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Margareta Pagano: America must force the tech giants to sell off data arms

MARGARETA PAGANO

It’s no longer a question of if but when Facebook, Google, Apple and Amazon are broken up. Working out how America’s tech monsters should be tamed is the trickier bit.

US regulators have been trying to find ways of cracking down on America’s tech giants for years. Until now, there has also been little political will for the regulators to move. Barack Obama was loath to hurt Silicon Valley because the techies did so much to further his campaign. President Trump has his own reasons to be circumspect.

But the mood’s changing. The 2020 election is proving the perfect battleground for politicians to compete over who can come up with the most dramatic antitrust reforms.

Senator Elizabeth Warren, who is seeking the Democratic nomination to run as president, has been the loudest voice so far — and the boldest. She wants Facebook to spin off Instagram and WhatsApp, to make Apple hive off its App Store business and for Amazon to sell Whole Foods.

Some of Warren’s remedies are spot on, and she deserves credit for highlighting the antitrust issues. At first glance, forcing Facebook to sell off its smaller social networks is the right move: Mark Zuckerberg should never have been allowed to gobble them up in the first place.

Yet forcing such a break up would not end Facebook’s hegemony. It was dominant before buying Instagram and WhatsApp. For that matter, Amazon was dominant before buying Whole Foods, and so was Google before acquiring YouTube. Apple has achieved world dominance but rarely by acquisition.

Tech analyst Ben Johnson points out that none of the giants achieved their power by using their own marketplace to limit competition — that is not how they became dominant. The reason they became dominant is simple: because consumers like them. Amazon founder Jeff Bezos has always said his aim is to work out what the consumer wants before they know it themselves, and he does it rather well.

That’s a much harder monopoly to crack. Senator Mark Warner, the top Democrat on the Senate Intelligence Committee, has some brighter ideas for reform. In his white paper on social media businesses published last year, Warner says the onus should be on the platforms to ferret out the bad guys. More controversially, he suggests the public should own their own data, and be able to move data with them, just as we do with our mobile phone numbers.

To date, the consumer watchdog, the Federal Trade Commission, has not taken action because it looks at customer benefit as the criterion for competition. If the price doesn’t go up for consumers, the FTC takes the view companies do no harm.

Yet social networks pose a conundrum: though the services are free for the consumer, the companies are making huge gains from owning their Big Data. As we have seen, the manipulation and sale of data may pose a national security risk: the US has no equivalent to GDPR, Europe’s latest legislation on data protection.

That’s why the FTC knows new rules have to be introduced — and why it was delighted by the European Commission’s victory over Google last week, punishing it with a €1.5 billion (£1.3 billion) fine for abusing its search monopoly to annex shopping links. Not only did the FTC help the EC with its case, its victory gives it courage.

What should the regulators do next? Renee Murphy, risk analyst at Forrester Research, says the killer blow would be for Facebook and other networks to be categorised as publishers under US law, as then they would be legally liable for everything they publish on their feeds, just like newspapers.

“Imagine if Mark Warner were to say that social media companies are in fact media companies and must be categorised as publishers,”she says. “That would change everything.”

It certainly would: if US regulators want to create new thoughtful antitrust policies, they will need to think beyond breaking up the tech giants. These giants have tentacles everywhere — in the cloud, on the ground and specifically, around our personal data.

Regulators need to decide whether social giants can own both the platform, and the data. Murphy says they shouldn’t own both, and she’s right. One or the other, but not both. Data should be owned by the public, either individually, or held in public trust.

If Facebook and its peers only make money by abusing their position, then you have to question their entire business model. Is it time for investors to take their profits and run?