tv House Judiciary Hearing on Impact of Digital Media on News Industry - Part... CSPAN June 15, 2019 2:02am-3:31am EDT
violence in the civil war with erin sheehan dean of you we louisiana state university. than a look at the civil war emancipation in the heart of america. with ed ayres of the university of richmond. followed by a discussion on seeing the conflict through the eyes of lady historians with gary gallagher, erin sheehan dean, ed ayres, steve barry and carol riordan. watch the annual gettysburg college civil war institutes summer conference, live this weekend. on american history tv on c- span 3. a congressional committee wants to know how facebook, twitter and medium are changing traditional news. house judiciary subcommittee on antitrust commercial and administrative law, heard from officials from various news organizations and media trade association groups. members ask about the impact of online medium platforms on the news industry.
the chair is authorized to declare recesses of the committee at any time. we welcome everyone to our first hearing on online platforms and market power, focusing on the free and diverse press. i now recognize myself for an opening statement. in recent years, there has been a cascade of competition problems on the internet. concentration in the digital marketing has pushed for journalism to the verge of extension. the -- acquisitions, growing innovation kills him, and high network effects and switching costs, appear to undermine entrepreneurship and startup rates. the sheer dominance of some platforms has resulted in the worst products, significantly less choice, leaving people without a competitive alternative to services that harvest the data, manipulative behavior to monetize her attention. response to these trends, the committee will commit conduct a bipartisan -- the purpose of
this investigation is to document anti-competitive combat conduct online. examine and and assess whether the competition and current enforcement levels are adequate to enforce these problems. over the coming months, we will conduct a top to bottom review of online markets, to a series of hearings on these topics, request information that is relevant to the investigation, and engage in a series of discussions with key stakeholders and policy experts. this is the first significant antitrust investigation undertaken by congress in decades. in the past, these investigations which include study of monopoly power in the -- industry, banking, oil and mall bell, the congress consider whether it needed to make changes to our laws and agencies. i strongly believe that this investigation is long overdue. this subcommittee has a constitutional responsibility to conduct oversight over antitrust laws and competition system to ensure that they are probably working.
congress, not the courts, agencies or private companies, enacted the antitrust laws. and congress must be responsible for determining whether they are -- competition problems in a modern economy. today's hearing is the first step in this process for examining these trends. your free and diverse press is the backbone of our vibrant democracy. justice -- wrote in 1927, those who won our independence early that public discussion is a political duty. with greatest threat to freedom is uninformed citizenry, and that the freedom of thought and speech are indispensable in the discovery and spread of political truth. over the past decade, the news industry has been a date of economic freefall. from 2006-2017, advertising revenue has fallen from $49 billion to $15.6 billion. resulting in mass layoffs that newspapers, or newspaper folding altogether. this year alone, roughly 2900 reporters and other new staff have already lost their jobs. these massive cuts are happening to traditional news companies and online news sources alike.
for example, earlier this year, the cleveland plain dealer announced another round of layoffs due to advertising losses. reducing its staff by 80%. from employment levels just seven years ago. buzz feet on the huffington post have also announced significant layoffs. these are online publishers that never relied on revenue from classified sections or subscriptions. they are designed to appeal to readers on social media sites and mobile devices. this raises a critical lesson. if online news publishers can't survive, then who can? during the same period, online -- gateways to news online have operated with virtual immunity from the antitrust laws. since 2007, google has acquired several of its competitors in the online advertising market. resulting in significant concentrations and a complete lack of transparency in the market. since 2011, another dominant online platform, facebook, has acquired two of its rivals. instagram and what's out. in an
effort to corner the map market for social media services and advertising on the services. facebook controls the user base of 2.7 billion people worldwide. the largest communications platform in human history. it plans to combine its products into a single platform. a move critics have suggested facebook is making to thwart antitrust enforcement. as competition -- preliminary report on digital platforms, with google and facebook have substantial market power, the number of markets is unlikely to erode over time through new competitive threats. they have also been numerous reports on these platforms engaging in anticompetitive conduct. such as favoring the wrong products, or discriminating --. it has gone unchecked by congress and a challenge by antitrust enforces in the united states. these trends strongly suggest that the decline of the news industry is not the inevitable result of the arrival of the internet. but is instead a direct consequence of enforcement choices that have created a more -- a smaller number of platforms are capturing the value of creative journalists and publishers. >> this is effective news
publishers into keyways. first publishers rely on google and facebook for the vast majority of traffic,. even minor changes to the platforms algorithms can have significant effects on the news industry overall. furthermore, as a result result of this immense concentration of power, publishers -- in particular have little bargaining power with the online platforms, exacerbating the economic crisis for trustworthiness. second, these platforms have a dominant position in the advertising market. lester, facebook and google amassed more than $60 billion from online advertising. the majority of all online and review, while controlling 90% of the growth in the market. -- president of news media alliance with testify today, this dynamic has resulted in economic catastrophe for news publishers. forcing them to cut back on their investments and quality journalism. in response, i have introduced the journalism conservation and preservation act to give news publishers and even playing
field to collectively negotiate with dominant platforms to improve the quality, accuracy, and attribution -- online. why do not view this legislation as a substitute for more meaningful competition online, or antitrust scrutiny, it is clear that we must do something in the short term just dave - save trustworthy journalism before it is lost forever. this is a life-support measure, not the remedy for long-term health. whether it's an online publisher or local newspapers, we cannot have a democracy without a free and diverse press. our country will not survive if we do not have shared facts, if corruption is not exposed and rated out at all levels of government, and the power is not held to account. this is a very reason the press is called the fourth estate. i view today's hearing is an opportunity to continue the conversation and how to address his crisis. jik and i and the ranking member rx open to exploring --. my hope is that today's hearing will serve as a starting point in this discussion. i think our panel of extraordinary experts for participating in today's hearing. i look forward to hearing your
testimony. at this time, i yield to mr. armstrong for his opening statement. >> i don't know where the button is over here. no. i appreciate that, and at this time i asked unanimous consent to enter congressman sensenbrenner state into the record. >> without objection, sorted. >> the best thing i can do for all of you is give you as much time as possible. okay with that, i will yell. >> the chair now recognizes as chairman of the full committee, the gentleman from new york, mr. nava for his opening statement. >> thank you mr. chairman for over holding today's hearing. before i deliver my statement, let me apologize. i have to leave afterward. we have a slight resolution on the fly have to deal with. over the course of the last 200 years, congress has routinely passed laws to protect and advance free and diverse press. whenever new technologies have transformed how americans produce and share news. via the telegraph, the radio, broadcast television. congress has sought to ensure that these new markets were structured to facilitate the
free flow of information and to protect the independence and financial viability of the press. today, as the internet becomes the dominant platform for accessing news, and as this platform grows more and more platform, and the hands of just two major companies, the news media once again faces serious threats. and conventional action once again may be required. as avenues for accessing news have now in recent years, advertising revenue, which is the primary means of support for most news publishers, has steadily declined as well. revenue has fallen, so too has a number of journalists whose work can be supported by news publications. local news outlets have been the most severely affected by this trend. with nearly 2000 local news publishers ceasing operations since 2007. in fact, the majority of counties in the united states no longer have a publisher of local news at all. hundreds of other publishers have been forced to consolidate or shrink their operation. this journalism crisis is also a democracy crisis.
