Tech Regulation

Will new EU digital regulations lead us to innovation or stagnation?

A recent event organised by the Consumer Choice Center looked at the role the Digital Services and Markets Acts will play in shaping Europe’s digital innovation future.

In December 2020, the European Commission presented the Digital Services Act (DSA) and Digital Markets Act (DMA). Both are aimed at regulating digital platforms, however, it remains unclear whether they will succeed in boosting innovation in the EU and ensuring fair rules of the game for all participants.

In particular, the DMA puts in place a series of ex-ante restrictions telling tech platforms how to behave and introduces a new “competition tool”. Although noble in its intentions, the worry is that the Act might fail to strike a balance between the need to incentivise European SMEs to innovate while preserving our freedom to choose services delivered by so-called “Big Tech” without excessive burdens.

On 3 March, the Consumer Choice Center hosted a high-level debate on the future of digital innovation in Europe and the role the said acts will play in shaping it. Below are some of the main points raised by our panellists.

“We need to ensure that the DMA doesn’t turn into an anti-American notion. The DMA must not be a protectionist tool used against companies from certain countries, and this is something I will keep an eye on as we move forward with the digital market reform. Digital innovation requires us to stay open, and this is only possible if we cooperate internationally, especially with our democratic partners such as the US. Small players will benefit from this too. However, safeguarding fair competition is pivotal, and that has to be at the centre of our DMA efforts,” said Svenja Hahn, a Member of the European Parliament for Germany (Renew Europe Group).

Eglė Markevičiūtė, Vice Minister at the Ministry of the Economy and Innovation of the Republic of Lithuania, joined the event in her personal capacity to comment on how to improve the alignment on data protection when it comes to the DSA and DMA. “There really is a need for greater flexibility on the enforcement and specific obligations when moving towards a set of criteria that would be applicable over a wide range of platforms and service providers. The goal is not to restrain big online platforms as a source of potential danger but to ensure that consumers as well as small and medium enterprises are protected,” she said.

“Digital innovation requires us to stay open, and this is only possible if we cooperate internationally, especially with our democratic partners such as the US” Svenja Hahn (DE, RE)

“I think the Commission sets out in the DMA to allow platforms to unlock their full potential by harmonising national rules so as to allow end users and business users alike to reap the full benefits of the platform economy and the digital economy at large. What is needed at the EU level is to ensure that harmonisation. To achieve that, I think you have to use objectives and administered rules as you can’t use very subjective or ambiguous standards,” added Kay Jebelli of the Computer & Communications Industry Association (CCIA).

“In the United States we tend to look at things around antitrust or competition using the consumer welfare standard which is basically the question of who’s being harmed. Europe, on the contrary, follows a more precautionary principle that can be summed up as ‘can we get ahead of what we think potential harm might be’, and the American mindset tends to be like ‘why do you want to regulate inefficiency into the system’,” said Shane Tews, a visiting fellow at the American Enterprise Institute.

With the world of technology constantly evolving, it is crucial that the European Union is able to keep up with latest developments, thereby providing European consumers with a wide array of choices.

Originally published here

Is this North Carolina Congressman hawking Bitcoin?

Sometime last week, Neeraj K. Agrawal, the communications director for the DC-based cryptocurrency think tank Coin Center, tweeted a link to an empty website: whitehouse.gov/bitcoin.pdf.

The idea he was trying to convey, in Internet speak, is that hopefully, one day we can look forward to the day when the Bitcoin whitepaper would be hosted on the White House’s website.

That would signal that the executive branch has endorsed elements of the cryptocurrency, and hosted the fundamental founding document to build confidence in the government using Bitcoin as a unit of currency.

That’s futuristic, crypto-fueled optimism that was nothing but a cheeky tweet in that moment.

Taking that to the next level, tech investor and entrepreneur Balaji Srinivasan put forward a challenge: which forward-thinking country or US state would host the Bitcoin white paper on their main domain?

Enter North Carolina Congressman Patrick McHenry.

U.S. Rep. Patrick McHenry (R-NC)

Hailing from Gastonia, a town I once worked in as a newspaper reporter, McHenry represents the 10th district in the northwestern part of the state, home to NASCAR drivers, the mighty Catawba River, and stretching to the stunning Blue Ridge Mountains.

He once represented part of Gaston County in the State House and was later elected to Congress as one of the youngest congressmen in 2004.

As the ranking member on the Financial Services Committee, McHenry has often been involved in regulatory debates and discussions on cryptocurrencies and financial projects, including Facebook’s Libra project.

At least in previous statements and letters, McHenry usually joined hands with his Democratic colleagues to oppose any competition to the US dollar, as we’ve noted in past press releases.

However, it seems McHenry is changing his tune on the future of innovation in the cryptocurrency space.

On Wednesday, he took on the challenge originally posted by Agrawal and followed by Srinivasan: he posted the Bitcoin whitepaper to his own website.

Not only that, but he stated that “policymakers should be on the side of innovation and ingenuity, which are vital to American competitiveness,” and urged his colleagues to join him.

Is this North Carolina Republican Congressman hawking Bitcoin? It seems the answer is yes.

Looking into it more, he’s grown more bullish on Bitcoin and tech-related financial services in the last two years and even clarified his position on why projects like Libra do not represent a true cryptocurrency.

Appearing on series of podcasts, including one with fellow Republican Congressman Dan Crenshaw, McHenry has been more vocal on why Bitcoin’s technology is like nothing before, and in fact, represents the future of financial and digital services.

And top it off — he posted the Bitcoin whitepaper on the congressional web server!

If McHenry’s statements are true, and if he is using his position as a Financial Services committee member to advance those ideas, I think we may have a consumer champion congressman to follow in the next two years.

As a fellow North Carolinian and advocate for consumer-friendly policies, I have been critical toward McHenry’s various positions in the past, specifically on legitimizing financial services for cannabis-related companies.

