The Regulation of Foreign Platforms.

• Author: Sitaraman, Ganesh

Table of Contents Introduction I. Problems with Contemporary Paradigms A. Tech Neoliberals B. National Security Technocrats 1. The general paradigm 2. Substantive administrability problems 3.Institutional administrability problems C. The Public and Its Platforms II. A History of Restrictions on Foreign Platforms A. Banking B. Communications C. Transportation D. Energy and Power III. Common Types of Foreign-Platform Restrictions A. Ex Ante Approvals B. Conditional Entry and Reciprocity C. Governance Rules and the Separation of Ownership and Control IV. How to Regulate Foreign Tech Platforms A. The Context of Foreign Restrictions 1. Economics and geopolitics 2. The constitutional context B. Toward a Platform-Utilities Paradigm 1. Sectors before firms 2. Structural separations 3. Standards and interconnection 4. Public investment and public provision C. TikTok and the Future of Platform Regulations 1. IEEPA, CFIUS, and legislative reforms 2. The presidential regulation of foreign tech platforms Conclusion: The TikTok Trilemma Introduction

In August 2020, the Trump Administration issued twin executive orders banning Chinese-owned tech platforms TikTok (1) and WeChat (2) from the United States. (3) These were not the first actions taken against Chinese tech platforms. The U.S. government, for example, had previously forced a sale of the Chinese-owned dating app Grindr. (4) And earlier that year, India banned TikTok and fifty-eight other Chinese apps. (5) But more than any other, the Trump Administration's ban on TikTok sparked immediate outrage, confusion, and criticism. (6) Some commentators attempted to identify the dangers that a ban might remedy: data collection on U.S. government employees, data collection on the general public, and the spread of disinformation. (7) Others questioned why some Chinese firms were banned and not others, noting that there was not a clear process for banning apps. (8) Still others observed that personal motives might be at play. (9) Users of the apps, as well as TikTok itself, brought lawsuits in federal court challenging the bans. (10) Part of the confusion was that the Committee on Foreign Investment in the United States (CFIUS), a group of government officials that reviews mergers for national security concerns, was already in the midst of a TikTok review. (11) After President Trump left office, the Biden Administration paused the bans. (12) It later revoked them, although it simultaneously ordered the Secretary of Commerce to consider data security threats from foreign adversaries' tech platforms when evaluating whether to prohibit or restrict foreign informational or communications technologies or services. (13)

This Article offers a new framework for thinking about national security restrictions on foreign tech platforms. Since the Trump executive orders, the debate over how to treat foreign tech platforms has largely been dominated by two paradigms. Each paradigm seeks a principled path forward rather than relying on expansive presidential discretion to ban foreign firms. (14) The first, tech neoliberalism, has been common among public commentators and opinion writers. Tech neoliberals object to placing any restrictions on foreign tech platforms because regulation would threaten "the open internet" and amount to taking a page from the authoritarian playbook. (15) Their approach channels the hardline free-trade and globalization approach that gained ground between the 1980s and the 2000s. A second camp seeks to maximize global openness as well, but it recognizes that foreign tech platforms may pose a risk to national security. Instead of nonregulation, therefore, these national security technocrats seek to identify the specific national security harms at issue and apply a case-by-case, narrowly tailored set of mitigation measures, coupled with a system of audits and monitoring to ensure compliance. (16) This approach, in broad strokes, is similar to the existing CFIUS review process.

Both paradigms, however, suffer from serious problems. While tech neoliberals are optimistic about harmony through global interconnectedness, the "open internet" is more imagined than real. Moreover, adherents fail to account for the serious liberty tradeoffs that their approach might require. National security technocrats, by contrast, face significant implementation and administrability issues that advocates neither discuss nor account for--issues that threaten to derail their entire enterprise.

