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tv   Hearing on Tech Companies Market Concentration Data Collection  CSPAN  January 24, 2022 6:10pm-8:16pm EST

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next, hearing on competition and privacy in the tech industry. witnesses testify about the growing market concentration of
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companies like amazon and the negative effects their size have on consumers. the senate finance subcommittee on fiscal responsibility and economic growth held this to our hearing. >> this hearing will come to order. good morning. and welcome to today's hearing of the subcommittee on fiscal responsibility and economic growth. i'm pleased to be working with
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a ranking member cassidy on this hearing on promoting competition, growth and privacy protection in the technology sector. senator cassidy will be joining us remotely. we're going to do a mixed hearing with some people in person and some people remote. under president biden's leadership, the american economy is rebounding. the unemployment rate has dropped from a pandemic height of 14.8% in april 2020 to 4.6% today. 5.6 million jobs have been added since president biden's inauguration. more than were added in the first ten months of any administration since we have been keeping records. child poverty is projected to plummet by more than 40% thanks to the american rescue plan. all of this has occurred despite an ongoing pandemic
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that has plagued us now for nearly two years. families have tried to adapt and those changes have echoed throughout our economy. demand has shifted as people have consumed fewer services while buying more durable goods like exercise equipment and home appliances. the economy has recovered more quickly than many businesses projected and all of this is contributing to unexpected bottlenecks and our supply chain and sporadic shortages at warehouses. and these factors contribute to the price increases for many consumer goods. but they are not the only reason that prices have gone up. sure, giant companies will raise prices when they have to, but they will also raise prices when they can get away with it. and how do we know this? because when companies are simply passing along their increase in cost and profit margins, they should stay the
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same, but when companies see a chance to gouge customers, particularly while everyone is talking about inflation, and those companies raise their prices beyond what is needed to cover their increased costs. right now, prices are up at the pump, the supermarket and online. at the same time, energy companies, grocery companies and online retailers are reporting record profits. that's not simply a pandemic issue, it's not simply something inevitable, like an economic force of nature. it's greed. and in some cases, it is flatly illegal. one reason for this price gouging is that fewer and fewer markets in america are actually competitive. when several businesses are competing for customers, companies can't use a pandemic or a supply chain tank to pad their own profits. in a competitive market, the
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margin above cost stays steady, even in troubled times. in a market dominated by one or two giants, price gouging is much easier. for generations -- under both democrats and republicans promoted free market competition, but started in the 1970's our government changed course for decades now. regulators and courts that looked the other way even as one sector after another has become dominated by one or two giants. they rubberstamp murder after murder without regard to the consequences, and when small businesses got wiped out and start-ups were smothered or bought out, they just didn't care. today, as a result of increasing consolidation across industries, bigger and bigger corporations have more and more power to charge their customers
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any price they want. they also wield more and more power to under invest in things like supply chain resiliency, and more and more power to hold out wages and benefits for workers. it is getting worse. earlier this month, federal trade commission noticed by september of this year, our agencies had received more merger filings than any other year in the previous decade. in fact, they are on track in 2021, to receive a 70% increase above average filings in recent years. giant corporations are taking advantage of this global crisis to gobble up struggling small businesses and to increase their power through predatory mergers. i introduced my pandemic anti monopoly act last year to slow
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down this trend, and to protect workers and small businesses, and families from being squeezed even more by harmful mergers during this crisis. i will re-introduce it this year, because the need is clear. the effects of-limited competition in our technology sector are particularly severe. that is why i am interested in exploring today's hearing. limited competition in tech is having spillover effects across our entire economy. anticompetitive practices in the semi conductor industry have exacerbated the supply chain issues. big tech firms have used their dominance to inflate prices throughout the online retail market, and to subject their workers to inhumane conditions during the pandemic. as ranking member cassidy has rightly highlighted in his own work, tech firms collect and exploit sensitive personal
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information, often threatening national security, harming our emotional health, and discriminating against vulnerable groups. it doesn't have to be like this. with a stronger antitrust laws and robust enforcement, we can ensure our economy works for american families, not just for the wealthiest corporations. congress could provide better tools to the ftc and the department of justice to investigate anticompetitive mergers and break up the companies that have held our economy down. we could also make it easier for the agencies to reject such mergers in the first place. by promoting competitive markets for consumers and workers, we can foster a stronger american economy, and a stronger american democracy. i look forward to discussing these issues today. i appreciate all of our witnesses who are joining us, and i look forward to hearing about your insights and your
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experiences. next, i'm going to turn to ranking member kennedy, cassidy, sorry, senator cassidy, for your opening remarks. senator cassidy? >> [laughs] senator warren, good morning to you all for being here for today's hearing. thank you for our witnesses for taking time to testify. senator warren and i agreed to a bipartisan hearing on promoting competition, growth, and privacy protection in the technology sector. i will focus my time on the privacy aspect of this, and specifically on the data broker industry. the data broker industry relatively unknown to most americans, but it's practices and techniques are interwoven into our lives. data brokers build profiles on individuals about certain attributes, and then sell that information to those who they see fit, or who wishes to purchase.
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for example, i'm a big fan of lsu football. i search was related to our new coach brian kelly, notre dame, lsu. that search data is collected. a profile is made, i'm a big fan of lsu football. i then receive ads about buying football tickets, merchandise, etc. we experience something similar over the internet. hacmultiple times a year, a company will be the victim of a hack. it exposes the data of thousands, if not millions of customers. we will go to great lengths to minimize those cyber incursions. an entire industry that transacts a much more detailed and sensitive personal information. from witnesses, they've said there's little information that data brokers cannot so, even less data if they aren't willing to sell. i believe that view in this room would think it a good idea to sell the profiles of american service members, and
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that's what is happening. we should have a conversation about whether american that we think it's okay to be bought and sold without the knowledge of americans, what type of data we think is acceptable to be bought and sold period. should we allow a list of military personnel to be sold to foreign adversaries? should we allow a list of domestic abuse survivors to be sold to domestic abusers? we should have a conversation about what that it is appropriate to collect, what limits should be placed on the groups that collect that data, and restrictions on how that data is sold or transferred to others. we should have a conversation about all the things our foreign adversaries can do with this data. that's why we sent out a team of data broker experts to talk about the different aspects of data brokers, what's regulated, what's not, how best to move forward. thanks again to our witnesses, and i am looking forward to discussing the issue. >> thank you very much.
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i appreciate it, senator cassidy. we've got a great set of witnesses here to share their views on promoting competition growth, and privacy protections in the american technology sector. i appreciate everyone being with us today. first, joining us virtually, we have courtney brown. miss brown is an amazon fresh worker at the company's fulfillment center, and out of new jersey, a leader with united for respect. she's a veteran of the united states navy. second, also joining us remotely, we have the honorable caro racine, the district of columbia's first elected attorney general. he is the president of the national association of attorneys general, and the chair emeritus of the democratic attorneys general associations executive committee.
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previously, he was a management partner at venable associate white house counsel for president clinton, and a staff attorney for the public defender service of the district of columbia. third, we have with the executive director of the open markets institute. it is research focuses on threats of the 21st century monopolies to our democracy, individual liberty, security, and prosperity. next, we have just in sherman. cofounder and senior fellow at ethical tech. and initiative at duke university focused on research at the interaction of technology and ethics. mr. sherman studies data brokers and the sensitive data that they hold on u.s. individuals. following mr. sherman we have sam sacks of yale law schools paul china center and a cyber policy fellow at the think kink
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new america. miss sex is an expert on cross border data flows, and studies how chinese government collects and uses the data. finally, we have miss stacey gray. miss gray's senior counsel at the future of privacy form. she is a data broker expert, and her research centers on the intersection of emerging technologies and federal regulation, and enforcement. increasing consolidation throughout the american economy, undoubtedly, contributes to the higher prices, worsening working conditions, and privacy concerns. the pandemic has not only exacerbated these issues, but has also exposed them more plainly. we can fix this together, we can make our economy work for all americans. i want to thank you all for being with us today. i am looking forward to hearing your testimony. miss brown, we are going to
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start with you. you are recognized for five minutes, and tell us what you want us to know. >> okay. good morning, everyone. thank you for inviting me to share my experience with you today. senator warren, members of the committee, my name is courtney brown, i live in newark, new jersey. i am currently working at an amazon fulfilments center, and have been for four and a half years. before working at amazon, i served my country as a service member in the united states navy. i took the commitment that i made to my country then seriously, as well as the commitment i take seriously now as a member of united for respect. i am here today, senators, to raise the alarm about amazon's business model, because it's a threat to the working people, and it's a threat to our economy. one out of every hundred and 50 american workers is an amazon employee. as well as in that group, there are some former employees. this multi billion dollar
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corporation grew on the back of its workers by exploiting them. i'm looking to you to stand up to corporations like amazon and protect us. the job that i do is a much-needed service, especially since the covid-19 pandemic began. as a process guide, i'm in charge of sorting 35,000 to 50,000 groceries duty for homes in new york city and new jersey. i'm in and out of our cooling constantly, stepping in and out of temperatures as low as negative ten degrees, picking up and sending packages down with little to no rest. we work that i do was supposed to be done with 30 to 40 people, but we operate with 25 people or less, every day. our work is essential, and our workload has increased, we need more hands on deck, not less. we can take turns getting breaks and getting the much needed rest. amazon can barely retain its workers. amazon's multibillion dollar
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wealth has made possible by offering same day delivery, anywhere from seem day to two day delivery. the corporation has achieved the speed and scale through their sheer brutality, punishing associates like me and my coworkers for not working fast enough and allowing associates to take time off to adequately rest and recover and prevent burnout. from the moment we pull into the parking lot, we are monitored. every step of this facility we take, and if we fall behind in any, during our 11 hour shift, we risk being disciplined or losing our jobs. we are pushed to our limit, to the point where we can't even take regular bathroom breaks. often, we have to run to and from the bathroom in under two minutes, so we don't get in trouble. on top of that, the bathrooms are usually pretty gross, and broken.
