WASHINGTON — Big Tech has a big problem.
Facebook has signaled it may well have to pay up to $5 billion to settle a Federal Trade Commission investigation into its privacy practices following a 2011 consent decree.
And that’s not even its biggest issue to solve.
Facebook is for now the most public object of Washington’s increasingly negative view of Silicon Valley. But the problems with the social-networking platform are essentially the same for all the big so-called edge companies — Facebook, Apple, Google and Twitter — that are getting a taste of the regulatory ire long principally confined to internet-service providers under the Obama administration.
Their enormous scale, compared to predecessors, and market power over information have created enormous, unforeseen and complicated issues, from seemingly unstoppable Russian election meddlers to inopportune breaches to claims of outright censorship.
Driving it all is a massive and heavily guarded, data-driven, targeted-advertising business model that provides for all that “free” content. The price/trade-off all along appears to have been consumer privacy and data security. The companies’ biggest sin, though, is hiding that fact from consumers — and Congress — and not allowing simpler solutions for consumers, such as a comprehensive opt-out policy.
Litany of Problems, Critics
The problems the former garage-startup Silicon Valley darlings face are legion, and attacks are coming from all sides: competitors, the Federal Communications Commission, President Donald Trump, Republicans and Democrats in Congress and even activist groups that were once allied with the edge and against the internet-service providers but that have now expanded their view of “bad actors.”
Democrats and Republicans in Congress are taking a hard look at social media’s liability from third-party postings, driven by issues like online sex trafficking, hate speech, violent speech and allegations of censorship of conservative speakers.
If social-media sites are weeding out content, then they are not neutral platforms. And if they are not neutral platforms, the argument goes, then they should not get the benefit of Section 230 of the Telecommunications Act of 1996, which innoculates them from legal action targeting third-party posts.
And as one side of the political aisle hammers edge providers for allegedly censoring conservative speech, the edge also faces hammering (from both sides) for not doing enough to weed out hateful and violent speech (as defined by whoever is doing the criticizing).
If edge providers are expected to police their sites better for unacceptable content, just what content qualifies as unacceptable?
No one argues that websites shouldn’t take down terrorist threats or streamed video of mass attacks, but what about grayer areas? Facebook CEO Mark Zuckerberg has signaled content that makes the online community feel uncomfortable is subject to being blocked.
And who is making the call? A person, an algorithm, the government? Edge providers are trying to figure that out under the explicit warning from Washington that they need to do it ASAP, including from Republicans who argue social media sites are not getting it right, or are getting “too left,” as it were.
Blackburn Video Was Rallying Point
Sen. Marsha Blackburn (R-Tenn.) testified at a Capitol Hill hearing last year that an October 2017 video launching her ultimately successful Senate campaign — she was chair of the House Communications Subcommittee at the time — was removed from Twitter’s ad platform “due to my pro-life message.” It was restored and Twitter ultimately apologized, saying the removal was a mistake.
But Blackburn’s experience became a rallying point for other Republicans, who have invoked it in recent weeks in their push to regulate the edge.
In a recent speech, Blackburn said that Silicon Valley has been arrogant, with a “toxic undercurrent” to industry practices that “can’t be ignored,” and something she signaled Washington definitely wouldn’t be ignoring.
Democrats and Republicans are both on board with some form of government crackdown on Big Tech, either more vigorous antitrust enforcement by the Federal Trade Commission and the Justice Department, new privacy regulations on edge providers or both, enforced by the FTC with stronger rulemaking and fining authority.
For edge companies not wishing to be the nail to Washington’s hammer, it couldn’t be a worse time for regulators and lawmakers to wake up to the dangers of all that data collection and sharing and tracking. That’s because this new scrutiny coincides with a presidential election campaign, giving a crowded field of Democratic primary candidates a “big issue” to hitch their wagons to.
Sen. Elizabeth Warren (D-Mass.) has been the most vocal on the subject, even adding a plank in her presidential campaign platform about breaking up Big Tech.
Sen. Amy Klobuchar (D-Minn.) a familiar critic of internet-service provider size and power, is also on the record, as is South Bend, Indiana, Mayor Pete Buttigieg. Buttigieg said antitrust law “has begun to hit its limits” with regulating Big Tech, which may need shaking up or even breaking up. He said that law “was not designed to handle some of these tech companies.”