I believe the exact tagline I used was “The North Carolina Republican singlehandedly blocking progress on cannabis banking“.

Obviously, McHenry’s ideas and policies are more nuanced and deserve a closer look. I look forward to him expounding on that much more. So while we may not agree on cannabis banking, there still could be much to agree on with the congressman.

If more politicians in DC and various statehouses approached this issue like McHenry, perhaps our governments would be better vehicles for fostering innovation and helping grow consumer choice.

Kudos to you, Rep. McHenry.

Yaël Ossowski is deputy director of the Consumer Choice Center

Consumer Choice Center joins group pushing back on breaking up U.S. tech companies

On January 21, the first full day of President Joe Biden’s administration, the Consumer Choice Center joined a coalition of taxpayer and consumer groups in calling on members of Congress to avoid using antitrust to break up tech firms.

Dear Leader McConnell, Leader McCarthy, and Republican Members of Congress:

On behalf of the undersigned organizations, representing taxpayers, consumers, and free market advocates across the nation, we write in strong opposition to proposals from across the ideological spectrum to change substantive antitrust standards that encourage courts to break up and destroy American technology companies. While we sometimes are concerned with the actions of these companies, as long-time supporters of free markets and free expression, we are troubled to see that some fellow conservatives would try to use the sledgehammer of big government to attack companies they may disagree with on a political or ideological basis.

This is a divisive period in our nation’s history, and with the democratization of news and information many policymakers are asking tough questions about the role technology plays in modern society. Congress may decide to legislate in the near future on matters like online consumer protection, data privacy, content moderation, and more. Regardless of what bills lawmakers introduce in the coming months — or what regulations or lawsuits are introduced by a new administration — our organizations firmly believe that the courts, not Congress, should determine whether America’s most successful companies have violated the antitrust laws. Congress should not change substantive laws to address political or ideological concerns about the companies in question. This is also the wrong message to send to entrepreneurs who are actively working to provide Americans with competitive alternatives to today’s household names.

In the past, conservatives and free market advocates agreed that the powers of the federal government are too great, and the societal and economic benefits of emerging technologies too strong, for true advocates of limited government to support politically-motivated efforts to tear apart successful firms simply because they’re big or for any number of other arbitrary reasons. These companies provide valuable services to hundreds of millions of American and global consumers. That assumption has now been challenged by recent “conservative” calls to “demand the breakup” of major technology companies. As policymakers face a White House and Congress controlled by one party for the next two years, it is imperative to avoid setting a precedent that companies who do not abide by the norms and rules of the governing party find themselves in the crosshairs of vindictive punishment down the road.

Therefore, it is worth reiterating to our allies in Congress and our colleagues throughout civil society: antitrust enforcement should never be used as a political or ideological tool. Instead, antitrust regulators and lawmakers should adhere to the prudent, decades-old consumer welfare standard, which has long been a ‘north star’ for antitrust enforcement and that — when properly applied — allows free-market economies to innovate and thrive.

Thank you for your consideration, and should you like to discuss these matters further we are at your disposal.

Sincerely,

National Taxpayers Union

Taxpayers Protection Alliance

ALEC Action

American Consumer Institute

Americans for Prosperity

Center for Freedom and Prosperity

Competitive Enterprise Institute

Consumer Choice Center

FreedomWorks

Libertas Institute

Lone Star Policy Institute

Market Institute

NetChoice

R Street Institute

Small Business & Entrepreneurship Council

TechFreedom

READ THE LETTER HERE

Twitter Ban shows that the free market works

Big tech’s conservative purge will lead to stricter regulations.

Earlier this month, Twitter banned the personal account of Donald J. Trump (@realdonaldtrump) and at the same time limited the official White House account, leaving the President of the United States unable to directly communicate with the nation and its voters on the platform. 

For many conservatives, the move to ban Trump from Twitter after the Capitol riots on January 7, was an assault on freedom of speech and since then, many leaders around the world have also condemned how Twitter handled the situation. 

German Chancellor Angela Merkel was critical of Twitter for blocking President Donald Trump’s account, considering the ban a threat to free speech. The European commissioner Thierry Breton saw Twitter’s decision as a total break from the past, calling it “the 9/11 moment of social media” in an op-ed published by Politico. Acting Australian Prime Minister Michael McCormack said blocking Trump amounts to censorship. And the French Junior Minister for European Union Affairs Clement Beaune said to Bloomberg that “This should be decided by citizens, not by a CEO.”

Other social media platforms such as Facebook, Instagram, Snapchat, TikTok, and YouTube followed Twitter’s lead and now Trump is banned from virtually every major platform out there, mostly indefinitely. Those who approve of Twitter’s ban of Donald Trump and the purge of thousands of conservative accounts on the platform, like to invoke the mantra that if conservatives think they have been “shut down”, they should also find comfort in the fact that the free market will provide an alternative and competition. However, it’s not that simple.

Social media platforms enjoy a great privilege that not many other companies or sectors do. They make their own rules under their Terms of Service and have total control of their platforms. This extreme power makes it hard for users and companies who feel that they have been unfairly treated to have a diligent due process review of their claims. With nowhere to go to have their voices heard, one last line of defence still stands and stronger than ever: the market.

After the ban of Donald Trump’s accounts, which had over 80 million followers on Twitter, some consumers started to ditch the social media platforms and services that they believe were censoring and targeting conservative speech. Many well known political accounts, such as James Woods reportedly lost over 7 thousand followers in 48 hours and the Heritage Foundation, a conservative think tank, lost 45,000 followers. Even more centrist political accounts as Dave Rubin reported a drop of over 35 thousand followers on Twitter. Republican lawmakers also lost thousands of followers. According to USA Today, about 42% of the accounts – 213 – had fewer followers on Jan. 13 than they did on Jan. 6. The vast majority of those accounts –200 – belonged to Republicans. As a result, the next week, Twitter stocks plummeted more than 10%. Facebook fell 4% to $256.84, Alphabet stock was down 2.2% to $1,766.72, and Amazon stock dropped 2.2%, to $3,114.21.

