The Worst Idea (So Far) in Democrats’ War on Big Tech

(Bloomberg Opinion) -- Senator Elizabeth Warren’s plan to break up Amazon, Facebook and Google got all the attention last week. But she isn’t the only Democrat looking to rein in big technology companies. Take the idea floated earlier by the chairman of the House antitrust subcommittee, Representative David Cicilline of Rhode Island. He wonders “whether there would be a way to think about separating what platforms do versus people who are selling products and information — a Glass-Steagall.” 

Cicilline thinks that separating out “functions,” as the Glass-Steagall Act did in financial services until its repeal in 1999, could help curb the market power of tech companies like Google and Facebook and increase market competition. 

Glass-Steagall, enacted in 1933 during the Depression, created barriers for any one institution from engaging in commercial and investment banking activities. It’s not entirely clear what analogy Cicilline is trying to make between this regulation and Big Tech, but he seems to be suggesting that it might make sense for government regulation to separate the companies’ platforms from the parts of their business that sell users’ data.

Think about how Google and Facebook work. They harvest data from their users, and then they use that data to help companies maximize the value of their ad purchases by targeting them to users who are most likely to be interested in their products. 

It’s not at all clear what it would mean to split those functions up, but an outcome would almost surely be ads that are more poorly targeted. That would be worse not only for Google and Facebook, but also for users and for ad-purchasing companies. And there is the risk that increasing regulation on the way internet companies handle ads could itself stifle competition, because incumbent businesses would be in a better position to afford the compliance costs.

Let’s take another step back. Any effort to impose new regulations on major tech companies — an idea gaining popularity in both U.S. political parties — should begin by clearly identifying the problems that new rules are intended to address. 

There is legitimate concern about how these platforms are shaping the information citizens consume, the public debate and the democratic process. Freedom of speech must be the lodestar in these deliberations. 

But it could be reasonable to explore regulations that require clear labeling of online political advertising, similar to what exists for traditional broadcast media ads. We may want to regulate the proliferation of fake or automated user accounts on these platforms, so that users know they are interacting with human beings and not bots. It might make sense to see if there are ways to hold platforms more accountable for the content that users post.

Another concern is the privacy of platform users. This is said to be a major issue for users, but I’ve long been skeptical. Around this time last year, there was much public discussion about Facebook CEO Mark Zuckerberg’s congressional testimony and the Cambridge Analytica scandal, including the revelation that information from as many as 87 million Facebook users was sold to a private company. 

At the time, I wrote in a column that despite all this public concern, Facebook users reportedly were not making major changes to their privacy settings. I also pointed out that despite all the personal information stored in email inboxes, very few users take the simple step of enabling two-factor authentication to protect their Gmail accounts.

The role of personal responsibility seems to get lost in the discussion. Users bear responsibility for their public behavior on the internet — including what they type into a search bar and what apps they allow to access their Facebook accounts — and for protecting their private information. 

In any case, some modest regulation could be reasonable: For example, companies should give prompt notification of data breaches.

But the issue is not the size and current market dominance of these companies. Breaking them up — whatever that even means — in the hope that new tech and social media companies would have an easier time competing with today’s incumbents would not address the root problems.

And are these companies actually stifling competition, as Cicilline and others think they may be? Not by the traditional, and correct, standard used to evaluate competition. Google and Facebook are not reducing the welfare of consumers by increasing the prices they have to pay, or decreasing the quality of products and services they enjoy, or reducing the choices available to users.

These companies are innovation powerhouses, changing the way we live, work and interact with each other. Their price? For 14 years I have used Gmail, and I haven’t given Google 1 cent for this fantastic product. The companies plow revenue into research and development, fueling the development of innovative products that will benefit consumers in the future. 

Can it really be said that Google and Facebook are stifling competition for information? There was a time when most Americans could choose among three network news broadcasts and their local newspaper. Thanks to the tech companies, consumer choice for information — of all kinds, not just news — has exploded.

The tech sector is concentrated; its underlying economics may mean it naturally tends toward that structure. But concern that tech giants are entrenched is at odds with the historical record. It was not long ago that Netscape and Internet Explorer were dominant web browsers. A browser other than Google is just one click away — and the company knows it. 

And Facebook has been showing signs of trouble. According to a study by Edison Research released last week, the company has reportedly lost 15 million users since 2017, with the biggest drop among people ages 12 to 34. Politicians who profess to worry about Facebook’s perpetual dominance should take notice. 

Glass-Steagall for Big Tech? Breaking up Google and Facebook? There is no compelling case for regulation this dramatic. If anything, politicians should be celebrating these companies as crown jewels of the American economy. And it’s worth noting that just a few years ago, before populism swept over U.S. public life, they were doing exactly that.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”

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