United States | Capitol punishment

America’s tech giants have no political party to protect them

They could eventually receive the kind of scrutiny that banks received after the financial crisis

|SAN FRANCISCO AND WASHINGTON, DC

THE tech giants have suddenly found themselves without a political party to protect them, just when they most need one. On November 1st executives from Facebook, Google and Twitter will testify before the House Intelligence Committee about how their platforms were used by Russia’s government during last year’s election. Politicians on both sides of the aisle, though they see eye-to-eye on very little, seem to agree that giant internet companies such as Amazon, Facebook and Google may pose a threat to society. “If data is the new oil, is [Amazon’s Jeff] Bezos the new Rockefeller?” asks Bruce Mehlman, a Republican lobbyist, in a report called “Navigating the New Gilded Age”, which is circulating in Washington.

Democrats, long backers of the tech sector’s innovative products, are no longer the allies they used to be. When Barack Obama was president techies got plum jobs in his administration, and the party’s supposedly superior data analytics seemed destined to help lock in an emerging Democratic majority. That warmth disappeared last November. Most Democrats believe Twitter, Google and Facebook helped put a Republican in the White House by boosting disinformation campaigns. A recent paper by the Computational Propaganda Project at Oxford University found that Twitter-users in swing states were just as likely to come across conspiratorial fictions in the run-up to the presidential election as they were to encounter something that passed for news. Liberal anti-tech sentiment in Washington was stoked in August, when a critic of Google’s dominance, Barry Lynn, was fired from the New America Foundation, a think-tank, supposedly because executives at Google, a donor, wanted him gone (New America denies this).

Several Democratic senators are rallying supporters by taking sharp public jabs against tech firms’ dominance. The odds are “very high” that the Democratic nominee for president in 2020 will run on an anti-tech platform, promising to break up the big companies, predicts Rob Atkinson of the Information Technology and Innovation Foundation, a think-tank.

Meanwhile, Republicans have also turned more hostile. In the past they could be counted on to approach regulation with a light touch, but today’s populist Republicans are not so hands-off. President Donald Trump has sent tweets beating up Amazon and other tech firms; his former chief strategist, Stephen Bannon, has suggested regulating Google and Facebook as utilities. Fox News and other right-leaning outlets have begun to criticise tech with the venom they once reserved for Hillary Clinton. Tech bosses have also clashed with Republicans over immigration policy. “Can tech just find one issue that’s supportive of Republicans?” laments a disconsolate Republican lobbyist.

Giant firms tend to attract scrutiny. However, unlike other huge companies, which create jobs in many states, internet firms employ fewer people per dollar of market value and concentrate those jobs mainly in thriving tech hubs. Techies’ tremendous wealth has made it easy to draw comparisons to last century’s robber barons. Consumers may benefit from their free products and from low prices, but small businesses have been hurt by the tech giants’ incursions into a wide array of industries, which can influence politicians. According to one estimate, Amazon captures half of all dollars spent online. Google and Facebook have captured virtually all the growth in digital advertising.

Anti-social networks

So far America’s techlash has consisted of more rhetoric than regulation. One exception concerns a proposal to regulate online political advertising. Two Democratic senators, Amy Klobuchar and Mark Warner, and one Republican, John McCain, recently introduced the Honest Ads Act, which aims to require online political ads to include information about who paid for them. Political ads on television, in print and on the radio must already do this, but Google and Facebook had successfully lobbied to be exempted from the requirement.

Bringing transparency to online political advertising is sensible, because more money will be spent on internet ads in future elections. This year digital advertising accounts for around 35% of total advertising spending in America. This will not rectify the larger problem, which concerns the ease with which Facebook, Twitter and Google spread fiction masquerading as news. After the recent shooting in Las Vegas, users who typed “Las Vegas shooting” into YouTube, which is owned by Google, were prompted to click on videos claiming that the shooter was secretly working for the government.

Compared with regulation aimed at holding companies responsible for spreading false information, the advertising bill ought to be fairly painless for tech companies to accept. That does not mean they will. Big tech companies have so far resisted any legislation that treats them like media companies, and have taken the minimum action necessary to appear co-operative. Facebook has found that Russian entities spent around $100,000 on ads in the election of 2016. But there is still more digging to do. Congressional leaders would be wise to demand an exhaustive audit of all political ads on the social network in order to see the extent of Russia’s purchases, says a top executive of a large advertising agency, who believes Facebook’s initial review and report to Congress were cursory.

In Europe America’s tech giants have faced regulation and antitrust action. The European Commission levied a €2.4bn ($2.7bn) fine on Google for abusing its monopoly position in online search. Is Washington likely to follow Europe’s path? In spite of the heated rhetoric similar enforcement measures, or sweeping new regulations, are several years away at least. Apart from the Honest Ads Act, the only other legislation that seems likely in the near term is a tax cut, which would benefit tech firms by making it easier to repatriate profits, says Blair Levin, a former official at the Federal Communications Commission.

Although there may be more calls to break up tech monopolies, there is not any real political appetite to do so. Nor is it clear that, under current law, trustbusters would succeed even if they tried. The likeliest impact will eventually be on the ability of tech firms to pursue acquisitions and mergers, although this has not happened yet. Amazon’s $13.7bn bid for Whole Foods, a grocer, was approved by regulators without much protest. Facebook recently announced that it was buying TBH, a nascent social-polling firm, for an undisclosed sum. Some pundits, such as Ben Thompson of Stratechery, a technology blog, have called for the deal to be blocked, arguing that social-media firms should not be allowed to buy one another. But it is unlikely that regulators in the Trump administration will take such a view.

Perceiving future risk, internet firms want to do all they can to fight the souring mood and win political allies. They have spent around $50m on lobbying so far in 2017. More than half of that comes from Alphabet (Google’s parent company), Amazon and Facebook combined. One of their tactics is to hire not just more lobbyists but also more employees. Amazon has started an advertising campaign to market its job creation: it has plans to hire an additional 100,000 people by mid-2018. But many of these jobs will probably be automated eventually. The e-commerce firm, which is based in Seattle, has also announced that it will open a second headquarters in North America, which would be a boon to any city it chooses. Around 240 cities and regions have submitted proposals. While Amazon contemplates its choice, it is enjoying a temporary boost in popularity among members of Congress.

Other firms are also proposing local projects as a way to curry favour with politicians. Microsoft is helping bring high-speed internet to rural areas. Google has run a programme called Google Fiber to roll out high-speed internet locally, although the project is on hold while it searches for a new boss. Facebook recently said it would spend $1bn to build a data centre in Virginia. But the new digital economy does not create many human jobs directly. Only around 100 Virginians will be needed to work at the data centre once it is built. Denso, a Japanese car-parts maker, recently announced that it would spend $1bn to build a manufacturing plant in Tennessee, creating ten times as many jobs as Facebook’s data centre will.

While heavy regulation of tech does not seem likely in the near term, political winds can change quickly and unpredictably. If a national data breach occurred at Facebook, Google or Amazon, exposing people’s personal information, as recently occurred with the credit-reporting firm Equifax, there could be a strong public outcry and greater urgency to impose regulations to ensure privacy. What helps protect internet firms today is that they have remained generally popular among consumers by offering cheap services and widely used products. But if a crunch comes, the big tech companies may find themselves haunted by their behaviour now.

This article appeared in the United States section of the print edition under the headline "Capitol punishment"

A tsar is born

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