Many conservatives tired of having their views/content removed by Big Tech companies are advocating for more regulation in the hopes of coercing these companies to stop removing conservative content. Others advocate for using anti-trust to break up these companies. Conservatives have always stood for limited government and freedom. Now is not the time to give up on that commitment. As Margaret Thatcher said, "This is no time to go wobbly". Besides philosophical reasons, there are also adverse practical effects which I will discuss in this paper.
Opponents of Section 230 claim that "platform liability protection" is a "gross exception to American publishing standards". They claim that "websites are shielded by the rule from legal risks in ways that other editorial broadcasters are not." However, this is not true, rather than being "an aberration that bucked prevailing US legal trends", statutory platform protections simply codified legal developments. For a huge portion of the 20th century, "the courts chipped away at the previous strict liability regime in favour of one based on faults by publishers and distributors". Educated, middle class readers demanded more specialised coverage from journalists. The wire news services grew in response to this demand and offered local papers "niche stories" they otherwise wouldn't have been able to cover. In the case, Layne v. Tribune a Florida newspaper printed a wire service story that had defamatory content. The state supreme court found "that the local paper was not strictly liable because it was impractical to expect newspapers to vet and verify the content of wire dispatches." If newspapers already had information to verify content, why would they need the wire service? This was eventually called the "wire service defense"; "it created a precedent that a distributor is only liable if it acted in a negligent, reckless, or careless manner in reproducing a story". This means that if "a distributor actively contributed to a harmful story"; he/she could be found at fault. But the mere act of allowing a story to run, even if a distributor has discretion, is not enough to create liability." Eventually other courts expanded this to cover radio broadcasts, non-wire news publications and television. Then decisions in the 1990s changed the situation.
In the Case Cuby v. Compuserve (1991), a federal judge found that Compuserve (an online service provider) "could not be held liable for alleged defamatory content posted by a third-party newsletter". It was found that Compuserve, "which did not moderate the newsletters' automatically uploaded content, was the distributor of third-party content not unlike a news vendor or public library rather than a publisher." In the case, Stratton Oakmont v. Prodigy, a few years after this, a New York Supreme Court Judge found that "Prodigy Services (which did engage in content moderation) could be considered the publisher of third-party content. "Prodigy was an online bulletin board in the early days of the internet that used software to filter profanity from its pages." A user on Prodigy posted pejorative comments about the investment firm Stratton Oakton. Stratton Oakton managed to successfully sue Prodigy for $200 million. According to the court's ruling, Prodigy's "efforts to remove obscene content made it a publisher" which means that it was responsible for not removing the defamatory content the user had posted online about Stratton Oakton.
A party could either engage in content moderation and be considered a publisher of third-party content or not engage in content moderation at all, in other words, "take a hands-off approach to third party content" and be considered a distributor. Taking a hands-off approach might save an internet service provider from lawsuits or legal liability but this would mean that the internet service provider's platform would be laden with pornography, murder photos and photos of animals being tortured to death. The downsides of this would be apparent to anyone who wishes to produce "a family-friendly service." Although, the provider might think it is desirable to take down such content, the story changes if the provider's service is going to be considered "the publisher of third-party content." If the service is considered "the publisher of third-party content", this would mean that every piece of third-party content would have to be reviewed or screened before it appeared on the service. "This effectively prohibits an internet with useful third-party upload functions and services."
Section 230 was written to solve this Moderator's Dilemma" that developed due to these court cases "dealing with alleged defamatory content posted by third party users of online services."
The section nullifies the prodigy ruling and states "no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." This means that websites will not be considered the publisher for the "vast majority of content users upload". Also, interactive computer services "cannot be held civilly liable for any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected." This means interactive computer services "cannot be held liable for removing third party content, even if that content is protected by the First Amendment."
Practical Effects of Completely Abolishing Section 230
Section 230 actually helps rather than harms companies who want to compete against Google and Facebook since they do not have to raise money for potential lawsuits. These increase in number as a service grows more popular. A good example of this is the video-sharing site BitChute which would likely would not have been able to take-off if it had had to raise money for potential lawsuits. Gab, a far-right social media website would also likely have not taken off. "Full30, a firearms friendly alternative to YouTube, is more vulnerable to suit than YouTube." Changes to section 230 "will fall hardest on competitors."
