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The Federal Trade Commission’s (FTC) recently announced tech task force could be bad news for consumers, or it could be good news. In my previous blog I examined what the task force should do to stay on the good news path. In this blog I will identify three things that the task force should avoid so as to stay off the bad news path.
Suggestion 1: Avoid unwinding past mergers
According to The Wall Street Journal, officials at the FTC indicated that the task force will be a vehicle for unwinding past tech mergers. Presumably this means requiring a merged company to divest itself of the service, assets, personnel, and intellectual property of one or more premerger companies. When is this a good idea? Almost never.
What would have to be true for an unwinding to be a good idea? Regulators would need to know enough about the future, the company’s current operations, and customers’ costs and benefits from their consumption to ensure that the benefits outweigh the costs.
Advocates for breakups like to point to the breakup of AT&T as an example of a good breakup. This belief (1) ignores that the Department of Justice, AT&T, and the courts drew the industry boundaries incorrectly (thus the years of court cases, regulatory proceedings, and merger cases trying to redraw industry boundaries); (2) pretends that the costs of changing the company’s operations and the salaries of the lawyers and consultants that made comfortable livings on the regulatory and legal proceedings were inconsequential; (3) ignores the consumer fraud that was enabled by the confusion created by the changing government and industry practices; and (4) pretends that lobbying and legislative costs of creating the Telecommunications Act of 1996 — the legislation that tried to undo many aspects of the AT&T breakup — and the regulatory and industry costs of dealing with the weaknesses of the act were inconsequential.
It would also have to be true that the premerger companies are now a viable business. The world has changed since the mergers. Who’s to say that GrandCentral (now Google Voice) would be viable or that WhatsApp’s original business trajectory would work today?
Suggestion 2: Avoid anti-tech phobias
As I described in a previous blog, some of today’s anti-tech rhetoric reflects some common phobias, such as the fear of big things (megalophobia) and the fear of change. I’ll focus on megalophobia.
Much of the opposition to tech progress reflects a fear of large businesses: Columbia University professor Timothy Wu based his new book on tech on the idea that big is bad. Salon’s Angelo Young recently advocated for the breakups of Amazon, Alphabet, and Facebook because they are big. The New York Times (here), The Economist (here and here), and Bloomberg (here) have all equated big with bad.
What’s wrong with this phobia? It misses the reality that the causes of tech company size are happy consumers and users. Every person who buys from Amazon, searches with Google, or posts to Facebook does so voluntarily. Happy customers create big companies.
Suggestion 3: Avoid being influenced by rhetoric
Tech’s critics use colorful language, possibly to cloak the weakness of their arguments or perhaps because they find the drama persuasive. Here are some examples of the rhetoric:
What’s wrong with the rhetoric? It bypasses analysis. An “evil empire” should be opposed on its face. “Overlord” raises images of an oppressive authority. A “curse” harms people by definition. Government regulation should be based on careful analysis, not ad hominem and other logical fallacies.
What’s at stake?
Is the FTC in danger of being hijacked by phobias and rhetoric? Probably not. Despite the FTC’s problems in the AT&T–Time Warner case, the agency has a reputation for good analysis. But given the expressed confidence of the FTC officials, the volume of dramatic language used to market regulation on tech companies, and the instincts that appear to drive many to fear big companies, the task force will have to be diligent.
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