Summer Update, Privacy + Competition -- Talking Tech w/ Michelle Richardson & Avery Gardiner
Host Brian Wesolowski sits down with Director of Privacy & Data, Michelle Richardson, unpacking what the $5 billion dollar fine levied by the Federal Trade Commission against Facebook means and updating us on where things stand with a federal privacy law in the United States. <br><br>Then Brian brings in Senior Fellow on Competition, Data, and Power, Avery Gardiner to talk about the latest on big tech and antitrust laws.<br><br>More on CDT's privacy legislation efforts: http://bit.ly/CDTfedpriv<br>More on CDT's competition work: https://cdt.org/issue/competition/<br><br>More on Michelle: twitter.com/Richardson_Mich<br>More on Avery: twitter.com/AveryWGardiner<br>More on our host, Brian: bit.ly/cdtbrian<br><br>Attribution: sounds used from Psykophobia, Taira Komori, BenKoning, Zabuhailo, bloomypetal, guitarguy1985, bmusic92, and offthesky of freesound.org.
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Transcript
Welcome to Tech Talk. Bye. CT.
Tea. Welcome to CDT's Tech Talk, where we dish on tech and Internet policy while also explaining what these policies mean to our daily lives. I'm Brian Wasilowski, and it's time to talk tech. In this episode, we unpack with the $5,000,000,000 fine levied by the Federal Trade Commission against Facebook means and get an update on where things stand with federal privacy law in The United States. We also hear from CDTs fellow on competition, data, and power about big tech and antitrust laws. Is there any merit to the increasingly loud calls to break up big tech companies? $5,000,000,000. That's the fine the Federal Trade Commission levied against Facebook for the mishandling of personal data of its users. It's by far the biggest fine against a tech company from the agency. But the fine perhaps wasn't the biggest part of the FTC privacy settlement with Facebook. There was also a number of oversight provisions that could impact how the company does business. Joining us today to address that and give us an update on other developments on The US privacy policy front is CDT's amazing director of privacy and data, Michelle Richardson. Applause. Applause. Applause.
Hi, Brian.
You're matching my energy level. You can do this. Right? Yes. Let's do it. Alright. Here we go. So Michelle, $5,000,000,000. Is that meaningful for a company the size of Facebook?
It really is. I think we're sometimes taken with just how big Facebook is. And there are many ways you can can measure what it is, whether it's the revenue or the market cap. But this is a large number. It is going to influence their behavior going forward. And it's only part of the actual settlement. Right? There are a number of things they had to agree to do in addition to paying the money. So hopefully, holistically, this will get Facebook moving in a better direction
as far as its data practices are concerned. Yeah. Money gets the headlines and that's what I started with. But let's talk about those actual provisions. What were they? Are they meaningful? And did the FTC go far enough?
You know, bottom line, we wished the FTC had gone a little little farther. Okay. It did address a couple of particular instances that we're all familiar with. For example, Facebook took the phone numbers that people shared for two factor authentication and then use them for advertising. Right? So they put into that. The rollout of some of their facial recognition tools wasn't very clear, so they told them you need to be much clearer and have people opt into these. And, but besides that, there were no real clear cross cutting rules about the appropriate collection, sharing, and use of data. And instead, they construct this elaborate oversight mechanism that happens internal to Facebook, new people, new oversight board that will do assessments of new products or changes to existing ones, especially when they tackle or use sensitive data like biometrics. Right? So balance the interests and equities and make a decision about their products. And it all has to be memorialized in writing, audited by outsiders, and be available to FTC. Okay. So we are really putting a lot of stock in this internal process. I think it is going to be a while before we find out if all of these internal review processes amount to any meaningful changes over the long term in Facebook and its business practices.
That makes a lot of sense. So but still, this was potentially bigger than something, like, that could be done under GDPR, Europe's g general data protection regulation. Is that true?
