Social media, communications, and high tech companies are amassing volumes of personal information about members of our community.
There is a growing sense that “something needs to be done” about this. Often that leads to calls for enhanced powers of government.
Two weeks ago, an official in the Trump administration speculated that the answers to the problems caused by “big data,” might be found in novel ways of enforcing the antitrust laws. Not surprisingly, the speaker was the head of the antitrust division in the Justice Department, Makan Delrahim.
The heads of other federal and state agencies will likely also find new evidence for their departments’ specialties, as well. Under Republican agency heads, the Federal Trade Commission and the Federal Communications Commission are already investigating Apple, Amazon, Facebook, and Google.
Democratic presidential candidates, notably Senators Warren and Klobuchar, are also pushing for greater government activism—including breaking up companies not because of the harm they can be shown to have caused, but simply because they are too big.
Much of this pressure should be resisted. Not every problem has a solution in expanding the role of government. Indeed, we could lose a great deal of value in our economy if we let the cry to “do something” cause us to hobble the very means most likely to resolve the problems we are urged must be fixed.
A good example is the proposal to use antitrust laws to deal with data privacy. “It would be a grave mistake to believe that privacy concerns can never play a role in antitrust analysis,” Makan Delrahim announced.
“It remains to be seen whether consumer behavior in the digital marketplace maps perfectly onto expressed preferences for privacy,” he continued, noting a study that found 1,500 MIT students were willing to give up contact information on their closest social media friends in exchange for a free pizza.
A good rule in public policy is to be wary of studies done at universities attempting to generalize from the behavior of college students to conclusions about the larger population. Assuming, nevertheless, that the MIT study has something useful to tell us, it hardly points toward an antitrust solution.
Antitrust laws are used to break up companies, or to restrict their business practices, in order to allow consumers to have more quality choices, at lower prices, in the market. If some social media firms offer better privacy protection than others, that should be a selling point for those firms over others, to consumers who prize that value. To consumers who don’t, a pizza might be a more attractive alternative. Why is this different from recognizing that people are willing to pay hugely varying ticket prices for different musical performers?
Structurally, some companies do have an advantage because they accumulate information about their customers. Amazon is most frequently identified in this regard, with some commentators spinning derogatory theories about a company that sends you information about products your past patterns indicate you might like.
Consumers can choose between companies that offer more or less of this kind of tracking. If you don’t like Amazon’s policies on tracking, try another platform, or go directly to the website of the product manufacturer. Privacy-friendly entrants can fill a niche in many markets.
There are some examples where size alone offers substantial advantages. Insurance companies, for that reason, are allowed to pool their separate experiential data across neighborhoods and demographics, to estimate risk better.
They have an exemption from the antitrust laws to do so, provided the state insurance commissions are doing a good job of oversight. Far more often, however, the solution to feared accumulation of economic power is not government, but to invite in new competitors. America on Line was once the undisputed provider of search services. Apps were bought on floppy discs and run on desktop computers.
Innovation, not government, brought us the advances we’ve enjoyed since those days.
Tom Campbell is a professor of law and a professor of economics at Chapman University. He served five terms in the US Congress, was director of the antitrust arm of the Federal Trade Commission, and was Finance Director of California. He left the Republican Party in 2016 to help form the Common Sense Party of California.
