A Realistic Proposal for Taming the Facebook Goliath

Public opinion against Facebook has been growing recently, as security breaches continue to occur on its vulnerable platform.  Many politicians have now realized that the companys unprecedented power and outsized influence are insalubrious for a democratic republic.

No measurable progress in curtailing the power of Facebook can be made unless politicians educate themselves about Facebook's business practices and acknowledge the role they played in creating the threat Facebook now poses to the body politic.

Facebook's surreptitious business model

There is no high-tech magic or mystery underlying Facebook's highly lucrative business model.  The company attained its lofty status as a $478-billion behemoth by pilfering, manipulating, and selling its customers' private personal data.

The company developed and implemented, with ruthless efficiency and a callous disregard for the security of its customers' private data, an ingenious advertising scheme, whereby users' personal private information was harvested and misappropriated without their knowledge or consent.  The data were manipulated and then transferred multiple times over, to diverse third parties, for extraordinary profits.  Apple CEO Tim Cook, perhaps, explained it best when he said Facebook's product is its customers.

Facebook had the great fortune of operating in a business environment of complete and total laissez-faire, which allowed it to implement its surreptitious and manifestly deceptive business strategy with impunity.  The company's rapid growth occurred in tandem with the maintenance of this regulation-free environment.

Politicians helped create this unaccountable Leviathan

Regulators and politicians were asleep at the helm while Facebook engaged in a rampant exercise of bad faith by purloining and misappropriating users' private information with not so much as a word of disclosure about how their personal data was being leveraged by the company to earn billions of dollars.  This chicanery continued unabated for over ten years without a scintilla of disclosure to users.

Disrupt Facebook's data harvesting practices

Facebook still generates over 90% of its revenue from targeted advertisements; its earnings growth is entirely dependent on its continuing ability to manipulate and freely sell users' private data with limited restrictions.  Any provisions that circumscribe its practice of harvesting data are inimical — if not fatal — to its bottom line.  A review of Facebook's financials during the period when it operated without scrutiny buttresses this contention.  Here are some telling numbers: Facebook's revenue increased from $1.97 billion in 2011 to $55.8 billion through January 2019 — a 2,729% increase.  Its market capitalization increased from $6.3 billion in 2013 to $487 billion through June 1.  The price of its stock rose from $27.10 in 2013 to its current price of $164.15 — a 170% increase.

Facebook CEO Mark Zuckerberg's recent comments that the company's future lies in offering "secure," encrypted, private communications is preposterous; as evidenced by the numbers above, the lifeblood of Facebook's operations is harvesting its users' private data for sale in new and beguiling ways.

Far too many Republicans have labored under the erroneous impression that regulations imposed on Facebook would place the technological supremacy of an American company at a competitive disadvantage.  This specious contention is sheer nonsense.  Free-market conservatives must be implored to stop referring to Facebook as a "tech" company.  Facebook is the world's largest advertising platform.  That's it.  There is nothing remotely "high tech" about it.

The mystique of Facebook somehow incorporating cutting-edge technology within its business practices to bring the world together has always been nothing more than a romantic fantasy.

Mandatory Disclosure Requirements

Imposing mandatory and adequate disclosure requirements would be highly effective at limiting Facebook's ability to freely transfer its users' data without their authorization.  In the absence of an anti-trust action, enacting regulations that would impair Facebook's business model is the most viable solution for circumscribing its inordinate power.

Specific regulatory provisions should be imposed that would require Facebook to disclose how its uses customers' data, identification of those to whom that data is transferred, how Facebook profits by this monetization, and the fact that data cannot be sold without the user's permission.  The company should also be compelled to disclose that users' private data can never be secure, either with Facebook or with third-party transferees.  The dirty little secret, as experience has now amply demonstrated, is that users' private data, Facebook's pious assertions to the contrary, are always going to be at risk.

Lastly, Facebook must be compelled to include this information on each user's home page, in plain terms that a person of average intelligence could understand.  Burying disclosure deep within multiple nested windows in the settings section is pointless and defeats the purpose of providing users with substantive information so they can make informed choices about remaining on the platform and preventing the sale of their personal data.

Billion-dollar fines should be assessed for non-compliance, such as those that have been levied by E.U. regulators against Facebook and Google recently for infractions against the GDPR.  Republican members of the Federal Trade Commission must stop being timid about wielding a big stick against a company that is a mortal adversary of conservatives.

Those who question the effectiveness of mandatory disclosure requirements should review Facebook's concerted and malevolent attempt to kill California's new data privacy law prior to its enactment.  Facebook initially resisted similar attempts by E.U. regulators at mandatory disclosures.  European regulators are now imposing more stringent disclosure requirements, to the consternation of Facebook, who, for over a decade, maintained a policy of omertà concerning its unsavory business practices.

The scandalous lack of disclosure concerning data manipulation that suffuses the entire tech world and upon which its profits are based is going to be one of the most significant issues that will shape the battle to rein in the tech giants.

Politicians who previously abrogated their responsibility by permitting Facebook to dominate the market now have a chance to redeem themselves.  Unless and until the dangers of Facebook's undue power are addressed and fought on new ideological and political turf, no progress will ever be made responding to the unique socio-economic challenges posed by the unaccountable tech giants.

John Kinsellagh is a freelance writer, former financial adviser, and attorney specializing in securities law.  He has served over 25 years as an arbitrator for the financial services industry.  He is the author of The Mainstream Media Democratic Party Complex and Election 2016, both available on Amazon.  Follow him on Twitter @JohnKinsellagh.  Read more of his commentary at errantnonsense.com.