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the constant pressure and surveillance is why amazon has twice the level of injuries compared to similar jobs. research has shown that workplace injury rates are higher and amazon facilities with more robotic and automated technology. i used to be a trainer, and i saw firsthand how 15 new hires, there would only be five that would make it to the one or two month mark. and many quite soon after due to injuries are over exhaustion. we are living in a country where machines are getting better treatment than people. the machines that my facility undergo retain maintenance checks to ensure that they don't burn out. the time i needed to take off, the one time i needed to take off to recover from a mom or mother's passing back in september, i was only given two days to do so. two days to plan a funeral and process my mother's death. i ended up taking a month off of unpaid time which was the only option i had at the time.
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this unpaid time was only because there was a reduction in the amount of work we had. my sister wasn't as lucky. she also works of me as well. she had to literally work the day of her death as well as the day after, come to her funeral and then return to work, two days later. her entire funeral was literally scheduled around me and my sister's work schedule. imagine what we went through well jeff bezos made 75 billion dollars last year, thanks to me and my coworkers. amazon's high tech sweatshop caused me to develop tendonitis, a debilitated pain in my heel, and ankles. i'm happy to stand for long periods of time at work with little to no rest. there was once where the pain was so severe, that i ended up going to the emergency room, because i was home the second
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time it happened, didn't have enough time to take off. i had to beg doctors and nurses to see me as quick as possible because it couldn't afford to lose my job, and the opportunity i had has been on leadership. this kind of exploitation is not just happening to me. people have been working through the pandemic nonstop, because amazon won't let us take time off. often, we are so exhausted, we break down and cry. a coworker of mine had to stop breastfeeding her child early due to not receiving any support when she had to pump at work. this is the type of environment amazon is >> this is the perpetuating across the type of environment country. amazon amazon is perpetually associates have been fighting back across the country. against these -- fighting back dangerous conditions for against these dangerous years, it's conditions for years a bit fixing the and instead of fixing problem, amazon the problem is only doubling amazon is only down on doubling down exploitative models. on exploited models. jeff bezos himself told shareholders that he plans to use more automated controls and
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the warehouse. amazon is sitting up high tech sweatshops and communities desperate for work. amazon is a big numbers company and they know there are people who have very limited choices and they know they can afford to complain or refuse conditions. amazon takes advantage of this desperation. the pandemic has caused a lot of businesses in this area. even someone like me who has considered looking for another chop, i can't because there are no jobs available or the pay is not enough to make rent and put food on the table. this committee has considered economic growth in the sector. to maximize profit -- including exploiting workers and vetting small businesses -- to stop corporations like amazon from running our economy
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and dictating for hundreds of millions of workers like me. i'm asking you to help me put an end to inhumane, exploited practices that we american injured exhausted and mentally battered employees each day. citing with working people. not big corporations. >> thank you very much, this brand. i appreciate your coming in and testifying now we go to attorney general wray seen. you are recognized for five minutes. >> chairwoman, one, ranking member cassidy and distinguished members of the subcommittee, thank you so much for the opportunity to testify before you today. as the first independent elective attorney general of the district of columbia and outgoing today president and bipartisan national association of the attorneys general, one of my most important
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responsibilities is to protect d.c. consumers from corporate -- including investigating and where appropriate filing suits against defendants that illegally exercise power, violate privacy laws and her workers. we've used our power in our authority to sue amazon and the local d.c. court for using its overwhelming market power, that is 50 to 70% of all online sales occur on amazon's platform to control prices through restrictive agreements with third party sellers that sell on amazon's marketplace, and feeding on amazon's reese tail business. amazon claims that everything it does in business is all about the consumer.
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well, our investigation reveals otherwise. amazon indeed is focused and the evidence is compelling on one thing. its bottom line. even at the expense of the consumers like the ones it claims to care so much about. in fact, amazon is costing all of us more money by controlling prices across the entire electronic mall. like you, senator warren, i, to, and a capitalist. people should get paid for their hard work, creativity, and entrepreneurship. people should certainly watch their profits increase as their businesses increase, but when companies like amazon unfairly and unlawfully increase their prices on all of us, stifle competition and take advantage of consumers, the lot must step
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in and say enough is enough. back in 2019, amazon was facing pressure from congress and regulators over anticompetitive behavior, and we know that the concerns are not amazon another big tech, is as bipartisan as it gets. to put regulators at ease, amazon claimed it removed a particular clause in its agreement with third sellers that prohibit these third sellers from offering their goods for lower prices or on better terms on competing online marketplaces, including the third party sellers on websites. again, amazon claimed that it removed that particular clause. here is the spoiler alert. amazon deceived congress and consumers with its blatant switch of replacing the initial
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terms of the agreement with different titles and different words that have the same illegal impact. let me give you a example of how this works if i am a third party seller selling, for example, headphones, i do want to list my product on amazon. why? because it reaches so many people. remember, 50 to 70% of the entire electronic mall. in order to do so i've got to do the following. sell the headphones at a price on the amazon marketplace that allows me to still earn a reasonable profit after incorporating amazon's very high feeds and commissions. then i am barred from selling my headphones on any other platform, including my own website at a lower price, even though i can't earn a fair profit by doing so. but in another way i've got to build in those high amazon fees
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and high amazon commissions into every price of the headphones that i sell. why? because amazon forced me to agree to agree to that term in order to access its electronic mall. and if they find out that i sell my headphones even on my own website for a lower price, lower than the built-in fees and commissions that amazon requires, guess what? you get kicked off of the amazon marketplace and have sanctions, financial sanctions imposed on me. this leaves third-party sellers with two choices. they get sell their product on amazon under these extremely restrictive terms that guarantee a profit to amazon and puts third-party sellers at risk, or they can only offer their product on other market places. but because amazon controls so much of the marketplace,
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sellers have little choice. these agreements impose an artificially high price as i explained, all across the online retail space. and consumers lose in this game. as a result of amazon's agreement. but absent he's agreements, third-party sellers can offer their products for lower prices. that is one of the bases for our lawsuits. amazon is not just doing this with third-party sellers, they are also doing it with wholesalers as well. so we recently added -- to our lawsuit. first party sellers sell to amazon for amazon to resell at retail to consumers. amazon lowers its retail prices to match or beat the lower price on a competing online marketplace. the wholesalers, listen to this, are forced to pay amazon the difference between the agreed upon profit and with amazon -- with the lowered retail price.
