Facebook has come under pressure today to follow Twitter’s announcement and ban political advertising. Mark Zuckerberg’s giant has also been under fire from its own staff in recent days for its decision to allow politicians to lie in political advertising. Globally, as we’ll see below, lawmakers are grappling with how to solve a problem like Facebook – but in the UK, it seems tentative proposals won’t come fast enough to prevent dark influence on the UK elections.
More on that in a moment. But interestingly, it’s a different story when it comes to Facebook’s designs on electronic currency…
If Facebook isn’t trusted (yet) with our money, why is it trusted with our democracy?
Just last week, Mark Zuckerberg was grilled on Capitol Hill on whether the company could be trusted to run an electronic currency called Libra. Even the Facebook CEO had to admit in evidence he gave to the committee that Facebook wasn’t in a good place to be trusted to launch such a new service.
Libra marks Zuckerberg’s next stage plan for the development of Facebook, building a private e-commerce business on the WhatsApp platform, using the Chinese app Wechat as its basic model. Facebook is testing payments on WhatsApp in India, as Zuckerberg told analysts on the company’s recent earnings call.
The Bank of England has said explicitly that there are serious questions for Facebook to answer before it can be allowed to play a systemic role in international finance. The Bank’s Governor, Mark Carney, illustrated the difference in regulating international finance and regulating democracy in a speech in the United States in August:
The Bank of England and other regulators have been clear that unlike in social media, for which standards and regulations are only now being developed after the technologies have been adopted by billions of users, the terms of engagement for any new systemic private payments system must be in force well in advance of any launch.
Facebook won’t be able to break international finance, no matter what it is allowed to do to democracy and human rights. Some of Facebook’s partners in Libra have been getting cold feet about the project.
Meanwhile, the UK heads to an election…
In the UK, plans for regulating social media’s role in elections have been allowed to languish in the Cabinet Office. So the UK heads to a General Election with no change in the regulations that applied at the time of the 2016 referendum, which even Dominic Cummings admits are inadequate. Facebook staff are in open revolt. But Facebook’s lobbyist-in-chief, former UK Deputy Prime Minister Nick Clegg, has yet to emerge as a champion of ensuring truthfulness in elections. UK MPs on the Commons Digital, Culture, Media and Sport Select Committee like Ian Lucas continue to press for changes to UK electoral law. Green MP Caroline Lucas and Green MEP Molly Scott Cato appealed to Mark Zuckerberg last month to tighten up Facebook political advertising. Instead, he has made things worse.
Mark Zuckerberg can’t set foot in the UK without giving evidence to the House of Commons Select Committee on Digital, Culture, Media and Sport. That’s a gig his minders consider too tough for him to undertake, unlike his hearings in Congress and the European Parliament. Other Parliamentarians from a growing number of jurisdictions, now regularly meeting as the International Grand Committee, would also like to question Zuckerberg. These legislatures now include Argentina, Canada, Chile, Estonia, Germany, Ireland, Singapore, Ecuador, Mexico, Morocco, Trinidad and Tobago, and the United Kingdom. It’s an indicator that legislators understand the need to band together across borders if they are to tackle Facebook.
Facebook is under regulatory and political scrutiny around the world. Belatedly, earlier this year Mark Zuckerberg became a convert to further regulation, posting ideas for regulation on his Facebook page and in the Washington Post earlier this year. However, within weeks, Facebook lobbyists were telling Congress that Zuckerberg’s comments were for international consumption. Nick Clegg recently announced Facebook’s proposed Oversight Board for Content Decisions. But doubts have been raised about the effectiveness and independence of Facebook’s internal structures. Meanwhile Clegg has warned Zuckerberg that once the regulatory bandwagon rolls, you don’t always get the regulation you want. No surprise perhaps that Zuckerberg, fearful of break-up threats from Republicans as well as Democrats, has been wining and dining politicians and pundits on the right of US politics.
The regulatory net is tightening…
Nonetheless, regulatory action is underway against Facebook. Aside from electoral laws it takes a number of forms: data protection; anti-trust; action against illegal and harmful content carried on Facebook’s system, and taxation.
In terms of data issues, In the United States, Facebook has been hit by a $5 billion fine from the Federal Trade Commission and a $100 million fine from the Securities and Exchanges Commission over Cambridge Analytica data abuses. Some wanted regulatory action to go further, with personal penalties and obligations imposed on named Facebook executives like Zuckerberg. Law enforcement agencies have also been on Facebook’s case. 38 state attorneys in the US are investigating Facebook. Facebook was fined more than 100 million euros by the European Commission in 2017 for breaking commitments against data-sharing given when it bought WhatsApp. Fines have taken place in other member states including the UK. Ireland’s data protection commissioner, essentially the EU-wide regulator for Facebook on data issues given that it is headquartered there, said at the end of 2018 that it had ten cases open against Facebook and its subsidiaries, and is due to report on these before the end of this year, which could result in fines in billions of euros.