as sources of trustworthy news disappear, americans civic life suffers. the majority of local newspapers and television stations no longer even assign a reporter to cover state and local government matters. with the less informed citizenry, citizens without quality local news generally see lower rates of voter turnout. and cities were newspaper shut down, have even seen the borrowing costs rise. suggesting, according to one study, the diminished transparency may enable governments to engage in riskier and more inefficient, or perhaps more corrupt, financing arrangements. >> there are a number of courses of this multi-decade decline in the news industry, including reduced print circulation, and reduced revenue from classified advertisements. one of the major concerns that has a emerged in recent years is the power of a small number of gatekeepers of the news and information that citizens see.
today, the vast majority of americans consume their news online. and to online platforms have immense control over how americans access to news sources. a single algorithm change by one of these private corporations can entirely distort the information the public chairs and consumes. and what revenue the publisher receives. moreover, these same platforms dominate the online advertising market. they account for nearly all of the growth in this market. in recent years. >> no single factor has led to this immense concentration of control. but it is incumbent on congress to understand the sources of this problem and address it urgently. american tradition is long recognized that preserving an open marketplace of ideas is vital to safeguarding the first amendment, and vital to a democratic form of government. the antitrust and antimonopoly laws have been a primary way that lawmakers and regulators have released the problem of overly concentrated markets.
when congress enacted the antitrust laws, it was with the purpose of protecting economic opportunity, and political equality. senator john sherman, the author of the sherman antitrust act, referred to the first antitrust law as a bill of rights. and a charter of liberty. overly concentrated - he did not regard it simply is a question of economics, efficiency, reducing prices. overly concentrated markets concentrate economic and political power. it is important to keep these broad goals of reducing concentration and promoting competition in mind. as we examine how online platforms impact free and diverse media. is a judge reviewing the consent decree breaking up at&t wrote check -- sources of information, the values underlying the first amendment: site with the policy of the antitrust laws." congress also is has a congress constitutional duty to ensure
that markets are structured in such a way that is compatible with our democratic values. while new technologies may up and how news and information are shared, it is vital that we maintain open and competitive markets which will best foster a robust, independent press. with this in mind, i welcome today's hearing is the beginning of the committee's investigation of competition in digital markets. and i look forward to hearing from our panel of experts. i thank you, chairman. i yield back. >> thank you chairman for yielding back. the chair now recognizes the ranking member of the full committee, the gentleman from georgia, mr. colin for his opening statement. >> thank you. thank you for holding this hearing today. i am glad that you and i have found some commonality. and i look forward to working together. this is the first of many hearings and oversight activities subcommittee expect to hold over the coming months on the important antitrust and competition issues in the tech sector. firmly support this initiative. the conversation we will have a
committee are critical as congress evaluates the depth, breadth, and importance of these tech issues and whether any amendments to the antitrust laws are needed. the public understanding of these issues and the evolving role of tech in the daily lives of the american people are equally important as we have these discussions. if we do identify needs for the administration, it is important we keep two principles in mind. first, the existing antitrust laws, new legislation be consistent in keeping the free market free. proposal to construct, new regulatory regime should be viewed with caution. experience shows that regulatory solutions often miss the mark. solve problems less efficiently than free markets, and can create new opportunities for anticompetitive companies to suppress competition. that is especially true regulation attempts to take on evolving problems in fast- moving markets like tech. i speak from experience here. i have worked through these before. and we have to make sure that we are not looking for an immediate solution to the soreness in our foot and recognize we have a problem with their. we need to make sure we are working this through. secondly, big is not
necessarily bad. companies that offer new innovations, better solutions, and more consumer benefits at lower prices often become big. to the benefit of society. shockingly. proposals to break up big companies just because they are big risk pulling out the baby with the bathwater. in any discussion, the simply most of that discussion first is not the right way. to move. it is because i -- i am excited to have joined both committee chairman sizzling and -- concert -- this bill takes head-on the problem of local and other news organizations disappearing from the public square as news consumption moves increasingly online. vibrant press has been critical to the success of our democracy since the founding of the republic. in the old days press organizations were able to thrive based on subscription and advertising revenue. but as the new consumption has moved to the internet,
traditional subscriptions are speedily drying up. and online avenue rev >> as a result, new organizations across the country are rapidly losing their economic lifeblood and disappearing from the public square. at the individual news outlets could count on being able to negotiate fair attribution, and advertising revenue agreements with the online platforms, the bleeding could be stopped. the problem, however, is the smaller news organizations don't stand a fair negotiating chance when they try to negotiate blues with a giant pick these giant stand as a bottleneck, the classic antitrust laws. between consumers and the producer of news content. journalism competition preservation act seeks to solve this problem simply, by allowing publications to take the platforms bottlenecks together. specifically, the bill allows the publications more years in which they can collectively negotiate with the platforms of without fearing antitrust act and -- again set activity. the bill allows new publications to dictate without
