An Ounce of Preventive Regulation is Worth a Pound of Antitrust: A Proposal for Platform CPNI.

A substantially similar version of this blog was published on the blog of my employer, Public Knowledge.

 

Last year, Public Knowledge and Roosevelt Institute published my book, The Case for the Digital Platform Act, I argued there that we could define digital platforms as a distinct sector of the economy, and that the structure of these businesses and the nature of the sector combined to encourage behaviors that create challenges for existing antitrust enforcement. In the absence of new laws and policies, the digital platform sector gives rise to “tipping points” where a single platform or small oligopoly of platforms can exercise control over a highly lucrative, difficult-to-replicate set of online businesses. For example, despite starting as an online bookseller with almost no customers in 1994, Amazon has grown to an online e-commerce behemoth controlling approximately 40% of all online sales in the United States and enjoying a market capitalization of $1.52 trillion. Google has grown from a scrappy little search engine in 1998 to dominate online search and online advertising — as well as creating the most popular mobile application system (Android) and web browser (Chrome).

 

Today, Public Knowledge released my new paper on digital platform regulation: Mind Your Own Business: Protecting Proprietary Third-Party Information from Digital Platforms. Briefly, this paper provides a solution to a specific competition problem that keeps coming up in the digital platform space. Continuing accusations against AmazonGoogle, and other digital platforms that connect third-party vendors with customers, that these platforms appropriate proprietary data (such as sales information, customer demographics, or whether the vendor uses associated affiliate services such as Google Ads or Amazon Fulfillment Centers) and use this data collected for one purpose to privilege themselves at the expense of the vendor.

 

While I’ve blogged about this problem previously, the new paper provides a detailed analysis of the problem, why the market will not find a solution without policy intervention, and a model statute to solve the problem. Congress has only to pass the draft statute attached from the paper’s Appendix to take a significant step forward in promoting competition in the digital marketplace. For the benefit of folks just tuning in, here is a brief refresher and summary of the new material.

 

A side note. One of the things I’ve done in the paper and draft statute in Appendix A (Feld’s First Principle of Advocacy: Always make it as easy as possible for people to do what you want them to do) is to actually define, in statutory terms, a “digital platform.” Whatever happens with this specific regulatory proposal, this definition is something I hope people will pick up on and recycle. One of the challenges for regulating a specific sector is to actually define the sector. Most legislative efforts, however, think primarily in terms of “Google, Facebook, Amazon, maybe Apple and whoever else.” But digital platforms as a sector of the economy includes not just the biggest providers but the smallest and everything in between. With all due respect to Justice Potter Stewart, you can’t write legislation that defines the sorts of actors covered by the legislation as “I know it when I see it.”

 

More below . . .

 

Continue reading

Breaking Down and Taking Down Trump’s Executive Order Spanking Social Media.

(A substantially similar version of this appeared first on the blog of my employer, Public Knowledge)

It’s hard to believe Trump issued this stupid Executive Order a mere week ago. Even by the standards of insanity known as the Trump Administration, the last week has reached heights of insanity that make a full frontal assault on the First Amendment with anything less than tear gas and tanks seem trivial. Nevertheless, given the vital importance social media have played in publicizing the murders of George Floyd, Ahmed Arbery, and too many others, how social media have broadcast police brutality against peaceful protesters to be broadcast live around the world from countless locations, and how social media has allowed organizers to to coordinate with one another, we need to remember how vitally important it is to protect these means of communication from being cowed and coopted by the President and others with power. At the same time, the way others have used social media to spread misinformation and promote violence highlights that we have very real problems of content moderation we need to address.

 

In both cases, Trump’s naked effort to use his authority to threaten social media companies so they will dance to his tune undermines everything good about social media while doing nothing to address any of its serious problems. So even though (as I have written previously) I don’t think the FCC has the authority to do what Trump wants (and as I write below, i don’t think the FTC does either), it doesn’t make this Executive Order (EO) something harmless we can ignore. Below, I explain what the EO basically instructs federal agencies to do, what happens next, and what people can do about it.

