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Live: Lawmakers Grill Big Tech CEOs in Historic Hearing on Power. Aired 2-2:30p ET

Aired July 29, 2020 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[14:00:00]

REP. DAVID CICILLINE (D-RI): I appreciate that, Mr. Pichai. Google's own documents and numerous interviews with companies effected by this conduct show that Google did just that, which is very disturbing and very anticompetitive. In addition to stealing content, Google also began to privilege its own sites. An investigative report published just yesterday found that 63 percent of web searches that start on Google also end somewhere on Google's own websites.

And to me that's evidence that Google is increasingly a walled (ph) garden which keeps users on Google's sites even if Google doesn't have the most relevant information and it's economically catastrophic for other companies online. And so my time is running out but Mr. Pichai I'll just end by saying the evidence seems very clear to me.

As Google became the gateway to the internet it began to abuse its power. It used its surveillance over web traffic to identify competitive threats and crush them. It has dampened innovation and new business growth and it's dramatically increased the price of accessing users on the internet virtually ensuring that any business that wants to be found on the web must pay Google a tax.

And with that I recognize the Ranking Member of the subcommittee, Mr. Sensenbrenner, for his first round of questions.

SENSENBRENNER: Thank you very much, Mr. Chairman. I've been in Congress 42 years, that's coming to an end at the end of this year. I'm breathing a sigh of relief. But during that period of time, during the decade of the 90s and the 00s I was involved as Chairman of the Science Committee and Chairman of this committee and trying to make the net universal and open it up to everybody.

And one of the - or one of the thesis (ph) that we use is the net should end up becoming basically the debate on issues not only in our country but throughout the world. And in exchange for that this committee and the Congress gave (ph) internet service providers immunity so if somebody said something defamatory in what they post then the ISPs could not be a part of a lawsuit for defamation.

Now after hearing Mr. Jordan give a long line of censorship of conservative viewpoints, I'm concerned that the people who manage the net and the four of you manage a big part of the net are ending up using this as a political screen. Conservatives are consumers too and the way the net was put together, in the eyes of Congress, is that everybody should be able to speak their mind.

Mr. Zuckerberg, Mr. Jordan litany of censorship zeros in on Facebook. Exactly what are your standards in quote "filtering out" political speech that maybe some people out there don't agree with?

ZUCKERBERG: Congressman, thank you for the opportunity to address this. Out goal is to offer a platform for all ideas. We want to give everyone in the world a voice to share their experiences and ideas. A lot of that is day to day things that happen in their lives some of it is political. And frankly I think that we've distinguished ourselves as one of the companies that defends free expression the most.

We do have community standards around things that you can and cannot say. I think you would likely agree with most of them. They ban categories of harm such as promoting terrorist's propaganda, child exploitation, incitement of violence, some more legalistic things like intellectual property violations and they also ban things like hate speech that could lead to dehumanizing people and encouraging violence down the road.

SENSENBRENNER: You know, if I - if I may ask a specific of you, it was reported that Donald Trump Jr. got taken down for a period of time because he put something up on the efficacy of hydroxychloroquine. Now, I wouldn't take it myself, but there still is a debate on whether it is effective either in treating or preventing COVID-19, and I think that this is a legitimate matter of discussion and it would be up to a patient and their doctor to determine whether hydroxychloroquine was the correct medication given the circumstances. Why did that happen?

ZUCKERBERG: Congressman, well first to be clear I think what you might be referring to happened on Twitter, so it's hard for me to speak to that, but I can talk to our policies about this.

[14:05:00]

We do prohibit content that will lead to imminent risk of harm, and stating that there's a proven cure for COVID when there is, in fact, none might encourage someone to go take something that could have some adverse effects, so we do take that down. We do not prohibit discussion around trials of drugs or people saying that they think that things might work or personals experiences with experimental drugs, but if someone is going to say that something is proven when, in fact, it is not, that could lead people to make (inaudible)...

SENSENBRENNER: But wouldn't that be up to somebody on the other side of the issue to say that this is not proven? And you know, I know as a fact for people with certain conditions in contrary (ph) indicated and they shouldn't take it on that, but wouldn't that be up to somebody else, you know, to say OK, what somebody posted on this really isn't true and here's what the facts are rather than having a Twitter or a Facebook take it down?

ZUCKERBERG: Congressman, in general I agree with you, and we do not want to become the arbiters of truth. I think that that would be a bad position for us to be in and not - and not what we should be doing, but on specific claims if someone is going to go out and say that they hydroxychloroquine is proven to cure COVID when, in fact, it has not been proven to cure COVID and that that statement could lead people to take a drug that in some cases some of the data suggests that it might be harmful to people, we think that we should take that down. That could cause imminent risk of harm.

