Interview with Luigi Zingales: Social Media and Antitrust

Allison Schrager has a conversation with Luigi Zingales on the subject “Break Up Big Tech? A conversation about the future of the industry” (City Journal website, September 21, 2021).

Zingales makes a number of interesting points, but here’s one of them:

I think the problem is that we treat Big Tech as one big issue, and we say we need to break them up. Rather, what we should do depends on what we want to accomplish, and what sector in the industry we’re talking about. Let’s start with social media. I think the government should have tried to stop Facebook’s acquisition of Instagram and WhatsApp, but I am not sure that breaking them up now would make a difference in the long term. If there are big network externalities, separating Facebook from Instagram would be just a temporary measure, because eventually only one of the two will prevail. …

[T]here is one thing I’d love to see. Why can’t I have software that monitors both Signal and WhatsApp and can receive and send data to both at the same time? In 2008, a company called Power Ventures did just that, but Facebook sued the hell out of it and established a principle in U.S. courts that if I give you my Facebook log-in credentials and you download data with my consent, then you are committing a federal crime and should go to jail. I think this is crazy, and it’s one of many legal issues making solutions difficult. …

We should separate the two key functions Facebook performs: sharing of information and editing of information. Facebook and Twitter allow me to share a photo with everyone who follows me. Yet, Facebook also decides whether all my followers will see the picture at the top of their feed, at the bottom, or not at all, if their feed is clogged with other posts. Facebook can also decide whether to promote my picture to lots of people I don’t know. …

First, we should separate the editorial role from the sharing role. In the editorial role, where there are no network externalities, we can have competition. I can have a University of Chicago editor, and another person could have Jacobin as editor. Newspapers can redefine their role as editors. I could subscribe to the Wall Street Journal editorial-selection services: the Wall Street Journal would edit and select from the web the articles or tweets I want to read. For example, I hate it when people talk about their lives on Twitter; other people love that. There should be free competition on curating these information feeds.

By contrast, the sharing function (which benefits from network externalities) should be considered a common carrier, with the restrictions typical of a common carrier, including universal service. Everyone should be allowed to post on Facebook, unless she violates the law. In the same way, the sharing function of Facebook should retain protection from legal liability, while the editorial function should not. …

Consider a phone company. Do you know how many crimes are committed over the phone? Are phone companies responsible for those? You could wiretap every conversation, but no one would even consider that possibility. Unlike phone companies, Facebook, Twitter, and YouTube promote the content posted on their networks. Recently, I wanted to watch a YouTube video of Noam Chomsky, and I immediately got all these recommendations for this strange TV channel. When I started to investigate, I discovered that it came from Venezuela. Venezuela has a very radical, left-wing channel that broadcasts in English for the American market. YouTube promotes the channel, and makes money off promoting it, because it wants to keep viewers like me attached to their service as much as it can. And the way to keep us engaged is to give us more and more radical stuff that stimulates us more and more. The problem isn’t social media; it’s the business model, which is to get people addicted to platforms.

I am not fully confident about the Zingales claim that sharing in social media has implications for network externalities, while editorial choices about what to promote does not. There is also a degree of irony here in that a previous round of complaints against social media was that it cannibalized newspapers and other journalism, by passing along their content without paying the original publishers for it. Now, the proposal is that social media sites should be required to let others curate and pass along their content?

But I do think it’s useful to think in specific terms about what we’re trying to accomplish by applying antitrust regulation to social media. Just saying “sic ’em” is not a worthy motivation for public policy. For example, is the goal to have a more competitive market for online advertising? Or to protect privacy of individual data? Or are there issues in how these firms choose what content to promote, and how to promote it, that raise anticompetitive or other policy issues? What part of a social media firm is more like a phone conversation, just passing along what someone says, and what part involves strategy and choices by the firm?