FTC’s Chopra Warns Against Tech Industry Mass Surveillance
The FTC needs a better understanding of “mass data surveillance” to decide whether current rules distort the competitive process, Commissioner Rohit Chopra said Monday during the agency’s third policy hearing (see 1810020061). Differing views were heard on the state of competitive tech markets.
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Elevation Partners Managing Director Roger McNamee, an early investor in Google, Amazon and Facebook, described a “giant market failure” that threatens the entrepreneurial economy: “For the first time in 60 years, the country is relying on monopolists for innovation.” Stratechery founder Ben Thompson argued consumers dictate how much market power online platforms command.
Monitoring consumer actions in online marketplaces goes “far beyond” what people should expect, Chopra said. That includes data collection completely unrelated to a transaction's purpose, he said, citing “surveillance capitalism.” He said consumers wonder if their phones are spying on them, claiming online ads sometimes sell products users discussed in what they assumed were private conversations. The hearings are a “starting point” for understanding the digital market and common data collection practices, Chopra said.
The platforms in question are “quite obviously” dominant, Thompson said. He noted that Google beating out Yahoo and earning its market position benefited consumers. Google had a “brilliant model” in which the more pages on the internet, the better the platform performed, he said, which was the opposite for Yahoo. University of California-Berkeley professor Steven Tadelis said if a service should outperform Google, users will switch.
Thompson’s user regulation theory would be “perfect” if not for Google and Facebook expanding horizontally and acquiring their most threatening competitors, McNamee argued, noting Facebook’s buys of WhatsApp and Instagram. With data-centric companies like Alphabet and Facebook, the buyer and seller are blocked from interacting directly, he said. Companies barter with consumers, trading services for personal data, the essential input to their businesses, he said. They gather all data possible, creating barriers for competitors to enter and consumers to exit, McNamee said.
Seemingly unassailable platforms can vanish quickly, said Georgetown University Law Center economist Howard Shelanski. It was assumed iTunes would dominate online music for several decades, he said, but that notion passed. The network effect -- in which every new user makes the service that much more desirable -- can be reversed when users leave services rapidly. Lack of alternatives due to anticompetitive behavior from incumbents means users aren't leaving services, McNamee said, calling it a “national security threat.”
Scott Kupor, managing partner for venture capital firm Andreessen Horowitz, agreed these platforms enjoy strong market positions. But big tech's distribution value for new startup investments is pro-competitive, he said.