SENSENBRENNER: OK. Thank you. I yield back.

CICILLINE: I thank the gentleman. I now recognize the distinguished Chair of the full Judiciary Committee, Mr. Nadler from New York, for five minutes.

NADLER: Thank you, Mr. Chairman. Mr. Zuckerberg, I want to thank you for providing this information during our investigation. However, the documents you provided tell a very discerning (ph) story, and that story is that Facebook saw Instagram as a powerful threat that could siphon business away from Facebook. So rather than compete with it, Facebook bought it. This is exactly the type of anticompetitive acquisition that the antitrust laws were designed to prevent.

Now, let me explain what I mean. Mr. Zuckerberg, you have written that Facebook can likely always just buy any competitive start ups. In fact, on the day Facebook bought Instagram, which you described as a threat, you wrote, quote, "One thing about start ups is you can often acquire them," close quote. Mr. Zuckerberg, you were referring to companies like Instagram in that quote, weren't you?

ZUCKERBERG: Congressman, I don't have the exact document in front of me, but I have always been clear that we viewed Instagram both as a competitor and as a compliment to our services. In the growing space around after smartphones started getting big and they competed with us in the space of mobile cameras and mobile photo sharing, but at the time almost no one thought of them as a general social network and people didn't think of them as competing with us in that space. And you know, I think that the acquisition has been wildly successful. We were able to by acquiring them continue investing in it and growing it as a standalone brand that now reaches many more people than I think either Kevin, the co-founder, or I thought would be possible at the time while also incorporating seem of the technology to make Facebook's photos sharing products better. So yes.

NADLER: OK, now in early 2012 when Facebook contemplated acquiring Instagram, a competitive startup, you told your CFO that though nascent Instagram could be very disruptive to us, and in the weeks leading up to the deal, you described Instagram as a threat saying that, quote, "Instagram can meaningful hurt us without becoming a huge business," unquote. Now, Mr. Zuckerberg, what did you mean when you described Instagram as a threat, as disruptive, and when you said that Instagram could meaningfully hurt Facebook? Did you mean that consumers might switch from Facebook to Instagram?

ZUCKERBERG: Congressman, thanks for the opportunity to address this. At the time, there was a small but growing field of mobile...

NADLER Did you mean that - did you mean that consumers might switch from Facebook to Instagram? That was my question. ZUCKERBERG: Thanks. Congressman...

NADLER: Yes or no. Did you mean that?

ZUCKERBERG: In the space of mobile photos and camera apps, which was growing, they were a competitor. I've been - I've been clear about that. And...

NADLER: OK, fine. Fine. In February of that year, February 2012, you told Facebook's Chief Financial Officer that you were interested in buying Instagram. He asked you whether the purpose of the deal was to neutralize a potential competitor or to integrate their products with ours in order to improve our services.

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You answered that it was a combination of both saying what we're really buying is time. Even if some new competitors springs up those products won't get much traction since we'll already have their mechanics deployed at scale. Mr. Zuckerberg, what did you mean that the purpose of the deal was to neutralize a potential competitor?

ZUCKERBERG: Congressman, well those aren't my words, but yes. I've been clear that Instagram was a competitor in the space of mobile photo sharing. There were a lot of others at the time that competed with apps like VSCO Cam and Pic Please (ph) and companies like that. It was a subset of the overall space of connecting that we exist in, and by having them join us they certainly went from being a competitor in the space of being a mobile camera to an app that we could help grow, help get more people to be able to use and be on our team. And I think that's been wildly successful.

NADLER: Reclaiming - reclaiming my time. Yes. Well, Mr. Zuckerberg, mergers and acquisitions that buy off potential competitive threats violate the antitrust laws. In your own words you purchased Instagram to neutralize a competitive threat. If this was an illegal merger at the time of the transaction why shouldn't Instagram now be broken off into a separate company?

ZUCKERBERG: Well Congressman, I think the FTC had all of these documents and reviewed this and unanimously voted at the time not to challenge the acquisition. I mean, I think with hindsight it probably looks like obvious that Instagram would have reached the scale that it has today, but at the time it was far from obvious. A lot of the competitors that they competed with in mobile sharing, including companies like Path which were hot at the time and had great founders and entrepreneurs running them - Dave Moore and I worked closely with him, and I don't even think Path exists today. It was not a guarantee that Instagram was going to succeed.

