The Federal Digital Platform Commission Would Be a Big Mistake
Senator Michael Bennet (D-CO) has introduced legislation to create a new Federal Digital Platform Commission (FDPC), an idea that has been under discussion for several years, primarily as a complement to antitrust enforcement. Whether we need stronger competition policy tools is a legitimate subject for debate, but the Bennet bill goes way beyond that. The new agency would have broad authority to regulate virtually every aspect of digital platforms with the threat of fines of up to 15 percent of global revenue. It is a bad idea that would severely hamper innovation in this critical economic sector in which the U.S. has been a global leader.
Senator Bennet recognizes the U.S. technology leadership position, and that U.S. companies provide a plethora of new services that consumers and businesses value highly. Yet the bill seems to assume that U.S. success is unrelated to the light touch regulatory approach we have taken. He expresses concern that the failure of the U.S. to establish a digital platform regulatory regime will cede that role to other countries – presumably, Europe. But since none of the great tech companies have come out of Europe, it hardly seems that Europe is a good model for digital regulation.
Senator Bennet observes that throughout our history, the United States has responded to the emergence of important new sectors of the economy by creating expert federal agencies empowered to provide “timely, thoughtful, and durable” regulations. It is true that we have created those agencies. To say that their regulations have been timely, thoughtful, and durable is, however, a stretch.
Indeed, our alphabet soup of regulatory agencies is littered with examples of regulatory failures, some of which caused the agencies to shutter their doors, but only after imposing large economic costs. For example, railroad regulation at the Interstate Commerce Commission (ICC) hindered the railroads’ efforts to improve technology and respond to new competition from trucks and blocked the railroads from dropping unprofitable services, eventually threatening them with bankruptcy. The ICC’s regulation of trucking had the opposite problem – rate bureaus (legal cartels) that held prices above competitive levels. Similarly, air fares under the Civil Aeronautics Board (CAB) were also above competitive levels. Prices dropped dramatically when airlines were deregulated. Both the ICC and the CAB have closed their doors to the benefit of American consumers.
Today’s regulatory agencies have a mixed record. Failures at the Federal Communications Commission (FCC) include years-long delays in the development of mobile telephony, and a large, artificially created sector of competitive local exchange carriers (CLECs), most of which went bankrupt. The cost to consumers of these failures ran to the tens if not hundreds of billions of dollars. With respect to universal service, after many decades and additional billions, the FCC is still trying to develop an efficient program that connects underserved populations. The agency has achieved some success in moving spectrum to more highly valued uses with its spectrum auctions, but the road to a truly efficient, market-oriented spectrum allocation regime remains quite bumpy.
All of this suggests that the creation of a new digital platform regulatory agency should be approached with substantial humility. It is difficult to get regulation of any sector right. Regulation of digital platforms, which are constantly evolving and are significantly more complex than traditional industries like trucking and airlines, would be even more problematic.
The FDPC’s remit includes every policy area associated with digital platforms – access, competition policy, content moderation, and consumer protection. Just about everything would be in the agency’s ambit, including promulgating measures to promote competition, prevent harmful levels of concentration, promote a competitive marketplace of ideas, protect consumers from abusive practices, and assure that algorithms are fair, transparent, and safe.
For “systemically important” digital platforms (to be defined by the Commission), the Commission would be required to consider rules for data portability and interoperability; standards for recommendation systems and other algorithms; transparency requirements for terms of service, including content moderation policies; and requirements for public risk assessments related to distribution of harmful content and steps taking to reduce those harms.
The Bennet bill also constitutes a major expansion of antitrust law by incorporating into merger review the non-competition objectives covered by the new FDPC. The law would authorize the agency to receive Hart-Scott-Rodino filings for acquisitions by systemically important digital platforms and to make recommendations to the FTC and the Antitrust Division on whether the acquisition violates any of the purposes of the FDPC, which are much broader than competition issues. The antitrust agencies would be able to use the FDPC’s recommendation as a basis for rejecting a proposed acquisition or requiring additional conditions.
To assist in its tasks, the agency would be required to establish an 18-member Code Council consisting of representatives from digital platforms, nonprofits, and technical experts from fields like data science, communications, and engineering. The Code Council would be empowered to “develop and propose voluntary or enforceable behavioral codes, technical standards, or other policies” for the Commission’s consideration. There is no requirement for proposals from the Code Council or the Commission to be subject to any economic or cost-benefit analysis.
None of this is meant to imply that there are no problems associated with digital platforms. But the Bennet bill is a draconian solution. It presents a choice: Do we want the U.S. to maintain its technology leadership, which has created great new services for consumers and businesses? Or do we want to adopt policies that will cede that position to other countries or simply slow the pace of innovation altogether?
The answer should be clear.
Thomas M. Lenard is Senior Fellow and President Emeritus at the Technology Policy Institute.
