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Washington’s Antitrust Push Could Create ‘Chilling Effect’ on Startups, Observers Say

There is concern that an FTC focused on ‘big is bad’ will stunt economic growth in the future.

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FTC Chairwoman Lina Khan

WASHINGTON, September 23, 2021 – Advocates for less government encroachment on big technology companies are warning that antitrust is being weaponized for political ends that may end up placing a “chilling effect” on innovative businesses.

The Institute for Policy Innovation held a web event Wednesday to discuss antitrust and the modern economy. Panelists noted their concern that antitrust law may be welded with political aims that will ultimately create a precedent whereby the federal government will stifle innovators who get too big.

Jessica Melugin, the director of the Center for Technology and Innovation, said technology companies could see what’s happening in Washington – with lots of talk of breaking up companies deemed too big – and be uncertain of the future.

She noted that growing companies largely seek one of two things to make it big: grow to file an initial public offering, where the company’s shares are publicly traded, or wait until a large company buys you out. She said talk emanating from the White House and Washington generally about regulating the industry could deter larger companies from acquiring them, and onerous financial regulations could put a damper on IPO dreams.

“If you start robbing companies of other smaller companies they purchased, it’s going to give a lot of entrepreneurs and a lot of funders in Silicon Valley pause,” Melugin said. “If another path to success gets blocked – the IPO is now harder, and now acquisitions are a little bit questionable…that’s a chilling effect.”

President Joe Biden has made a number of appointments to key positions that is bringing more attention on Big Tech, including known Amazon critic Lina Khan to chair the Federal Trade Commission, which recently filed an amended case against Facebook for alleged anticompetitive practices. He also appointed antitrust expert and Google critic Jonathan Kanter as assistant attorney general in the Justice Department’s antitrust division.

FTC could set a bad precedent if focus is ‘big is bad’ 

Christopher Koopman, the executive director at the Center for Growth and Opportunity at Utah State University, said he’s concerned about the precedent Khan could set for big companies.

He said the odds are that once Khan starts, she will continue down “this path of ‘big is bad’ because that’s a prior that she has and she’s continued to operate on her entire professional career. It just so happens that the focus of this is on tech companies.

“We may be building a regulatory apparatus that will continue to burrow a hole right down the middle of the American economy before we even have a chance to ask if that’s really what we want,” Koopman added. “We just have to recognize that it doesn’t matter, really, who is running the FTC – once we tell the FTC to go break up big companies, they’re going to go break up big companies.”

And the concern for Carl Szabo, vice president and general counsel of lobby group NetChoice, which advocates for less government regulation on the future of technology, is not just a domestic problem, but an international one, too.

“I really do worry about us shanking our innovation and essentially giving a free kick to our competitors and that seems to be what we’re doing,” Szabo said. “Right now, we lead the world.

“This is an international issue, this is a national issue, and we really need to – whether Conservative or Democrat – as Americans we need to see the forest from the trees. And if we want to put corporations ahead of competitors and think those are good democratic values, go ahead and do it.

The House has before it six antitrust bills targeting big technology companies, which passed the chamber’s judiciary committee in June. The goal of the bills is to rein in the power of Big Tech through new antitrust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses.

Federal Communications Commissioner Brendan Carr said earlier this year that Big Tech has too much influence and power, citing the ability of Apple and Google to remove applications like controversial chat website Parler from its app stores.  Carr recently recommended that Big Tech contribute to the Universal Service Fund, which supports broadband expansion in low-income and rural areas of the country, because these companies benefit from broadband.

Social Media

Americans Should Look to Filtration Software to Block Harmful Content from View, Event Hears

One professor said it is the only way to solve the harmful content problem without encroaching on free speech rights.

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Photo of Adam Neufeld of Anti-Defamation League, Steve Delbianco of NetChoice, Barak Richman of Duke University, Shannon McGregor of University of North Carolina (left to right)

WASHINGTON, July 21, 2022 – Researchers at an Internet Governance Forum event Thursday recommended the use of third-party software that filters out harmful content on the internet, in an effort to combat what they say are social media algorithms that feed them content they don’t want to see.

Users of social media sites often don’t know what algorithms are filtering the information they consume, said Steve DelBianco, CEO of NetChoice, a trade association that represents the technology industry. Most algorithms function to maximize user engagement by manipulating their emotions, which is particularly worrisome, he said.

But third-party software, such as Sightengine and Amazon’s Rekognition – which moderate what users see by bypassing images and videos that the user selects as objectionable – could act in place of other solutions to tackle disinformation and hate speech, said Barak Richman, professor of law and business at Duke University.

