about Amazon's profits.\1\
---------------------------------------------------------------------------
    \1\ Subcommittee Hearing, Promoting Competition, Growth, and 
Privacy Protection in the Technology Sector, Tuesday, December 7, 2021, 
09:30 AM, https://www.finance.senate.gov/hearings/promoting-
competition-growth-and-privacy-protection-in-the-technology-sector.

So, if they get punished for trying to do a good job for their 
customers, but rewarded for doing a bad one, and if Amazon financially 
benefits from the work poorly executed and from the mistakes, then 
that's basically the definition of dysfunctional by design, which means 
Amazon's executives are aware of the benefits from the dysfunctions, 
therefor it's fair to assume it's intentional. And if Amazon has always 
been aware of these mistakes, but by not fixing these mistakes Amazon 
benefits by immense profits, then again you have to ask, are they 
really mistakes anymore or are they dysfunctional by design, therefore 
liable for those mistakes. And as long as Amazon has these financial 
incentives and monopoly power they have no need or motivation to fix 
these mistakes or to do a better job for their employees and for their 
---------------------------------------------------------------------------
customers which includes their 3rd party sellers.

And remember, Amazon has 2 customer bases, 1st--The customers who 
purchase the products and services from the platform. And 2nd--The 3rd 
party sellers who pay fees to sell on the platform and use the FBA 
services.

The 3rd party sellers I'm referring to in this document are the 
American small businesses who are following the rules of Amazon's 
platform and the rules of the federal and state laws. I'm not referring 
to the 3rd party sellers, mostly in foreign countries, who are selling 
through FBA in America and are gaming the system by paying Amazon 
employees to rig the system for them, and are not accountable to 
federal or state laws.\2\
---------------------------------------------------------------------------
    \2\ Some Amazon Sellers Are Paying $10,000 A Month To Trick Their 
Way To The Top, By Leticia Miranda, BuzzFeed News Reporter, Posted on 
April 24, 2019, at 3:35 p.m. ET. Last updated on April 24, 2019, at 
4:47 p.m. ET, https://www.buzzfeednews.com/article/leticiamiranda/
amazon-marketplace-sellers-black-hat-scams-search-rankings.

---------------------------------------------------------------------------
1--FBA Returns (Fulfillment by Amazon's returns processing warehouses).

The financial burdens and risks of FBA's returns are disproportionately 
put on the 3rd party sellers rather than Amazon. The extreme 
inefficiencies in the returns processing system frauds the 3rd party 
sellers out of additional and unnecessary consecutive returns 
processing fees on the same returned items that are often in an 
infinite loop going back and forth between FBA returns department and 
the buyers. Where stressed employees knowingly process used and damaged 
``non-sellable'' returns, then mark them as ``sellable'' as a faster 
processing option due to unrealistic quotas, and then place the item 
back into inventory to be shipped to the next customer, only to get 
returned again due to its used condition. Employees are pushed to work 
so fast, that it's impossible for them to take enough time to properly 
inspect the condition of all the FBA returns, and a guaranteed second 
return of the same item gives Amazon's FBA additional fraudulent 
lucrative profits in FBA returns processing fees payable by the 
victimized unwitting 3rd party sellers. And it frauds the buyers who 
believed they were to receive products in new and unused condition, and 
potentially dangerous to the buyers depending on the condition of the 
compromised products. Considering this grand scale fraud is conducted 
through the mail, its millions of dollars in mail fraud.

An Amazon employee who worked at LEX2 processing returns made a post on 
Reddit where he answered questions about the LEX2 returns processing. 
The following quotes gives you an idea of the state of affairs.

A Reddit user named anning123 asked this question:

        I bought something in new condition, but the package I received 
        was clearly opened and used. The item itself has a sticker with 
        ``LPN PM'' number, do you know if it means anything?

The Amazon employee named AmazonAssociate09876 answered:

        The LPN PM sticker is a ``License Plate Number.'' They are used 
        by Amazon returns facilities to label returned items so that a 
        new barcode with a track history can be applied. If you ever 
        see that sticker it means the item has been returned via 
        Amazon. This doesn't exactly mean it's been used though as 
        plenty gets returned in brand new condition.

        What happened with you though could be multiple things. For 
        example clothes are inspected to see if it is clean, undamaged, 
        and the correct item. The packaging is not considered unless 
        the item won't stay in it in which case it is repackaged in a 
        new bag. We are not required to fold it nor make it look nice 
        again.

        If it was basically anything else, then you are one of about 3 
        million customers every year who got a bad product due to 
        ``work place laziness.'' Amazon requires it's employees to 
        process 44 returns an hour to maintain ``acceptable'' rate. At 
        my FC they have been lax on this and the average is now 36 an 
        hour. Not maintaining rate will lead to a warning. Do it again 
        is a write up. Three write ups is a termination. Most new hires 
        struggle to hit 44 an hour and at least half lose their jobs 
        due to rate alone. So a lot of associates cheat and never even 
        look inside the packaging (or new hires not answering their UI 
        questions correctly because they don't read the thing) and end 
        up processing items that are clearly damaged as new. Which 
        leads to customers like you getting a bad product.

