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Let’s Unite for US Tech Leadership, Mr. President

Let’s Unite for US Tech Leadership, Mr. President

In an era of political division, President Biden has called on Republicans and Democrats to unite against a common enemy. Unfortunately, instead of a foreign adversary, he has chosen to target leading U.S. tech companies, accusing them in a recent Wall Street Journal op-ed of destroying privacy, spreading harmful content, and hurting competition. Not only are these alleged abuses vastly overblown, but the regulatory solutions he appears to endorse would do more harm than good.

Reform is certainly warranted in these areas, particularly regarding privacy and content moderation, but singling out “Big Tech” with onerous regulatory schemes would only hurt U.S. competitiveness, innovation, and consumers.

Rather than uniting against some of America’s most innovative companies, President Biden should be taking the lead in passing legislation for the American tech industry to succeed in the face of current and future challenges the country now faces in global markets, including the geopolitical tech rivalry with China and Europe’s protectionist digital sovereignty initiatives.

President Biden’s rhetoric toward leading tech companies suffers from two major flaws. First, why single out a select group of companies for special opprobrium because they are Big with a capital B? Privacy issues occur across organizations of all sizes and kinds, in both the public and private sectors, online and off. Children get access to inappropriate content on television, in magazines, and online. And there are competition issues in a range of industries, with the tech industry nowhere near the top of the list based on objective criteria.

Second, the president paints a markedly dystopian picture, veering into themes that are the stuff of fictional programs like Black Mirror. For example, he implies that targeted advertising is an inherent privacy violation. It is not. Most online companies do not sell their customers’ data to advertisers; they simply serve ads to users who are most likely to be interested in them. That lowers marketing costs and boosts sales for advertisers, which drives economic growth, and it generates advertising revenue for online companies, big and small, so they can provide valuable services to users for free, which is particularly beneficial for low-income Americans

The president implies that online platforms are cesspools of crime and depravity, as when he claims they have allowed “child sexual exploitation, nonconsensual pornography, and sales of dangerous drugs”—all of which are indisputably wrong and should be illegal no matter where they occur, as ITIF has called for. But all leading tech companies take these and related issues extremely seriously and work hard to keep offending content off their sites.

The president then says “big tech companies have elbowed mom-and-pop companies out from their platforms.” The reality is that large tech companies have created enormous selling opportunities for mom-and-pop companies around the country, bringing them market access they simply could not get on their own. And to the extent consumers shop on large tech platforms instead of going to small companies, it’s not because the companies are forcing them to; it’s because they choose to go where they find the best value.

So, while congressional or administrative action is needed in some of these areas, that action should not be based on hyperbole or myth.

President Biden is right that Congress should pass federal privacy legislation. ITIF has called for a national privacy framework that establishes basic consumer data rights, preempts state laws, ensures reliable enforcement, streamlines regulation, and minimizes the impact on innovation. But the whole economy needs a new privacy law, not just Big Tech. It should also apply to retailers, insurance companies, political campaigns, and others using consumer data.

The primary holdup in bringing bipartisan privacy legislation to the House floor has been resistance from former House Speaker Nancy Pelosi and others in the California delegation who oppose having their state law superseded by a federal one. Speaker Kevin McCarthy, while also representing a district in California, may be more willing to support a uniform federal privacy law than his predecessor. But restricting targeted advertising, which pays for the vast amount of free content, apps, and services on the Internet, is not part of the most popular legislative proposal. Any attempt to insert such a provision would certainly torpedo hope of passing a new privacy law in the 118th Congress.

When it comes to reforming Section 230 of the Communications Decency Act, President Biden needs to be clear about what change he wants. As a candidate he said the law “should be revoked,” yet now he suggests “reform”—a significant difference. ITIF has outlined opportunities for improving Section 230 so that online platforms are held responsible for their own conduct while creators remain liable for their own content. But the specifics matter. Any update to Section 230 could have dramatic consequences for consumers and businesses, so policymakers should not make haphazard changes.

Moreover, the president has not been paying attention if he believes Congress can find common ground on Section 230. Republicans want platforms to take down less speech. Democrats, including the president himself, say they want platforms to take down more speech. The only common ground to date has been that both sides point the finger at tech companies.

The president’s op-ed goes on to say, “we need to bring more competition back to the tech sector.” He suggests that today’s capital-B tech companies (a pejorative term, like “Big Tobacco”) are monopolists akin to Standard Oil before the Sherman Act. In fact, they are not monopolies; they operate in highly competitive markets. The latest Census Bureau data show that the largest four firms in the industry category for Internet Publishing and Broadcasting and Web Search Portals (NAICS code 519130) have just 54 percent of the market, a number that antitrust experts do not consider to be concentrated.

Moreover, most Internet companies, large or small, must desperately compete for “eyeballs.” YouTube competes with Facebook and Twitter, which compete with TikTok, Snap, Pinterest. And all are constantly subject to technological disruption from new entrants and new technologies, as might be possible with the emerging metaverse and Web3.

In his op-ed, President Biden singles out the practice of self-preferencing when he accuses tech companies of finding “ways to promote their own products while excluding or disadvantaging competitors.” Calling for “fairer rules of the road” for small companies, President Biden overlooks the fact that self-preferencing is common in most retailers (like local supermarkets and pharmacies) and that it has been shown to be beneficial for consumers. Moreover, current antitrust laws already enable enforcers to prevent exclusionary foreclosures of rivals without a legitimate reason. So, the president’s call for legislation against self-preferencing will do more harm than good for consumers and innovation.

Finally, the populist opposition to large companies in favor of smaller competitors fails to account for market realities: Large tech platforms need and strive to attract more third-party sellers, which often are small businesses. It is consumers who ultimately select whether to buy from the large or small businesses on the platform, just as they do when they stroll down the aisles of a grocery store.

Instead of undermining innovation and harming consumers with competition legislation based on faulty premises, an alternative solution would be to provide clearer guidelines to prevent the most egregious practices, such as forming cartels or engaging in exclusionary foreclosures, irrespective of the firm size.

Congress should rally around beneficial reforms that are based on clear-eyed analysis of firms’ behavior, consumers’ interests, and U.S. economic competitiveness, not give in to populist fearmongering against things that are Big with a capital B.

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