If Section 230 is done away with, social media companies could choose to adhere to a no moderation standard out of fear that they (like Prodigy) would face liability for content not removed by them. It is rational to be worried about missing something as every minute 147,000 photos are uploaded on Facebook, 319 news users join Twitter, 347,222 stories are posted by Instagram users and 500 videos are uploaded on YouTube.
The other option would be to "ratchet up" content moderation and adhere to "a no mercy standard." If the past is any indication of what the result of this choice will be, it does not bode well for conservatives as conservative speech online might be disproportionately affected. For example, it is possible that individuals might choose to sue Facebook claiming that a pro-life advertisement made them feel "unsafe".
Potential Proposals
Senator Hawley's "Ending Support for Internet Censorship Act" requires "tech companies to moderate content without political bias as a condition of civil immunity". This means a tech company would only receive Section 230 protections if it did not moderate content in a political biased fashion.
The bill defines the term moderate as "influencing or altering content in a manner that is designed to negatively affect a political party, political candidate, or political viewpoint" or "disproportionately restricts, or promotes access to, or the availability of, information from a political party." The restrictions placed on content moderation apply to the use of algorithms or any other automated processes and also apply to officers and employees "motivated by an intent to negatively affect a political party, political candidate, or political viewpoint." "The threshold for immunity certification is also problematic because an inability to prove neutrality is not proof of bias. What would be considered a disproportionate response and in comparison, to what? Also, how would the FTC commissioners determine if algorithm outcomes are purposefully biased when they result from multiple factors at a particular time.
The bill would leave it up to five FTC commissioners to decide which "large social media sites deserve Section 230 protection." This has the potential to be abused for partisan reasons. The five political appointees are not answerable to Congress or the President and "could effectively control civic discourse online." The parameters of neutrality could change as often as commission membership changes. This bill would burden all except the biggest platforms and give extra advantages to already incumbent dominant companies, reducing competition. Former FTC Commissioner Josh Wright said, "this bull quite literally injects a board of bureaucrats into millions of decisions about internet content. This is central planning. Full stop." This bill would lead to the establishment of a large administrative bureaucracy as companies covered under the bill would need to get an "immunity certification". Conservatives are for limiting government's size not expanding it.
Companies covered by the bill are those with "more than 30 active million US monthly users, 300 million worldwide users, or $500 million or more in global revenue". This would facilitate the growth of the largest companies and increase their influence over online discourse. Any upstart competitors that got close to reaching any of these figures would have an incentive to sell to larger competitors who already have the compliance personnel to deal with the bill's regulations.
Another Hawley Proposal is called "The Limiting Section 230 Immunity to Good Samaritans Act". Section 230 provides "Protection for 'Good Samaritan' Blocking and Screening of Offensive Material." The proposal would "amend the Communications Act of 1934 to provide accountability for bad actors who abuse the Good Samaritan protections provided under that Act, and for other purposes." There is no definition of "Good Samaritan", "abuse" or "bad actors" which means the terms are subjective when considered in regard to Section 230. Consequently any decisions on content moderation would also be subjective. The bill "essentially disincentivises moderation at the margins for fear of exposure to liability". Companies would be disincentivised from removing "offensive and objectionable content" that previously was not on the platform. This bill would again only apply to the largest web services which would have the same consequences as discussed for the previous bill.
The Stop the Censorship Act would "limit moderation of 'objectionable' content by only granting immunity when companies act in 'good faith' to remove 'unlawful content'. It would not matter if moderation was non-biased politically, a company could only remove unlawful content meaning social media pages could potentially be filled with "hateful, violent, and sexually explicit content". This was the very problem Section 230 was written to combat. There has also been discussion of imposing a duty of impartiality on social media companies in the British government.
Replacing negative rights with positive rights would lead to "a significant drop-off in investment and innovation in the sector". Under a positive rights framework resources have to be distributed in a specific way. This means that companies and their investors "no longer enjoy complete property rights, which are integral to investment". Positive rights obligations would also use resources which could otherwise be used for risk-taking which is necessary for innovation.