BUCK: The acquisition has done wildly well, largely because not just of the founders talent, but because we invested heavily in building up the infrastructure and promoting it and working on security, and working on a lot of things around this. And I think that this has been an American success story. NADLER: Well, thank you. Mr. Zuckerberg, you're making my point. In closing, Mr. Chairman, I want to end where I began. Facebook, by Mr. Zuckerberg's own admission and by the documents we have from the time, Facebook saw Instagram as a threat that could potentially siphon business away from Facebook.

And so, rather than compete with it, Facebook bought it. This is exactly the type of anti-competitive acquisition that the anti-trust laws were designed to prevent. This should never have happened in the first place, it should never have been permitted to happen and it cannot happen again.

I yield back.

CICILLINE: Thank you, Mr. Chairman. I would remind the witness that the (inaudible) for the FTC in 2012, of course, do not alleviate the anti-trust challenges that the Chairman described.

And with that, I'm going to recognize the gentleman from Colorado, and again, thank him for co-hosting one of the most important field hearings we had along with Mr. Neguse in Colorado, and I think was very critical in this investigation, be recognized for five minutes, Mr. Buck.

BUCK: Thank you, Mr. Chairman. And I want to offer my appreciation to you for the bipartisan way that you have approached the Subcommittee's investigation. I want to start by saying that capitalism is the greatest instrument for freedom this world has ever seen. Capitalism has given the United States the freedom and means to defeat the Soviet Union, beat back fascism and put a man on the moon.

This economic system has lifted millions our of poverty. It has made America the freest, most prosperous nation in the world. Our witnesses have taken ideas born out of a dorm room, a garage, a warehouse and built these dreams in to four of the biggest power players in the digital, global economy. You have all enjoyed the freedom to succeed.

Now, let me be clear, I do not believe big is necessarily bad. In fact, big is often a force for good. However, I want to address one particularly disturbing issue. Mr. Pichai, in October 2018 Google dropped out of the running for a Pentagon contract to complete the Joint Enterprise Defense Infrastructure, or JEDI contract which was valued at more than $10 billion.

Google's stated reason for removing itself from the bidding process is that the U.S. military's project did not align with Google's corporate values and principles. This is the same U.S. military that fights for our freedoms and stands as a force for good across the globe. These are the same soldiers, sailors and airmen that sacrifice their lives to ensure you have the freedom to build your company and set your corporate policies without fear of government interference, unlike in communist China.

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I also find it very interesting that only months after making this decision to withdraw from the JEDI contract, Marine General Joseph Dunford, the Chairman of the U.S. Joint Chiefs of Staff warned the Senate Armed Forces Committee that the Chinese military was directly benefiting from Google's work. It made me wonder what values Google and communist red China had in common.

I asked myself, self, is it that the Chinese communist party imprisons Uighur Muslims in concentration camps like it is shown on the chart behind me? Could it be that China forces slaves to work in sweatshops? Maybe they align on the design to suppress free speech in Hong Kong. Did Google agree with CCP's decision to lie to the world about the COVID-19 pandemic?

Then I thought about Google's dragonfly experiment, I wondered if perhaps you agreed with the Chinese government's use of technology platforms to spy on its own people and enforce draconian security laws. Maybe it's that your company is aligned with the Chinese communist party's corporate espionage policies where the strategy is to steal whatever can't be produced domestically.

These values that allow Google to work with the Chinese military but not the U.S. military help explain why Google wouldn't think twice about blatantly stealing a competitor's product right down to the watermark without any hint of attribution.

Mr. Pichai, during our field hearing in my home state of Colorado I heard a story that sounded so brazen and contrary to free market principles that I thought it must be straight from the Chinese communist party's corporate espionage playbook.

Google took advantage of a company that relied on your search engine to build its brand and compete. Google misappropriated lyrics from Genius Media Group's website and published those lyrics on Google's own platform.

However, Genius caught Google in the act, quite literally red handed. When Google - when Genius suspected this corporate theft is occurring, the company incorporated a digital watermark in its lyrics that spelt out, "red handed," in Morse code. Google's lyric boxes contained the watermark showing that your company stole what you couldn't or didn't want to produce yourself.

After Google executives stated that they were investigating this problematic behavior, Genius created another experiment to determine the scope of the misappropriation. It turns out that out of 271 songs where the watermark was applied, 43 percent showed clear evidence of matching.

