It’s a scenario we may face soon, given that the Trump administration has gutted the Consumer Financial Protection Bureau, which was established to protect ordinary people who have disputes with banks. Meanwhile, President Trump’s Treasury is eagerly pressing for data sharing between tech firms and big banks to create “efficiency, scale and lower consumer prices.” Again, we have to ask, are lower prices really worth more than all the hidden costs?
It’s hard to know, thanks in part to the gutting of the Office of Financial Research, which is why there has been almost no study of the systemic risks and predatory pricing practices that could emerge when the world’s largest technology firms and the biggest banks on Wall Street share consumer data. The lack of attention to these issues is no surprise, given the deregulatory stance that this administration has taken. But it’s alarming nonetheless.
More alarming still is how some of the flow charts in the Treasury paper outlining how platform players and banks might work together to share consumers’ financial information in order to offer “personalized” products and services remind me of the complex illustrations of credit default swaps that we saw in the wake of the 2008 crisis. Both are Rube Goldberg–style studies in risk. Complexity of that sort always makes me nervous, as it leaves so much room for the party with more information to obfuscate. Call me a Luddite, but I’ve always agreed with former Fed chair Paul Volcker that the ATM has been the most useful “innovation” in finance in the past few decades.
Too Big to Regulate?
No matter what the Silicon Valley giants might argue, size, ultimately, is a problem, just as it was for the too-big-to-fail banks. This is not because bigger is inherently bad but because the complexity of these organizations makes them so difficult to police. Like the big banks, Big Tech uses its lobbying muscle to try to avoid regulation. And like the banks, it tries to sell us on the idea that it deserves to play by different rules.
It does not. If anything, I’d argue that when firms become this big and this complicated, they need many more rules than most other companies. At the very least, Facebook, Google, Amazon, and the other systemically important platforms should be forced to disclose political advertising in the same way that television, print, and radio firms do. When in the financial markets, they should be forced to stay in their own sandbox the same way that their competitors, the big banks, are. When trafficking in other sorts of personal information, like, for example, healthcare information (which can be collected and sold via any number of health and wellness apps that we all use), they should be bound by the same privacy rules that the healthcare industry follows. Big Tech isn’t special. But it is systemically important. It sits in the middle of communications, media, and advertising markets, in the same way that big banks sit in the middle of financial markets. The Fed or the FTC can step in when structurally important financial institutions are both making markets and participating in them; the FTC should do the same with Big Tech. In fact, I’d argue that we need a specific regulatory body for the technology industry, a topic I’ll come back to in the last chapter.
Treating the industry like any other would undoubtedly require a significant shift in the Big Tech business model, one with potential profit and share price implications.29 The extraordinary valuations of the Big Tech firms are due in part to the market’s expectations that they will remain lightly regulated, lightly taxed monopoly powers.30 But that’s not guaranteed to be the case in the future. Antitrust and monopoly issues are fast gaining attention in Washington, where the titans of Big Tech may soon have a reckoning.
CHAPTER 11
In the Swamp
Back in 2012, University of Maryland law professor Frank Pasquale, a scholar in the area of information law, accepted an invitation to speak at what he thought was a straightforward academic conference at George Mason University on the topic of competition, search, and social media. At the time, Google was under investigation for anticompetitive behavior in the search market in the United States (where the FTC was investigating the Yelp case) and in Europe (where the British comparative shopping start-up Foundem was challenging the search giant on what it felt was the use of discriminatory price-comparison algorithms). The legal challenges raised by the burgeoning digital economy were becoming more pressing by the day, and Pasquale was eager to exchange views on the changing landscape with other academics.
Pasquale, a tall, lanky, and affable information law scholar who bears a passing resemblance to a young Jimmy Stewart in both looks and demeanor, had been researching Google and the other tech giants for some time. His 2015 book, The Black Box Society, had yet to be published. But he had already become a go-to source for scholars, businesspeople, and policy makers who wanted to better understand how the platform tech giants were collecting our personal data, then connecting the dots of our behavior and selling those insights to the highest bidder.
His presentation, “Search, Antitrust, and Competition Policy,” focused on Google, specifically how the targeting of personal data and analysis of our every movement online gave the firm enormous power to both help and hurt consumers.
“I shopped yesterday at a big and tall menswear shop, and today, I’m being given ads for airline seats with more legroom,” said Pasquale, who outlined in detail the way in which Google’s surveillance capitalism worked. He compared the policy makers’ obliviousness of the implications of these practices to the way in which regulators were willfully blind to the risks posed by the financial sector in 2008. As he later put it in his book, “Lobbyists for the black box industries mock the capacity of government to comprehend the business practices of a Google or a Goldman.” Yet, as he notes, there are plenty of examples of complex industries—consumer products, pharmaceuticals, and healthcare, for starters—that are successfully regulated, to the benefit of all.1 These industries also spend a lot of money on lobbying, but somehow regulators still have been able to tame them, often after a crisis prompted public outrage.