It is extremely dangerous to make common cause with those on the left who would like to engage in content or operational regulation. Remember, it is the left who has more to lose by not regulating as the internet is the only cultural medium that is not almost completely dominated by liberal perspectives. There is an "ideological liberal near-monoculture at publicly funded universities, major newspapers, and networks, the vast pre-existing administrative apparatus in the federal government-and in management and corporate culture for most of Silicon Valley for that matter… Any expansion of federal agency oversight of Internet content standards stand ultimately to be repurposed to the aims of the left in the long run". Administrative agencies are dominated by liberals, apart from an occasional free-market oriented appointee, the meaning of political neutrality or criteria for "a certification of objectivity" will be very different for them than what the meaning is for Josh Hawley. Liberal content will be considered objective and non-biased. Observe the claims of NPR that it is non-biased during fundraising efforts. An interactive computer service biased to the left would have no problem meeting the standard of "proving to the Commission by clear and convincing evidence that the provider does not…moderate information provided by other information content providers in a politically biased manner".
It is important to remember that any neutrality mandate will also affect the right of conservatives to discriminate on "potentially dominate alternative" platforms of the future. Just like Google and Facebook displaced old leaders, it is possible for this to happen again.
Regulation could also stifle future private efforts to create "sophisticated user tools and databases." "One size fits all" government solutions will stifle "the evolution and competition that need to happen among platforms". There could be competition for degrees of openness, insularity, authentication, anonymity and "other competitive disciplines".
The Fairness Doctrine - A Warning from the Past
The record of government to impose fairness is not one to be optimistic about. In 1949, the FCC imposed the Fairness Doctrine where broadcasters were required to "afford reasonable opportunity for the discussion of conflicting views of public importance." The result of this was that broadcasters chose to completely avoid controversial topics as fairness is not something that can be proved and is an imprecise concept. Consequently, the public was left less informed. In 1971, the FCC declared that it could withdraw radio broadcasting licenses if stations aired "music associated with drug use". It stated that failure to monitor lyrics would mean "a violation of the basic responsibility of the licensee's responsibility for… the broadcast material presented over his station. It raises serious questions as to whether continued operation of the station is in the public interest." One station removed all Bob Dylan songs because management couldn't interpret the lyrics. Other stations removed all content with even a mention of drug use, including anti-drug messages out of fear of having their licenses revoked.
In the 1960s, conservative radio surged because of the proliferation of non-network, independent radio stations who were in need of more money and thus were prepared to air political views that would be considered too radical by network radio. The result of this was constant attacks on the Kennedy administration's policies such as the "failure to provide air support at the Bay of Pigs, opening trade with Eastern Bloc nations and ratifying the Nuclear Test Ban Treaty." The administration used targeted IRS audits to challenge the tax-exempt status of offending broadcasters and thus stop the flow of donations to them. After this, it selectively applied the Fairness Doctrine which pressured station owners to completely drop conservative programming. This was managed from the Oval Office and the Attorney General's office and some of it was even caught on tape. Instead of adding liberal points of view, they eliminated the conservative programs and instead just avoided any controversial content or content "that touched on hot button issues". However, if the controversial issues were still aired, any "disagreement over that issue" was framed "as a binary option between mainstream, respectable points of view". The result of this was an extreme underrepresentation of both left-wing and right-wing radicals. The FCC chairman announced a clarification of the Fairness doctrine and when he announced the kinds of speech that would be targeted, only conservative positions and rhetoric were identified.
The White House organized a front organization. "the Citizens Committee for a Nuclear Test Ban Treaty that had the ability to lodge "Fairness Doctrine-based complaints for response time" whenever a conservative broadcaster criticized the Nuclear Test ban Treaty. An enhancement of the Fairness Doctrine was passed by the FCC (the Cullman Doctrine) which forced stations to give response time slots based on the responding group's paying for the airtime and for free to interest groups who said they could not pay. Criticism of the treaty had successfully been "blunted".
During the 1964 Presidential campaign, the Democratic National Committee "commissioned a tram of operatives" that included a former FCC lawyer who was previously in charge of enforcing the Fairness Doctrine "to garner free pro-Lyndon Johnson airtime any time a station aired broadcasters who spoke of their support for Barry Goldwater." The lead operative later said that the Fairness Doctrine Campaign had garnered higher than 1700 free broadcasts boosting Johnson and was very effective at "inhibiting the political activity of these Right-Wing broadcasts."
A look at history shows how conservatives have managed to challenge liberal domination of media, through deregulation. Conservative command of talk radio started after the FCC stopped enforcing the Fairness Doctrine in 1987. In a year, Rush Limbaugh's radio show was syndicated and by 1991 it had become "the top show in syndication."
