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Callahan's apology alone is unlikely to satisfy committee members. In calling Yang to testify, Chairman Tom Lantos (D-Calif.) clearly wanted Yahoo to discuss how it has changed, or will change, its policy on supplying information to government authorities that could result in human-rights violations.
In addition to handing over Tao's e-mail, Yahoo provided information about anonymous online postings by three other men that led to convictions for political crimes, says Rosenzweig. Two of the three are still serving multiyear prison sentences.
The hope among some committee members was that Yahoo would set an example for other Internet companies doing business in China and other countries without freedom-of-speech guarantees. If Yahoo publicly promised not to hand over certain types of information or block access to certain Web pages, such as U.S. embassy Web sites, other Internet companies might have followed suit.
- Video: Dressing down Yahoo
In his opening remarks to the House committee, Yang made no such promises. He did, however, outline some actions Yahoo is taking to protect human rights in China.
Yahoo has established a team to address privacy and freedom of expression issues. The team, said Yang, consults with academics and U.S. agencies such as the State Department to adopt strategies that "limit risks around challenges to freedom of expression and privacy in new markets." Yahoo and other companies are also working with nonprofits to develop an industry code of conduct.
Yang may wish Yahoo could do more in China. However, his company no longer has much influence in the country. In 2005, Yahoo merged its Chinese operations into Alibaba Group, a Chinese company that runs the e-commerce sites Alibaba.com and Taobao.com, paying $1 billion for a nearly 40% stake in the parent company.
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Comply with local laws
Coincidentally, Alibaba.com held an initial public offering of stock on the Hong Kong Stock Exchange on Tuesday, the same day Yang testified on Capitol Hill. While the parent company will retain a majority interest in Alibaba.com after the IPO, Yahoo's sizable stake isn't big enough to control the Chinese site's policies. And the CEO of Alibaba.com and its parent has already asserted publicly that he plans to cooperate with Chinese authorities.Committee members also wanted Yang to weigh in on a proposed law called the Global Online Freedom Act of 2007. The House bill, introduced by Smith, would make it a crime for U.S. technology companies to supply any government authorities with information about customers that could be used to identify a person. Such information would include names, Social Security numbers, phone numbers and home addresses.
Already approved by Foreign Affairs Committee, the measure is being weighed by the Commerce Committee.
"Not only does it protect human-rights activists in countries like China where rights are suppressed, but it also protects the Internet companies," says Patrick Creamer, communications director for Smith. "Yahoo and other companies say they are just following the laws that they are forced to (in other countries). This gives American IT companies a leg to stand on."
But Yang's testimony showed few signs of giving Congress the answers it wants regarding the bill. Although Yahoo officials have said they support the "general objectives" behind the legislation, they argue it "effectively bans" U.S. Internet companies from doing business in China.
Should such a law exist, they say, countries such as China might not allow U.S. companies to operate within their borders since, to do so, they must agree to comply with local laws. Even if a company was permitted to set up shop in a foreign country under such circumstances, its employees there would be vulnerable to arrest if they tried to comply with the proposed U.S. law in a way that violated local regulations.
"Just as companies doing business in the U.S. are bound to follow the laws here, U.S. companies doing business elsewhere are bound by host country laws," Yahoo said in a statement e-mailed to BusinessWeek. "As a company, if Yahoo! is served with a lawful request and refuses to comply, local employees could be subject to civil and criminal penalties, including arrest."
This article was reported and written by Catherine Holahan for BusinessWeek.
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