How Washington Will Tame Tech’s Behemoths
William Barr, in his January confirmation hearings to become the U.S. attorney general, entered into the lexicon a valuable, if redundant, expression to describe the biggest technology companies in the land. “I think a lot of people wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers,” said Barr, an establishment Republican lawyer from central casting—and therefore an unlikely antagonist for Big Business. His locution stuck, heightening the sense that the “behemoths”—Facebook, Google, Amazon, Microsoft, Apple, and a handful of less-gigantic competitors—now face a greater regulatory threat than at any other time in their relatively brief existence.
The companies are fighting the onslaught in various ways. Microsoft, the industry’s journeyman of governmental warfare, is cleverly advocating regulation of a narrow slice of potentially creepy technology: facial recognition. Apple is pointing fingers, suggesting its data-privacy stance is holier than Facebook’s and Google’s. Facebook, in a preview of how the industry will battle its adversaries, has simultaneously called for some form of regulation while darkly warning of the unintended consequences of the wrong kind. (One argument certain to get Donald Trump’s attention: Regulate us too severely, and you’ll only empower our Chinese competitors.)
The situation is fluid, but it’s clear that legislators, regulators, and consumer advocates are fed up with big tech companies and that some form of stricter control almost certainly is coming. What’s more, in the U.S., regulating Big Tech might be the one subject that bridges the ever-widening political divide. Says a top policy executive for a major tech player: “This is where the libertarian right meets the populist left.”
At the highest level, the industry faces the once unthinkable notion that it needs an overarching regulator. In the U.K., the opposition Labour Party has proposed creating a single digital regulator. The idea is gaining traction in the U.S. too. “This is like mortgages: In the right hands, they’re a tremendous benefit,” says Fiona Scott Morton, an economics professor at Yale. “But I can sell an exploding mortgage to a lower-income person and ruin their financial life. Most people would say they like mortgage regulation.”
The area most likely to see fast action is privacy. Last year the European Union began implementing its General Data Protection Regulation, a broad measure that gives individuals rights over their data. California then added a hastily crafted Consumer Privacy Act, due to take effect in 2020. The business community so thoroughly dislikes the California law that there’s broad agreement on passing federal legislation in Washington to preempt that and other potential local directives, possibly this year. “This is one area where it doesn’t make sense to have a patchwork of laws,” says Michael Beckerman, CEO of the Internet Association, a 45-member trade group that counts all the major non-hardware digital players as members. “It’s almost like having different electricity standards between states.”
If privacy legislation is most likely to happen soon, a bevy of more complicated issues will be addressed more slowly. A rethinking of decades of antitrust law could have the most impact on the biggest tech players, particularly Amazon, Facebook, and Google. Breaking up these giants would require a new approach, widely known as “hipster antitrust” theory, which focuses on the harm the companies cause to competitors rather than on higher consumer prices, as traditional antitrust law does. (After all, big tech players usually lower prices for consumers—or charge them nothing at all.) “We’ve got to stop using the word ‘monopoly’ and start using the word ‘anticompetitive,’ ” says Roger McNamee, a longtime Silicon Valley investor who has become an adversary of big tech, particularly Facebook.
The behemoths won’t go down without a fight, of course. Their massive balance sheets can fund endless lobbying, the public tends to love their (often free) products, and the fractious political climate works to their advantage. Yet there’s an air of inevitability about regulation. It is becoming a question of when, not if.