This originally appeared on the blog of my employer, Public Knowledge.
Frances Haugen, the (hopefully first of many) Facebook whistleblower, made one thing abundantly clear this week in both her 60 Minutes interview and her Senate Hearing: The United States needs a specialized agency to oversee digital platforms. Antitrust enforcement alone is not enough. Breaking up Facebook would solve some problems, but without additional oversight it will also produce a bunch of smaller companies all running algorithms that maximize engagement regardless of the harm to society (something I have called the “Starfish Problem” — tear up a starfish and the pieces regenerate into lots of smaller starfish). Companies, Haugen warned, “will always put profits over people.” Haugen further emphasized that effectively regulating Facebook (and other digital platforms) requires specialized expertise about the sector. “Right now, the only people in the world trained to analyze these experiences are people who grew up inside of Facebook,” Haugen said. We don’t just need new laws, or to expand the Federal Trade Commission. As Haugen stressed multiple times, we need a specialized, sector-specific regulator to do the job right.
Back in May, Facebook V.P. of Global Public Affairs Nick Clegg wrote an op-ed also calling for the creation of a digital regulator. “Finally,” writes Clegg, “the U.S. could create a new digital regulator. Not only would a new regulator be able to navigate the competing trade-offs in the digital space, it would be able to join the dots between issues like content, data, and economic impact — much like the Federal Communications Commission has successfully exercised regulatory oversight over telecoms and media.”
How do these two diametrically opposed people arrive at the same recommendation? Does the fact that Facebook also says it wants a regulator automatically make it a bad idea? Given that Public Knowledge has repeatedly pushed for a sector-specific regulator since 2018, we obviously don’t think so. But if a sector-specific regulator is the right answer, why is Facebook also pushing for a digital regulator?
Facebook Reads the Writing on Its Wall.
Public Knowledge isn’t the only one calling for a sector-specific regulator (although I believe we were the first — and still have the most comprehensive blueprint for building one). Former Federal Communications Commission Chair Tom Wheeler, along with Phil Verveer and former Public Knowledge President Gene Kimmelman, have also proposed a sector-specific regulator. Professor Ellen Goodman and former Ambassador Karen Kornbluh at the German Marshall Fund have proposed creating an independent digital platform regulator focused on fighting disinformation. The idea has gone sufficiently mainstream that even the Washington Post has opinion pieces supporting the “radical” idea of “creating a new federal agency focused on the digital economy.” Mind you, as I go to great lengths to explain in my book, we have a long history of creating specialized agencies of the kind described by Haugen and others. As with many things inside the Beltway, what counts as “routine” or “common sense” as opposed to “radical” has little to do with history or policy and a lot to do with framing and messaging.
More importantly, some governments have begun to move from talking about regulating digital platforms to actually doing it. The European Union has gone further, introducing a comprehensive Digital Services Act and Digital Markets Act to define and regulate digital platforms. The United Kingdom has taken the intermediate step of creating a specialized “Digital Markets Unit” within its Competition Markets Authority, after this report recommending the United Kingdom adopt a new “pro-competition regulatory regime” for services supported by digital advertising.
Facebook has understood for years that the day of regulatory reckoning will come. They have made a calculated decision to try to shape the process rather than resist it. AT&T successfully used a similar tactic at the beginning of the 20th Century. In 1910, AT&T agreed to be regulated as a common carrier by the ICC. In 1913, AT&T settled its first antitrust suit by agreeing to the Kingsbury Commitments (which imposed limited interoperability obligations). This bought AT&T another 20 years of lightly regulated monopoly until Congress got serious and created the FCC (which AT&T resisted vigorously).
‘Would You Like To Shoot Me Now or Wait ‘Til You Get Home.’