The market reacted this way because large tech companies are alienating users by directly excluding accounts and because people are simply leaving the platforms all together for alternatives such as Gab and Rumble. Parler was a popular alternative for Twitter but was wiped off the internet last week after both Apple and Google remove the app from their stores and Amazon decided not to host the website on their AWS servers. 

Most of today’s social media platforms are free because they collect data about their users every day, from location to website searches, even fingerprinting all your devices. Those pieces of information are sold to advertisers who cater to your interests.  As we have written, this practice is both innovative and helps support the social media networks we use. However, the business model is not sustainable if tech companies are not able to gather updated information about their users, or worse, if the consumers the advertisers are looking to reach are not on their platforms anymore. 

Twitter CEO Jack Dorsey, whose company’s share plumed the most this week, seems to have realized this the hard way. His strategy may have backlashed as now, millions of conservative consumers are out on the internet, without a home, and desperately looking for a new place to be heard and speak freely. He acknowledged last week that banning Trump from Twitter “sets a precedent I feel is dangerous: the power an individual or corporation has over a part of the global public conversation.”

Tech companies should be aware that even though they enjoy a privileged position now, this might not last for long. The European Commission, for example, has introduced two proposals that would place more restraints on digital giants. The first, is the Digital Markets Act, the centerpiece of Europe’s digital plans aimed at boosting online competition in a world dominated by Silicon Valley. The second is the Digital Services Act aimed to limit the spread of illegal content and goods online, making online platforms responsible for the spread of such content. Other countries might also try to regulate digital services in a way that would be prejudicial to tech companies and most importantly, to consumer choice. Poland, for instance, plans to make censoring of social media accounts illegal: “algorithms or the owners of corporate giants should not decide which views are right and which are not,” wrote the prime minister, Mateusz Morawiecki on Facebook last week.

For now, a free market is still the most powerful way in which consumers can have a voice and make their choices clear. This might change in the future, but it’s comforting to know that even when governments fail, consumers and private companies can count on the power of supply and demand. And if you ask me, I wouldn’t change it for anything else.

Follow me on Twitter or LinkedIn

Originally published here.

Facebook Breakup will harm consumers

Breaking up and regulating tech companies will harm consumers, not serve them.

The recent uptick in downloads of privacy-focused messaging apps such as Signal and Telegram is a great testament to the power of consumer choice in the digital sphere. It should deal a heavy blow to the attempts of breaking up or regulating WhatsApp’s parent company Facebook as the market is quite evidently not dominated by one monopoly. Moreover, intrusion into private companies will ultimately result in stifling consumer choice, and thus, should be abstained from.

Today’s consumers and developers have far greater power than ever before. No company is spared from the continuous battle over users as switching to a competitor in the tech world takes a few clicks and an app store. A great number of tools and services are at constant disposal for anyone, who is looking for a better solution to his individual problem.

Given these market dynamics, app creators are incentivised to create solutions for every niche problem to satisfy their target user group, compete in a global market, and scale their solution worldwide. Some apps may access your data to provide a better service by analysing usage patterns. Others may protect your privacy but compromise on another feature. The ability to choose between these options (or to use both for different use cases!) constitutes a consumer choice paradise rather than a monopoly worth regulating.

Furthermore, interfering in markets by breaking up companies or regulating them seldom comes at no cost. Any infringement harms innovation and reduces investment.

Facebook, for instance, purchased Instagram and WhatsApp for $1 billion and $19 billion, respectively. Although both had an existing user base, neither was generating large sums of revenue before being taken over. There is simply no telling if without investments in innovation from their new parent company, those services would have generated any long term profits and delivered the services to their users that they love today.

Retroactively, turning back the clock would set a dangerous precedent for any company that wants to invest in creating superior experiences for their user-base and show that no investment is safe from regulators. The price for innovating to enrich all of our lives would be an uncertain return on investment. The ultimate victim of over-regulating a naturally liberal market: consumers.

Fears of harming innovation as a consequence of overzealous regulators are not purely theoretical. The effort to split Microsoft’s software and operating system from another in the early 2000s did little to liberate markets. Rather, it inhibited the company that developed the most popular operating system from innovating by dragging them into the courtroom for pre-installing the Internet Explorer on Windows machines.

In the end, no regulators were necessary to decide on behalf of consumers. As more browsers naturally emerged, consumers replaced Internet Explorer as the most popular browser regardless of it being delivered out of the box. However, there is no telling how much damage has been done to Microsoft and users alike by the regulatory efforts to destroy a company simply because of its success.

Today’s efforts even go beyond break up fantasies. Another favoured approach by lawmakers across the globe is imposing interoperability, ordering messaging services to communicate with each other to lower barriers of entry. On first sight, the idea makes sense: let users choose their preferred service and allow them to communicate with anyone regardless of their preferred option. Unfortunately however, interoperability will also only harm consumers.

Interoperability necessitates common standards. Emails for example are interoperable as you can communicate with anyone regardless of their provider. The standard may have been the gold standard a few decades ago. But by today’s standards emails are not secure, they are not user friendly, and there have been no significant improvements to the protocols for decades. Similarly, text messages are interoperable, which is hardly a plus as they are simply inferior to messaging apps. 

Absent any regulation, developers can tailor these apps to their users, introduce new features, and innovate to win users. This liberty to innovate is why freely available apps provide the safest way to communicate that has ever existed by superior encryption standards. It also allowed millions of users to switch to an alternative app last week, seeking conditions that are not standardised by law and more applicable to them.

Any governmental effort to define these encryption standards, as would be necessary to allow for interoperability, would also make it easier to break these privacy seals that consumers desperately desire.  Lawmakers need to understand that their actions are not providing value to consumers. Neither breaking up so-called monopolies nor imposing arbitrary regulations is in the interest of their people. Consumers are more than capable of making their own choices. Millions of them have done so in the past week as they did not agree with a new policy imposed on them by WhatsApp.

