It has become something of a ritual for CEOs of the America’s biggest technology companies to appear before Congress to be harshly criticized for allegedly engaging in monopolistic behavior, biased censorship, and violations of privacy, but in the decade since the ascendance of Big Social Media, Congress has failed to back up their complaints with real legislation.
That may be about to change.
A legislative push to rein in dominant tech platforms through competition policy is gaining steam, analysts tell MarketWatch, after a hearing Thursday where a bipartisan group of legislators began to question the business models of Facebook Inc.
Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey and Google parent Alphabet’s CEO, Sundar Pichai, took a tongue lashing Thursday from members of the House committees on communications and technology and consumer protection.
YouTube have been vectors of misinformation that helped lead to the Jan. 6 riotous invasion of the Capitol and have exacerbated COVID-19 vaccine skepticism. They also faced criticism from Republicans for what they allege are biases against conservative political viewpoints.
Alex Cynamon, an analyst at Veda Partners, told MarketWatch that while these lines of attack were not wholly new, and that often Republican and Democratic complaints about Big Tech practices were at odds with one another, investors should be concerned with what he saw was a new interest on the part of lawmakers on the “core business models of targeted, behavioral advertising” by social media companies.
He pointed to comments by Democratic Rep. Anna Eshoo of California, whose district includes parts of Silicon Valley, that characterized social media companies business models as fundamentally problematic.
“Your model has a cost to society. The most engaging posts are often those that induce fear, anxiety, anger and that includes deadly, deadly misinformation,” Eshoo told Zuckerberg at Thursday’s hearing. “This is dangerous and it’s why Representative [Jan] Schakowsky and I are doing a bill that is going to ban this business model of surveillance advertising,” referring to the Illinois Democrat.
“If more members start thinking about this issue in those terms, that’s consequential for investors,” Cynamon said. It remains to be seen whether more Democrats are ready to take up this fight, let alone whether Republicans would sign on. But, Cynammon argued, “the longer it takes for Congress to advance a federal privacy framework, the stronger it will be,” because states are already beginning to advance frameworks of their own and because public opinion of Big Tech firms appears to be growing more negative over time.
Robert Kaminski, managing director at Capital Alpha Partners is more skeptical that yesterday’s hearing made any impactful legislation more likely. “The companies are now in a paradox where they have pledged to do the impossible: to be forums for free expression, but not misinformation; to censor political speech, but not allow interference in elections; to be useful and engaging, but not addictive,” he told MarketWatch.
These contrary demands by Democrats and Republicans make significant legislation less likely. “They are threatened with legislation, but there are too many perceived problems to make progress on any single one. I call it the Chaos Theory of Big Tech,” he added.
At the same time, there is unmistakable momentum on the part of antitrust enforcers to increase oversight of Big Tech. Legislation to greatly increase funding for the Federal Trade Commission and the Department of Justice’s Antitrust Division has bipartisan support in both the House and the Senate and on Thursday Acting Chairwoman of the FTC Rebecca Kelly Slaughter announced the creation of a new rulemaking group that would focus on prohibiting unfair or deceptive practices and unfair methods of competition, that could impact social media firms but also platform marketplaces like Apple Inc.
and Amazon.com Inc.
“It would be cleaner and simpler for Congress to address these problems with a legislative package,” Cynamon said. “But it’s not uncharacteristic of Congress to leave it up to an agency to roll up their sleeves and develop these rules.”