worrying there antitrust laws and sales will stand in the way. does not promote, propose any new regulatory structures. does not threaten to break up any company. it does promise to simply and effectively solve the problem. today's hearing provides an excellent opportunity to examine this bill. and other issues related to journalism in an online environment. these issues include matters as diverse as a boom in -- mergers and acquisitions to the problem of online outlets -- of the online public square. as we begin this, for all of it here. many of you are here recognizing a large, diverse group. met with many of you over the years. understand my position, as i have stated clearly, the principle that i have laid out. and as we go forward in this, anything that happens should be done when everyone comes to the table. everyone has a chance to share their opinions. everyone has a chance to offer what may or may not be good legislative solutions. it is up to this body to here honestly from the people and the companies involved. if we take everybody at face value, it is the american
people at the end of the day, that will benefit. week, i promise for my perspective in our site, will not rush to judgment. we encourage he decided not rush to judgment and companies to participate in a positive solution. when this body does that, we have seen great things happen. when we do not, we end up with more albums then we began to initiate. with that, i yield back. >> i think thank the gentleman for yielding back. is now my pleasure to introduce today's witnesses. our first witnesses david siobhan, the president and ceo of the news media alliance. where he has been since 2015. he has spent 10 years of the united states chamber of commerce. and a number of executive roles, including executive vice president, chief operating officer and chief of staff. he is a member of the board of directors of transamerica insurance. answers on the board of trustees at the university of
pittsburgh, his alma mater. he received his bachelor of arts from the university of pittsburgh, his mba from georgetown university -- from university of law. our second witnesses president and witnesses acknowledge packaging. before his time of public knowledge, mr. kellerman served as director of the internet for human rights project at the new american foundation. and has as the chief counsel for the u.s. department of antitrust division. of the senate judiciary committee as well as a legislative director with consumer federation of america. mr. kamel currently serves as adjunct professor -- washington university school of law. senior fellow at the silicon flatiron center for law, technology and entrepreneurship at the university of colorado. and on the board of the international media support and global partners to two. he received his ba from -- university. brown university in providence, rhode island. and his jd from university of virginia. and witnesses sally hubbard. director of enforcement strategy at the open market institute. prior to her time with open market, ms. hubbard was a senior at editor of antitrust enforcement and regulation of tech and -- she has also spent
seven years as the assistant attorney general of the new york state office of attorney general sent a trust bureau. she had her bachelor of law at the college of william and mary. -- university school of law. fourth witness on the panel is matthew shares, the vice president of law and policy. and -- association. vice president, he advises internet and technology companies on matters including internet law, and intellectual property and trade. additionally, he is an adjunct professor at university law center and georgetown graduate school in the american university boston college of law. mr. shares received his ba from duke university in his jd from university of law school. the fifth witnesses david petoskey, executive president and general counsel and news corp. the son of the dean of the georgetown law school i attended. fire to join a new score, mr. petoskey was a partner at -- llp. where he focused on the white- collar defense and security litigation enforcement. he has also served as assistant
u.s. attorney in the eastern district of new york he was a deputy chief of the criminal division. mr. bukowski is a member of the executive committee of the center by counsel and an officer of the federal bar foundation. he received his ba from the university of michigan and his jd from georgetown university law center. it is now my pleasure to yield to the gentleman from georgia for our final introduction. mr. collins. thank you. i appreciate it. it's an interesting thing being a member of congress for introducing a member of the press for my own state. which i am pleased to do. i -- welcome kevin riley. -- atlanta journal-constitution in my home state of georgia. those of you from georgia no, the ajc is one of the best in the business. even though it is located in atlanta, i would argue it is where the entire state of georgia goes to get the news. kevin's editor for nearly 10 years now and has worked in the in news industry for nearly 40. in 2001, the -- named riley one of the industries 20 under 40 up and comers. he is well known as an effective, collaborative, innovative leader. but sometimes, -- needs to say a little more. so, we asked one of his
reporters, greg listing, -- works for kevin, described how he would describe his boss. think it's very telling. kevin is the type of editor who encourages reported to experiment and try new things by doing it himself. shortly after the ajc unveiled a personal journey feature he wrote a masterful story about a world war ii veteran returning to the french battlefield for the first time since the fight. helping to unlock a 69-year-old mystery in the process. when we started getting deeply involved in the podcast, kevin headlined a season of the breakdown show. focusing on the murders of two young atlantans. as we in the newspaper industry face more demands to tell stories in different ways, kevin is now the forefront of going on tv and radio to share our work. >> he goes on to say, i am not just -- by saying this. kevin is a perfect example of the case delete. i think another one of your reporters -- is here as well and probably would say the same thing. the perfect case's lead by example and i cannot think of a better complement. earlier this year before we introduce a journalism conservation preservation act,
just a call to spine have this critical bill is for ajc for communities across georgia and the entire newspaper industry. local journalism is a core part of every industry in georgia nationwide. and honored of to have a member of local media today. i yield back. >> we welcome all of our very distinguished witnesses. thank you for participating in today's hearing. if you would please rise, i will begin by swearing you in. please raise your right hands. do you swear or affirm under penalty of perjury that the testimony you are about to give us true and correct to the best of your knowledge, information and beliefs, so have you got? thank you. let the record reflect that the witnesses answered in the affirmative. you may be seated. please note that each of your witness statements will be entered into the record in its entirety. accordingly, i ask that you summarize your testimony and five minutes and help you stay within that time, there is a timing light on the table. the light switches from green to yellow, you have one minute to conclude your testimony. when the light turns red it signals your five minutes have expired.