In 1992, Congress relaxed ownership rules, allowing a single company to own two stations per market. Consequently, conservative investors were able to "increase their station holdings". In 1996, the Telecommunications Act further reduced ownership restrictions.
It is important to remember that the internet is not the radio-spectrum, there is no issue of scarce broadcast frequencies having to be rationed. The justification for the Fairness Doctrine was the scarcity of broadcast frequencies, however, there is no such issue with the internet which is unlimited.
In his veto of the Fairness Doctrine, Ronald Reagan wrote, "In any other medium besides broadcasting, such Federal policing of the editorial judgement of journalists would be unthinkable… The FCC found that the doctrine in fact inhibits broad casters from presenting controversial issues of public importance, and thus defeats its own purpose…I recognise that 18 years ago the Supreme Court indicated that the fairness doctrine as then applied to a far less technologically advanced broadcast industry did not contravene the First Amendment. Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969). The Red Lion decision was based on the theory that usable broadcast frequencies were then so inherently scarce that government regulation of broadcasters was inevitable and the FCC's "fairness doctrine" seemed to be a reasonable means of promoting diverse and vigorous debate of controversial issues. The Supreme Court indicated in Red Lion a willingness to reconsider the appropriateness of the fairness doctrine if it reduced rather than enhanced broadcast coverage. In a later case, the Court acknowledged the changes in the technological and economic environment in which broadcasters operate. It may now be fairly concluded that the growth in the number of available media outlets does indeed outweigh whatever justifications may have seemed to exist at the period during which the doctrine was developed. The FCC itself has concluded that the doctrine is an unnecessary and detrimental regulatory mechanism…Quite apart from these technological advances, we must not ignore the obvious intent of the First Amendment, which is to promote vigorous public debate and a diversity of viewpoints in the public forum as a whole, not in any particular medium, let alone in any particular journalistic outlet. History has shown that the dangers of an overly timid or biased press cannot be averted through bureaucratic regulation, but only through the freedom and competition that the First Amendment sought to guarantee.
Television
For many years, the FCC prevented competition to the three national television networks which were liberal. However, over time restrictions eased. In 1972, HBO became the first "pay-TV network" in America. This stimulated swift development of satellite transmissions. After the Deregulatory Cable Act of 1984, investment in cable hardware and programming increased substantially. From 1984 to 1992, upwards of $15 billion was spend by the industry on "wiring America". The Telecommunications Act of 1996 also led to greater consumer choice. Due to the continuous deregulation taking place, investors decided to deploy broadband networks which gave cable companies the means to "offer higher-speed Internet and competitive telephone services". In 1996, Fox News (the conservative answer to left-wing CNN) was introduced to the American public and by 2002 it reached the top of the cable news ratings and has never lost the spot. The arrival of MP3 players, Internet radio, smartphone applications and music subscription services has coerced radio stations to change from music to the talk formats in which conservatives rule. An example of this is the Sinclair BroadCast company which was started in 1986. It has gone from only three stations to 191 in 89 different markets and is now among the biggest broadcasters in the US. As technology advances, conservatives will have many other avenues to communicate with the public.
Imagine if the old regulatory framework still existed today, how would the Daily Show with Trever Noah or the Late Show with Stephen Colbert exist if every time President Trump was criticized, the network would have to give the Trump administration free response time. Single point-of-view editorial shows ranging from Rachel Maddow to Tucker Carlson would be much less common because of the requirement to give airtime to juxtaposing viewpoints. The reason these programs exist today is the 1970 decision "to exempt satellite and cable broadcasting from the kind of close regulatory scrutiny applied to network broadcasters."
The Dangers of a Public Interest Standard
Liberal, Slate journalist April Glaser advocates for an application of middle 20th century rules governing radio and television broadcasting to the internet. One of the most important rules (laid out in the 1934 Communications Act) said that broadcasting had to be done in the "public interest, convenience, and necessity". This mandate inspired progressives at the FCC to implement the Fairness Doctrine in 1949.
