Happy Friday! We’ve got a special edition of the newsletter this morning co-hosted by the always insightful Will Oremus. Let us know what you think at cristiano.lima@washpost.com and will.oremus@washpost.com.
Why Facebook’s antitrust problem in Congress isn’t going away
As Facebook’s stock took a historic nosedive this month, news reports raised an unexpected silver lining for the tech giant: the downturn could put it out of reach of antitrust legislation targeting Silicon Valley’s most powerful companies.
Critics who argue that the bills unfairly take aim at a few major companies seized on the prospect that Facebook, long a primary focus of lawmaker scrutiny, might dodge new regulations. “The possibility that Facebook will fall below the bill’s arbitrary threshold for market capitalization is just the latest example of why this is the wrong approach,” Rep. Zoe Lofgren (D-Calif.), who has opposed the legislative efforts, told The Technology 202.
But in truth, Facebook’s slide would have to extend well into the future to shield it from lawmakers’ antitrust push. And if it did, it would likely mean the company no longer enjoys the iron grip on social media that put it in Congress’ crosshairs to begin with.
Still, the debate highlights “the challenges of crafting laws that target the tech industry,” as CNBC’s Lauren Feiner wrote — in particular, the difficulty of defining, and measuring, dominance.
Facebook shares tumbled by some 25 percent last week when the company reported that it expects slower growth due to changes to Apple’s privacy settings and difficulties in capitalizing on Instagram Reels, its answer to the short-video sensation TikTok. The company, which renamed itself Meta last fall in a pivot toward virtual reality, also reported that its flagship Facebook app lost daily users for the first time.
Facebook, along with Apple, Amazon and Google, are the tech behemoths whose ballooning wealth and power served as impetus for antitrust reform. Rather than targeting firms by name, lawmakers are using market cap as a key metric to determine which companies would be covered under their proposals, including a bipartisan bill to block dominant platforms from giving their own products preferential treatment, known as self-preferencing.
The Senate version would include major platforms with net annual sales or a market cap of more than $550 billion, while the House bill sets the threshold at $600 billion, both adjusted for inflation. Relying on the metric could help regulators avoid having to define the markets platforms allegedly dominate in court, something that’s been a hurdle for antitrust lawsuits.
The drop in Facebook’s cap, which fell below $600 billion for the first time since 2020, at first glance appears to provide the company an out if the bills are passed. But it’s unlikely to escape the regulations anytime soon.
In the House self-preferencing bill, regulators can designate that a platform be covered if it exceeded the market cap threshold at any time in the two years prior. That means even if Facebook’s stock stays low, it could still be tagged at any point in at least the next two years.
In the Senate version, platforms can be designated if their average market cap over a six-month stretch exceeded the threshold in the two years prior. That means escaping the rules would require a sustained drop we’ve yet to see from Facebook.
Plus, once a company is covered, it can stay that way for years. The designation sticks for seven years in the Senate bill and 10 years in the House bill, though Facebook could appeal both the initial designation and later to have it removed in court. Still, combined, these factors make it nearly impossible for a company to wiggle its way out overnight.
Notably, Facebook’s value had already rebounded past the $600 billion mark as of Wednesday, and it has bounced back emphatically from stock drops in the past. It’s plausible that last week’s dip will prove little more than a speed bump on its ascent back toward a value of $1 trillion.
But let’s imagine that Facebook were to experience such a sustained fall from grace that it managed to get out from under the proposed new antitrust regulations.
A Facebook that failed to rebound from this setback would be, in key ways, a different company from the 800-pound gorilla we know today — and less of a competitive juggernaut.
Meta suddenly appears to be losing battles with rivals on two fronts — Apple in the battle over data collection and TikTok in the battle for young people’s attention. If the company can’t regain its footing, a reasonable case can be made that it doesn’t hold the same kind of impregnable market position as its larger tech brethren — and, perhaps, doesn’t require the same legislative interventions after all.
Luther Lowe, senior vice president of public policy at the consumer-reviews site Yelp:
If it stayed below $600b for two years, I would submit it is unlikely to be exerting serious enough market power to warrant the tougher scrutiny. In other words, the legislation is working well and exactly as designed. pic.twitter.com/3OtZKeLDZ6
— Luther Lowe (@lutherlowe) February 8, 2022
The question of whether legislators picked the right metrics for their antitrust bills remains open. But the slim chance that Facebook might elude them probably won’t be what resolves it.
Our top tabs
Privacy and civil rights advocates are concerned about data ID.me collects
Identity verification firm ID.me, which has come under scrutiny following a scuttled IRS contract, says it collects a vast amount of data in state contracts, including location information from people’s phone companies “in the event of an investigation into a user,” Drew Harwell reports.
“The company says that information is critical to flushing out identity theft,” Drew writes. “Its privacy policy says it can use people’s sensitive and personally identifiable information to ‘cooperate with law enforcement activities.’ ” The company alerts government clients to “clear cases of fraud,” ID.me chief executive Blake Hall told The Post.