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this can lead to wholesalers owing amazon millions of dollars. to avoid triggering disagreement, wholesalers have increased their prices on their goods and on competing online marketplaces. in other words, they have agreed to do when amazon wants, that is to charge consumers more for products that they ordinarily would have to pay, but for amazon's illegal agreements. all of these agreements reduce an online marketplace ability to compete with amazon's marketplace for price and result in consumers paying artificially high prices. even outside this litigation, small businesses have complained and complained that amazon has stolen their business ideas and passed them on as amazon's own. let me give you one example. >> attorney general, i'm going to have to stop you here for a
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minute. we've gotten five minutes for each of our witnesses, but we will be able to ask you questions. i definitely want to hear this. is that okay? >> absolutely, senator. i'm happy to stop right here. >> great. thank you so much. i appreciate it. now, mr. lamb, you're recognized for five minutes. , mr. lynn. >> chairman warren, ranking member cassidy, members of the subcommittee, thank you for inviting me to speak with you today on this fundamentally important topic. i am barry lynn and it's good to see you today. political economics is the art of governing how people compete with an exercise power over one another. and an essential truth to human societies that competition among people is inevitable. which people can't control is whether corporations and markets are structured to promote the liberty and
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well-being of the individual. the ability of citizens to make wise decisions and the security and prosperity of individuals and of the nation. for two centuries americans were masters of engineering competition policy to achieve these ends. american citizens use anti monopoly laws to make themselves the most equal and free people in the world in the most prosperous innovative and powerful. but beginning for decades ago, americans and both parties radically altered how we think about and enforce competition policy, rather than aim to promote liberty, democracy, community, prosperity, policy makers embraced a philosophy that said we should aim to provoke tub -- to promote efficiency only. the results? the result of that today? americans face the greatest set of domestic threats to liberty and democracy since the civil war. today in america, as courtney made clear, monopolists drive down the people we -- peoples wages while driving up prices the people must pay.
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monopolistic threaten the freedom of the press and expression. the novelist spy on citizens and use the people's own secrets to misinform, insight and enraged those same citizens for profit. monopolists tax, extort and steal other people's businesses. anápolis destroy better technologies and ideas. monopolists destroy vital industrial capacities. last year we saw this with face mask. this year was semi contest -- semiconductors. monopolists create dangerous dependencies on power for states. monopolists strip america communities of wealth, opportunity, independence, security and hope. none of this is new. i myself first warned of how platform monopolists threatened freedom of expression and democracy more than 11 years ago. myself, first warned of the dangers of the supply chain concentration 19 years ago. there is good news. americans are swiftly awakening
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to this interlocking set of crises, today the great majority of americans from across the political spectrum want to see monopolists strips of their powers and better yet enforcers of legislatures are on the move. the justice department of ftc have brought lawsuit against facebook in the most democratic, and to monopoly action in history, attorneys general from 49 states, puerto rico, washington, d.c. and -- investigations of google and facebook involving three additional lawsuits. then there are the smart and urgent efforts to strengthen antitrust laws here in the senate. as with senator warren's proposal in the house and in europe, and around the world. perhaps most important, president biden has personally condemned the promenade of the chicago school consumer welfare philosophy of richard pozner and restored the nation's traditional focus protecting the american people and the nation itself from all dangerous concentrations of
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power and control. and lina khan and jonathan canter -- my didn't propose that long forces are strong enough to get the job done. today's hearings marks an important step forward in this great struggle. it highlights the pressing need to re-learn that competition policy is much more than mere antitrust law. rather competition and policies is a combination of antitrust with trade policy, corporate governance, wall street governance and industrial strategy. such as with semiconductors and i detail how we can rebuild our industrial system in ways that make us truly safe, while also
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bringing inflation and boosting wages. our opportunity today is not merely to rebuild with the monopolists have broken these last 40 years, it is to really learn how to use anti monopoly laws both to imagine and make an america far more democratic, just, and forward-looking than anyone of us there to imagine in a generation. >> thank you very much, mister lynn. appreciate it. mr. sherman, you are recognized for five minutes. >> chair warren, ranking member cassidy, and distinguished members of the subcommittee. thank you for the opportunity to testify today about privacy issues facing american citizens. i am a fellow at the university stanford school public policy, where lead a research project focused on data brokerage ecosystem. a multi billion dollar virtually unregulated industry of u.s. companies aggregating, buying, and selling.
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americans intimate personal data on the open market. data brokers are profiting off the vulnerability and insecurity of the u.s. and its citizens. comprehensive consumer privacy law is vital, congress need not wait to resolve this debate to regulate data brokerage. today, i will make three points. congress should strictly control the sale of data to foreign companies, citizens, and governments. strictly control the sale of data and sensitive categories, like genetic and health information, and location data. stop companies from circumventing those controls by inferring data. our research at duke university has found data brokers widely advertising data on hundreds of millions of americans. there are sensitive demographic eight of information, political preferences and beliefs, and whereabouts of realtime locations, as well as data on first responders, students, government employees, and current and former members of the u.s. military.
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data brokers can track and steal your race, religion, gender, sexual orientation, income level, how you vote, what do you buy, but you search online, and where your kids and grandkids go to school. this harms every american, particularly the most vulnerable. i will focus on three examples. data brokers advertised data on millions of current and former u.s. military personnel. criminals have bought this data to scam better ins and their families because of the military benefits they get from the federal government. foreign states could acquire this data to profile military personnel, track them and their families, and undermine national security. the chinese government's 2015 hack of the office of personal management was one of the worst breaches the federal government has suffered. given the future, there is no need for the chinese government, to hack those databases when the data could be bought
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legally on the open market from u.s. companies. beta brokers known as people search websites aggregate millions of americans public records and make them available for search and sail online. abusive individuals have used this data, including highly sensitive information for whereabouts on family members, to hunt down and stop, harass, imitate people, women and the lgbtq plus community. there is little and u.s. law stopping data brokers from collecting, publishing, and selling bag on victims and survivors of intimate partner violence. data brokers advertise data on millions of americans mental health conditions. companies can legally purchase this data from other firms and use it to exploit consumers. criminals already scam senior citizens using data broker data. they could similarly by data on seniors with alzheimer's and
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dimension to steal away their life savings. foreign governments could acquire the status for intelligence purposes. our research has found that companies selling this data on hundreds and millions of americans conduct relatively little know your consumer due diligence. for those that, do it's unclear how strong it is in practice. brokers may also make their customers signed nondisclosure agreements, stopping them from saying where they obtained u.s. citizens information. as part of talking about data threats to american civil rights, u.s. national security, and democracy, we must focus on this entire data brokerage ecosystem. there are three steps congress can take now. first, strictly control the sale of data broker data to foreign companies, citizens, and governments, which currently can entirely legally by citizens data directly or through foreign companies. second, strictly control and consider outright bans on the sale of data in sensitive
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categories like genetic and health information, and location data, which is used now to follow, stop, and harm individuals. third, stop companies from circumventing those controls by inferring data, using the algorithms and other techniques to predict things they have not technically collected. congress can and should act now to regulate the data brokerage ecosystem, and it's threats to consumers, civil rights, and national security. thank you. >> thank, you mr. sherman. now, miss sachs, you are recognized for five minutes. >> chair warren, ranking member cassidy, and members of the subcommittee, it is such an honor to testify today. i am a senior fellow at yale law schools and a cyber security fellow in america. i've spent the last decade as an analyst of china's technology and data policies, both in the national security community, and with the private sector. i advised corporations on china's tech policies. today, i will focus my
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testimony on china and global cross border data flows. well my expertise focuses on china, and i will speak specifically about the chinese government's efforts to acquire data, my view is that the most effective solutions require the united states put forward a more comprehensive data governance vision, with stronger protections for security and privacy for all companies. some of these risks are specific to china, but so much of this is much bigger. u.s. lawmakers have an opportunity to address trans national security threats, but while also advancing a more secure, ethical, and democratic internet in its own right. we chinese government has embarked on an ambitious national data strategy with the goal of acquiring, controlling, and unlocking the value of data. my written testimony submitted for the record has more details on some of the recent plans and
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directives that signal the centralization of chinese state power of information flows within and beyond china's borders. the chinese leadership seeks to control data as both a strategic and economic asset. there are concerning national security risks. beijing has been presumed to have national security information from the theft of personal records of roughly 20 million individuals from the u.s. office of personnel and management as my colleague testified. if that location, health and social media data would be acquired on the open data market, and combined with what beijing already has, china could target individuals insensitive government national security positions and the military for manipulation, coercion, and blackmail. this is particularly concerning from the counter intelligence perspective. as chinese online services and network infrastructure grow in predominance around the world,
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it is possible that the chinese government could use this position to monitor data processes abroad, just as the united states have done as shown by snowden. utilizing data transmissions across u.s. intelligence networks. we simply do not know would value and harm data created now will hold in the future. we must grapple with the implications of the ccp gaining control of information flows beyond china's closed internet ecosystem. i have the following recommendations. first, me analogy of data as the new oil is false, and leads to bad policy. it assumes that data is a finite state resource, and as such, efforts by both beijing and washington to hoard and wall off data from each other will only lessen national power, not increase it. instead, congress should
