Can Big Tech Be Reined In by Rules It Consistently Breaks?

Well informed observers of the tech industry have cautioned against two things: economic downturn and government regulation.  Each had a palpable sense of the inevitable – not a matter of if, but when.  As we enter 2020, the conditions for both are present, if not altogether ripe.

Dire predictions of a global recession have been hovering over the economy for several quarters.  But low interest rates, strong consumer spending, and investor confidence have kept the economy buoyant.  The new China trade deal and record-high NASDAQ belie economic woes.

If this election year turns out like others, the economy will hum along through the first two quarters, then decelerate as we head into November.  If an economic slowdown were to occur, it would owe as much to politics as to recessionary pressure.  And even that might recede if the president gets re-elected.

On the other hand, the prospect of government regulation continues to gain momentum.  Every time a Big Tech company takes a misstep, the rhetoric on tech regulation grows louder, bringing Google, Amazon, Facebook, and Apple (GAFA) under the glare of Congress.  Of course, Big Tech’s own tin ear on important issues has not helped.  When Facebook refused to relent on its own cryptocurrency – Libra – and resisted changes to its political advertising policy, the calls for regulation spiked.

Separate investigations by Congress, the Department of Justice, and the Federal Trade Commission have prompted Big Tech leaders to boost their presence and spending in Washington.  Amazon spent over $12.4 million in 2019.  Facebook spent over $12.3 million and Apple spent $5.5 million over the first nine months of the year – an 8 percent boost from the previous year.  Notably, Google’s parent company, Alphabet Inc., spent over $9.8 million on lobbying, which was 41 percent less in lobbying expenses after it overhauled its government affairs operation.

Federal actions have been matched by state attorneys general who have launched their own independent investigations into Google and Facebook.  The Europeans set the pace and precedent for hefty fines and heavy-handed regulation of Big Tech, accounting for nearly 200 regulations in 2019 alone.  Citing antitrust and competition concerns, the EU has been both pro-active and aggressive in the effort to hold Big Tech accountable.

In the precious space of consumer data, 2019 saw some of the biggest data breaches of all time.  In March 2019, hundreds of millions of Facebook and Instagram users’ credentials were exposed due to the company’s inefficient password storage management.

In April 2019, Facebook exposed 540 million records on unprotected servers.  The total number of breaches was up 33 percent over 2018, according to research from Risk Based Security.  That amounted to 5,183 data breaches for a total of 7.9 billion exposed records.  In November 2019, the same research firm called 2019 the “worst year on record” for breaches.  And yet even with major privacy and data breaches, Big Tech continues unscathed.

Today’s digitally conscious consumers expect and demand more control over their own data.  They want to determine when, where, and how they interact electronically with banks, stores, and advertisers.  Even though collected data can inform innovation and improve services, transparency and consent are the consumer mandates of the day.  We have seen the global fallout when massive databases are breached and witnessed the standoff between Apple and the FBI over a terrorist’s cell phone data.

Yet, even as new revelations unfold on data security, the rules affecting privacy are lost in the cloud(s).  Congress has yet to act on a comprehensive federal privacy bill, while the California Consumer Privacy Act became effective at the beginning of the year.  Any number of states promise to follow California’s lead in 2020, especially in the absence of a preemptive federal law.

Even with the rise in rhetoric, there are serious concerns about the reality of tech regulation.  Can Big Tech be reined in by rules that it consistently breaks?  Beyond privacy regulation, what else can be done to deal with the GAFA juggernaut?  Are traditional antitrust principles sufficient to manage new realities of the tech economy?

And the ultimate question: Has tech become too big and too pervasive in society to effectively control?  The answer to these questions requires a much broader view of the role of technology in our lives.

In fairness, it would be a travesty if the debate on tech regulation were confined to misdeeds, however egregious they have been.  For all the negative reports surrounding the technology sector, there are many more positives.  On the balance sheet of technology pros and cons, there should be little doubt that technology – as evinced by GAFA – has been a positive force in society.  If Congress and the regulators want to solve the problem, they should take a more balanced view of the role of technology in our society.  They should adopt measures that chasten bad action without chilling the momentum of the industry.

Big Tech is now worth over $5 trillion.  Even with the specter of regulation, investors are drawn to technology stocks, pushing the five most valuable U.S. tech companies to account for over 17 percent of the S&P 500, up from 11 percent in 2015.  And Apple, Facebook, Google, and Amazon have continued to acquire smaller companies in the face of antitrust investigations.  These economic developments inure to the benefit of society, even if macroeconomic.  But tech success leads to jobs, which lead to changed lives and communities.  If anything, these benefits need to be diversified, not diluted.

Thus, we must ask: “What is right with technology and at what cost?”

In fact, this may be the ultimate question that policymakers must address if they are to credibly balance the competing public interest with the promulgation of new rules to police, patrol, or punish Big Tech.  We must embrace the notion that technology is neither good nor bad, but necessary.  As a society, we must acknowledge that technology builds both commerce and community; it drives success and service and it innovates and innervates progress.

In our earnestness to undo the wrong, we cannot abandon what is right.

Adonis Hoffman, Esq. is CEO of The Advisory Counsel, Inc. and a former FCC official.  He leads the Initiative on Responsible Technology at Business in the Public Interest, Inc.  He is a member of The Media Institute’s Board of Trustees and First Amendment Advisory Council.  This article appeared in Fox Business Online on Jan. 22, 2020.