The level of data collected by the company suggests that it could be “morphing from a privatized identity-verification investigator into a privatized FBI,” American Civil Liberties Union senior policy analyst Jay Stanley said.
ID.me’s systems themselves have been exploited by scammers. Last month, federal prosecutors said a New Jersey man verified fake driver’s licenses through a California ID.me system. The company has pointed to the case as an example of how well its systems work, noting that it referred the case to law enforcement after an internal investigation. But “the case shows that ID.me’s identification systems failed to detect a series of bogus accounts created around the same day that included fake driver’s licenses with photos of the suspect’s face in a cartoonish curly wig,” Drew writes. An ID.me spokesman declined to explain how the bogus accounts got approved.
Hall said ID.me is “deeply committed to access, equity, security and privacy” and has worked “to advance a consumer-centric model of identity verification where individuals — not data brokers or credit bureaus — get to decide how their data is shared.”
The IRS this week announced that it wouldn’t be using ID.me’s face-scanning to verify identities of people trying to access their tax information online. The move came after dozens of lawmakers objected to the facial recognition contract.
California’s workplace regulator sued Tesla
The California Department of Fair Employment and Housing said it received hundreds of complaints from workers who called the company’s Fremont, Calif., factory a “racially segregated workplace,” Jacob Bogage and Faiz Siddiqui report.
“A common narrative was Black and/or African American workers being taunted by racial slurs and then baited into verbal and physical confrontations, where they, in turn, were the ones disciplined for being purportedly ‘aggressive’ or ‘threatening,’ ” the department said in an excerpt of the lawsuit provided to The Post. The suit also argued that Tesla’s Black workers were “subjected to discriminatory terms and conditions of employment.”
The lawsuit comes as Tesla contends with multiple lawsuits alleging toxic work conditions. The company said it “strongly opposes all forms of discrimination and harassment” and “continues to seek to provide a workplace that is safe, respectful, fair, and inclusive.”
In other Tesla news: The company’s “Full Self-Driving” technology can be dangerous on public roads, experts told Faiz and Reed Albergotti. The company has recalled several versions of the automated driving technology, issuing updates to the software after federal auto safety regulators raised concerns.
Tesla, which disbanded its public relations department in 2020 and does not typically answer media requests, did not respond to repeated requests for comment.
Klobuchar, Lummis propose bill targeting social media algorithms
The bipartisan bill would ask the National Science Foundation and the National Academies of Sciences, Engineering, and Medicine to look into ways to slow the spread of harmful posts and misinformation online, the Verge’s Makena Kelly reports. Once researchers make recommendations, the Federal Trade Commission would codify them and require social media platforms to implement them.
“Tech and public interest groups like Public Knowledge have already come out in support of the Klobuchar measure, noting that its absence of [Section] 230 changes makes it one of the better models for algorithm regulation,” Kelly writes.
The bill is co-sponsored by Sens. Amy Klobuchar (D-Minn.) and Cynthia M. Lummis (R-Wyo.), who are both on the Senate Commerce Committee.
Rant and rave
Apple announced that it plans to make its AirTags — small devices designed to help you find belongings like keys — more difficult to exploit for unwanted tracking. Blogger and researcher Jane Manchun Wong:
AirTag has created more problems than it aims to solve :Shttps://t.co/zu7RLoaPhu pic.twitter.com/ic1WDjH32Z
— Jane Manchun Wong (@wongmjane) February 10, 2022
The Electronic Frontier Foundation's Eva Galperin:
Apple adds more anti-stalking mitigations to their AirTags. All progress is good progress, but I still want AirTag detection built into Android: https://t.co/ZLURIukjlR
— Eva (@evacide) February 11, 2022
9to5Mac's Chance Miller:
Another interesting tidbit here is that Apple confirms it has been working with law enforcement on instances of AirTag stalking.
— Chance Miller (@ChanceHMiller) February 10, 2022
This includes "cases where information we provided has been used to trace an AirTag back to the perpetrator." https://t.co/o4D8iAdpeS
Inside the industry
Workforce report
Trending
Daybook
- Rep. Lisa Blunt Rochester (D-Del.) speaks at an ITI and Bridge for Innovation event on technology equity and opportunity on Monday at 1 p.m.
- FTC Commissioner Christine Wilson speaks at a U.S. Chamber Technology Engagement Center event Monday at 2 p.m.
- A House Energy and Commerce Committee panel holds a hearing on oversight of the National Telecommunications and Information Administration (NTIA) on Wednesday at noon.
- The Atlantic Council hosts an event on European data policy Thursday at 11:30 a.m.
Before you log off
This guy has an amazing voice! 😂🐶🔊 pic.twitter.com/zbkAFNTiLj
— Mack & Becky Comedy (@MackBeckyComedy) February 10, 2022
That’s all for today — thank you so much for joining us! Make sure to tell others to subscribe to The Technology 202 here. Get in touch with tips, feedback or greetings on Twitter or email.