In terms of anti-trust and competition policy, the online advertising model which drives the Facebook/Google duopoly is now under scrutiny globally. The Australian Competition and Consumer Commission said platforms like Facebook and Google need scrutiny because their dominant businesses are vertically integrated, that is, present at multiple levels of the same supply chain. Facebook is vertically integrated through the Facebook audience network and the services offered on Facebook platforms.
The German Cartel Authority, the Bundeskartellamt, has called Facebook’s combination of data on individual users, drawn from a variety of data sources, “an exploitative abuse” of its dominant position. If its judgement is confirmed, Facebook’s advertising model, based on the massive accumulation of data which makes it so attractive to advertisers, will be called into question, unless it gets direct consent from users. Facebook has challenged the ruling in the German courts. The UK’s Information Commissioner has also begun serious work on online advertising, with research indicating how little it is understood by users and how more understanding of its nature results in greater concern about it. The UK Competition and Markets Authority is now carrying out a market study into online platforms and the digital advertising industry. Facebook had to settle a recent dispute with advertisers in a court case about the veracity of its advertising numbers for $40 million. Facebook said the case was without merit but it still paid up.
It is sometimes argued that the most effective way to regulate Facebook would be some form of structural separation - to break it up, stripping it of WhatsApp and Instagram or Facebook Messenger. However, some legal scholars like Harold Feld warn of the ‘starfish problem’:
If you tear up a starfish, the pieces regrow and instead of one starfish you have five starfish,” says Feld. “If you’re going to split up Facebook, what’s to prevent it becoming three Facebooks, each one dominant in its particular market segment?
Arguably, the real power centre of Facebook is its vertical integration as a social media network, a media distribution company, a media buying company, an advertising exchange or platform, an advertising agency, and a data analytics company; its horizontally integrated data exchanges between Facebook, WhatsApp, Messenger and Instagram; and the ability of advertisers to sell across the Facebook companies. Structural separation of these functions might be a powerful solution.
Democratic presidential contender Senator Elizabeth Warren has called for break-up of what she calls the ‘Platform Utilities’ with clear restrictions on their vertical integration.
In the UK, the House of Lords Communications Committee concluded that it was appropriate to put special obligations on companies such as Facebook to ensure that they acted fairly to users, to other companies ‘and in the interests of society’. These obligations would be enforced by a regulator.
Countries around the world, including Australia, India and Singapore, have developed new measures around the takedown of illegal content or disinformation: as with the UK proposals announced in April 2019, many questions remain, including around due process, precision in definition of prohibited material, and satisfaction of human rights principles. Facebook now commands little confidence, because it has been found wanting before, and because its decisions on content moderation have appeared inconsistent, contradictory, capricious, and compromised by the profit motive. Legislative and regulatory frustration with Facebook and other platforms has turned to the question of criminal penalties on the senior managements of platform companies.
Facebook responds by pointing to the amount of material posted on its platform every day, with billions of posts and hundreds of millions of photographs. Others argue that Facebook is effectively being subsidised for the costs of its own failures by users, media organisations and others who flag up problem materials. Instead, it should be investing sufficiently to address the online pollution that it is causing, as with the ‘polluter pays’ principle that underpins much environmental legislation.
Pressure is also on to make platform companies pay more tax. In his October 2018 budget, the then UK Chancellor of the Exchequer Philip Hammond announced a new Digital Services Tax which would be levied on the revenues of the ‘Big Tech’ companies from 2020. Some have suggested levies on the advertising revenues of companies such as Facebook. Taxation is one way to address the negative externalities of platforms such as Facebook or to fund social goods such as independent news.
Resistance at all levels is needed
Facebook, for some, is now an empire. But inside the Empire, resistance is now growing amongst current Facebook staff as well as former employees and current and former investors. Leaks have taken place regularly over the last year or two and the range of issues has had an impact on morale, Facebook’s former UK policy chief Lord Richard Allan confirmed before the International Grand Committee a year ago.
Fixing Facebook will take coordinated international regulation. It will require scrutiny of its data-mining business model. Some now argue that aggregated data should be held in public ownership. We need proper analysis of Facebook’s role in the digital advertising market. We need forensic analysis of its data practices. We need interrogation of Facebook’s recommendation and other algorithms. There must be personal obligations on Facebook’s founder and other senior executives and directors. We need re-designation of Facebook as a utility. We need break-up of the Facebook family of companies in a meaningful way, focusing as much on its vertically-integrated advertising operation as on its ownership of Instagram, Messenger and WhatsApp. The planned integration of its family of companies should be blocked by regulators in the US and Europe. It should be prevented from entering new markets like finance. We need new taxation systems which reduce the incentives for corporate surveillance, and support the development of independent media. We need modernised electoral laws around the world, and a ban on dark money and dark advertising as Open Democracy has demanded.
At the core of this discussion of course is corporate power in the age of surveillance capitalism. We need to move fast and break-up Facebook, before it breaks us. If central bankers won’t let Facebook break international finance, we shouldn’t let it break democracy.