Ayn Rand called the public interest standard an excuse "covering the right of some men (those who, by some undefined criterion, are the public) to sacrifice the interests of other men (of those who, for unspecified reasons are not the public)." This was a response to then FCC Chairman Newton Minow who called television a "vast wasteland" and advocated for limits to be put on the number of game shows, Westerns and cartoons broadcasted. Minow said "a steady diet (of westerns and private eyes for the whole country is obviously not in the public interest…I like westerns and private eyes too--but a steady diet for the whole country is obviously not in the public interest." The matter is not whether he was right or wrong about the merits of certain cartoons, even if he was right, individuals should be free to choose not some paternalistic government.
However, this is not even close to the most unsettling aspect about the dangers of the public interest standard. In the 1940s, President Roosevelt banned newspapers from owning radio stations, allegedly because of the public interest in "preventing cross-media consolidation." However, the more probable reason was to block anti-New Deal newspaper owners from possessing a radio platform to air their views which were critical of his policies.
Anti-Trust
Many politicians both in the UK and the US, concerned that conservatives are being censored on media have turned to anti-trust as a solution. The purpose of anti-trust is to "preserve market competition and promote consumer welfare". In late 19th and early 20th century America, there were concerns about the dominant market power of the biggest railroads and oil companies. For this reason, laws were enacted which empowered the government "to intervene and protect healthy market competition."
It is difficult to find a market that one of the big three tech companies: Google, Apple and Facebook monopolises. Apple's iOS has to compete against Android in the mobile market. In addition to Facebook there are many other social networking and messaging sites. There are lots of different places to advertise online. Additionally, tech has to compete with some offline options such as traditional media. There is no doubt that they are extremely successful, but they do not meet the traditional definition of monopoly. Technology is still very dynamic. In the past, companies that seemed unstoppable have been replaced by new competitors or have even been compelled to move to a completely different service. Market dynamism not multi-decade rulings or legal settlements in response to the DOJ's (Department of Justice's) antitrust cases against IBM and Microsoft undercut the power of their "alleged anti competitive conduct".
While Generation X and Millennials embraced Facebook and Google, Generation Z is already embracing Snapchat and other tech competitors. In the case U.S. v. Microsoft, the US Court of Appeals said "to be condemned as exclusionary. A monopolist's act must have an anti competitive effect." This means that it has to harm the competitive process and consequently hurt consumers. Just harming competitors is not enough. Antitrust law is supposed to protect competition/the competitive process. It is not supposed to go after any company that out competes its rivals as this would do the opposite of its purpose which is to protect competition/the competitive process.
"Early anti-trust law was inconsistent and unpredictable, and reflected a desire to protect small businesses and achieve vague social and political objectives." Many scholars, mostly from the University of Chicago "developed a principled and workable framework to consider antitrust questions." Their work (including Robert Bork's 'The Antitrust Paradox) played an important role in the moulding of modern anti-trust doctrine. According to scholars Geoffrey Manne and Justin Hurwitz "For Bork, the paradox of antitrust law is that antitrust law, meant to shield consumers from anti competitive business practices, had come to be used to shield competitors from competition, at the expense of the consumer's welfare". In the view of these scholars, antitrust law should primarily be concerned with economic welfare not "vague non-economic objectives" and it should also protect consumers from anti competitive behaviour. This approach was victorious when in 1979 the Supreme Court, referenced the Antitrust Paradox and came to the conclusion that "Congress designed the Sherman Act as a 'consumer welfare prescription.'" Now, it is commonly accepted that antitrust law's purpose is to advance consumer welfare.
There are some individuals who have a worldview that big business is bad in and of itself. This includes Supreme Court Justice Brandeis, neo-Brandeisans and the far left. In their opinion, antitrust should go after big business because "big businesses and high concentration of power within an industry" is a problem. At the root of this view is the notion that government can discern what size businesses in a specific industry should be or what the concentration level should be. On the other hand, antitrust law rejects this mentality of "big is bad". However, these neo-Brandeisians want to go back to the failed approach of the past. They want antitrust not to just look at competition and consumer welfare but also beyond that to issues like labour rights and political corruption.
A disadvantage of breaking up companies is that it is possible that smaller entities will not have enough of the resources they had previously for security and moderation. They also would have to generate revenue on their own as there would no longer be any subsidisation from the parent companies. Imagine if Instagram was made independent from Facebook, it is a real possibility that its news feed would be cluttered with ads to generate enough revenue. This may lead to "problematic financial incentives driving the popularity of 'fake news' and other practices concerning user privacy".
