Lawyers Sowing Legal Chaos

11 Monday Jul 2022

Posted by Nuetzel in Big Government, Litigation, Living Constitution

Tags

Activism, Administrative State, Bill of Rights, Homelessness, John O. McGinnis, Legal Formalism, Legal Realism, Leviathan, Living Constitution, Mark Pulliam, Martin v. Boise, Ninth Circuit Court, Originalism, Pro Bono Litigation, Supreme Court, Trial Lawyers, West Virginia v. EPA

It goes without saying that the legal profession played a huge role in the development and growth of the administrative state. I reviewed some history about that growth in my last post, which dealt primarily with the Supreme Court’s recent ruling in West Virginia v. EPA. It’s certainly clear that courtrooms have served as venues for many of the steps in creating the federal Leviathan we know too well today. So has a large representation of attorneys in Congress. Environmental law? Tax law? Antitrust? Labor law? Civil Rights? Bank regulation? The examples and sub-examples are numerous, and while all might have laudable dimensions, there is no question that all present lucrative opportunities for attorneys… and for manipulative abuses. The burgeoning domain of administrative law enforced and adjudicated by federal agencies was itself a by-product of growth in the array of economic and social regulation, and it too was abetted by the legal profession. Moreover, it’s not inaccurate to say that the active rent-seeking efforts of private special interests, which undergird the “demand” for public intervention and regulation, are likely as not to have been spearheaded by corporate legal departments.

Ex post losses of various kinds are effective drivers of public intervention. Obviously, trial attorneys seek redress against various harms to clients who come their way, and they manage to stretch monetary damages to absurd levels. Public intervention, however, often takes the form of ex ante risk avoidance, and attorneys frequently take lead roles in agitating for ever-greater precautions against risk. A key characteristic of these measures is that they tend to be zero- and even negative-sum in nature. That is, in this kind of world, it is not atypical for one person’s gain to be less than another’s loss. This dynamic creates a formidable obstacle to economic growth.

Country Club Subversives

John O. McGinnis puts all this into a tidy nutshell in “Lawyers for Radical Change”:

“Since the birth of the modern regulatory state, lawyers are no longer primarily the allies of commercial classes, as they were in the early republic, but instead the technocrats and enablers of regulation and redistribution. The more the nation intervenes in economic affairs to regulate and redistribute, the greater slice of compliance costs and transfer payments lawyers can expect to receive. Thus, they cannot be counted on as supporters of property rights or even of a stable rule of law. Their interest lies frequently in dynamic forms of legal transformation and the uncertainty they bring. Far from supporting a sound, established social order, they are likely to seek to undermine it.”

McGinnis highlights the legal profession’s remarkable transition from once-active guardians of personal liberty, property rights, and the rule of law to active agitators for a nation grounded in non-productive rent seeking. The populist penchant for “do-something-ism” in response to every perceived risk, injustice, or grievance plays right into their skill set. And there are vast opportunities for attorneys in regulatory and fiscal matters. Compliance and legal work-arounds are enormously profitable to attorneys, to say nothing of the many forms of litigation. In all cases, one might say, “follow the fees”.

This is not exclusively a pecuniary matter, however. It’s also one of raw political ambition and status. A spectacular and perverse phenomenon has been the legal profession’s agitation for dismantling the rule of law, denying certain rights enumerated in the Constitution (e.g., free speech, gun rights) and insisting upon the enforcement of imagined rights through novel interpretations of the Bill of Rights and its amendments (e.g, guaranteed income, “equity”), even so-called rights and demands involving demonstrable harm to others (reparations, no bail laws, abortion).

Here’s McGinnis on the legal profession’s nearly complete sellout of the original text of the Constitution:

“Under living constitutionalism, lawyers and judges are not simply servants of the law but potentially tribunes of the people, because they can choose to create new rights and discard others. In a legal world without the formal anchoring in text and precedents that characterized the lawyer’s craft of the past, innovation and, indeed, radicalism are prized as sources of power.”

