In Antitrust We Trust? Big Tech Is Not the Problem - It's Weak Data Privacy Protections.

• Date: 01 February 2021
• Author: Creser, Olivia T.

TABLE OF CONTENTS I. INTRODUCTION 291 II. BACKGROUND 292 A. The Internet's Move to a Centralized Ecosystem 292 B. The Characteristics of Big Tech 294 1. Network Effects 295 2. Economies of Scale 295 3. The Role of Data 296 C. Concentration 297 D. Is Big Bad or Is Bad Bad? 298 1. Data Collection Practices Across the Internet and Beyond 298 2. Commercial Data Collection Leaves Consumers Exposed 300 III. THE MOVEMENT TO TAKE DOWN BIG TECH 300 A. Shifts within Congress and Federal Agencies 301 B. The Evolution of Antitrust and the Rise of the New Brandeis School 302 IV. BREAKING UP BIG TECH WILL NOT CURE CONSUMER HARMS 307 IV. AMEND SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT 311 A. The FTC's Expertise 312 B. Expand FTC Authority to Enforce Against Section 5 Violations 312 C. Expand FTC Authority to Order Conduct 314 VI. CONCLUSION 315 I. INTRODUCTION

The Big Tech companies--Amazon, Apple, Facebook, and Google (1)--which many once admired as the trailblazers that brought the technology frontier to America's front door, have fallen out of favor with a public that no longer trusts how important these firms are to American life. (2) The idea to break up Big Tech has been around for over a decade, (3) but the movement did not become mainstream until 2019 when Democratic presidential candidates were asked to debate the topic for the first time on a national stage, exposing the shift in public opinion. (4)

That same year, some of Big Tech's most notable pioneers turned their backs on the companies they helped to start. Apple co-founder Steve Wozniak said in an interview he "wish[es] Apple on its own had split up a long time ago," and thought that Big Tech has "taken our choices away." (5) Facebook co-founder Chris Hughes echoed these sentiments in a New York Times opinion column where he mused about his own use of Facebook, saying, "The choice is mine, but it doesn't feel like a choice." (6) Hughes joined the call to break up Facebook, attributing the platform's privacy missteps to its quest for "domination." (7)

The shift in attitude toward Big Tech runs parallel to a movement fervently working to chip away at the edifice of antitrust doctrines that have dominated jurisprudence since the 1970s. (8) This group, referred to as the New Brandeis School, (9) is not only motivated by the power of Big Tech but also sees consolidation across a number of industries as a sign that antitrust law is failing to curb excessive accumulations of power. (10) The New Brandeis School is pushing to activate antitrust law against a number of social, economic, and political ills associated with the power of Big Tech and consolidation of power generally. (11) This Note focuses on particular ills that some have identified as symptomatic of Big Tech--namely, consumer exploitation, manipulation, and data privacy violations. (12)

The New Brandeisians have identified the size of Big Tech as the source of consumer harm online. However, these harms are symptoms of one of the basic principles that created the Internet ecosystem as we know it today, that is, the unregulated collection of consumer data for commercial purposes. This principle enables practices that exploit, manipulate, and violate the privacy of consumers to grow and persist. Therefore, breaking up Big Tech will not stop these harms from continuing to occur. Instead of focusing on Big Tech, this Note proposes that Congress and regulators prioritize the true cause of consumer exploitation, manipulation, and privacy violations--weak data privacy protections.

Section II of this Note explains the evolution of the Internet ecosystem and identifies the characteristics of Big Tech firms. In addition, it refutes arguments claiming that Big Tech's dominance is the cause of consumer exploitation, manipulation, and privacy violations in the digital marketplace with examples of consumer harm persisting throughout the Internet ecosystem. Section III discusses the inadequacies of the New Brandeisian approach to the power of Big Tech. Section IV shows that a strategy to curb consumer harm online that focuses on the power of Big Tech will fail to make a sufficient impact. Section V proposes a solution to consumer harm online that rests in a modification to the FTC's Section 5 authority, which will enable the agency to enforce data privacy protections that a reasonable consumer will expect.