        It's a two sided issue that can be fixed if Amazon bloody 
        stopped putting on the blame on the returns associates and 
        acknowledged their own fault. Just one simple solution is to 
        have the out bound employees call out bad product when they 
        stow it. That said they also have a rate to maintain as well. 
        Maybe having inflexible rates that only ever go up is a bad 
        thing? Or maybe being inflexible to the point that a machine 
        decides if someone loses their job not a human and no one can 
        supersede said machine is problem as well?\3\
---------------------------------------------------------------------------
    \3\ Reddit post: Hello! I am an Amazon Returns associate, AMA!, 
https://www.reddit.com/r/IAmA/comments/nv1cg4/
hello_i_am_an_amazon_returns_associate_ama/.

I've been selling on Amazon since 2009 as a low volume 3rd party 
seller. And for many years, sellers and myself, have been requesting 
Amazon create a button (option) in seller central where we can opt to 
have all our FBA returns automatically removed from inventory 
regardless of the condition so we can evaluate them for ourselves to 
determine if they're in sellable condition. There are many examples of 
this request in the seller forums.\4\, \5\, \6\ 
And it would be by far easier on Amazon's employees to not have to 
judge within 96 seconds (60m/44r = 96s) if a product had been tampered 
with, opened, used, swapped out with another product, etc. . . . But 
Amazon has denied us this simple option over and over again. And it 
would be much easier for Amazon to automatically remove the returns 
since they already have a process of ``removal of returns'' and 
``removal of inventory''. And the returns would be easy to track and 
send back to the original seller because each stickered FBA product has 
internal bar codes printed on a sticker that's placed on the products 
which tracks the logistics of individual sellers' products.
---------------------------------------------------------------------------
    \4\ Amazon, please make a few FBA changes to help sellers avoid 
suspensions by ConcernedFbaSeller Posted on: 05 August 2015 5:16 PM, 
https://sellercentral.amazon.com/forums/
thread.jspa?threadID=264246&start=0&tstart=0&sortBy=date.
    \5\ How do I stop returns from getting put back in to inventory? By 
Schiit Audio Posted on: 02 October 2014 10:38 AM, https://
sellercentral.amazon.com/forums/thread.jspa?threadID=
223907&tstart=0.
    \6\ How to Identify Returned Item for Purpose of Removal Order, by 
LucasP, May 9, '15 8:46 AM, https://sellercentral.amazon.com/forums/t/
how-to-identify-returned-item-for-purpose-of-removal-order/49183.

Since Amazon was very aware of the problem for years, and after a lot 
of pressure, to appease us, Amazon finally tried a wonderful pilot 
program for a limited time called the ``FBA Customer Returns Removal 
Pilot Program''. Where sellers give Amazon the ASIN numbers of the 
products they want to be automatically removed from inventory if 
they're returned. Amazon would automatically mark them when they're 
returned as ``unsellable'' regardless of the condition, which would 
automatically have them pulled from inventory and returned to the 
original seller. A perfect super simple solution that worked within 
their existing system. But then Amazon stopped the pilot program for 
unknown reasons.\7\ They had many opportunities of simple and fantastic 
solutions like this one to correct the situation, but chose not to. The 
only problem I see, if Amazon improved the returns processing system by 
reducing the quotas on their workers to allow them to do a better job, 
and allowing sellers to automatically pull out all of their returns out 
of inventory, then Amazon would lose potentially millions to billions 
of dollars in unnecessary and fraudulent additional fulfillment fees 
and returns processing fees payable by the victimized unwitting 3rd 
party sellers.
---------------------------------------------------------------------------
    \7\ FBA Customer Returns Removal Pilot Posted byu/frankyford, 
https://www.reddit.com/r/FulfillmentByAmazon/comments/ebo25y/
fba_customer_returns_removal_pilot/.

---------------------------------------------------------------------------
Here's the math:

This is a screenshot of one of my returns payment summaries from 2016.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


.epsSo basically, if the product is sold and the customer keeps it, 
then on this product that costs $19.95 Amazon would profit $5.87 in 
processing and referral fees, and the seller profits $14.08. Keep in 
mind these fees do not include the amount of money spent in FBA storage 
fees, shipping fees to the fulfillment centers, or Amazon's 
advertisement fees for the sale of that product on Amazon's platform.

But if that product is returned in damaged and used condition, Amazon 
still profits $3.48 in processing fees, but the seller loses the entire 
price of the product in addition to $3.48 in processing fees ($19.95 + 
$3.48 = $23.43). And if the product was marked correctly as non-
sellable and shipped back to the seller, then the additional removal 
fee of .50 cents would have made the total a loss of $23.93 ($23.43 + 
.50 cents = $23.93).

And now, if that same returned product that's used and damaged is put 
back into inventory to be fraudulently sold as new and unused condition 
to the 3rd party sellers next buyer, then it pretty much guarantees the 
buyer will return it based on its poor condition. So, the second time 
that same products gets processed as a return, Amazon profits a 
combined total of $6.96, and the seller now loses a combined total of 
$6.96 plus the entire cost of the product ($19.95 + $6.96 = $26.91).

And you can easily see how the math can quickly add up if the product 
goes unnoticed by the 3rd party seller, and is in an infinite loop 
between the returns department and the customers. I assume that 
eventually the customer would finally receive a new and unused product 
in good condition, but who knows after how many attempts, and it would 
be at the expense of the 3rd party seller.

