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The US needs antitrust law for the 21st century

 |  May 15, 2019

By The editorial board, Financial Times

Facebook’s chief executive Mark Zuckerberg recently called for the US government to be more proactive in regulating social media. His former dorm mate Chris Hughes went a step further last week.

Mr Hughes wants to break up the social network he co-founded. The controversies surrounding Facebook point to a broader need for a new competition law. At a time when governments in Europe are already moving against Big Tech’s excesses, the US should take the chance to reform its own outdated rules. In his article, Mr Hughes excoriates Mr Zuckerberg for chasing profits over user security.

The Facebook co-founder is alarmed by Mr Zuckerberg’s ability to decide what millions of people read via the network. Mr Hughes goes on to criticise the US government for its relative inaction, emphasising that fining Facebook or instituting new privacy rules is insufficient. In calling for the company to be broken up, Mr Hughes rejects the school of competition law dominant in the US since the 1980s.

This views pricing as the only metric for assessing competition. Such a narrow focus collapses when applied to Facebook and other Big Tech firms, which provide services for “free” in return for taking users’ data, rather than their cash. Mr Hughes instead draws on the “new Brandeis” school of antitrust thinking, as proposed by the lawyer Lina Khan or Senator Elizabeth Warren. Proponents argue that regulators should return to a 19th century conception of “welfare”, tied to democracy, power and the political economy. Facebook epitomises the dangers of data oligopolies, with its plan to tie WhatsApp, Facebook and Instagram into a single encrypted messaging system.

With control of three major platforms, it can use metadata such as contacts or external pages to provide useful data to advertisers and to train algorithms. New competitors without access to these data reservoirs will inevitably struggle to compete. In the past, Big Tech firms have simply acquired them and folded them into their business or copied their ideas at scale.

The data rich get data richer, even though there is no apparent cost to consumers under current competition law. As Mr Hughes also argues, a lack of competition makes it harder for consumers to hold companies to account for privacy failures. In March Facebook revealed it had stored hundreds of millions of passwords insecurely.

This week, the Financial Times reported on a vulnerability in WhatsApp that allowed attackers to surveil users. Europe is ahead in modernising its antitrust laws. In February, Germany blocked Facebook from pooling cross-platform data without user consent. In the UK, the Report of the Digital Competition Expert Panel called for greater scrutiny of tech mergers and for data sharing with smaller firms. Yet as the report pointed out, the US government is key.

Without changing how US competition law functions, Facebook and other data oligopolists will continue to dominate. New antitrust laws should be developed with care. Ill-designed regulations may inadvertently entrench the power of incumbents. Regulation should also account for the different business models which underpin tech giants, which do not all use data in the same way. Sweeping efforts will be ineffective at ensuring competition across the tech sector. Issues such as misinformation and hate speech will also require attention.

Nevertheless, the US government has the chance to moderate the power of a few companies over millions of users. Data oligopolies and the silent stifling of innovation may be difficult to see and measure. But they are far from harmless.

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