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: Google, Facebook undertake appeasement campaigns before Thursday CEO showdown in House

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In the days leading up to yet another expected confrontation between Big Tech leaders and regulation-touting Congressional members, two of the three participating companies took conciliatory actions to lower the temperature.

Facebook Inc.
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+4.12%
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vilified by lawmakers and privacy advocates as a font of misinformation on vaccines, pulled an about-face last week: It is in the process of eradicating misleading content from its digital platforms while directing 50 million people to information on how and where to be vaccinated.

Meantime, Alphabet Inc.
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+0.28%

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+0.34%

said it will slash the service fee it collects to 15% from 30% on the first $1 million that developers earn from its Play Store app marketplace. (In November, Apple Inc.
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which has been criticized for the same practice, introduced a new Small Business Program that reduced the App Store’s commission rate to 15% for developers earning up to $1 million per calendar year in net revenue from the sale of apps and in-app purchases.)

Earlier in March, Google said it wouldn’t develop new advertising tools that track users across their web browsing. The previous practice of individualized tracking has come under increased criticism from privacy advocates and scrutiny from regulators. The action has triggered concern for Justice Department investigators, who are asking advertising industry executives whether the move will hobble smaller rivals, according to a Wall Street Journal report.

The flurry of actions underscore growing concern — perhaps even fear for the first time — about steps federal lawmakers will take to address antitrust concerns.

At the same time, Facebook and Google have ramped up advertising in the D.C. area to make their cases, says one critic. “They have dialed up the wheelhouse of noise—you could say amplified their misinformation through Facebook ads on buses about its support of regulation, or Facebook and Google ads about cable-news shows like ‘Morning Joe’ and popular tech newsletters,” Luther Lowe, senior vice president of public policy and government affairs at Yelp Inc.
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told MarketWatch.

A treacherous trifecta of hearings, legislation and anti-tech appointees like Columbia University law professor Tim Wu to the Biden administration has prompted some of the targeted companies to soften their business strategies and belatedly address criticisms. Chief executives of Facebook, Google, and Twitter Inc.
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should anticipate a tongue lashing Thursday before the House Energy and Commerce Committee on misinformation online.

“There is more of an element of fear after years of ignoring Washington,” Derek Horstmeyer, a finance professor at George Mason University’s School of Business, told MarketWatch. “There is a more political will to pursue this, and the American public—especially Republicans—are angry over the power these four companies have over our lives.”

Thursday’s hearing, the latest in a string of high-profile showcases for lawmakers to excoriate the business practices of the tech industry and suggest legislative remedies, comes as the Justice Department and Federal Trade Commission continue antitrust investigations and the Biden administration beefs up its team with vocal critics of the industry like Wu and his academic colleague Lina Khan, who is expected to be nominated to the FTC.

Lawmakers have jousted with Big Tech for years, but antitrust experts predict a more harsh tone this week with Democrats in control of the legislative branch. “The country now sees a more realistic likelihood of passing legislation, compared to the last four years, [and] lawmakers will have the opportunity to probe the executives,” Jennifer Lee says. 

The flurry of recent moves by Google and Facebook illustrate large tech companies are “responding to popular sentiment,” Nii Ahene, chief strategy officer at search-engine marketing firm Tinuiti, told MarketWatch. “People and politicians have a better sense of the power of these platforms, and the influence they have on our lives. It is a lot more apparent in 2021 than it was in 2018, 2016, 2013. We spend a ton of time on these platforms through smartphones. This is an unregulated space.”

Google’s best efforts may be undercut, however, by the unearthing of a treasure trove of more than 300 pages of confidential, unredacted documents from the original Google investigation during the Obama administration that some antitrust experts are calling the “Pentagon Papers of Antitrust.” Politico first reported on the documents.

The memos highlight how Washington regulators badly misread the growing influence of Google and others, and passed on reining in their dominance of the economy, according to some tech observers. Among their erroneous conclusions: they saw only “limited potential for growth” in ads that track users across the web, which became the linchpin of Alphabet’s $182.5 billion in annual revenue; they assumed consumers would continue to rely on PCs to search for information rather than the 62% of queries that now take place on mobile phones and tablets, where Google is a market leader; and they thought Microsoft Corp.
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Mozilla or Amazon.com Inc.
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+1.55%

would offer viable competition to Google in the market for the software that runs smartphones, a market ruled by Google and Apple.

“It was extremely frustrating to know this was going to happen, see it happen, and then witness irreparable damage to Yelp,” Lowe said.

Republican Senators Mike Lee (Utah), Marsha Blackburn (Tenn.) and Josh Hawley (Mo.) reportedly have sent a letter to Democratic Sen. Dick Durbin (Ill.) for a full hearing based on the papers.

As the heat intensifies on Google and Facebook, Apple and Amazon have maintained low profiles and adroitly avoided the politically fraught climate.

“Apple does not pose the same sort of concern to the public that Facebook and Google do because it doesn’t permeate our lives every day,” antitrust lawyer Paul Swanson told MarketWatch. “What puzzles me is the lack of attention on Amazon. They have created and compete in multiple markets, and it is hard to understand how those markets can be run fairly.”

“Apple and Amazon are big consumer-facing issues that regulators and lawmakers still don’t have a grasp on,” he added.

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