It’s been a big week for the Federal Trade Commission. A court on Monday threw out the agency’s antitrust complaint against Facebook and told it to come back with a stronger argument. On Thursday, Lina Khan chaired her first meeting as the new head of the FTC and started making changes right out of the gate, expanding the agency’s antitrust powers.
Khan is famous for her antitrust arguments against Amazon, but she’s also written on the role privacy concerns could play in attempting to regulate big tech firms like Facebook. I spoke with Issie Lapowsky, a senior reporter for Protocol, who dug into this part of Khan’s background, especially a 2019 article she co-authored on the idea of “information fiduciaries.” The following is an edited transcript of our conversation.
Issie Lapowsky: The idea was basically that any business has a fiduciary duty to their shareholders. So a lot of privacy people are asking, “Well, why don’t they have a fiduciary duty to us?” And this is an idea that was really emerging in privacy circles. Lina Khan, more or less, ripped it apart. In this article, she basically said that the very business model that a lot of these companies are built on, which is personalized advertising, is completely inconsistent with being an information fiduciary — with holding people’s personal privacy first. And so it was a pretty scathing critique of this business model that is so foundational to the internet.
Kimberly Adams: And she gave a pretty interesting metaphor for how it would work.
Lapowsky: She did. I really liked this part of the paper. And I should note that she co-authored the paper with David Pozen. They basically wrote, imagine that you go to the doctor, and let’s just, for the sake of argument, call this doctor Dr. Zuckerberg. Imagine that instead of paying Dr. Zuckerberg for their services, Dr. Zuckerberg gets paid from advertisers who, the second you walk in the door, are pitching ads for pills and procedures that you might want to get. And all those ads are based on the information that Dr. Zuckerberg collects on you. And they write, could such a model really be seen as consistent with respecting your health? If not, then could such a model really be seen as consistent with respecting your privacy? And the answer is no. This is how Facebook makes its money, and no matter what commitments they make, they’re always putting the money first.
Adams: So then, what happened to this idea that had been gaining so much steam after that article came out?
Lapowsky: I think it changed a lot of people’s minds. I think people who saw this as an important contribution — the idea of information fiduciary — started to rethink it and wonder how it would really work because a lot of these big tech companies that are being targeted by these laws, like Facebook, are incorporated in Delaware. And in Delaware, they do have certain legal obligations already to their shareholders. So now you introduce a new legal obligation that is in direct conflict with the one that already exists, and that just creates a really messy situation and basically an untenable situation. So I think it did change a lot of people’s minds. There were some laws in New York that had included this idea. They no longer do. We don’t have a federal privacy law, but there are a number of states introducing privacy laws, and this has not gotten as much pickup as you might have thought.
Adams: Given Lina Khan’s view on both competition and privacy, or at least what we know, what kind of power does she have now to potentially apply some of these arguments to what’s happening in the world of tech now?
Lapowsky: So there are a couple ways. I think we need to establish first that her views on privacy are part and parcel of her views on competition. And as a little digression, the reason she became so well known in the world of antitrust is because she really pushed forward the idea that the only way to harm consumers is not just pricing. For a long time, the feds looked at has a company’s monopoly led to increases in pricing and [whether] that hurts consumers. She basically argued that a lot of the biggest monopolies now are actually offering even cheaper prices or free services to consumers, but they are contributing other harms to consumers, and privacy is just one of them. So it goes part and parcel. Facebook is a free service because, she argues, it is in a lot of ways violating people’s privacy. So it’s important to recognize that, I think, a lot of her antitrust enforcement actions will have the effect of dealing with a lot of the privacy concerns she has.
But the FTC doesn’t just oversee antitrust. It also oversees deceptive practices. One of the biggest recent cases in the tech world that we’ve seen the FTC bring was against Facebook. They entered into a consent decree with Facebook years ago, saying that Facebook had not been upfront with consumers about how their data was being used, and they were being deceptive. Then, years later, through the Cambridge Analytica scandal, Facebook ended up being in violation of that consent decree and reached a $5 billion settlement with the FTC. The FTC could continue to bring cases where it finds that companies are being deceptive with regard to their use of user data. Which obviously, we looked at these really labyrinthine privacy policies that companies put out and sometimes find that the actual actions are not in keeping with the promises they’re making. And then, there are things like rule-making. The FTC hasn’t been superaggressive on rule-making in this space, but they certainly could be. They could pass some kind of rule that says, “You have to do X, Y, Z with regard to user privacy.”
Related links: More insight from Kimberly Adams
Here is Issie’s article looking at this, and that Harvard Law Review article she was talking about. The Verge has a good writeup on Khan’s first meeting as chair of the FTC, which was livestreamed in the agency’s first open business meeting in two decades. In addition to rolling back a Barack Obama administration rule restricting the agency’s antitrust enforcement, the commission voted 3-2 to streamline FTC investigations moving forward.
Ars Technica has a piece on Amazon’s attempt to try to keep Khan literally out of its business. Since Khan has a history of criticizing the company, it says there’s no way she can be unbiased. But that track record is probably why she was hired in the first place. And if you’re missing Molly Wood, she unpacks that Facebook antitrust ruling with Kai Ryssdal on the podcast “Make Me Smart.”
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