(Editor’s note: This review discusses Regulating Digital Industries: How Public Oversight Can Encourage Competition, Protect Privacy, and Ensure Free Speech by Mark MacCarthy (Brookings Institution Press, 452 pages.) The review is co-published with Tech Policy Press here.)
Mark MacCarthy’s many years in Washington, first as a regulatory analyst and Congressional staffer and then in corporate advocacy, have left him an unlikely optimist about regulation. He believes that now is the time to rein in the technology giants whose heft and influence have made them targets for pending antitrust lawsuits, Congressional reform attempts, and harsh rhetoric from President Joe Biden and his predecessor.
In his new book, Regulating Digital Industries: How Public Oversight Can Encourage Competition, Protect Privacy, and Ensure Free Speech, MacCarthy presents an ambitious strategy for reviving the pro-regulatory energy of the 1930s. He argues that updated New Deal zeal ought to animate a new stand-alone agency to oversee companies in the fields of social media (for example, Meta, owner of Facebook and Instagram, Google, owner of YouTube, and ByteDance, owner of TikTok); online search (Google and Microsoft); e-commerce (Amazon); advertising technology (Google); and mobile app infrastructure (Apple and Google).
MacCarthy’s idealism may strike readers as naive, given the fractiousness and cynicism of today’s Washington. And yet, his cogent, highly detailed volume will be a page-turner for policy wonks who, like me, beaver away at regulatory ideas on the assumption that someday the clouds of partisan rancor will give way to an era of rational debate about the public good. Stranger things have happened, right? (Full disclosure: I, too, have published what may appear to be pie-in-the-sky proposals, with titles like: Enhancing the FTC’s Consumer Protection Authority to Oversee Social Media Companies.)
Valuable Historical Context
A senior fellow in Governance Studies at the Center for Technology Innovation at the Brookings Institution, MacCarthy is also an adjunct professor in Georgetown University’s Communication, Culture & Technology Program. These pursuits follow stints in government as a regulatory analyst at the Occupational Safety and Health Administration and as a staffer on the House Committee on Energy and Commerce. After moving through the proverbial revolving door to the private sector, he worked on policy for the broadcasting, financial services, and computer industries, culminating in a nine-year stint as senior vice president for global policy at the Software & Information Industry Association.
He witnessed first-hand the anti-regulatory revolution of the 1970s and 1980s. Later, by his own account, he worked on industry’s behalf to resist various forms of government oversight. MacCarthy doesn’t reveal whether he regrets his past role fighting regulation, but he stresses that whatever happened over the past four-plus decades, now it is “time to return to an older tradition of public oversight of business in general and the tech industry in particular.”
A problem with this back-to-the-future spirit is that the anti-regulatory fever that infected the Republican Party—and, during the 1990s, the Democratic Clinton administration, as well—remains a powerful force in Washington. MacCarthy is undeterred, observing that in recent years, bills adding teeth to antitrust enforcement and establishing online privacy protections have received strong bipartisan support before falling tantalizingly short of overall Congressional approval.
MacCarthy focuses on three areas of concern: promoting more competition in a tech industry dominated by giant companies that he compares to the mighty corporate trusts of the late 19th century; shielding tech customers’ privacy in light of those companies’ tendency to amass and exploit vast amounts of personal data; and diminishing what he calls “information disorder,” the online hatred, political mis- and disinformation, and conspiracy mongering that have eroded public trust in elections, public health policies, and other aspects of democratic civic life.
Synergies and Tensions
To make progress on these three fronts, Congress needs to pass legislation in each, according to MacCarthy. One of his key insights is that, if well designed, the three strands of reform he envisions could reinforce each other. Tougher competition laws, for example, would enable government to deter tech titans from squashing new entrants and dependent businesses. And reducing the market muscle of the largest Silicon Valley companies might also aid government in attempts to deter privacy invasions and promote more effective content moderation.
MacCarthy acknowledges that reform measures could interfere with one another. Strong privacy protections might hinder the platform surveillance needed to improve content moderation. Similarly, making platforms “interoperable” by mandating that users have the ability to easily move themselves and their data from one venue to another—which, in theory, should foster greater competition by boosting upstarts—might make it easier for purveyors of hatred and falsehoods to elude content moderation efforts.
The need to seek synergies and minimize unintended consequences inform MacCarthy’s conviction that the only way to make meaningful progress in reining in tech companies is for Congress to create a new regulatory body dedicated to overseeing the sector, much as the Federal Communications Commission oversees telecommunications and broadcast and the Securities and Exchange Commission regulates market participants. He argues that the economic importance of the tech industry and the need for staff with specialized expertise justify the establishment of a stand-alone agency. But he concedes that this is a Herculean ask, and offers as a second-best alternative the creation of a new tech bureau within the Federal Trade Commission, which after a few years could be spun off into a separate agency.
