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America Was Born Fighting Monopolies

W.D. Cooper, "Boston Tea Party." (1789)(Public Doman)

Reining in Big Tech is not a conservative or liberal agenda, it’s an American agenda. A new independent academic report shows a way forward

Big Tech is on the spotlight. Hardly a week goes by without fresh news on some problems in Big Tech: from growing market power to concern over their excessive data gathering, to end with concerns on how Big Tech companies negatively impact democracy.

For example, over the past months, The American Conservative has published pieces affirming that antitrust is not the right tool to address the many Big Tech concerns; others saying antitrust is the way to go; arguing that companies such as Apple, Google, Facebook, and Amazon are “incubating a quiet and particularly insidious form of tyranny” that Americans should fight to maintain their freedoms; discussing problems with tech addition and the business model of digital platforms; wondering whether Reddit is purging The_Donald, a pro-Trump page; and arguing that, while pretending to be liberal, Big Tech has a troublesome history of mostly ignored sexual harassment cases. 

Reading these and many other pieces in the media will make it clear that reining in Big Tech is not a conservative or liberal agenda; it’s an American agenda. America was born fighting the tea monopoly granted by the colonizers to the East India Company. It is time to gear up for a fight against an even greater threat to liberty. Anyone who loves freedom should be concerned with the ubiquitous power digital platforms such as Google and Facebook hold over our lives. 

While there is bi-partisan distress about Big Tech, there is no consensus on the appropriate policy solutions to address these concerns. In fact, there is not even a widely accepted agreement on what is the ultimate source of these problems. The lack of a clear roadmap is to be expected. 

First, digital platforms are complex and diverse companies, so policy initiatives require the combination of multiple disciplines. Second, the U.S. Federal Government stands out amongst advanced democracies for not having taken any formal step to promote a better understanding of the challenges raised by these companies. While the Federal Trade Commission was holding endless hearings on “Competition and Consumer Protection in the 21st Century,” governments from the UK to Germany and Australia have already produced in-depth analyses not only on the negative impact of digital platforms, but also on the alternative ways to address them.

 The same delay seems to prevail in enforcement. While the United States is just starting investigations (see the recent announcements by the DoJ, the FTC and 50 State Attorneys General), in other jurisdictions many of these cases have already been trialed.  

These delays might be due to the fact that Big Tech has long been in close contact with Washington, and/or that companies such as Alphabet, Amazon, and Facebook are the second, sixth, and ninth largest spenders in corporate lobbying. Even if this were the case, however, not all hope is lost. The United States has a laudable history of a strong civil society performing many of the roles that in other countries are left to governments. In keeping up with this noble tradition, the Stigler Center at the University of Chicago Booth School of Business created an independent, multidisciplinary committee, composed of 30 academics and policy experts, to study the problems created by digital  platforms.

This Stigler Center Committee on Digital Platforms spent a year studying digital platforms’ political and market power, their respect of individual privacy, and their impact on our news ecosystem. The final report and attached policy brief released a couple of weeks ago probably represent the most in-depth independent academic study of digital platforms to date. The report does not limit itself to an in-depth analysis of the current state of affairs; it also provides an array of possible solutions.  

On the market power front, the Stigler Report argues that digital platforms operate in markets that tend to monopolies. In these markets, when an incumbent reaches a certain threshold market share, it naturally tends to become a monopolist—a phenomenon known as “tipping.” This means that new entrants will face prohibitively high barriers to entry if they try to displace incumbents like Google or Facebook. To make matters worse, platforms have been actively engaging in exclusion practices and have acquired hundreds of companies with almost no governmental oversight. These practices have led many venture capitalists to talk about “kill zones”—a set of industries where little new investment in innovation takes place. 

In addition, the Report shows how the concept that digital platform services are “free” is largely an illusion. Consumers not only barter data and attention but, more importantly, they often end up paying the cost of the expensive advertising through higher prices for the goods and services they ultimately buy. 

The harms arising from platforms’ market power are the greatest when combined with these companies’ abilities to exploit consumers’ behavioral biases. Many products are designed to be as addictive as possible, keeping us constantly “hooked” to the platforms without any considerations for our wellbeing. The problem is exacerbated by so-called “dark patterns,” which have proven to be particularly efficient ways to subvert the free choice of the most vulnerable users—poor, uneducated, and older consumers. 

If all this was not enough, digital platforms have emerged as some of the most powerful political actors of our times. They spend fortunes in direct lobbying, set the agenda in a way commonly associated with media companies, are as complex to regulate as large banks, and may directly engage their user base in fighting new legislation and/or play a “Chinacard any time their interests are threatened. This combination of the political power of the companies and the addictive nature of their products is particularly worrisome.  

We are already witnessing firsthand the many problems associated with the rise of these companies. Think of excessive data collection or the crisis in investigative journalism. The dramatic reduction in the cost of collecting, storing, and analyzing billions of bits is transforming all our devices into “digital spies.” While large datasets bring many benefits to society, we need to discuss more clearly the trade-offs to understand where they are worth it and where they are not. Most importantly, we have to discuss how this “surveillance” might impact our own freedom. As the Stigler Report makes clear, market incentives alone will not be sufficient to protect our personal privacy or ensure data security.

Another collateral damage of the rise of digital platforms is the devastation in the newspaper industry: Almost 50 percent of U.S. counties no longer have a daily newspaper. Digital platforms did not target newspapers; they were simply more efficient advertisers. Nonetheless, the growing concentration of news distribution around digital platforms will have many adverse impacts on American democracy. 

First, as digital platforms increase their control over news distribution and readership, they replace thousands of viewpoints by roughly a duopoly. Second, the sole goal of digital platforms is to maximize time spent on the platform, not to provide any news content. Unfortunately, these two goals are often negatively correlated. Last but not least, Section 230 of the Communications Decency Act immunizes digital platforms from all liability associated with speech, so these companies are all but encouraged to spread inflammatory or even overtly false content. 

The Stigler Report proposes a wide range of policy solutions that span both sides of the political spectrum. In the Policy Brief that accompanies the report support we defend several measures, including

  • We need to strengthen antitrust enforcement in merger review and against exclusionary practices. 
  • We should promote increased interoperability among digital platforms. 
  • We need much stricter data protection legislation, with pro-consumer default rules in privacy being a good first step.
  • We need to start addressing dark patterns and addiction—areas largely neglected by the public debate.
  • We may need to revisit Section 230 liability to level the playing field in media markets, and we need experimentation to promote local investigative journalism and democratic accountability. 

These are some carefully thought initial suggestions that some will consider too timid and others too radical. We welcome dissent and discussions on the pros and cons of these and other alternative solutions—a strong public debate is necessary to ensure that policy responses are not captured by the platforms. What is clear, however, is that once again monopolies are threatening the free markets and the democratic values that Americans rightfully praise. Whatever the preferred solutions are, we need to start implementing some of them now. Tomorrow might be too late. 

Luigi Zingales is the Robert C. McCormack Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business and the Faculty Director of the Stigler Center. Filippo Maria Lancieri is a JSD candidate at the University of Chicago Law School studying antitrust, data protection and political economy.

This article was supported by the Ewing Marion Kauffman Foundation. 

 

 

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