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mandate a stronger cybersecurity protection and basic standards for what data can be collected and retained in a comprehensive federal privacy laws to protect sensitive american data, not just from sophisticated state hackers, but from the unregulated industry abated brokers around the world, trading in consumer data without transparency or controls. well comprehensive federal privacy law moves slowly amid much debate, having baseline rules for the data broker industry would close off a prime target for exploitation now. we currently, there is nothing in a regulatory structure that would prevent the chinese government from buying american citizens data. that's why bans on chinese software applications won't make us more secure or safe. even if tiktok, for example, where an american owned company, it could still legally by that data on the open market. given this, american data is shockingly exposed and will remain that way as long as
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restrictions on data flows only focus on specific companies deemed adversaries. the united states should work with like-minded governments to develop a common set of standards and safeguards, perhaps building off of the initiative put forward by the chinese government, the japanese government, known as data free flows with trust. i have more specific recommendations in my written testimony, but in conclusion, and actions by the united states in offering and a formative compelling vision of u.s. data governance in its own right will only make the united states less secure, less prosperous, less powerful, and allow a space for chinese companies controlled by the ccp to flourish. thank you. >> thank you very much, miss sacks. now, mist gray, you are recognized for five minutes? >> thank, you chair warrants, ranking member cassidy, and members of the committee for the opportunity to testify
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today. my work at the future of privacy for is in u.s. law and public policy related to emerging technology and consumer privacy regulation. specifically, i've been asked to speak to the title of data brokers. privacy advocates, the federal trade commission, and members of this and other senate committees have long called for greater transparency and accountability in the data broker industry and regulation is long overdue. many of the most influential reports published on this a decade ago have influenced the debate, and since then, much has changed. there have been significant advances in machine learning, artificial intelligence, adoption of consumer technology has also become universal with 97% of u.s. adults owning a smartphone, and most families, of course, owning many additional devices. the legislative landscape has evolved more slowly and is largely not kept up. since 2018, california and two other states have passed consumer privacy laws, three
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states have established limited data broker specific regulations, and many of these have focused on transparency through the establishment of data broker registries, while other, suggests the california privacy rights act codify broader consumer rights to opt out of the sale and sharing your data. much more work remains to be done. i'd like to make two points regarding data brokers, and give recommendations. the first point is that defining very term data broker has been an ongoing challenge because it encompasses a broad spectrum of divergent companies and business activities. the leading definition includes any business that collects and sells personal formation to a consumer with whom that business does not have a direct relationship. many hundreds of businesses fall into this definition and use data for a wide range of purposes that include many of these as my fellow witness pointed out, including marketing and advertising, as well as people search databases, fraud detection, identity verification, risks scored. some of these activities directly benefit consumers,
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such as the use of data to protect a bank account against fraudulent activity. others primarily benefit the purchasers or users of data, such as advertisers, with fewer or little or no accompanying benefits to individuals or society. second, the lack of a direct relationship with consumers, characteristic of the data broker industry, is at the heart of concerns around privacy, fairness, and accountability. it presents the greatest challenge for crafting effective data privacy regulation, and i will explain why. any business with the direct consumer relationship, such as a restaurant, hotel, retail, or even a social media network, can collect large amounts of personal formation about u.s. consumers today, directly or by purchasing it. in some cases, those companies can exercise enormous influence of market power, as we've heard. however, there are still some degrees of accountability to users who are aware that companies exist, and can the
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lead counsel raise alarms. in contrast, a business lacking a direct relationship with consumers typically does not have the same reputation interests, incentives, legal requirements to limit the collection of data and protect advanced misuse. however, a lack of consumer relationship also means businesses engaged even in data processing cannot rely on traditional historical privacy mechanisms with notice of choice. meaningful affirmative consent, or opting in might be impractical or impossible for business to obtain for some of these cases, while opting out after the fact tends to be both an adequate safeguard, and impractical for most consumers to navigate. we know consumers can become overwhelmed with choices and lack the knowledge to assess future risks, complex acknowledging, or future potential secondary uses. so, what does this all mean? first and foremost, congress
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should pass based on comprehensive privacy regulation that establishes clear rules for both data brokers and first 40 companies that process personal information from consumers. it should address the gaps and current u.s. sectoral purchasing on privacy. it cannot rely solely on consumer choice. privacy laws should also codify clear limits on the collection of data that apply accountability measures such as transparency, risk assessment, auditing, limitations on the use of sensitive data, and limits on retention. in the absence of comprehensive legislation, there are a number of other steps congress can take to address risks related to privacy and data brokers, including empowering the federal trade commission to continue using its unfair and deceptive trade practices authority through funding, staff, the establishment of the privacy bureau, limiting the ability of law enforcement agencies to purchase information from data brokers, and acting sick correlation for uniquely high-risk technologies such as biometrics and facial recognition. or updating existing federal
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law such as the reporting act to more effective covering uses of data. thank, you and i look forward to your questions. >> thank you very much, i appreciate all of your testimony here and i recognize senator whitehouse for five minutes of questions. >> thank you very much, chairman ward. i appreciate it. out of that's needing an important hearing related to the witnesses here. facebook and google have been profiting off some of the worst propagate or's, as you would call it, of climate denial. in the center for countering digital hate finds ten fringed sites that fuels 69% of climate disinformation on facebook. with a little bit of focus we could address this problem if it's only ten major ten proper gaiters. google itself makes millions
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from google ads that it runs alongside climate denial content as if it were legitimate. mr. lynn, can you talk about our information ecosystem suffers when a handful of companies control what people see and how they perceive reality. would a communications plot -- monopoly means in a world in which there is so much deliberate climate denial propagated by industry? >> thank you, senator. this is a fundamental important issue. what we see today and what we are to understand is to understand that google and facebook today are -- these are the communications and corporations of the 24 century. these are the 80 entities and the western unions of the 21st century. at&t and western union they did not and they were prohibited by
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law from manipulating hill people spoke to one another. google and facebook, their business model is based on manipulation. the reason they taken data is in order to manipulate you. there are a massive manipulation machine. the way they make their money and buy renting out the manipulation machines and calling that the money that they receive, they call it advertising. so what we have is in the midst of our society, rather than networks that connect people and empower people to speak with one another and interact with one another, we have machines that are designed to set people into conflict with one another, to feed them false information, to determine how people vote. >> so they are ready, willing and able tools for false information proper gaiters? >> when they were established i
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think the idea would be systems would be used by proctor and gamble to sell. would they now do is they went themselves out to a lot of -- vladimir putin, climate deniers, the chinese communist party. whoever comes along. >> let me switch to the data that you are talking about that they have gathered and asked the witnesses who spoke about data privacy and data brokers. wet the somebody listening to this hearing need to know about what companies know about them? with data brokers can extract from what companies know about them to sell and to what extent that information could be individualized back to them, potentially by foreign bad actors and governments? >> mr. sherman?
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>> data brokers know everything about pretty much every american, where you work, your kids go to school and how much money you make and race and religion, sexual orientation. and their entire business model is that they can target these individuals. they saw the data and offer advertising for the purposes of targeting specific individuals. so these profiles are out there on the open market for sale. >> if you were running a psychological warfare operation involving american public officials or american ceos or various kinds of decision makers of american society, how valuable a tool with that be if you are a foreign government to be able to look into peoples lives and understand -- not only what you directly know the wood conclusions you can realistically draw about all their shopping habits are and so forth. >> incredibly valuable for that. you can buy databases right now
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where people search online. how they vote. with the thank. so it is all out there on the open market. >> my time is up. thank you, chair worn. if i could, i would like to add one more question for the record so is not to take up much time, but one of the things we are in the finance committee a lot, our chairman has joined us. he's very active on this subject. it's that if we make big american companies pay a fair share in taxes, that will make them anti uncompetitive against foreign big companies. that's the arguments our republican friends always make. what they ignore is that when big american companies big don't pay a fair tax burden. that gives them -- obviously that plays out in
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this tech world. because you have apple and google have come up with what they call it? the double irish and the dutch sandwich and all these peculiar tax tricks that they use to avoid to pay their fair share. i would be interested in your views again in writing and not now, because my time has expired, in how that creates competitive disadvantage with potential contenders against them with competitive advantage in the u.s., and to what extent it locks and financially with some of their monopolistic power because frankly they put themselves in a place where they don't have to pay taxes. but all the competitors or smaller competitors have to. thank you very much. i appreciate the potential of that question in writing. >> thank you senator whitehouse. a very thoughtful question. senator cassidy, i think you are up. >> thank you, madam chair. thank you all for testifying.
