American Big Tech: No Rules

Over the past few years, a long-term trend towards the regulation of technology giants has clearly emerged in many countries throughout the world. Interestingly, attempts to curb Big Tech are being made in the United States itself, where corporate headquarters are located. The Big 5 tech companies are well-known to everyone—Microsoft, Amazon, Meta (banned in Russia), Alphabet and Apple. From small IT companies, they quickly grew into corporate giants; their total capitalisation today is approximately $8 trillion (more than the GDP of most G20 countries). The concern of American regulators about the power of corporations arose not so much because of their unprecedented economic growth, but because of their ability to influence domestic politics, censor presidents, promote fake news, and so on.

Washington Post columnists predicted that 2022 could be a watershed year in the regulation of Gatekeepers in the USA. However, if we sum up the interim results of the fight between Joe Biden and the tech giants, then progress is not so obvious yet. Of all the proposals currently before Congress, this is an antitrust bill (the American Innovation and Choice Online Act), which would prohibit Apple, Alphabet and Amazon from providing advantages to their own services and products presented in app stores and e-commerce platforms, to the detriment of those offered by their competitors. According to some experts, this bill has good prospects, and perhaps as early as this summer, it will be put to a vote.

The US authorities have demonstrated that they are not ignoring the problem and are responding to it. A June 9 presidential decree on combating monopoly practices, and the appointment of well-known critics of Big Tech to key positions such as Lina Khan (FTC Chair), Tim Wu (Special Assistant to the President for Technology and Competition Policy), and Jonathan Kanter (Chair of the U.S. Justice Department's Antitrust Division) are proof of this. The American government earns points for showing that it’s proactive. However, all of the aforementioned measures are only the first cautious steps.

The solution to the problem of tech sector regulation is complicated not only by the lobbying power of technology companies, but also by the fact that there is no unanimity in the US Congress regarding how narrow and rigid the rules should be. There are fierce debates between representatives of both parties on this issue.

It is hardly worth expecting the United States to quickly adopt something similar to the Digital Market Act, Digital Services Act or GDPR at the federal level. This should be seen as a matter for the more distant future; not just when a consensus emerges on the issue of regulation within the leading parties, but also when the current model of interaction between regulators and large private business has been completely revised.

Today, America lags behind its European peers in rule-making. It is likely that the global leadership of the EU in the field of technical regulation could potentially spur the US government to take more active steps. As experts note, such a "gap" leaves American companies exposed to other countries where they carry out their activities. The status of the US as a leader in the field of digital products and services is threatened when policies and rules in the digital marketplace are determined by other states.

Over the past few years, a long-term trend towards the regulation of technology giants has clearly emerged in many countries throughout the world. Interestingly, attempts to curb Big Tech are being made in the United States itself, where corporate headquarters are located. The Big 5 tech companies are well-known to everyone—Microsoft, Amazon, Meta (banned in Russia), Alphabet and Apple. From small IT companies, they quickly grew into corporate giants; their total capitalisation today is approximately $8 trillion (more than the GDP of most G20 countries). The concern of American regulators about the power of corporations arose not so much because of their unprecedented economic growth, but because of their ability to influence domestic politics, censor presidents, promote fake news, and so on.

No laws, no rules

Traditionally, Americans have been less eager to put pressure on Big Tech than, for example, the Europeans, who introduced the General Data Protection Regulation (GDPR) in 2018; it was followed by the Digital Markets Act (DMA) and the Digital Service Act (DSA).

In the United States, there is no law that protects the personal data of users at the federal level; regulation is carried out only at the level of individual states. California, Virginia, Utah and Colorado have adopted their own privacy laws. Florida and Texas have social media laws that aim to punish internet platforms for censoring conservative views.

Dozens of federal privacy data protection and security bills have been defeated without bipartisan support.

One of the few areas where US legislators have reached a consensus is protection of children’s online privacy. This bill largely repeats many of the points of the DSA, such as establishing requirements for the transparency of algorithms and forcing companies to oversee their products.

It is also worth mentioning the accession of the USA in May 2021 to an international initiative to eliminate terrorist and violent extremist content on the Internet (Christchurch Call), but this call is not legally binding.

Perhaps all the successes of the US in the "pacification" of Big Tech are limited to the abovementioned steps.

As for the antimonopoly legislation, it is becoming tougher, but it is also being applied very selectively. The numbers speak for themselves: there have been 750 mergers in the high technology sector in the last 20 years.

Thus, we can conclude that today in the United States, there is still no comprehensive regulation of digital platforms.

Causes of Regulatory Inertia

There are several reasons for America’s soft attitude towards the dominant companies: First, the intellectual basis of U.S. antitrust policy over the past 40 years has largely been based on the ideas of the Chicago school of economics, according to which it is inappropriate for the state to overregulate companies if they show economic efficiency and do not violate the interests of consumers. The main inspirer of the Chicago school, Robert Bork, has many followers, so lawsuits filed by the Federal Trade Commission or individual state prosecutors often end in nothing. For example, in June 2021, the court dismissed two antitrust lawsuits against Facebook: claims against Facebook related to the acquisition of WhatsApp and Instagram by the company, which could have forced it to sell these assets. These were filed in December 2020 by the Federal Trade Commission (FTC) and a group of attorneys general from 48 states. U.S. District Judge James Boasberg ruled that the FTC's lawsuit was "not legally sound" because it does not provide enough evidence to support claims of Facebook's monopoly position in the social media market.