And presidential hopefuls are not the only officials looking to leverage the issue.
Shaking up or breaking up Big Tech has even made allies of Klobuchar and Blackburn. The two lawmakers have pressed the Federal Trade Commission to go public with any investigation it is conducting of Google or other edge providers given “concerns regarding potential privacy, data security and antitrust violations involving online platforms,” the duo said in an April letter to the agency.
The Federal Trade Commission is taking a new look at the edge as it relates to antitrust issues. FTC chairman Joe Simons told Congress last month that the review of how the antitrust laws should apply to high-tech conduct is not a one-off task force, but a new litigation division ready to pursue anti-competitive conduct by the edge, including getting at digital platforms through their impact on privacy.
Simons made it clear that antitrust issues are raised not only by pricing but by reductions in product quality, which could include privacy, he said.
One argument is that edge giants have been allowed to grow by buying smaller companies — acquisitions that didn’t raise antitrust alarms — then use that size as a de facto bar to future competitive startups, the absence of which can’t be measured.
At a Senate Judiciary Committee hearing two weeks ago, witness Brian O’Kelley — founder of AppNexus and the self-described founder of many of the technologies that make programmatic advertising possible — summed up his issue with big tech in general and Google in particular. He said Google has used its bundled services to “unfairly” impede the growth of his startup: “The internet giants have no incentive to address privacy issues without competitive pressure or regulatory oversight.”
Congress needs to “figure out a way to rein in these massive companies” to protect consumers and preserve startup innovation, he said.
O’Kelley also said the focus on price is the loophole that has allowed Google and Facebook to buy hundreds of companies under the antitrust radar.
New Antitrust Scrutiny at Justice
The Brookings Institution just released a report teeing up the “the major political and economic threats” posed by online platforms, arguing that while a number of lawmakers are calling for “modernizing” antitrust to match the digital age, “dominant tech companies continue to largely evade scrutiny.”
The Justice Department is also definitely looking at whether antitrust laws have kept up with the digital age and, if not, what needs to be done about that.
There is a bright spot for Big Tech in Justice antitrust chief Makan Delrahim’s cautionary words that size, even virtual monopoly power, is not in and of itself illegal. Rather, the concern is whether or not that power is used anti-competitively.
Old views of competition are already being upended by new tech, though.
In a decision that could have wider implications for Big Tech, the U.S. Supreme Court recently held that Apple could be sued for the prices developers charge for their apps on its App Store.
Somewhat mirroring the arguments for Section 230 liability protection for social-media sites for third party postings, Apple had argued, citing 40-year-old precedent, that it was not liable for the prices charged by the members (essentially third parties) of its App Store marketplace. The high court saw it otherwise — given that iOS device users do not have the option of another marketplace, and that Apple takes a 30% cut of the app price — and allowed a suit by iPhone users to proceed.
That could open the door to suits against others, including Google and Microsoft.
The Open Markets Institute, which filed an amicus brief in support of the iPhone users, called it an important win in the public’s fight against monopoly in the tech sector.
“Today, more and more of consumers’ purchases go through platforms, where sellers and buyers meet virtually via technology, instead of in brick-and-mortar stores,” Center for Democracy & Technology senior fellow Avery Gardiner said following the decision. “These technologies are evolving fast, and [the court’s] decision shows that antitrust law is — as it should be — flexible enough to address allegations that companies may misuse their market strength in novel ways. … The more we can learn about the actual impact on competition of high tech companies’ policies, the better.”
Even internet activist groups, which allied with Big Tech firms in pushing for the reinstatement of ISP network-neutrality regulations, are in the hunt for Big Tech scalps.
Fight for the Future weighed in with an op-ed in The Guardian last month calling for Zuckerberg’s resignation and providing 25 reasons why that should happen. No. 22: “Special access for tech giants: Facebook gave certain business partners like Amazon and Netflix preferential access to user data, allowing the tech giants to skirt the company’s usual privacy rules in order to grow its user base and attract more advertising revenue.”