"As all-encompassing as today's social media platforms seem, they are only a snapshot in time, prominent parts of a virtually boundless and ever-changing Internet and media landscape".
Robert Bork wrote "Antitrust is valuable because in some cases it can achieve results more rapidly than can market forces. We need not suffer losses while waiting for the market to erode cartels and monopolistic mergers." This concedes that eventually the market destroys monopolies. However taking action using antitrust instead of waiting for the market to erode monopolies naturally may actually cause harm in the long run.
"An enforcement action now could have a deterrent effect on future mergers, contracts, and innovations, including in unrelated industries. The consumer harm from these could well exceed the short-term benefits of a short-term improvement on market outcomes—assuming that regulators are consistently capable of such a feat." The IBM v United States case went on from 1969 to 1982. By the time 1982 arrived, the computer market was very different from what it had been before, IBM's competitors had overtaken it a long time ago. Eventually regulators gave up. It is possible that IBM might have developed "a consumer benefiting innovation" if it had not had to spend all the money, resources and time in defence of itself in the case. No one will ever know.
Network Effects
The larger the number of people using a good or service, the more are the benefits of the good or service. A good example of this is Facebook, as more users join Facebook it becomes more valuable. This is called a "direct network effect". In other words when the number of users increases on one side of the market (in this case Facebook users) there are increased benefits. The higher the number of users on Facebook, the more attractive Facebook becomes to advertisers. This is an example of an "indirect network effect." In other words when the number of users increases on the other side of the market (advertisers are on one side and users are on the other side), the platform becomes more appealing to advertisers.
Although network effects provide a challenge for those seeking to compete against incumbents, these are by no means insurmountable hurdles. According to Professor Catherine Tucker of the Massachusetts Institute of Technology, "Social networks, ride-hailing apps, or digital marketplaces do not depend on any one type of hardware, and as a consequence it costs very little for users to try new ones out. Having five different social media apps on my phone is not a problem at all. Having five different desktops with different operating systems, on the other hand, is clunky…. These examples remind us that network effects only really work as a source of competitive advantage if your product is also "sticky." Scale will not bring future competitive advantage through network effects if your customers can all leave tomorrow."
Network effects can also work in the reverse direction. Previously economists focused mostly on physical connections like telephones where switching was harder due to the presence of physical connections and equipment. However, it is much easier to switch on online platforms. Individuals can try an alternative platform for free and without leaving the one they are already on. If they like it, they can eventually move to the other one. Joining or leaving a platform is done in a few clicks. It is flawed reasoning to think that people will not join another network because most of their personal network is not on it and consequently the incumbent "successful communications platform" would be shielded from competition. This is because people can use multiple platforms; this is called "multi homing". If enough people try a platform and like it, then it is possible for the rest of the network to move over to the other platform and even drop the initially used platform. AOL, MSN Messenger, Friendster, Myspace and Orkut used to be at the top but then declined rapidly and were overtaken by Facebook, Snapchat, WhatsApp, Line and others.
"Systematic research on online platforms by several authors…shows considerable churn in leadership for online platforms over periods shorter than a decade. Then there is the collection of dead or withered platforms that dot this sector, including Blackberry and Windows in smartphone operating systems, AOL in messaging, Orkut in social networking, and Yahoo in mass online media."
Data
There is a lot of concern that incumbent big tech companies' possession of large amounts of data gives them an advantage that makes it extremely hard for new entrants to overcome. However, success is not just dependent on how much data you have but how you make use of that data. Dominant platforms cannot stop competitors from gathering data, even the same exact data. Just like public goods, data are non-rivalous which means "the supply does not decrease as consumption increases and non-excludable which means "it is available to all."
According to the Economist "the world's most valuable resource is no longer oil, but data…With data there are extra network effects. By collecting more data, a firm has more scope to improve its products, which attracts more users, generating even more data, and so on." History proves that this does not necessarily end competition. AOL, Friendster, Myspace, Orkut, and Yahoo had a lot of data on users. In the cell phone arena, Blackberry and Microsoft had data. In search engines, AltaVista, Infoseek and Lycos had data. In browsers Microsoft had data. In all of these instances data did not "give the incumbents the power to prevent competition". Also, there is no "evidence that their data increased the network effects for these firms in any way that gave them a substantial advantage over challengers". Firms that have had no data at the start have managed to displace leaders. When Facebook launched in India in 2006 it did not possess any data on Indian users because it possessed no Indian users. At this time Orkut was the most popular social network in India and had users in the millions and data on these users. Fast forward four years and Facebook was the leading social network in India. In 2011, Apple had more than 50 million users and downloaded music was being sold at a rapid rate of one billion songs every 4 months. Apple had data on individuals and their downloads while Spotify had nothing, no users and no data when it entered America the same year. Fast forward to the present and Spotify is the "leading source of digital music in the world".