Legal “Realism”

There are other dimensions to the aberrant drift in the interests of the mainstream legal profession. Over 20 years ago, Mark Pulliam discussed some of these issues in “The Lawyer’s War on Law”. In that article, he decried so-called “legal realism”, which elevates prevailing attitudes about social policy and justice over legal formalism and originalism. This philosophy is used to justify what amounts to predation among trial lawyers seeking to smear the defense, especially those who suffer from unpopularity among current elites or the media. Gone is the idea of fighting for what is right under the law; instead the goal is to “win at all costs”. Here is Pulliam on this phenomenon:

“… lawsuits succeed without credible proof of injury or causation–‘junk science’ experts, paid by the hour, provide whatever pretext a jury requires–because of a combination of judge-made liability rules that tilt the playing field in favor of plaintiffs’ gripes, trial judges determined to redistribute wealth, and the brute force of endless dishonest lawsuits that seek unlimited, bankruptcy-threatening damages. Many businesses, having lost faith in courts’ ability or willingness to make rational rulings, routinely pay the equivalent of ransom just to escape the system. Most ominously, the trial lawyers have recently joined forces with state and local governments to loot unpopular industries for political purposes. Litigation is no longer just a way to bilk opponents; it is a political weapon.”

The legal realist school of thought is used as a ready excuse for nearly any form of judicial activism, including nullification of controlling statutes in election procedures, allowing lawyers and judges to run elections.

Pro Bono Subversion

More recently, Pulliam provided another example of a perverse activity sponsored by the legal profession, and in particular large law firms. In “Lawyers Cause Homelessness”, he discusses pro bono litigation and its paradoxical harms. Of course, pro bono work sounds so very good and generous. And, in fact, it can be very nice, as when attorneys offer free legal advice to those who cannot otherwise afford it. However, it is not uncommon to see these efforts used in the service of political activism. Pulliam contends that prestigious law firms use pro bono litigation as an inducement to attract young associates, fresh out of law school and full of the social justice blather taught there. How exciting to be offered a position at an elite firm with the opportunity to work on activist causes!

The case used by Pulliam to illustrate this dynamic is Martin v. Boise, decided by the Ninth Circuit Court in 2018, which he describes thusly:

“Martin v. Boise … declared unconstitutional—as ‘cruel and unusual punishment,’ of all things—any city ordinances that prohibit homeless people from sleeping or camping overnight on public property (such as parks, sidewalks, and, in California, beaches) unless the jurisdiction provides enough shelter beds to house every single ‘person experiencing homelessness,’ a burden no city will ever be able to meet. …

With a wave of the activist wand, the Ninth Circuit relieved vagrants of any responsibility to provide their own shelter. Society has this duty, and it must accept the consequences of its failure to provide cradle-to-grave care, no matter how improvident the lifestyle decisions of individual actors. In one fell swoop, in the absence of any relevant Supreme Court precedent, three unelected judges on the Ninth Circuit rendered more than 1,600 municipalities within the court’s jurisdiction powerless to curb urban homeless encampments.”

According to Pulliam, the Washington DC law firm Latham and Watkins dedicated more than 7,000 hours of attorney time to the case:

“Latham … publicly bragged about its ‘major Ninth Circuit victory’ and was honored for it by the Legal Services Corporation’s Board of Directors with a Pro Bono Service Award.”

This is a stark illustration of the depths of activism to which the legal profession has descended. And the case is hardly unique, as Pulliam goes on to illustrate. Despite the literal meaning of the term pro bono, this kind of activity is anything but for “the public good”.

Conclusion

Who really benefits from the kind of legalistic mayhem we see today? The written words of the Constitution are now said to mean things that are often diametrically opposed to the framers’ intent. The federal government absorbs ever greater shares of the nation’s resources. Private parties use federal power to petition for rents that could never have been gained in private markets. Laws are made by federal agencies who, in turn, internally adjudicate disputes between those very agencies and private parties. Litigation runs rampant in search of deep pockets. And elite law firms are somehow deemed praiseworthy for working to undermine safety, cleanliness, property rights, and the enumerated rights guaranteed under the Constitution.