So, if the process was honest and efficient, and the product was 
removed the first time, then Amazon would profit a total of $5.87. But 
when it's returned twice and processed twice, Amazon profits in returns 
processing fees a total of $6.96 ($3.48 + $3.48 = $6.96). The 
additional profit from the first return and the second return combined 
is a total of $1.09 ($6.96 - $5.87 = $1.09). So Amazon made an extra 
$1.09 in the fraudulent reprocessing of a used and damaged return, than 
if they simply pulled it out of inventory when it was returned the 
first time.

One dollar and 9 cents doesn't sound like much money, but Amazon has 
about 200 million PRIME members, and more than 200 million shipments a 
year. So, say for example, if Amazon only did this once a year with 
approximately only 10% of their PRIME members, a seemingly overlooked 
and honest ``mistake'' that gets refunded. And if Amazon makes an 
additional profit of $1.09 from the combination of the fees earned on 
the 1st and 2nd return of the same unit, in this scenario if the 
originally costs is $19.95, then $20 million x $1.09 = $21,800,000.00, 
in potential illegal profits per year.

Now imagine if it happened to all of their PRIME members, but only once 
a year. Imagine if it happened to all of their PRIME members, but 
several times a year. Keep doing the math, and the motivation to not 
fix this debilitating situation starts to become more obvious at the 
expense of the FBA employees who are used as proxies, the 3rd party 
sellers who Amazon is stealing from, and the customers who are put at 
risk of potentially receiving a dangerously tampered with product. And 
at the expense of the shareholders as well since these illegal profits 
also inflates the value of Amazon, because it's undetectable as to how 
this extra money was made since it's undetectable as how it should have 
never happened.

It's also very dangerous for the consumers because many of the non-
sellable returns that are placed back into inventory and shipped out 
again typically have a variety of these issues: no packaging, no 
product instructions, no warning labels, no users manuals, no warranty 
papers, no tamper evident security seals, missing parts, used items, 
soiled items, damaged items, swapped items with different low quality 
products, originals swapped with counterfeit items, items covered in 
human hair or pet hair, items covered in body fluids, etc. . . . just 
simply repackaged in Amazon's plastic bags and barcodes and put back 
into inventory to be shipped to the next unwitting 3rd party FBA 
sellers' customers.\8\, \9\, \10\, 
\11\, \12\
---------------------------------------------------------------------------
    \8\ ``Online order of diapers arrives at Jersey City home--but they 
were already soiled,'' By Joshua Rosario | The Jersey Journal, Updated 
January 11, 2020; Posted January 10, 2020, https://www.nj.com/hudson/
2020/01/online-order-of-diapers-arrives-at-jersey-city-home-but-they-
were-already-soiled.html.
    \9\ ``Why did Amazon send this man a pair of moldy shoes?'', Inside 
Edition, Duration: 01:43 2/6/2020, https://www.msn.com/en-us/video/
viral/why-did-amazon-send-this-man-a-pair-of-moldy-shoes/vi-BBZJmc9.
    \10\ ``Amazon Customer Outraged To Find `Baggie of Drugs' Inside 
Package Containing Gift For His 8-Year-Old Niece'' Newsweek, by Khaleda 
Rahman On 11/24/19 AT 9:26 AM EST, https://www.newsweek.com/amazon-
customer-outraged-drugs-package-1473750.
    \11\ ``A ``new'' Amazon waffle maker came with an old crusty-
looking waffle already in it''; ``Buying from Amazon is still a crap 
shoot.'' Vox, By Jason Del Rey@DelRey January 3, 2020, 2:20pm EST, 
https://www.vox.com/recode/2020/1/3/21047550/amazon-waffle-maker-
babycakes-marketplace-seller.
    \12\ ``Police investigate after 65 pounds of weed included with 
Orlando couple's Amazon order,'' WFTV.com By: Jeff Deal, Updated: 
October 20, 2017-6:16 PM, https://www.wftv.com/news/local/police-
investigate-after-63-pounds-of-weed-included-with-orlando-couples-
amazon-order/627653301/.

This fraudulent activity also damages 3rd party sellers' accounts in 
``violation reports'' which the 3rd party sellers' accounts can get 
suspended for, since Amazon passes the blame for ``Item not as 
described'' and ``used items sold as new'' complaints onto the 
unwitting 3rd party FBA sellers who have no idea that Amazon's FBA put 
used returns back into inventory. Typically when an FBA seller's 
account is suspended, they have to pay Amazon a disposal fee for their 
inventory if they can't afford to have it all shipped back to them and 
if they can't afford long term storage fees in FBA. The disposal fee is 
the cheapest removal option, but at the greatest loss. But ``disposal'' 
doesn't necessarily mean Amazon disposes of it, in many cases it's free 
inventory for Amazon to sell. So if Amazon wants the inventory of a 3rd 
party FBA seller, there are ways for Amazon to get it for free, and the 
returns fraud ``account violations'' could be a means amongst many to 
---------------------------------------------------------------------------
that scenario.