When Myspace was Big Tech
The most relevant examples to concerns about Big Tech's censorship is Myspace which was founded in 2003.
In 2007, a TechNewsWorld article claimed that Myspace was a natural monopoly. The arguments made by the writers sound quite similar to those made about Facebook. The writers said that network effects pushed social networks to monopoly status. The time invested uploading content and the increasing utility of the social network as more people joined made "Myspace's dominant position unassailable". At this time Myspace had the highest number of unique users of any social media platform including Yahoo 360, Friendster and Facebook.
After watching its rapid growth Rupert Murdoch decided to buy it in 2005 for $580 million. A few months later he agreed to an advertising contract with Google. According to the Financial times "within 15 months of the acquisition, revenues had leapt from about $1m a month to $50m a month." When June 2006 arrived, Myspace had overtaken Google as America's most visited site. According to Hitwise (an online web measurement firm), 73.4% of all social networking traffic took place on Myspace. At its December 2008 peak, the site had 75.9 million unique visitors in America only which was about 1/4th of the American population. The belief in
Myspace's market dominance was very widespread. In fact, LiveUniverse "brought and lost a case against Myspace alleging it had monopoly power". According to LiveUniverse, Myspace was engaging in exclusionary conduct because it "refused to deal with the firm". Today's tech giants are also sometimes accused of this.
Ironically when the TechNewsWorld article was written there was already a new kid rising on the block, Facebook. By the time 2008 arrived, Facebook had surged ahead of Myspace in the number of worldwide users. By the time 2009 arrived, Facebook surpassed Myspace in the number of unique US visitors. The Financial Times wrote that Myspace's market share fell to just 30% by the end of 2009. Facebook had "a more user-friendly interface" and "a less cluttered advertising space" which allowed "more onsite innovation" and drove the swift rise of user numbers. Facebook's adoption of an "email address importer tool" also helped in boosting user rates which lead to an "accelerating of its own network effects." Myspace never recovered. When 2016 came, Myspace had just around 15 million "unique global visitors per month". In February 2018, "global monthly traffic fell further to 7.6 million users per month".
The Department of Justice introduced a case against Google. It claimed that Google had "foreclosed the market for search by paying third parties to establish Google as the default search engine on their internet browsers, mobile devices and carriers". It is claimed that "the power of the default prevents competitors from achieving recognition and scale, depriving them of advertising revenue and thus perpetuating Google's monopoly. However, the fact is that companies in lots of markets pay for "prominent" product placement and in this case, there is nothing that is stopping Microsoft from doing the same thing for its search engine, Bing by outbidding Google. It is a real possibility that people stick with Google not because they find it difficult to find alternatives but because it is the best search engine. It only takes 20 seconds to change your search engine and funnily the most searched term on Bing is "Google" which may give some indication of customers' opinions of quality. It is obvious that Google is paying fees because it sees some benefit and there is no doubt that "default positions" have some effect on "market outcomes". However, the record shows that when better products are available, customers aren't very hesitant to switch. Consider this, 69% of all desktop users use Google Chrome as their browser even though it is not the default browser on either Apple's operating system or Microsoft Windows.
In the case of Google, it is important to identify the particular market being investigated. If given closer thought, it becomes evident that advertising and not "search" is the actual market. Google only has a monopoly if you consider "search advertising" as distinct and separate from other "display advertising" and advertising in TV, newspapers and radio. This could be argued but the paradox is that many Big Tech critics accuse Google and Facebook of destroying a lot of the newspaper industry by reducing its advertising revenues.
There is not much evidence that Google's actions are harming search engine users. Additionally, it is unclear how banning Google from giving money to Firefox (who competes with Google Chrome) or Apple (which already has an incentive to give its iPhone users the best search engine to enhance their experience) would boost consumer welfare.