That off-with-his-head approach is a far cry from the days when Zuckerberg’s founding of Facebook, and its explosive growth, was being celebrated in the 2010 movie The Social Network.
That Big Tech has become the new go-to target was illustrated on Capitol Hill at a recent hearing.
Rep. Greg Walden (R-Ore.) routinely raised the issue of the virtual regulatory impunity of edge providers during the FCC chairmanship of Democrat Tom Wheeler, who frequently pointed out that the agency had no regulatory authority over social media or search engines.
In defense of mobile broadband providers being investigated for sharing geolocation data with aggregators who turned it over to bounty hunters and stalkers (as Democrats claimed), Walden said most carriers had stopped sharing that data, and aggregators had instead turned to data harvesting apps and engines. Those sources provide information that was even more precise, and they were essentially unregulated.
Heading Off New Regs at the Edge
Seeing the handwriting on the wall, edge providers have signed on to some form of federal privacy legislation and have taken self-regulatory steps to better track where political and other ads are coming from. Getting paid in Russian rubles, as some were, should have already been a tipoff, some skeptical legislators have said.
Edge firms also have launched diversity audits and created content boards to look at what goes up and what must come down on their social media sites. But the massed lobbying and public relations power of the so-called FAANG companies (Facebook, Apple, Amazon, Netflix and Google) may not be enough to derail what has become a bipartisan regulatory freight train.
If they want any insight on how to deal with that, cable broadband providers have had plenty of experience, though don’t look for a lot of sympathy.
In an interview for C-SPAN’s The Communicators series in March, Michael Powell, president of NCTA–The Internet & Television Association, said edge providers’ reversal of fortune since the “halo” days of the Obama administration is the biggest case of policy whiplash he has seen.
During the Obama years, Powell said, edge providers could do no wrong — the administration was fairly teeming with Google executives — walking around the town with a halo over their heads and telling the narrative of how they weren’t evil and were connecting the world.
“Their origin myths were all positive, and I think politicians drank that Kool-Aid pretty aggressively for the last decade or so,” Powell said.
The “shocking” reversal of fortune since the 2016 election may be a bit overdone, Powell said, but it was also overdue for a sector that had been allowed to power up without “particularly thoughtful scrutiny.” Powell, a former Justice antitrust division attorney, said that kind of vigilance is what is overdue, and he sees a day of reckoning coming.
It may already be here.
The Warren Plan
WASHINGTON — President Donald Trump has caught a lot of grief from some Democratic quarters for saying his administration would block the AT&T-Time Warner deal or potentially break up Comcast- NBCUniversal. But Sen. Elizabeth Warren (D-Mass.) has announced she would break up Big Tech. Period.
This is how Warren, a candidate for president, describes the steps she will take:
“Making big, structural, changes to the tech sector to promote more competition — including breaking up Amazon, Facebook and Google.
“Passing legislation that requires large tech platforms to be designated as ‘Platform Utilities’ and broken apart from any participant on that platform.
“Appointing regulators committed to reversing illegal and anti-competitive tech mergers, including:
• “Amazon: Whole Foods, Zappos
• “Facebook: WhatsApp, Instagram
• “Google: Waze, Nest, DoubleClick.”
To read more about Warren’s “break up Big Tech” agenda, go to multichannel.com/June3.
He’s Not Joshing
WASHINGTON — One way to identify an issue ripe for the picking is when a freshman legislator adopts it with the kind of vigor conservative Republican Sen. Josh Hawley of Missouri has in making Silicon Valley reform the issue that has defined his first weeks in Congress.
In a speech to the Hoover Institute, Hawley laid out a dystopian view of new tech. He said the evidence suggests that there is something deeply troubling, even deeply wrong, with the “entire social media economy.” Rather than being a source of strength, it is “a source of peril,” he said.
Citing suspension of an account promoting an anti-abortion film, in a letter to Twitter CEO Jack Dorsey, Hawley also called for a third-party audit of Twitter’s account-suspension policies and, in a speech to the Conservative Political Action Conference (CPAC) in Washington, he said the days of a Section 230 sweetheart deal between the government and Big Tech need to come to an end.
Section 230 of the Communications Decency Act relieves social media platforms of liability for third-party content, saying, in part: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”