There’s big rot in big tech

In case you missed it, Facebook and Google aren’t cool anymore. If anything, they’re the bad guys as seen by many. Recent years have witnessed a fierce backlash across the Western world—and the political spectrum—against Big Tech. And for good reason. With a business model built on addiction and a penchant for purveying pornography, censoring political viewpoints, and monetizing user data in increasingly creepy ways, they can hardly blame the public for hostility.

However, such reflexive public outrage is rarely the best environment for sober public policy. Consider the early 1900s, when a wave of wrath against the dubious tactics and market power of new industrial giants led to a crusade against Standard Oil and its founder, John D. Rockefeller. By the time the courts broke up the company in 1911, it was no longer the monopoly it had been and the action, intended to be punitive, actually made Rockefeller vastly wealthier. Given Meta’s (that is, Facebook and Instagram’s) announcement that it will block all news content in Canada in response to the controversial Online News Act, such lessons are worth heeding.

The law (Bill C-18, passed on June 22) enables traditional media providers (like local newspapers) to collectively bargain for the right to be compensated by Facebook, Google, and other tech platforms whenever their news stories or even headlines are shared. Although this might seem odd at first glance, the legislation is an attempt to recognize that advertising is a two-way street, and ensure the money flows in the right direction.

When LeBron James’ face shows up on a Happy Meal, he doesn’t pay McDonald’s for helping advertise his image and sell tickets to his games; they pay him for helping them sell more happy meals. So should Facebook pay the Toronto Star for helping drive traffic to Facebook by the carefully reported news stories it posts there? Or should the Toronto Star pay Facebook for driving traffic to its website?

Ordinarily, we can trust the free market to decide which party benefits more, and ensure they get justly compensated. But as with any competition, a market is only really free when participants are in roughly the same class; LeBron James vs. a 13-year-old would not be a game worth watching. Just so, monopolistic power can skew a market such that a powerful company that has cornered a key market (like Facebook or Google) can extract value unfairly from its customers—including traditional media outlets. Canada’s Online News Act—and the similar Journalism Competition and Preservation Act currently before the U.S. Congress—try to level the playing field by giving weaker legacy media outlets increased bargaining power.

In principle, then, such laws can sound like a great idea. But in practice, they could prove disastrous. Meta, protesting that the law is “fundamentally flawed legislation that ignores the realities of how our platforms work,” has decided to block all news content in Canada, which seems likely to hurt Canadian journalism a lot more than it hurts Facebook. Indeed, one leading Canadian tech critic has called the bill an “epic miscalculation,” observing that while news drives only about three percent of Facebook’s traffic, Facebook accounts for 17-30 percent of legacy media’s traffic. In other words, it’s as if McDonald’s demanded that LeBron James start paying them for putting his picture on Happy Meals, and LeBron decided he has better things to do with his money.

Worse, such laws are premised on a somewhat nostalgic appeal to the good old days of small-town journalism that are now long gone. Most local news media have long since been bought up by national or international conglomerates that are more concerned with delivering returns to shareholders than serving the public interest. As one journalist put it, laws like the Online News Act or the JCPA are “just a way to force two different groups of rapacious monopolists to divide up their ill-gotten gains in a slightly different way.”

Moreover, if Facebook and Google did start paying CNN for clicks, that would have a highly predictable result as stories and headlines would become even more egregiously clickbait-y than they already are. Google was quick to point that out in its testimony against Bill C-18.

Legislators aren’t wrong to suspect that something is rotten in the state of digital media. There really is something perverse about the business model of most of Big Tech, which claims intellectual property rights over valuable user-generated information and then monetizes that information, while seeking to addict those same users to increase advertising premiums. And the decline of traditional journalism really is weakening civic ties and degrading public discourse. These problems, however, will require far more comprehensive reforms than laws like the Online News Act. In this case, as so often when it comes to lawmaking, putting a Band-Aid on a serious wound may simply hurt the patient more.