Who benefits? Perhaps most of all it is the attorneys! The more chaotic, the better! Then again, if you’re at risk of legal trouble, you better damn well consult an attorney. We can’t seem to live without lawyers, but sadly, we can’t live free with them.

Will Your Local School Get a “Wokey-Dokey”?

16 Friday Jul 2021

Posted by Nuetzel in Capital Markets, Education, Wokeness

≈ 3 Comments

Tags

Academic Dilution, American Bar Association, Cobb County Georgia, Cognia, Critical Race Theory, Diversity, Environmental Social Governance Scores, Equity, ESG Scores, Fact-Checking, Forward Though Ferguson, Grant Making, Investor Activism, John O. McGinnis, Missouri Department of Education, Originalism, School Accreditation, Stacey Lennox, Woke Middlemen

“Middlemen” are often characterized as rip-off artists, or “takers” who somehow insinuate a role for themselves without adding value. They usually do perform valuable roles, however, in price discovery and in matching and routing product to willing consumers, as well as offering a feedback loop to producers. Still, it would be difficult to defend them if they routinely favored producers whose business practices had specific political objectives. Certain middlemen, whom we might broadly label “influencers”, play an indirect role in the transaction process that is sometimes formalized, but not always. They can be rating agents, personalities on social media, or funding sources. Increasingly they blend political criteria into their ratings, recommendations, and decisions. Unfortunately, a number of institutions (and consumers) are falling prey to the corrosive influence of “woke middlemen”, or have already, including education, capital markets, and even law enforcement. The list broadens considerably if we include the influencer roles often played by media more generally, and even government itself.

Grading Schools’ Wokeness

School accreditation at the K-12 levels is often in the hands of organizations that serve as “woke middlemen”. For example, those in charge of accreditation may be in a position to demand compliance with the tenets of critical race theory (CRT). If you haven’t seen it, read this post by Stacey Lennox on the impact that accreditors are having on schools in Cobb County, Georgia. It can be very painful for a school and its students to lose accreditation. Such a loss can happen as a result of legitimate academic decline, but it also can be used as a threat of political retribution, as the situation in Cobb County so aptly illustrates. The task of awarding accreditation is performed by different agents in different states, but often a state’s education department will contract out to firms like Cognia, Inc. This company’s treatment of the Cobb County schools is shocking, and Cobb County taxpayers pay more than $133,000 annually for Cognia “membership”.

The CEO of Cognia says its commitment to diversity, equity, and inclusion has prompted it to introduce a “new protocol” in its approach to education standards. Celebrating diversity is one thing, but the application of “equity” in the allocation of school or district resources is quite another. But have no fear! Cognia is happy to offer its consulting services to schools to help them meet these new standards. Lennox notes that a few interested parties in Georgia, including parents and state officials, are scrutinizing Cognia’s sinister role in the matter of the Cobb County schools. That can’t happen soon enough!

Cognia operates in a number of other states. In Missouri, for example, the company is intimately involved in the accreditation of private schools. The state Department of Education is mandated by law to handle accreditation of public schools. The DOE’s standards were recently revised, with input from a variety of “stakeholders”, especially the public education establishment. It also receives input from organizations like Forward Through Ferguson, which represents “stakeholders” affiliated with a school district that lost its accreditation several years ago. As the last link shows, that organization takes a strong position on matters of racial equity and justice. It should not come as a surprise that the latest school standards issued by the Missouri DoE in 2020, which are greatly revised and expanded, place specific emphasis on racial equity. It’s certainly not clear that promoting equity, as a distinct mission beyond assessing academic performance, is part of the DoE’s mandate under state law.

