I’ve always been skeptical about the push to sue, legislate, and regulate social media companies toward better behavior. My view has been they might get their wrists slapped, but that the risks weren’t material to the stocks. And that has largely been the right call. Now I’m not so sure.
State and federal litigation against
(ticker: FB) and
-owned Google (GOOGL) is mounting. And social media firms are taking heat for their role in creating the fraught political climate that led to a mob taking over the U.S. Capitol this past Wednesday. In short, the risks to the social media companies—and their shareholders—are rising.
This past week, the social media networks took their most drastic actions yet to rein in President Trump’s public comments. The most shocking news came late Friday when
(TWTR) permanently suspended his account, citing “the risk of further incitement of violence.” (The stock was down nearly 4% in late trading Friday night.) Facebook has banned Trump on its platform at least until his presidency ends on Jan. 20.
The social media companies may finally be feeling pressure to take some responsibility for our nation’s discourse and behavior, especially in the wake of the attack on the Capitol, which left five people dead and dozens injured. And it’s hard to avoid the feeling that social media is somehow to blame. Rioters, after all, gathered with the help of social media and then posted in real-time to Twitter, Facebook, Instagram, and other sites as they stormed the Capitol.
Roger McNamee, an early investor in Facebook who has become one of its greatest critics, has spent the last four years urging regulators, prosecutors, and legislators to end the company’s practice of converting user data into dollars, largely via targeted advertising. It’s what Harvard Business School professor Shoshana Zuboff calls “surveillance capitalism.”
In an interview last week, McNamee told me that Facebook’s WhatsApp change was “a giant f-you to antitrust regulators…a completely irresponsible action.”
A WhatsApp spokesperson says that it began notifying some users of the change in December and that new terms are intended to make it easier for businesses to communicate with consumers through WhatsApp. The company provided an opt-out of data sharing with Facebook back in 2016 but no longer offers that option.
Facebook is positioning itself as a friend to small business. It recently ran a series of full page ads in major newspapers attacking a new
(AAPL) policy that requires Apple device users to opt-in to having their activity tracked across apps and websites. Apple sees this as a consumer privacy issue; Facebook positions it as bad for small business. More to the point, it would also be bad for Facebook’s business.
So far, investors remain unconcerned about social media’s liability; and the events of the past week, which also included Democrats taking control of the Senate, don’t seem to have changed their mind.
After an initial flutter, tech stocks still raced higher on the week. One veteran internet analyst I spoke with sees the risks of tech regulation only slightly heightened by Georgia voters flipping the Senate to Democratic control—the tech giants, after all, have detractors on both sides of the aisle.
President-elect Biden, like Trump, has called for the elimination of Section 230, a provision of the 1996 Communications Decency Act that protects online businesses from being liable for their users’ posts. Still, investors seem unconcerned about imminent change. In the early going, Biden will have his hands full trying to address a raging pandemic and a wounded economy—fixing Section 230 might not be high on his to-do list.
And yet, there’s no question the risks to big tech are greater than they were a year ago. McNamee, for one, predicts that the megacaps, including Facebook, Google,
(AMZN), and Apple—will all lose antitrust cases in the months ahead. He sees particular risk in the case filed against Google in Texas by a group of 10 state attorneys general. They argue that Google conspired with Facebook to engage in price fixing in the online advertising market.
McNamee points out that federal law, at least, allows for felony treatment of price-fixing actions. Last year, a former CEO of Bumble Bee Foods was sentenced to 40 months in prison for conspiring with rivals StarKist and Chicken of the Sea to fix canned tuna prices. For now, Big Tech is dealing with civil cases. McNamee thinks the details in that 130-page Texas complaint are damning. Google says the case is “meritless.” Facebook has declined to comment.
Write to Eric J. Savitz at firstname.lastname@example.org