July 26, 2021

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The Technology 202: Amazon’s new CEO will inherit major political headaches

8 min read

But the company also is facing political challenges expected to only escalate under a Democratic-controlled White House and Congress. Amazon has emerged as a punching bag for politicians in both parties, and lawmakers are already signaling Jassy should prepare for the hits to keep coming.

“I have some questions for Mr. Jassy,” tweeted Rep. Ken Buck (R-Colo.), who sits on the House Judiciary antitrust subcommittee that grilled Bezos last year.

Rep. Pramila Jayapal (D-Wash.), who also sits on the same subcommittee, promised in a statement she would continue her work to ensure “that we aggressively challenge dominant tech platforms such as Amazon.”

(Bezos owns The Washington Post). 

Jassy will face regulatory battles on multiple fronts when he becomes CEO this summer.

Regulators are examining the company for potential anticompetitive behavior, and lawmakers are considering legislation that could significantly curtail its business practices. Democrats are also calling for changes to the tax system that would force the company and its wealthy executives to pay more. Amazon’s products — ranging from its home Alexa devices to facial recognition systems — also are at the center of debates over the future of privacy

Meanwhile, multiple federal and state agencies are examining the company’s checkered record on labor issues. Just yesterday, Amazon reached a settlement with the Federal Trade Commission to address allegations it shorted contract drivers $61.7 million in tips.

 And the scrutiny is not just limited to the United States; the company faces antitrust charges in Europe as well.

“Those governments have decided that Amazon needs to be regulated, and this won’t change that path,” said Paul Gallant, an industry analyst at Cowen & Co.

It remains to be seen whether Jassy will try to make inroads with lawmakers or whether his approach to policymaking will be Bezos 2.0.

Gallant said Jassy has the opportunity to strike a more “collaborative” relationship with members of Congress — after Bezos largely avoided Capitol Hill appearances. Bezos testified virtually only once before Congress during his nearly 30 years as CEO, when he appeared alongside other tech executives at an antitrust hearing last summer.

Jassy may not be a household name in the same manner as Bezos, but he does have experience with Washington that could help the company. Under his leadership, Amazon’s cloud business made significant inroads in serving government clients, including the CIA. However, under the Trump administration, the company suffered a high-profile blow when the administration opted to award a multibillion-dollar contract to Microsoft. aAt a conference that year, Jassy didn’t shy away from publicly criticizing the decision, or then-President Trump’s treatment of his predecessor.

He also is no stranger to some of the company’s competition problems. Much of the attention in Washington is on how Amazon has allegedly favored its own products over those of other sellers in its marketplace. But similar concerns have been raised about the cloud business Jassy ran, my colleague Jay Greene reported. Amazon also has been accused of trampling smaller software companies that make their own niche products that run on top of Amazon’s cloud services.

Jassy has publicly defended the company against calls for a breakup. “Simply because the company’s been successful in a few different business segments doesn’t mean it’s somehow too big,” Jassy said in a February 2020 PBS documentary.

And Jassy has already overseen some of the company’s most controversial products. Rekognition, Amazon’s facial recognition tools, fell within his division. In the same PBS documentary, Jassy defended sales of that technology to law enforcement. Months later, the company ultimately moved to pause police use of the software for a year after it faced backlash last summer over its business ties to police departments during the height of Black Lives Matter protests.

Amazon’s critics called for Washington to keep up the pressure on the company and Bezos following the transition.

Bezos will remain the company’s executive chairman and pull back from day-to-day operations to focus on other interests, including philanthropy, The Washington Post and Blue Origin, his company focused on space travel. 

It remains unclear what role Bezos will play in addressing the company’s ongoing regulatory problems. Amazon declined to comment.

“Perhaps he’s going to spend a lot more time crafting a response to regulators and government officials,” said David Larcker, a professor at Stanford Graduate School of Business who specializes in corporate governance. “You would think it would be compelling to have someone who’s really at the heart of the evolution of the company to be the one to explain it, why we’re not monopolistic and why we’re good for society.”

Yet Amazon’s critics saw the situation differently — and seized on the leadership transition as a sign Bezos was hiding from the political scrutiny.

Sarah Miller, the executive director of the Economic Liberties Project, has called for the Biden administration to bring an antitrust case against Amazon. She does not think the leadership overhaul will have much impact on the company’s behavior — or its treatment of smaller businesses and workers.

“Today’s announcement is an effort by Bezos to hide from the policymakers, antitrust enforcers and local communities that are waking up to Amazon’s monopoly power,” Miller said. “He can try to refocus eyes on his philanthropy, but he should still be held accountable for what happens at Amazon.”