Kya Shoar is a Digital and Tech Fellow at the Consumer Choice Center.

The government’s Facebook trustbusting is a zealous takedown that harms consumers and punishes innovation

WASHINGTON, D.C — On Wednesday, the Federal Trade Commission issued its long-awaited lawsuit, in conjunction with attorneys general from 46 states, that aims to force Facebook to break up its popular services WhatsApp and Instagram for alleged “anticompetitive” behavior.

Yaël Ossowski, deputy director of the Consumer Choice Center, a millennial consumer advocacy group based in Washington, D.C., said the FTC’s lawsuit does more to actively harm consumers than help.

“The actions by agencies of our federal and state governments to try to dismantle Facebook’s legal business acquisitions after-the-fact are woefully misguided and will end up harming consumers,” said Ossowski. “These are free services offered to consumers in a competitive marketplace that boasts hundreds of social apps for messaging, photo sharing, and social networking.”

The social media platform lawfully purchased Instagram for $1 billion in 2012, and also bought WhatsApp for $19 billion in 2014, offering both cash and stock options for its founders.

Both services were acquired and already greenlit by the FTC, and have achieved inordinate amounts of success and user growth since.

“In terms of social messaging users, WhatsApp is dwarfed by Facebook’s own Messenger and even Snapchat in the United States. And that’s not even considering the nearly 200 million iPhone US users who predominately use iMessage, or the nearly 100% of cell phone users who use traditional SMS,” said Ossowski.

“Instagram was a risky investment in 2012, and has grown to become successful because of Facebook’s own innovation and algorithms. Small businesses and entrepreneurs benefit from these platforms because they can reach customers and consumers love them for their ability to share pictures and videos with friends and family,” said Ossowski.

“This amounts to nothing more than a zealous takedown of American innovation by the political and legal class. If the FTC is successful, it would empower and embolden foreign companies far from the reach of our laws and institutions at the expense of our own tech sector.

“Let’s be clear: The internet is the ultimate playground for consumer choice. Government attempts to intervene and regulate based on political considerations will only restrict consumer choice and deprive us of what we’ve thus far enjoyed,” said Ossowski.

“Rather than speaking for consumers, the federal government and attorneys general are willingly quashing their preferences and choice. That is a much more powerful monopoly than any social media platform could ever hope to achieve,” said Ossowski.

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The Consumer Choice Center represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Washington, Ottawa, Brussels, Geneva, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice.

Learn more at consumerchoicecenter.org

Stopping targeted advertising cuts off industries and dumbs down tech

The European Parliament’s vote to phase out the practice threatens to reduce consumer choice and stifle what is one of Europe’s most innovative sectors, writes the Consumer Choice Center’s Yaël Ossowski.

hen we hear gripes about social media, one of the top concerns is targeted advertising.

On any given day, this type of segmented advertising is used by the local hair salon searching for new clients, an environmental group asking for signatures on a petition, and a political candidate seeking your vote. These are all important and vital for our civil societies in Europe.

These groups pay to get your attention on social media because it achieves something essential: to generate business, to advocate for social causes, or win elections. This is facilitated by the unique platforms where we post and share information.

And because social media is usually free, accepting this advertising allows platforms to grow and scale to continue providing value to users. That is the balance that most of us understand. Some people are mildly annoyed, but others prefer advertising that caters to their interests.

Unfortunately, that distinction has given fodder to activists and politicians who want to ban this style of advertising to limit the ability to spread information on social media.

In October, MEPs in the European Parliament voted overwhelmingly in favour of severely restricting and eventually phasing out targeted ads. The proposal was an amendment to the annual competition report, aimed at overhauling the Digital Services Act. It remains non-binding until such regulation is issued by the European Commission.

Using his Twitter account, Dutch MEP Paul Tang categorised the vote as a “win” against large tech companies, further adding that “We see that big tech continues to expand their market power by considering personal data as a commodity. In addition to interfering with our privacy, such a revenue model is unhealthy and sickening for the internet.”

In this case, politicians in Brussels get it wrong. These policy remedies would end up being harmful to both consumers and small businesses, and dumb down the greatly innovative tech sector that provides value to users across Europe.

Social media platforms have grown to be popular because they empower users to speak their minds and profitable because they enable small businesses and groups to find current and future customers. That is a win-win for our societies.

If targeted advertising is dismantled online as some hope, it would severely restrict the options for entrepreneurs and social groups to find supporters and clients. That may sound good in theory, but in practice, it means stopping advertising options for environmental groups, restaurants hoping to deliver food during continued lockdowns, and more.

Regulating innovative technology because of serious legal and health concerns is warranted but stopping information and unique algorithms that give us what we want is a step too far.

We must face the fact that social media has become the new marketplace where we seek information. If we legislate and ban specific methods of sharing information on products and services online, this reduces consumer choice and chokes off entire industries. This harms everyone.

“If we legislate and ban specific methods of sharing information on products and services online, this reduces consumer choice and chokes off entire industries. This harms everyone”

More than harmful, it is also based on the false assumption that adults are not intelligent enough to understand or interpret advertising. This is both paternalistic and wrong.

Of course, ads are annoying for those who do not want them. And, luckily, the same technology that created targeted micro-advertising has also spawned ad-blocking browser plugins, Virtual Private Networks, and private browsing modes that are simple and easy to use for those who want them.

Thanks to technology, everything we do online has gotten more efficient, more effective, and less costly. It has empowered non-profits like mine, given a voice to millions of entrepreneurs, and offered untold value to users around the world.

As advocates for a free and open Internet, we must continue to uphold innovation and ensure it is protected from those that wish to limit its potential. The European Union needs to find ways to foster, rather than choke off, the innovation that every citizen on the continent deserves.

Originally published here.

Halting targeted advertising kills industries and dumbs down tech

When we hear gripes about social media, one of the top concerns is targeted advertising.