And since there is no way to leave company feedback directly for 
Amazon, then the 3rd party FBA sellers have to take the full blow of 
the customers' negative reviews and feedback from poor FBA experiences, 
which is extremely damaging to their businesses' reputation, brands and 
sales, even though they had no control over the FBA shipments and 
activities.\13\ And the returns fraud also damages the product reviews 
of private label brands when a customer receives a used/damaged/
swapped/counterfeit/knock-off/moldy/soiled returned item they thought 
was supposed to be the legitimate product in new condition.
---------------------------------------------------------------------------
    \13\ Are we really this powerless with new feedback removal team? 
Kings Fan Goods Posted on: 21 September 2017 8:56 PM, https://
sellercentral.amazon.com/forums/thread.jspa?thread
ID=367788&tstart=0. Kings Fan Goods Posted on: 21 September 2017 8:56 
PM.

``Feedback'' reviews are about the companies' services, which is 
different than the ``product reviews''. And without visible feedback 
reviews about Amazon, then Amazon will always look better as it 
fraudulently deceives the buyers that Amazon is more trustworthy than 
any other 3rd party seller or any other business in general. This is an 
unfair business practice since Amazon allows others to judge 3rd party 
sellers, but no one is allowed to judge Amazon. It's also damaging to 
other honest businesses outside of Amazon because customers can't 
compare their reviews to Amazon since Amazon has no reviews about 
itself. Therefor there are no limitations on how poorly Amazon's 
services are and how badly they can abuse their entire ecosystem to 
squeeze, cheat and steal more cash out of its debilitated bodies. And 
too many 3rd party sellers are too scared to speak up, out of fear of 
retaliation and loss of their selling privileges.\14\
---------------------------------------------------------------------------
    \14\ Mas_Des_Bories comment August 14, 2017 6:07 AM post #23, 
https://sellercentral.
amazon.com/forums/t/what-s-do-i-do-next-amazon-will-not-pay-for-what-
they-destroyed/321102/23.

2--FBA overcharges, non-reimbursements, swapped inventory and phantom 
---------------------------------------------------------------------------
inventory.

Another way Amazon unjustly profits from FBA warehouse inefficiencies 
due to employee stress, and quotas, is that their employees are forced 
to works so fast that they make many costly mistakes, and then to 
compensate, out of fear of losing their jobs or pressure from 
management, they'll cover their tracks by manipulating the inventory 
data at the expense of the 3rd party sellers, or they won't process the 
information correctly for reimbursements, or they won't cooperate with 
sellers for their contractual reimbursements.

When FBA sellers catch mistakes where they didn't receive their due 
reimbursements for FBA lost and damaged inventory or FBA returns not 
returned within 45 days,\15\ they have to report it within a claim 
period to get their money back. Sometimes after a great deal of work 
and documentation from the FBA sellers, Amazon will actually reimburse 
them, but typically below the fair market value.\16\ Other times Amazon 
will simply refuse to reimburse the claim even if it's within the claim 
period, by making nonsensical excuses, or changing the facts, or hiding 
the discrepancies by changing the terminology, etc. . . 
.\17\, \18\, \19\, \20\, 
\21\ Other time's Amazon won't reimburse in cash but with a totally 
different cheaper bogus product, as an exchange.\22\, \23\ 
Sometimes claims are denied for no practical reason.
---------------------------------------------------------------------------
    \15\ How do you catch the refunds that need to be reimbursed?, 
https://sellercentral.
amazon.com/forums/thread.jspa?threadID=206387&tstart=0 Uplifting Deals 
25 May, 2014 7:40 AM.
    \16\ OnlineSeller comment in What's happening with FBA system 
October 8, 2017 6:04 AM, https://sellercentral.amazon.com/forums/t/
whats-happening-with-fba-system/326179/10.
    \17\ Beware Reimbursement Requests Getting Difficult by 
HonestSeller, Posted on August 2, 2017 11:48 AM, https://
sellercentral.amazon.com/forums/thread.jspa?messageID=4093066#
4093066.
    \18\ What do I do next? Amazon will not pay for what they 
destroyed! By TheLeatherman Posted on: 26 July 2017 12:03 AM, https://
sellercentral.amazon.com/forums/t/what-s-do-i-do-next-amazon-will-not-
pay-for-what-they-destroyed/321102.
    \19\ Is anybody aware of a policy change in handling ``stickered'' 
inventory? Funky Monkey Posted on: 16 February 2014 8:10 PM, https://
sellercentral.amazon.com/forums/t/is-anybody-aware-of-a-policy-change-
in-handling-stickered-inventory/304119.
    \20\ THEY CHANGED THE TERMINOLOGY! Funky Monkey March 20, 2014 2:45 
AM, https://sellercentral.amazon.com/forums/t/is-anybody-aware-of-a-
policy-change-in-handling-stickered-inventory/304119/33.
    \21\ Results and observations from my experience digging for FBA 
Reimbursements TiffDMP Posted on: 05 March 2016 12:52 PM, https://
sellercentral.amazon.com/forums/thread.
jspa?threadID=293756.
    \22\ Amazon no longer reimbursing units not returned in cash! Funky 
Monkey, Posted on: 28 July 2017 12:31 PM, https://
sellercentral.amazon.com/forums/t/amazon-no-longer-reimbursing-units-
not-returned-in-cash/321425.
    \23\ Amazon lost entire pallet of inventory, magically found 
cheaper substitute, by Richard Roberson Posted on: 20 November 2017 
10:34 AM, https://sellercentral.amazon.com/forums/t/amazon-lost-entire-
pallet-of-inventory-magically-found-cheaper-substitute/336057.

