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Big Tech’s Professional Opponents Strike at Google

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Months before the Justice Department filed a landmark antitrust suit against Google this week, the internet company’s adversaries hustled behind the scenes to lay the groundwork for a case.

Nonprofits critical of corporate power warned lawmakers that Google illegally boxed out rivals. With mounds of documents, economists and antitrust scholars detailed to regulators and state investigators how the company throttled competition. And former Silicon Valley insiders steered congressional investigators with firsthand evidence of industry wrongdoing.

An unlikely collection of lawyers, activists, economists, academics and former corporate insiders are now fueling the backlash against the world’s largest technology companies. Bolstered by millions of dollars from high-profile sponsors like the financier George Soros and the Facebook co-founder Chris Hughes, they have coalesced to become a new class of professional tech skeptic.

To rein in Google, Apple, Facebook and Amazon, the tech opponents have employed a wide set of tactics. They have lobbied regulators and lawmakers about anticompetitive business practices, filed legal complaints about privacy violations, organized boycotts and exposed the risks of disinformation and artificial intelligence.

Their potency was cemented on Tuesday when the Justice Department filed its suit accusing Google of maintaining an illegal monopoly over internet search and search advertising. After years of making the same argument, the opponents claimed the action as a victory.

“It’s a moment of pride,” said Cristina Caffarra, a London-based economist who advised state attorneys general on their Google investigation and worked on an earlier probe of Google in Europe that the Justice Department’s case is similar to. “We did it.”

ImageFiona Scott Morton, a Yale economist, has detailed the potential harms of tech giants like Google to regulators.
Credit…Roderick Aichinger

Their rise underlines the growing sophistication of opponents to the more than $5 trillion technology industry. Even if the Justice Department’s suit against Google becomes mired in legal wrangling, their swelling numbers and activity suggests that the tech behemoths will face years of scrutiny and court battles ahead. That could eventually lead to new regulations and laws that reshape people’s digital experiences.

“There is a counterweight growing in reaction to Big Tech similar to what we’ve seen in relation to Big Oil over these past decades,” said Martin Tisné, managing director of Luminate, a foundation that has provided $78.3 million since 2014 to civil society groups and law firms focused on tech-accountability issues. “I would hope the companies are concerned and watching.”

Google declined to comment beyond its statements on Tuesday that the Justice Department’s lawsuit was flawed and “would do nothing to help consumers.”

Google, Amazon, Facebook and Apple have girded themselves for a long battle. Often outspending their critics, they have hired law firms, funded policy think tanks, built out their lobbying operations and started public relations campaigns. They have also argued that they behave responsibly and that consumers love their products.

Carl Szabo, the vice president of NetChoice, a trade group that represents Google, Facebook and Amazon, dismissed the tech critics as “an industry for activists” and an opportunity for rivals to “put on the moniker of consumer protection.”

The anti-tech professionals agree on many broad points: that the companies have too much power and have transformed commerce and communication. But they have sometimes found themselves at odds with one another and do not agree on the fixes. Some support using antitrust laws to take on the companies, potentially breaking them up. Others said tougher regulations were better to rein in the firms.

Credit…Chip Somodevilla/Getty Images

Sarah Miller, executive director of American Economic Liberties Project, a group focused on corporate concentration, favors breaking up the companies. She said there was “jockeying” to put forward ideas, but that the movement was a “fairly aligned, functional ecosystem.”

Many of the groups are increasingly well funded. Billionaires including Mr. Soros and Pierre Omidyar, the eBay co-founder who backs Luminate and other groups, have poured tens of millions of dollars into opposing the tech industry. Mr. Hughes, a co-founder of Facebook, is funding think tanks and activists who pressure the companies.

Institutions like the Ford Foundation are also funding civil society groups and research efforts to study tech’s harms. And human rights groups such as Amnesty International, Human Rights Watch and the Anti-Defamation League have devoted more resources to tech-accountability issues.