mr. siobhan you may begin. your recognize for five minutes. >> thank you chairman cellini, chairman nadler, ranking member kahlo, representative armstrong and members of the subcommittee. thank you for inviting me to participate in a caring. my name is david shaffer and i am the president and ceo of the news media alliance. nonprofit trade organization representing over 2000 publishers across the united states. our members include some of the largest news organizations covering events around the globe. as well as local publishers focusing on the issues that impact communities and the daily lives of citizens in every state and congressional district. the news media has played a key role in our democracy since its founding. the missions has been to enrich society's understanding of foster public discourse that is vital to the healthy democracy. over the years, the news media has fill the mission extremely well. we're also an industry that is fully embraced a digital future. publishers offer a wide array of innovative and compelling online experiences, sustained
by truly great journalism. my membership includes a number of digital only news publishers. the rise of digital news retribution has also introduced new and potentially existential threats to the news industry. specifically, the emergence of dominant tech platforms as intermediaries between publishers and their audiences. online platforms serve an important purpose. today, 93% of americans get at least some of the news online. these platforms help users find great journalism. -- contributed to the enormous growth in the past two decades. and the same with the digital platforms are critical for online news, online news is critical for the digital platforms. the public demand for quality journalism is massive and growing. and that has driven deep engagement with facebook and google. -- estimate the content some generated some $4.7 billion for google and 2018. the platform to news organizations mutual alliance would not be a problem if not for the fact that the
concentration among the platforms means a small number of companies now exercises extreme level of control over the news. in fact, a couple of dominant firms act as regulators for the news industry. only these regulators are not constrained by legislative or democratic oversight. the result has been to fight revenues away from publishers. this trend is clear when you compare the growth in google's -- and the decline in the news industry's advertising revenue. googles u.s. revenue was 2.1 billion. on the newspaper industry accounted for $48 billion in advertising revenue. and 2017, in contrast, googles u.s. revenue has increased over 25 times to $52.4 billion. of the newspaper industry said revenue has fallen 65% to $16.4 million. the effect of this revenue decline in publishers has been terrible. and they have been forced to cut back on investments in journalism. that is the reason why newsroom employment has fallen nearly a
quarter over the last decade. one question might be asked is, if the platforms are unbalanced having such a negative impact on the news media, why don't publishers do something about it? the answer is, they cannot. at least under the existing antitrust loss. news publishes basic collective action problem. no publisher on its own can stand up to the tech giants. the risk of demotion or exclusion from the platforms is simply too great. and the antitrust laws prevent news organizations from acting collectively. up the result is publishers are forced to accept whatever terms and restrictions are imposed on the. the journalism competition and preservation act introduced by chairman sizzling and ranking member columns is an innovative market oriented solution to this collective action problem. markets work best when both bodies have some leverage to ask for better terms and to credibly withdraw from negotiations at the other side's demands are unreasonable. our goal is actually the find a way to work sustainably with the online platforms to give americans the best journalism possible.
present trends and news business simply cannot continue. without some action to give news publishers a voice in the future, we will all experience the effects of deep financial stress in this industry and the loss of great, important journalism and communities across the country. it is not too much to say that the very fabric of our civic society is at risk. this is not a problem that will be solved by private charity, from individuals, or even the big platforms themselves. what we need are sustainable business relationships that return value to the great important journalists who create the news content from which we all depend. again, thank you very much for having me here today. >> thank you mr. siobhan. you is to come in, you're in a recognized for five minutes. >> thank you mr. jenna. nevers of the subcommittee come on behalf of public knowledge, i appreciate the invitation to testify today. your opening statements across the board highlight what i think are the natural economic tendencies of what has happened in the digital marketplace. we have enormous costs in platforms that return scale
economies and scope economies with declining costs. these are network effect industries. it is not new to our economy. this is a new form of it. what we see is the tendency towards a few companies dominating in that space. the natural economics of the space. they have also highlighted the concern about gatekeeper roles and bottlenecks. and we have a history of this. of concern about this. the history includes all of the media, including the newspapers for abuse of power when we have had too much concentration, too few players in the marketplace. to few independent voices that stifle the marketplace of ideas. so, we have had these problems in the past with previous technologies. we're having them again now. in summits. antitrust has been the right tool to address them. in some instances, congress has stepped in with other policy
solutions. i urge you to consider all of that. we have massive power here in the marketplace of ideas. and it stems both on the technology side and on the content and distribution side. think all of it needs to be looked at. in an attempt to fight on concentrated power and dominance at all levels of the distribution chain, and to maximize competitive market forces. particularly when they involve the marketplace of ideas. clearly, we need strong enforcement of the anti- enforcement laws. we need to consider new laws. i appreciate the committee to step in to begin this detailed study. but it is important that as we attempt to stop these abuses where we find them, we don't create new monopoly power just to take on dominance. it is critical to tackle dominance head-on, and not create more monopoly. the digital marketplace us, we all know, has totally transformed our lives. it has destroyed all kinds of
brick-and-mortar players. industries, companies. and that includes classified and display ads in the print business. it is much broader than just news. news as being important. what i am afraid we need to confront is the money from that old model, from that business model, will never come back. it is gone. i think journalism needs to consider a new business model, and we should do everything we can with public policy tools to help. the digital age will require new forms of creative financing. in order to get local news, and fight misinformation in the parking place. public support will be necessary. i urge you to consider creating some kind of public service duty of care, to deliver trustworthy information. not subsidizing companies, or industries, but instead, promoting fact checking,
information accuracy services. that deliver value, and that can be said ported to protect local media and news in particular. >> in a digital platform space, i think what is most important is to look at those natural economic tendencies dipping towards dominance, creating barriers to entry, that make it very difficult to foster competition and invasion of the market. and examine whether anyone is putting their thumb on the scale. either in violation of the antitrust laws, or otherwise, and symbols of fairness in our society. that is why your inquiry is important, and i commend your effort to look carefully, both at what the problems are, and what the possible solutions should be. consumers themselves are actually reinforcing the problem. we are, on the negative side, lazy. but mostly, just complacent to
do what is simple. that reinforces the power of those who have our attention in the first place, and can find ways to make it very attractive for us not to consider competitive options, new options, better news, as opposed to just salacious information. it is important that we look at all policy tools that are available to address these concerns. antitrust can do something to try to improve enforcement. where you have dominance in markets, -- often you need broader policy tools. i urge you to consider nondiscrimination, interoperability where there are problems. we have done this in telecommunications before. we have done it in the cable industry. this would not be a 1st for congress. now is the time to consider it for digital platforms. thank you. >> thank you mr. con. the china recognizes ms.
hubbard for her opening statement for five minutes. be determined to delaney and members of the subcommittee. thank you for inviting me to speak with you today. in my view as a former antitrust enforcer, starving of journalism and a disinformation crisis are both in good part monopoly problems. i have been writing about antitrust and tech platform since the summer of 2016. when i noticed that the tech giants, google, apple, facebook, and amazon, were all doing the same types of things that microsoft had been sued for. nearly 20 years earlier. they were leveraging their market power to make fair competition impossible. these tech giants are gatekeepers, that also compete against companies that must get to their gates to reach users. news publishers must get through facebook and google skates. these are the two platforms concentrated control over the flow of information. but facebook and google compete against news publishers for user attention, data, and add dollars.
they are controlling the game and playing it, too. publishers never had a fair shot . noted they have bargaining power against platforms. the platforms can cut them off with a simple tweak of their algorithms. facebook and google exploit their middleman positions to divert ad revenue away from publishers and into their own pockets. and the platforms can hyper target users, based on the 360 degree views of what their users read, think, and do. thanks to their ability to track users across millions of websites, and even off-line. last year, facebook and google accounted for approximately 85% of the growth of more than, of the more than $150 billion digital ad market in the u.s. and eu. according to digital content next which is a main association for publishers. disinformation, facebook and youtube program their algorithms to prioritize engagement, which amplified propaganda.