On any given day, this type of segmented advertising is used by the local hair salon searching for new clients, an environmental group asking for signatures on a petition and a city council candidate seeking your vote. These are all important and vital for our civil society.

These groups pay to get your attention on social media because it achieves something essential: to generate business, to advocate for social causes or win elections. This is facilitated by the unique platforms where we post and share information.

And because social media is usually free, accepting this advertising allows platforms to grow and scale to continue providing value to users. That is the balance that most of us understand. Some people are mildly annoyed, but others prefer advertising that caters to their interests.

Unfortunately, that distinction has given fodder to activists and politicians who want to ban this style of advertising to limit the ability to spread information on social media.

The latest scandal du jour, as one can guess, revolves around the 2020 elections and how political forces targeted would-be voters on social media.

Using Twitter and Facebook proved effective for both the Biden and Trump campaigns, up until both platforms halted political advertising. Hundreds of millions of dollars were spent and tens of millions of voters were reached.

In a hearing on Tuesday, senators on the Judiciary Committee excoriated Twitter CEO Jack Dorsey and Facebook CEO Mark Zuckerberg for their proprietary algorithms that drive engagement and sell ads.

Senators took turns grinding their axes, lodging complaints about content moderation, targeted advertising and market power.

The policy remedies discussed have so far been two-pronged, either using antitrust laws to break up the social media firms or rewriting Section 230 of the Communications Decency Act that currently treats online outlets as platforms rather than publishers, not making them liable for the content shared on their pages.

In either case, politicians in Washington get it wrong.

Action in either direction would end up being harmful to both consumers and small businesses, and dumb down the great innovative tech sector that is the world’s envy.

Social media platforms have grown to be popular because they empower users to speak their minds and be profitable because they enable small businesses and groups to find current and future customers. That is a win-win for society.

If targeted advertising is dismantled online as some hope, it would severely restrict the options for entrepreneurs and social groups to find supporters and clients.

That may sound good in theory, but in practice it means stopping advertising options for environmental groups, restaurants hoping to deliver food during continued lockdowns and more.

Regulating innovative technology because of serious legal and health concerns is warranted but stopping information and unique algorithms that give us what we want is a step too far.

We must face the fact that social media has become the new marketplace where we seek information. If we legislate and ban specific methods of sharing information on products and services online, this reduces consumer choice and chokes off entire industries.

This harms everyone.

More than harmful, it is also based on the false assumption that adults are not intelligent enough to understand or interpret advertising. This is both paternalistic and wrong.

Of course, ads are annoying for those who do not want them. And, luckily, the same technology that created targeted micro-advertising has also spawned ad-blocking browser plugins, Virtual Private Networks, and private browsing modes that are simple and easy to use for those who want them.

Thanks to technology, everything we do online has gotten more efficient, more effective and less costly. It has empowered nonprofits like mine, given a voice to millions of entrepreneurs and offered untold value to users around the world.

As advocates for a free and open internet, we must continue to uphold innovation and ensure it is protected from those who wish to limit its potential.

Originally published here.

Why Europe needs radical digital reform

EU attempts to curtail the influence of the world’s digital giants are stymying innovation, argues the Consumer Choice Center’s Maria Chaplia.

Amazon will soon face antitrust proceedings to address concerns raised by EU authorities regarding the company’s access and use of data. Specifically, they claim the American company can see sensitive commercial information on third-party products such as price or volume. Amazon’s actions would qualify as anti-competitive if the EU finds that it has been using this data to improve the ranking of its own products.

Regardless of the outcome of this investigation into abusive, monopolistic behaviour, the EU will come out as a loser if it does not undertake a radical digital reform to liberalise its digital single market. In the face of digital competitors from abroad, it has become convenient to pull out antitrust laws in response to every tech issue. But such an approach has neither made the EU more innovation-friendly nor more mindful of actual consumer needs.

Instead of letting digital services of all types develop at their own pace, the EU has relegated itself to passing legislation that is far from technology-neutral. According to EU Competition Commissioner Margrethe Vestager, the EU’s current regulations were put in place “when no one could have foreseen the situation we’re in today, that platforms would not just be channels, but full ecosystems where a lot of what is ongoing is monetised by the platform itself.” There was, of course, no way to predict what has happened, but it’s a poor justification for the EU’s digital lag.

Regulators, though with noble intentions, are simply unable to know ahead of time how far innovation can and will go. What they can do, instead, is create and sustain a framework that does not pick winners and losers, but safeguards intellectual property rights, keeps taxation low to encourage returns, limits barriers to entry, and makes investment easy.

In Europe, there are many outdated laws that make it burdensome to create new and innovative digital services before they ever hit the market. One example is the lack of a European-wide license for audiovisual services, forcing service providers to apply in every Member State if they want to show their content. It is the same for most other digital services in the EU, including music streaming or news collection.

“If the EU succumbs once more to antitrust legislation, it will come at the expense of future innovation and risk cutting off millions of European consumers from vital digital services”

Another key issue concerns taxation. The EU has long considered levying a tax of between two and six percent on the local revenues of platform giants. The prospect of trade talks with the US has brought this topic back into the spotlight. However, an EU-wide digital tax would limit potential future innovation. Innovators should be able to choose between high-taxed and low-taxed locations, not be faced with a uniform unavoidable tax. Complicated issues – such as the EU’s digital lag – require complex solutions according to officials, but that’s not the case. Less intervention means more innovation. Antitrust lawsuits and actions are a great tool for tax collecting but they don’t solve the core problem. We need a digital market that has many different options to choose from, making it less likely that one company can gain a monopoly as it will be more preoccupied with actual competition, and thus seek to come up with innovative solutions for consumers.

If the EU engages once more in antitrust proceedings, it will come at the expense of future innovation and risk cutting off millions of European consumers from vital digital services. We need reform and liberalisation in order to better provide for both consumers and producers.

