Last Thursday marked the first of a series of public hearings that the Federal Trade Commission will hold concerning “the need for adjustments to competition and consumer protection law.”
Because of the controversial policies and actions that have been undertaken by today’s social media giants, especially Facebook, these events are projected to generate significant attention and fanfare. But is all this hoopla warranted?
Some analysts believe the Federal Trade Commission or Department of Justice should increase their interventionist footprint to resolve market failures, particularly ones that relate to high market share companies in the digital age. I disagree. What will maximize consumer utility are not new rules and regulations, but rather the enforcement of existing laws. At the very least, before decision-makers begin modifying or expanding upon the nation’s consumer protection measures, they should start standing up for ones that are already on the books.
The temptation to use the force of government to break up Facebook with the Sherman and Clayton Antitrust Acts certainly has not won hearts in Washington without reason, and make no mistake about it: violating contractual agreements with users should not go unpunished. But while breaking up and mandating divestitures on the part of Facebook might provide a feel-good retaliatory blow for Americans who were victimized and mistreated, what societal conflicts would it resolve? Very few, if any.
Although the size and scope of Facebook’s operations would shrink, the same people would remain in charge, and the same corporate culture would stay in place. In other words, the “business and politics as usual” of the present day would not change, and the same illicit behavior would continue.
What would put a hard stop to Facebook’s malevolence are behavioral remedies —stipulations that prohibit certain types of inexcusable behavior. But such rules have been in place for years. They just haven’t been enforced.
In 2011, in response to its alleged breach of private contracts, Facebook—as a show of good faith to its users—voluntarily signed onto a binding settlement agreement, known as a consent decree, with the Federal Trade Commission. According to Wired, Facebook “agreed to get consent from users before sharing their data with third parties.” This decree brings hefty fines for each violation, amounting to as much as $40,000 every time it breaches the contract.
Former high-ranking FTC officials believe that Facebook has violated its agreement. If so, it would bring corporate penalties to the tune of trillions of dollars just from the latest privacy scandal alone. That exorbitant price tag will make any company—regardless of size—learn a hard lesson and change its policies as a result. So why not enforce the decree?
After all, doing so across other industries has done more for consumer utility than trust busting ever will. A primary example is in the music industry, where agreements were signed between the Justice Department and ASCAP and BMI, two entities that control nearly every music copyright spanning across all genres.
Even in the 1940s, the DOJ knew that, as in the case of Facebook today, breaking up these institutions would provide consumers with little value because bigness was not the problem—badness was. Shrinking their market share would have done nothing other than create more institutions that engage in the same form of unacceptable behavior. And so, the Justice Department ultimately came to terms with these music industry consent decrees, where the two entities agree to provide blanket song licenses at a set rate for all businesses.
While it’s impossible to force-change one’s motives and beliefs, these ASCAP/BMI ground rules have disincentivized the organization’s harmful business practices without the need for heavy-handed government regulation. In the cases where these institutions have acted out of line, they have quickly reversed course because of swift governmental intervention, such as when ASCAP paid a $1.75 million fine in May 2016 for breaching the terms of its contract. Businesses and American consumers have remained protected for seven decades, worry-free. If only the FTC would put Facebook in its place by making such enforcement a priority.
The implementation of behavioral remedies has adequately protected consumers in a swath of other industries, and there’s no reason to think that it wouldn’t work here if given a chance.
Instead of reinventing the wheel and expanding the size and scope of government, decision-makers should give the status quo a chance to succeed.
Ed Brodow (USMC Retired), is author of the book, "Tyranny of the Minority: How The Left is Destroying America," and CEO of Negotiation Boot Camp. A true “Renaissance Man,” Ed has been a US Marine Corps officer, Fortune 500 sales executive (IBM, Litton Industries), novelist, and Hollywood movie actor with starring roles opposite Jessica Lange, Ron Howard, and Christopher Reeve.
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