The Washington Post - USA (2020-07-31)

A22 EZ SU THE WASHINGTON POST.FRIDAY, JULY 31 , 2020

BY RACHEL LERMAN, REED ALBERGOTTI, ELIZABETH DWOSKIN AND HEATHER KELLY

The four chief executives of Ap-
ple, Amazon, Facebook and
Google just faced a five-hour del-
uge of probing and pointed ques-
tions from a Congress accusing
the companies of various anticom-
petitive behaviors.
A day later, all four companies
were worth even more.
The tech giants’ stock prices
rose on Thursday as they reported
strong financial results after the
market closed. It shows, again, just
how bulletproof the companies
have become as investors bet on
their long-term success, even amid
a global pandemic, an economic
decline and antitrust probes.
Wednesday’s hearing was al-
ready unlikely to shake investors,
analysts said, especially because
many questions veered off topic.
“Had there been a focus on anti-
competitive behavior, I suppose
investors would be more con-
cerned,” Wedbush Securities ana-
lyst Michael Pachter said in an
email Thursday.
In the first full quarter affected
by the historic coronavirus eco-
nomic downturn, Amazon’s rev-
enue surged 40 percent, fueled by
people stuck at home and online
shopping. Apple reported 11 per-
cent revenue growth, fueled by
customer demand. Amid a shrink-
ing ad market, Facebook’s revenue
increased. Google reported its
first revenue decline, although it
was less than expected.
Overall, the strong showing
demonstrates how well the tech
giants are positioned to withstand
significant challenges, including
the scrutiny of Congress, federal
investigations, a public health cri-
sis and, in Facebook’s case, even an
advertiser boycott.
On Wednesday, lawmakers
questioned the tech CEOs on top-
ics including how Amazon pays
third-party sellers, how much Ap-
ple charges developers on its App
Store and how Google manages

both sides of its advertising tools. They also levied allegations of bias against conservatives on Face- book and Google search, as well as questions about the companies’ ties to China. Lawmakers appeared well prepared for the hearing, coming at the CEOs with documentation including email communications, transcripts of past testimonies and recordings of customers who say they were wronged. Google and Facebook executives addressed the hearing head- on during conference calls Thurs- day, while Apple CEO Tim Cook hinted at it. Amazon did not. “We’re focused on growing the pie,” Cook said in prepared remarks, echoing comments he made the day before on Capitol Hill and pointing to the economic impact of the App Store. Facebook CEO Mark Zucker- berg defended his company, saying that “some seem to wrongly assume that most of the content on our services is about politics, news, misinformation or hate. Let me be clear. It’s not.” He said it’s only a small part of total content, adding, “We do not profit from misinformation or hate. We do not want this content on our platforms.” Facebook posted revenue of $18.7 billion in the second quarter ending June 30, an 11 percent in- crease over the same period a year ago — a solid showing despite advertisers pulling back due to the pandemic and a boycott of the social network that includes Dis- ney, Verizon and more than a thousand other companies. Zuckerberg said people also “wrongly assume” that the company’s business is dependent on a few large advertisers, but small businesses represent Facebook’s largest advertisers. He said he was troubled by the calls to go after digital advertising, especially during a period of economic turmoil. “It’s true that going after the ability to target ads would affect the revenue of companies like Face- book. But a much bigger cost would be that it would reduce the effec- tiveness of the ads and opportunities to grow,” he said. “This would reduce the opportunities for small businesses so much that it would probably be felt at a macroeconom- ic level. Now is that really what policymakers want in the middle of

a pandemic and recession?” Facebook also paid out the $5 billion that it was required to pay to the Federal Trade Commis- sion to settle charges that it violated consumer privacy when it al- lowed the political consultancy Cambridge Analytica to inappro- priately siphon the data and pro- files of millions of Facebook users, the company said. On Google’s call, Pichai repeat- ed familiar talking points that he believes Google is good for users and creates more choices. But he also admitted that the scrutiny wouldn’t be going away anytime soon, and that the company would adapt if governments imposed new rules. “We’ve obviously been operat- ing under a scrutiny for a while and we realize at our scale that’s appropriate, and we’ve engaged constructively across jurisdic- tions,” he said. “Obviously we will operate based on the rules. And so to the extent there are any areas we need to adapt, we will. Being flexible around those things are important, I think.” Google faces investigations from the federal government and the states into its size, and has already been fined about $9 billion by the European Union over