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mr. sherman, i can't help but note pearl harbor day. our country has come to honor to service the men and women and clandestine services, etc, that offer themselves -- and we make tremendous investment in hospitals and other services to including a suite of benefits to help these folks who have offered so much. but i am struck when you speak about how a data broke or cancel personal information or active military personnel. i presume -- to allow a company to basically rip them off of these benefits that they would ordinarily receive. how and where -- how does someone get such information? what is the price of one military profile, and is it
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safe to say that companies are getting rich off of using this data to trick our service folks into giving their benefits over to the company -- marginal benefits for the service person or veteran, the great benefits for the company and the taxpayer gets ripped off. i got at least three questions. >> data brokers are absolutely profiting off the vulnerability and security of the u.s. and its citizens that includes veterans, that includes members of the military. i don't have the figure in front of me for the cost of one of those profile second follow-up on that. i will just say it's very easy to find information online and to purchase it. our research has shown that any of these companies offering this data, whether it's military personnel, low income individuals, whatever it is, do
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not do much customer vetting. they're basically willing to sell to most entities with a paycheck and an email address. so at the end of the day it's all too easy for people to use this, as they have to scan veterans and create risks to national security. >> how do they get this information? how do they know that someone is active military, etc? >> because the collection and buying and selling of this information is still unregulated it's very easy for these companies to put pieces of information together to figure out how you are. much like they might track where you go during the day or what you spent to figure out how much money you and your household make. they might look at where you travel to figure out if you are in the military. >> with the data broker themselves, if they have location data that would obviously indicate that i was putting my life on base every night, except for an occasional
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appointment which seems to be a military zone. are they buying this location data from others? >> likely both. many companies collect this data directly from people's phones. whether you're working on the hill or in the military or even in an intelligence agency. and also by the state of from other companies. >> i'm a physician. so let me toss this out. and question the other witnesses on data brokers. it's occurred to me that we have hipaa penalties, if i as a physician would reveal that somebody was hiv positive or had a mental illness. but you specified that the mental illness is actually well-known. makes total sense to me. if you have location data, it shows that somebody goes to work every day at a place which is known to be a mental health clinic or an hiv clinic, a treatment clinic, that the person is probably employed
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there, but if they go every two weeks or every month where they go to a pharmacy afterward they could infer that the patient is either got hiv or mental health or another illness. but those are often stand-alone clinics. so they could infer those. is this kind of a direct kind of guess at how all this is done? does this not kind of violate certainly the -- it seems almost a letter of the hipaa regulations? mr. sherman, please? >> that's exactly the problem with data brokers, senator. they could basically dance around the very few, very limited privacy laws that we do have by proxy data and algorithms to get that information. >> tell us what you were speaking of his inferring. they can infer even if they don't directly collect? >> that is correct. >> and they sell that that out to those who might be interested in marketing to
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someone who has mental illness or hiv? >> yes, they do that. >> any further comments because as a physician that greatly offense me. he idea that we can infer, that which is otherwise restricted is it violates that which i always had in my dna as a physician in terms of protecting patient privacy. >> i would characterize that the same way, senator. in fact this is one of the major problems that needs to be addressed through non sectoral comprehensive privacy regulation, because data collected increasingly through apps, fitness devices and devices like bicycles and electric vehicles, can often lead to the type of information sharing that you are describing. some of it when it is directed -- directly collected from
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consumers. some of it when it's inferred through -- >> my car, which is connected to the internet, theoretically they can have an up the data broker could purchase the information for my location data from a car quote unquote a smart car. although if you could just do it on enough from somebody cell phone, is all that true? >> all of that is true. much of the commercial location data is out in the industry, some from mobile apps, cars, tied to devise i.d.s, for example. some of it is directly from apps, when it claims from the -- driving behavior and all of that information is valuable. some like transportation analytics and urban planning. some of it more harmful. >> i yield back, madam chair.
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>> thank you very much, senator cassidy. senator white? >> thank you, senator warren. i want to thank you and senator cassidy for getting into these issues. senator cassidy just mentioned the monitoring car is a computer own wheels. i have been investigating for years as chairman of this committee the sleazy unregulated world of these data brokers, and several instances, we blew the whistle on government agencies that were too eager consumers for this information and we pushed apple and google to get some of this sleaziest data brokers out of their stores and out of their businesses, and i'm glad we are making progress. we have a lot more to do. i want to start with you, mr. sherman. we made an important point with
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respect on how foreign governments can acquire american data to run disinformation campaigns, identify undercover government personnel, blackmail government employees, and i have been working on legislation for sometime now to deal with this threat, the bill will be introduced shortly. my first question to you, mister chairman, do you agree congress should enact legislation to strictly limit the exports of americans personal data, to high-risk foreign nations and companies to address wood's, in my view, a demonstrable national security threat? >> there is a huge security threat and congress does need to control the sale of data to foreign companies, citizens, governments, as you referenced. it is all too easy to get that on the open market. >> very good. miss gray, we have also been looking at this whole issue of how u.s. government agencies
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bypass the courts by buying americans data from data brokers. i have introduced bipartisan legislation, the fourth amendment is not for sale to close these loopholes. do you agree the governments exploitation of these loopholes and is a serious problem, and do you agree that congress ought to close these ever yawning loopholes by passing or legislation? >> absolutely, senator. the fourth amendment not for sale act as a strong model. it is what's needed right now. >> tell us, if you would, how this connects with privacy issues because i have introduced another piece of legislation, the mind your own business act. had that become law, i am of view mr. zuckerberg would have already faced major sanctions for behavior, connected with
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privacy violations. how does this whole area connect with privacy? on the finance committee, we are increasingly looking at privacy issues. for example, we feel very strongly that wealthy tax cheats right now are but as likely to get audited by the government, getting hit by a meteor. we have got to do more to root out that corruption. we can do it in a way that is consistent with protecting people's privacy. i am a privacy, hawk i will put my privacy credentials up against anybody in the united states senate. tell us how this whole field connects with the broader expanse of making sure that we protect people's privacy? >> sure. well, one of the issues is the sheer scale and volume in the modern commercial data ecosystem, and it is becoming increasingly untenable, i think,
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to separate the related fields of law enforcement and national security uses of data, and commercial collection and uses of data that originates for a particular purpose, and ends up being used for secondary purposes and being used by government agencies. >> it is striking because i'm also on the intelligence committee. i've come to the conclusion that privacy is a massive economic and national security issue. you can't just separate these all out in two separate boxes. it's a question of economics and national security and privacy, they are directly linked. i want to thank all of you for your good work, i appreciate senator cassidy's interest in this, senator warren has been a long time leader of making sure that we hold these major economic forces and our country, our largest companies
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accountable. by the way, i was in oregon, and people were asking me about these issues. being successful and ensuring there is accountability aren't mutually exclusive. we can do both. of course we want our businesses to do well, of course we want them to be profitable, but they can also be accountable, and key american values like protecting people's privacy. i want everybody to know i am so pleased that senator warren has given us this chance. these sleazy unregulated data brokers, i want to put them on notice today. we are going to stay at it until there are serious consumer protections, whether it's the fourth amendment, it's not for sale, or other kinds of measures. there is going to be accountability in this field. thank, you senator warren. >> thank you, senator wyden, and for your longtime leadership in this area. this is how we are going to make change. thank you for all you've done. i want to talk about another aspect of the issues we raised today, and that starts over 100
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years ago. congress passed our first antitrust laws to protect both local businesses, and to protect our democracy from powerful, dominant corporations that would undermine competition, crush workers, and couch consumers. starting in the 1970s, our government reversed course. corporate ceos and lobbyists pushed the idea that mega mergers and corporate behemoths were actually good. using complicated models to say, if we let big corporations get even bigger, they would be more efficient, they would lower prices for everyone, and they would compete better on the world stage. unfortunately, too often, that is not what happened. take the semiconductor industry, for an example. hedge fund managers took over our biggest chip manufacturer, until. intel grew its market size,
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cemented its dominant position, for an anticompetitive and predatory practice. then, having killed the competition, the managers were free to weaken entails fundamentals with impunity. i will give you an example. 40,001 to 2010, instead of spending more money on innovation. remember, we are talking about semiconductor industries. we've got to stay on. instead of spending more money on innovation, on new ideas, on more efficient manufacturing in the united states, and tells managers spent 48 billion dollars on stock buybacks. they boosted share prices, and executive pay while they hollow it out a once great company. so, mr. lynn, you know a lot about the semiconductor industry. did consolidation particularly the growth of intel lead to
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greater efficiency? >> no, senator. the opposite. >> did it lead to lower prices? >> absolutely not, senator. >> did it at least make intel a stronger competitor on the world stage? >> the opposite, senator. >> in your assessment, what exactly did happen as a result of intel's growing dominance in its field? >> first, one of the things you mentioned $48 million that intel paid out between 2001 and 2010, the dominance allowed them to pay out much more between 2010 and 2020. actually, 130 billion dollars over the last ten years. so, the looting at sacking of this corporation grew much faster and more aggressive over the last few years. this results in higher prices for the chips. it results in more power and
