Information & Ethics Committee on May 29th, 2019

[The Chair, Conservative, Bob Zimmer]

Please go very quickly, because I know we're trying to squeeze everybody in.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

With respect to the monetization of personal data, I raised the point with experts yesterday that the business model is the problem. That was put forth by a number of folks, and Apple, I think—Tim Cook—made the same point about the industrial data complex.

Microsoft and Amazon, do you think the business model is itself a problem? You just want to collect more and more information about us. What's the value to us in your collecting so much information about us? Is the business model a problem?

[John Weigelt]

To be clear, the information we collect is only there for the products. We're not looking at doing things personalized to you and you only, to target to you.

When we find that people aren't using a feature, grosso modo we anonymize, pseudonymize, and that's a great feature. We try to surface that feature in subsequent releases. That's simply there to help enhance our business. We're a software and services company. That's what we do, and that's our business line.

[Mark Ryland]

Our business model is very consistent with consumer privacy, because it's all about meeting customer choice through a traditional purchase-and-sale model of capabilities and products and services.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thank you.

[The Chair, Conservative, Bob Zimmer]

Now we'll go to Mr. Angus for five minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you very much.

Diapers.com was an online business selling diapers in this competitive market that Amazon says is out there. Jeff Bezos wanted to buy it. They refused, so Amazon went to predatory pricing. Amazon was losing $100 million on diapers every three months to put a competitor out of business or to force them to sell. They finally agreed, because they were afraid Amazon would drop prices even lower.

We talk about antitrust because of the “kill zone” of innovation that The Economist is talking about, but with Amazon, it's the kill zone of competition—the power that you have through all of your platforms to drive down prices and actually put people out of business. Shaoul Sussman says that the predatory pricing practices of Amazon are antitrust in nature and need legislation.

What do you say?

[Mark Ryland]

Again, I have to say that I'm not an expert in competition law and I don't know the history or the details of some of the things you mention.

In the general business that we're in, we see robust competition across all these businesses. There are a lot of new start-ups, and we even have a great number of competitors who use our Amazon Web Services platform. Some of the largest online commerce platforms in, say, Germany and Latin America use AWS and trust us with their businesses, so we think competition is working.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Yes, so you've got all the people to use your cloud services and then you can drive down prices against mom and pop. Lena Kahn, from Open Markets, says that because you are controlling so much market dominance in so many various areas, you can use your profits from the cloud to run predatory pricing and to run down competition. She says that your “structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny”.

This is an issue that I think legislators need to think about. We see that in Canada one of the great advantages you have is that you're not paying taxes the way our poorest businesses have to. In the U.K., you made 3.35 billion pounds and paid only only 1.8 million pounds in taxable income. I mean, you're like our biggest welfare case on the planet if you're getting that.

In the U.S., it's even better. You made $11 billion in profits and you got a $129-million rebate. You were actually paying a negative 1% tax rate. That seems to me to be an extraordinary advantage. I don't know of any company that wouldn't want to get a rebate rather than pay taxes—or any citizen.

How is it that we have a marketplace where you can undercut any competitor and you can undercut any book publisher and you're not even properly paying taxes? Don't you think that it's at least our job to rein you guys in and make sure that we have some fair rules in the marketplace?

[Mark Ryland]

Again, I apologize. I'm not an expert in the competition law area. The panel discussion was on security, consumer protection and privacy, where I do have some expertise, but I'm not able to answer your questions on that area.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Yes, that's unfortunate. I mean, this is why our chair asked that we get people who would be able to answer questions, because these are the questions that as legislators we need to have answered. We're dealing in this new age, and your colleagues at Facebook have put us in this situation. If Facebook had better corporate practices, we might not even be paying attention, but we're having to pay attention. If Amazon was not engaged in such anti-competitive practices, we might think that the free market was great, but it's not great right now, and you can't answer those questions for us.

It puts us in a bind, because as legislators we're asking for answers. What's a fair taxation rate? How do we ensure competition in the marketplace? How do we ensure that we don't have predatory pricing that is deliberately driving down prices and putting businesses—our businesses— out of business because you have such market dominance and you can't answer the question? It leaves us very confused. Should we call Alexa or Siri? Would they help?

[Voices]

Oh, oh!

[Mark Ryland]

I apologize, but I don't have the expertise to answer those questions.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

[The Chair, Conservative, Bob Zimmer]

I would like to highlight what Mr. Angus said. This is the reason we asked Mr. Bezos to come. He can answer those kinds of questions before this grand committee. He's exactly the person who could have answered all our questions. We wouldn't have kept anybody off the panel, but certainly we wanted people who could give us comprehensive answers with regard to the whole package.

I will go next to Mr. Lucas from the U.K.

[Ian Lucas]

John, could I return to transfer of data within Microsoft? You mentioned that Microsoft has acquired a number of companies. LinkedIn, which you mentioned, was one of them. Can you just be clear? If I give information to LinkedIn, within the Microsoft organization is it then transferred to other businesses within Microsoft?

[John Weigelt]

Absolutely not. LinkedIn remains rather independent from the organization.

[Ian Lucas]

You're saying there is a wall around the information that is collected by LinkedIn and it's not transferred within the Microsoft organization.

[John Weigelt]

Any transfer of.... Excuse me. Let me step back from that. Any connection between your LinkedIn profile and, let's say, your Office toolset is done by the user, and that's a connection that's done explicitly. For example, in your email clients, you may choose to leverage your LinkedIn connection there. That's something that the user intervenes with in their LinkedIn profile. It's their Office—

[Ian Lucas]

I'm interested in the default position. If I join LinkedIn and I don't go through the terms and conditions and I give information to LinkedIn, does it get transferred or is it capable of being transferred to other businesses within the Microsoft family, as you guys like to call it?

[John Weigelt]

LinkedIn doesn't share that information across the business from the back end.

[Ian Lucas]

As a general rule regarding the separate businesses within the Microsoft organization, is the information transferred generally?

[John Weigelt]

As a general rule, each business line is independent.

[Ian Lucas]

Is the information transferred between the separate businesses?

[John Weigelt]

Personal information is maintained by each individual business line.