 

More below . . . .

Continue reading

A Slew of Minor Corrections On My Political Advertising Post From the Dean of Public Interest Telecom.

There is an expression that gets used in the Talmud to praise one’s teacher that goes: “My Rabbi is like wine and I am like vinegar,” whereupon the Rabbi actually doing the talking quotes some superior wisdom from his teacher.

 

When it comes to FCC rules governing political advertising, Andrew Jay Schwartzman is like wine and I am like vinegar. Andy knows this stuff backward and forward. So after my recent blog post on Facebook political advertising, Andy sent me a very nice note generally complimenting me on my blog post (always appreciated), but pointing out a bunch of things I either got wrong or could have said more clearly. As Andy observed in his email to me, they don’t actually impact the substance. But in the spirit of transparency, admitting error, and generally preventing the spread of misinformation, I am going to list them out here (a la Emily Ruins Adam Ruins Everything) and correct them in the actual post.

 

List of my goofs below . . . .

Continue reading

Political Advertising In Crisis: What We Should Learn From the Warren/Facebook Ad Flap.

[This is largely a reprint from a blog post originally posted on the Public Knowledge blog.]

The last week or so has highlighted the complete inadequacy of our political advertising rules in an era when even the President of the United States has no hesitation in blasting the world with unproven conspiracy theories about political rivals using both traditional broadcast media and social media. We cannot ignore the urgency of this for maintaining fair and legitimate elections, even if we realistically cannot hope for Congress to address this in a meaningful way any time soon.

 

To recap for those who have not followed closely, President Trump has run an advertisement repeating a debunked conspiracy theory about former Vice President Joe Biden (a current frontrunner in the Democatic presidential primary). Some cable programming networks such as CNN and those owned by NBCU have refused to run the advertisement. The largest social media platforms — Facebook, Google, and Twitter — have run the advertisement, as have local broadcast stations, despite requests from the Biden campaign to remove the ads as violating the platform policy against running advertising known to contain false or misleading information. The social media platforms refused to drop the ads. Facebook provided further information that it does not submit direct statements by politicians to fact checkers because they consider that “direct speech.”

 

Elizabeth Warren responded first with harsh criticism for Facebook, then with an advertisement of her own falsely stating that Zuckerberg had endorsed President Trump. Facebook responded that the Trump advertisement has run “on broadcast stations nearly 1,000 times as required by law,” and that Facebook agreed with the Federal Communications Commission that “it’s better to let voters — not companies — decide.” Elizabeth Warren responded with her own tweet that Facebook was “proving her point” that it was Facebook’s choice “whether [to] take money to promote lies. You can be in the disinformation-for-profit business or hold yourself to some standards.”

 

Quite a week, with quite a lot to unpack here. To summarize briefly, the Communications Act (not just the FCC) does indeed require broadcast stations that accept advertising from political candidates to run the advertisement “without censorship.” (47 U.S.C. §315(a).) While the law does not apply to social media (or to programming networks like NBCU or CNN), there is an underlying principle behind the law that we want to balance the ability of platforms to control their content with preventing platforms from selectively siding with one political candidate over another while at the same time allowing candidates to take their case directly to the people. But, at least in theory, broadcasters also have other restrictions that social media platforms don’t have (such as a limit on the size of their audience reach), which makes social media platforms more like content networks with greater freedom to apply editorial standards. But actual broadcast licensees — the local station that serves the viewing or listening area — effectively become “common carriers” for all “qualified candidates for public office,” and must sell to all candidates the opportunity to speak directly to the audience and charge all candidates the same rate.

 

All of this begs the real question, applicable to both traditional media and social media: How do we balance the power of these platforms to shape public opinion, the desire to let candidates make their case directly to the people, and the need to safeguard our ability to govern ourselves? Broadcast media remain powerful shapers of public opinion, but they clearly work in a very different way from social media. We need to honor the fundamental values at stake across all media, while tailoring the specific regulations to the specific media.