Yeah. Yeah. This is similar to GDPR in some ways and that it really looks to have the companies try to balance the interests here and make better decisions and force them to think more closely about how data is being used and the real risks it poses to individuals. And as far as number wise, we think it seems to be in the ballpark, and in some ways larger than
the first fines we're seeing coming out of GDPR right now in Europe. Okay. So then this slightly begs the question, although I'm I'm sending you a softball here that you can hit out of the park, Michelle. If the FTC can do this and have this level of fine, this level of enforcement, do we still need federal privacy legislation in The United States?
Yes. Yes. Yes. Yes. So, we did criticize that the settlement didn't have any clear cut rules about what's an appropriate use of data. In many ways, it was still stuck in the old version of the Internet where it's about transparency, opt in or opt out. And, really, the future is making some cross cutting decisions about what's appropriate. Okay. Recognizing that some data is very sensitive and it should not be repurposed, that there should not be, you know, this game to get people to check boxes and turn over more and more data. So it's still very appropriate for congress now to step in and write some clear rules. So for us, that's things like individual rights to access, correct, and delete your information. Clear guidance about reasonable data security practices so people can feel comfortable their information isn't likely to be hacked or breached. And use limitations. This is one of the harder things to come up with. But are there types of data that are so sensitive that they shouldn't be repurposed? You know, you turn over your biometrics for a biometric service, that's fine. But it can't be sold or shared, for something unrelated that you just didn't sign up for. Sure. And those are types of things that are unlikely to emerge from FTC settlements anytime soon.
So this is what we really need Congress to tackle, and they are in the place to do it. So there were some things moving. There might still be some things moving, although we're about to hit August recess. Where are we then on Capitol Hill? Is anything happening in the senate, in the house, when it comes to federal privacy legislation?
Yes. So there have been a number of bills introduced in the house and senate, or outlines bills made public, from members who are interested. We are still waiting though, for the two major proposals. You know, the house and the senate look to their chairman and ranking members to really lead the way. Right? Not that other other members aren't influential, but they take the lead and will set sort of the the framework that we'll all be operating in. And so we are still waiting for those. It looks like they are not gonna be available before everyone leaves for August recess. So September. Boom. Okay. This is what we're hoping. September to see, the baseline legislation in the house and the senate. I think once that language comes out, we can all move very quickly to analyze it and make suggestions. There's certainly enough lobbyists and lawyers in this town who are very On both sides. Yeah. Very interested in this legislation. So, you know, the California law goes into effect January 1, and then is enforceable six months later. So we still have a chance to do it before the end of this year or maybe early next year and, get one single national standard before some of these different state laws start going into effect. But there is a bit of a ticking clock there with the California legislation pushing it a bit. Yeah. Yeah. And, I don't think all of the incentive to find a federal solution completely evaporates once California goes into effect. But, you know, we've seen in past privacy scenarios like Snowden. Right? Very different situation. NSA, Broadspine, over time, just the momentum can fade. So it's important for us to all act as quickly as possible here where it's still at the forefront of people's imagination,
Congress is interested, and capitalize on all of this energy to get it done. And if you are a betting woman, which I'm sure you're not, what do you think the odds are that we are going to see meaningful privacy legislation in at least introduced in the fall? I won't ask you about passage. Yeah. 100%. I feel very good about that. 100%. You feel good about that. Okay. Good. So that means you'll have a very, very, very busy fall. Does this, you know, delay in it being introduced give you a little bit of time to enjoy the summer?
Absolutely. Absolutely. But, trying to be realistic. These things take time. Yeah. It's very complicated. We in advocacy community know that these sorts of campaigns take years. Right? I guess we're about to find out that whether we're in, you know, year two or year 15.