“If you compare today to five years ago, there is a much different awareness among policymakers and the public,” said Vera Franz, deputy director of the Open Society Foundations, an organization backed by Mr. Soros that has spent $24 million this year on groups focused on privacy, online discrimination and other tech topics. “The key question is how to translate that awareness to real change and real accountability.”

The anti-tech movement’s first signs of success came in the European Union about a decade ago when some of Google’s rivals banded together to persuade regulators to investigate the company for antitrust violations. The resulting cases cost Google more than $9 billion in fines.

In 2016, the opponents scored another victory when the European Union passed a landmark data privacy law, the General Data Protection Regulation, which many lawyers and activists now use against the tech companies.

In the United States, few were alarmed by tech’s power until the 2016 presidential election, when Russia used social media to spread disinformation and sow political discord. In 2018, the Cambridge Analytica scandal exposed Facebook’s weak privacy safeguards and added to the momentum.

Since then, the influence of industry critics has swelled. Antitrust lawyers and economists focused on tech accountability are in demand at law firms and think tanks. Civil society groups eager to investigate the industry are hiring data scientists and researchers. Universities are adding programs looking at tech’s harm.

Bookstores are also stocking titles like “The Age of Surveillance Capitalism,” by the Harvard professor Shoshana Zuboff, about how companies like Facebook and Google try to predict and control human behavior. Netflix films like “The Social Dilemma,” which is critical of social media, have become surprise hits.

Tristan Harris, a former Google design ethicist, said few shared his concerns about tech five years ago. Now he speaks with American and European authorities about regulating the tech giants as public utilities. Mr. Harris, who starred in “The Social Dilemma,” said he wanted to mobilize “a global movement of regulator people and citizens,” akin to what Al Gore did for the environment after releasing “The Inconvenient Truth.”

“It took a long time to get here,” said Mr. Harris, who in 2018 also co-founded the Center for Humane Technology, a nonprofit that raises awareness about tech’s dangers.

Credit…Netflix

One clear impact of the anti-tech community was the 449-page report released on Oct. 6 by the House antitrust subcommittee, in one of Congress’s deepest looks at the industry in years. House lawmakers concluded that Amazon, Apple, Google and Facebook had abused their power to block competitors.

Tech critics played a central role influencing the direction of the report. Lina Khan, an antitrust and competition law scholar, was a counsel for the committee that drafted the report. Fiona Scott Morton, a Yale economist, and Gene Kimmelman, a former Justice Department antitrust official, provided legal and economic background to investigators. Roger McNamee, an early Facebook investor who later turned against the social network, also met so regularly with congressional staff members that he thanked several of them in his 2019 book, “Zucked,” about the damage Facebook was doing to society.

A similar coalition helped build momentum for the Justice Department and state attorneys general investigations of Google. Lawyers at the Justice Department built the case off theories developed by economists including Ms. Caffarra.

There was a “consensus that enforcement has not delivered,” said Ms. Caffarra, who works at Charles River Associates, an economic consulting firm. “I’m in favor of really putting on pressure. Too little has happened.”

But their criticism varies by company. While Ms. Caffarra and Ms. Scott Morton have raised alarms about Google and Facebook, they have also done work on behalf of Amazon.

Gary Reback, an antitrust lawyer who has battled Microsoft and Google, said the political momentum could evaporate. Two decades ago, he said, the government filed a landmark antitrust case against Microsoft — but did not produce the safeguards to prevent misbehavior later.

“We should have had a seminal moment 20 years ago,” he said. “Something happened that caused the momentum to dissipate, and that’s the risk here.”

For now, the mood is largely celebratory. After this month’s House report, Google’s critics in Washington passed around a version of a meme that featured dancing pallbearers holding a coffin, essentially jubilant over the misfortune of the coffin’s occupant.

The pallbearers were Representative David Cicilline, the Rhode Island Democrat who chairs the House antitrust subcommittee, and Representative Ken Buck, a Republican member of the panel who agreed with parts of the report.

And the coffin? It bore Google’s logo.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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