The Problem Lies in Policy
If we recognize that a major short-term cause in creating this paranoid cult is social media models based on addiction, monopolization and surveillance, and a long-term cause is systemic cheating in our economy and culture, we can break down our problems in manageable chunks. These problems originate from laws and regulations guiding commerce.
And that’s why I think the solution lies in part at the agency set up to regulate commerce - the Federal Trade Commission. The FTC is a potentially economy-reshaping institution. It has broad jurisdiction over privacy, consumer protection, and antitrust laws, meaning it can reorient how virtually every corporation in the country functions. It can write rules against ‘unfair methods of competition,’ which can include prohibiting anything from discriminatory pricing in industrial gas markets to addictive or deceptive user interfaces to certain kinds of targeted ads. As a small example, the commission took action earlier this year
against corporations engaging in ‘merchant cash advances,’ precisely the predatory lending that trapped Babbitt.
So why doesn’t anyone pay attention to the FTC as a way to solve any social problems? Well, the FTC has been effectively dormant for forty years, a playpen of elite well-paid lawyers who come up with elaborate reasons to whitewash lawbreaking by the powerful. The latest example is when the $100B+ video conference call giant Zoom
was caught lying about its security practices. The FTC didn’t fine the corporation, merely requiring the company to implement an internal compliance program. Such “no money no consequence” settlements encapsulate how enforcers condone serial lawlessness. Still, strong legal authority remains at the FTC, waiting to be used precisely to stop the systemic cheating that inflames protesters across the spectrum.
If we can restore the FTC and get it to do its original job, one it did reasonably well for decades, we can begin to rebuild our trust in our institutions.
“FTC orders are not suggestions”
In fact, the FTC has begun to get a bit more aggressive under Trump. The most obvious sign is the massive antitrust suit filed by the FTC to break up Facebook. This suit is not the result of Trump or the Republicans, who have been in charge of the commission, but a result of one of the most energetic, hard-charging, and creative regulators in government, who has for years been prodding the commission to do more. His name is Rohit Chopra, and he’s a Democrat who may become the Chair of the FTC, if Joe Biden so chooses.
The FTC is a commission, which means it has five members making decisions, three of the majority party and two of the minority party. Chopra was confirmed as a minority member of the commission in 2018, and has spent his time sketching out how a more vigorous FTC can restructure the American economy and end the elite lawlessness that is creating so much desperation and anger.
To understand what that might look like, it helps to go over Chopra’s vision of how to govern, because it is something we see nowhere else in American government. The very first thing that Chopra did after he was confirmed into office was to send a commission-wide memo titled
Repeat Offenders, in which he argued, very simply, that big corporations who repeatedly violate the law should face serious penalties, like break-ups, firing of senior managers and board members, and clawbacks of executive pay. Or as he put it, “FTC orders are not suggestions.”
This memo immediately upset the FTC staff and fellow commissioners, because it disrupted the agency’s genteel and bipartisan culture of deference to large corporations. What is important to recognize about large scale popular anger at inchoate social forces is that there really is a conspiracy of elites against them, but it comes not in the form of weird paranoid fantasies, but in the form of genteel wealthy lawyers who make intimidating frowny faces at antitrust conferences when someone brings up using public authority to enforce the rule of law against the powerful. These people tut-tut at riots and protests, not recognizing their own role in creating an environment of lawlessness. The painful work of institutional reform to deal with the chaotic social forces in play requires officials like Chopra, who are not afraid to upset social niceties, but are able to do so with analytical and legal rigor.
In retrospective, Chopra’s memo was exactly the kick in ass the slothful commission needed, because it showed that the FTC had authority and power to secure justice, and was simply not using it. At the time Chopra issued it, the FTC was working on just such a repeat offender: Facebook. The FTC had an order against Facebook in 2011 over deceptive practices, which the corporation as part of the order had pledged to stop. In 2018, the Guardian revealed that Facebook was in violation by allowing Cambridge Analytica to violate user privacy.
The Cambridge Analytica scandal was a tragic moment for America, a pivot point where the FTC had leverage to restructure a dysfunctional market. The FTC could have attacked the addictiveness of Facebook’s products, which were organized to sell more targeted advertising based on data gathered via the privacy violations it settled over. But the FTC, over Chopra’s objection, let the opportunity pass.
In fact, the responsibility for the market structure of big tech lies with the FTC. The FTC shut down a Google antitrust investigation in 2013 with a 5-0 vote, and it approved an endless number of mergers, including Facebook’s purchase of Instagram and WhatsApp. It did not take any meaningful action in the 2010s to address data gathering or targeted advertising, and did not even bother to study the massive industrial shift under way, meaning Congress until late last year had to rely on foreign investigations of social media to make policy. The social media environment that fostered these riots, in other words, occurred because of the policy framework for Google, Facebook, Twitter, and so forth that the FTC organized. Chopra’s assertive approach, from the get-go upset the consensus enabling this toxic framework.
