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Once a darling, Big Tech is now a target

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Privacy concerns are seriously tarnishing the image of Big Tech, once the darling of Washington for its innovation and jobs-creating prowess. High-profile data breaches, criminal probes of Facebook’s tracking of its users, and the steady stream of Russian use of social media to influence elections have caused a backlash, both among the public and in Congress.

One poll last summer showed two-thirds of Americans want Washington to act to protect privacy. This week, Sens. Ed Markey, D-Mass., and Josh Hawley, R-Mo., rolled out a proposed update for the children’s privacy law. And broader data privacy laws are in the works, with the tech industry backing the idea of a national law rather than a potential patchwork of state measures.

Still, the pendulum isn’t swinging fully toward Europe’s ambitious new privacy protections. Big Tech is urging lawmakers to strike a balance. “We definitely want a federal privacy law that is uniformly and strongly enforced,” says Linda Moore, CEO of industry trade group TechNet. But “we don’t want it to have a chilling effect on innovation.”

Washington

When Facebook announced on March 6 a new emphasis on user privacy, much of the public reaction was along the lines of “we’ll believe it when we see it.” And two days later, when Democratic presidential candidate Elizabeth Warren pledged that her priorities would include breaking up giant tech companies like Google and Facebook, responses were similarly skeptical.

The grains of salt are warranted. Facebook founder Mark Zuckerberg has pledged to respond to public concerns about privacy before. Major antitrust actions to bust apart giant companies are rare.

Yet those recent announcements also symbolize a change that has occurred over the past year or so. Public concerns about online privacy are on the rise. Prominent researchers are wondering aloud if the rise of “Big Tech” is bad for both the economy and society. Politicians of both parties are increasingly talking about the need for a national law to provide data-commerce rules of the road – and the industry itself increasingly agrees.

“There has been an enormous shift,” says Andrea Limbago, chief social scientist at Virtru, a technology firm focused on data protection. And it’s needed, she argues. “In the United States, we really need to have a counterweight to that movement that’s going on [globally toward] digital authoritarianism.”

Although the shift is significant, it doesn’t mean the pendulum is swinging completely toward an embrace of strict internet regulation and a “delete Facebook” rejection of Silicon Valley’s giants.

Legions of consumers are still hooked on Google searches, buying things on Amazon, and checking social media daily or hourly. (When Facebook and its sibling services Instagram and WhatsApp ran into simultaneous derailments Wednesday, users vented and adapted in the only way they knew how – by posting on Twitter.)

Beware the states?

In fact, the momentum for a federal data-privacy law is partly rooted in the technology industry’s desire to hold regulatory impulses in check, rather than await the prospect of disparate and sometimes stringent state-level legislation.

Perhaps the central question surrounding proposed federal legislation is whether it will block states from enacting their own laws (as the industry and many innovation advocates urge).

Many Democrats in Congress are wary of preempting state laws unless they feel assured a new federal law will have sufficiently broad protections and enforcement for consumers.

Their desire for a strong law is bolstered by a range of indicators and incidents: 

  • A succession of high-profile data breaches have hit the news, including one revealed by Facebook last fall that affected as many as 30 million of its users.  
  • On Wednesday, The New York Times reported that federal prosecutors had launched a criminal investigation into Facebook’s deals to share user data with other firms. Separately, the Times has reported on mobile-app companies that track users’ locations without informing them that the data could be used in targeting ads.
  • Polls over the past year have found a majority of Americans concerned about data privacy and want government to act (with two-thirds saying that in one SAS survey last summer).
  • Official government reports have amplified concerns about efforts by Russia-based groups to influence U.S. elections, including the 2016 presidential race.

Last August, Director of National Intelligence Dan Coats described the latter trend as part of a “pervasive messaging campaign by Russia to try to weaken and divide the United States.”

To Ms. Limbago, it’s part of a global battle over how information will shape people’s lives. The Russian efforts, she says, are just one example of how, if unchecked, authoritarian practices can ripple from one nation to another. Conversely, she adds, steps to strengthen online data protection in the U.S. could help promote greater data integrity worldwide.

Others agree.

“It’s not just about protected privacy and competition. It’s really about what is the nature of our liberty in the 21st century both in America and around the world and other democratic societies,” says Jeff Chester, who heads the Center for Digital Democracy, a consumer advocacy group in Washington. “That’s really what’s being decided.”

Backlash started in 2018

Although the public backlash started earlier, the changed atmosphere in U.S. policymaking circles began emerging last year as executives including Mr. Zuckerberg were called before Congress to testify and as Republicans joined Democrats in the grilling.

Although the fate of bills is far from certain, bipartisan efforts at legislation on a range of tech-industry issues are underway in both the Democrat-controlled House and the Republican-controlled Senate.

This week, it was Sens. Ed Markey, D-Mass., and Josh Hawley, R-Mo., who took a turn, rolling out a proposed update for the law on children’s privacy. Then lawmakers questioned tech executives about location tracking and other data-collection practices. And Sen. Ted Cruz, R-Texas, tweeted his support of Massachusetts Senator Warren, after reports that Facebook briefly took down some of her ads calling for the company’s breakup.

“She’s right,” Senator Cruz tweeted. “Big Tech has way too much power to silence Free Speech…. A serious threat to our democracy.”

Although President Donald Trump has also criticized Big Tech giants like Amazon, the pendulum hasn’t swung all the way to Europe’s ambitious new protections of privacy.

A key question is how to balance privacy protections with continued U.S. leadership in new data-based products and services.

“We definitely want a federal privacy law that is uniformly and strongly enforced,” including a role for state attorneys general and a better-funded Federal Trade Commission, says Linda Moore, CEO of TechNet, a trade group for the industry. But “we don’t want it to have a chilling effect on innovation.”

Lessons from Europe

She and others note the European Union’s new General Data Protection Regulation (GDPR) that went into effect last year has created new compliance costs that are harder to bear for small companies than large ones. The result is that, in effect, Big Tech has been getting bigger as a share of Europe’s information services market.

Ms. Moore says the U.S. has a chance to learn from Europe’s experience in creating legislation that guards against too-high compliance burdens while also helping consumers have transparency and control over how their data is used.

The question of whether a few firms have grown too powerful is another piece of the puzzle.

Senator Warren argues for possibly breaking off portions of Google, Amazon, and Facebook, based partly on the idea that a single company shouldn’t be both a key platform for online commerce and a provider of services on that platform.

Her proposal may be a long shot, but it has won some fans. And even defenders of existing antitrust law say it may need to be applied with more rigor toward those tech giants.

At the same time, others point to the penchant of younger Americans to shy away from Facebook – and of some longtime users to abandon the platform – as signs that the industry isn’t as monopoly-prone as critics say. Conservative analyst James Pethokoukis of the American Enterprise Institute critiqued Senator Warren’s proposal by pointing to a Fortune magazine cover from 1998 that has proved less than prescient in hindsight: “How Yahoo! won the search wars.”

Focus on the big or the small?

Economists, meanwhile have been debating whether the rise of powerhouses like Amazon and Facebook have helped or hurt the overall economy.

However that debate over antitrust concerns shakes out, some say it’s important not to focus regulatory attention mostly on the highest-profile firms.

“The bigger driver of violating that privacy are these hidden data aggregators and data brokers that gather up information,” companies that consumers have no conscious relationship with, says Kirsten Martin, a technology expert at George Washington University. “They have an even more nuanced view of us than Facebook, because they’re buying all the little bits of data from all over, [from offline shopping to] our browsing history.”



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