through surveillance, facebook and google learn what messages people are susceptible to, whether whether ads are propaganda. the me rent out these manipulation machines to others for huge profit. the scale of the manipulation is massive. because of facebook and google's dominance. and the platforms lack competitive pressure to fix the disinformation problem. -- for facebook users is instagram, which facebook owns. users need to be able to vote with their feet and switch to alternatives. to their credit, facebook and google started on the path to dominance with innovation. but there monopoly power is not purely the result of competing on the merits. facebook has repeatedly acquired rivals, including instagram and what's up. and google's -- without the ad ecosystem as it brought up the digital ad market spoke by spoke. including applied semantics,
--". together facebook and google have not - bought 150 companies in the last six years. google alone has bought nearly 250 companies. thus far, antitrust enforcers have not stood in their way. nor have they stopped facebook and google from leveraging their monopoly power to exploit competition. week antitrust enforcement set the stage for these platforms to extract the fruits a publishers labor. much of the monopolies are extracting well across most sectors of our economy. monopolies are putting the american dream at risk, as people, including journalists, are not rewarded for their effort. beginning immediately, antitrust enforcers should prevent -- looking to acquire competitive threats and companies that fortify their monopoly power. they should unwind anticompetitive deals and divest subsidiaries to open up competition. and they should just sue to stop exclusionary practices. i trust enforcement alone won't solve everything alone. but we won't be able to solve
anything unless we we can monopolies power. is it necessary but not sufficient conditions. news is a social good that is essential to hold power account. there was a journalist named ida carbo that took down the most notorious monopoly in u.s. history, standard oil. news of the special production, like -- american history to nondiscrimination and interoperability rules. we also need rules to -- curb invasive data collection by default. and give citizens ownership of the data. the good news is, we have been here before. i have seen pointed out. we have, these are not new challenges. we have stood up to powerful --. each time we were better for it. we only, we all reached new waves of innovation. we have restored our markets and remove the gatekeeper. but if we don't act now, the change the structure of the market, things will continue to control speech, journalism will continue to wither, so will our democracy. thank you. >> thank you. the chairman
recognizes mr. shares for five minutes. >> thank you mr. chairman, members of the committee. on behalf of the computer and communications industry association, and association of technology, internet and communications firms, i appreciate the opportunity to appear today. let me begin by acknowledging that success brings scrutiny. digital technology and the internet has revolutionized the u.s. economy and the global economy. the industry leaders are names recognized around the world. the most prominent brands we know. we welcome and evidenced driven conversation an examination of this transformation of the firms that are leading it. but declining newspaper prospects are an independent phenomenon. firms that date, the oldest, from the 90s, did not start this trend in the 80s. although technology has challenged some news publishers business models. in part by ushering in extensive new
competition, globalizing the advertising market, and disrupting the dominant local advertising position that many publishers once had. because journalism is important to any democracy, we share the goal of ensuring that it continues. digital services play an important role in doing that. in fact, digital services provide benefits to three separate constituencies. users, news producers and advertisers. we know users attribute thousands of dollars in value to free of charge online services, and turn to them for answers, entertainment, education, connection and communication and commerce. these services also provide users with access to a range of news content across multiple devices and formats. in a way that enables purchase - participation, which surveys tell us increase civic engagement civic engagement and interest in news producers content. these producers intern, received 10 million viewers per month from digital services,
traffic, which they can monetize as digital souls. publishers have embraced the internet. using technology to better engage their audience. numerous digital native news outlets have a shared in the bureau of labor sit the sticks estimate 13,000 employees worked in the digitally enabled newsrooms in 2017. digital services also enable and benefit advertisers. as the saying goes, and advertisers knows half is that budget is wasted. he just doesn't know which half. with technology, advertisers can now figure out where their budget is best optimized, and whether money actually is in fact wasted and direct funds accordingly. this is increasingly important for small firms who now have a global reach, regardless of the size of the business. so, how does antitrust law fit into this? antitrust law focuses on maximizing consumer welfare. enforcement seeks lower prices, higher quality, more innovation.
separate policy goals are usually pursued elsewhere through legislative means. this ensures consistent and apolitical application of the law. the law does not punish success. instead, it applies additional obligations when successful firms possess market power in a defined market. these markets aren't defined ad hoc arbitrary line drawing. these, we use economics. we see if consumers respond to changes in the prices, given factors like competition. enforces then assess whether a firm -- a prices or increase the quality. >> i know digital firms are sometimes objectively identified essay, being in the search and social media market. this is not necessarily a relevant market. economic analysis would show us the news publishers and digital services fight fiercely for ad dollars. indeed, that is one reason why we are here today. this intense intra-medium competition is generally healthy . and undermining of antitrust exemptions is unlikely to achieve the goal we all share. competitors -- prices will be
higher, quality read decrease in innovation will slow. the u.s. experience with antitrust exemptions for newspapers, specifically, is not encouraging. for the internet, when broadcast threatened newspapers, which led to the newspaper preservation act of 1970, we tried this. and it is widely regarded as having been unsuccessful. some argue, the mpa actually foster press monopoly. in conclusion, let me remind us all that the antitrust modernization commission of 2007 looked at many of these issues and considered them at length. they, as well as antitrust enforcers from both parties, have criticized antitrust exemptions. that being said, we do share the objective of promoting a diverse, robust economically sustainable news production. proposed alternatives, which are discussed in our testimony, include tax incentives and deductions, grants, new
nonprofit categories. all of these options deserve consideration and cci welcomes opportunity to participate in the conversation. thank you. >> thank you mr. jer. mr. petoskey is recognized for five minutes. >> chairman says illini, members of the subcommittee. thank you for inviting me to speak with you today. my name is david petoskey. and the general counsel of news corp. the proud home of news publishers like the wall street journal and harpercollins book publishers. i am here today because the marketplace for news is broken. healthy markets incentivize risk , investment and effort by rewarding companies that develop superior products. unfortunately, in the news business, free writing by dominant online platforms, which aggregate and then reserve our content, has led to the liens share of online advertising dollars generated off the back of news going to the platform. many in silicon valley
dismissed the process old media. failing to evolve in the face of online competition. but this is wrong. we are not losing business to an innovator who has found a better or more efficient way to report and investigate the news. we are you losing business because the dominant platforms deploy our news content to target our audiences to then turn around and sell that audience the same advertisers that we are trying to serve. erosion of advertising revenue undercuts our ability to invest in high-quality journalism. meanwhile, the platforms have little, if any commitment to accuracy or reliability. for them, a news article is valuable if viable. not verify. to address these challenges, we need meaningful dialogue. it is therefore dispiriting when the platforms claim that the products only help consumers and publishers.