Aside from problems with social media, Chopra has also attacked systemic corruption in the economy. There are too many Chopra dissents and statements to go through, so I’ll pick three. In 2018, two of the largest industrial gas companies in the world, Linde and Praxair, merged in a complex international transaction. For a procedural reason involving German financial rules, the FTC could have blocked this merger easily, without even having to go to court. But the FTC, with four commissioners (including Chopra’s fellow Democrat, Rebecca Kelly Slaughter), voted to let it go through, arguing that the $80 billion resulting corporation would be efficient and wouldn’t increase prices. Chopra
dissented. Sure enough, with its new market power, the company soon
announced a massive price hike, proving Chopra right, and the other four - Christine Wilson, Joe Simons, Noah Phillips, and Slaughter - wrong.
Two other transactions Chopra opposed were the merger of
AbbVie Inc. and Allergan, and the merger of
Bristol-Myers Squibb Company and Celgene Corporation. These mergers involved giant pharmaceutical corporations who use their monopoly patents to gain more bargaining leverage against everyone in the medical supply chain, raising prices on consumers and reducing medical innovation. The FTC has a long history of letting pharma companies merge, which has led to higher prices. Sure enough, the House Oversight Committee soon
showed that Celgene had been plotting to keep prices high and continue to raise them. Meanwhile, a few days ago, AbbVie
jacked up the price of top-selling drug Humira by 7.4%. Once again, Chopra was right, and the FTC bureaucracy and the majority of the commission was wrong.
But that’s not all. Chopra has a long track record of restructuring industries. Before he went to the FTC, he served as the ‘student debt ombudsman’ at the Consumer Financial Protection Bureau, where he parlayed a role without much legal authority into a vehicle to restructure private student lending. Here’s the
Wall Street Journal in 2014, noting that Chopra’s style of “applying pressure through public means—a big departure from the more measured style of other financial regulators—is causing friction.” As one lobbyist for student lenders put it, “There’s more tension between banks and those in the CFPB’s student-lending division than in all other areas of the CFPB combined.”
The goal for Chopra wasn’t to upset financial villains, but to change policy. And he did. Large student lenders began lowering interest rates on borrowers and extending repayment plans. What Chopra did wasn’t enough to take on the whole crisis - student debt was a driver of the Occupy Wall Street protests - but he was a minor regulatory official without much leverage, and what leverage he did have he used with creativity and aggressiveness. That’s the kind of public official you want to promote.
Chopra has used this same strategy of combining analytical rigor with public pressure at the FTC. Early on, he pressured his fellow commissioners on behalf of worker rights, in a case called
Your Therapy Source. A businessman had been cheating workers by fixing wages with competitors, and was caught red-handed in text messages doing so. Chopra
dissented from the settlement, which imposed no meaningful penalties. Once again, this was a 4-1 vote, meaning that he stood against three Republicans and a Democrat. And once again, he was proved right, as the Department of Justice later
returned a criminal indictment against the owner of Your Therapy Source.
Chopra has spearheaded successful efforts to block scams around Made in USA corporations (once again with
initial opposition from both the Rs and his fellow Democrat). He led the FTC in
taking on the problem of merchant cash advances, as well as an endless array of consumer rights problems (like
debt collection and credit reporting). He has been
a leader in working with regulators globally to address privacy problems. And he and his staff have
uncovered significant dormant regulatory tools that would allow the FTC to expand its ability to regulate unfair commerce. This is exactly the kind of creative and aggressive public official Democrats need to put in a position to address the problem of social media, and then to take on the culture of elite lawlessness in American corporations.
And we don’t need to guess whether Chopra will succeed. He already has. Last month, his pressure campaign culminated in the FTC’s historic antitrust case against Facebook. The FTC rejected its own legacy of approving bad mergers, and set a goal of unwinding the Instagram and WhatsApp purchases by Facebook that it had enabled years earlier. Chopra had finally brought his fellow Democratic member, and the Republican Chairman, Joe Simons, to his side (though two libertarian Republicans, Noah Phillips and Christine Wilson,
voted not to take action against Facebook). Now just imagine what Chopra can do if he’s actually in charge of the commission.
Redressing Institutional Failure
Chopra is the kind of leader one needs to deal with the current crisis of social media. He’ll use every lever possible, he has international credibility to work with enforcers all over the world, and he isn’t afraid of confrontation or of antitrust elite lawyer frowny faces at conferences. He also will enable Joe Biden to accomplish his agenda, to restructure these social media giants, and to ensure that the massive pandemic and infrastructure spending happens with minimal cheating and monopolization, and a maximum of domestic production.
The day before the riots, the Democrats won two Senate seats in Georgia, which means that Joe Biden doesn’t need to beg and wheedle his opposition to appoint people to agencies. Now he can just put Chopra as Chair of the FTC. He should. It won’t solve everything. But Chopra knows how to restructure social media, and he understands how to use regulatory levers to restore the political legitimacy we desperately need. Hopefully he’ll become our new FTC Chair.