The Case(s) Against Big Tech

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Both sides want to rein in Big Tech — but how?

Republicans and Democrats agree that Big Tech has too much power. They also agree that something needs to be done about it. But they disagree on just about everything else, and as hearings are scheduled, subpoenas are issued and lawsuits are filed, partisan conflicts over the means could overshadow the ends.

Republicans are focused on censorship,arguing that platforms like Twitter and Facebook silence conservative voices. The Republican-controlled Senate Judiciary Committee is expected to vote this week on whether to subpoena Twitter’s Jack Dorsey and Facebook’s Mark Zuckerberg to testify about the “suppression” of information, after their platforms restricted the spread of an unverified New York Post article about Joe Biden. Amid the controversy, the F.C.C. chair, Ajit Pai, said he would move ahead with modifying Section 230, the law granting liability protection to tech companies over what appears on their platforms. Mr. Dorsey, Mr. Zuckerberg and Google’s Sundar Pichai are due to testify before a Senate subcommittee about the law on Oct. 28.

• Will a Republican focus on censorship temper Democrats’ enthusiasm for action? Top Democratic senators yesterday dismissed censorship accusations as “baseless fantasy grievance” and questioned the timing of hearings and regulatory actions, despite the need for “reform that creates a structure for healthier online ecosystems.”

Democrats want sweeping antitrust changes. The Justice Department is expected to file a long-awaited antitrust suit against Google this week, reportedly without support from Democratic attorneys general, who say the case is too limited. The sides also largely split along party lines in a recent House antitrust investigation into Big Tech, with the Democrat-led majority calling for more significant changes to antitrust law than key Republicans like Ken Buck.

• Will the Democrats’ expansive approach to antitrust enforcement turn off Republicans with narrower concerns? In the House, Mr. Buck and colleagues pushed for “targeted antitrust enforcement over onerous and burdensome regulation that kills industry innovation,” a position that may harden as Europe threatens antitrust actions against the U.S. tech giants, who are likely to appeal for support from lawmakers as a matter of national pride.

Then there is the election. If Joe Biden wins, he has said he will be tough on Big Tech, but Silicon Valley’s avid support of his running-mate, Kamala Harris, leads some to believe that his administration would be more moderate. His campaign has drawn support from the likes of tech stalwarts like the former Google chief Eric Schmidt, who hosted a fund-raiser last month, and major tech critics like Senator Elizabeth Warren, who will host a fund-raiser next week with a slate of speakers who share her views.

Today’s DealBook newsletter was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

HERE’S WHAT’S HAPPENING

Little progress in stimulus negotiations. House Speaker Nancy Pelosi said that the White House had “come to a place where they are willing to address the crisis,” but President Trump told reporters that she “does not want to do anything that’s going to affect the election.” The speaker had set today as the deadline for a deal that could pass before the election.

U.S. prosecutors charge six Russian intelligence officers with cyberattacks. The Justice Department accused them of running a global campaign to attack targets like a French presidential election, an electricity grid in Ukraine and the 2018 Winter Olympics, costing billions of dollars.

American airports screen more than one million passengers. The total on Sunday was the highest since mid-March, but still down 60 percent versus a year ago. Delta and United reported weak earnings last week, and analysts are bracing for more bad news from American and Southwest this week.

President Trump makes Dr. Anthony Fauci his foil. Mr. Trump called America’s top infectious disease expert “a disaster” in a campaign conference call, and said Americans were “tired” of hearing about the pandemic. Meanwhile, more than 70,450 new coronavirus cases were reported in the U.S. on Friday, and a Wisconsin judge reinstated statewide restrictions on bars, restaurants and other indoor businesses.

SoftBank is charging ahead with its public equity strategy. The Japanese investor has reportedly amassed more than $20 billion in holdings, Bloomberg reports, despite shareholder skepticism about the company’s huge bets on tech stock call options. It’s currently betting on a volatile third-quarter earnings season — and buying yet more options.

Big Oil’s existential deal making

A flurry of big takeovers in the oil patch — the latest being ConocoPhillips’ $9.7 billion acquisition of Concho Resources — shows how the industry is turning to M.&A. to cope with persistently low petroleum prices, The Times’s Cliff Krauss reports.

Companies have slashed costs and jobs as oil prices remain around $40 a barrel, just above the levels that many businesses need to break even. Some analysts think prices may have peaked, thanks to electric vehicles, reduced driving because of the pandemic and tougher government regulations, including under a potential Biden administration.

• More than 50 North American drillers have filed for bankruptcy protection, including once-mighty companies like Chesapeake Energy. Corporate restructuring advisers predict more Chapter 11 filings to come.

That has pushed big companies to get even bigger, eliminating competition and cutting expenses. Buying Concho will triple ConocoPhillips’ presence in the Permian shale formation, the world’s most productive oil field, and make it more competitive with the likes of Exxon Mobil. That’s also why Chevron bought Noble Energy, Devon acquired WPX and Pioneer is reportedly in talks to buy Parsley Energy.

