Day: January 26, 2023

The best answer to TikTok is a forced divestiture 

As consumer advocates, we pride ourselves as standing for policies that promote policies fit for growth, lifestyle freedom, and tech innovation. 

In usual regulatory circumstances, that means protecting consumers’ platform and tech choices  from the zealous hands of regulators and government officials who would otherwise seek to shred basic Internet protections and freedom of speech, as well as break up innovative tech companies. Think Section 230, government jawboning, and consequences of deplatforming.

As such, the antitrust crusades by select politicians and agency heads in the United States and Europe are of primary concern for consumer choice. We have written extensively about this, and better ways forward. Many of these platforms make mistakes and severe errors on content moderation, often in response to regulatory concerns. But that does not invite trust-busting politicians and regulators to meddle with companies that consumers value.

In the background of each of these legislative battles and proposals, however, there is a special example found in the Chinese-owned firm TikTok, today one of the most popular social apps on the planet. 

The Special Case of TikTok

Now owned by Bytedance, TikTok offers a similar user experience to Instagram Reels, Snapchat, or Twitter, but is supercharged by an algorithm that serves up short videos that entice users with constant content that autoloads and scrolls by. Many social phenomena, dances, and memes propagate via TikTok.

In terms of tech innovation and its proprietary algorithm, TikTok is a dime a dozen. There is a reason it is one of the most downloaded apps on mobile devices in virtually every market and language. 

Researchers have already revealed that China’s own domestic version of TikTok, Douyin, restricts content for younger users. Instead of dances and memes, Douyin features science experiments, educational material, and time limits for underage users. TikTok, on the other hand, seems to have a suped-up algorithm that has an ability to better attract, and hook, younger children.

What makes it special for consumer concern beyond the content, however, is its ownership, privacy policies, and  far-too-cozy relationship with the leadership of the Chinese Communist Party, the same party that oversees concentration camps of its Muslim minority and repeatedly quashes human rights across its territories.

It has already been revealed that European users of the TikTok can, and have, had their data accessed by company officials in Beijing. And the same goes for US users. Considering the ownership location and structure, there isn’t much that can be done about this.

Unlike tech companies in liberal democracies, Chinese firms require direct corporate oversight and governance by Chinese Communist Party officials – often military personnel. In the context of a construction company or domestic news publisher, this doesn’t seemingly put consumers in liberal democracies at risk. But a popular tech app downloaded on the phones of hundreds of millions of users? That is a different story.

How best to address TikTok in a way that upholds liberal democratic values

Among liberal democracies, there are a myriad of opinions about how to approach the TikTok beast.

US FCC Commissioner Brendan Carr wants a total ban, much in line with Sen. Josh Hawley’s proposed ban in the U.S. Senate and U.S. Rep. Ken Buck’s similar ban in the House. But there are other ways that would be more in line with liberal democratic values.

One solution we would propose, much in line with the last US administration’s stance, would be a forced divestiture to a U.S.-based entity on national security grounds. This would mean a sale of US assets (or assets in liberal democracies) to an entity based in those countries that would be completely independent of any CCP influence.

In 2019-2020, when President Donald Trump floated this idea, a proposed buyer of TikTok’s U.S. assets would have been Microsoft, and later Oracle. But the deal fell through.

But this solution is not unique.

We have already seen such actions play out with vital companies in the healthcare space, including PatientsLikeMe, which uses sensitive medical data and real-time data to connect patients about their conditions and proposed treatments. 

When the firm was flooded with investments from Chinese partners, the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) ruled that a forced divestiture would have to take place. The same has been applied to a Chinese ownership stake in Holu Hou Energy, a U.S.-subsidiary energy storage company.

In vital matters of energy and popular consumer technology controlled by elements of the Chinese Communist Party, a forced divestiture to a company regulated and overseen by regulators in liberal democratic nations seems to be the most prudent measure.

This has not yet been attempted for a wholly-owned foreign entity active in the US, but we can see why the same concerns apply.

An outright ban or restriction of an app would not pass constitutional muster in the US, and would have chilling effects for future innovation that would reverberate beyond consumer technology.

This is a controversial topic, and one that will require nuanced solutions. Whatever the outcome, we hope consumers will be better off, and that liberal democracies can agree on a common solution that continues to uphold our liberties and choices as consumers.

Yaël Ossowski is the deputy director of the Consumer Choice Center.

Alcohol labeling and ban: Ireland in the dark path of Lithuania

European Union member states are busy regulating alcohol use and limiting consumer choice even though historically, it has shown that bans and limitations on use have had the opposite effect as had been intended.

There are two recent examples of strict alcohol regulations, both coming from countries where alcohol consumption is high. Hence, lawmakers believe that limitations are needed to decrease the number of drinkers.

Lithuania started down this road in 2017 when Parliament put the following into to law: they banned the advertisement of alcohol; the legal age to buy alcohol was raised to twenty; the opening hours for shops to sell alcohol was shortened; in restaurants, maximum alcohol content was maximized; and alcohol sale at sports events or on the beach is also restricted.

The measures have become very unpopular among consumers in the past years. However, there has yet to be a severe political movement to repeal the law. As usual with similar bans (think of the Prohibition in the USA a century ago), people have found ways to find loopholes in the system. Youngsters asking their older friends to purchase alcohol, people crossing borders to find alcohol in other countries after the ban hours, or the illegal sale of alcohol at houses are just a few examples of the creative ways people come up with.

At the other end of the continent, Ireland has been active in regulating alcohol sales. Recently, plans have been introduced to label alcohol products with possible health risks once consumed. The decision is very disadvantageous for Irish consumers who will be deprived of some of the best wines of Italy, France or Portugal, because it will just not be worth it for them to take on the costs associated with relabeling bottles for a market as small as Ireland. Both sellers and buyers will lose due to this decision.

We at the Consumer Choice Center condemn any alarmist measure that is unjustified but would have the effect of influencing consumers to make negative decisions. It worries us to see that politicians are jumping on the bandwagon of populistic legislation for unfounded reasons, as treating all responsible drinkers as if they drink excessively is anything but a sound decision.

The message from consumers to lawmakers when they are obsessed with regulating their lives is that they should finally be considered adults and not treated like children when they want to make their own choice. If problematic drinking is an issue of concern in either of these countries, then legislative action should be taken in a targeted way that focuses on those who struggle with substance abuse, rather than a heavy handed approach that treats all drinkers as if they are alcoholics. 

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