Originally published here.

How Not to Respond to Alarming Social Media Censorship

Protecting a free and open internet means not using punitive regulations or policies to hamstring social networks because of the scandal of the day.

Call it election interference, censorship, or simple editorializing, but Twitter and Facebook’s throttling of several New York Post articles this week has drawn lots of criticism.

The stories allege that Hunter Biden, former Vice President Joe Biden’s son, introduced Ukrainian energy adviser Vadym Pozharskyi to his father after receiving a cushy $50,000 a month board seat at the company Burisma. (Other outlets have contested the report).

There is no question that the social networks in question made a bad call. Disabling the link on the various platforms made even more people seek it out, creating a “Streisand Effect” of mass proportions.

But the content of the articles isn’t what really matters.

The reaction to the New York Post report reveals just how much pressure is put on social networks to perform roles far beyond what they were intended for. We want them to simultaneously police speech online, keep the networks free for open discussion, and be mindful of “fake news” that spreads rapidly.

So, it is important to understand why Facebook and Twitter felt they had to censor the story in the first place—and why all of us are actually to blame. For the last several years, campaigners, activists, and politicians have primed us all to accept the byzantine expectations and regulations put on social networks.

From Netflix documentaries such as The Social Dilemma and The Great Hack to the criticisms of “surveillance capitalism,” many voices are calling for further regulation of social media networks.

Some on the Right smirk as Sen. Josh Hawley pens legislation to repeal Section 230 of the Communications Decency Act or to ban “infinite scrolling” on social media apps. Meanwhile, some on the Left cheer as technology CEOs are dragged before congressional committees and castigated for “allowing” Trump to win in 2016. 

This week, it was revealed that the New York State Department of Financial Services wants a “dedicated regulator” to oversee social media platforms. Other states will likely follow suit.

But what we’re all too loath to admit is that these firms do what any of us would do when under scrutiny: they pivot, they engage in damage control, and they aim to please those with pitchforks outside their doors. It’s the same whether it’s Black Lives Matter or President Trump.

Facebook has committed to ending all political advertising online (hurting non-profit advocacy groups like mine) and Twitter already implemented a similar policy last year, lauded by political figures such as Hillary Clinton and Andrew Yang.

Of course, when tech giants censor or delete stories that we perceive to advance or hurt our political “team,” we are all up in arms. But protecting a free and open internet means not using punitive regulations or policies to hamstring social networks because of the scandal of the day.

Internet policy remedies dreamed up in Washington, D.C. will almost always end up hurting those of us who don’t have power or deep pockets. It harms the small businesses that use social networks for advertising, and it sets up more roadblocks for ordinary users who simply want to check in with friends and family. 

Big Tech isn’t powerful because it has money, but because it has delivered superior products, those that have left platforms such as AOL, Myspace, and Yahoo in their wake.

Social networks have evolved from places to connect and share information across borders to intellectual and political battlefields where we wage digital wars.

Of course, there should be regulation in some respect. But it should be smart regulation that keeps platforms relatively free and open and provides incentives for future innovation. The powerful platforms of today can afford to comply with cumbersome rules, while new market entrants cannot. 

That means that with every new proposal to roll back Section 230 protections or require quasi-governmental fact-checking functions around Election Day, we’re depriving consumers of choice and entrepreneurs of the ability to innovate.

Of course, targeted censorship of certain accounts or stories on social media networks is bad. But policy “solutions” dreamed up by technologically illiterate bureaucrats and power-hungry politicians would no doubt be even worse. 

Originally published here.

Western Standard

Ottawa is getting ready to meddle in your newsfeed and streaming services

David Clement writes about Ottawa’s plan for draconian new regulation of your newsfeed, social media, and even Netflix.

Heritage Minister Steven Guilbeault announced last week the Trudeau government wants to enforce Canadian content regulations for platforms like Spotify and Netflix, and is looking at Australian-style regulations requiring platforms like Facebook to compensate news outlets whenever a news outlet’s link is shared there.

Both of these proposed regulations are silly.

For Canadian content, the Trudeau government seems hell-bent on applying outdated regulations to innovative tech platforms like Netflix and Spotify. These platforms are successful because they provide consumers what they want in terms of video and audio content. It seems quite paternalistic for the government to interfere, and require that these companies produce Canadian content, regardless of whether there is consumer demand for it.

This is problematic because CanCon regulations forcibly tell consumers that they want, or are required, to consume Canadian content, and then force companies to create content based on that false assumption. I, of course, want Canadian artists and content creators to do well and thrive, but I also know that the Canadian media/entertainment space is mature enough to stand on its own two feet. It would be better for Canadian success to be a result of meeting consumer demands and not the result of a government decree. 

Supporters of CanCon regulations say these regulations are required to “protect Canadian culture and the people who produce it”, but who exactly are we protecting Canadian culture and its producers from? If Canadian content isn’t successful in the domestic market, that is because it isn’t appealing to the demands and wants of Canadian consumers. It is backwards for the government to meddle to try and shield Canadian creators from the wants of domestic consumers.

If legislators want to actually listen to the demands of Canadian consumers, they’d know that Canadians like Netflix and Spotify just how they are, and that intervention isn’t needed. Plus, we already have a taxpayer funded outlet to protect Canadian culture and its creators: the CBC. Is the $1 billion the CBC receives not enough to provide a home for Canadian content? Do we really need to be forced to pay for Canadian content as both taxpayers, and in the private sector? I don’t think so.

Beyond content, the heritage minister’s comments regarding social media platforms having to pay news outlets to share web links are just as misguided. In an interview with Radio-Canada, Minister Guilbeault suggested that Canada is looking at following Australia’s lead, and creating regulations that would force a platform like Facebook to pay news outlets every time one of their web links is shared. That means that when you or I share an article, let’s say from the Toronto Star, Minister Guilbeault thinks that Facebook should be forced to compensate the Star, despite the fact that Facebook is acting as a free lead generator. This genuinely leaves me scratching my head as to why this is a good idea. Media outlets make their money in two ways: advertising dollars linked to views or through subscriptions. Being able to freely share a news story on social media drives traffic to these news outlets, which is exactly how they make their advertising money and solicit subscribers. 