 

Until Congress gets off its butt and actually passes some laws we end up with two choices. Either we are totally cool with giant corporation making the decision about which political candidates get heard and whether what they have to say is sufficiently supported and mainstream and inoffensive to get access to the public via social media, or we are totally cool with letting candidates turn social media into giant disinformation machines pushing propaganda and outright lies to the most susceptible audiences targeted by the most sophisticated placement algorithms available. It would be nice to imagine that there is some magic way out of this which doesn’t involve doing the hard work of reaching a consensus via our elected representatives on how to balance competing concerns, but there isn’t. There is no magic third option by which platforms acting “responsibly” somehow substitutes for an actual law. Either we make the choice via our democratic process, or we abdicate the choice to a handful of giant platforms run by a handful of super-rich individuals. So perhaps we could spend less time shaming big companies and more time shaming our members of Congress into actually doing their freaking jobs!!

 

(OK, spend more time doing both. Just stop thinking that yelling at Facebook is gonna magically solve anything.)

I unpack this below . . .

Continue reading

Can Trump Really Have The FCC Regulate Social Media? So No.

Last week, Politico reported that the White House was considering a potential “Executive Order” (EO) to address the ongoing-yet-unproven allegations of pro-liberal, anti-conservative bias by giant Silicon Valley companies such as Facebook, Twitter, and Google. (To the extent that there is rigorous research by AI experts, it shows that social media sites are more likely to flag posts by self-identified African Americans as “hate speech” than identical wording used by whites.) Subsequent reports by CNN and The Verge have provided more detail. Putting the two together, it appears that the Executive Order would require the Federal Communications Commission to create regulations designed to create rules limiting the ability of digital platforms to “remove or suppress content” as well as prohibit “anticompetitive, unfair or deceptive” practices around content moderation. The EO would also require the Federal Trade Commission to somehow open a docket and take complaints (something it does not, at present, do, or have capacity to do – but I will save that hobby horse for another time) about supposed political bias claims.

 

(I really don’t expect I have to explain why this sort of ham-handed effort at political interference in the free flow of ideas and information is a BAD IDEA. For one thing, I’ve covered this fairly extensively in chapters five and six of my book, The Case for the Digital Platform Act. Also, Chris Lewis, President of my employer Public Knowledge, explained this at length in our press release in response to the reports that surfaced last week. But for those who still don’t get it, giving an administration that regards abuse of power for political purposes as a legitimate tool of governance power to harass important platforms for the exchange of views and information unless they promote its political allies and suppress its critics is something of a worst case scenario for the First Amendment and democracy generally. Even the most intrusive government intervention/supervision of speech in electronic media, such as the Fairness Doctrine, had built in safeguards to insulate the process from political manipulation. Nor are we talking about imposing common carrier-like regulations that remove the government entirely from influencing who gets to use the platform. According to what we have seen so far, we are talking about direct efforts by the government to pick winners and losers — the opposite of net neutrality. That’s not to say that viewpoint-based discrimination on speech platforms can’t be a problem — it’s just that, if it’s a problem, it’s better dealt with through the traditional tools of media policy, such as ownership caps and limits on the size of any one platform, or by using antitrust or regulation to create a more competitive marketplace with fewer bottlenecks.)

 

I have a number of reasons why I don’t think this EO will ever actually go out. For one thing, it would completely contradict everything that the FCC said in the “Restoring Internet Freedom Order” (RIFO) repealing net neutrality. As a result, the FCC would either have to reverse its previous findings that Section 230 prohibits any government regulation of internet services (including ISPs), or see the regulations struck down as arbitrary and capricious. Even if the FCC tried to somehow reconcile the two, Section 230 applies to ISPs. Any “neutrality” rule that applies to Facebook, Google, and Twitter would also apply to AT&T, Verizon, and Comcast. 

