Is big tech's freewheeling odyssey across the American economy coming to an end?
During a House Committee on Energy and Commerce hearing Tuesday morning, lawmakers heard several appeals for federal data privacy legislation from a panel of industry leaders and consumer advocates.
As proceedings continued, just one mile away the Federal Trade Commission announced the creation of a new task force within the Bureau of Competition to monitor the U.S. technology sector, investigate anticompetitive practices and manage necessary enforcement.
The simultaneous events point to a greater shift in Washington: Regulators are figuring out what to do about big tech. Lawmakers are too.
Both sides are grappling with the questions, has big tech become too big? And can it be entrusted to protect consumers and their data, or does the government need to step in?
The Technology Task Force marks an important step for the FTC as it weighs the size and scope of Silicon Valley, building off a similar model the commission used to tackle hospital mergers in the early 2000s. It also adds a more centralized competition lens to the consumer protection focus the commission has taken in regulating technology thus far.
Regulators are figuring out what to do about big tech. Lawmakers are too. Both sides are grappling with the questions, has big tech become too big? And can it be entrusted to protect consumers and their data, or does the government need to step in?
Many experts believe that breaking up big tech is a matter of when, not if. Then-law student Lina Khan made viral waves last year with a Yale Law Journal article about Amazon's antitrust issues, kicking off renewed attention to what can (or can't) be done with the handful of companies that dominate the airwaves.
Tackling technology from a different angle
The FTC is in the midst of a series of hearings on competition and consumer protection in the 21st century. With the major shifts it has precipitated in the economy, the tech industry has naturally risen as a top focus.
The creation of the task force is significant in that it shows a timely response from the commission that it is paying attention to issue areas dominating political attention, according to Henry Su, partner at Constantine Cannon LLP and former FTC attorney. Most of the FTC’s focus on technology has been around the privacy and consumer protection side; the competition aspect is a little less developed.
Getting the task force off the ground shouldn't take long as the competition bureau is fairly fluid in structure and regularly shifts resources and people around certain projects, Su said, in an interview with CIO Dive. What is less clear is when results might come about.
It could take the task force some time to create a plan of research, determine what kind of data it will gather and how it will collect it, and establishing how it will decide if something is anticompetitive and address it, according to Su.
The new team will pull from the bureau's current employees to fill the 17 staff attorney positions, according to the announcement, pulling in experts on areas such as social networks, online advertising, platform businesses and mobile operating systems. A technology fellow will assist the task force's investigations with technical assistance.
What's important for a regulatory body taking a close look at the tech industry is bringing in subject matter experts, Su said. That means including technologists, not just lawyers.
The new office is modeled after another task force the commission created in 2002 to tackle a similarly complex and evolving industry. Then-director of the Bureau of Competition Joe Simons led the launch of the FTC's Merger Litigation Task Force, ramping up the agency's hospital merger review and supporting its focus of merger enforcement in retail.
Simons, now chairman of the FTC, said in the announcement that the task force is the next step of the commission's ongoing efforts to examine technology's role in modern competition and consumer protection. By centralizing focus and expertise, the team can work exclusively on the rapidly evolving technology market.
The Technology Task Force will work closely with economists from the commission's Bureau of Economics and staff in the Bureau of Consumer Protection with expertise in technology platforms. The Office of Technology Research and Investigation, the technology arm of the Bureau of Consumer Protection, evaluates technology's impact on consumers but is resource-pressed.
'Prospective merger reviews'
The FTC has generally focused on areas like phishing and profiling that affect consumers and their data, privacy and behavior, Su said. A technology arm within the Bureau of Competition would have a different mission, focusing instead on antitrust practices.
The task force will also be responsible for looking into "prospective merger reviews in the technology sector and reviews of consummated technology mergers," and one of the team's co-leaders is Patricia Galvin, the current deputy assistant director of the Mergers III Division at the commission.
There has been a lot of consolidation in some technology markets as big players bring smaller companies under their umbrella. Recent news that Facebook is looking to consolidate its Instagram and WhatsApp platforms could be of interest to the task force in assessing fair concentration of data and economic power.
In the 1990s, the FTC launched an inquiry into Microsoft over its monopoly in the PC operating system market, an investigation that eventually went to court and was settled in 2001 with Microsoft found at fault. If the commission looks into the practices of Facebook or one of its peers, especially Amazon or Google, another major technology antitrust case could arise.
Facebook is already in negotiations with the commission over what could amount to a fine in the billions of dollars for violation of a consent decree. Such a sum would break records for the largest penalty handed down to a technology company, ushering in a new era of privacy enforcement.
When determining fines, the FTC can take into account the number of times a company violates a decree. The largest penalty handed down to a technology company thus far was a $22.5 billion fine to Google in 2012.
With the relatively uncharted territory that big tech has created, whatever happens could be a first. Many technology experts have cautioned the government against a heavy-handed legislative and regulatory approach to the technology sector, citing potential negative effects such as stifled innovation.
ITIF president Rob Atkinson released a statement urging caution in the new task force:
"Hopefully the FTC will not be swayed by populist furor and instead confine itself to careful, objective analysis based on the reality that many technology markets tend toward concentration, and that this concentration is usually pro-consumer and pro-innovation."
Economically damaging outcomes could arise from traditional antitrust action applied to 'platform' industries and organizations that rely on a free business model, he said.