The FTC’s Social Media Data Practices Report Is a House of Cards Built on False Assumptions and Unsubstantiated Claims
The Federal Trade Commission (FTC) published a staff report in September 2024 on the data practices of nine of the largest social media and video streaming services (SMVSSs)—Amazon, Facebook, X (formerly Twitter), YouTube, Snap, ByteDance (owner of TikTok), Discord, Reddit, and WhatsApp. This report makes four false assertions: First, that platforms surveil their users, including children; Second, that the majority of these sites secretly share the data they collect with advertisers to fund their free services; Third, that these platforms collect large quantities of user data to lock out competitors; And fourth, that a lack of competition between these services limits consumer choice.
First, the report alleges that these platforms conduct “vast surveillance” of their users, including children. The FTC frequently uses this hyperbolic language to describe a host of common practices such as ad-supported businesses and personalized advertising. This language suggests that the mere collection of consumer data is problematic, which is not the case. The FTC should recognize that safe data collection and retention leads to innovation and flexibility, benefiting consumers by, for example, offering tailored content or improving efficiency through transaction history. There is a clear distinction between “surveillance” and providing consumer data to an algorithm that generates personalized results.
Second, the report claims many sites use opaque data collection practices for targeted advertising. However, it fails to provide concrete evidence of how SMVSSs’ targeted advertising harms consumers. Instead, the report merely states SMVSSs collect “troves” of data “in ways the consumer might not expect,” without specifying how these data practices are implemented. In reality, virtually all data sharing is asymmetrical: Tech companies have information on customers but do not share it directly with advertisers. Rather than selling users' data, companies sell the ability to target ads to specific user profiles. Critics often label targeted ads based on consumer data as “creepy” and “invasive,” but they fail to point to tangible harms, which the FTC also fails to do in this report. Once again, providing consumer data to an algorithm that matches ads with their target audience is not surveillance.
Third, the FTC report falsely asserts that these online services collect large quantities of user data to build “competitive moats” and “lock out rivals.” However, the report contradicts itself on this point. On one hand, the FTC says consumer data is highly competitive, and companies prioritize acquiring it, “even at the expense of user privacy and sometimes the law.” On the other hand, the FTC also complained these companies are “sharing data broadly with affiliates and third-party entities” and acquiring datasets from “data brokers and others.” Which is it? Are companies hoarding exclusive access to data, or are they sharing and easily acquiring it from others? Should the FTC also target large hotel chains for collecting data on their users, making it harder for smaller hotels to compete? What about car rental companies?
Moreover, just because an established company has a certain advantage over newer or smaller competitors does not mean the company is engaged in anticompetitive practices. For example, competitors to Starbucks would face significant challenges in becoming a rival due to Starbucks’ extensive insights into consumer coffee consumption. However, this does not mean Starbucks has created an insurmountable "coffee data moat." The exchange of data is a fundamentally different exchange of value from other transactions. Unlike most goods, data is non-rivalrous—multiple companies can collect, share, and use the same data simultaneously.
Fourth, the FTC warns that a “lack of competition in the marketplace can mean that users lack a real choice among services and must surrender to the data practices of a dominant company…depriving consumers of additional choice.” However, there is significant competition among both social media platforms and video streaming services. In fact, one of the most common complaints from consumers, particularly about streaming services, is that there are too many choices.
The FTC’s own report highlights the sheer number of large SMVSSs by examining nine that compete with one another in various ways, without even considering all the platforms available to consumers. The report states that “competition can spur companies to provide more consumer-friendly terms and protections [which] can exist regardless of whether companies offer their products to consumers using a ‘zero price’ model, a ‘freemium’ model, or by charging all consumers a monetary price for the product.”
Consumers do not want to pay for online services that are already free. As ITIF’s Center for Data Innovation has found, only one in four Americans would prefer services like Facebook and Google to collect less of their data if it meant having to pay a monthly subscription fee. Additionally, Americans are far more willing to accept data tracking when it enables a customized experience, additional features, and free services.
Overall, the FTC’s report raises concerns and assumptions without offering substantial data analysis or evidence of consumer harm. This is no surprise given the FTC’s recent polarization, but it is disappointing nonetheless. Notably, two of the five FTC Commissioners who voted to release the report also dissented on key aspects of the report. Andrew Ferguson in his dissent said, “…I believe the report should have focused more on proposing legislative improvements to the online rights of parents and children rather than accusing companies of violating existing law under novel, dubious theories.”
The FTC risks losing credibility on the data economy if it continues to produce reports that lack factual support and logical reasoning. Moving forward, instead of making unsubstantiated claims rooted in a hostile stance toward the tech industry, it should seek to approach these issues using objective, evidence-based research.
