Does Facebook Want to Be Regulated?

Legislation meant to rein in the social-media monopolist could cripple Facebook’s competitors while they’re still in the cradle—and Mark Zuckerberg knows it.

Facebook CEO Mark Zuckerberg testifying before a House Energy and Commerce hearing on Wednesday about data privacy and the use of Facebook data to target American voters in the 2016 election.
AP Photo/Andrew Harnik
April 11, 2018, 8 p.m.

Toward the tail end of Tuesday’s Senate hearing with Facebook chief executive Mark Zuckerberg, Sen. John Kennedy laid out for the social-media mogul how the congressional dog-and-pony show was likely to end.

“There’s gonna be a whole bunch of bills that are introduced to regulate Facebook,” the Louisiana Republican said. “It’s up to you whether they pass or not. You can go back home, spend $10 million on lobbyists, and fight us. Or you can go back home and help us solve this problem.”

Kennedy clearly meant it as a threat. But in their drive to punish Facebook for a host of missteps on data privacy, foreign meddling, and troubling content, lawmakers may in fact be playing right into Zuckerberg’s hands.

Many tech experts and smaller online platforms are increasingly concerned that new regulations on social-media companies would inadvertently cement Facebook’s dominance for years to come. They say new rules could raise the costs of compliance across the internet ecosystem, particularly if those rules mandate stricter content monitoring or tougher account-verification standards.

Facebook can easily eat those costs and remain profitable, but other platforms—especially Facebook’s nascent competitors—will struggle to take off under the extra weight.

“While larger platforms might have the resources and ability to handle the legal challenges created by new and, at times, inconsistent laws, new rules will put a particularly heavy burden on small and nonprofit projects,” said Jan Gerlach, the public-policy manager of the Wikimedia Foundation, which runs the popular online encyclopedia Wikipedia.

Facebook has “the financial resources to absorb any sort of regulatory burden,” said Charles Duan, a senior technology fellow at the libertarian R Street Institute.

“And they’re almost certainly aware of the fact that regulation will potentially mean that there are fewer players in the market,” he added. “All of those add up to a pretty strong incentive to favor regulation because it will help the company in the end.”

Over the course of his back-to-back congressional appearances, Zuckerberg repeatedly expressed his willingness to back new rules targeting an ecosystem where Facebook is the apex predator.

“I’m not the type of person who thinks all regulation is bad,” he said Tuesday. “I think the real question, as the internet becomes more important in people’s lives, is what is the right regulation?”

But a small cadre of Republican lawmakers are wondering whether the “right regulation” actually means “right for Facebook.” In their respective hearings, Sen. Dan Sullivan and Rep. Fred Upton both asked Zuckerberg whether he favored regulations because they would effectively entrench Facebook as the dominant social-media platform.

“Senator, that certainly wouldn’t be our approach,” Zuckerberg told Sullivan.

Both Sullivan and Upton compare potential regulations against Facebook to the Dodd-Frank financial rules ostensibly targeted against big banks. In their telling, those rules backfired by imposing onerous requirements on small banks, allowing big banks to swallow up the competition and grow even more powerful.

“That’s one thing you have to fear,” Upton, a former chairman of the House Energy and Commerce Committee, told National Journal after Wednesday’s hearing. “If you go over the top, then you prevent any new idea or new entrepreneur to have a chance to break into the market.”

Whether Facebook comes out on top in a new regulatory regime depends, of course, on which regulations Congress decides to pass. And it’s perhaps telling that Zuckerberg repeatedly refused congressional invitations to explicitly back existing legislation requiring “opt-in” consent from social-media users before their data is shared with third parties.

“Opt-in rules are unlikely to be a major barrier to competition among social-media platforms,” said Natasha Duarte, a data-privacy analyst at the Center for Democracy and Technology. “If done right, they could potentially make it easier for people to choose the services they use based in part on those services’ data practices or the privacy protections they offer.”

Instead of discussing “opt-in” rules, Zuckerberg repeatedly returned to themes such as content monitoring and, to a lesser extent, account verification for users and advertisers. Lawmakers have long seethed over Facebook’s apparent inability to police terroristic content, hate speech, and other undesirable material on its platform. And Zuckerberg’s failure to discover the Russian-backed accounts and advertisers sowing political chaos on Facebook during the 2016 election played a huge role in compelling him to testify.

Zuckerberg promised his company would hire thousands of new content monitors and deploy cutting-edge artificial-intelligence tools to remove inappropriate posts and ferret out the real identities of online actors. But while Facebook would be able to absorb the costs of these higher security standards, other actors would struggle to pay an army of moderators or develop effective AI programs.

“Increased monitoring obligations can put a large burden on smaller organizations that run websites with user-generated content,” said Wikimedia’s Gerlach. “If new or smaller websites can’t get off the ground because of burdensome expectations on moderating content, we lose the opportunity for a fair, neutral, equitable space online for innovation and collaboration to thrive.”

Not everyone, of course, is concerned that new regulations will stifle competition in the social-media space. “I don’t think we can competition ourselves out of this problem right now,” said Allison Bohm, policy counsel at liberal tech group Public Knowledge.

While Bohm acknowledged that some rules could certainly tip the scales in Facebook’s favor, she believes policymakers will be able to “tailor legislation” in a way that clips Facebook’s wings without knocking smaller platforms out of the sky.

Bohm’s viewpoint appears to have at least one powerful, if somewhat unexpected, backer. Sen. John Thune, the Republican chairman of the Commerce Committee, suggested to National Journal on Tuesday that his committee could thread the needle without entrenching Facebook and other tech giants.

“I think it’s something we have to weigh and have to look at,” Thune said. “You want to create an environment that’s more competitive, not less. And I think we can get that accomplished.”

All of this raises the question: Even in the absence of onerous rules, could another online platform actually dethrone Facebook? While several experts extolled the internet as a dynamic and unpredictable place—consider Facebook’s own meteoric rise—none could point to a specific company now accumulating enough market share to challenge the social-media monopolist.

Asked Wednesday by National Journal about whether regulation could actually benefit Facebook, Sen. Kennedy admitted the question raised “a valid point.”

“If you raise the costs of compliance so high, you could make matters worse because it stifles competition,” Kennedy said.

Then the senator paused. “Of course, there is no competition right now,” he added, “because Facebook buys all of it.”

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