The Mudge hearing shows lawmakers are unprepared when it really counts

Pass/fail

In his Senate testimony Tuesday, Twitter whistleblower Peiter Zatko said U.S. regulators are so out of their depth when dealing with tech companies that the agencies let the firms “ grade their own homework .” As lawmakers tossed in irrelevant, repetitive and vague questions, they made it clear they haven’t exactly been keeping up with the material either — and may have to take an incomplete if the final grade requires passing a bill.

Zatko, who goes by Mudge, was touted as the latest blockbuster tech witness in a years-long series of congressional hearings.

• Sure, lawmakers have railed at CEOs and praised whistleblowers galore since Zuckerberg first testified on the Hill in 2018.
• But this time last year, ahead of Frances Haugen’s testimony, my editor and I pointed out what was then only whispered in Washington: The parade of hearings sure seems useless and even manipulative.
• Congress has lots of reasons to yell, but few motivations to get smarter, make compromises and build consensus. You know — to do their jobs.

So were the senators smart, using their precious time to build the case for or improve upon current privacy proposals ? Did they drive toward new ideas that would address Mudge’s concerns about foreign infiltration of social media and weak regulators?

• In a word: lol.
• To be fair, the questions weren’t up there with the “ series of tubes ” speech or asking Zuck how Facebook makes money, and Republicans surprisingly turned down the volume on typical shouting about political bias, real or imagined.
• But by and large the closest senators came to any legislative substance was asking Mudge if users should have more insight into how companies use their info — which even the most rapacious data brokers would say “yes” to, at least in public, in this day and age.

GOP Sen. Lindsey Graham said he was working with Democrat Elizabeth Warren on a proposal for a standalone tech regulator.

• That sounds like a good compromise in theory, but it flies in the face of years of work to invest in the FTC as the agency tech answers to, rather than building something new.
• It’s also politically DOA , because Republicans hate new bureaucracy, and it would pretty much require a time machine to get done given how few days are left for legislating this year.

Credit where it’s due: The Judiciary Committee where Mudge testified has advanced legislation on antitrust.

• It’s others — primarily House Speaker Nancy Pelosi and Senate Commerce Committee Chair Maria Cantwell — who are holding up privacy , despite the White House more or less begging for Congress to act.
• But the fate of that competition legislation is still up in the air , and few of the senators on Tuesday even crowed about it, or used Mudge’s expertise to draw attention to industry’s lingering claims of privacy and security concerns about the bill.

Sen. Amy Klobuchar, who is leading the antitrust push, sounded annoyed that her colleagues seemed to feel they’re still in the “tossing out ideas” phase of their group project when we’re actually in the crucial last possible moments to pass something, maybe for years.

• “Despite this probably being our 50th hearing … we have not passed one bill out of the U.S. Senate when it comes to competition, when it comes to privacy, when it comes to better funding the agencies, when it comes to the protection of kids,” she lamented.
• “I think we better be putting the mirror on ourselves,” she said, saying Congress plays a role in tech companies’ sense that they can act with impunity.

Despite all this, there’s still a small (and ever-shrinking) chance for tech legislation to pass this year. The surprising productivity of Congress over the summer is a reminder that lawmakers can snap out of their customary inaction. But after Tuesday’s hearing, it’s even clearer that, if Congress produces, it’ll only be thanks to the few brainiacs who bothered to do the reading.

— Ben Brody ( email | twitter )

In Google

Google news is everywhere this week , and that’s not really a great thing for one of the world’s largest tech companies. Regulators and courts around the country and around the world are zeroing in on several of the company’s practices, pursuing lawsuits and levying sometimes-massive fines.

Here in the U.S., one of many massive antitrust lawsuits got a green light to move forward.

• A federal judge ruled Google has to face the ad tech antitrust lawsuit by a group of state attorneys general.
• U.S. District Judge P. Kevin Castel did dismiss claims Google colluded with Facebook in the “ Jedi Blue ” program, but he otherwise gave the green light for the group of 17 attorneys general to make the case that Google abused its market power on three other counts.
• Those focus on Google’s ad-buying tools, in-app networks, ad exchanges and publisher ad services.

