On Saturday, Mark Zuckerberg appealed to the government for increased regulation of the internet. According to Zuckerberg, increased government action is needed to protect society from harmful content, ensure election integrity, protect people’s privacy, and guarantee data portability. If enacted, the government would possess a wide range of control over internet businesses. To Zuckerberg, this is in the public’s best interest.
But make no mistake about it—Zuckerberg’s cries for regulation are not driven by humanitarianism. Rather, regulations would solve glaring issues Facebook has faced since the 2016 election.
Tarnished Reputation and Broken Trust
For starters, Facebook’s reputation has still not completely recovered from the Cambridge Analytica scandal. In 2016, Cambridge Analytica, a data firm, was given access to the private information of 50 million Facebook users. They allegedly used this information to assist Donald Trump in influencing public opinion during the presidential election. Ever since, Facebook has faced a seemingly unrelenting stream of negative press coverage.
Federal prosecutors are currently investigating Facebook for its data sharing deals.
In August of last year, Apple removed Facebook’s Onavo security app from its App Store for violating its rules on data collection. The founders of Instagram left the company in September. Just last month, Facebook lost two top executives, Chris Cox, their chief product officer, and Chris Daniels, the leader of WhatsApp. And just last week, they admitted to the removal of nearly 2,000 accounts with Russian and Iranian ties.
This doesn’t even take into consideration the potential legal issues Facebook is currently facing. The New York Times reported last month that federal prosecutors are currently investigating Facebook for its data sharing deals. Additionally, President Trump has frequently lashed out at the company for its perceived anti-conservative bias. This has proven to be a never-ending headache for Facebook, but government regulation could provide them with a way out.
With increased government oversight, Facebook’s leadership will finally be able to pass the buck to someone else. The government will provide them with a clear set of rules. Any negative press coverage that occurs outside of those guidelines will not be attributable to their company but to the rule-making body of the government. This will allow Facebook’s leadership to regain credibility within a clearly definable framework that they are not responsible for creating.
But perhaps Zuckerberg’s appeal for regulation is even more cunning. Government regulation will undoubtedly be met with higher costs. Internet companies will have to spend more on staffing to be in compliance with the increased burdens implemented by the rule-making body. We saw this play out in the banking industry after the Great Recession. A study conducted last year found that since 2009, banks have been fined a total of $345 billion dollars in penalties and noncompliance costs. Further, another study found that in 2016, banks spent $100 billion dollars on regulatory compliance alone.
Facebook will be given a path to regain the credibility that has been lost since 2016, and they will be secure from potential competition.
Large internet companies like Facebook and Google will easily absorb the strain of increased regulatory costs. It is the smaller businesses that will feel the financial squeeze. With increased regulatory compliance spending, smaller startups will face an even bigger hill to climb to compete with the likes of Facebook.
Ironically enough, in an age when presidential candidates such as Elizabeth Warren are clamoring against tech monopolies, Zuckerberg is appealing to the government to help him create one. It is a clear move towards regulatory capture. In the disguise of aiding the public interest, government regulations will undoubtedly benefit the largest and wealthiest of tech companies. They will capably absorb the additional costs and be more secure than ever as future upstart businesses are priced out of the market.
In the end, the benefit of increased regulation for Facebook will be a twofold path to stability. Their leadership will be given a path to regain the credibility that has been lost since 2016, and they will be more secure than ever from potential competition.