Social Media Giants Duck for Cover as Washington Gets ‘Fed Up’

Social Media Giants Duck for Cover as Washington Gets ‘Fed Up’

David McLaughlin and Ben Brody March 20, 2019

(Bloomberg) -- Facebook Inc. has touted its new plan to integrate the company’s messaging products and use encryption as a privacy enhancement. Insiders also say it could help stave off any effort by Washington to break up the company.

Tech giants are hunkering down in the face of a mounting bipartisan backlash after outrage over the failure of Facebook, YouTube and Twitter Inc. to swiftly remove video of the New Zealand massacre. President Donald Trump slammed Facebook, Google and Twitter on Tuesday for siding with Democrats, while the House’s top antitrust lawmaker called for an investigation of Facebook.

The onslaught is set to intensify as the 2020 presidential campaign gets under way, even as the candidates are spending big money on the tech platforms to spread their messages. Attacking the companies serves both sides: Conservatives can be seen as fighting liberals in Silicon Valley, while progressives can attack corporate power.

Republican Congressman Devin Nunes of California sued Twitter on Monday, while Senator Elizabeth Warren of Massachusetts, a Democratic presidential candidate, last week complained Facebook has too much power, winning an unprecedented retweet from Republican Senator Ted Cruz of Texas, a Trump ally. On Tuesday, Representative Bennie Thompson, a Mississippi Democrat and the chairman of the House Homeland Security Committee, demanded that social media companies testify about violent content.

“There is a sea change politically on Capitol Hill,” said Jonathan Tepper, the author of the “The Myth of Capitalism: Monopolies and the Death of Competition.” “The left and right are completely fed up.”

Not long ago, tech giants like Facebook, Alphabet Inc.’s Google and Inc. were seen as the darlings of American capitalism. They went from startups to dominating markets like internet search and online retail, in the process joining the ranks of the most valuable companies in the world. Merger watchdogs were largely hands off as the companies gobbled up smaller firms to solidify their positions or enter new markets, as Facebook did with Instagram and WhatsApp.

Yet their size and vast influence has brought the risk of increased regulation and enforcement around privacy, control over data, responsibility for content and market power. Any curtailing of their practices could threaten their business models. Facebook declined to comment about the criticism directed at the company.

“We have to do something,” Trump said Tuesday, claiming the social media companies discriminate against conservative speech without elaborating. His son Donald Trump Jr. also attacked the companies in a column in the Hill on March 17, calling for a “vigorous defense” against the platforms.

Pressure isn’t only coming from Washington. Texas Attorney General Ken Paxton told Bloomberg TV Monday that his state is among those said to be looking into whether Google is violating privacy or antitrust laws. He said he’s also interested in looking at Facebook and “any of these giant companies that are dominating the market place and potentially harming consumers.”

“We are looking at a broad range of companies that control a lot of the marketplace,” he said. “Are they protecting consumer data? How do we get more transparency in the process so consumers are treated fairly and their information is protected?”

To head off the heightening scrutiny, the companies are spending record sums on lobbying and fund a legion of trade groups in Washington to defend them. Facebook’s plan to stitch together the chat tools on WhatsApp, Facebook Messenger and Instagram while encrypting messages addresses criticism that the company flouts privacy concerns.

At the same time, the more integrated the company’s different businesses, the harder it might be for regulators to prise them apart.

Even as Big Tech comes under fire, it’s not clear whether Washington will act. Regulating the platforms would require new legislation and tackling anticompetitive conduct could take years of investigation and litigation. Yet with Democrats and Republicans calling to rein in the companies, the prospect of some kind of action is greater than it’s ever been.

"People have come to the realization that there are some very serious downsides to big tech and that they have essentially gotten the mother of all hall passes," said Scott Galloway, a professor at New York University’s business school and an outspoken critic of the power of the big technology companies.

There are signs U.S. enforcers are taking note. Federal Trade Commission Chairman Joseph Simons last month formed a task force to investigate tech companies for potentially anticompetitive conduct.

Tepper is skeptical either the FTC or the Justice Department will go after the companies. More likely, he said, is passage of new legislation.

“Conservatives and the left are realizing it’s not good or healthy for the economy to have all the power vested in essentially in a few large monopolies,” he said.

--With assistance from Mark Gurman, Sarah Frier, Matt Day, Selina Wang and Gerrit De Vynck.

©2019 Bloomberg L.P.


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