Your company which advertises itself as a doorway to freedom took advantage of this small company, all but extinguishing Genius' freedom to compete. Google is supposed to connect people to information. Your corporate values once stood for freedom, a platform that let capitalism flourish and helped bring countless people across the globe out of poverty.

My question to you, Mr. Pichai, do you think that Google could get away with following China's corporate espionage playbook if you didn't have a monopolistic advantage in the market?

PICHAI: Congressman, I want to be able to address the important concerns you raised. First of all, we are proud to support the U.S. government. We recently signed a big project with the Department of Defense where we are bringing our world-class (inaudible) cyber security approach to help protect Pentagon networks from cyber security attacks.

We have projects underway with the Navy, the Department of Offense Affairs - happy to follow-up and explain more. We have a very limited presence in China, we don't offer any of our services - search, Maps, Gmail, YouTube, et cetera in China.

And with respect to music we license content there - in fact, we license content from other companies and so this is a dispute between Genius and the other companies in terms of where the source of the content is. But again, happy to engage and explain what we do here, further.

BUCK: Thank you. I yield back, Mr. Chairman.

CICILLINE: Thank the gentleman. I now recognize the gentleman from Georgia, Mr. Johnson, for five minutes.

JOHNSON: Thank you, Mr. Chairman.

Mr. Cook, with over 100 million iPhone users in the United States alone, and with Apple's ownership of the App Store, giving Apple the ability to control which apps are allowed to be marketed to Apple users, you wield immense power over small businesses to grow and prosper. Apple is the sole decision maker as to whether an app is made available to app users through Apple's App Store, isn't that correct?

COOK: Sir, the App Store - thank you for the questions. The App Store is a feature of the iPhone, must like the camera is, and the chip is. And so ...

[14:20:00]

JOHNSON: Yes, and my point is - and I'm sorry to interrupt, but I want to get to the point. The point is that Apple is the sole decision maker as to whether an app is made available to app users through the Apple store. Isn't that correct?

COOK: If it's a native app, yes, Sir. If it's a web app -

JOHNSON: All right. OK. Thank you, then. Throughout our investigation, we've heard concerns that rules governing the app store review process are not available to the app developers. The rules are made up as you go. They are arbitrarily interpreted and enforced and are subject to change whenever Apple sees fit to change; and developers have no choice but to go along with the changes, or they must leave the app store.

That's an enormous amount of power. Also the rules get changed to benefit Apple at the expense of app developers, and the app store is said to also discriminate between app developers with similar apps on the Apple platform and also as to small app developers versus large app developers. So Mr. Cook, does Apple not treat all app developers equally?

COOK: Sir, we treat every developer the same. We have open and transparent rules. It's a rigorous process because we care so deeply about privacy and security and quality we do look at every app before it goes on; but those apps - those rules apply evenly to everyone and as you can tell by going along -

JOHNSON: Some developers are favored over others though, isn't that correct?

COOK: That is not correct, and as you can tell from going from - (inaudible) 500.

JOHNSON: Sir - (inaudible). I'll give you an example. By due (ph) has two app stores - two app store employees assigned to help it navigate the app store bureaucracy, is that true?

COOK: I don't know about that, Sir.

JOHNSON: Well you don't have other app developers who have that same access to Apple personnel, do you?

COOK: We do a lot of things with developers including looking at their beta test outs regardless of whether they're small or large.

JOHNSON: OK. Well let me ask - let me ask you this question - Apple has negotiated exceptions to its typical 30 percent commission for some apps like Amazon Prime. Is that - a reduced commission such as the one that Amazon Prime gets - available to other app developers?

COOK: It's available to any one meeting the conditions - yes.

JOHNSON: OK. Well let me ask you this - Apple requires all app developers to use Apple's payment processing system. If those developers want to sell their goods or services to Apple users through Apple's app store, isn't that correct?

COOK: That is correct because it's process -

JOHNSON: By processing - and by processing payments for apps that you allow into the app store - you collect their customer data and you use that data to inform Apple as to whether Apple should - whether or not it would be profitable to launch a competing app. Isn't that correct?

COOK: Sir, 84 percent of the apps are charged nothing. The remaining 16 percent either pay 15 or 30 depending upon the specifics. If it's in the second year of a subscription - as an example - it only pays 15 percent. If you look back at history -

JOHNSON: Well what's to stop Apple from increasing its commission to 50 percent?

COOK: Sir, we have never increased commissions in the store since the first it operated in 2008.

JOHNSON: There's nothing to stop you from doing so, is it?