But unbeknownst to Pasquale, he was just the opening act in a panel in which the deck was stacked against him. Shortly after he spoke, Scott Sher, an attorney from Google’s own law firm, Wilson, Sonsini, Goodrich, and Rosati, took the stage. But rather than an academic presentation, he delivered what amounted to a brief of Google talking points (“Competition is a click away,” and the like). He also laid out harsh refutations of Pasquale’s critique of Google’s monopoly power, claiming that a 65 percent market share (which is what the firm had at the time) in search was nothing to be concerned about.
Pasquale felt completely blindsided. Ordinarily at scholarly conferences, academics present their own research, and debate back and forth. Sher essentially gave a PR presentation for Google. “There was no time at the end for me to respond, though I had listed about fifteen things I planned to dispute in his presentation,” says Pasquale. “I wish I had simply demanded the floor, but that risked making me seem like a wild-eyed radical.”
Only later did Pasquale find out that he had been set up: He was a token Google critic, capable of giving some semblance of balance to a conference that was largely planned, bought, and paid for by Google itself.2 As The Washington Post later reported, it was part of a campaign by Google executives to shift the antitrust conversation in the nation’s capital, at a time when the FTC was, as we’ve already discovered, seriously considering whether it should break the company up. As an email trail shows, the executives had “suggested” mostly speakers who they knew to be sympathetic to Google, and worked with the GMU Law and Economics Center to structure panels in such a way that the company would appear in a positive light. They also made sure that key FTC personnel like Beth Wilkinson, a Washington litigator who had been appointed to head up the investigation into Google, received invitations.
Google’s “Silicon Tower”
I was sympathetic to Pasquale’s story for many reasons, one of which is that I myself have been in similar situations. In 2017, I
appeared on the BBC’s Intelligence Squared program to debate the subject of whether Big Tech firms should be broken up as anticompetitive monopolies. I was speaking for the motion, and University of Leeds professor Pinar Akman vigorously argued against such measures. She had her own legitimate arguments to make. But it’s worth noting that a chunk of her research is paid for by Google.3 In studying the tech sector, I have also, in recent years, turned to the work of various academics, like, for example, Stanford Law professor Mark Lemley, a particularly prolific publisher of work in which Google might have an interest. I eventually found in the fine print in the footnotes of some of his research that he was also a Google “consultant.”4
I don’t mean to pick on these academics particularly. As it turns out, all this is just the tip of the iceberg. Over the past decade or so, Big Tech in general but Google in particular has bought and paid for mountains of academic research conducted on areas of interest to the firm. A July 2017 Wall Street Journal investigation into the topic found that Google had financed hundreds of research papers to defend against regulatory challenges to its market dominance, shelling out anywhere between $5,000 to $400,000 to a host of academics, consultants, and former or future government officials.5
Some of the money flowed to Daniel Sokol, a University of Florida professor who in 2016 published a paper arguing that Google’s use of data was perfectly legal. At the time, he noted that no companies had funded the research. What he didn’t note was that he himself was a part-time attorney at Wilson Sonsini, and that his paper’s coauthor was a partner at the law firm, too. Nor did Sokol note that in March 2013, he had helped Paul Shaw, a Google public policy official (Google has dozens of them, along with hundreds of PR staff and legions more lawyers, all of whom work together to push issues of interest), persuade law professors to write papers sympathetic to Google’s points of view for an online symposium on patents. The professors weren’t paid. But Sokol did submit a $5,000 bill to Google for his work.
In 2016, two groups—the Google Transparency Project and the Campaign for Accountability—known to be go-to sources for anyone looking for information on Google’s funding of academics and government officials, put out a paper entitled “Google’s Silicon Tower,” looking at the presence of Google-funded speakers at key 2016 policy conferences arranged by the Federal Trade Commission, George Mason University, and Princeton. Among the findings: More than half of the speakers at the FTC’s 2016 PrivacyCon (twenty-two out of forty-one) were funded by Google, and more than half of the research papers presented there had an author with financial ties to Google—only one of whom had disclosed that funding.
Perhaps more shocking was that Lorrie Cranor, the FTC’s chief technologist at the time, had received $850,000 dollars from the search giant, including some $350,000 in personal research awards and $400,000 in shared grants. And at George Mason’s event on global antitrust investigations of Google, four out of five speakers had received funding from none other than Google, while five out of seven of the panelists at Princeton University’s broadband privacy workshop received support from the company.6
It’s important to note that the “Silicon Tower” paper was paid for in part by corporations that have their own various legal or competitive battles with Google. (The Google Transparency Project, for example, is backed by Microsoft and Yelp, among others, and the Campaign for Accountability, which doesn’t disclose corporate funding, has backed various Oracle positions over the years.) But that fact doesn’t make the findings untrue, just as the research funded by Google itself isn’t necessarily without any merit (although it’s hard to imagine that the researchers doing it aren’t somewhat biased in favor of the company). Both sides have their arguments to make. But what all this tells us is how the debate around key issues of economic policy in the most important industries in our country has been almost entirely hijacked by large corporations with deep pockets.