Google lost an appeal in the EU, meanwhile, and is still on the hook for a more than $4 billion antitrust fine.

• The European Union’s General Court upheld a 2015 antitrust ruling against Google but shaved around 215 million euros off the fine, bringing it down to $4.12 billion.
• The original dispute centered on whether Google used the dominance of Android to promote its search engine.
• The case is one of several in which EU regulators fined Google several billion dollars. In 2021 Google lost a different appeal over a $2.8 billion fine for behaving anticompetitively with its shopping service, and in 2019 it was fined $1.69 billion for bundling advertising and search.

And the antitrust suits don’t stop coming: Cases in the U.K. and the Netherlands are reportedly next.

• A group of publishers are planning to sue Google over its digital advertising practices in both British and Dutch courts, Reuters reports .
• The same law firm is handling both cases, which aim to ”obtain compensation” on behalf of U.K. and EU publishers for “damages [Google] has caused to this important industry.”
• Google could theoretically be on the hook for up to $25.4 billion between the two as-yet-unfiled suits.

It’s not all antitrust: Regulators in South Korea say Google’s breaking privacy laws, too.

• South Korea on Wednesday fined Google and Meta around $72 million for violating South Korea’s privacy law.
• Regulators said Google didn't notify users adequately about data collection, set default settings to "agree" and hid other options, according to TechCrunch.
• The fines are the largest South Korea has ever levied against a company for violating personal information protection law, TechCrunch reported.

— Kate Cox ( email | twitter )

In Washington

The Treasury Department held strong on its ban of Tornado Cash , the Ethereum application that allows crypto users to obfuscate their payments trail. The application is useful to hackers to help them get away unidentified, as almost happened in the Axie Infinity case . Treasury offered guidance for users trying to remove Tornado Cash funds without violating sanctions.

Google entered a government agreement to work on open-source chips. The National Institute of Standards and Technology, Google and a handful of research universities agreed to work together on developing chips for nanotechnology and semiconductor research. Google agreed to subsidize initial production and pay for setup costs.

Sens. Edward Markey and Ron Wyden want Immigration and Customs Enforcement to explain what they’re doing with facial recognition. In a letter to ICE, the two Democrats cite new findings from the Georgetown Law Center on Privacy & Technology, including that ICE has used the technology to identify 32% of all U.S. adults by their driver's licenses.

A MESSAGE FROM ALIBABA

Alibaba — a leading global ecommerce company — is a particularly powerful engine in helping American businesses of every size sell goods to more than 1 billion consumers on its digital marketplaces in China. In 2020, U.S. companies completed more than $54 billion of sales to consumers in China through Alibaba’s online platforms.

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In the courts

Several research groups were solicited to dig up dirt on Zatko, according to a report in The New Yorker. The Twitter whistleblower said he was “disturbed by what appears to be a campaign to approach our friends and former colleagues under apparently false pretenses with offers of money in exchange for information about us.”

The SEC charged VMware with misleading investors by manipulating financials. Without admitting wrongdoing, VMware settled the charges for $8 million.

Coming soon

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In data

4%: That’s the percentage of members of Congress below the age of 40, over the last 22 years on average, according to a Business Insider analysis. The current Congress is historically old: Between 1950 and 1990, on average 10% of members were under 40, and in the early 1980s, that number reached a high of 17%.

The best stock pickers are in D.C.

Congress is really good at trading stocks. Many times, they also happen to regulate the companies they’re buying: Between 2019 and 2021, 183 members of Congress or their immediate family traded stock, and more than half of them sat on committees that may have provided relevant information on company performance, according to a New York Times analysis. Tech companies were well represented in the full report.

A MESSAGE FROM ALIBABA

Using economic multipliers published by the U.S. Bureau of Economic Analysis, NDP estimates that the ripple effect of this Alibaba-fueled consumption in 2020 supported more than 256,000 U.S. jobs and $21 billion in wages. These American sales to Chinese consumers also added $39 billion to U.S. GDP.

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