2. BACKGROUND

   1. The Internet's Move to a Centralized Ecosystem

      The Internet ecosystem is defined as an "internet-dependent...business-enabling system within the broader economy, defined by activities that rely on the internet to promote exchanges of products, services, and information." (13) Since its humble beginning in the early 1990s, the modern Internet has grown exponentially from 3,000 websites in 1994 to 1.72 billion websites today. (14)

      Contrary to the increase in the number of websites, actual page views have decreased over time. "While in 2001, the top 10 websites accounted for 31 percent of all page views in America, by 2010 the top 10 accounted for 75 percent." (15) This paradox defies initial projections about the decentralized nature of the Internet. (16)

      Tim Wu, a leading New Brandeisian, when asked in an interview in 2010 whether he thought the technology monopolies of that time looked different than those of the past, he replied, "I know the Internet...was designed to resist centralized control...[b]ut firms today, like Apple, make it unclear if the Internet is something lasting...." (17) At that time, companies like Apple and Google began to dominate their respective markets. (18) Even then, many believed that the Internet would withstand centralization. Some gravitated toward factors like switching costs, which early on appeared to outweigh evidence that any firm had durable market power. (19) For example, in 2012 Robert Bork notably argued the proposition that "Google is the 'gateway' to the Internet...contradicts real world experiences [because] [c]onsumers can switch to other search engines at zero cost." (20) Those who see switching costs as enabling Big Tech's market power, rather than undermining it, have since criticized Bork's remarks. (21)

      Today, many believe the Internet is concentrated because Big Tech consists of digital platforms, (22) while others argue that technology sectors, including the Internet, are too dynamic to remain beholden to monopoly power for too long. (23) The former opinion challenges the long-standing theory of "creative destruction," which characterizes industrial change as "incessantly revolutioniz[ing] the economic structure from within, incessantly destroying the old one, incessantly creating a new one." (24) Neither position has been definitively refuted and ultimately leave questions about competition in the digital marketplace unresolved.

      As the digital world has shifted "from the wide-open web to semi-closed platforms," researchers and scholars have set out to understand the structural models that facilitated the move and enabled certain firms to capture market power and preserve it over time. (25) The following sections (II.B and II.C) provide an overview of the structural characteristics of digital platforms and how those characteristics enhance the market power of Big Tech.

   2. The Characteristics of Big Tech

      Big Tech companies are distinguished from other Internet-based companies because they are digital platforms. A digital platform is a two-sided market in which an intermediary (the platform) enables two interested parties, usually buyers and sellers, to interact. (26) Two-sided markets existed before the digital age, (27) but digital platforms are singled out for their strong network effects, economies of scale, and use of data. (28) Digital platforms are generally prone to tipping. Tipping means that once a firm gains enough users in a given market, it establishes itself as a powerful incumbent--one that is difficult to displace. (29) The popularity of digital platforms can be attributed to these characteristics which enable greater connectivity within Internet ecosystem.

      1. Network Effects

         Network effects occur when the value of a product is dependent upon the number of its users. (30) This occurrence is especially important for digital platforms because success hinges on the platform's ability to incentivize parties on either side (usually buyers and sellers) of the platform to interact. Once the number of users reaches a certain threshold, network effects take over and the service increases in value as more users join. (31) This phenomenon captures the trajectory of Facebook's growth: individuals' desire to be on the platform increases as more people they know join the network, linking the value of the social network to its size.

      2. Economies of Scale

         Economies of scale occur in industries when efficiencies in production reach a point at which production costs decrease with every added customer. (32) For example, when a manufacturer creates an assembly line that maximizes labor and materials efficiently and thus minimizes the cost of each product unit, the manufacturer reaches "scale." However, in typical markets, efficiencies have a ceiling that, once reached, will result in increased costs for every additional unit of production. (33) In digital markets, products and services are delivered as digital information and can be replicated at little to no cost. (34) An example of this is the digital distribution of music. Platforms like Spotify and Apple Music distribute millions of music albums with virtually zero increased cost to production because the music has no physical form--the costs do not increase in proportion to usership. "The same holds for information services that are subject to fixed design and development costs and fixed maintenance and updating costs." (35) For example, every time Facebook updates its services, it does so for all of its users in a jurisdiction, but the cost only incurs once.

         Generally speaking, digital...