Analysis | The Technology 202: Will Washington's antitrust moment hurt deals in Silicon Valley? Google is an early test. - The Washington Post

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Google CEO Sundar Pichai speaks during the keynote address of the Google I/O conference.(AP Photo/Jeff Chiu)

Google is at the center of an antitrust storm brewing in Washington. But that didn’t stop the search giant from announcing a multibillion-dollar acquisition yesterday.

Google’s plan to buy the data analytics start-up Looker for $2.6 billion raises questions about whether Washington is going to step up scrutiny of deals in its quest to crack down on Silicon Valley’s expansive power. The Looker deal will be an early test for regulators as they need to approve it. 

Google’s purchase of Looker is a pretty standard tech deal, Paul Gallant, a tech policy analyst at financial services company Cowen, said. But now Washington “suddenly cares” about whether deals might have a dampening effect on competition.

“The reality today is there are no more free passes on small-take acquisitions,” Gallant told me.

As Amazon, Google, Apple and Facebook find their power under Washington’s microscope, there’s broad uncertainty about what the antitrust moment could mean for mergers and acquisitions in Silicon Valley. If tech giants find themselves locked in a years-long battle with Washington over their dominance, it could make them more cautious about buying up smaller firms.

“It will make the dominant tech companies think very differently about future deals that could even be arguably be viewed as thwarting competition,” Gallant said. 

It's creating some jitters in Silicon Valley, especially among venture capitalists who rely on mergers and acquisitions with larger tech firms for returns on the investments they make in start-ups. 

“I am concerned,” said Scott Kupor, managing partner of the venture capital firm Andreessen Horowitz and author of the new book “Secrets of Sand Hill Road.” “It's not a tomorrow problem, but if this goes on for five, ten years, it could have a meaningful impact.”

As some politicians call for breaking up companies such as Google and Facebook, they're taking a closer look at the ways these companies have been able to grow through acquiring smaller businesses.

Washington's sensitivity is changing because policymakers have seen how even the acquisitions of small companies can contribute to a large tech company's power. Facebook in particular is an example of this. It acquired the messaging service WhatsApp and the image-sharing service Instagram while they were still in early stages — which ultimately ultimately cemented the company's social media kingdom. And as Facebook is now embroiled in privacy scandals, some critics argue the company's bad behavior would have been more limited if WhatsApp and Instagram remained independent and competed with Facebook. 

“Washington just wants to make sure the next generation of Googles, Amazons and Facebooks have the opportunity to emerge,” Gallant said. “Regulators don't want to inadvertently let that next superstar firm get swallowed up before getting traction.” 

To be sure, regulators would only be able to intervene in Google's acquisition of Looker if they're able to make the case in court that it could harm consumers in the future, Gallant said. There's actually a case to be made that the Looker deal could create more competition in the cloud computing space. Google's acquisition of Looker will allow it to provide more analytics tools for its Google Cloud customers — and it is currently trailing other tech giants like Amazon and Microsoft as a cloud service provider. 

“They need this stuff to stay in the race,” said Gerald Kane, an information systems professor at Boston College. Washington regulators are far more likely to intervene on consumer-facing deals, Kane added. 

But just the fact that news of the deal is raising eyebrows shows how much antitrust scrutiny has intensified in recent days. The tech giants' antitrust troubles mounted this week as House lawmakers announced a broad investigation into competition in the tech industry, and the Federal Trade Commission and Department of Justice divided oversight of large tech giants such as Google, Facebook, Amazon and Apple — signaling greater oversight could be on its way.

Google did not respond to a request for comment. The company said in a blog post that the Looker acquisition will bring more robust data management offerings to its customers. 

You are reading The Technology 202, our guide to the intersection of technology and politics.

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BITS, NIBBLES AND BYTES

Federal Communications Commission (FCC) Commissioner Ajit Pai speaks. (Photo by Oliver Contreras/For The Washington Post)

BITS: The Federal Communications Commission will allow AT&T, Verizon and other phone carriers to block suspected robocalls in a move aimed to cut back on a broad onslaught of spam calls, my colleague Tony Romm writes. 