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concentration of power over workers, and it's not people on the assembly line, but scientists, the engineers. these are the people that we count on to develop a better future, and we have concentrated power over them. we see less innovation as another effect. the other effects include this extreme concentration of capacity that we have seen in corporations like tsv in taiwan. this extreme concentration where you have all of a certain kind of, if you have your eggs in one basket. it means the system itself is fragile, and subject to catastrophic failure. you have the system that gives other powerful countries like china power over the people who depend on that capacity. for instance, by threatening to disrupt shipments in taiwan. it leads to this massive shortages, the structural shortages that we have seen that are leading to the
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shutdown of assembly lines all around the world, not just in america. we are talking about ford, 50% decline in production of cars. in q2. we are seeing toyota, 40% decline of production of cars in q3. this equals vastly higher prices for newer cars, vastly higher prices for used cars, vastly higher prices for rental cars, and a lot of dirtier cars on our streets because we can't replace them with new, are cleaner cars. >> you know, consolidation clearly did not strengthen our semi conductor industry, but consolidation or lack of competitors in this field did create this supply chain crisis that the pandemic has exposed. now, as you rightly point, out without semiconductor chips, other manufacturers like auto companies can't meet demand. they are furloughing workers,
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at the same time that orders are stacking up all because they can't get chips. the u.s. manufacturers once supplied all around the globe. what has been managements response to this? the same executives who exacerbated this crisis by failing to properly invest in their operations and infrastructure. now, they are asking congress to bail them out so they can make the investments that they should have been making years ago. excessive concentration is a real problem. it is also a problem in our domestic logistics and supply chain operations, and it applies, obviously, two big tech firms. miss brown, i'd like to go to you, if i can. during the four and a half years that you've worked at amazon, amazon has grown bigger and bigger. its profits have skyrocketed. let me ask, in your personal
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experience, have amazons logistical operations improved? or have things just gotten worse, and particularly with the covid crisis? can you speak to the? >> absolutely. it's gotten worse as the years have gone, especially with the pandemic. it's all about pushing out as much as possible for amazon. it used to be about the quality we are giving our customers. that was the number one thing. now amazon doesn't care very much. they don't care about how their workers are trained. it's all about speed and quantity. when it comes to my facility with delivering food, we deliver broken eggs, crushed bread, we end up sending out a lot of spoiled food and everything. a lot of us want to do good, work but it's frustrating
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because we are at a limit, or for amazon, this only means they are getting rich. they preach the customer obsession, but it's not good for customers at all, and it's not good for hardworking peoples at the bathroom at centers either. workers cannot do their jobs well because amazon wants to make more money. that's the bottom line for them. as much product as they can get out and more money. if you attempt to try and do these things, like give customers good quality, action and practice customer obsession, you end up getting written out and terminated. the bottom line for them is all profit. >> thank you so much, miss brown. amazon's profits have exploded during the pandemic, even though deliveries have been significantly delayed and services have become more expensive. in a competitive marketplace, amazon's rivals would be able
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to compete on these factors, providing more reliable service or lower prices, or a better work environments. because there is no competition, consumers get higher prices, and worse services while amazon gets even richer. markets can produce lower prices. markets can produce more reliable products. markets can produce robust supply chains, only if there is competition. what's giants are allowed to dominate an industry, everyone else pays. thank you very much. senator cassidy, i recognize you. . >> thank you. miss gray, i have a series of questions for you right now. my last line of questioning, speaking about how location data can establish someone being hiv positive, have a mental illness, or the military personnel, etc. i understand the organization with which you work considers
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the kind of location data to be personal information that should be regulated. can you comment on that, please? >> certainly. commercial location data of the nature of the data that is frequently bought and sold in the data broker industry is, often tied to not necessarily a name and contact information, but dived bias identifier, such as a device i.d. related to a mobile phone. that has led many in the industry to claim, at times, the data is not personally identifiable, that it's been sought advised, or be identified to a certain extent. and while the rest may have been lessened, the fact remains that persistent precise location information overtime is very straightforward to relate back to an individual
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person because our behaviors and movements are unique overtime. so, that is one of the unique challenges specific to the location of the commercial industry. >> sorry, i had to start my video. my computer was about today, as you guys are getting a tour of my kitchen. [laughs] i apologize for that. secondly related to that, what is the difference between suppressing data. i call my data broker, i contact them and say i want my data to be marketed, etc. how do i ask them to get rid of it? i'm told oftentimes it's not gotten rid, of but suppressed. suppression is different than deletion. can you elaborate on that, please? >> sure, senator. suppression is an industry term that is frequently used for the purpose of describing when a
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company maintains a list of individual consumers or, individuals, devices, for the purpose of excluding those individuals or devices from their products and services, but not necessarily deleting the underlying data. there can be a range of reasons to do that. one of them, for example, is to comply in an ongoing manner with deletion or opt out requests that are required by some of the emerging privacy laws. for example, data brokers that automatically collect large amounts of information from public records may receive a request to delete data from an individual, delete that data, but be unable to continue to delete data on that individual in the future, unless a retained suppression list exists. >> in that case, you suggest it's a positive thing, in which they would, using the suppression to mark this. is it a positive or a negative
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that data is merely suppressed as opposed to eliminated? >> i would say, senator, it depends on the use case. there are other high-risk marketing and advertising use cases related to suppression lists. as we've heard, for example, some marketers and advertisers wish to exclude certain segments of the population from receiving advertisements that may be deemed offensive, for example. a list of households associated with the loss of a child, or the loss of a pregnancy. it may be a list of marketer uses to exclude those households from receiving marketing and advertising related to baby products. right? that's an example. so, it depends on the use and there is some risk associated, particularly with those more sensitive categories of information just by the maintenance of the suppression list. >> there's clearly a nuance
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here. if we were to address that in legislation, we would need someone such as you and your organization to help elaborate the nuance because it actually sounds like it could be a positive thing, although you suggest that there is a potential negative as well. so, let me ask you about the next thing. i think it's another nuance. in your written testimony, i believe it was you who spoke of the fact that this big data can be very helpful. do you wish to look at, to give an example, whatever came to full fruition, but it has another countries, using location data to establish who may have been at a conference in which covid is known to have affected people, so therefore you can do that? after mardi gras in march of 2020, people use location data to figure out with everybody went back to in orleans after mardi gras, and where people had come from, and able to
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establish covid came to new orleans from both the northwest and northeast. clearly, people are using data in another sense. what is the nuance between using the data appropriately for public health purposes as an example, as opposed to letting me know how congested the highway is, and should i take this route or another? as opposed to using it nefariously, if you will. >> you are right, senator, to point out that there are good and bad uses of this data. for example, in the early stages of the covid-19 pandemic, there were a large commercial data sets held by both first parties, including google, and members of the commercial location data broker industry that provided aggregate analysis of how people were moving around to help assist public health efforts. there are good and bad use cases. one of the nuances here is that,
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when we talk about where information practices, and privacy, and having a realm of private life, there are increasing concerns over the fact the data is collected is the first place, even if it's later used for good or beneficial purposes. there is, nonetheless, a zone of private life that most agree should not be treated upon. another case is, most consumers are aware they are sharing location data for a particular service and not aware it may be re-used for a secondary or incompatible purpose. things a commercial research and public health purposes are technically incompatible purposes, because that's not the reason the data was necessarily provided. so, crafting nuanced exceptions related to sources of data, sensitivity of data, risk related to harm individuals and groups and society are all part of crafting effective
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regulation here. >> i will finish with this and turn it back to you, madam chair. i sincerely think, observation, lee it can't be disputed. we come up with better legislation when a hearing such as this takes information from those who are stakeholders, and academics, and others who are analyzed, and try to get those nuances down. again, i ask you to contact my staff afterwards with some idea of those nuances. that's an open invitation to everybody on the panel. madam chair, i turn back to you. >> thank, you senator cassidy. as attorney general, you've seen pointed out amazon controls 50 to 70% of the 430 billion dollar market online for consumer goods. prices for everything from light bulbs to mattresses, to motor oil are going up on amazon. the question is, why is that happening? a huge part of the reason is amazon's delivered exploitation of its dominance to squeeze
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more dollars out of consumers and third-party sellers. another words, amazon is taking a big bite out of the middle. one of our witnesses, attorney general racine filed a lawsuit this, year against amazon, for this very reason. a particular focus of the lawsuit is the impact that something amazon calls it's their pricing policy. if i can, attorney general racine, i'd like to follow up on the example you gave to illustrate this policy. let's say if i make your phones and sell them for $100 on my website, i want to make sure we are clear on all this. if i want to saw them on amazon to access this huge marketplace online and extend my reach, i have to pay amazon's fees and agree to their terms. my understanding is that amazon's fees can be as high as 40% of the cost of these goods.
