U.S. regulators and American citizens are rightly wary when large firms go to Washington and argue that less regulation and more corporate freedom of action is better. But what should we make of large companies, particularly tech firms, when they argue for more regulation?
While it may be tempting to see these arguments as a progressive and long-term desire to "do the right thing," it’s generally more accurate to assume the call for regulation is a tool that aims to shape markets to the firm’s advantage and to the disadvantage of its competitors.
Both Apple CEO Tim Cook and Microsoft President Brad Smith at the recent International Association of Privacy Professionals conference made eloquent calls for federal privacy legislation. Smith went so far as to argue that the failure of Congress to move forward on privacy legislation "makes our country less influential in the world." Facebook (now Meta) has been calling for “updated internet regulations” for several years. During the COVID-19 pandemic, Amazon called for federal anti-price gouging legislation as the price of hand sanitizer and masks surged online — while carving out an exception for "unavoidable price increases."
Facial recognition is another powerful example. In 2018, Amazon’s Rekognition was at the center of a controversy about law enforcement’s use of facial recognition. Into the fray stepped Microsoft with a blog post that walked back an earlier claim that Immigration and Customs Enforcement used Microsoft facial recognition technology, and called for the government to take the lead on “thoughtful” regulation.
The debate then centered itself in the state of Washington (where both firms hold considerable sway), with Microsoft’s Smith claiming that a state law would serve as a de facto global law, because both Microsoft and Amazon would be covered. A 2020 facial recognition bill proposal that passed into law was sponsored by a Microsoft employee also serving as a state legislator.
It’s clear that we need new laws to govern emerging technologies that evolve beyond the scope of old laws. But we shouldn’t interpret these initiatives from firms to be particularly enlightened or altruistic. At a minimum, tech companies are reading the tea leaves and recognizing that leaning into regulation early gives them a better opportunity to shape proposals that may pass into law. Fighting against the inevitable is almost never a good idea. Better to embrace the inevitable and shape regulation to make it easier for your firm to comply and thrive than for others to do so.
It’s true that tech firms are under particular scrutiny and raise eyebrows when they say positive things about regulation because for the first few decades of Silicon Valley and the web so-called “permissive innovation” held sway. This philosophy — that tech firms should be able to do almost anything they want to do unless and until somebody can positively prove it is dangerous — was bolstered by the idea that politicians and regulators were just unable to understand fast-moving technology. Regulatory constraints on tech firms would only be a recipe for stunted economic growth, slower innovation and less competitiveness.
The mood of the public and of regulators with regard to technology has obviously shifted in the past several years. In response, tech firms now employ “strategic regulation.” The goals are straightforward: Try to lay as uniform a marketplace foundation as possible across national and even international borders; tilt the landscape to favor one's business model and value chain over others'; create a regulatory environment that unequally burdens competitors with compliance and other costs.
To be clear, strategic regulation isn’t a moral embarrassment or scandal — it’s a legitimate part of the corporate tool box. But top executives, CEOs, regulators and lawmakers framing these actions as a contribution to the greater good should raise alarm bells.
Here’s how we can better assess these kinds of proposals in a level-headed way. Firms should be asked for much greater specificity about precisely what regulations they would support, and explain why those specific regulatory provisions would enhance competition, innovation and the performance of markets. No more prizes for generic statements about privacy, consumer protection or technology ethics. Tech companies are in business to generate profits; regulators are in business to ensure that firms do so safely, in competition with each other and consistent with the long-term interests of society.
It’s ultimately up to the public to judge how these interests and objectives come together around any specific issue, and the stakes are complicated enough without shadow-boxing around rhetoric that is aimed simply to bolster reputations. Firms are justified in arguing for regulation that improves how markets function, and then competing to win within those markets. But we do not want any firm getting a free pass to convince those listening, that the firm’s interests have somehow become automatically equivalent to society’s interests.
The goal should be to make more transparent what kinds of regulatory initiatives would be good for the economy and society overall — not just for the firm that’s asking for a new rule.