“There is one thing in our country that unites Republicans and Democrats,” FCC Chairman Ajit Pai said. “They are sick and tired of being bothered by unwanted robocalls.”

Under the order, telecom carriers have a legal go-ahead to enroll consumers in their call-blocking services by default. Before, customers had to opt-in to such tools on their own. The change would “make it easier for consumers” to get robocall relief, Pai said, noting that many people don't know they can obtain these services.

Though the order had bipartisan support, Democratic Commissioner Jessica Rosenworcel warned it could result in higher prices on consumers' bills because it did not require the telecom providers to offer these services for free. 

“I think robocall solutions should be free to consumers. Full stop,” Rosenworcel said. “I do not think that this agency should pat itself on the back for its efforts to reduce robocalls and then tell consumers to pay up.”

The top four carriers have said not said much about their plans following the FCC's move. The efforts on call blocking are not mandatory, meaning telecom giants could choose not to change their practices.

Sen. Josh Hawley, R-Mo. (AP Photo/Alex Brandon)

NIBBLES: Sen. Josh Hawley (R-Mo.) yesterday announced legislation that would require YouTube and other video hosting sites to turn off their recommendation systems for videos featuring children. The legislation follows a New York Times report earlier this week that YouTube has been recommending videos of children to users who sought out other content that could be used to sexualize minors.

“Every parent in America should be appalled that YouTube is pushing videos of their children to pedophiles. It’s equally outrageous that YouTube refuses to take the most effective step necessary to fix the issue,” Hawley said in a statement. “I’m proud to announce this legislation to force YouTube to do the right thing and place children’s safety over profits and pedophiles.”

Advocates for child safety online praised the legislation, saying YouTube wouldn’t act without intervention from lawmakers.

“It’s abundantly clear at this point that YouTube won’t make substantive changes to make its platform safer if those changes will affect views and revenue, even in extreme cases like an algorithm recommending videos of young children to pedophiles,”  Josh Golin, executive director of a Campaign for a Commercial-Free Childhood, wrote in an email to The Post. “Senator Hawley’s legislation is a needed corrective for a platform that prioritizes profits over children’s safety.”

YouTube did not respond to a request for comment but said in response to the Times report that it would not exclude videos with minors from its recommendation system.

Hawley is targeting YouTube as the website faces broad crticisim from other Republicans, such as Ted. Cruz (R-Tex.), for alleged bias against conservatives. Cruz's office says it will be hosting a hearing with YouTube's parent company Google, but did not respond when asked for specifics about timing.

Visitors are tracked by facial recognition technology from state-owned surveillance equipment manufacturer Hikvision at the Security China 2018 expo in Beijing, China. (AP Photo/Ng Han Guan)

BYTES: Microsoft removed a public database of more than 10 million facial recognition images, the Financial Times reported yesterday.

The database had been used by a number of companies, including Microsoft, as well as suppliers of equipment used by the Chinese government to surveil ethnic minorities such as the Uighurs and other Muslims in Xinjiang, China.

The “MS Celeb Database” was criticized for including the public photos of a number of Internet users who did not give their consent. The database is the third to be taken down since the Financial Times reported on the use of public research databases by the Chinese government.

It’s unclear, however, who might still have access to the database. “You can’t make a data set disappear. Once you post it, and people download it, it exists on hard drives all over the world,” Berlin-based researcher Adam Harvey told the Financial Times.

Microsoft told the Financial Times that the set was taken down after the employee running the database left the company.

In steep contrast from when the database was introduced in 2016, Microsoft now faces pressure from both lawmakers and human rights watchdogs questioning the role of the technology in human rights violations, specifically the suppression of ethnic minorities by the Chinese government. Microsoft president Brad Smith has advocated for regulation of facial recognition technology, but the company has been opposed to some efforts to enact it in its home state of Washington.

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