Facebook also knows that whatever it proposes, many of its critics will reflexively oppose. Facebook’s call for a digital regulator on the same day as the Haugen hearing is reminiscent of the classic Bugs Bunny bit where Bugs Bunny escapes Elmer Fudd by asking “would you like to shoot me now or wait ‘til you get home” and tricking the eager Daffy Duck into demanding “shoot me now!” This isn’t just cartoonish misdirection, however. By supporting the concept of a digital regulator, Facebook plays on the fears of some of its most vigorous critics that a digital regulator would prevent antitrust from breaking up Facebook (and other giant digital platforms). The above quoted history shows that those genuinely interested in curbing the market power of giant digital platforms must take these concerns seriously. Certainly it seems clear that Facebook would like to see this happen. It explains why the more pressure Facebook feels on the break-up side, the louder they have called for regulation — and now a sector-specific regulator.
But the more complete history of AT&T shows that it doesn’t happen to unfold that way. As I’ve written elsewhere, antitrust played an important role in constraining AT&T even after regulation; and the FCC played a vital role in making the complex dismemberment of AT&T’s multiple monopolies one of the most important and successful antitrust divestitures in history. In addition to calling for creation of an independent digital platform regulator long before Facebook, Public Knowledge has supported antitrust lawsuits against Facebook (and other digital platforms like Google). The Case for the Digital Platform Act proposes empowering the agency to impose divestitures and other types of structural separation where warranted — as well as the need to preserve traditional antitrust enforcement by Department of Justice and FTC even after creating the digital regulator. A digital platform regulator, done correctly, complements antitrust enforcement rather than prevents it.
The FTC Is Not Enough. We Need a Dedicated Regulator.
Regulation does not substitute for antitrust, but antitrust does not substitute for regulation. Rigorous antitrust enforcement absolutely improves the lives of consumers, but it does not solve the basic problem Frances Haugen pointed out over and over at every opportunity: Companies will always put profit over people. Breaking up Facebook and Instagram would reduce the harm either can do separately, but the incentive to create algorithms that “maximize engagement” in ways that harm teenage girls, promote misinformation, and ultimately undermine our democracy may very well not change. Nor does generic consumer protection law — the “unfair and deceptive practices” standard — cover the range of unique harms that these new technologies can cause. The consumer harms of Instagram are likely to look different from the potential consumer harms of a search engine. Or an app store. Or a marketplace. Or a smart home platform. Each uses the data, network, and tools of their product different enough to require expertise in a regulator.
It is therefore not enough to bulk up the FTC, though that is also needed. We absolutely applaud proposals such as an infusion of $1 billion to the FTC to support enforcement. We support legislation that would strengthen the FTC’s privacy protection powers. But Frances Haugen correctly pointed out in her testimony the need for specific experience and expertise to understand and regulate digital platforms. As she testified, right now, only people who have worked at Facebook have the deepest understanding of how Facebook works. This applies equally to Amazon, Google, and other digital platforms, and it’s a huge problem. If we agree that digital platforms are a unique sector of the economy, then it requires a combination of highly specialized expertise and exclusive focus to oversee them. Put another way, the fact that this sector creates unique problems requires an agency with unique powers and expertise to address them.
Additionally, a specialized, sector-specific regulator armed with the right authority can — and should — promote the positive in the sector. The Facebook outage demonstrated the tremendous reach (and therefore market power) of Facebook globally, but it also highlighted what a powerful tool it can be for small businesses, local governments, and others. A sector-specific regulator can do more than simply prevent Facebook from using its power to exploit users. It can create rules that affirmatively promote the usefulness of platforms like Facebook for these same users.
In 2019, when Public Knowledge first published the blueprint for a digital platform regulator, few people were willing to concede that regulation was necessary — let alone a sector-specific regulator. But the last two years have shown that a sector-specific digital regulator is necessary, not “radical.” If you believe Frances Haugen and her case against Facebook, you should support her conclusion (and those of many others) that we can only comprehensively address the harms of digital platforms with a new expert agency.
The interesting point for me on Facebook is that it is clear that the social media giant is engaging in systematic advertising fraud, and has been doing so for years.
It seems to me that simply by enforcing laws against fraud against these companies, and the VCs who fund what amounts to a bucket shop, you could go a long way toward fixing the problems.
If Mark Zuckerberg and Masayoshi Son were frog marched out of their offices in handcuffs, a lot of the mishugas that we see would stop.