Second, Americans profess the "California model" of Internet governance, which also implies minimal government intervention in the affairs of Silicon Valley companies.

Third, one can note the close relationship between government structures and private business. Such a connection is provided both by the phenomenon of “revolving doors” (when civil servants go to work in corporations and vice versa), and by the active lobbying activities of corporations. The American "Tech five" actively interact with the US Congress and the European Parliament, allocating impressive amounts for lobbying and hiring personnel with political connections. In 2020, Big Tech's total spending for these purposes in the US Congress amounted to more than $63 million.

Finally, given the fragmentation of the political and economic space, techno-economic blocs are being formed, which are precisely centred on such tech giants. They are the ones who provide America with economic and technological leadership, dominance and influence in the global digital space, which explains the cautious attitude of the authorities towards the industry.

Too much freedom...

At the same time, appetites for pacifying the tech giants are also growing in the United States. They stem from allegations of a variety of significant abuses. For example, the report of the Subcommittee on Antitrust, Commercial and Administrative Law, issued in October 2020, highlights the following violations: dissemination of disinformation and hatred, monopolisation of markets, violation of consumer rights.

Concerns about the political and economic power of dominant companies arose against the backdrop of declining wages, declining start-ups, declining productivity, increasing inequality and rising prices. In addition, some experts point out "concentrated corporate power actually harms workers, innovation, prosperity and sustainable democracy in general." There are fears among some politicians and experts that the US economy has become too monopolised and, therefore, less attractive to the rest of the world, which reduces the ability of the United States to make a constructive contribution to the development of basic international standards in the field of competition and technology.

Another issue that worries the American establishment is content moderation. The 2020 presidential election and the storming of the US Capitol have shown the power of social media and its impact on the public consciousness. Joe Biden, like his predecessor Donald Trump, has threatened to reform or completely remove Section 230 from the text of the Communications Decency Act, according to which social networks are not "publishers" of information, and therefore are not responsible for the statements of third parties that use their services. While the issue of abolishing or reforming this section has not been resolved, 18 bills have already arisen around it from various members of Congress.

As mentioned above, there is no comprehensive regulation of tech giants in the United States, but this does not mean that they feel at ease on American soil and are not fined. Here we can recall a 2019 case, when the FTC fined Facebook a record $5 billion due to a data leak of millions of social network users to Cambridge Analytica, which advised Donald Trump's headquarters. The fine was the largest in US history and, cumulatively, was almost five times (as of February 2021) more than all fines imposed by the EU under its Privacy Regulation (GDPR). In addition, a series of antitrust lawsuits against Google followed in late 2020. Thus, it is obvious that companies in some cases experience significant pressure from regulators.

From rhetoric to practical steps?

Washington Post columnists predicted that 2022 could be a watershed year in the regulation of Gatekeepers in the USA. However, if we sum up the interim results of the fight between Joe Biden and the tech giants, then progress is not so obvious yet. Of all the proposals currently before Congress, this is an antitrust bill (the American Innovation and Choice Online Act), which would prohibit Apple, Alphabet and Amazon from providing advantages to their own services and products presented in app stores and e-commerce platforms, to the detriment of those offered by their competitors. According to some experts, this bill has good prospects, and perhaps as early as this summer, it will be put to a vote.

The US authorities have demonstrated that they are not ignoring the problem and are responding to it. A June 9 presidential decree on combating monopoly practices, and the appointment of well-known critics of Big Tech to key positions such as Lina Khan (FTC Chair), Tim Wu (Special Assistant to the President for Technology and Competition Policy), and Jonathan Kanter (Chair of the U.S. Justice Department's Antitrust Division) are proof of this. The American government earns points for showing that it’s proactive. However, all of the aforementioned measures are only the first cautious steps.

The solution to the problem of tech sector regulation is complicated not only by the lobbying power of technology companies, but also by the fact that there is no unanimity in the US Congress regarding how narrow and rigid the rules should be. There are fierce debates between representatives of both parties on this issue.

It is hardly worth expecting the United States to quickly adopt something similar to the Digital Market Act, Digital Services Act or GDPR at the federal level. This should be seen as a matter for the more distant future; not just when a consensus emerges on the issue of regulation within the leading parties, but also when the current model of interaction between regulators and large private business has been completely revised.

Today, America lags behind its European peers in rule-making. It is likely that the global leadership of the EU in the field of technical regulation could potentially spur the US government to take more active steps. As experts note, such a "gap" leaves American companies exposed to other countries where they carry out their activities. The status of the US as a leader in the field of digital products and services is threatened when policies and rules in the digital marketplace are determined by other states.

First published in the Valdai Discussion Club.