• None of these deals came with much of a premium, a reflection of the travails of smaller players in the industry.

“When we get to the other side of it and people are safe, I’m a big believer that human contact and the need to move around and be with people will be no different than it was before.”

— David Solomon of Goldman Sachs, on how working habits will change (or not) after the pandemic, at the Milken Institute’s Global Conference

In the digital currency race, the U.S. is happy to let others lead

Jay Powell is in no hurry to issue a digital dollar. When it comes to central bank digital currencies — a hot area in the crypto world — it’s more important for the U.S. to get it right than to be first, he said at an I.M.F. panel discussion. This deliberate pace worries some in the U.S. fintech industry, especially given China’s haste in the space.

China’s central bank just concluded its largest digital currency trial, distributing online wallets with 200 digital yuan (about $30) to 50,000 people to spend at 3,000 retail outlets. It initiated pilot projects in April, and the commerce ministry announced additional efforts for the 2022 Winter Olympics in Beijing.

“It’s not a matter of competition with China,” Benoît Cœuré of the Bank for International Settlements suggested at a separate D.C. Fintech Week conference. The Chinese project is “primarily domestic” and “not geopolitical,” he argued. Other countries should watch closely and take notes, Mr. Cœuré said, because the conversation about digital currencies is widespread and there are “lessons for everyone.”

• “Can countries play catch up?” asked the Georgetown Law professor Chris Brummer. China is thinking decades, if not a century, ahead, Brad Garlinghouse of the virtual currency company Ripple replied. The playing field won’t level once a country establishes a lead in “the internet of value,” in his view.

What’s next? The pandemic has raised interest in central bank digital currencies, along with other forms of cashless payments that enable online commerce and remote transactions. Still, regulators are preoccupied by the legal, technological and economic challenges presented by that new money and its movement across borders. “We need to go slow, because we are in a hurry,” said Agustín Carstens of the Bank of International Settlements, echoing Mr. Powell’s warnings on the same panel. “With payments, there’s no room for mistakes.”

Stock buybacks just got more complicated

A recent fine imposed by the Securities and Exchange Commission over a questionable stock buyback by the energy company Andeavor may have big implications for all publicly traded companies.

The back story: Late in Andeavor’s negotiations to sell itself to Marathon Petroleum in 2018, it announced a $250 million buyback, repurchasing 2.6 million shares at an average price of $97 each. Shortly afterward, Andeavor announced a deal with Marathon that valued its stock at more than $150 per share.

• The S.E.C. punished the move by applying an accounting rule in an unexpected way. The regulator found that the buyback was initiated when Andeavor had material nonpublic information that wasn’t disclosed to shareholders. But instead of charging the company or executives with fraud or insider trading, it “zeroed in on the company’s accounting controls, and found them inadequate to ensure compliance” with Andeavor’s own rules about buybacks, according to lawyers at Davis Polk. (Andeavor admitted no wrongdoing and agreed to pay a $20 million penalty.)

That makes share repurchases a little dicier. Buybacks were already under increased political and regulatory scrutiny. Now, there is a new accounting twist, adding extra concerns over internal controls. “The process of approving a buyback now seems more complicated than it was a day before the case came out,” Robert Cohen, a partner at Davis Polk and a former S.E.C. enforcement lawyer, told DealBook.

THE SPEED READ

Deals

• Intel agreed to sell its memory chip unit to SK Hynix of South Korea for $9 billion. (NYT)

• Didi Chuxing is reportedly weighing going public in Hong Kong instead of the U.S., seeking a valuation of over $60 billion. (Reuters)

• Microsoft’s longtime in-house deal maker, Marc Brown, has stepped down to start a new growth-investment team at the Swedish private equity firm EQT. (Bloomberg)

Politics and policy

• To limit the spread of the coronavirus, Ireland announced a new national lockdown, closing nonessential businesses and imposing local travel restrictions for the next six weeks. (NYT)

• While Congress and the White House fight over additional stimulus, the Fed is sitting on billions in untapped pandemic relief funds. (WaPo)

• Tax authorities from four countries are investigating Euro Pacific, a financial firm based in Puerto Rico, over its potential role in tax evasion and money laundering. (NYT)

Tech

• WeWork has withdrawn from a deal to pay the company’s co-founder, Adam Neumann, $185 million in consulting fees because he “violated” the agreement. (WSJ)

• Pakistan lifted its ban on TikTok after the social network committed to blocking accounts that spread “obscenity and immorality.” (NYT)

• The return of start-ups being born in garages, thanks to the pandemic. (NYT)

Best of the rest

• U.S. diplomats and spies suspect that high-tech audio weapons have been deployed against them in China, Cuba and Russia. (NYT)

• How Freshfields, one of Britain’s top law firms, is trying to become a powerhouse in the U.S. (FT)

• Perdue Chicken wants you to know that it has no ties to Senator David Perdue, Republican of Georgia. (Business Insider)

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