Washington Failed to Regulate Big Tech—And Now it’s About to Discover That It Can’t
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Companies like Facebook, Google, and Amazon dominate their markets, and have deep pockets and armies of lobbyists.
Dystopian warnings abound that “winter is coming” for the tech industry, in the form of a new era of tough regulations and harsh oversight from Washington. Twitter and Facebook executives are being grilled by Congress over Russia’s use of their platforms to influence the US election. Consumer advocates are demanding more policing of credit-rating agency Equifax after hackers stole 143 million Americans’ personal data from it. Dozens of senators have signed up to support SESTA, a bill that would make websites liable if people place sex trafficking ads on them.
But companies like Facebook, Google, and Amazon dominate their markets, and have deep pockets and armies of lobbyists. That, combined with historical precedent, gridlock in Congress, and the Donald Trump White House’s aversion to regulation in general, means passing new laws or rules to rein them is going to be a tough battle, some government and industry veterans say.
There’s a “better chance of Democrats supporting a repeal of Obamacare”—a move that was deeply unpopular even with Trump supporters—than of “cyber enforcement or regulation occur[ring] at the federal level,” predicts James Norton, a former Department of Homeland Security official who worked on cybersecurity in the George W. Bush administration, and now heads Play-Action Strategies, a DC consulting firm.
Weak regulatory agencies
As the internet and tech industry in the US has grown in the past two decades, not only has federal rule-making not kept pace, but the government hasn’t adapted to oversee it. There is no federal agency, for example, with clear responsibility for content that appears on the internet, be it ads that result in teen girls being sex-trafficked or propaganda used by a foreign government to sway an election.
The Federal Trade Commission enforces the US’s antitrust laws (along with the Department of Justice), unfair practices by companies, and truth in advertising. The agency is investigating after Facebookchanged the terms of its privacy agreement after acquiring WhatsApp, and is looking into the Equifax data breach. However, right now, the FTC is not developing any new regulations in regard to the tech or internet industry, a spokeswoman said, though it is reviewing existing ones.
As tech giants hoover up upstart competitors in order to stay dominant, there’s been no interference from antitrust regulators. Critics, including Dealbook’s Steven Davidoff Solomon, argue regulators are stuck in an outdated view of the world, namely that they consider an industry competitive as long as it allows new startups to be formed, regardless of how hard it is for those startups to displace the big players.
The Federal Communications Commission is tasked with overseeing the telecommunications industry, and what’s broadcast by public television and radio, but not content on the internet. It did pass historic net neutrality rules in 2015 designed to ensure consumers had open and equal access to information. Under the regulation-averse Donald Trump administration, however (more on that below) the FCC has proposed rolling back those rules, saying they are bad for business. The proposed roll-back pitches broadband companies against Silicon Valley, which supports the rules.
The FCC’s findings on how competitive the wireless market is, and therefore whether it deserves more oversight, have also swung, pendulum-like, depending on whether a Republican or Democrat is in the White House. Its latest report has drawn criticism for calling markets with just one broadband choice for business users “competitive” as long as there are other providers within half a mile.
The Federal Election Commission is charged with keeping foreign influence out of politics. One of its then members warned years agothat Russia could potentially spread propaganda online to influence US elections, and that political ads on the internet should be better identified. An alliance of free-speech advocates and deep-pocketed right-wing donors shut down the FEC’s push to develop new rules especially for the internet. The FEC recently voted, however, to review the issue.
Several Democrats in Congress are floating ideas for bills, including senators Amy Klobuchar and Mark Warner, who propose making all social-media companies with more than one million users disclose more information about who is buying political ads and who they are targeting. But whether these can pass or not depends on a deeply dysfunctional Congress coming together, and Congress members getting up to speed on an industry most don’t understand (more below).
Officials at the big internet and tech companies who deal with federal agencies often say the industry is doing too much good, changes too fast, and is too complicated for the US government to write rules around it.
“It’s really hard to make the case that consumers are being harmed when they have access to more information and lower prices,” said one such executive. If Silicon Valley companies were monopolies, “we’d see a slowdown in innovation,” she said, but instead “the competition keeps racing to new areas.” The next hot spot is home devices and assistants, for example, she said. While Amazon’s Echo is dominant in the “assistants” category, the fact that Samsung is also in the connected home market illustrates that there’s plenty of room for competition, she said.
Deep-pocketed tech firms
In recent years, tech companies from Airbnb to Uber to Google have poured money into lobbying in Washington DC and now have sizable in-house and outside teams that regularly meet with Congress, fund think tanks, and try to influence how lawmakers, federal employees, and the general public see the industry.
The industry’s total lobbying spending jumped from $1.2 million in 1998 to $59.2 million in 2016, and it’s on pace to meet or beat that amount this year, according to data compiled by the Center for Responsive Politics. Google leads, but Facebook and Amazon are also spending millions:
The Trump factor
President Donald Trump presents two sizable roadblocks to regulation of the tech industry.
First, he has continuously dismissed US intelligence agencies’ findings that Russia tried to influence the presidential election in his favor. The ongoing investigations in Congress, including the probe of Facebook ads, are a “hoax,” he tweeted on Sept. 22.
Second, the White House under Trump has embarked on a strategic, deliberate, and widespread dismantling of the regulations that companies are required to follow. An early executive order required any federal agency to eliminate two regulations for any new one that it passed.
It seems unlikely Trump would happily sign new restrictions into law, particularly any that imply he’s admitting Russia could have influenced the election. For them to pass, Congress would have to adopt them with a majority big enough to override the presidential veto. It managed that in the summer with new sanctions on Russia, but is likely to be much more divided when it comes to regulations on business.
An aging, dysfunctional Congress
Republicans lead both houses of Congress, but in the eight months since Trump took office, they have not managed to pass any major legislation because of divides within the party.
Perhaps more importantly, they lack the expertise. With the exception of a handful of lawmakers like Virginia senator Mark Warner, who was a tech investor before he joined politics, Congress members “struggle when these topics come up,” Norton said. “These platforms are growing so fast and their influence is growing so fast, and you don’t have digital natives looking at” the industry.
The current Congress is among the oldest in history: the average age of a senator is 61 and a representative in the House is 57. Democrats, who tend to be more pro-regulation, are also older than their Republican counterparts—the average age of the Democratic leadership and ranking members in the House is 68, for example, versus 59 for Republicans. (These are the members with the most power inside the party, who set the party’s agenda in Congress for the year).
Senate minority leader Charles Schumer doesn’t “do emails” and is so attached to his 1990s-era flip phone it was the subject of an April Fools’ joke this year. (He wasn’t actually giving it up).
After years of being mocked for my flip phone, finally turning over a new leaf. pic.twitter.com/Ezc2gfChI1
— Chuck Schumer (@SenSchumer) April 1, 2017
That’s not to say that these lawmakers couldn’t write smart legislation, of course, but given all the other obstacles in their way, the odds seem low. After all, the Equifax breach, as large as it was, hasn’t prompted consumer protests that could push Congress to act. “We’re going to need to see a far worse scandal and far worse problems before anything is done,” predicts John Wonderlich, the executive director of the Sunlight Foundation, which promotes more transparent government.
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