And in many cases Amazon employees will manipulate the inventory status 
to deny reimbursements, like if its ``warehouse damaged'' where Amazon 
would owe a reimbursement, they'll change it to ``customer damaged'' so 
Amazon wouldn't be responsible for the reimbursement, even if it's 
never been shipped to a customer.\24\ They'll also delete the entire 
claim records (Case ID #) and retract and delete e-mails.\25\ They've 
also suspended FBA sellers' accounts for bogus reasons if they try to 
get Amazon to pay them their due reimbursements too often.\26\
---------------------------------------------------------------------------
    \24\ Customer Damage when No Inventory was Returned, https://
sellercentral.amazon.com/forums/t/customer-damage-when-no-inventory-
was-returned/349577.
    \25\ FunkyMonkey's reply to TheLeathrman, https://
sellercentral.amazon.com/forums/t/what-s-do-i-do-next-amazon-will-not-
pay-for-what-they-destroyed/321102/7. TheLeatherman Posted post #7 July 
28, 2017 12:19 AM.
    \26\ https://sellercentral.amazon.com/forums/t/what-s-do-i-do-next-
amazon-will-not-pay-for-what-they-destroyed/321102/26. TheLeatherman 
post #26, August 15, 2017, 1:45 PM.

And Amazon will often change the status of a ``warehouse damaged'' unit 
to a ``sellable'' unit to not have to reimburse the FBA seller by 
swapping dissimilar inventory between sellers and hide their actions by 
saying in the ``Adjustment Reports'' the inventory came from a 
``Holding Account''. Typically the dissimilar inventory is of far less 
value and in inferior condition than the original, or an entirely 
different product or counterfeit, but Amazon will claim it's the same 
type of product when it's not. Another use of a ``holding account'' is 
to make it look as if it's a totally new product that they held from 
the seller's inventory, even when there were no other units in the 
inventory it could have come from, it's phantom inventory to hide the 
discrepancies so when the data is reconciled, everything looks 
---------------------------------------------------------------------------
accounted for.

FBA also regularly overcharges 3rd party sellers in ``weight handling 
fees,'' ``long term storage fees'' errors, fulfillment fees, oversize 
fees, etc.\27\, \28\, \29\, 
\30\, \31\, \32\
---------------------------------------------------------------------------
    \27\ FBA fulfillment is 131.74 for a 11.95 item, Real chance Posted 
on: 18 November 2017 6:50 PM, https://sellercentral.amazon.com/forums/
thread.jspa?threadID=376081&tstart=30.
    \28\ Yet another reimbursement type . . . FBA storage fees for non-
existent ASINs by Water_Enthusiast (formerly iSnorkel) Posted on: 14 
March 2017 7:46 AM, https://sellercentral.amazon.com/forums/t/yet-
another-reimbursement-type-fba-storage-fees-for-non-existent-asins/
284554.
    \29\ FBA LONG TERM STORAGE FEE ERRORS!?!?!? WATCH OUT! Bee_Blessed 
Posted on: August 18, 2016 4:54 PM, https://sellercentral.amazon.com/
forums/t/fba-long-term-storage-fee-errors-watch-out/182971.
    \30\ Been overcharged FBA fees for thousands of orders and amazon 
won't reimburse by SnoRainier Posted on: 26 April 2017 10:58 PM, 
https://sellercentral.amazon.com/forums/t/been-overcharged-fba-fees-
for-thousands-of-orders-and-amazon-wont-reimburse/302279.
    \31\ Why is Amazon stealing from the little guys? By just_a_li 
April 18, 2017, 1:01 PM, https://sellercentral.amazon.com/forums/t/why-
is-amazon-stealing-from-the-little-guys/298524.
    \32\ Anyone else being overcharged for FBA fees? By Florida_Man, 
https://seller
central.amazon.com/forums/t/anyone-else-being-overcharged-for-fba-fees/
278036.

There have also been widespread issues for FBA inbound shipments, and 
3rd party sellers at their wits end sending petitions to Jeff Bezos 
directly through the seller forums. In a forum titled ``Petition to 
Jeff/Executive Team regarding FBA Issues'' Rooster wrote, ``1--In the 
last few months a change was made whereby the Seller was blamed for 
issues caused by the FBA warehouses--without recourse.'' ``2--There is 
an auto-reconcile feature that seems to be in place which is causing 
widespread issues by not allowing a shipment to be researched for items 
lost by the warehouses--or not being counted correctly in receiving.'' 
``3--Complete and correct shipments are being counted in as short and 
then designated with a ``Problem'' designation requiring Sellers to 
Acknowledge that we caused the problem and thus taking a hit to our 
Inbound Metrics as well as losing the value of the items lost.'' Other 
sellers in the forum joined in and added their own lists of grievances 
over other disservices.\33\
---------------------------------------------------------------------------
    \33\ Petition to Jeff/Executive Team regarding FBA Issues. By 
Rooster, Posted on: August 11, 2017 2:28 PM, https://
sellercentral.amazon.com/forums/thread.jspa?threadID=362363.

