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Enforcing the rules against the tech giants

As the tech backlash against Facebook, Google and Amazon gathers momentum, the question is no longer whether global tech companies will be regulated, but when, how and by whom.

Facing the tech giants

Over the course of the coming election cycles in both Canada and the United States, we’re likely to hear more from candidates promising to regulate the tech industry. U.S. Senator Elizabeth Warren, who is running for the Democratic presidential nomination, has already pledged to break up Facebook, Google, and Amazon. The Trudeau government is contemplating changes to both the Broadcast Act and the Personal Information Protection and Electronic Documents Act – PIPEDA – to create rules around how information is disseminated online. It has also announced intentions to introduce a "digital charter" for Canadians that could help them assume some measure of control over their personal infomation.

But as the government prepares to propose reforms, regulators are already looking at their own statutory tools. The question now is a matter of who will take the lead.

When it comes to the companies' exploitation of big data, Canada's Competition Bureau took stock as to whether the Competition Act was sufficient to keep the companies in check. After a round of consultations, the bureau did conclude that it could police the industry using just “the traditional framework of competition law enforcement.”

Earlier this year, as CBA National reported, the Office of the Privacy Commissioner also waded in, suggesting it could force companies to obtain a user’s consent before sending their data to a foreign jurisdiction. It is also threatening to sue Facebook in Federal Court to force it to comply with privacy laws.

As regulators seek to impose their own stamp on the file, we could see concerns grow about competing regulatory oversight. But for now, when it comes to reining in tech’s power, “it makes little sense to work alone,” Josephine Palumbo told the crowd at the CBA Competition Law Spring Conference in Toronto. Palumbo is the Deputy Commissioner responsible for deceptive marketing practices at the Competition Bureau.

“The Competition Bureau and the Office of the Privacy Commissioner have differing, but complementary mandates,” she said.

The Bureau investigates anti-competitive activities, protects consumers and promotes competitive markets. The Office of the Privacy Commissioner investigates and reports on violations of Canadian privacy laws. It is now recommending new consent rules for when corporations trade in big data collected from users.

But even if the regulators have been eager to assert their jurisdiction, and wield their existing powers, Canada is still playing catch-up to the United States.

South of the border, all eyes are on the Federal Trade Commission, to see how it plans on enforcing its own antitrust and privacy laws.

Meanwhile, everyone is looking to the U.S. to see how it will go about enforcing its antitrust and privacy laws. “The 500-pound gorilla is: What is the FTC going to do with Facebook?” Amanda Reeves told attendees in Toronto. A partner at Latham Watkins in Washington, she joined Palumbo on the panel along with Mark Opashinov, a partner at McMillan.

Facebook appears set to strike a deal with the FTC to pay fines up to US$5-billion owing to the social media company’s numerous privacy breaches and practice of improperly informing users about their privacy protections. Reeves says there are two other options on the table that, if used, would signal the FTC plans to get serious. It could hold CEO Mark Zuckerberg personally liability for his company’s privacy failures. Or it could impose stricter limits on Facebook’s data collection.

If the punishment consists of only a fine, it signals that the “competition law perspective isn’t enough” to deal with the issues at hand, Reeves said. Focusing on big data exploitation from a strictly competition law perspective won’t “get you very far.”

To that end, the Competition Bureau and Privacy Commissioners competing, but complimentary, mandates might actually mean enforcement in Canada will look more robust.

Palumbo further underscored that cooperation needs to exist not just between domestic regulators, but among international ones, too. “Borderless problems require borderless solutions,” she noted.

But even as public and political attention focuses on new regulatory regimes for these companies, there is a feeling within the world of competition law that the status quo isn't so bad. “The sky is not falling,” Opashinov said. “The rules exist, and the laws are largely adequate.”

And there is an argument to be made for taking a  cautious approach. As Micah Wood, a partner at Blakes in Toronto argued, action for action's sake isn't the answer. Using competition law to discourage anti-competitive practices generally bend the curve of market growth downward, he pointed out, even if it leads to positive outcomes for consumers. But he warned that: “If we do it wrong, we may bend it down even more.”

“We have to think holistically about all of the benefits that these systems have created,” Wood added. “And we have to think about whether we want government regulation or ad hoc antitrust [litigation].”

Reeves also acknowledged that some solutions should come from other areas of law. “I think privacy and consumer protection law is having its big moment of relevance.”

Indeed, while there might be grounds to investigate anti-competitive practices on the part of the big players, proving that there has been substantial harm in the market because of market consolidation is a tougher sell. To some degree, the size of the company is exactly what users want. After all, Facebook has become the largest player in the game precisely because users have appreciated its ubiquity — that all of your friends and family are there.

At the same time, Facebook is only good as its user base. Should its users — or, for that matter, its advertisers — go elsewhere, the company will lose market share precipitously. To that end, there is a belief that the market could still regulate itself.

Still, there is a view taking hold that efforts to distort the open market need to be addressed. Google, for example, has been repeatedly admonished and fined by European competition authorities for abusing its ad market for its own gain at the expense of its competitors. That is placing pressure on competition lawyers and authorities to pick their battles.

“There is a real risk that taking the wrong case could have a chilling effect,” Wood said.

Besides, competition authorities are likely to be called upon to pay attention to another area, Reeves said: Mergers. Investigating the further concentration of big players is an area of competition law that can’t be addressed adequately in other areas of law. Said Reeves: “The merger thing is where, I think, things are about to get really interesting.”