The same dynamic is operative at higher levels of education. For example, John O. McGinnis reports on that august middleman known as the American Bar Association, which now proposes “new accrediting standards for law schools that would make them more race-conscious, more politically correct and less intellectually diverse.” This proposal reeks of a desire to downgrade law schools that treat originalist principles with respect. It’s as if we need more attorneys lacking any real understanding of the fundamental, individual rights recognized by and enshrined in our Constitution.

Back to the K-12 levels, the greater is the emphasis on equalizing outcomes, which is the ultimate goal of calls for academic “equity“, the less is the focus on academic excellence. Gifted programs are almost sure to receive fewer resources. Subjects like math and science are recalibrated toward a lower common denominator. Difficult reading assignments are put aside. Discipline suffers. And that’s all before we get to instruction in social justice and critical race theory! If they aren’t already in on it, today’s school leaders might well suffer from “Wokaphobia”, or fear of the consequences of insufficient wokeness.

Grading Corporations’ Wokeness

In the past I’ve written about “middleman” organizations assigning so-called “Environmental, Social, and Governance” (ESG) scores to public companies. These scores are marketed to activist investors, investment funds, and financial advisors as criteria for building “socially responsible” portfolios. ESGs are very much in vogue at the moment, and they have political and social objectives. A public company with a low ESG score, or a fund holding a portfolio of companies with a low average ESG score, may be penalized by the investment community. To avoid such an outcome, companies engage in all sorts of virtue signaling nonsense, not to mention misdirection of staff and assets on pursuits that have nothing to do with fundamental business objectives.

The same kind of corporate waste is motivated by attempts to gain positive media attention or even approval of so-called influencers. There is nothing new about public relations, but today, a veritable army of negative-PR activist “middlemen” hunt for corporate victims on which to prey. The slightest transgression, be it any direct or indirect association with carbon emissions, “cultural appropriation” in advertising, a gender/racial wage or hiring gap, a negative regulatory finding, or any disparate impact in pricing, can subject a company to withering condemnations on social media, in the community, and at the corporate gates. This excessive scrutiny does great social and economic damage, dominating attention and absorbing resources in a defensive posture, all at the expense of a proper focus on the value of product and the people who work honestly to produce it.

Woke Middlemen and Social Failure

Woke leftists performing reviews for school accreditation are dangerous to our children and the future of our republic, and there are other kinds of “middlemen” who are actively undermining schools, such as teachers’ unions. The ESG scores produced by middlemen from the woke investor community undermine business objectives and economic efficiency. We could add to the list of middlemen the corrupt “fact checkers” promoted by major media organizations, large political contributors who fund the campaigns of anti-police prosecutors, and climate-alarmist grant-making organizations. Conservatives and libertarians have varying levels of awareness of these influencers and middlemen, who have been broadly successful in institutionalizing their agendas. They sometimes operate behind the scenes, and they sometimes are cloaked in an ostensible legitimacy, but one must know one’s enemies. Like invasive weeds, they are difficult to root out. In a few cases they can simply be ignored, but their impact elsewhere will be hard to reverse unless they are challenged politically, in the courts, and in the marketplace.

Social Media and the Antitrust Reflex

10 Tuesday Apr 2018

Posted by Nuetzel in Antitrust, Regulation, Social Media

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Tags

Anticompetitive Behavior, Antitrust, Brendan KIrby, Cambridge Analytica, Data Privacy, EconTalk, Facebook, Fact-Checking, Geoffrey A. Fowler, Information Fiduciary, John O. McGinnis, Jonathan Zittrain, Judicial Restraint, Mark Zuckerberg, Matt Stoller, MeWe, Navneet Alang, Predatory Pricing, Social Media, Trust- Busting

Facebook is under fire for weak privacy protections, its exploitation of users’ data, and the dangers it is said to pose to Americans’ free speech rights. Last week, Mark Zuckerberg, who controls all of the voting stock in Facebook, attempted to address those issues before a joint hearing of the Senate Judiciary and Commerce Committees. It represented a major event in the history of the social media company, and it happened at a time when discussion of antitrust action against social media conglomerates like Facebook, Google, and Amazon is gaining support in some quarters. I hope this intervention does not come to pass.

