Internet: Heavy-Handed Regulation No Needed

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A Facebook VP’s proposal to regulate the Internet would undermine competition, innovation, and free speech.

A founding father of the Internet, Vint Cerf, attributes its astonishing economic success in no small part to “permissionless innovation,” the freedom of Internet developers to try new business models and offer new services without obtaining prior government approval. The clear signal government sends by not overregulating the market is a reason the Internet today is a staple in our lives. Any calls for Internet regulation should be met with a healthy dose of skepticism, and before acting, the government should ensure that proposed Internet regulation is going to provide more consumer benefit than harm.

In a recent essay, Facebook vice president for global affairs and former U.K. deputy prime minister Nick Clegg claims that U.S. Internet “regulation is overdue” and proposes bipartisan congressional action in four areas. Two of his broad proposals deal with clarifying rules for the removal of illegal content by Internet platforms and enacting federal privacy legislation. These proposals may have some merit but need to be fleshed out.

His other two legislative proposals, however, should be rejected. First, his endorsement of a new federal “digital regulator” with broad powers would stifle innovation and allow established companies to keep potential rivals out of the market. Second, his call for Congress to regulate speech designed to “mislead people and undermine public trust” and speech involving the use of social media in elections is particularly pernicious. Having the government police speech on the Internet is a recipe for widespread suppression of competing viewpoints and violates the First Amendment’s guarantee of freedom of speech.

First, Clegg’s proposals for a digital regulator overseeing such areas as “content, data, and economic impact — much like the Federal Communications Commission” (FCC) would disincentivize innovation. It would kill the technological dynamism that has characterized the Internet and created enormous wealth and consumer benefit.

The FCC, touted by Clegg, was responsible for delaying technological progress in telecommunications, costing the American economy hundreds of billions of dollars in forgone wealth creation. Regulators also fall into the trap of regulatory capture. Large companies lobby the government heavily for the regulation they want, persuading the regulators to create burdensome standards only they can meet. These standards keep out new companies, allowing large companies to protect their market share and profit margin. After the General Data Protection Regulation was passed into law in Europe, digital advertising competition decreased, and the market power of Google and Facebook rose.

This is not surprising, since it’s easier for large companies to comply with regulations than start-ups, causing many would-be competitors to drop out of the market. Without the threat of new companies entering the market, there will be less innovation.

Second, Clegg’s call for revising rules around the use of social-media platforms in elections and imposing liability on “malicious” political operations is suppression of speech at best, but it may also be unconstitutional.

Freedom of speech is a fundamental right set out in the Constitution. While it’s not a violation of free speech for platforms to monitor and regulate the speech occurring on their own platforms, free speech is threatened when targeted regulation is introduced to force the supervision of speech on platforms. Clegg claims regulation is the only way to prevent the United States from “becoming a nation that exports incredible technologies but fails to export its values.”

But his call for regulation of political speech on platforms is a paradox. If protection of speech is so fundamental to American values, then any regulation that suppresses political speech goes against those values. Political speech has long been protected by the Supreme Court, and Congress should not threaten that right just because the speech has moved online.

Before regulators interfere in digital-platform markets, they should tread carefully, calibrating their policies to minimize harm to the economy, innovation, and free speech. In particular, regulators should not blindly follow the recommendations of big technology companies whose entire business model depends on favorable regulation.

As the adage goes, “The customer is king.” If Congress enacts Internet regulation to stifle innovation and suppress speech, then the customer will be thrown out of the castle, and tech companies will rule the kingdom.

Alden Abbott is a senior research fellow with the Mercatus Center at George Mason University and formerly served as the Federal Trade Commission’s general counsel. Andrew Mercado is a research assistant with the Mercatus Center, focusing on innovation and governance.

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