ignoring the mounting facts, clearly showing the harms they have inflicted on the news industry. the fact is, news publishers have been busy innovating online , expanding our reach to digital audiences, while the dominant platforms have benefited from our innovation and premium content. in part, this is made easier by the platforms's control over the internet and tech space. they control the tech infrastructure, the data, and the tools used to sell and serve ads online. and at the same time, they also compete against news publishers for those same at dollars. news publishers have no good options to respond to these challenges. any publisher that tried to withhold its content from a platform, as part of a negotiating strategy, would starve itself of reader traffic. in contrast, losing one publisher would not harm the platforms at all. since they would have ample alternative sources for news content. to escape this prisoners
dilemma, news organizations need to act collectively. but this is prohibited by antitrust law. so, what is the solution? first, we need more dynamic and modernized antitrust enforcement. we are hopeful that invigorated, reinvigorated antitrust is on the horizon. after a generation of obsession with price effects, without adequate consideration of the other aspects of consumer and social welfare, including quality, innovation, and choice, some very recent, encouraging signs of re-examination have occurred. second, and in the meantime, news publishers need a fighting chance. the journalism competition and preservation act is well- designed to help restore the proper balance between content generators and distributors on the internet. this bipartisan legislation is narrowly tailored both in scope and duration.
i would like to close by sharing a quote from my late father, robert petoskey, you mentioned earlier, mr. 1995 th he recognized the need for regulators to give a higher degree of scrutiny. because of the implication for democratic values. in the newspaper article on the topic, he said, antitrust is one of economics. i do believe if you have issues in the newspaper business, i think you want to be more careful. in the law review article, it
is by law to include certain political values in interpreting antitrust laws. informed by history and policy and political values, the antitrust law should protect the pillars of our democracy. there is no industry more sinful to our democracy in the news media. thank you for inviting me here today. i am the editor of the constitution. a few years ago, journalist established that 80 doctors in georgia had sexually abused patients including patients under anesthesia. those doctors were still license. the newspaper investigated and found a nationwide problem.
hundreds of doctors were abusing patients and getting away with it. the investigation prompted reforms. it was a finalist for the pulitzer prize. it is equally important that readers of that investigation told us that is what they want from the newspaper. that kind of coverage. the victims of those doctors called our reporters and thank them for telling the stores. about a year before the story, dozens of educators in the public schools have been found guilty of altering students standardized test scores in the largest cheating scandal in the nation's history. the convictions culminated a year-long journalistic effort by the atlanta journal- constitution. the reporters had noticed that student scores on george's standardized test showed extraordinary improvement. they analyzed the scores. the improvements in some schools divide statistical possibility.
the reporting triggered a state investigation that found systemwide cheating in 44 atlantic public schools. 170 teachers and administrators participated. inflated the scores of thousands of students given the false impression of progress. exceeded those students. the story would never have been uncovered without them. educators would have never faced justice. the system would not have been fixed. most important of all, students will not have been offered the chance to gain the knowledge that they have been denied. no other news organization has the capacity for such deep reporting. no other organization could have withstood the relentless pressure to back off a list by the school district and the business community. no other news organization would have stuck with the story for five years. this kind of reporting is hard.
it is upsetting. it is important. it has real impact and we are proud of it. newspapers to other stores as well. i was reminded of one last week as i prepare for this testimony. let me tell you about the woman that she mentioned. her name is shirley. she is the widow of a world war ii veteran. they lived in georgia. she spent decades trying to unearth the story behind her husband's service. i enable myself to discover many details about her husband's time in combat. after her husband died, she still hundred to know more about his service. she was so enthralled that she journeyed to france for a reunion of her husband's military unit. i joined her. inspiring tribute. in a story i wrote about.
she literally retrace the steps of that young private. the man who would later be her husband through, but during world war ii. it was the unknown story of a local hero. one that only the atlanta journal-constitution could sell. it would be lost to history without us. this sent me a text as i prepare for this testimony. she said, your stories have become a touchstone in my life. i watched the coverage of the day and write a lot. i am more grateful than ever. we invested a lot of time and money and effort in the stories that i met you. that is what newspapers do. use our resources into our stores. the good ones and the hardwoods. i shared these examples because they illustrate the everyday challenge faced by local
journalist. we must be vigilant to tell important well reported and thoughtful stores. we must care that they get wide distribution. that is our job. we are accountable to people like ms. shirley and her neighbors. almost always the debate about media is framed with the discussion of international news branch. the greatest peril of our nation books at the local level. a regional or community newspaper most cope with fast- changing technological and financial matters. we are the ones who are concerned with our community. the well-being. our staff lives in our community. they have a big stake in informing the public. social media companies have enormous influence on the distribution and availability of ms. we should be worried
about losing newspapers. the fountain has within the local news ecosystem. it is worth considering stories that will go on till. >> we will not proceed under the five-minute role of questions. >> thank you mr. chairman and witnesses for being here today. i would like to extend a warm welcome to the editor of my hometown paper. the purpose of this hearing is to face a important problem head-on. local newspapers to major publishers to online innovative. is dying. this is in some part because a shift of how we consume our views. it is also because of the massive availability of information on digital platforms. while it is increasing, the
revenue is decreasing. no business can process. we cannot continue to rely on the good grace of concentrated will to do the right thing. a free market approach is applied to the ballistic online platform that was. it's relationship to a free and diverse press. moreover, it poses a direct and pressing threats to our republic. therefore to our freedom. i am looking forward to talking with all of you about potential solutions. i think the chair for hosting this very important hearing. i would note that a free press
or that free press content has a cost. that price is profoundly expensive and could press freedom out of the fragile marketplace of freedom. they have shifted from traditional media sources to local news to the television and internet. local partners in particular has declined resulting in massive downsizing at newspapers. newsroom staff declined to 45 percent from 2008 three 2017. how has -- how have they worked to overcome this challenge?>> thank you for that question. one important point to make about the statistics that you cite in terms of preference for new sources is this.