These fraudulent practices are damaging to the sellers' businesses, 
sales, finances, brands, product reviews, feedback, and reputation. And 
of course absolutely devastating to their mental health as they watch 
in horror and agony as all their investments, hard work and dreams get 
stolen from them, and the fear of how they'll financially survive and 
provide for their families is unimaginable; millions of 3rd party 
sellers have been living through this every day for years. And of 
course sellers getting blamed for FBA issues out of the sellers' 
control creating ``account violations'' which suspends the sellers' 
accounts are even worse, aside from destroying the sellers' entire 
businesses, the sellers are unable to access their sellers' accounts to 
recover their reimbursements, and they'll have very few chances of ever 
recovering their money. Sometimes the sellers' only chances of 
reimbursements are if they go public with their story in Amazon's 
Seller Forums, if they get lucky a forum monitor will chime in and 
resolve the problem to save face on a now public issue. It's difficult 
for sellers to get the attention of the media, because reporters simply 
can't grasp the intricate details of online retail and have a hard time 
understanding the issues. It's the same problem with government 
---------------------------------------------------------------------------
agencies.

These fraudulent practices also defraud the buyers who believed they 
were getting a product in new and unused condition and/or believed they 
were getting the product they ordered, and not a product that FBA 
swapped out with something else to avoid reimbursing their FBA 3rd 
party sellers.

Any contractual reimbursements that are denied and not paid back fully 
are boundless profits for Amazon. It's a win-win situation for Amazon's 
financial advantage into the millions to billions of dollars, but it's 
all stolen money from the 3rd party sellers.

For example, in Amazon's Seller Forums where the FBA sellers try to 
keep everyone aware of FBA's latest inventory manipulations, a FBA 
seller named Water_
Enthusiast (formerly known as iSnorkel) Posted a warning to FBA sellers 
on: 17 September 2016 1:34 PM in a thread titled, ``New type of FBA 
reimbursement to request: Missing Unfulfillable Units'',

``We open cases for reimbursements that should have been issued 
automatically, but aren't, to the tune of over $15,000 a year (plus 
some lost units replaced to our inventory). Most cases are eventually 
successful.''

. . . ``Recently I've stumbled on yet another category of units that 
require reimbursement requests--missing unfulfillable units. In my 
experience, NONE of these types of missing units have been ``auto-
reimbursed'' so opening a case is the only way to get what is due when 
Amazon misplaces unfulfillable units.''

``When a customer returns an item with opened packaging, whether the 
item is damaged or not, Amazon puts it back into our FBA inventory as 
an unfulfillable unit. So far so good, system works as expected (we 
have the ``repackaging of returns'' option off). We have the account 
setting enabled to automatically return to us all unfulfillable units 
every 2 weeks. So you would expect that these unfulfillable units would 
make it back to us within a few weeks so we can inspect and repackage 
or otherwise deal with it at our facility.''

``However I have found 60+ instances in the last several months where 
the unfulfillable unit apparently DISAPPEARED--it never came back to 
us, it does not remain as an unfulfillable unit in our FBA inventory, 
it has not been reimbursed in $ or in units, and I see no evidence of 
it being converted to a fulfillable unit and being added to FBA 
inventory that way.''

``Multiple cases opened so far (with 5 units per case), half of the 
cases have successfully earned reimbursement for the missing units so 
far, with the rest of the cases still open. Several cases required 
multiple contacts to resolve, especially when there were multiple 
orders/returns for units of the same SKU, some of which were actually 
returned to us and some of which were not.''

. . . (Side note--we've found our cases have been resolved quicker and 
more favorably since we've taken to answering every emailed survey 
``Were you satisfied with the support provided?'' to reward reps who 
resolve in our favor (5 star), and to give appropriate feedback (1 to 2 
star) to reps who give the runaround or make errors. I believe that the 
reps can look at the feedback we give to other reps, much as eBay 
members can view the ``feedback left for others'' in a buyer's 
feedback, and that this may influence how they treat our cases. 
Especially the prospect of earning 5 stars. YMMV.)

. . . And then in a reply to her post another seller named Chief Robot 
posted on 29 December 2016 2:17 AM and said, ``Yes, we find these from 
time to time. Just found a few ``reserved'' inventory that were lost or 
should have been reimbursed. Status changed from unfulfillable to 
reserved. Then stays in reserved forever. Best is when it belongs to an 
old listing that no longer has a catalogue page and is archived, you 
never see it when quickly scanning trough gui page. New SS excuse, 
reserved unit is a fantom [Phantom] unit that was created to solve an 
error in the past.''\34\
---------------------------------------------------------------------------
    \34\ ``New type of FBA reimbursement to request: Missing 
Unfulfillable Units,'' by Water_Enthusiast (formerly known as iSnorkel) 
Posted on: 17 September 2016 1:34 PM, https://sellercentral.amazon.com/
forums/t/new-type-of-fba-reimbursement-to-request-missing-
unfulfillable-units/198156.