antitrust concerns. Google parent company, Alpha- bet, reported a slight 2 percent decrease in revenue to $38.3 billion, still beating Wall Street expectations. The company noted a “gradual improvement” in its ad business since the beginning of the pandemic. That began to pick up in the second quarter as more users started Googling for com- mercial items again after backing off in the early spring, Chief Finan- cial Officer Ruth Porat said on the earnings call. But she cautioned that the economy is far from recov- ered. “We do believe its premature to say that we’re out of the woods,” Porat said. Amazon also reported a change in consumer shopping habits since April. In the early days of the pandemic, customer demand was skyrocketing, mostly for specific products such as groceries and safety products. Its online grocery sales tripled this quarter year- over-year. “That mix is not super profit- able,” said Amazon Chief Finan- cial Officer Brian Olsavsky on a media call Tuesday. “The extra costs of covid essentially make that type of sale a break-even proposition for us.”

The narrow demand probably also stemmed from Amazon’s own policies. It began limiting ship- ments to “essential” products in March, a policy that has it eased up on in mid-April. That’s around the time customers went back to more normal shopping patterns, and Olsavsky said the company was also able to ship more products. Customers also spent more money on digital entertainment products, including e-books, Audible titles and movies. Amazon’s revenue grew to $88.9 billion. And while the company spent more than $4 billion on various covid-19 measures, including additional safety measures for workers and scaling up to meet demand, it still posted a more than $5 billion profit. Amazon CEO Jeff Bezos re- ceived some of the toughest questions during Wednesday’s hearing, partly because it was the exec- utive’s first time testifying before Congress. Lawmakers dug in on how Amazon uses the data it col- lects from third-party sellers to inform its own products, and whether it recommend Amazon’s own brands over others. (Bezos owns The Washington Post.) Apple’s revenue was also up,

growing 11 percent in the third quarter to $59.7 billion and beating Wall Street expectations. “In uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relent- less innovation,” Apple’s Cook said in a news release Thursday. The topic of antitrust scrutiny did not come up in questions from analysts, who focused more on how, exactly, Apple has been able to juice growth in iPhone sales during a global economic and health crisis and when sales had appeared to be declining for more than a year. Apple said some consumers had been waiting for the new iPhone SE in its smaller form. Analysts weren’t worried about Apple after Wednesday’s hearing. Gene Munster, an analyst with Loup Ventures, called Apple a “winner” in an email. “The topics for Tim Cook largely orbited around the App Store, which we estimate accounts for about 5% of Apple revenue. By comparison, the other tech companies fielded questions that impact- ed the majority of their revenue,” he wrote. Munster believes the big- gest problem for the tech companies is an abstract one: distraction. All four companies’ stock prices climbed in after-hours trading — spiking more than 5 percent for Facebook, Amazon and Apple. Three of the companies, Amazon, Apple and Alphabet, are already among the most valuable in the world, with market caps of more than $1 trillion. “Putting in rules and breaking up companies isn’t necessarily bad for stock prices,” said Mat- thew Stoller, the director of re- search at the American Economic Liberties Project, a Washington think tank devoted to reducing the power of monopolies. He pointed to the breakups of Standard Oil, AT&T and electric utilities, all of which he said were good for investors. “Does anybody really believe that if you separated AWS (Amazon’s cloud computing division) from the rest of Amazon that it would somehow reduce the value of the aggregate entity? Or course not,” he said. [email protected] [email protected] [email protected] [email protected]

A day after congressional grilling, Big Tech companies post strong results

JOSH EDELSON/AGENCE FRANCE-PRESSE/GETTY IMAGES People pose for a selfie a t Facebook’s corporate headquarters in Menlo Park, Calif., in October 201 9. Facebook posted revenue of $18.7 billion in the second quarter despite a shrinking ad market.

