Despite confidence and competence, platoons of attorneys, 1.4 million documents, 400 hours of setup meetings, and 20 press briefings, the tech CEOs testifying before Congress on Wednesday were underprepared.
Like many other CEOs before them, four tech titans leading Amazon, Facebook, Apple, and Google appeared before Congress on Wednesday. These four were different from others given the immense wealth—with $350 billion in combined personal CEO wealth (Jeff Bezos himself is worth more that the assets of McDonald’s or of Nike), and the size of their companies—with $806 billion in combined sales, their firms would be the 19th largest nation in GDP. They were also different in that they were testifying remotely but on a platform to all of them, Cisco’s WebEx. Finally, they were different in that they are among the most brilliant minds in business and technology.
Accordingly while there is great schadenfreude over their success, such envy does not destroy the folk hero status they represent as entrepreneurs and employers. Unlike the ashamed, angry, or desperate past appearances by leaders of the steel industry, the airline bosses, auto makers, financiers, opioid drug sellers, and of course vilified tobacco marketers, the technology wizards appear with proud track records of accomplishment enriching investors. They could boast of being the creators of 1.5 million coveted jobs directly triggering profound ripple effects of economic development.
So—what did they do wrong? They walked in believing their own heroic myths before a powerful but less adoring group. The House Judiciary Subcommittee for Antitrust has no direct enforcement power but it does have a reputation-breaking impact and can help lay a trail for future Department of Justice or Federal Trade Commission action—let alone future legislative measures.
A key lesson from Yale’s renowned studies of mass communication sixty years ago was that to persuade sophisticated audiences, you have to show them both sides of an argument legitimately first, and then offer solutions. When Jamie Dimon went before Congress over problems at JPMorganChase, for example, he preemptively offered his take on their risk management slippages that led to unexpected massive trading losses in 2012, and in 2008 surfaced the industry-wide problems which led to the financial collapse, citing what should have been better managed.
Each of the tech CEOs’ opening scripts celebrated patriotic, American Dream talking points featuring givebacks to smaller enterprises. They went on to defend themselves against allegations of wrongdoing, or, in some cases, protest ignorance of behavior they were being criticized for.
What they did not provide is any acknowledgement of genuine problems which followed from their success. These are issues having to do with the core mission of this committee on antitrust, mainly not through monopoly exploitation of consumers through higher prices as targeted by the Sherman Antitrust Act 1890 but through the anticompetitive actions targeted by the Clayton Antitrust Act of 1914. In fact, there is a long history of unraveling past cleared acquisitions such as Facebook’s purchase of Instagram. For example, P&G had to divest Clorox in 1960—years after clearance in 1957.
Each company has exposures on this front. Fully 70% of Google’s revenues are from data harvesting (much of which is not transparent to consumers) and advertising. The EU has already fined Google a record $5 billion for leveraging its smartphone market dominance with Android to block rivals. This was on top of another nearly $3 billion for the ways Google favored its own products and services over those of its rivals. Multiple American companies, most notably Yelp and TripAdvisor, have accused Google of using its dominance of the search engine market to unfairly favor its own or closely associated brands and services over that of rivals, effectively picking winners and losers as a gatekeeper to customers and consumers. On top of this, President Trump has repeatedly hammered away at Google for supposedly discriminating against conservatives in its search engine results.
Facebook is surely the most exposed with little sympathy for Zuckerberg, but with 60% control of Facebook voting shares, Zuckerberg does not seem troubled.
Currently Facebook is enduring a month-long boycott by 1,000 major advertisers, who are responding to complaints of toxic hate speech and false malicious posts fomenting seeds of bigotry, which often appears next to the companies’ targeted advertising. After denials and deflections, Facebook recently admitted it was slow to respond to inappropriate content on the site, and the company began to remove over 1 million fake bot accounts a day. The boycott organizers, a group of civil rights organizations such as the ADL, the NAACP, and the Color of Change labeled Facebook’s response as “very disappointing” and “functionally flawed.”
Fully 98% of Facebook revenues are from advertising. While being investigated by the EU, Facebook has already been sanctioned multiple times by the FTC for consumer privacy violations.
Apple, with Tim Cook’s comfortable relationship with President Trump, was thought to be the least exposed. It is, however, already under review by the DOJ and state attorneys general investigating abuses by its second largest revenue source after iPhones—the $46 billion App Store business. Plus, there are allegations that Apple Pay’s proprietary mobile payments systems restrict access on Apple smart mobile devices to Apple’s competitors. Plus, there are unrelated, lingering, rarely discussed concerns over Apple’s unique concessions to Chinese cybersecurity requirements to store its Chinese iCloud data on servers run in partnership with Chinese enterprises.
After 26 years at the helm of the company he founded, this was Bezos’s first congressional testimony. Amazon faces perhaps the most wide-ranging and diverse set of complaints of any of the four companies. Recently, AT&T’s CEO John Stankey has complained that Amazon has blocked the access to its newly launched HBO Max direct streaming service. Antitrust complaints focus on its dominance over e-commerce, edging out other e-commerce competitors as well as traditional brick and mortar retailers, stoked by concerns over Amazon’s entry into new business lines such as groceries (Whole Foods), fashion, and cloud computing through Amazon Web Services. According to the Wall Street Journal, Amazon has also used data from small third-party retailers to advance and benefit its own direct-to-consumer operation despite pledging not to do so and stealing product design at predatory prices.
Other concerns and allegations center on Amazon’s poor treatment of its workers; poor warehouse safety practices; Amazon’s alleged dodging of its fair share of taxes (repeatedly raised by President Trump), and political bias with Bezos’s ownership of the Washington Post.
Amazon defends itself vigorously, arguing that the company’s e-commerce business model is not grounded in selling ads like Google and Facebook, and released a report on small business saying sales by third-party sellers grew 26% in the past year, outpacing Amazon’s own sales directly to consumers.
Instead of legally crafted sales pitches, these brilliant titans of technology should have acknowledged new challenges in influence, impact, innovation, and independence.
Jeffrey Sonnenfeld is senior associate dean for leadership studies and Lester Crown professor of leadership studies at the Yale School of Management.