So I'll take some patience and persistence. Most I know you have plenty of persistence when it comes to this. Michelle, thank you for the updates on the privacy front. Absolutely. Thanks for having me. Break them up is an increasingly common refrain from policy makers seeking to address an array of tech and Internet policy issues. Of course, that is easier said than done, and existing antitrust laws have a lot to say about how to address issues of anti competitive practices. CDT is working to bring more thoughtful or, dare I say, nuanced insights to the conversation around antitrust issues in tech and was able to bring on board a talented and passionate antitrust lawyer to lead our efforts. That lawyer is the one and only, Avery Gardner, and she's our guest today on Tech Talk. Welcome, Avery. Hi, Brian. Great to be here. And I well, before we start, I wanna welcome Maeve as well who wrote this script for me. She's our wonderful intern from the Washington, Ireland program. Shout out, Maeve. Woo hoo. Hi, everyone. There we go. That was great. Back to Avery. So first, for those of us who find antitrust confusing, which used to be me until you joined us, tell me a bit about antitrust and how the laws work.
Well, we should stop calling it antitrust and start calling it competition law because that's what it's really about. And it at base level, it's quite simple. We believe in The United States that a free market system is most likely to result in great prices, qualities, services, and opportunities for consumers. And so our competition laws are oriented around that, protecting the competitive process, so consumers continue to get the benefits of a competitive system where different companies work against each other to try to create the best products and reach the most people.
So why is it such a hot issue? I mean, you hear it all the time now, especially in relation to, let's say, big tech, the tech and Internet companies that we all know and love.
It's both an old problem and a new problem. So over the past, call it 30, we've had increasing levels of concentration throughout the American economy. So it's not isolated to tech. If you look at companies that make candy, there are only a couple of those. If you look at companies that make medical devices, there are only a couple of those. So market concentration is not limited to tech, but I think the new part is how important tech is to our everyday lives and how obvious it is to us, how regularly we're interacting with some of the big tech giants. Because we are working with them from the minute we wake up until when we go to bed at night. So it's hard not to notice their increasing power and influence.
That makes perfect sense. So let's talk a little bit about the laws, the competition and antitrust laws themselves. They've been around for a while. It doesn't seem like we have new ones or anything. Are the current laws, specifically in The US,
flexible enough to deal with kind of these big tech issues that we're seeing? In my mind, they absolutely are. So the Sherman Antitrust Act goes Oh, my goodness. This is like a old high school lesson. Yes. Sherman Antitrust. Continue. I'm sorry. Sherman Antitrust Act, named for senator John Sherman, which was the answer at a, tech trivia night last night, I'm told. Oh, you did not participate? I should've, but I'm told that our team did very well on that. That's great. So Senator Sherman was the principal architect of what's called the Sherman Act, even though it changed dramatically from when he originally introduced it to what was actually passed. And that goes back to 1890. Wow. So that's a hundred twenty nine years that we've managed to have this particular law work for us. And the reason it works is that it is so very flexible. It's very very short. It really only has two substantive sections and each of those is only one or two sentences long. And so it's been left to the courts to interpret and fill in the gaps in that statute. And that's what they've done. We've had antitrust case law developed in all 50 states. It's been done by the Supreme Court. In fact, Justice Stevens, who died yesterday, was known as an antitrust lawyer and authored a few of those important antitrust decisions at the Supreme Court. Trust lawyer, and authored a few of those important anti trust decisions at the Supreme Court. So that is our our big law. It's incredibly flexible, and it has served us well through all sorts of transitions in our economy over generations. I think it's flexible enough to handle the new challenges posed by tech. And then there's one other law that I should mention briefly, and that's the one on merger review. And what it, and one other law that goes with it, say in concert, is that any merger over about 90,000,000 has to be reported to the federal agencies before companies can complete the deal. And that gives the government a chance to look at it and say, wait, this is a merger between two companies that compete today. If we lose the benefit of that competition, will American consumers suffer? And then they can sue to block a deal, if they have a concern about it. So, that is very important in the tech space, which is certainly a very merger heavy area. Yeah. And it's been a focus of some of the concern that the tech companies are buying up smaller competitors.