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thanks to these fees, let's pick that example, i have to increase my prices to make sure i can turn a profit. instead of charging $100 for these earphones, i may not have to charge $140. the worst part is, i may not have to also charge $140 on my own website, and on every other platform where i am trying to sell my headphones. these inflated prices crush american consumers. attorney general racine, i want to return to your opening remarks. i wanted to go back over the example you talked about, that you also mentioned how amazon forces wholesalers to pay more as well. i did the consumer part there. can you say more about how they're doing this with other wholesalers as well? >> sure.
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it captured it exactly right, senator, which of course is no surprise to me. with respect to wholesalers, amazon, again, forces these first party sellers, that i will call them, to reach an agreement with them in regards to the price is going to be. here is the deal. if amazon lowers its retail prices to match or beat a lower price for that initial good on the online marketplace, the wholesaler is forced to pay amazon the difference between the agreed upon profit that they made with amazon, and the money that amazon realizes after it lowers the retail price. in a short, amazon has profit protection at the cost of the
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first party seller. i do feel compelled to also mention, and don't take my word for it, look at the april 23rd 2020 wall street journal article written that talks about how amazon has scooped up data from its own sellers. these first party sellers. it launches competing products. not only are the crushing these first party sellers with these unlawful agreements, that has the wheel edge. they are also using data around the popularity and selling of these products to launch competitive products against these first parties sellers. amazon can't win enough without cheating. that's why we are suing them. >> so, this just knocks me out.
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in a typical collusion case, like price fixing, competitors a legally agreed to charge higher prices. when they got caught, they could go to jail under federal law. amazon accomplishes the same thing in house, and it has higher fees that are inflating prices on its own platform, as well as in stores and other websites through these anticompetitive contract provisions with third-party sellers. the result is that prices go up for millions of americans, and americans can't see it. there's no place else to do the price comparison to see what's happening here. this price increase is entirely hidden from consumers. the price looks the same wherever they go. it shows up as inflation. amazon -- >> senator, can i give you
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numbers? >> please. >> i think it's going to make your point. between 2014 and 2020, amazon's revenue from third-party sellers fees and charges grew from 11 point 75 billion dollars to over 80 billion dollars. this year, amazon has estimated to reach over 121 billion dollars in fees from third-party sellers. they are doing this because it is extremely profitable. they don't care that consumers are paying for too much for goods, and they aren't doing what they say they are doing, which is focusing 100% on consumers. they are focused, 100%, on utilizing your market power to extract every bit of profit that they can. >> so, the question, obviously,
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that we have to ask is how do they get away with this? but i would like you to focus on, if you can, attorney general racing, is how amazon's dominant market position contributes to this kind of pricing power that is then felt throughout our economy. >> the example with the headphones that i gave, that you accentuated, frankly, and made better, is the best example. that is that what amazon does, it artificially builds its commissions and fees into a product, and ensures that that embedded profit it has, frankly, continues throughout the electronic many male or major mall in such a way that no one, not even you, nor me, the
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creator of our own headphones, can sell our headphones for cheaper than what amazon, and we, essentially, are forced to agree to sell it at. why do we engage in that agreement? because they own 50 to 70% of the marketplace. look at it as a toll booth keeper. if the road only leads to the toll booth, the toll booth keeper can raise those prices, and you, as the driver, have no choice but to pay whatever they are asking. if you're trying to get down that road, we think it's illegal, we appreciate the work of this great committee. we are going to make laws in the courts, and we look forward to helping, with respect to the legislation. >> i very much appreciate that. i appreciate your point about 50 to 70% of the marketplace
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they already own. yet, amazon keeps growing. they don't just grow by sales, they continue to acquire. back in may, amazon announced its proposed acquisition of mgm studios. that would be an 8.45 billion dollar deal. now, i wrote a letter to the ftc commissioners, asking them to review the deal thoroughly and to evaluate how the deal might affect workers and prices, and other markets in the amazon ecosystem. mr. lin, even if the ftc wanted to oppose this huge merger, it would be a challenge to successfully block it. notwithstanding everything we've already heard from the attorney general and the others who testified about it. can you explain why that is? >> yes, thank you, senator. first, it's going to be very expensive in terms of the time
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for this limited stuff that the ftc has. they're going up against the richest corporation in the world, the most powerful corporation in the world. you know, corporation that can throw a wrench after wrench, after wrench into the mechanism. it's very expensive in terms of the expertise they have to pay for. economic expertise. they have to put millions and millions of dollars, often, into the kitty to pay for economists. this is, even with president biden's renunciation of the board of consumer welfare philosophy, the legacy, because of the nature of the law, the legacy of the consumer welfare philosophy and this focus on efficiency continues to shape how the judiciary is going to look at this issue. they have to be ready with this very expensive expertise. the third reason, it is very difficult to communicate with judges. the stylized language of
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consumer welfare, of efficiency. like, this is an issue of power. it's an issue of democracy. it's an issue of human liberty. and we have to talk about this in terms of efficiency. judges are trained to use common sense to enforce the law, to ensure rule of law. when you are using consumer welfare framing, you are speaking in nonsense. >> i really appreciate that. you noted earlier that president biden has selected two outstanding experts. lena khan and jonathan candor, to lead the antitrust efforts of the ftc and doj. these are people that believe in competition. they're going to build strong cases. congress needs to do its part. we need to make sure they have the resources, and we need to make sure that they have the tools to be able to wage these battles. otherwise, we are going to continue to see companies like amazon squeeze consumers, no
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matter who is president or no matter what crisis of the day we are dealing with. it's important we step up on our side as well. thank you. senator cassidy, back to you. >> thank you. it appears five minute limits are off. i may go -- >> i apologize. please, go as long as you need to, senator cassidy. >> [laughs] i have a series of questions for you, miss sacks. first, your testimony speaks the need to have, kind of, a comprehensive arrangement between countries, or blocks, if you will, if we take the eu as a block, in order to have some sort of, and i think i'm summarizing, although i'm sure you will find something.
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the reason i say this is i have been told that the general data protection regulation of the eu risk making the eu a digital colony to the u.s. or china. it's so restrictive, that the big data sets that are required to enhance research on ai are almost impossible to construct. i don't know if that's true. you know far more than i do. nonetheless, that's what i'm told. so, there is something here. how do we allow those data sets required for ai to be constructed, big data sets, if you agree that is the case, and then how do we have a governance that would exclude bad actors, and i think folks see try know it all their cyber
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espionage as being a bad actor. nonetheless, they could get the fruits of this big data. you had mentioned specifically the japanese, the doubt it free flow with trust paradigm. i think i've given you a lot of directions to go with your answer. i will turn it back to you. >> thank, you senator cassidy. i think you get at a key point here, which is that u.s. security and prosperity relies on access to large international data sets. as with other areas of the data broker legislation he mentioned with miss gray, this one will have nuance to it. how do we allow global data flows, what with the right safeguards in place, both at home and internationally? i think that a big important step here is making sure we get our own house in order first. the transatlantic beautiful relationship will be key, and it is important to the u.s. put forward its own vision of data privacy first. this should not be a copy and
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paste of gdpr. the topic of this hearing focused on antitrust guests at challenges, which was one of the most important critiques of gdp ours, that it may only end up serving those companies that are wealthy enough to comply with a heavy burden that comes along with it. it reinforces the concentration of power in big tech, while they're still maybe limitations on meaningful privacy protections. i think that the japanese data free flow of trust model is a compelling way to think about how can like-minded countries come together to put in place certain standards that would allow data to flow with certain conditions in place? and perhaps, there could be a certification regime, drawing on some of the privacy protections already outlined in the oecd line guidelines. this will require new ones as
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well. i look for to supporting the efforts of the committee to do that. >> now, does that require an international treaty? i'm assuming you might not be an international trade attorney. can we pass legislation which is in alignment with others without having a formal treaty? do you have a sense of how we go about this oecd kind of collaboration? >> i think this is what i'm going to need to get back to you on the specific nuts and bolts of the various tools that are in place. if it's all right, i will follow up with you and your staff after. >> i appreciate that. now, miss sachs, tell me, can a -- so, we flirt that the chinese government, as an example, could purchase information on u.s. military personnel and presumably location data as well. it'll be interesting to see where people are and poured, concentration, etc. the kind of force?
