The Wrong Regulation of Big Tech Could Make Things Much Worse

The Wrong Regulation of Big Tech Could Make Things Much Worse
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Tech legislation is often weakly crafted, exposing the ignorance of lawmakers and leaving behind loopholes for wrongdoers. It starts with the small stuff and gradually ratchets up in severity. Industries do see the problems or complications that they’re creating. Many good people are willing to cooperate with a structure of limitations, provided it is clearly defined and fairly enforced. But they need to rest assured that other market participants will abide by the same rules. Clumsy loopholes allow unethical competitors to gain advantage and secure dominance, at the expense of those trying to read between the lines and do the right thing. In this way, laws aimed at bolstering ethics could have the unintended consequence of making the industry less ethical. The devil is in the detail.

Consider the CAN-SPAM Act of 2003. It was a noble effort to halt the new and rising problem of spam, but its usefulness relies on FTC enforcement and there is a lot of wiggle room. The FTC’s business guidelines suggest that commercial entities should tell recipients how to opt out of receiving future email, with a clear and conspicuous explanation. The instruction should be “easy for an ordinary person” to understand. Evidently, spammers know different ordinary people than the rest of us. The FTC guidelines also note that “creative use of type size, color, and location can improve clarity.” But font creativity can also be used for obfuscation. Most problematically, the FTC says that “you may create a menu to allow a recipient to opt out of certain types of messages, but you must include the option to stop all commercial messages from you.” This has been exploited in full. Companies routinely structure their opt-out messages in such a way that users skim and intuitively feel they are opting out of all messages, when they are actually unsubscribing from one of twelve vaguely differentiated flavors of marketing.

Some of my colleagues have argued that a more granular preferences center actually empowers the consumer and shows respect for their role in a value exchange. However, the opt-out process is often tedious and deceptive. This commercial deceit is also “empowered,” by legal ambiguity. Forthright businesses suffer the disadvantage of their good behavior.

Considering that something as basic as spam still eludes crystallized legislation, how much faith can we put in Elizabeth Warren’s recent proposal to break up big tech? Warren believes that tech mergers, such as Facebook’s acquisition of Instagram, have limiting effects on industry competition. But limiting the exit strategies for startups isn’t fair, either. It penalizes founders who have invested their blood, sweat, and tears, as well as the venture capitalists who take on massive risk in order to get 10X, or greater, returns. The underpinning investment philosophy of VC contains an understanding that a significant number of investments will fail or break even, but one “unicorn” could make it all worthwhile. Sometimes, these results depend on an acquisition. Traditional, risk-averse and by the numbers investors would never be able to stomach that approach. Senator Warren could severely damage current models of innovation in the United States. What would replace those models? Will a “Democratic socialist” government step in to support startups? See “Solyndra” for a case study on how that might pan out.

This is not to discount the need for tech regulation entirely. Data breaches and scandals indicate a strong need for vigilance and more interested parties. Even our election infrastructure remains critically vulnerable.

We also need to acknowledge that the internet is a center for civic engagement. When corporations determine policies, they aren’t simply setting the terms of their business in a secular way. They are shaping democracies and global politics.

People rely on tech giants for political information and organization. So, what happens when the sector misbehaves, or when an internet giant bars that political participation?

Google recently announced that it will ban political ads in Canada because it doesn’t want to deal with complications stemming from the federal government’s new transparency laws. Bill C-76 is an omnibus bill that requires ad purveyors to track political ads with a registry or else face fines. The intent is to detect signs of foreign influence and keep everything above board. Instead of abiding by this, Google stated, “We’re focusing our efforts on supporting Canadian news literacy programs and connecting people to useful and relevant election-related information.”

Digital-centric young people turn to search engines when they’re trying to connect with political content, even if it’s localized. Overworked people also rely on tech because they need quick answers and have time limitations. Maybe a retired person might be more inclined to notice a bulletin or event in a community center, or pick up a physical newspaper and see a print ad. Therefore, Google is not merely bowing out of the political process in a manner that will produce equal effects. It is actively disrupting a particular demographic and any corresponding political leanings.

There is also an enormous contradiction underlying Google’s position here. The company claims that it simply didn’t have the lead time to figure out ways to be in compliance with this bill. They said they wouldn’t be able to detect ads of a partisan nature due to the fact that such ads might not specifically mention a candidate or party by name. They also said that ads are sold automatically in real-time, which further complicates their ability to identify them. Okay. On the surface, this seems valid... But then, it was reported: “Google will modify its ad policies and systems to block advertisers from running ads that fall under the definitions set out in C-76.” What? If they can identify the ads in order to block them, why can’t they identify them in order to track them, in compliance with the law?

Google was famously founded with the mandate “don’t be evil.” But doing nothing sometimes allows evil to triumph, as the proverb goes. Colin McKay, Google Canada’s head of public policy and government relations, said, “We’ve come to the decision that the best way for Google to comply with the Elections Act in the 2019 election cycle is actually to stop accepting elections ads as defined in the legislation.” Is that compliance, or a neglect of corporate citizenship?

When companies reach a certain size, they become political actors, regardless of whether that was their original intent. If Google overlooks its civic duties, Senator Warren, progressive leaders, and aggressive European regulators might be able to inspire more people to join their side. This could turn out badly. Some of these leaders haven’t demonstrated the prerequisite knowledge for tech regulation.

Revolving doors sometimes supply governments with up-to-date industry knowledge. But the practice also creates conflicts of interest. This doesn’t mean that we should default to ignorant, ideologically-driven politicians, who lack intellectual curiosity and a respect for capitalism.

 

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