Eakinomics: The
Real Lesson From Financial Regulations? How NOT To Regulate Technology
Guest authored by Jennifer
Huddleston, AAF's Director of Technology and Innovation Policy
Do we need a Glass-Steagall for tech? How about a Consumer Financial
Protection Bureau (CFPB)-style agency for data protection? Many of the latest
calls for regulating technology giants seem to be borrowing from the history
of financial sector regulations. But as I discuss in my recent piece “Why Technology
Should Not Be Regulated Like Finance,” such an approach is at best
a problematic analogy, and more likely would not benefit consumers or resolve
concerns about market concentration.
Drawing on heavily regulated sectors when creating new regulations for tech
would shift away from the market-driven
and light-touch regulatory approach that has been an important
factor in the United States’ leadership in technological innovation. For
example, calls for a Glass-Steagall for technology largely focus on
preventing “Big Tech” companies from being both a seller and a platform for
other sellers of the same goods or services. Advocates for such regulation
often argue that platforms such as Amazon are using data to gain an unfair
advantage and engaging in self-preferencing of their own products.
But this is not the same kind of separation that Glass-Steagall was targeting
in the financial sector—not to mention the debates over the success of
Glass-Steagall itself. Instead, such a separation is more akin to preventing
Costco from offering the Kirkland brand of products. Many consumers enjoy and
benefit from the additional options that can be provided when companies are
in many different lines of business, so to require such separation would
limit consumer choices and potentially raise prices for such goods and
services. If antitrust and competition policy are to focus on consumers and
not picking favored competitors, such a policy seems not only misguided but
downright backward.
Antitrust policy is not the only place where there have been calls for a
finance sector-style approach to regulating technology. A recent paper
suggested that the United States consider a CFPB-style regulatory agency for
data. There is an irony in using the CFPB as a model given court rulings
around its constitutionality, but that aside, such a regulatory body could
still be detrimental. The United States already has a consumer protection
agency in the Federal Trade Commission (FTC), and it has been an active
enforcer in issues such as data privacy with a focus on consumer harm. A new
agency focusing only on data could allow larger players to seek favorable regulations
that keep out smaller and innovative competitors.
Further, with data touching almost every industry and aspect of the economy,
the potential reach of such an agency’s regulations is almost limitless.
Rather than creating a new and powerful agency, policymakers should look at
how they might improve the FTC’s existing consumer protection role around
data.
In short, policymakers calling to regulate technology in the same way as
finance have it backward. Rather than looking to finance and other heavily
regulated sectors for lessons in how to rein in the technology sector,
perhaps we should look at how we could instead apply the light-touch
regulatory style of the tech sector to finance. Doing so could improve
consumer experiences and increase beneficial innovation across the economy.
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