Gains emphasize firms’ stature, even amid virus and antitrust probes

BY ROBERT BARNES

The Supreme Court on Thurs-
day shut down a lower court’s
decision that cited the coronavi-
rus pandemic as reason to ease the
rules on gathering signatures for a
citizens ballot initiative.
The case from Idaho was the
latest example of the high court
deferring to state officials, rather

than lower-court judges, in how to deal with election-related issues caused by the outbreak of covid- 19. The justices put on hold a l ower-court order that Idaho officials either put on the ballot an education initiative promoted by a group called Reform Idaho or al- low the group to gather signatures electronically, although the dead- line had passed. It is unclear exactly how the court’s vote broke down, although at least five of the nine justices had to agree with the action. Justices Sonia Sotomayor and Ruth Bader Ginsburg dissented. Three justices joined Chief Justice

John G. Roberts Jr. in explaining the action. But the order did not state how the other three justices — Clarence Thomas, Stephen G. Breyer and Elena Kagan — voted, which sometimes happens when the court settles an emergency request. Sotomayor said that her colleagues have become too quick to grant the requests of state officials in such challenges, sometimes even before lower courts had fin- ished their work. “By jumping ahead of the court of appeals, this court once again forgets that it is ‘a court of review, not of first view,’ ” she wrote, citing court precedent, and “under-

mines the public’s expectation that its highest court will act only after considered deliberation.” The U.S. Court of Appeals for the 9 th Circuit had refused to put a district judge’s order in the case on hold, but had said it would expe- dite its consideration of the mat- ter. But Roberts said the district court did not adequately consider the burdens its order placed on Idaho election officials, who are dealing with other issues involv- ing the pandemic. “The district court did not accord sufficient weight to the state’s discretionary judgments about how to prioritize limited state re-

sources across the election system as a whole,” he wrote. He added: “This is not a case about the right to vote, but about how items are placed on the ballot in the first place. Nothing in the Constitution requires Idaho or any other state to provide for ballot initiatives. And the claims at issue here challenge the applica- tion of only the most typical sort of neutral regulations on ballot ac- cess.” In this election year, the court is increasingly being called upon to decide election issues related to the pandemic. The conservative justices have been in the majority as the court in most cases has

sided with state officials when they ask for stays from lower- court decisions they don’t like. Sotomayor said the court has lowered its standards for when to intervene. “Although an applicant seeking a stay pending appeal ‘has an especially heavy burden,’ this court has begun to grant such stays with notable frequency,” she said, quot- ing the court’s past requirements for emergency action. “It is beginning to look like such an applicant has nearly no burden at all.” The case is Little v. Reclaim Idaho. [email protected]

Justices block lower-court decision easing election rules due to pandemic

Ruling had relaxed rules on gathering signatures for Idaho ballot i nitiative

BY SHAYNA JACOBS

new york — T he Justice De-
partment on Thursday dropped
its support for a gag order that
would have prevented President
Trump’s ex-lawyer Michael Co-
hen from writing his forthcom-
ing tell-all book or discussing it
with the media, according to
documents filed in federal court

Thursday. The about-face was spelled out in a proposed settlement agreement sent to U.S. District Judge Alvin Hellerstein. In it, Assistant U.S. Attorney Allison Rovner and Cohen’s attorney Danya Perry wrote that there should be “no specific media provision” governing Cohen’s release from prison to home confinement. Hellerstein has yet to approve the deal. Cohen was abruptly retaken into custody July 9 after meeting with a probation officer to discuss the terms of his home confinement, which would

have prohibited him from speaking to the media or pub- lishing his book while serving the remainder of his sentence. His lawyers filed a lawsuit saying those terms violated his First Amendment rights. Hell- erstein agreed and ordered Co- hen’s release. Cohen, 53, has said his book is due out in September and would include unflattering informa- tion about Trump. According to court documents filed before Hellerstein’s ruling last week, the book will include examples of Trump making racist and anti-Semitic remarks in private settings.