The fact is that the public debate around monopoly, privacy, cybersecurity, and so forth (to the extent that we are even having a public debate) is largely orchestrated by the very companies upon which the debate centers. These aren’t payoffs per se; “I know from interacting with many of the academics in this Google firmament that it’s mostly not about a specific quid pro quo. It’s much more subtle than that,” says one senior aide for an influential Democratic senator working on legislation around these issues. “It’s about social and intellectual capture, which is actually much more effective, both short- and long-term. Google supports researchers working in areas that are complementary to Google business interests, and/or adverse to its competitors’ business interests; things like relaxed copyright laws, patent reform, net neutrality, laissez-faire economics, privacy, robots, AI, media ownership, government surveillance (which is often villainized in order to draw attention away from extensive corporate tracking), et cetera. They do this via direct grants to the researchers, funding of their centers and labs, conferences, contributions to civil society groups, and flying them out to Google events.”7
In this way, the company not only builds goodwill, but successfully “grooms academic standard-bearers, prominent academics who will drive younger peers in a direction that is more favorable to the company,” says the aide. It seems that truly independent academics like Frank Pasquale are, these days, almost impossible to find.
Follow the Money
All the money is, of course, about controlling the policy debate in Washington. Whenever there are moves by politicians to rein in Big Tech, the companies can trot out their paid-for experts. Witness the congressional hearings on monopolies in 2019 following Democrat Elizabeth Warren’s calls to break up Big Tech firms.8 The experts giving testimony included Joshua Wright, a former Trump adviser and professor at George Mason University, who had written academic research funded indirectly by Google, and criticized antitrust scrutiny of Google shortly before joining the Federal Trade Commission, after which the FTC dropped their antitrust suit.
Senator Josh Hawley, a Republican who had brought a case against Google during his tenure as Missouri’s attorney general, asked how anyone could possibly justify not acting to regulate Big Tech when “every day brings some creepy new revelation” about everything from the misuse of consumer data to cronyism. A Wired article quoted Wright as saying simply that his views had “attracted like-minded supporters” as the antitrust debate had grown.9
No wonder. Over the past few years, the technology industry has quietly become the dominant political lobbying power in America, in terms of the sheer amount of cash and soft power it exerts in an effort to avoid regulatory disruption of its business model. According to the Center for Responsive Politics, the Internet and electronics industry together spent a record $216.4 million on federal lobbying in 2017 and $224.6 million in 2018—more than any other industry except Big Pharma.10 Google was the highest spending corporate lobbyist in both 2017 and 2018.11 And Amazon takes the cake in terms of the sheer number of issues it lobbies, disclosing that it lobbied forty federal agencies on twenty-one different general issue areas in 2018. Some of the topics are the usual ones that Big Tech firms lobby around: net neutrality, telecoms, and data standards. But others were much more Amazon specific: The company weighed in on issues related to self-driving cars and drones, which it plans to use to carry its massive yearly freight of goods; it also lobbied to allow groceries to participate in certain government programs (reflecting its new interest in that area via its Whole Foods acquisition), and pushed for laws that would be more favorable to its pharmaceutical business (the company bought an online drug store, PillPack, in 2018).12 Even Netflix, which is in some ways the Teflon FAANG, has major lobbying efforts going in both the United States and Europe around issues like copyright, privacy rules, and various digital regulations.13
That’s only the money we can see. Silicon Valley also funds any number of unrelated nongovernmental organizations and interest groups that then help argue their
case, either explicitly or simply by abandoning agendas that could be harmful to tech. Google alone has thrown money at more than 140 such third-party entities, including various nonprofits, academic institutions, and media fellowships. The media capture I find particularly upsetting, for obvious reasons. Facebook, in the wake of the 2016 election-meddling scandal, decided to start “paying indulgences to make up for some of its sins against journalism,” as a 2019 Wired cover story on the company put it,14 by throwing hundreds of millions of dollars toward supporting the local news industry, which had itself been decimated by the platform giants, which have taken nearly all new digital ad dollars. Google also donates large sums of money to news organizations for the development of certain types of content15 (many brand-name publications have been the recipients of such “largesse” from the platform giants). You could argue that this shows that Big Tech is trying to repair the damage that it has wrought to real news, and to liberal democracy in general. I’d argue the opposite—journalism wouldn’t be in this sort of shape if content creators had received a fair share of the revenue for what they create from the very beginning.
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