Public opinion against Facebook has been growing recently, as security breaches continue to occur on its vulnerable platform.  Many politicians have now realized that the companys unprecedented power and outsized influence are insalubrious for a democratic republic.

No measurable progress in curtailing the power of Facebook can be made unless politicians educate themselves about Facebook's business practices and acknowledge the role they played in creating the threat Facebook now poses to the body politic.

Facebook's surreptitious business model

There is no high-tech magic or mystery underlying Facebook's highly lucrative business model.  The company attained its lofty status as a $478-billion behemoth by pilfering, manipulating, and selling its customers' private personal data.

The company developed and implemented, with ruthless efficiency and a callous disregard for the security of its customers' private data, an ingenious advertising scheme, whereby users' personal private information was harvested and misappropriated without their knowledge or consent.  The data were manipulated and then transferred multiple times over, to diverse third parties, for extraordinary profits.  Apple CEO Tim Cook, perhaps, explained it best when he said Facebook's product is its customers.

Facebook had the great fortune of operating in a business environment of complete and total laissez-faire, which allowed it to implement its surreptitious and manifestly deceptive business strategy with impunity.  The company's rapid growth occurred in tandem with the maintenance of this regulation-free environment.

Politicians helped create this unaccountable Leviathan

Regulators and politicians were asleep at the helm while Facebook engaged in a rampant exercise of bad faith by purloining and misappropriating users' private information with not so much as a word of disclosure about how their personal data was being leveraged by the company to earn billions of dollars.  This chicanery continued unabated for over ten years without a scintilla of disclosure to users.

Disrupt Facebook's data harvesting practices

Facebook still generates over 90% of its revenue from targeted advertisements; its earnings growth is entirely dependent on its continuing ability to manipulate and freely sell users' private data with limited restrictions.  Any provisions that circumscribe its practice of harvesting data are inimical — if not fatal — to its bottom line.  A review of Facebook's financials during the period when it operated without scrutiny buttresses this contention.  Here are some telling numbers: Facebook's revenue increased from $1.97 billion in 2011 to $55.8 billion through January 2019 — a 2,729% increase.  Its market capitalization increased from $6.3 billion in 2013 to $487 billion through June 1.  The price of its stock rose from $27.10 in 2013 to its current price of $164.15 — a 170% increase.

Facebook CEO Mark Zuckerberg's recent comments that the company's future lies in offering "secure," encrypted, private communications is preposterous; as evidenced by the numbers above, the lifeblood of Facebook's operations is harvesting its users' private data for sale in new and beguiling ways.

Far too many Republicans have labored under the erroneous impression that regulations imposed on Facebook would place the technological supremacy of an American company at a competitive disadvantage.  This specious contention is sheer nonsense.  Free-market conservatives must be implored to stop referring to Facebook as a "tech" company.  Facebook is the world's largest advertising platform.  That's it.  There is nothing remotely "high tech" about it.

The mystique of Facebook somehow incorporating cutting-edge technology within its business practices to bring the world together has always been nothing more than a romantic fantasy.

Mandatory Disclosure Requirements

Imposing mandatory and adequate disclosure requirements would be highly effective at limiting Facebook's ability to freely transfer its users' data without their authorization.  In the absence of an anti-trust action, enacting regulations that would impair Facebook's business model is the most viable solution for circumscribing its inordinate power.

Specific regulatory provisions should be imposed that would require Facebook to disclose how its uses customers' data, identification of those to whom that data is transferred, how Facebook profits by this monetization, and the fact that data cannot be sold without the user's permission.  The company should also be compelled to disclose that users' private data can never be secure, either with Facebook or with third-party transferees.  The dirty little secret, as experience has now amply demonstrated, is that users' private data, Facebook's pious assertions to the contrary, are always going to be at risk.

Lastly, Facebook must be compelled to include this information on each user's home page, in plain terms that a person of average intelligence could understand.  Burying disclosure deep within multiple nested windows in the settings section is pointless and defeats the purpose of providing users with substantive information so they can make informed choices about remaining on the platform and preventing the sale of their personal data.

Billion-dollar fines should be assessed for non-compliance, such as those that have been levied by E.U. regulators against Facebook and Google recently for infractions against the GDPR.  Republican members of the Federal Trade Commission must stop being timid about wielding a big stick against a company that is a mortal adversary of conservatives.

Those who question the effectiveness of mandatory disclosure requirements should review Facebook's concerted and malevolent attempt to kill California's new data privacy law prior to its enactment.  Facebook initially resisted similar attempts by E.U. regulators at mandatory disclosures.  European regulators are now imposing more stringent disclosure requirements, to the consternation of Facebook, who, for over a decade, maintained a policy of omertà concerning its unsavory business practices.

The scandalous lack of disclosure concerning data manipulation that suffuses the entire tech world and upon which its profits are based is going to be one of the most significant issues that will shape the battle to rein in the tech giants.

Politicians who previously abrogated their responsibility by permitting Facebook to dominate the market now have a chance to redeem themselves.  Unless and until the dangers of Facebook's undue power are addressed and fought on new ideological and political turf, no progress will ever be made responding to the unique socio-economic challenges posed by the unaccountable tech giants.

John Kinsellagh is a freelance writer, former financial adviser, and attorney specializing in securities law.  He has served over 25 years as an arbitrator for the financial services industry.  He is the author of The Mainstream Media Democratic Party Complex and Election 2016, both available on Amazon.  Follow him on Twitter @JohnKinsellagh.  Read more of his commentary at errantnonsense.com.