we are typical of most newspapers of our size and in the market similar to ours in this way. our audience has never been larger than it is now. you can bond the people we have that read the printed newspaper and that audience we can guard our online in our markets. we have more people reading the atlanta journal-constitution than at any other point in our history. the challenge is sort of simple. in what kind of world do you grow your audience and reach a bigger market. something is out of work. it is just counterintuitive to america business work. when you succeed, you reap the benefits of that investment. that is the missing piece for a newspaper. >> what are your projections
and how has your digital platform presents -- you have explained that. led them into my next question. how many local papers does your organization represent. >> this or any requirement that local newspapers be prioritized on digital platforms. >> in terms of the search. >> there is no requirement that they be prioritized. the digital -- digital audience isn't flooding across the board.>> one of the major issues is the ability to use individual data and targeted advertising. how did the online giants
control user data and why is this such a powerful phenomenon? >> the advertising has changed profoundly. rather than reaching an audience, they reach individuals to the degree that they're able to get more detailed data about those individuals to send them targeted debtor. the more data company has, the market segment the market and deliver targeted ads. the dominant platforms are light years ahead of other competitors. the star dominance in the digital absence.>> the chair not recognize the ranking members of the committee. >> one of the interesting things. i have been asked this a lot. sometimes we can put things out there but at the end of the day it is not actually a workable solution then we are just simply talking about things. generating a lot of stuff it
does not dissolve into staff. we should not to simply throw ideas out there. but we should actually find ideas that work. the question has come up a great deal. we be sure that any agreement to negotiate with the only platforms under what we are proposing that this legislation be adequate enough. how does it play out 10 or 15 years down the road.>> of is that there is never going to be guarantees about infinite solutions. i think there is a real chance for us to develop enduring partnership with the platforms. the platforms is a potential solution for news and journalism rather than a problem. i think the issues are well understood.
grows our audience larger than it has ever been. in terms of any audience. they need good content to engage their user. we need access to those user. it is just this world were we cannot act collectively. that means we have this problem of anyone publisher does not really get a say in how the content is distributed to those user. >> we were at this for a long time. we had a similar kind of issue. we had the content owner and the technology that has been great for many things. there was a disconnect. i think this is something that i have emphasized for years. that original idea. that the platforms have. it is something worth protecting. we cannot kill the goose with the golden egg. we are just going to keep
taking. one of these days they will not exist anymore. it was a seven day a week paper. just 20 days ago. it is down to only a five day week paper. they could possibly make a father. most of the district is one paper per county. because of a very terrible carrier. there is other issues that we have there. as we look at the, we need to make sure that both are involved in this. i think that is the concern that i have. i think it will go further in this process no one there is the online capability. i want this to be understood. force we have had to do a lot of interviews. they hold the hearings that are adversarial. what do we need to do in a perspective. i appreciate all the witnesses. will we engage -- of that that
is the biggest that we have going forward. thank you for this and thank you for the partnership on this bill. and i recognize this young lady from washington. >> represent the district that seattle. we are down to one of them. i am also somebody who read the morning paper. for a very long time. digital technology is amazing. i am astounded by the proliferation of information that is at our fingertips. i washed my child to grow up immersed in the digital world. they have access to the breath of information that can never have been imagined. several decades ago.
there are these exciting new ways that we are fighting to use technology and share information. i will tell you that many of my constituents want us to make sure that we are utilizing that technology with appropriate regulations. a very small number of companies exert a great deal of control over what news and information each one of us sees when online. those companies do have sophisticated witnesses that tracked what we do and where we are located. it never ceases to amaze me. i plugged in something and the very next day i have five of the same thing. we know our information is being monetized. 's companies are selling access to our attention. using their own for party algorithms to determine what information articles we see it
what we do not see. it is easy to forget that we would do a very quick google search. when we click on the article. we are actually being controlled by those corporations. let me start with you. your assistant attorney general. have also worked as a journalist. which online platforms would you say are most impacting the public's access to trustworthy sources and wire. >> in terms of this information, the platforms are having the most impact. that is because of the business model. engaging content because of the human nature in a survival instinct.
by having the engagement, there actually prioritizing this information as well. the shoulder pads. do not have any competition, they are free to pursue these business models without having any competitive restraint. >> let's go to that question of regulation. it is repeatedly declined to interfere. google has acquired a double- click and add mall. why do these acquisitions mean for consumers of news and information. regulation is seen as something
that is out there. this is very direct impact for consumers. >> all of them were illegal under the act which prohibits mergers that may have lessened competition. looking back, it is clear that all of them did lessened competition. you lessened competition, the consumers are not just high prices. 's loss of innovation. this loss of trust. loss of control. when we approve the competitor mergers, there is no home. >> what do you think about the ftc current work around this. >> i definitely think they should be doing more. i think there is a possibility of unwinding some of the mergers that are illegal.
there have been public documents showing facebook had identified it as a competitive threat using its vpn technology. i do not know if we were told anything different than u.s. regulators. i do think they need to do much more in this regard. >> a semi time is expired. >> i recognize the gentleman from north dakota. >> i appreciate mr. riley talking about small-town papers. if large publishers have had this problem you can imagine how effective small publishers are by this issue. my first grown-up job was coaching my summer baseball team.
one, you never get in trouble for what she does her. number 2 you shall always criticize in private. i have to those with me for a long time. i appreciate that. just earlier, -- mr. severn and mr. petoskey talked about antitrust. we assumed that we know there is competition problems in the market. we are to have long-standing remedy. there may be some disagreement about whether or not that is actually sufficient. that allows them to come together to negotiate times. was to reenact the competition act as opposed to just enforcing antitrust law?>> thank you very much. the current antitrust laws
protect google and facebook from us. giving us the power to stand up for ourselves. there is an urgency in the industry. this is the industry that really cannot wait years and years for antitrust solutions. we are at a crisis point now. what we are asking for is relatively simple. we are not asking the government to regulate in one. we are just asking to be left alone to defend ourselves. >> i think we have had a lapse in antitrust. we do not have the specific cases. we need stronger enforcement.
i do not believe it solves this problem. you should look very carefully at whether this kind of negotiation and the way it would happen. i am not at all sure that is how it would work. have wonderful new critters here. there are tablets. i just think this is very complicated. to take a very careful look at what would actually create a better marketplace dynamic. i actually believe there are better ways to do this. requires a different approach. >> i was a antitrust has been interpreted narrowly for the last 40 years. they are presenting new challenges that are going to take time.