It is bizarre for the federal government to mandate that Facebook compensate newspapers for driving web traffic to their website and sending them free leads. This desire to have the government further protect the media industry becomes even more strange when you consider that the industry is already subsidized by taxpayers at the tune of $600 million dollars.

And if Australia has shown us anything, following through with this type of legislation would be disastrous for consumers, for newspapers, and for society at large. In response to the regulations down under, Facebook stopped allowing for users to share news links on their platform. 

This hurts consumers because it means that news won’t be available on social media at all, where most of us consume it. This is a net negative for society because less news availability ultimately means poor media literacy, which certainly isn’t good. And lastly, this is terrible for newspapers because it eliminates their ability to reach online audiences via social media, which reduces traffic and their ability to generate subscribers.

Rather than enforce outdated regulations on Netflix and Spotify, legislators should listen to Canadian consumers. In regards to the offer of additional regulations, with all due respect Minister Guilbeault, thanks, but no thanks.

David Clement is a columnist for the Western Standard and the North American Affairs Manager with the Consumer Choice Center

Originally published here.

Consumer Choice Center Signs Joint Letter to Senate Judiciary Committee on Antitrust Hearings

September 15, 2020
The full letter can be downloaded here

The Honorable Michael S. Lee
Chairman, Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

The Honorable Amy Klobuchar
Ranking Member, Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

Dear Chairman Lee and Ranking Member Klobuchar,

We, the undersigned, write today to provide you with a statement for inclusion in the record of the Subcommittee’s September 15th hearing, “Stacking the Tech: Has Google Harmed Competition in Online Advertising?”[1] We are a group of legal experts, economists, and consumer and taxpayer advocates who believe in the importance of promoting competitive markets and defending the rule of law.

We believe that weaponizing antitrust for broader socio-economic purposes would fundamentally alter the primary goal of antitrust and seek to address the increasing calls to move away from the consumer welfare standard[2] and to use antitrust as a tool for unrelated concerns.[3] While signatories herein may prefer various approaches for addressing non-competition concerns about issues such as privacy, online content, liability, and myriad other popular topics associated with technology firms, we uniformly agree that any congressional assessment of issues related to digital markets must be characterized by rigorous economic analysis, productive in promoting competition and consumer welfare, and based on predictable and enforceable standards.

As discussions about antitrust law enter mainstream discourse, we thank the Subcommittee for the opportunity to provide a statement for inclusion in the record, and for providing an appropriate forum specifically dedicated to the discussion of antitrust concerns.

PUTTING RECENT PROPOSALS INTO PERSPECTIVE

Before addressing the specific topic of today’s hearing, we find it critical to make note of the economic consequences of many of the recent proposals to revise antitrust law, which seriously risk making the American economy and consumers substantially worse off across a wide array of industries. Many discussions around antitrust have centered on large, successful American technology companies, and the House Judiciary Committee has launched an investigation and we expect to see certain proposals come out of that investigation. However, the implications of today’s antitrust debate extend far beyond just “Big Tech.”

These proposals — which are likely to materialize within the days or weeks following today’s hearing —include aggressive merger prohibitions, inverting the burden of proof, allowing collusion and antitrust exemptions for politically favored firms, and politicizing antitrust enforcement decision-making more generally. Additionally, arbitrary or overly broad antitrust enforcement would hamper economic recovery and risks job losses as the nation recovers from the economic slow-down, evolving market dynamics, and changing consumer needs resulting from the global pandemic.

I.            The Current State of the Antitrust Debate

We fear that both sides of the aisle are pushing for the weaponization of antitrust, either as a tool to punish corporate actors with whom they disagree or out of a presupposition that big is bad. Unfortunately, the antitrust debate has begun to devolve into a litany of unrelated and often contradictory concerns, unsubstantiated and dismissive attacks, and seemingly a presumption that any market-related complaint that can be made on the internet can also be cured by the panacea of antitrust. This highly charged atmosphere has led to radical proposals that run contrary to economic evidence and endanger significant advances made in antitrust scholarship.

The Senate Committee on the Judiciary — and specifically this Subcommittee — has an important role to play. While there are many issues plaguing our society today, we believe that this Committee is equipped to examine antitrust soberly and without misdirection from legitimate anger over other issues which antitrust is not designed to address.

CONSIDERATIONS FOR FURTHER INQUIRY

II.            The Law: New Technology, Same Principles  

a.      The consumer welfare standard has greatly benefited antitrust and is underrecognized as a significant narrowing of federal government power in the last half century and a major victory for the movement to preserve the rule of law.

It is important to consider what is at stake. Using antitrust to achieve policy or political goals would upend more than a century of legal and economic learning and progress. The need to bring coherency to antitrust law through a neutral underlying principle that cannot be weaponized is what led to the adoption of the modern consumer welfare standard. It is broad enough to incorporate a wide variety of evidence and shifting economic circumstances but also clear and objective enough to prevent being subjected to the beliefs of courts and enforcers.[4]

Therefore, we would like to stress the need to distinguish between the proper and improper uses of antitrust in approaching discussions of market power, and are concerned that today’s hearing could lead to the use of antitrust to address concerns surrounding online content moderation, data privacy, equality, or other socio-political issues that are unrelated to the competitive process. Weaponizing antitrust for broader socioeconomic purposes would fundamentally alter the primary goal of antitrust, undermine the rule of law, and negatively impact consumers.

I.            The Role of Presumptions

b.      Approaches to antitrust enforcement based on presumptions of anticompetitive harm drastically upend core tenants of our legal system by inverting the burden of proof and diminishing the role of the federal judiciary.