A ‘Tipping Point’?
“Policymakers and the public are at a tipping point in the conversation about regulating digital industries,” MacCarthy writes. Whistleblower revelations in late 2021 about Facebook’s internal research showing the ineffectiveness of its content moderation policies and the psychological harm suffered by vulnerable teenage users, he adds, “turbocharged the pro-regulatory movement among policymakers.” In the end, Congress did not pass a single tech-reform bill for president Biden to sign. But major reforms take multiple Congressional sessions to coalesce, he maintains: “The prospect for immediate reform might not be bright in 2023, but in the long term it is not a question of if but when.”
Maybe. But MacCarthy’s rose-colored spectacles seem to obscure the clashing partisan motivations that lie beneath the shaky Washington consensus for doing something about tech. Republicans and Democrats both view social media companies’ content practices as flawed. But many Republicans embrace a dubious belief that conservatives are mercilessly canceled by left-leaning Silicon Valley platforms. The Republicans want more content left up. Many Democrats see the same platforms as inundated by right-wing intolerance and falsehoods; they want more content taken down. These disparate goals make it difficult to compromise on legislation.
MacCarthy sees clearly that some reformers put too much faith in using antitrust law to break up Silicon Valley giants. He quotes Senator Elizabeth Warren (D-MA): “When you’ve just got a bright-line rule, you don’t need the regulators. At that point, the market will discipline itself.” This thinking, MacCarthy observes, reflects “a triumph of hope over experience.”
Break-‘em-up advocates like Warren generally point to the dismemberment of the telecommunications industry in the 1980s. But the AT&T breakup “took place against a backdrop of pervasive state and federal regulation,” MacCarthy argues. In that instance, a federal judge, Harold Greene, served as a de facto regulator for a dozen years, overseeing restrictions on the spun-off regional Bell holding companies. As MacCarthy writes, Greene received sustained backup from the Justice Department’s Antitrust Division, “an active and energetic FCC, and state public utility regulators all over the country.” Bottom line: antitrust lawsuits, even winning antitrust lawsuits, cannot get the job done by themselves.
European Pioneers
On tech regulation, the European Union and United Kingdom are several steps ahead of the United States and should be seen in Washington as potential models. The EU’s recently enacted Digital Services Act contains many of the elements MacCarthy would like to see in legislation in the U.S. These include a framework for imposing liability on social media and other platforms that receive notice that they are hosting illegal material, obligations for user transparency, mandated public reports on content moderation activities, corporate self-assessments of the risks associated with platform features, outside audits, and access to data for researchers. The DSA’s twin, the Digital Markets Act, imposes duties on larger digital platform gatekeepers that include third-party interoperability, business-user access to platform information about their customers, and verification tools for online advertisers. The DMA also prohibits platforms from favoring their own services over those offered by business users and from enforcing rules that prevent users from linking with businesses outside their platforms.
The DSA and DMA share a potentially fatal weakness, however: the EU’s failure to create an effective system for implementing and enforcing the new measures. Companies are permitted to take the initiative, proposing plans to put the new rules into practice, with regulators relegated to accepting or rejecting the corporate proposals—a recipe for endless rounds of paperwork. Without a regulator empowered to write its own rules and then enforce them, the EU’s pioneering tech legislation could come to naught. (MacCarthy has more hope for the U.K.’s new Online Safety Act, which lodges enforcement authority in the country’s traditional media regulator, Ofcom, and gives the agency extensive regulatory powers.)
Regulating Digital Industries has its quirks. MacCarthy, for instance, opposes giving his proposed digital regulator oversight of companies that design artificial intelligence systems, including the generative AI large language models behind apps like ChatGPT, which for the moment are the “it” technology of Silicon Valley. He argues that it would be fine for the proposed regulator to scrutinize AI employed by a social media or e-commerce company but that AI should not be overseen as a separate line of business unto itself. I find his reasoning on this point difficult to follow. (President Biden signed an executive order on Oct. 31 imposing a raft of new obligations on makers of certain AI systems.)
But my complaint is a minor one. Overall, this earnest call for reinvigoration of government conveys a wealth of information and a timely blueprint for applying tools developed for other industries to Big Tech. At some point, one hopes that Washington policymakers pull MacCarthy’s book off the shelf and get down to business.