 

But this niggles at my mind enough to ask a good old law school hypothetical. If Trump really did issue an EO similar to the one described, what could the FCC actually do under existing law?

  Continue reading

Information Fiduciaries: Good Framework, Bad Solution.

By and large, human beings reason by analogy. We learn a basic rule, usually from a specific experience, and then generalize it to any new experience we encounter that seems similar. Even in the relatively abstract area of policy, human beings depend on reasoning by analogy. As a result, when looking at various social problems, the first thing many people do is ask “what is this like?” The answer we collectively come up with then tends to drive the way we approach the problem and what solutions we think address it. Consider the differences in policy, for example, between thinking of spectrum as a “public resource” v. “private property” v. “public commons” — although none of these actually describes what happens when we send a message via radio transmission.

 

As with all human things, this is neither good nor bad in itself. But it does mean that bad analogies drive really bad policy outcomes. By contrast, good analogies and good intellectual frameworks often lead to much better policy results. Nevertheless, most people in policy tend to ignore the impact of our policy frameworks. Indeed, those who mistake cynicism for wisdom had a tendency to dismiss these intellectual frameworks as mere post hoc rationalizations for forgone conclusions. And, in fact, sometimes they are. But even in these cases, the analogies till end up subtly influencing how the policies get developed and implemented. Because law and policy gets implemented by human beings, and human beings think in terms of frameworks and analogies.

 

I like to think of these frameworks and analogies as “deep structures” of the law. Like the way the features of geography impact the formation and course of rivers over time, the way we think about law and policy shapes how it flows in the real world. You can bulldoze through it, forcibly change it, or otherwise ignore these deep structures, but they continue to exert influence over time.

 

Case in point, the idea that personal information is “property.” I will confess to using this as a shorthand myself since 2016 when I started on the ISP privacy proceeding. My 2017 white paper on privacy legislative principles, I traced the evolution of this analogy from Brandies to the modern day, similar to other intangibles such as the ‘right of publicity.’ But as I also tried to explain, this was not meant as actual, real property but shorthand for the idea of a general, continuing interest. Unfortunately, as my Public Knowledge colleague Dylan Gilbert explains here, too many people have now taken this framework as meaning ‘treat property like physical property that can be bought and sold and have exclusive ownership.’ This leads to lots of problems and bad policies, since (as Dylan explains) data is not actually like physical property or even other forms of intangible property.

 

Which brings me to Professor Jack Balkin of Yale Law School and his “information fiduciaries” theory. (Professor Balkin has co-written pieces about this with several different co-authors, but it’s generally regarded as his theory.) Briefly (since I get into a bit more detail with links below), Balkin proposes that judges can (and should) recognize that the nature of the relationship between companies that collect personal information in exchange for services is similar to professional relationships such as doctor-patient or lawyer-client where the law imposes limitations on your ability to use the information you collect over the course of the relationship.

 

This theory has become popular in recent years as a possible way to move forward on privacy. As with all theories that become popular, Balkin’s information fiduciary theory has started to get some skeptical feedback. The Law and Political Economy blog held a symposium for information fiduciary skeptics and invited me to submit an article. As usual, my first draft ended up being twice as long as what they wanted. So I am now running the full length version below.

 

You can find the version they published here, You can find the rest of the articles from the symposium here. Briefly, I think relying on information fiduciaries for privacy doesn’t do nearly enough, and has no advantage over passing strong privacy legislation at the state and federal levels. OTOH, I do think the idea of a fiduciary relationship between the companies that collect and use personal information and the individuals whose information gets collected provides a good framework for how to think about the relationships between the parties, and therefore what sort of legal rights should govern the relationship.

 

More below . . .

Continue reading

I Accidentally Write A Book On How To Regulate Digital Platforms.

