By John D. McKinnon, Byron Tau and Douglas MacMillan
WASHINGTON -- Technology firms, which long enjoyed a hands-off
approach from Washington aimed at fostering their growth, are
facing more political challenges from both parties amid growing
concerns over the companies' size, influence and perceived lack of
accountability.
New scrutiny by Congress of Facebook Inc. over its acceptance of
Russian ad buys in the 2016 campaign is just the latest in a string
of policy problems facing technology firms.
It was already a tough year for Silicon Valley in Washington,
where lawmakers have been pushing proposals that could roil the
industry, including measures on net neutrality, privacy and
liability. The industry's standing suffered again in the past week
when lawmakers laid plans for public hearings to examine whether
Facebook and other social-media platforms were used by foreign
governments during the 2016 campaign to manipulate the U.S.
election. Lawmakers also signaled they are considering new
legislation to address online spending by foreign adversaries -- a
potential blow to the firms' cherished freedom from close
government oversight.
"This is a Wild, Wild West," said Sen. Mark Warner, a Virginia
Democrat, about the possible need for more controls on internet
companies.
It wasn't long ago that President Barack Obama held a festival
on the White House grounds to celebrate high-tech firms and their
transformative power. Dubbed "South by South Lawn," the event last
October was the coda of a cozy relationship in which Silicon Valley
became a powerful influence on Mr. Obama's presidency and a core of
his support.
In contrast, at a White House meeting between tech leaders and
President Donald Trump earlier this year, Microsoft Corp. Chief
Executive Satya Nadella led off by urging Mr. Trump to maintain an
"enlightened" immigration policy as well as government research
spending -- two areas where the new administration had clashed with
Silicon Valley. Mr. Trump responded by urging other CEOs to keep
their comments "a little shorter."
The end of the tech-friendly Obama administration has opened the
sector to more policy challenges from both the right and left, amid
growing concern over the companies' influence. Compounding the
problem for the industry has been its occasional lack of
broad-based support among Republicans in recent years, a situation
that became more acute following the GOP sweep in the 2016
election.
In the internet's early days, Washington often took a
light-touch approach designed to nurture the fledgling industry.
Now, though, some lawmakers say big internet firms eventually could
lose key aspects of the special legal protections they enjoy under
U.S. law. There is even talk of possible antitrust scrutiny for
some big tech firms in the U.S., following the European Commission
decision to issue a record $2.91 billion fine against Alphabet Inc.
unit Google for allegedly abusing the power of its dominant search
engine. The company filed an appeal of the fine on Monday.
"Antitrust, privacy and overall trust in tech companies are
serious emerging issues that represent important potential threats
to the Valley, " said Ted Ullyot, partner for policy and regulatory
affairs at the venture-capital firm Andreessen Horowitz and the
former general counsel of Facebook. "All the more reason why tech
companies need to understand and engage with the policy arena,
starting early in their development, to help minimize those threats
in the current environment," he said.
The companies involved didn't want to comment on their standing
in Washington. But some of the largest companies have boosted their
spending on lobbyists and hired influential former government
officials to help craft their response to regulatory pressure.
Largely, this message still rests on the idea that the tech
companies generally are providing valuable free services to
users.
That may not be enough to ward off the current push by U.S.
regulators and Congress, said Nick Sinai, former U.S. deputy chief
technology officer during the Obama administration.
"Tech companies need to realize that presumption of good faith
is eroding," said Mr. Sinai, now a venture partner at Insight
Venture Partners. "They need to make sure they are good neighbors,
good employers, good at delivering on the promises they make to
customers, and think hard about who they have been leaving out or
affecting."
So far this year, tech firms have faced new or more intense
fights over issues such as user privacy, net neutrality, antitrust,
intellectual property and their legal immunity for unlawful
third-party posts such as those linked to sex trafficking.
In March, the House and Senate passed GOP-backed legislation
that rolled back Obama-era rules that had benefited internet
companies by tightening user-privacy rules for their nascent rivals
in the wireless and cable sectors.
After internet activists complained about the measure, GOP Rep.
Marsha Blackburn of Tennessee, an influential subcommittee
chairman, stunned internet firms by proposing privacy legislation
that would impose big new burdens on the internet firms, as well as
the wireless and cable companies.
In April, Federal Communications Commission Chairman Ajit Pai
proposed a rollback of Obama-era rules on net neutrality that long
were championed by the internet industry. The rules require
internet providers to treat all traffic equally.
Then in August, a bipartisan group of more than 25 senators
introduced legislation to pull back online firms' near-blanket
immunity from lawsuits over harmful third-party posts, at least for
sites involved in marketing adult services. The aim is to curb what
experts view as an epidemic of online sex trafficking, including of
children.
Internet companies have appeared to score at least a few policy
victories, some of them significant, for example on
autonomous-vehicle oversight, which gave them more flexibility in
developing such vehicles.
But a legislative showdown with the tech companies over
political manipulation during the election is adding to concern
that the industry is losing its influence in Washington.
Sen. Richard Burr (R., N.C.), who is chairman of the Senate
Intelligence Committee, which is investigating foreign interference
into the 2016 election, has signaled he is likely to call a public
hearing on the issue of social-media activity.
A Facebook spokesman said Thursday that the company "will
continue our cooperation with the relevant investigative
authorities" who are looking into foreign meddling.
Antitrust worries also have grown this year, particularly among
liberal Democrats and some Republicans. Mr. Trump himself raised
concern about possible antitrust issues regarding Amazon.com Inc.
during the campaign. But to date his administration hasn't made any
public moves against Amazon, and even quickly approved the
company's deal to buy grocery chain Whole Foods.
The president's nominee to be the Justice Department's antitrust
chief, Makan Delrahim, who has yet to be confirmed by the Senate,
promised to "investigate and vigorously enforce the antitrust laws
with respect to online platforms," as with other firms. Mr.
Delrahim also promised to protect American businesses from
"discriminatory antitrust enforcement" by foreign authorities.
One of the biggest advantages Congress conferred to the industry
in the 1990s is the immunity given to internet businesses for harm
created by user posts. But lawmakers including Sens. Rob Portman
(R., Ohio) and Richard Blumenthal (D., Conn.) decided this year to
amend the 1996 Communications Decency Act to remove immunity from
classified-ad sites such as Backpage.com, which have been
criticized for publishing ads purportedly linked to sex
trafficking. Backpage.com contends it uses industry-leading
practices to prevent sex-trafficking ads, including ads featuring
minors, from showing up in its classified listings.
The senators have run into intense opposition from big firms
such as Facebook and Google, as well as trade group the Internet
Association. The companies worry about being dragged into lawsuits
inadvertently, despite their considerable efforts to suss out
illegal trafficking.
Ms. Blackburn's privacy bill is potentially one of the most
worrisome developments for big online firms, including Google and
Facebook. Her legislation would strengthen U.S. consumers' privacy
rights online, allowing for customers to opt in before the firms
can use their browser history or other sensitive data. Such a
requirement could reduce the amounts of data available to the firms
for their lucrative online advertising business.
The companies have launched an all-out lobbying effort to defeat
the legislation, dimming its chances of enactment. The bill appears
to be stalled at least in part because of the tech companies'
opposition.
Google's own talking points about the bill described it in
near-apocalyptic terms, arguing it "imperils the future of internet
commerce and economic growth in the U.S.," and "undermines the
business models of all companies that provide online services."
Write to John D. McKinnon at john.mckinnon@wsj.com, Byron Tau at
byron.tau@wsj.com and Douglas MacMillan at
douglas.macmillan@wsj.com
(END) Dow Jones Newswires
September 15, 2017 19:25 ET (23:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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