COOK: No, Sir. I disagree strongly with that. There is a competition for developers just like there's a competition for customers, and so the competition for developers - they can write their apps for Android, or Windows, or Xbox, or Playstation. So we have fierce competition at the developer side and the customer side, which is essentially - it's so competitive. I would describe it was a street fight for market share in the Smartphone business.

JOHNSON: Has anyone ever retaliated against or disadvantaged a developer who went public about their frustrations with the app store?

COOK: Sir, we don't - we do not retaliate or bullying people. It's strongly against our company culture.

CICILLINE: The counter of the gentleman has expired. The Chair now recognizes gentleman from Florida, Mr. Gates.

[14:25:00]

GATES: Mr. Zuckerberg, in his written testimony made the claim that Facebook is an American company with American values. Do any of the rest of you take a different view that is to say that your companies don't embrace American values? It's great to see that none of you do.

Mr. Pichai, I'm wonder about Google's market power - how it concentrates that power, and then ultimately how it wields it. Project Mayven (ph) was a collaboration between Google and the Department of Defense that Google pulled out of citing ethical concerns; and you made the decision to pull out of that joint venture following receipt of a letter from thousands of your employees saying that Google should not be in the business of war.

My question, Mr. Pichai, is did you weigh the input from your employees when making the decision to abandon that project with the United States military?

PICHAI: Congressman, thanks for your consent. As I said earlier, we're deeply committed to supporting the military and U.S. Government. We've under taken several projects since then. We do take our employees input into (inaudible). One input we make decisions based on a variety of factors as a company we were new in the cloud space at that time. Since then (inaudible)

GATES: Thank you. That's a sufficient answer that you did take their feedback into account. In fact, some of your Googlers have recently sent you a letter where they've asked you exit other partnerships as a consequence of ethical concerns.

They've asked you to stop doing business with American Law Enforcement saying that police broadly uphold white supremacy and that Google should not be engaged in any services to police; and as you well know you provide some of the most basic services to police like email. But you also provide services that help keep our cops safe when they're doing their job, and so my question is here in front of Congress and the American people - will you take the pledge that Google will not adopt the bigoted, anti-police policy that is requested in the most recent letter?

PICHAI: Congressman, we have a long track of working law enforcement when it is supported by due process, and the law - we pushed back against overbroad requests. We are transparent about the requests that we get, but we have long history of following the law and incorporating the law (inaudible)

GATES: Oh, I understand the history. I'm asking about the future to the law enforcement.

PICHAI: We will (inaudible).

GATES: That are watching today - can they rest assured that under your leadership Google will not adopt these bigoted, anti- police policies?

PICHAI: Congressman, we've accommodated the country to work with law enforcement in a way that's consistent with law and due processes in the U.S.

GATES: I greatly appreciate that and I know that will be very comforting to the police who utilize your services. You mentioned earlier in your discussion - in the discussion about China that you're engagement in China was very limited, but yet Google has an AI China center. The Chinese Academy of sciences has published a paper saying -- that -- that enhanced the targeting capabilities of China's J20 fighter aircraft.

You collaborate with Chinese universities that take millions upon millions of dollars from the Chinese military. Matter of fact, one of your Googler's Fei-Fei Li, while under your employ, was cited in Chinese state media saying China is like a sleeping giant, when she wakes, she will tremble the world.

The former Secretary of Defense Mr. Shanahan said that the lines had been blurred in China between commercial and military application and as Mr. Buck cited, General Dunford says that your company is directly aiding the Chinese military. And Peter Teal, who actually serves on Mr. Zuckerberg's board at Facebook said that Google's activities with China are treasonous.

He accused you of treason. So why would an American company with American values so directly aid the Chinese military but have ethical concerns about working alongside the U.S. military on Project Maven? And I understand your point about cyber security and those things but Project Maven was a specific way to ensure that our troops are safe on the battlefield.

And if you have no problem making the J20 Chinese fighter more effective in its targeting why wouldn't you want to make America as affective? PICHAI: Congressman with respect we are not working with the Chinese military, it's absolutely false. I had a chance to meet with General Dunford personally. We have clarified what we're doing -- what we do in China compared to our peers, it's very, very limited in nature.

Our AI work in China is limited to a handful of people working on open source projects and happy to share and engage with the office to explain our work in China for you.

GAETZ: Gosh, I mean when the chairman of the Joint Chiefs of Staff says that an American company is directly aiding China, when you have an AI center, when you're working with universities and when your employees are talking about China trembling the world, it seems to really call into question your commitment to our country and our values.

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