Some of you may have noticed I haven’t posted that much lately. For the last few months, I’ve been finishing up a project that I hope will contribute to the ongoing debate on “What to do about ‘Big Tech'” aka, what has now become our collective freak out at discovering that these companies we thought of as really cool turn out to control big chunks of our lives. I have now, literally, written the book on how to regulate digital platforms. Well, how to think about regulating them. As I have repeatedly observed, this stuff is really hard and involves lots of tradeoffs.

 

The Case for the Digital Platform Act: Market Structure and Regulation of Digital Platforms, with a Foreword by former FCC Chair (and author of From Gutenberg to Google) Tom Wheeler, covers all the hot topics (some of which I have previewed in other blog posts). How do we define digital platforms? How do we determine if a platform is ‘dominant’? What can we do to promote competition in the platform space? How do we handle the very thorny problem of content moderation and filter bubbles? How do we protect consumers on digital platforms, and how do we use this technology to further traditional important goals such as public safety? Should we preempt the states to create one, uniform national policy? (Spoiler alert, no.) Alternatively, why do need any sort of government regulation at all?

 

My employer, Public Knowledge, is releasing The Case for the Digital Platform Act free, under the Creative Commons Attribution-NonCommercial-ShareAlike license (v. 4.0) in partnership with the Roosevelt Institute. You can download the Foreword by Tom Wheeler here, the Executive Summary here, and the entire book here. Not since Jean Tirole’s Economics for the Common Good has there been such an amazing work of wonkdom to take to the beach for summer reading! Even better, it’s free — and we won’t collect your personal information unless you actively sign up for our mailing list!

 

Download the entire book here. You can also scroll down the page to links for just the executive summary (if you don’t want to print out all 216 pages) or just the Tom Wheeler foreword.

 

More, including spoilers!, below . . .

Continue reading

What Makes Elizabeth Warren’s Platform Proposal So Potentially Important.

As always when I talk politics, I remind folks that this blog is my personal blog, which I had well before I joined my current employer Public Knowledge. I’ve been commenting on Presidential campaigns since well before I joined PK, and I don’t run any of this stuff in front of my employer before I publish it.

 

 

Friday March 8, the Presidential campaign of Elizabeth Warren, not to be confused with the actual office of Senator Elizabeth Warren (D-MA), announced Warren’s plan for addressing the tech giants. Warren has been drawing attention to massive concentration in industry generally and tech specifically since well before it was cool, so the fat that she is out of the gate with a major proposal on this early in the 2020 campaign is no surprise. Nor is it a surprise that her proposed plan would end up breaking up, in some significant ways, the largest tech platforms.

 

What makes Warren’s contribution a potential game changer is that she goes well beyond the standard “break ’em up” rhetoric that has dominated most of the conversation to date. Warrens proposal addresses numerous key weaknesses I have previously pointed out in relying exclusively on antitrust and is the first significant effort to propose a plan for permanent, sustainable sector specific regulation. As my boss at public knowledge Gene Kimmelman has observed here, (and I’ve spent many 10s of thousands of words explaining) antitrust alone won’t handle the problem of digital platforms and how they impact our lives. For that we need sector specific regulation.

 

Warren is the first major Presidential candidate to advance a real proposal that goes beyond antitrust. As Warren herself observes, this proposal is just a first step to tackle on of the most serious problems that has emerged in the digital platform space, the control that a handful of giant platforms exercises over digital commerce. But Warren’s proposal is already smart in a number of important ways that have the potential to trigger the debate we need to have if we hope to develop smart regulation that will actually work to promote competition and curb consumer abuses.

 

I break these out below . . . .

Continue reading

Apple v. Pepper: Can Illinois Brick Survive Ohio v. Amex, or Is Antitrust On Two Sided-Platforms Possible or Effectively Dead?