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we know from other information as to what's branch of the military they were in. do other countries have that same sort of lacks attitude regarding, allowing the illegal purchase of information upon their security forces? for example, what about china? >> the chinese government is actually moving rapidly ahead to lock down more kinds of data that are deemed vital to national security, even in the commercial sector. for example, they put in place a data security law this fall, which seeks to put forward a data classification scheme, where they will move across sectors to define what kind of dad it would be vital to national security. they did this first in the auto sector, for example, and then national security has new high bar security obligations as well as localization requirements around who that data could be shared with. >> i think it was you who suggested it could be counterproductive if you wall off your data.
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that indeed free flow of data a nuance here, free flow of data is essential to sending economic power for a nation as a whole with economic power of course being somewhat linked to national security. in your mind, as what they're doing counterproductive? is that something we should also do? is it counterproductive? >> the chinese government is shooting itself in the foot by over classifying the kind of data that it deems vital to national security. in theory, what they're trying to do, is say certain kinds of data is vital to national security and needs to be locked down. other kinds of data should flow and circulate in the economy. now, how that's going to happen in practice is another story. i think there could be something we could learn here in terms of defining what is the most sensitive kind of data, and mister chairman and miss gray have mentioned location data, for example.
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president biden put forward an executive order in june in which he called for creating a framework to assess what the security risks of transactions of involving american sensitive data should be restricted. and that executive order, he said not all data has the same level of sensitivity. i think one thing we can do is have a more thoughtful process, following on that executive order around what kind of data is vital to national security, and should be subject to higher protections. what kind of data is less sensitive, and should be subject to more international flow and sharing. >> let me finish with this, mr. sherman. is there any sort of data that cannot be released? we say we are going to have location data, and we are going to use it for multiple purposes. this is very important. maybe you just want to use it to establish crowd flows within a city, for city planning, etc. is there any data that cannot
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be re-leaked if you don't have enough robust data set to compared to? >> as miss gray mentioned, there's a difference between data with someone's name or social security number attached, and data that does not have it attached. at the end of the day, you could re-identify anything. as myself and others have not testified, there is so much data out there on americans hoarded by different companies, that it is all too easy to combine to identify people by name. >> okay. madam chair, i am going to sign off now. i have to transition to come in for votes. i thank all the witnesses for your testimony, including senator warren's witnesses whom i did not ask questions of, but found your testimony very interesting. madam chair, i look forward to collaborating with you on future such events. >> thank you for being such a great partner on this. i really appreciated. senator cassidy and, like you, i am delighted with the
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witnesses you've invited today to learn from them and hope we will have many follow-up questions for the record here. thank you for your partnership. this is just the opening round. we will keep going on this. i've got one more round of questions i'd like to be able to ask right now. would i'd like to do now is focus a little bit about market dominance and the impact on workers. for too long, our antitrust policies have focused on prices and consumers, which is important, and the amazon data shows that we have weak enforcement of those policies. not has led these big companies to increase prices across the board. we've also talked about how consolidation creates other problems, particularly for american workers. you know, whenever these companies merge, low corporate executives like to talk about the new efficiencies. what they usually mean by that, because they're going to lay off workers and cut wages.
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as companies grow more dominant, they have more and more power to lay off workers and cut wages with no real consequences for themselves because they know that, as industries become more consolidated, workers have fewer alternatives. this means that employees who are subject to increasingly harsh, dehumanized working conditions, a worker can't just move to a better job if there is no other available employer. this is called an opposite-y power, and our antitrust laws need to better address this. miss brown if i can, i'd like to ask you a couple of questions. you work for amazon fresh. lots of people order their groceries for delivery within a few hours. never think anything more about it. there is a grueling process that happens behind the scenes
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to accomplish this feat. can you explain how conditions at your warehouse have changed during the pandemic? >> absolutely. so, i'm going to paint a picture for you about what the process looks like. it causes a chain reaction of people in the warehouse together it is a small team of people that you know looking at the numbers and who are impacted running around the warehouse is bigger than a football field but then an event smaller team and then to package the items out and then it goes to a smaller amount of people and then depending on where it is going on the conveyor belt and then
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it goes to my people and then we are responsible for thousands of those orders every day to make sure it is the customers so and during the pandemic so a lot of that which was included and then to get right back to it and then to have kids and family members that are dependent and
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then basically to become nonexistent on things you have to work. >> this sounds really grueling. and then to find better employment and then to grow like no other company and with the small local businesses are closing. if conditions are just bad at the amazon workhouse what other employment options do you and your coworkers has to support yourself and your families? >> a lot of my coworkers don't
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really have very many options open in new jersey. so most of the jobs warehouse jobs but they don't pay enough. so then we are stuck taking advantage of any warehouse like this. so we know we have no other choice due to lack of regulation and everything to protect us. >> so you are right. it is not an accident. so in your industry but to be equipped amazon can pressure other companies to follow suit with the poor labor standards were to put them out of business. but it was announced last week that the amazon facility in alabama workers are entitled
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to hold the new union election. if that is successful it will be the first union ever in the united states. but i will ask about what it is like to negotiate with amazon if you don't have a union on your side. they claim that direct connection between managers and associates and then to wristband respond to the amazon employee that can you tell us and then talk about negotiating. >> so then to find a solution
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but they continue to exploit us and then to speak out those conditions so amazon especially to say you will be written up i tried to defend yourself is not an issue it will not go to well. >> i am very concerned that the workers that are most at risk during the pandemic are more likely to be women or people of color so that just varies depending on the job. so the one thing i want to ask you, so what have you observed
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about amazons treatment of racial minorities and women? >> they will hire anyone and everyone. that is true. whether or not you can be promoted and what you will be doing. many are black and brown and very few of us are in the promotion process so then it looks okay but mostly they higher white managers out of school that have never worked for amazon but the majority of the workforce is black and brown so when they do promote you the pay is different from
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those who are hired from outside so if you are black and brown making manager with internal promotions you get a lower wage compared to someone who's coming from outside that gets a higher wage and then it makes it even and more scarce with any type of leadership with any of that responsibility usually a white guy over someone that looks like me. >> i appreciate your testimony to talk about this. this all suggests to me that if we really tackle the dominant power issue by fighting abusive employer practices we could accomplish two important goals to strengthen the labor force and
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advance gender equity vigorous competition is better for all americans who work and who purchase goods. thank you very much for your testimony i do appreciate it. i now ask for unanimous consent the statement can see for the subcommittee from the teamsters and the strategic organizing center for antitrust policy for workers including the tech sector to be entered into the record without objection. so ordered. united states is that an inflection point with income disparities is what we haven't seen in our lifetime the government lacks enforcement of antitrust the past few decades is a huge part of the
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problem regulators and judges have allowed merger after merger and the result the huge corporations, the biggest companies need to compete on their merits and they need to offer better products, better prices, better service not just gouge consumers and
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second we have to give our antitrust agencies better tools to break up the anti-competitive deals that are most harmful to our economy like facebook's acquisition of instagram and finally our competition policies must safeguard our workforce. those synergies that reduce corporate costs often can modify american workers. real people with families to support deserve to work with dignity are paid a huge cost when they reduce competition. more than 100 years ago our antitrust laws were not designed to promote efficiency or to increase all i it protects us
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from being at the mercy of economic -- that can exploit customers. they were also designed to protect their democracy from the corrupt influence of giant corporations. congress needs to do its part once again to make our economy more competitive. so i want to say again thank you to all of our witnesses. i appreciate your being here today in your testimony has been very valuable and appreciate your answers. for any senators who wish to submit questions for the record pooser due one week from today tuesday december 14. our witnesses will have 45 days to respond to any questions and i want to thank you all again and with that this hearing is adjourned.
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