That's great. Great lesson. Sherman Antitrust Act. So competition, though. When I think about competition, one of the things I often think about is fairness in pricing. And a lot of the things that we get with, or the services or benefits we get from tech are technically free to the consumer.
How does that work, you know, when we think about competition, antitrust, and tech if services are free? Are there more levers or ways we can look at competition than just pricing? I'm so glad you asked this question because it is one of the biggest myths in the discourse today about competition policy. People say, well, Google search is free, so there's nothing the antitrust laws can do. Or Facebook doesn't charge users, so there's nothing the antitrust laws have to say about that. That is flat out wrong. And if you take nothing else from our conversation today, Brian, than that, we will have had success for this conversation. So we will have a successful day, because for decades, the antitrust laws have addressed not just price, but also quality, quantity and innovation. And those are all equal under the antitrust laws of The United States. So we have cases going back to the Supreme Court years and years and years ago, well before Google Google ever was founded, or the Internet existed, that take into account those factors and look at the totality of competition, not just price. And I also wanna add that even when something is free to consumers, there are other parts that are being paid for, right? These are for profit entities trying to make money. So even though the consumer facing price may be zero, there are advertisers sharing prices and supporting these various companies in their business networks. And it's perfectly appropriate for the antitrust agencies to investigate whether those prices are higher than what we would have otherwise had in a competitive marketplace. I assume they're doing that now at the Department of Justice.
You don't
know? Well, antitrust investigations are technically confidential. They don't tell us when they're opening one. And it's actually an important point for tech folks to understand because when the FCC opens a proceeding, it tells us all that opens a proceeding. And usually calls for public comment and puts everything out on an open record so you can read it all. That's not the way antitrust works. And that's because the way you tell whether something's competitive requires you to look at the company's most sensitive documents and get their biggest secrets about how they price and how they choose what products to promote and how they choose where to invest their R and D dollars. And if you made that public, you would actually harm competition by making it easier for people to, steal things and thwart their competitive plans. So it's all done behind closed doors, unless they bring a court case. And so I expect that there have been dozens of investigations at the federal agencies of these antitrust issues related to tech giants. And they didn't result in a complaint in a court case, therefore, we don't know any of the details of them. That's interesting. Is that the case worldwide or is that kind of specific to The US? The European Commission tends to announce when it is opening an antitrust investigation. So we usually have a little more understanding of exactly what they're actively pursuing. And that's true of many of the member states as well in Europe. But, here, we just don't know. Okay. That's interesting.
So another part of competition, that I think is fascinating and I'm trying to understand, so perhaps you can help me out with this. It's easy to understand if widget company a buys widget company b, they merge. There's fewer widget companies out there. Perhaps there's, you know, a competition issue there, perhaps not. But what happens when, and this seems to be the case in tech, a company owns different types of products or services in the supply chain. So the online store and producing the products and the advertising around it. I think that's called is that the vertical kind of like Oh, very good. Hold on. I'm trying. Yeah. That's a vertically integrated company. There we go. There we go. Is this an issue in tech that you see, and can competition laws deal with this? Because, you know, the first scenario, a buys b makes sense if they're the same product. But if a buys b and b is kind of a different point in the supply chain, is that anti competitive? Could it be
try to make sense for this. That's a complicated question because I think it's a complicated issue. It is a complicated issue. So yes, we do in merger analysis look at the possible vertical consequences. They can be good or they can be bad. It's very fact specific. Specific. But I hear a lot of people repeating the line right now. You can either be a referee or a player in the game, but you shouldn't be both. So if you're a platform company, you shouldn't be allowed to sell products on the platform. And I think that's missing a big part of of the way our economy has worked for a long, long time, because this is not new to tech. If you go today into a CVS, which is kind of like a platform, where you have lots of different products all offered on shelves in a common location, it's a physical one. Yeah. Not a digital one, but a physical one. You will see a shampoo bottle, bottle of Pantene shampoo. And right next to it, you will see a bottle of CVS brand shampoo. It'll be in the same shape as the Pantene bottle. It'll be the same color. And it'll have a label that says, compare to the active ingredients of Pantene shampoo on it. That's CVS both owning the platform and selling a product in the platform. So this is not a new development. This is not a new market structure that we're dealing with. I do think there could be some specific aspects of it in the digital space that are different. Right? A CVS is limited by the number of shelves it has and a shopper can look up and down the shelves and left and right to find what he or she wants. It's a little harder to do that when you've got millions of different products on the virtual shelves of a platform. So we should think about whether that creates a meaningful difference or not. It's something I get the luxury of thinking about here at CDT. But the simple fact that a company plays in different parts of the market, isn't itself inherently anti competitive.