Returning to the highly interventionist pre-1970s antitrust jurisprudence through burden shifting provisions that would require a company to prove it is not a monopoly would create greater incentives for the government and private plaintiffs to file suit. More importantly, however, these reforms are not needed because current antitrust law has adequate power to intervene and claims of lax antitrust enforcement are demonstrably false. The FTC and the DOJ have only lost a handful of cases in the last decade, and private litigants continue to bring monopolization claims. Outside of the courtroom, multitudes of mergers and anticompetitive actions are prevented out of fear of government action.

II.            The Market: Questions of Concentration and Definitions

c.       Digital platform markets are not traditional linear markets. They are two-sided markets and competition typically turns on non-price factors.

One of the most important questions to address in this discussion is that of market definition. Importantly, digital advertising is not a traditional, linear market. It is a two-sided market in which advertisers try to influence the online behavior of consumers through an intermediary.[5] Traditionally, market definition is framed around a static product with a distinct type of customer. With advances in technology, this build-and-freeze model breaks down as advertising platforms evolve.

However, as Ronald Coase pointed out: [I]f an economist finds something – a business practice of one sort or other – that he does not understand, he looks for a monopoly explanation. And as in this field we are rather ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on monopoly explanations frequent.[6] Indeed, when it comes to the innovative business model that has engulfed digital advertising, regulators are struggling to apply the correct regulatory framework.

d.      The relationship between concentration and competition in the market is tenuous, and structural changes in the economy have resulted from increased competition.

A positive correlation between high market concentration and profitability does not indicate monopolistic practices, and the underlying drive for commercial success can simultaneously enhance pro-consumer efficiencies.[7] In other words, concentration alone does not indicate lack of competition, as firms capture a larger slice of the market through higher productivity and innovation.[8] Some critics argue that systematic anticompetitive conduct is inherent in the digital advertising model, or that the rapid growth or dominance of these platforms allow them to exist entirely insulated from competitive market forces.

As then-Judge Clarence Thomas wrote in U.S. v. Baker Hughes, “[e]vidence of market concentration simply provides a convenient starting point for a broader inquiry into future competitiveness.”[9]It is a step in the right direction to for today’s hearing to analyze the exercise of market power, but it is critical to determine whether the power of the market is being used to benefit or harm not the competitor, but instead the consumer. That is the relevant inquiry.

CONCLUSION

As Robert Bork pointed out, “[a]dvertising and promotion are particular obsessions of antitrust zealots.”[10]

We encourage the Committee to continue in this effort and to reclaim this debate from the politicized approach that seeks to transform our antitrust laws and refocus the conversation on enforcement, market analysis, and the core purpose of antitrust.

We thank you for your oversight of this important issue and ask that this letter be included on the Committee or Subcommittee’s website and repository. Please feel free to contact us should you have any questions or requests for additional input from signatories. We welcome the opportunity to further discuss these views and relevant proposals or congressional assessment with the Committee.

Sincerely,

[1] See Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google. Hearing Before the House Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law, 116th Cong, (July 29, 2020), available at: https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=3113

[2] See Robert H. Bork, “The Antitrust Paradox: A Policy At War With Itself” (1978).

[3] See, e.g. Douglas H. Ginsburg, Originalism and Economic Analysis: Two Case Studies of Consistency and Coherence in Supreme Court Decision Making, 33 Harvard Journal of Law and Public Policy. (217–18) (2010) (discusses political goals read into the Sherman Act by the Supreme Court).

[4] Shifting away from the consumer welfare standard would catapult antitrust law back to the era of the 1960s when, in Justice Potter Stewart’s words, “[t]he sole consistency that I can find is that, in litigation under [the antitrust laws], the Government always wins.” United States v. Von’s Grocery Co., 384 U.S. 270, 301 (1966) (Stewart, J., dissenting).

[5] See, e.g. Ashley Baker, Comments Submitted to the DOJ Antitrust Division Regarding Competition in Television and Digital Advertising. (June 2019), available at: http://bit.ly/2PwehnJ.  

[6] Coase, R.H. “Industrial Organization: A Proposal for Research. Policy Issues and Research Opportunities in Industrial Organization.” (p. 67). (Victor R. Fuchs ed.) (1972).

[7] Harold Demsetz, Industry Structure, Market Rivalry, and Public Policy, 16 Journal of Law & Economics

(April 1973), 1-8.

[8] See David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen. “Concentrating on the Fall of the Labor Share.” American Economic Review, 107 (5): 180-85 (2017).

[9] See U.S. v. Baker Hughes

[10] See Robert H. Bork, “The Antitrust Paradox: A Policy At War With Itself” (p. 314) (1978).
Organizations listed for identification purposes only.


Sincerely,
Ashley Baker
Director of Public Policy
The Committee for Justice


Robert H. Bork, Jr.
President
The Bork Foundation


Wayne Brough
President
Innovation Defense Foundation


James Czerniawski
Tech and Innovation Policy Analyst
Libertas Institute


Richard A. Epstein
The Laurence A. Tisch Professor of Law,
New York University School of Law
The Peter and Kirsten Bedford Senior
Fellow, The Hoover Institution
The James Parker Hall Distinguished
Service Professor of Law Emeritus and
Senior Lecturer, The University of Chicago


Tom Giovanetti
President
Institute for Policy Innovation


Katie McAuliffe
Executive Director
Digital Liberty


Doug McCullough
Director
Lone Star Policy Institute


Grover G. Norquist
President
Americans for Tax Reform


Curt Levey
President
The Committee for Justice


Yaël Ossowski
Deputy Director
Consumer Choice Center


Eric Peterson
Director of Policy
Pelican Institute


Thomas A. Schatz
President
Council for Citizens Against Government
Waste


Timothy Sandefur
Vice President for Litigation
Goldwater Institute


Pete Sepp
President
National Taxpayers Union


David Williams
President
Taxpayers Protection Alliance


Josh Withrow
Senior Policy Analyst
FreedomWorks

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