understanding how these new markets work. with some of these were approved, some of the people objecting raised privacy concerns. the regulators felt that policy was not an area that antitrust cover. as we have had experience, we understand the privacy is a aspect of product quality. all of the users of these tools have expectations that they carry privacy that is in their interest. it just has not really stretched his muscles in a long time to understand those types of quality issues. it is going to take a while. the law is complicated. they need re-examination. the bill is a good short-term remedy while the larger issues are tackled. >> do you want to say something?>> i agree.
when we say things that feel complicated is a way of not doing anything. we have seen regulators around the world. address this problem. i think it is important to take action quickly. this is not an apples to apples comparison. while holding the platforms themselves liable for copyright violations, there may actually be worse for them than the disease. time will tell. automatic filtered programs.
you mentioned you to here. they are incredibly expensive to run. plus, it is not quite the same. >> the past the roles. each member will have to promulgate their own laws in association with those rules. companies will have to operate that patchwork of different laws. probably the worst case scenario is not the business in some of those countries. knowing that states like california and new york would dictate a marketplace. i agree with you. >> we do have a tool we have had for a very long time. before you're looking at the different solutions, we have
used antitrust laws against microsoft. they would have never been able to come onto the scene. is not a novel tall. >> i agree. that is why i asked the question. >> and now recognize the gentleman from florida.>> thank you so much and thank you to all of you for being here with us today. we talked about many newspaper publishers who have seen significant growth in digital subscriptions. yet they continue to struggle. many have shut down. it is truly unfortunate. would you please talk about why the news industry continues to struggle despite the increase in online readership and digital subscription.>> our
audience is both growing and moving very quickly. that take the vast bulk. determine everything about the experience it was in this publisher. they get to decide what was this delivered to them. whether or not we can monetize it and on what terms.>> please go ahead. >> there are powerful advertising engines the great targeted advertising. they take the bulk of the digital advertising revenue. the rules of the game for all and engagement the setup against content creators.
again, one of the things we do know is that people love ms. the audience is bigger than ever. the platforms know this. >> the platforms know this. they know that people go online to consume that product. they get to make money monetizing them. >> some researchers have estimated that for every dollar in advertising spent on digital ads, they go to the publisher. meaning that they could be capturing around 70 percent of all digital ad spending. what is the 70 percent figure tell us about the market? >> as a for sure, i would say that 70 percent cut shows there
is extraction. it is not a fair bargaining power. is not a fair price. >> why is the bargaining power so important to this industry and the consumer?>> throughout the economy, when you have such concentrated market. there is a lack of bargaining power. it means that everyone else has to play by the terms of a dominant company. we're talking about press. it is a critical to our democracy. we do not want them playing by the terms of a dominant company. critical that they have bargaining power and can have a fair deal with getting this important content to the world. >> finally. the 22nd soundbites and being
able to click on a lot of things. they do not have the same effect as the headlines. there is just something about reading the newspaper. i believe you get the whole story. heard editor say once that the other big benefit is you may bump into another story that you had no intentions on reading. i think informed america is a better equipped and smarter america. could you tell me, what is lost when a local or regional newspaper goes out of business and what effect does it have on a local community. we have shared two different powerful stories with us today. when a newspaper goes out of business, what is that effect on a local community. >> let me try to explain it this way.
there were several references to the engagement of citizens. let me give you a whirl world example. we cover the state. we have a big group of reporters that cover the state legislator when it is in session. i tried to go another each year and spend the day with our reporters and editors to do that. so that i can meet legislators and really get a good idea of work. i have been down there and sometimes it feels like our reporters are the only ones that are there. what is happened, it has gotten too expensive to send reporters. that is not good for our democracy. that is not good for any of those communities because of what is happening in the industry. it is not good for us. we would like to see them around. it would make us better. the state would be better.
that is kind of the first world example about these complicated issues. that is how it really plays out. >> the witnesses have pulled to bolt. will have the gentleman from florida and then we will briefly adjourn. i apologize for the inconvenience. >> thank you mr. chairman. we are presented with a historic opportunity. ) populace have joined together under the leadership to attempt to change the way consumers exchange with the platforms. it is nice to be working together towards such a important go. it seems as though there are three ways that the consumer experience can be altered. technology companies can
voluntarily choose to be more transparent. they could choose to act with better partners in the news industry. investigations and hearings. will be able to animate the department of justice to engage in more enforcement. that the third option would be a legislative option. honestly someone's action is evident. if our goal was to remain silent, the animate the department of justice, with specific guidance would you give in that life. >> the goal of investigating is a very good first step in there is a lot of capacity in these markets. there is a lot that is not understood. about how the algorithms work. how their structure.
their structure to benefit consumers as the platforms that. districts with the intent of blocking competition. the most important first step is for the community to dig into the facts and brings them transparency. >> what types of allegations would you want the department of justice to layout to achieve that outcome?>> i think i will follow the money at this point. the engine of these platforms is the advertising that they sell. the competition and effect are able to extract so much suggest something fundamentally broken and lack of competition in those markets. >> i want to ask about the legislative options we have available to us.
does not apply to the people you represent. as i understand it, i'm happy to be corrected. it is a neutral public platform that they enjoy certain liability projections. does it make the anti- competitive posture platforms more pronounced that they have access to this special liability protection. >> there is a huge disparity. they delivered to these platforms. they get the money. that is a good deal. we are responsible for what we publish. there allowed to deliver it monetize this content with complete lack of responsibility.
i think that is a disparity that will have to be addressed. i think with regards to the massive platforms, i think it is time to relook at that. >> that is very instructive testimony. as we look at the ways to rebalance the skill, there is legislation you have entered this. i hope we will not exclude the other statutory advantages that are baked into the business models. they should liability to one particular segment of the industry. while giving others liability protection in absence of the transparency. it would demonstrate that they are worthy of that liability.
i think there is a virtuous reason for section 230. the essence of the transparency the request is platforms to show that are in neutral platform. event in the way they operate the business with the way they can control compton. i think that is an important part of the legislative function. i am grateful that he has tried to enhance the voluntary actions of some technology platforms by pointing out if he is biased in that. >> you are doing very well with the final common.>> i want to reassure you that this investigation is intended to look at a broad range of practice on this platform. we would just stand in recess very briefly.
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