In the aftermath of the release of a report from the UK Competition and Markets Authority that concluded "Facebook and Google unfairly dominate components of the digital advertising industry", US politicians interrogated the chief executives of Google, Amazon and Apple in Congress. Neither the report nor the politicians could provide evidence that consumers were harmed by the tech companies' actions. Instead, it was automatically assumed that any complaints made by competitors about the practices of these big three firms was the same thing as "competition being undermined". All these businesses compete against each other in multiple, different markets, including digital assistants, devices and streaming. The question is "whether each dominates any relevant product market, restricting competition to consumers' detriment". This is not as easy as it sounds. Although Google started as a search engine, it "competes for paid custom in digital advertising". An increasing number of people are using Google to obtain information on a destination, this includes using maps, flight bookings and videos. Facebook "faces more complex strands of competitive pressure". Effectively, it is in competition for any website that wants users' time, for example messaging, telecoms, news feeds, connection apps, review websites and many more. Each sub-sector has multiple competitors. Facebook's customers who actually pay are advertisers who have multiple other options as showcased by the recent boycott of Facebook by some advertising companies.
Although Amazon and Apple have a more easily identified "core market', even they compete in multiple markets beyond just the retail and phone sector such as e-books and operating systems. Additionally, they have actually contributed to more competition in many sectors by developing "rich digital ecosystems that give third parties the ability to sell goods or apps.
Acquisitions
The House Subcommittee recommended changes to Section 7 of the Clayton Act (which would affect mergers and acquisitions). The proposed changes would transfer the burden in mergers "by placing 'the burden of proof upon the merging parties to show that the merger would not reduce competition.'" In regard to acquisitions, the report "recommends strengthening the Clayton Act to prohibit acquisition of potential rivals and nascent competitors." The effect of this would be to make acquisitions a lot more difficult.
This is not necessarily beneficial to consumers as "mergers and acquisitions can benefit consumers by creating efficiencies in the market, lowering prices and improving goods and services, among other benefits." Private enterprise and not the government is in a better position to make decisions as private enterprises' decisions are shaped in response to the demands of consumers rather than "what some government officials think a market should look like".
Additionally, making acquisitions harder would harm entrepreneurs and the targeted companies. This is because "half of U.S. start-ups across the economy said that their most realistic long-term goal is to be acquired." If their desired exit strategy is made much more unlikely, this will dissuade entrepreneurs from starting businesses and discourage innovation.
A lot of politicians were worried about harm to the competitive environment because of "aggressive tech mergers and acquisitions" such as Google's purchase of YouTube and Facebook's purchase of WhatsApp and Instagram. However, paradoxically, these "measures enhanced real-world competition" by increasing the strength of competition faced by traditional TV and mobile companies. This may look like big companies buying up competitors to prevent competition, but this supposes that the acquired companies "would have done as well without the investment and expertise of their purchaser".Funnily enough, politicians were also concerned about more competitors in markets. They referred to examples where Amazon and Google used their acquired data to enter new product lines. There is a problem, it seems when Big Tech companies compete "with existing businesses through lower priced own-brand products".
As Reagan said, "Governments tend not to solve problems, only to rearrange them." Mandating viewpoint neutrality could work against conservatives in the long run. In many cases big Tech does not qualify as a monopoly (under the consumer welfare standard) and even if it did, breaking it up could lead to possible economic harm (which will not be known by anyone.) Prohibiting acquisitions is also harmful economically. Policymakers should reject government-imposed solutions. Government bureaucracy is never impartial or altruistic. Under the free enterprise system, consumers and investors can act based on their own information and preferences. There are penalties for any error in judgement which are both swift and strict. In a lot of cases, consumers and investors are able to inflict a lot more damage than any regulatory agency/regulator. Private individuals should take action by joining advocacy groups, communicating with company executives or joining competing services. As the historical record shows, deregulation has largely benefited conservative media far more than any regulation. Regulation could potentially stifle innovation, suppress free speech and lock in the dominance of incumbents for many years. Individuals could marshal public support and private resources to create alternative platforms. Parler is a good example of an alternative platform; a lot of conservative personalities have already joined it. Amazon recently decided to kick Parler out its cloud services but there are other hosting providers such as the right leaning Epik. It is also important to remember President Gerald Ford's warning, "A government big enough to give you everything you want is a government big enough to take from you everything you have."