Justice Department officials had argued that Cohen was combative throughout the probation meeting. The Federal Bu- reau of Prisons alleged that he refused to wear an ankle moni- tor, which was one of the requirements for his release to home confinement. Cohen’s lawyers disputed that, though they argued he shouldn’t have to wear one because he is not a violent convict. Cohen pleaded guilty in 2018 to tax evasion, making false statements, lying to Congress and committing campaign fi- nance violations in connection with hush-money payments to

two women who during the 2016 campaign alleged having affairs with Trump years ago. Trump denies the allegations. Cohen had been serving his sentence, which runs until No- vember 2021, at a federal prison in Otisville, N.Y. He was released in May because of concerns about the novel coronavirus. From the time of his release until July 9 he was living at home in Manhattan on a furlough status with no conditions — in a transition period before he was expected to enter into a home- confinement agreement. In ordering Cohen’s release last week, Hellerstein said Co-

hen’s lawyers did nothing wrong by questioning the home-confinement contract. The judge said, too, that he had never seen a gag order like the one proposed in Cohen’s case. Cohen’s lawsuit named Attor- ney General William P. Barr, who in congressional testimony this week said he had no knowl- edge of the decision to revoke Cohen’s release. Officials in- volved in that process have said in court documents that they did not know Cohen was writing a book when the decision was made to retake him into custody. [email protected]

Justice Department drops support for order that would block Cohen’s book

Trump’s ex-lawyer sued after he was taken into custody early this month

BY TOLUSE OLORUNNIPA AND JOSH DAWSEY

President Trump’s campaign
has temporarily paused its televi-
sion advertising with less than 100
days to go before the election, a
move that comes amid a broader
shake-up in his faltering bid for a
second term.
Two weeks after Trump demot-

ed former campaign manager Brad Parscale and replaced him with Bill Stepien, the reelection effort is re- viewing its spending, messaging and strategy in an attempt to boost the president’s fortunes. Polls have shown Trump trailing presump- tive Democratic nominee Joe Biden, as voters give the president low marks for his handling of the coronavirus. “With the leadership change in the campaign, there’s understand- ably a review and fine-tuning of the campaign’s strategy,” said a senior campaign official, who spoke on the condition of anonymity to discuss internal deliberations. “We’ll be back on the air shortly, even

more forcefully exposing Joe Biden as a puppet of the radical left wing.” The Trump campaign’s efforts to hit the reset button and refocus ahead of the vote come as the president has continued to push divisive messages that have frustrated members of is own party. On Thursday, Trump mused about delaying the November election due to concerns about alleged voter fraud, a prospect that was widely rejected by Republicans and Democrats. The president’s “delay” tweet, and others about “Suburban Housewives” have frustrated some in his campaign who are looking to hone their message against Biden in the final stretch of

the race, according to another senior campaign official, who also spoke on the condition of anonymity. Stepien is also looking at person- nel allocation, officials said. He has told colleagues he is determined to bring a new focus to the campaign, with daily staff meetings, check-ins with field staff and more account- ability for officials. Stepien recently polled staff members and learned most had never worked on a presi- dential campaign before, according to an official. Stepien has also told other advis- ers that the campaign must talk about coronavirus more often and forcefully.

Trump has told other aides he is impressed with Stepien’s com- mand of data, but he has continued to veer into episodes that campaign officials see as unhelpful, officials said. On a recent Friday afternoon, Stepien spent an hour with about 100 reporters via video chat, argu- ing that the race was competitive and that polls in 2016 were wrong too. NBC News earlier reported the pause in advertising spending, not- ing that the campaign spent almost nothing on television or radio ads on Wednesday and Thursday, and had almost no ads booked through the end of August.

It is not clear when the campaign will complete its review or return to the airwaves. Even before Stepien’s promo- tion, the Trump campaign had struggled in its efforts to define Biden, who has largely cam- paigned from his Delaware home. Biden has outraised Trump in recent months, and is continuing to run television ads, including spots that criticize the president for his handling of the pandemic. [email protected] [email protected]

Michelle Ye Hee Lee and Anu Narayanswamy contributed to this report.

Trump campaign temporarily pauses ad spending to review its messaging

New manager o f reelection effort a ims to s hift focus

The Washington Post - USA (2020-07-31)

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