In the case of this seller Water_Enthusiast, she carefully monitors her 
FBA inventory so her losses are minimum, but at the expense of her 
labor which is costly. This is labor Amazon FBA is getting paid to do 
through sellers' FBA fees, but FBA does the job so poorly that it takes 
sellers valuable additional time to correct FBA's costly errors. In 
many cases it costs more to pay an additional employee to keep track of 
FBA to prevent the non-reimbursement loses, than they would recover 
from non-reimbursements. So it's simply cheaper to succumb to 
victimization of Amazon stealing from them. Most sellers don't have the 
time, resources or knowledge to stay on top of it, or they're not aware 
of the non-payments because they assume Amazon's FBA is doing the job 
---------------------------------------------------------------------------
they're paying them to do. So they lose everything to Amazon.

So let's do the hypothetical math on this, say there were 100,000 FBA 
sellers selling at her sales volume that assumed Amazon was honestly 
and efficiently reconciling the inventory and payments, and weren't 
aware of the losses or unable to be reimbursed, then 100,000  
$15,000.00 = $1,500,000,000.00 a year of potential profits which Amazon 
could keep without detection or consequence. And that doesn't include 
the sellers that have higher or lower sales volume than her.

These profit should look like a negative on Amazon's balance sheets, 
but shows up as a positive. And are undetectable as how they were 
gained because it's undetectable as how they should have been lost. 
Perhaps somewhere in Amazon's fluctuating policy something is written 
about claim periods. But nowhere in the policy does it say FBA sellers 
are responsible for keeping track of FBA payments and reimbursements to 
make sure FBA pays them according to policy otherwise FBA is not liable 
for reimbursements. FBA is supposed to keep track of the inventory as a 
part of the contractual agreement of their services and pay 
reimbursements accordingly without margins of error.

No new Amazon FBA warehouse should be allowed to be built in the USA 
until a thorough external audit and investigation is done of all FBA 
business practices since the first day Amazon started FBA, for both the 
employees and the 3rd party sellers. Investigations need to be done 
into the abuse and exploitation of their employees who are also being 
used as proxies for theft; against their will. The ``Adjustment 
Reports,'' ``Reserved Units,'' ``Holding Accounts'' and ``Inbound 
Shipments'' need to be thoroughly investigated and reconciled. Non-
reimbursements, non-payments, overcharges that's owed to the 3rd party 
sellers need to be investigated, reconciled and reimbursed. A 
reconciliation of all inventory needs to be done to find all the 
discrepancies over the years, so the full value of the lost, damaged 
and non-returned items can be fully accounted for and reimbursed to the 
3rd party sellers. Additional fraudulent fees from processing the same 
returns over and over again into an infinite loop must be reimbursed. 
Overcharges from weight handling fees and long term storage fees errors 
must be reimbursed. And considering that the 3rd party sellers are 
illegally forced and racketeered into FBA via PRIME, since FBA is 
illegally tied to PRIME and the ranking visibility on the platform, 
then 3rd party sellers should also be reimbursed all their fulfillment 
fees as restitutions from being illegally racketeered into FBA. (I can 
further elaborate about racketeering via protection racket upon 
request). And an SEC investigation needs to be done on the additional 
money FBA stole from its 3rd party sellers but then reported as 
profits, when in fact it was stolen money. FBA & SFP needs to be untied 
from PRIME as the sole qualifications, so other fulfillment service 
companies can qualify a product for PRIME, or any other perks made 
available on the platform. And going forward, Amazon's FBA should be 
closely monitored and audited by external agencies. These agencies 
should do reviews and audits of the monitoring of inventory status, and 
making sure the reimbursements and inventory are reconciled. And Jeff 
Bezos's influence, and the resulting employees' fears and pressures to 
abide to his selfish and unethical commands in this massive fraud needs 
to be investigated.

3--Fast paced counterfeits screening forces counterfeits to slip 
through the cracks; and Amazon financially benefits.

Amazon gives the impression that they've invested heavily in stopping 
counterfeits on their platforms and within FBA. But the working pace is 
set up for failure and inefficiencies, just like the previous examples. 
And Amazon profits bountifully from the counterfeits that are forced to 
slip through the cracks.

Wade Shepard, an investigative reporter did such a thorough job 
explaining how this happens, that there's not much more I need to add 
to his reporting to explain this. So here are some quotes from his 
article ``How Chinese Counterfeiters Continue Beating Amazon'' by Wade 
Shepard, January 12, 2017:\35\
---------------------------------------------------------------------------
    \35\ How Chinese Counterfeiters Continue Beating Amazon, by Wade 
Shepard, January 12, 2017, https://www.forbes.com/sites/wadeshepard/
2017/01/12/why-amazon-is-losing-its-battle-against-chinese-
counterfeiters/#7a75e68c585c.

        Amazon's counterfeit problem grew exponentially when the 
        marketplace began to aggressively target Chinese sellers in 
        2015. To help cut out the import/export middlemen and allow 
        Chinese manufacturers and merchants to sell directly to buyers 
        in the USA, Canada, and Europe, Amazon streamlined the shipping 
        process by doing things like registering with the Federal 
        Maritime Commission to provide ocean freight, which allowed for 
        Chinese merchants to ship entire containers directly to 
---------------------------------------------------------------------------
        Amazon's fulfillment warehouses.