The Threat

At the heart of the current uproar are Facebook’s data privacy policy and a significant data breach. The recent scandal involving Cambridge Analytica arose because Facebook, at one time, allowed application developers to access user data, and the practice continued for a few developers. Unfortunately, at least one didn’t keep the data to himself. There have been accusations that the company has violated privacy laws in the European Union (EU) and privacy laws in some states. Facebook has also raised ire among privacy advocates by lobbying against stronger privacy laws in some states, but it is within its legal rights to do so. Violations of privacy laws must be adjudicated, but antitrust laws were not intended to address such a threat. Rather, they were intended to prevent dominant producers from monopolizing or restraining trade in a market and harming consumers in the process.

Matt Stoller, in an interview with Russ Roberts on EconTalk, says antitrust action against social media companies may be necessary because they are so pervasive in our lives, have built such dominant market positions, and have made a practice of buying nascent competitors over the years. Steps must be taken to “oxygenate” the market, according to Stoller, promoting competition and protecting new entrants.

Tim Wu, the attorney who coined the misleading term “network neutrality”, is a critic of Facebook, though Wu is more skeptical of the promise of antitrust or regulatory action:

“In Facebook’s case, we are not speaking of a few missteps here and there, the misbehavior of a few aberrant employees. The problems are central and structural, the predicted consequences of its business model. From the day it first sought revenue, Facebook prioritized growth over any other possible goal, maximizing the harvest of data and human attention. Its promises to investors have demanded an ever-improving ability to spy on and manipulate large populations of people. Facebook, at its core, is a surveillance machine, and to expect that to change is misplaced optimism.”

Google has already been subject to antitrust action in the EU due to the alleged anti-competitive nature of its search algorithm, and Facebook’s data privacy policy is under fire there. But the prospect of traditional antitrust action against a social media company like Facebook seems rather odd, as acknowledged by the author at the first link above, Navneet Alang:

“… Facebook specifically doesn’t appear to be doing anything that actively violates traditional antitrust rules. Instead, it’s relying on network effects, that tendency of digital networks to have their own kind of inertia where the more people get on them the more incentive there is to stay. It’s also hard to suggest that Facebook has a monopoly on advertising dollars when Google is also raking in billions of dollars.“

Competition

The size of Facebook’s user base gives it a massive advantage over most of the other platforms in terms of network effects. I offer myself as an example of the inertia described by Alang: I’ve been on Facebook for a number of years. I use it to keep in touch with friends and as a vehicle for attracting readers to my blog. As I contemplated this post, I experimented by opening a MeWe account, where I joined a few user groups. It has a different “feel” than Facebook and is more oriented toward group chats. I like it and I have probably spent as much time on MeWe in the last week as Facebook. I sent MeWe invitations to about 20 of my friends, nearly all of whom have Facebook accounts, and a few days later I posted a link to MeWe on my Facebook wall. Thus far, however, only three of my friends have joined MeWe. Of course, none of us has deactivated our Facebook account, and I speculate that none of us will any time soon. This behavior is consistent with “platform inertia” described by Alang. Facebook users are largely a captive market.

But Facebook is not a monopoly and it is not a necessity. Neither is Google. Neither is Amazon. All of these firms have direct competitors for both users and advertising dollars. It’s been falsely claimed that Google and Facebook together control 90% of online ad revenue, but the correct figure for 2017 is estimated at less than 57%. That’s down a bit from 2016, and another decline is expected in 2018. There are many social media platforms. Zuckerberg claims that the average American already uses eight different platforms, which may include Facebook, Google+, Instagram, LinkedIn, MeWe, Reddit, Spotify, Tinder, Tumblr, Twitter, and many others (also see here). Some of these serve specialized interests such as professional networking, older adults, hook-ups, and shopping. Significant alternatives for users exist, some offering privacy protections that might have more appeal now than ever.