Last term the Supreme Court decided Ohio v. American Express, an antitrust case in which the Supreme Court held that when analyzing whether conduct harmed consumers (and is thus a cognizable injury under the antitrust laws based on the current “consumer welfare standard“), if the object of the case is a two-sided market, the Court must analyze both sides of the market, i.e., the consumer facing side and the merchant facing side, to determine if the conduct causes harm. If vertical restraints on the merchant side of the platform produce benefits to consumers on the other side, then the restraints do not violate the antitrust law — even if they prevent new competitors from successfully emerging. In Ohio v. Amex, the court reasoned that an “anti-steering provision” that prevented merchants from directing consumers to other credit cards with lower swipe fees (the amount a merchant pays the card) was offset by Amex providing benefits such as travel services (at least to platinum members) and various discount and loyalty reward programs. The court found this consumer benefit offset the cost to merchants of the higher swipe fees (as the dissent observed, the majority did not address the finding of the district court that these higher swipe fees were passed on to consumers in the form of overall higher prices).

 

While Ohio v. Amex dealt with credit cards, folks like Lena Kahn have argued that because digital platforms such as Facebook are also “two-sided markets,” this decision will make it extremely difficult to go after digital platforms. As long as the company justifies its conduct by pointing to a consumer benefit, such as giving the product away for free (or selling at a reduced cost in the case of companies like Amazon), it is hard to understand what harm to the folks on the other side of the market will satisfy the consumer welfare standard. Or, in other words, it would appear under Ohio v. Amex that even if a firm like Amazon or Facebook does things to prevent a competitor or extract monopoly rents from the non-consumer side, as long as consumers benefit in some way everything is cool.

Others have argued, however, that we should not read Ohio v. Amex as bleakly as this. Since the majority did not address the findings of the district court, the majority did not rule out that exercise of market power over the merchant side could never cause harm to consumers and thus violate the consumer welfare standard. Rather, taking the decision at face value, those more optimistic about the future of antitrust and two-sided markets maintain that the district court erred in Amex by focusing on the harm to competition, rather than how that harm directly impacted consumers (again, the dissent points out the district court did focus on the harm to consumers, but the majority makes no comment on these findings, so there is no negative case law about whether a merchant voluntarily passing on the higher swipe fees in overall higher prices is a cognizable harm).

 

Recently, the Supreme Court heard argument in Apple v. Pepper.  As I explain below, although Apple v. Pepper addresses standing rather than a finding of a violation of the antitrust law itself, it should provide further guidance on whether antitrust law remains relevant in the era of two-sided markets. More below . . . .

Continue reading

We Need To Fix Media, Not Just Social Media — Part III

This is part of a continuing series of mine on platform regulation published by my employer, Public Knowledge. You can find the whole series here. You can find the original of this blog post here. This blog post is Part 3 of a three part series on media and social media. Part 1 is here, Part 2 is here. This version includes recommendations that are my own, and have not been reviewed by, or endorsed by, Public Knowledge.

 

And now . . . after more than 6,000 words of background and build up . . . my big reveal on how to fix the problems in media! You’re welcome.

 

Somewhat more seriously, I’ve spent a lot of time in Part 1 and Part 2 reviewing the overall history of the last 150 years of how technology and journalism inter-relate  because two critically important themes jump out. First, the evolution in communications technology always results in massive changes to the nature of journalism by enabling new forms of journalism and new business models. Sometimes these changes are positive, sometimes negative. But the dominance of the large media corporations financing news production and distribution through advertising revenue is not a natural law of the universe or necessarily the best thing for journalism and democracy. The Internet generally, and digital platforms such as news aggregators and social media specifically, are neither the solution to the dominance of corporate media as optimists hoped it would be or the source of all media’s problems as some people seem to think. Digital platforms are tools, and they have the same promise to utterly revolutionize both the nature of journalism and the business of generating and distributing news as the telegraph or the television.

 

In Part 2, I looked at how activists and journalists connected to social media used these tools in ways that changed the way in which the public observed the events unfolding in Ferguson in 2014, and how this challenged the traditional media narrative around race and policing in America. Combining the lessons from this case study with the broader lessons of history, I have a set of specific policy recommendations that address both the continued solvency of the business of journalism and steps to regain public trust in journalism.

 

More below . . .

 

Continue reading