        ``Amazon wanted all those Chinese sellers in the U.S. They 
        actively invited them to sell,'' explained Chris McCabe, an 
        Amazon Seller consultant from ecommerce Chris and a former 
        Amazonian who once worked in the company's merchant account 
        investigation division.

        Once these bulkheads were removed, China-based merchants began 
        pouring into the marketplace, doubling their presence in 2015 
        alone, and making Amazon the cross-border ecommerce choice for 
        Chinese sellers. That same year, Amazon moved past Walmart as 
        the most valuable retailer in the USA, Jeff Bezos moved up to 
        number five on Forbes's wealthiest person list, and profits 
        soared by 20%.

        . . . over 60% of the world's knockoffs originate from China--a 
        big chunk of an industry worth half a trillion dollars per 
        year.

        ``Did we see a rise in counterfeits being sold on Amazon after 
        the marketplace became popular with Chinese merchants?'' I 
        asked Julie Zerbo.

        ``We absolutely did,'' she replied. ``Sure, counterfeits were 
        present on the site prior to Amazon's push for a greater 
        presence of Chinese sellers, but the influx of fakes since then 
        has been enormous.''

        It is unreasonable to assume that Amazon expected anything 
        different, as China's prevalence for counterfeit production was 
        well know prior to their big China push. According to China's 
        state-run Xinhua news agency, 40% of the country's domestic 
        online marketplaces were made up of counterfeit goods in 2015, 
        the same year that Amazon bridged the ecommerce hemispheres.

        Amazon claims to be doing whatever they can to inhibit 
        counterfeits in their marketplace . . .

        But when fake items on Amazon are about as easy to find as 
        authentic ones, I have to wonder what these anti-counterfeit 
        measures actually consist of--and why they don't seem to be 
        working effectively.

        Michael Jakubek, who worked on Amazon's fraud and abuse 
        prevention teams between 2004 and 2012 . . . [said] ``The big 
        problem with this is that the investigators get rewarded based 
        on how quickly they go,'' Jakubek said. ``There's no reason 
        they can't identify that these sellers are bad, but they're 
        compensated to go so quickly that they typically just do really 
        cursory reviews.''

        Chris McCabe, who investigated merchant violations for Amazon 
        for 5 years, elaborated: ``You need people, properly trained 
        people with the right kind of SOPs in their hands or in their 
        heads, and that's where a lot of the failures come in. I mean, 
        they are being pressured to review work very quickly. They have 
        this IPH (investigations per hour) which always slowly inches 
        up . . . If you know you have a certain number of 
        investigations to do during an hour and you've done two that 
        were incredibly complex and you have to do ten more in the rest 
        of the hour, but those two took you half an hour or 20 minutes, 
        it means you have to blow through the rest of them to catch 
        up.''

        . . . Amazon employees are not only pressured to work extremely 
        rapidly--often sacrificing quality for quantity--but many 
        positions are perpetually filled by those who are new on the 
        job.

        '`The highly skilled, experienced, trained people that I used 
        to work with are gone,'' McCabe explained. ``They need better 
        training. They need more auditing of investigations, because 
        it's clear that all the wheels have come off the cart when it 
        comes to the quality of the work that goes into an 
        investigation of an appeal, a review of an account.''

        To put it simply, Amazon's high-pressure, high-turnover, 
        metrics-driven work environment seems to result in torrents of 
        seemingly mindless mistakes, oversights, and copy and paste 
        responses. While Amazonians are encouraged to tear apart each 
        other's ideas, be available to respond to emails 24/7, and 
        treat their job like a lifestyle, scammers and counterfeiters 
        are running amok, selling knockoffs on their marketplace with 
        near impunity--even when caught they just open up a new account 
        under a new name and hope to fall through the cracks of 
        Amazon's porous HR strategy once again.''

It's a clear pattern of behavior. So, since 2019, Amazon had employed 
approximately ten thousand additional employees to fight frauds and 
counterfeits. But they let it get so out of control for so long, that 
now they can't even stop it. So now tax payers are responsible to pay 
for it through the additional work of law enforcement, like the DOJ and 
FBI. ``Amazon's hiring of former federal law enforcement agents seems 
like a strategy to avoid liability without seriously addressing the 
fundamental problems with its marketplace,'' Schakowsky said in an 
interview for an article by Emily Birnbaum and Daniel Lippman, ``How 
one of America's largest employers leans on federal law 
enforcement''\36\
---------------------------------------------------------------------------
    \36\ How one of America's largest employers leans on federal law 
enforcement, by Emily Birnbaum and Daniel Lippman, Tuesday, December 
21, 2021, 4:30 AM, https://news.
yahoo.com/amazon-cultivates-close-ties-federal-093010630.html.
---------------------------------------------------------------------------

Conclusion

There's only so much money to squeeze out honestly and fairly, 
eventually when the sources runs dry, the only way left to attain it is 
to steal it or cheat it out. Just like Amazon did with the 61.7 million 
of stolen Flex driver tips. And lawmakers should be very wary that all 
those shiny objects that Amazon dangles in front of them to coax 
favoritism and to change laws in their favor is riddled with that 
stolen money.

                                   [all]