How to rein in the power of Big Tech

Chicago Booth’s Stigler Center suggests ways to protect consumers while promoting competition

Digital platforms such as Google and Facebook have grown exponentially, swallowed rivals and revolutionized the world of media, demonstrating increasing potential to harm consumers, even as they provide convenient and valued services.

On the campaign trail, many candidates are demanding new rules, but which ones are justified? To address this question, the George J. Stigler Center for the Study of the Economy and the State at the University of Chicago Booth School of Business spearheaded a yearlong multidisciplinary research effort and now is presenting the final results.

The Stigler Committee on Digital Platforms Final Report and Policy Brief, released Sept. 17, identifies the trouble with America’s largest technology companies in four areas—market structure, consumer privacy and data protection, media, and political systems. It then delivers policy recommendations to rein in Big Tech, including creating a new Digital Authority.

“We want to reduce the harmful effects of digital platforms without reducing the enormous benefits they bring,” said Luigi Zingales, faculty director of the Stigler Center and a finance professor at Chicago Booth. “Taken together, the recommendations are aimed at maintaining the benefits of digital platforms while promoting competition, protecting consumers and defending democracies.”

The policy brief and the accompanying 330-page report are the result of 12 months of research and debate among more than 30 scholars and policymakers convened by the Stigler Center at its annual antitrust and competition conference in Chicago.

The recommendations come at a time when the U.S. government is increasing its own scrutiny of digital platforms. State attorneys general from across the country announced last week a sweeping investigation into the market power of big technology companies including Google and Facebook. The Justice Department said in July that it would start an antitrust review into Google and Apple, while the Federal Trade Commission fined Facebook a record $5 billion as part of a settlement related to violating consumers’ privacy rights.

The Stigler report cites “the lack of meaningful competition in many key digital markets” and adds that “the concentration of economic, media, data and persuasion, and political power is incredibly dangerous for our democracies.”

A significant problem with scholarship around policymaking in many areas, but particularly around digital platforms, is the influence or even the perceived influence of corporate money and donations on think tanks, NGOs, and even universities, said Zingales, one of the world's leading economists and an expert on the issues at intersection of economics and politics. To preserve not only the independence but also the appearance of independence of the analysis, the center recruited scholars and experts who had not worked for, consulted with or acted as expert witness for or against Google or Facebook within the previous two years.

The policy recommendations from the Stigler Committee on Digital Platforms build on the solutions formed by four subcommittees, each writing a separate report on its findings. The four subcommittee reports are Market Structure and Antitrust, Privacy and Data Protection, Media and Politics.

The key policy recommendations are as follows:

  • Force interoperability among social media, similar to how phone companies operate. Mandate an open and common application program interface that allows different messaging systems to connect to one another.
  • Change the threshold for merger review, basing it on transaction value or other criteria that allow regulators to scrutinize transactions between digital platforms and startups.
  • Create inside the FTC a Digital Authority, capable of overseeing all aspects of digital platforms. This DA would oversee how these companies collect data, set up rules allowing data portability among competing service providers and data sharing with third parties, promote open standards, and review mergers in parallel with the Justice Department.
  • Extend campaign disclosure obligations to specifically target digital platforms, including relationships with politicians, academic funding, and the intentional promotion or demotion of content related to political figures.
  • Adopt sticky pro-consumer default rules, forcing companies to actually explain data protection practices to consumers instead of just encouraging them to click “I agree.” Also discourage so-called dark patterns, or user interfaces that can confuse consumers or manipulate them.
  • Remove the safe-harbor protections associated with Section 230 of the 1996 Communications Decency Act for content actively promoted and monetized by digital platforms.
  • Promote investigative and democratic journalism by: setting up pilot projects that instruct the development of alternative funding sources for local news media; and requiring antitrust authorities to consider media plurality when reviewing mergers between media companies.
  • Impose an additional fiduciary duty on the boards of monopolies, specifically a fiduciary duty toward society.

—Article originally appeared on the Chicago Booth website