Good morning. Thank you for having me, Chair.
Thank you for the opportunity to testify today on behalf of Digital Content Next. DCN is the only trade group exclusively focused on the future of high-quality digital content companies that manage trusted, direct relationships with consumers and advertisers.
Our members include more than 60 media companies and thousands of brands, including news organizations ranging from local to national and international, such as The New York Times, The Washington Post, the BBC, The Wall Street Journal, The Guardian, The Philadelphia Inquirer and the Financial Times.
I last testified before this committee in 2022, ahead of the passage of the Online News Act, which DCN enthusiastically supported. We are grateful for your considerable diligence in studying the imbalance in bargaining power with Google and Facebook.
As background, I have nearly 30 years of digital media experience, including spending the first 20 running digital media businesses. During that period, I executed a number of major commercial deals with the large tech companies.
With antitrust lawsuits under way around the globe against Google and Facebook, the evidence emerging in these cases confirms what we have witnessed whenever one of these companies faces a legislative or regulatory threat to its bottom line.
Today, I'd like to open by sharing at a high level the types of intimidation brought on by the companies.
The first is threats to legislation. As you know, Australia provided a road map for this investigation, legislation and intimidation tactics around Bill C-18.
Much of the public learned about Australia's new bill when Facebook blocked users' sharing of news for five days in March 2021, just as vaccines were being rolled out. What may be less known is that Facebook's plan was to block news during the most critical week of Parliament's deliberations. A brave whistle-blower shared internal documents from The Wall Street Journal showing access at the highest level of the company before going underground for fear of identification and retaliation. Consider how much more informed lawmakers would have been if that whistle-blower hadn't been scared away from testifying.
The second is threats to investments. The public may know that Facebook significantly expanded its investment in the U.K. over the last few years, even moving a number of executives to London before shuttering its Instagram office earlier this year. Less known is what we learned through an open records request: that Mark Zuckerberg threatened to pull back investment in the U.K. at a time when its Parliament was demanding he testify about questions he never answered—to this day—including to Canada's Parliament, which went so far as to summon him.
On a related note, it made global news when the company agreed to pay $5 billion to the U.S. government to settle the matter in the States. However, what is less known is that this is the basis of an ongoing shareholder lawsuit alleging insider trading charges against Zuckerberg, and that the company overpaid to protect its CEO.
The third is threats to publishers and newsrooms. We've seen significant headlines over the years about both companies funding news projects and academic programs. Behind the scenes, the companies were able to leverage commercial relationships to suppress reporting on information considered sensitive to the companies. Those considered partners, through high-revenue programs or advanced access to new products, are understandably much more reluctant to publicly criticize the companies.
Google and Facebook also issued threats to pull out of news altogether. One example is the head of news at Facebook reportedly telling Australian publishers that they would be in “hospice” if they didn't work with Facebook.
In 2018, The Guardian and The New York Times reported on Cambridge Analytica, which is Facebook's largest-ever scandal. Again, less known is Facebook's threat to sue The Guardian a day prior to its news report, which Facebook's own head of news—and I'm quoting her, as I was sitting immediately next to her on a Financial Times conference panel—said was, “Probably not our wisest move”.
The fourth is record spending on lobbying, including through proxies. Google and Facebook registered in the top 10 lobbyists in the EU and the U.S. In addition to direct employee and campaign contributions, there is a long list of groups that champion the two companies' talking points in return for significant funding.
The fifth is that the companies intimidate consumers in order to drive outrage, including by using their dominant gateways of YouTube, search and messaging. This includes the oft-repeated claims that regulations will destroy innovation or end the free and open Internet. In each case, whether it was on new privacy laws, the EU copyright directive or Australia's news bargaining code, the Internet never broke.
Facebook often takes it a step further by suggesting it will have to charge for services or kill thousands of small businesses and millions of jobs. Mind you, the company makes tens of billions in profit per year, driven nearly entirely by ultra-high margin advertising.
As you've witnessed first-hand, these companies use various tactics in a coordinated fashion to slow down or stop any regulation that would impact their bottom line. Fortunately, their playbook is becoming more widely known and policy-makers around the globe are beginning to take action.
I appreciate the opportunity to speak with you today. I look forward to answering any questions you may have.