Academic journal article AEI Paper & Studies

Data and Privacy Inquiry: Control Points in Technology and Policy

Academic journal article AEI Paper & Studies

Data and Privacy Inquiry: Control Points in Technology and Policy

Article excerpt

Chairman Nadler, Ranking Member Collins, Subcommittee Chairman Cicilline, Ranking Member Sensenbrenner, and members of the subcommittee, thank you for the opportunity to discuss digital markets. It is an honor. I am heartened by your bipartisanship. I commend the detailed and focused preparation by committee staff in advanced of this hearing. If Congress is to make meaningful and appropriate laws, it must undertake these inquiries. Digital markets are complex field, and there is value to mapping its many dimensions and inviting different perspectives. This testimony reflects my own views and research carried out at Denmark's Center for Media and Information Technologies at Aalborg University. As a mother of three Danish-American children who are European citizens, I also have a personal and academic interest in why European policies are failing to stimulate European-made internet innovation and reducing consumer trust online.

The objectives of this digital markets inquiry are to (1) document competition problems in digital markets, (2) examine whether dominant firms are engaging in anticompetitive conduct, and (3) assess whether existing antitrust laws, competition policies, and current enforcement levels are adequate to address these issues. Additionally, the subcommittee seeks feedback on how and whether data either enable or deter market entry and how privacy may affect competition and antitrust enforcement.

Digitization challenges traditional antitrust analysis because of complexity and change. (1) Indeed the writings of Judge Louis Brandeis have been popularized of late to justify new-fangled antitrust approaches to large technology companies. However, just as Brandeis was skeptical about so-called big business, he was also concerned about big government. (2) As such, it is inconsistent to advocate dismantling enterprise while growing government.

Interestingly, Brandeis' key argument against large enterprise was that it was inefficient, but that critique does not describe today's technology firms, which are extremely efficient. These companies are highly innovative, continue to increase output, and deliver increasing value to end users. It is not in their interest to behave anticompetitively--at least in an overt way. However, I am concerned about their covert practices, their activities that do not in themselves rise to the level of antitrust violations but lead to conditions and settings that favor their continued dominance. Namely, I am concerned about how they influence public choices on internet policy and technology. Moreover, some large American tech firms have put Americans' safety, security, and privacy by bending to the will of the Chinese government in requiring data processing in China and with Chinese tools.

I will use the engineering concept of control points to describe this covert behavior. Just as a linchpin keeps a wheel from sliding off the axel, harnessing a control point is a powerful, efficient way to govern a system. As these platforms grow and gain economies of scale, the more easily they manage control points in the system, adding more capability with seemingly less effort. One need not control the system if one can just manage its control point. I will describe how the companies leverage control points in technology and public policy to gain advantages in the marketplace. Moreover, I will demonstrate how regulatory interventions, however well-intentioned, such as data protection, privacy regulation, and net neutrality, have strengthened the market positions of these companies. Many well-meaning policies are promoted on the premise that they will "level the playing field," but we must look at the actual effects, not just the theory.

Moreover, I am skeptical to opportunistic, election season, media-seeking calls to break up "big tech". I am hard-pressed to find successes from government intervention. For example, American folklore alludes to the 19th-century railroads as justification for regulatory intervention, but the creation of the Interstate Commerce Commission itself was a product of rent seeking, reflecting the political prioritization of powerful agricultural interests over that of transport, not consumers. …

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