Okay. That was very helpful. Thank you. So back to the kind of intro that I I read off, break them up. It's you know, we're hearing it from a lot of places. We're also hearing it on, the presidential campaign trail from a number of different candidates. What do they actually mean when they say that and what are they trying to accomplish with this? Is is break them up potentially a solution?
Well, it's actually super exciting for me because never before have presidential candidates been elbowing each other out to try to have the most aggressive antitrust policy. Yeah. I know. That seems like a very new thing. For the dorky antitrust lawyering me. Mhmm. No. It's it's a too glib response that doesn't actually look at the facts at issue. So let me give you a a real example. If you're concerned with a company's contract with somebody else, right? You think it's exclusionary or they won't deal with a certain kind of company, what you would wanna do if you found that anti competitive was change their contracting policies. Breaking them up wouldn't actually address the harm that you think exists. So I I say that because I think what we need to do first is look at what harm can we identify here that's associated with these companies and their size, if any. If we then identify harms, what are the right remedies to address those specific harms? And if that is best addressed by suing to break up a company, then you sue to break up a company. But if it's best addressed by some other conduct remedy, pursue the conduct remedy. So I think break them up is just too glib. It also, is too glib procedurally. Because the president of The United States cannot just say by executive order, I'm gonna break up Google, or I'm gonna break up Facebook. They don't have the legal authority to do that. The way you do it is you do an investigation, you bring a complaint in federal court, you get a judge to rule on it, by the way, you then have an appeal, probably gets remanded. This takes years. And it's something that can be done. In the Reagan years, there was the effort to break up AT and T that was successful through the courts. And then there was the effort to break up Microsoft. That didn't actually happen, although it was initially the remedy that was sought. Instead, they did a conduct remedy where they said you can't bundle these offerings anymore. And that seems to have been very successful in creating competitive white space for other companies to come in and be incredibly successful with new offerings. So, I would say, no, no, it shouldn't be break them up. It should be, let's take a hard look at what's going on, how it affects consumers, and then figure out what's the right way to remedy any harms. And if I can add, Brian, I think that we also shouldn't fall into the trap of limiting it to the four companies or five companies that we hear about all the time. We should think about other parts of the tech sector, and take a hard look at the antitrust issues associated with them. And when I talk to most people, they know that they only have one or two options for broadband connectivity Yeah. From where they live. That's a pretty concentrated market. We have right now four wireless carriers. Be going to three. Yeah. That's also not very many. So it it shouldn't be an isolated look at only a couple of companies that happen to be very consumer facing and consumer oriented. It instead should look broadly at all of the parts of the tech sector, find the biggest areas of concern, and take action.
Well, that's a good note to leave it on. No doubt you will be very, very busy in the the coming months and hopefully years at CDT. Avery, thanks so much for joining us on on Tech Talk today. Thanks so much. This was fun. That's it for this episode of Tech Talk. Michelle and Avery are perhaps the two busiest people at CDT these days, so be sure to visit cdt.org to read some of their insightful posts on privacy and competition issues. Also, you can find CDT and Avery and Michelle on Twitter. You can like us on Facebook, and you can also add us on LinkedIn. I'm Brian Wojciech. Thanks so much for listening.
