At a hearing at the U.S. Senate Committee on the Judiciary Tuesday, lawmakers grappled with how to handle regulating the advertising technology industry and whether current anti-trust laws are equipped to address concerns that tech behemoths that own the most user data may have a monopoly.
Just a week after the latest in a series of hearings on a potential federal privacy law, senators questioned the five witnesses in front of them on whether such a law could or should help regulate an industry that has, to date, generally gone unregulated. And while the witnesses did agree the status quo won't stand, opinions differed on whether a law similar to the EU General Data Protection Regulation or the California Consumer Privacy Act is the right approach or if they might have a detrimental effect on competition. Notably, the subject matter mainly focused on examples of tech behemoths Facebook and Google.
Despite early reports that the GDPR — which will hit its one-year mark May 25 — has had a detrimental effect on small businesses and startups, Johnny Ryan argued the regulation is a business enabler and not a business killer. Ryan is chief policy and industry relations officer at privacy-focused web browser Brave, which Ryan said grew 600 percent in the last year. He urged lawmakers to craft a similar, principles-based U.S. law.
"We view the GDPR as a great leveler," Ryan said. "It can establish the conditions to allow young, innovative companies like ours to flourish. Today, big tech companies create cascading monopolies by leveraging users’ data from one line of business to dominate other lines of business, too. This hurts nascent competitors, stifles innovation and reduces consumer choice."
He argued the GDPR's provisions on "purpose limitation" and freely given consent with concerns lawmakers outlined throughout the hearing, including that online platforms know more about users than users are even aware and that the data collected is sometimes sensitive and often shared or sold.
"These two GDPR tools, the purpose limitation principle, plus the ease of withdrawal of consent, enable freedom," Ryan said. "Freedom for the market of users to softly 'break up – and 'un-break up' – big tech companies by deciding what personal data can be used for."
It's that kind of consumer control Sen. Josh Hawley, R-Mo., wants to ensure. He introduced his Do-Not-Track Act this week, which would make observance of users' privacy wishes compulsory via browser settings.
Brian O'Kelley, former CEO of AppNexus, agrees that the current method of gathering consent doesn't work. "Even with my computer science degree and 15 years of adtech experience, it is hopeless to try to follow my data around the internet. I don’t read 15 pages of privacy policy legalese before I visit a website. I often allow third-party cookies because many sites break if I don’t."
He seeks a change and called for a shift in anti-trust regulation as a way to address the fact that companies, specifically, he said, Google and Facebook, have been able to vacuum up consumer data en masse — and as they've grown, acquired more and more companies, adding to their massive data pools.
"Over the past decade, Facebook and Google have successfully completed hundreds of acquisitions without any meaningful anti-trust implications, creating super-monopolies reminiscent of AT&T and Standard Oil in their respective heydays," O'Kelley said. "The reason that these acquisitions have gone uncontested is that modern anti-trust enforcement uses consumer prices as the sole measure of consumer welfare to evaluate a proposed merger. Since much of the internet is ad-supported, the direct monetary cost to the consumer is zero. In effect, we have created an advertising anti-trust exemption that has allowed ad-supported companies to buy whoever they want."
O'Kelley called on Congress to close the "anti-trust loophole" to correct the problem.
But Jan Rybnicek, an attorney at Freshfield's, disagreed. He said current anti-trust law, last overhauled in the 1970s, is sufficient to protect healthy competition and changing that would disrupt the market and harm consumers in the end.
"Breaking up the largest platforms to address a perceived competition problem ultimately only will harm consumers," O'Kelley testified. "Not only is this proposal putting the cart before the horse as no clear market failure has yet been identified, but the solution itself is unworkable. The proposal may sound simple in theory but it is anything but that in practice. For one, it is not clear exactly what these companies would be broken up into and how they would operate afterward. What is clear, however, is that consumers would suffer considerable harm in the form of inferior products and services."
Sen. Amy Klobuchar, D-Minn., who is the ranking member of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, in February reintroduced two bills that would revise anti-trust law in the U.S., the Merger Enforcement Improvement Act and the Consolidation Prevention and Competition Promotion Act of 2019. The bills aim to help enforcers, namely the Federal Trade Commission and the Department of Justice, better assess the impact of merger settlements and impose higher fees on companies aiming to make them and strengthen the legal standard for a merger in the first place, respectively.
At the hearing, Klobuchar said she's concerned about consolidation that has already taken place and that agencies should be able to look back at mergers like Facebook and WhatsApp or the online travel industry.
However, Rybnicek, while not specifically speaking to Klobuchar's bill, said "these changes are unnecessary. Anti-trust law is robust, incorporates new learning and can address issues raised by the new digital economy, including digital advertising." In his written testimony, he added, "Of course there is room for improvement, but changes should be based on actual evidence rather than supposition and fear of 'bigness.'"
But Sen. Richard Blumenthal, D-Conn., said big tech companies are able to harvest all sorts of data on consumers with "almost no restraint" and believes anti-trust law can have a positive impact on solving some of the perceived harms Congress is trying to protect against. That is, if there are more companies to choose from, no one or two companies own all the data and therefore control what happens to it. Consumers who don't like what one company is doing with their data can simply move to another.
Professor Fiona Scott Morton, of Yale School of Management, agreed, saying at one point during the hearing, "If we had more options, we wouldn't have these problems."
But Sen. Thom Tillis, R-N.C., argued that it isn't the job of the lawmakers in the room to decide whether to break up companies like Facebook and Google. Often an advocate for the industry, Tillis touted their merits, arguing, "If we did not have ad-based sites out there we would not be nearly as far along in this space as we are."
He called for, in place over regulatory overreach, the creation of internet literacy for consumers to know the right questions to ask: "I want to make sure we don't try to overprotect the consumer along the way. I think we need to figure out a way to have a basic level of literacy there where you can protect a lot of info being exploited today if you did your homework."
In the end, O'Kelley had three proposals for Congress: "Protect consumers rights to their own data; create regulatory entity that can keep u with innovation; and close the "advertising anti-trust loophole."
For his part, Ryan ended by urging Congress to "enact strong privacy rules so that a healthy marketplace can develop. Give consumers freedom to choose the companies and services they want to reward," he said, adding Europe's law takes from the U.S. fair information practice principles as its core ideas. "The GDPR is based largely on American principles. We urge you to bring them home."