Importantly, both camps also make a conceptual mistake. Neither one takes tech platforms seriously as platforms--as firms that have a distinctive political economy and thus have almost always been subject to special regulatory treatment, including foreign restrictions. Throughout history, policymakers and scholars have considered firms in many sectors--including banking, communications, transportation, and energy--special due to their political economy. Economically, firms in these sectors are often natural monopolies, facilitators of a range of downstream commercial activity, or subject to network effects. Politically, firms in these sectors play a critical role in society and can wield considerable power, implicating core democratic and national security interests. Firms in these sectors have therefore been treated differently than firms producing ordinary tradable goods. (17) Indeed, these firms have been subject to distinct regulatory regimes designed to address their specific economic and political dynamics.18 Some refer to the above sectors as "public utilities," "regulated industries," or "infrastructure industries." (19) I will refer to them as platforms or platform industries, both to modernize and simplify usage and to connect their political-economy dynamics to those of tech platforms. (20) Part I below describes the dominant paradigms in tech-platform regulation and introduces the analogy between tech platforms and regulated industries.

Since the First Congress, the United States government has frequently placed restrictions on foreign ownership, control, and influence in platform industries. (21) Restrictions have not just been common in the banking, communications, transportation, and energy sectors; they emerged alongside these sectors and evolved with them. Restrictions on foreign control in banking date back to Alexander Hamilton's financial plan. They were a central aspect of the First and Second Banks of the United States, in addition to the National Bank Acts of 1863 and 1864, which remain the foundation for modern banking regulation. (22) Restrictions on the foreign ownership of broadcast and undersea cables emerged with the rise of radio communications in the early twentieth century, and these restrictions were strengthened in subsequent decades. (23) In the post-World War I era, the newest innovation in transportation--air travel--was regulated. Restrictions on foreign ownership in this sector drew on principles used in the maritime shipping context. (24) And in the energy sector, nuclear power has, since the first decade of its existence, had stringent restrictions on foreign ownership. (25) In each of these areas, Congress and the executive branch have, over time, modified restrictions on foreign ownership, influence, and control--strengthening and weakening restrictions in light of national security challenges and economic policy preferences. Part II describes restrictions in these four sectors, their justifications, their evolution, and important dynamics around their application and implementation up to the present.

From this history of restrictions, it is possible to identify commonly used regulatory strategies for addressing foreign control and influence. First and most importantly, restrictions on foreign influence in platform industries have not followed a case-by-case approach. Rather, general rules have applied to firms across the entire sector. In most sectors, federal regulators must give ex ante approval, via a license or charter, to a foreign platform before it can operate in the United States. That approval is conditional on meeting sectoral regulatory standards and often requires corporations to have a U.S. subsidiary. (26) This enables review and remedy of both national security dangers and non-national security risks in the sector. Second, Congress has in some areas conditioned entry of a foreign platform on reciprocal treatment from the platform's home country. (27) Third, and perhaps most strikingly for modern observers, many policymakers saw the separation of ownership and control as a virtue rather than an agency cost (as is common in contemporary corporate law and governance). Restrictions on the amount of foreign investment, as well as mandates that corporations and directors be U.S. citizens, were legal requirements that sought to reduce foreign control and influence. Part III explores these commonly used strategies for regulating foreign platforms.

Drawing on this history, Part IV offers a different approach for thinking about national security restrictions on foreign tech platforms: a platformutilities paradigm. Part IV first discusses the geopolitical, economic, and constitutional contexts of platform regulation. It then uses the platformutilities paradigm to identify principles for regulating foreign tech platforms today. First, the platform-utilities paradigm suggests that restrictions on foreign platforms should operate at the sectoral level before targeting particular firms. While the communications, banking, transportation, and energy sectors have some shared political-economy dynamics, they each raise distinctive national security and democracy issues. For example, banking implicates issues of monetary sovereignty and financial stability, but telecommunications does not. Sectoral regulations are attentive to these dynamics. Such regulations have also generally been coupled with ex ante approvals to ensure that foreign platforms...