The problem isn’t single cases but structural factors.

Oversight of the dominant digital platforms’ broad effects on society is not possible within the existing federal regulatory structure. Agencies such as the Federal Trade Commission (FTC) and Department of Justice (DOJ) are filled with good and dedicated professionals, yet they are constrained in what they can do. Such limitations are perversely demonstrated by the recent headline-grabbing antitrust actions by both agencies. Antitrust enforcement, while important, is targeted against specific circumstances and cannot protect against general consumer abuses. Similarly, while the FTC also has authority over unfair and deceptive acts, many abuses in the digital marketplace are harmful but not considered deceptive and unfair. The FTC is further hampered by limited power to promulgate broad rules, thus constraining most of its activities to one-off proceedings against a singular company for a specific type of abuse rather than establishing broad behavioral rules across the consumer-facing digital economy.

“Reprioritizing digital policy to reflect the public interest requires focused attention on the broad sweep of corporate behaviors by the dominant digital companies.”

Reprioritizing digital policy to reflect the public interest requires focused attention on the broad sweep of corporate behaviors by the dominant digital companies. This is best achieved by establishing a new federal agency staffed with digital expertise and the focused responsibility to oversee protection of consumers and promotion of competition in the services that are critical to our lives and livelihoods.

Challenge

Our daily lives—from work and school, to shopping and a multitude of other activities—are built around the services provided by the dominant digital companies. Similarly, the country’s economic growth is pinned to a digital economy that grew over four times faster than the overall economy. Those services and this economic expansion are largely the provenience of a handful of tech companies that began as struggling startups and became corporate behemoths with systemic importance. These companies are broadly referred to as “platform companies” because it is on the platform of their computer farms that the critical services reside.

The companies’ systemic importance has been financially rewarding. During the first eight months of the pandemic, Facebook’s market value increased 47%; Alphabet/Google by 26%; Amazon soared up 64%; Apple went up 63%; and Microsoft up 29%.1 All but Facebook were valued at over $1 trillion. Together, these companies are five of the six most valuable companies in the world—Alibaba, a Chinese digital company, ranks number five.

Multiple marketplace studies2—including a landmark investigation by the House Subcommittee on Antitrust—demonstrated a litany of substantial abuses and harms resulting from the unsupervised exploitation of the dominant digital companies. Such abuse falls into three categories: the dissemination of misinformation and hate; the distortion of markets to become non-competitive; and the violation of consumers’ rights.

“Misinformation is the logical result of a revenue model that rewards the volume of information over its veracity.”

Misinformation is the logical result of a revenue model that rewards the volume of information over its veracity. When lies pay as well as truth, there is little incentive to only tell the truth.

Market distortion results when companies assume the role of gatekeepers to the new economy. Unrivaled network effects result in consumers having only one practical choice for service.3 Such a dominant position is then used to stifle competition and the innovation it drives.

Consumer rights are trammeled in the process. The forced acceptance of take-it-or-leave-it terms and conditions at the outset of the relationship with many services continues throughout the user’s relationship with that service. Particularly offensive is the virtually unconstrained siphoning of consumers’ personal data and its conversion from private information into a corporate asset.

As the digital economy and the critical services of these companies exploded, however, public-interest oversight atrophied. A federal government proficient in doing again what it did yesterday was ambushed by digital technology that allowed companies to behave in unprecedented ways. To date, these companies have been called to answer to the public interest in only two narrow ways. On limited occasions, they faced prosecution for their deceptive acts—such as when Facebook did not adhere to the privacy practices it represented to its users. The other public-interest effort is antitrust prosecution. This type of prosecution is a recent development that faces an uncertain future against prevailing jurisprudential interpretations. Because there will not be a definitive answer on its certainty until years later, the offending practice can continue to operate during this time. While policing deceptive and/or anticompetitive acts is important and laudable, it is insufficient. Prosecuting unfair and deceptive acts about privacy policies does not improve the protection of Americans’ privacy rights. Bringing antitrust suits does not protect against the broad social and economic implications of consequence-free digital company behavior. The scale of digital marketplace challenges simply exceeds the scope of existing regulatory agencies. Challenges such as the portability of personal data, shared access to data, interconnection and interoperability among services, self-preferencing practices, privacy protection, data security, open access to markets, oppressive contract terms, and a transparent description of what the companies do with personal information are beyond the scope of an antitrust lawsuit or an unfair and deceptive practices action. As a result, the rules pertaining to such actions were made not by policies established to protect the public interest, but by the digital companies themselves to benefit their own best interests.