Antitrust vs. Popular, Low-Priced Service Providers

Facebook’s business model does not fit comfortably into the domain of traditional antitrust policy. The company’s users pay a price, but one that is not easily calculated or even perceived: the value of the personal data they give away on a daily basis. Facebook is monetizing that data by allowing advertisers to target individuals who meet specific criteria. Needless to say, many observers are uncomfortable with the arrangement. The company must maintain a position of trust among its users befitting such a sensitive role. No doubt many have given Facebook access to their data out of ignorance of the full consequences of their sacrifice. Many others have done so voluntarily and with full awareness. Perhaps they view participation in social media to be worth such a price. It is also plausible that users benefit from the kind of targeted advertising that Facebook facilitates.

Does Facebook’s business model allow it to engage in an ongoing practice of predatory pricing? It is far from clear that its pricing qualifies as “anti-competitive behavior”, and courts have been difficult to persuade that low prices run afoul of U.S. antitrust law:

“Predatory pricing occurs when companies price their products or services below cost with the purpose of removing competitors from the market. … the courts use a two part test to determine whether they have occurred: (1) the violating company’s production costs must be higher than the market price of the good or service and (2) there must be a ‘dangerous probability’ that the violating company will recover the loss …”

Applying this test to Facebook is troublesome because as we have seen, users exchange something of value for their use of the platform, which Facebook then exploits to cover costs quite easily. Fee-based competitors who might complain that Facebook’s pricing is “unfair” would be better-advised to preach the benefits of privacy and data control, and some of them do just that as part of their value proposition.

More Antitrust Skepticism

John O. McGinnis praises the judicial restraint that has characterized antitrust law over the past 30 years. This practice recognizes that it is not always a good thing for consumers when the government denies a merger, for example, or busts up a firm deemed by authorities to possess “too much power”. An innovative firm might well bring new value to its products by integrating them with features possessed by another firm’s products. Or a growing firm may be able to create economies of scale and scope that are passed along to consumers. Antitrust action, however, too often presumes that a larger market share, however defined, is unequivocally bad beyond some point. Intervention on those grounds can have a chilling effect on innovation and on the value such firms bring to the market and to society.

There are more fundamental reasons to view antitrust enforcement skeptically. For one thing, a product market can be defined in various ways. The more specific the definition, the greater the appearance of market dominance by larger firms. Or worse, the availability of real alternatives is ignored. For example, would an airline be a monopolist if it were the only carrier serving a particular airport or market? In a narrow sense, yes, but that airline would not hold a monopoly over intercity transportation, for which many alternatives exist. Is an internet service provider (ISP) a monopoly if it is the only ISP offering a 400+ Mbs download speed in a certain vicinity? In a very narrow sense, yes, but there may be other ISPs offering slower speeds that most consumers view as adequate. And in all cases, consumers always have one very basic alternative: not buying. Even so-called natural monopolies, such as certain public utilities, offer services for which there are broad alternatives. In those cases, however, a grant of a monopoly franchise is typically seen as a good solution if exchanged for public oversight and regulation, so antitrust is generally not at issue.

One other basic objection that can be made to antitrust is that it violates private property rights. A business that enjoys market dominance usually gets that way by pleasing customers. It’s rewards for excellent performance are the rightful property of its owners, or should be. Antitrust action then becomes a form of confiscation by punishing such a firm and its owners for success.

Political Bias

Another major complaint against Facebook is political bias. It is accused of selectively censoring users and their content and manipulating user news feeds to favor particular points of view. Promises to employ fact-check mechanisms are of little comfort, since the concern involves matters of opinion. Any person or organization held to be in possession of the unadulterated truth on issues of public debate should be regarded with suspicion.