Richman argued that this “middleware technology” is the only way to solve this universal problem without encroaching on free speech rights. He suggested Americans in these technologies – that would be supported by popular platforms including Facebook, Google, and TikTok – to create the buffer between harmful algorithms and the user.

Such technologies already exist in limited applications that offer less personalization and accuracy in filtering, said Richman. But the market demand needs to increase to support innovation and expansion in this area.

Americans across party lines believe that there is a problem with disinformation and hate speech, but disagree on the solution, added fellow panelist Shannon McGregor, senior researcher at the Center for Information, Technology, and Public Life at the University of North Carolina.

The conversation comes as debate continues regarding Section 230, a provision in the Communications Decency Act that protects technology platforms from being liable for content their users post. Some say Section 230 only protects “neutral platforms,” while others claim it allows powerful companies to ignore user harm. Experts in the space disagree on the responsibility of tech companies to moderate content on their platforms.

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Big Tech

Surveillance Capitalism a Symptom of Web-Dependent Companies, Not Ownership

Former Google executive Richard Whitt critiqued Ben Tarnoff’s argument in ‘Internet for the People’ during Gigabit Libraries discussion.

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Photo of Ben Tarnoff, co-founder of magazine Logic and the author of “Internet for the People”

July 15, 2022 – A former Google executive  pushed back against a claim that the privatization of broadband infrastructure has created the world’s current data and privacy concerns, instead suggesting that it’s the companies that rely on the web that have helped fuel the problem.

Richard Whitt, president of technology non-profit GLIA Foundation and former employee of Google, argued that while the World Wide Web is rife with problems, the internet infrastructure underlying the web remains fundamentally sound.

Whitt was responding to claims made by Ben Tarnoff, a journalist and founder of Logic Magazine, at the Libraries in Response event on July 8. Tarnoff argued – as he does in his recent book, “Internet for the People” – that the privatization of broadband infrastructure in the 1990s has allowed the use and commodification of personal data for profit to flourish (known as surveillance capitalism).

The discussion took place during the Gigabit Libraries Network’s series “Libraries in Response.” The session was titled “If the Internet is Broken, How Can Libraries Help Fix it?”

Privatization, Tarnoff claims, has raised such issues as polarization of ideologies and the “annihilation of our privacy.” As a result, he said, the American people are losing trust in tech companies that “rule the internet.”

Whitt responded that the internet is working well based on the protocols, standardized rules for routing and addressing packets of data to travel across networks, derived at the onset of the internet.

The World Wide Web, a system built on the internet to allow communication using easy-to-understand graphical user interfaces, allowed for browsers and other applications to emerge, which have since perpetuated surveillance capitalism into the governing approach of the web that it is today, said Whitt, suggesting it’s not ownership of the hard infrastructure that’s the problem.

The advertising market that encourages surveillance extraction, analysis and manipulation is, and will continue to be, profitable, Whitt continued.

The discussion follows a Pew Research Center study that found that only half of Americans believe tech companies have a positive effect in 2019 compared to a seventy-one percent in 2015.

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Big Tech

American Innovation and Choice Online Act Has Panelists Divided on Small Business Impact

The bill is intended to prohibit product preferences on tech platforms, with some saying it could harm small companies dependent on those platforms.

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Panel at CSIS event on Thursday

WASHINGTON, July 6, 2022 – Observers are still divided about the effect on small business of legislation that is intended to keep large technology platforms from giving preference to their own products over others.

The Center for Strategic and International Studies hosted experts last month to discuss the American Innovation and Choice Online Act, which was introduced in January. The event heard both support for the bill, as well as concern that it could negatively impact smaller businesses that rely on the larger platforms.

“Existing antitrust law is not going to be enough to rein in the power of the largest tech platforms,” Charlotte Slaiman, competition policy director at public interest group Public Knowledge, said, adding the AICOA is very important for small business competition “to get a fair shot.”

“Fundamentally this is a really important…for competition because this protects small companies that are potential competitors against one of these large platforms,” she added.

Krisztian Katona, vice president of global competition and regulatory policy at the Computer & Communications Industry Association, however, said that after performing a cost-benefit analysis of AICOA, he expects the legislation will hurt business competition.

He said that the legislation would increase operating costs for smaller companies and force these companies to reduce the cost of their services. He predicts that close to 100 companies by 2030 would be negatively impacted by the legislation if it becomes law.

Others agree with Katona. A report in March by the Small Business and Entrepreneurship Council said small business owners felt the AICOA could be detrimental to them, saying it could increase prices. Meanwhile Michael Petricone, senior vice president of the Consumer Technology Association, said in June that small businesses would be affected the most by big tech regulation because they depend on those platforms.

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