Rant and rave

Before anyone knew about Bezos’s plans, Amazon was ridiculed online for a helix-shaped building the company said it planned to build in Virginia. Here’s one take from CNBC news associate Annie Palmer: 

Another, from Washingtonian food editor Jessica Sidman:

Morning Consult tech policy reporter Sam Sabin luckily sees the bigger picture:

Our top tabs

As GameStop stock plummets, amateur traders see giant losses.

The game store chain’s stock fell 60 percent, and the online horde that invested big in the company is grappling with the losses, Drew Harwell reports. It comes as one trading app popular with the investors, Robinhood, faces regulatory scrutiny in Washington, where its CEO is scheduled to testify in a matter of weeks.

Some amateur traders on the Reddit forum that fueled the rise of the “meme stock” have posted images of their bank accounts losing hundreds of thousands of dollars in a matter of hours. 

Sen. Elizabeth Warren (D-Mass.), meanwhile, has asked Robinhood about its practices and ties to Citadel, a hedge fund that Reddit users have accused of pressuring the app to limit certain stock trades (Robinhood has denied the allegations).

TikTok will begin warning users about potential misinformation.

The short-form video app is rolling out warning labels telling users when videos contain “unverified content,” and they’ll also warn users of the content when they try to share it. The announcement comes after an election that saw debunked claims of fraud surge, and amid a pandemic that has seen a rise in unverified information

The app, which is owned by Chinese company ByteDance, partners with fact-checkers to verify content, but is trying to “limit the spread of potentially misleading information.” It says that the new feature’s impact will be significant, with it reducing sharing of unverified videos by 24 percent and decreasing likes on those videos by 7 percent in tests. 

One watchdog group found videos with election fraud claims on the app, which is popular among millennials, received hundreds of thousands of views on the platform last year before being taken down. 

A SpaceX prototype crashed during a test flight.

The ship crashed in a fireball as it tried to reorient itself for landing, Christian Davenport reports. The crash is a stark reminder of the risks for spaceflight as companies such as SpaceX step up their efforts to send civilians to the stars. 

On Monday, SpaceX announced that it plans to send an all-civilian crew to space in a flight expected later this year. But the company’s founder and CEO, Elon Musk, has warned of “not zero” risks as he tussles with federal aviation officials.

Inside the Biden administration

Tech industry supports Biden immigration orders but wants more.

Biden’s three new executive orders, which order the review and potential reversal of the Trump administration’s immigration policies, have the tech industry celebrating — and calling for more action to help highly skilled workers. 

The industry battled the Trump administration over its immigration policies. It wants the Biden administration to loosen the Trump administration’s restrictions on H1-B visas, or temporary visas for highly skilled foreign workers.

“To further bolster the U.S. economic recovery in response to the COVID-19 pandemic, it is critical that President Biden rescind the current suspension of high-skilled immigration,” Information Technology Industry Council President and CEO Jason Oxman said in a statement. “Our industry is committed to working with policymakers in the administration and in U.S. Congress to advance a modern, competitive immigration system.”

Inside the industry

Google’s parent company posted record earnings.

The company is recovering from the grim numbers it saw at the beginning of the pandemic, the Associated Press’s Michael Liedtke reports, largely because of its vast advertising network. The company, however, continues to face regulatory scrutiny for its dominance of the online search market.

The company’s fourth-quarter ad revenue reached $46.2 billion, a 22 percent increase over the same period in 2019, and the company’s quarterly profits hit $15.2 billion. The company’s stock hit an all-time high on Wednesday and went up by more than 7 percent in extended trading after the numbers outpaced investor projections.

Social media watch

Daybook

  • The two-day virtual Masters of Digital conference begins today, with European Commission President Ursula von der Leyen set to speak on Thursday at 11 a.m.
  • The Electronic Frontier Foundation holds an event on online free speech issues today at 11 a.m. The discussion will focus on conservative social media company Parler and social media platforms’ removals of former president Donald Trump.
  • The Senate Commerce, Science and Transportation Committee considers the nomination of Rhode Island governor Gina Raimondo, President Biden’s pick for commerce secretary, today at 10 a.m.
  • John Samples, a member of Facebook’s oversight board, speaks at a virtual R Street Institute event on Thursday at 2:30 p.m. The discussion will center on the board’s upcoming decision on Donald Trump’s fate on the social media network.
  • Sen. Edward J. Markey (D-Mass.) delivers a keynote address on the first day of the three-day virtual INCOMPAS communications and technology policy summit on Feb. 8 at noon.
  • Acting Federal Trade Commission chair Rebecca Kelly Slaughter delivers the keynote address at the virtual Privacy Papers for Policymakers Award event on Feb. 10 at 1 p.m.

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