Last Tuesday at the joint session, Zuckerberg acted as if such a bias was quite natural, given that Facebook’s employee base is concentrated in the San Francisco Bay area. But his nonchalance over the matter partly reflects the fact that Facebook is, after all, a private company. It is free to host whatever views it chooses, and that freedom is for the better. Facebook is not like a public square. Instead, the scope of a user’s speech is largely discretionary: users select their own network of friends; they can choose to limit access to their posts to that group or to a broader group of “friends of friends”; they can limit posts to subgroups of friends; or they can allow the entire population of users to see their posts, if interested. No matter how many users it has, Facebook is still a private community. If its “community standards” or their enforcement are objectionable, then users can and should find alternative outlets. And again, as a private company, Facebook can choose to feature particular news sources and censor others without running afoul of the First Amendment.

Revisiting Facebook’s Business Model

The greatest immediate challenge for Facebook is data privacy. Trust among users has been eroded by the improprieties in Facebook’s exploitation of data. It’s as if everyone in the U.S. has suddenly awoken to the simple facts of its business model and the leveraging of user data it requires. But it is not of great concern to some users, who will be happy to continue to use the platform as they have in the past. Zuckerberg did not indicate a willingness to yield on the question of Facebook’s business model in his congressional testimony, but there is a threat that regulation will require steps to protect data that might be inconsistent with the business model. If users opt-out of data sharing in droves, then Facebook’s ability to collect revenue from advertisers will be diminished.

As Jonathan Zittrain points out, Facebook might find new opportunity as an information fiduciary for users. That would require a choice between paying a monthly fee or allowing Facebook to continue targeted advertising on one’s news feed. Geoffrey A. Fowler writes that the idea of paying for Facebook is not an outrageous proposition:

“Facebook collected $82 in advertising for each member in North America last year. Across the world, it’s about $20 per member. … Netflix costs $11 and Amazon Prime is $13 per month. Facebook would need $7 per month from everyone in North America to maintain its current revenue from targeted advertising.”

Given a choice, not everyone would choose to pay, and I doubt that a fee of $7 per month would cost Facebook much in terms of membership anyway. It could probably charge slightly more for regular memberships and price discriminate to attract students and seniors. Fowler contends that a user-paid Facebook would be a better product. It might sharpen the focus on user-provided and user-linked content, rather than content provided by advertisers. As Tim Wu says, “… payment better aligns the incentives of the platform with those of its users.” Fowler also asserts that regulatory headaches would be less likely for the social network because it would not be reliant on exploiting user data.

A noteworthy aspect of Zuckerberg’s testimony at the congressional hearing was his stated willingness to consider regulatory solutions: the “right regulations“, as he put it. That might cover any number of issues, including privacy and political advertising. But as Brendan Kirby warns, regulating Facebook might not be a great idea. Established incumbents are often capable of bending regulatory bodies to their will, ultimately using them to gain a stronger market position. A partnership between the data-rich Facebook and an agency of the government is not one that I’d particularly like to see. Tim Wu believes that what we really need are competitive alternatives to Facebook: he floats a few ideas about how a Facebook competitor might be structured, most prominently the fee-based alternative.

Let It Evolve

Like many others, I’m possessed by an anxiety about the security of my data on social media, an irritation with the political bias that pervades social media firms, and a suspicion that certain points of view are favored over others on their platforms. But I do not favor government intervention against these firms. Neither antitrust action nor regulation is likely to improve the available platforms or their services, and instead might do quite a bit of damage. “Trust-busting” of social media platforms would present technological challenges, but even worse, it would disrupt millions of complex relationships between firms and users and attempt to replace them with even more numerous and complex relationships, all dictated by central authorities rather than market forces. Significant mergers and acquisitions will continue to be reviewed by the DOJ and the FTC, preferably tempered by judicial restraint. I also oppose the regulatory option. Compliance is costly, of course, but even worse, the social media giants can afford it and will manipulate it. Those costs would inevitably present barriers to market entry by upstart competitors. The best regulation is imposed by customers, who should assert their sovereignty and exercise caution in the relationships they establish with social media platforms … and remember that nothing comes for free.

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Tag Archives: John O. McGinnis

Lawyers Sowing Legal Chaos