Do Consumers Care About Privacy? If Not, Antitrust for Privacy is a Fool’s Errand

“Big tech” companies are criticized for their size and surveillance practices. Recent antitrust filings argue big tech size begets platform surveillance and big tech surveillance begets platform size.

The social networking antitrust case brought by state attorneys general alleges that monopolistic platforms harm consumers by degrading the privacy protections they offer over time. The argument is that a platform wins users with sector-leading privacy protections and proceeds to roll those back as the platform gains market power. Since consumers do not pay a fee for social networking services, a claim that consumers are harmed by an alleged monopolistic platform must focus on the quality of its services, and according to state attorneys general, privacy is a principal feature of social network service quality.

“Historically, Personal Social Networking providers have refrained from charging a monetary price for providing Personal Social Networking to users, relying instead on monetizing user data and engagement through advertising. Personal Social Networking providers compete for users based on a variety of factors, including quality of the user experience, functionality, and privacy protections, among other factors.”

Complaint at 13.

The argument that consumers prefer greater privacy protection than big tech provides is always tricky, as every example of an alleged big tech surveillance practice existing in the market is simultaneously an example of the market tolerating that very practice. The antitrust privacy argument seeks to resolve this tension with the explanation that market power enables companies to adopt practices despite consumers’ preferences: without viable alternatives in the market for “Personal Social Networking Services,” consumers must take what they can get, and what they can get is not what they actually want.

In a world where consumers’ revealed preferences on a mass scale suggest they accept the balance of privacy protection presently on offer, how can one discern that consumers demand greater privacy protection than the market actually supplies? The state attorneys general complaint looks to a market entrant platform’s early privacy protection practices and argues those features — along with other aspects of user experience — were a platform’s initial competitive advantage. The intellectual inspiration for the state antitrust suit — Dina Srinivasan’s law journal article — looks to consumer privacy preference polling and surveys to support the claim that consumers value privacy in social networking services. Query whether either of those empirical claims is compelling or dispositive.

As Skee-Lo’s timeless song goes, “I wish I was a little bit taller, I wish I was a baller….” With respect to consumer demand, there is little doubt that ceteris paribus consumers would accept, and plausibly prefer, greater privacy protections. However, where greater privacy protections are traded off against other competing values, who knows to what extent consumers in aggregate will hold them dear.

In theory, increasing competition in the market for personal social networking services would provide an interesting experiment to test the hypothesis that consumers demand greater privacy protections than those presently on offer. However, this begs the question of how little competition in social networking there truly is. The state antitrust suit narrowly defined the relevant market as that for “Personal Social Networking Services” and excludes YouTube from that space. The word “TikTok” does not appear in the complaint; the word “Snapchat” appears once as an oblique reference. In antitrust, market definition matters. It is possible that in a competitive market for social networking services, the relative value that consumers place on privacy protection as traded off against other features is less than what legal theorists and attorneys general assume it is or ought to be.

Market failures happen. Could it be that the aggregate of individual choices with respect to the relative value placed on privacy produces an inefficient distribution of privacy for society as a whole? Maybe. Perhaps digital privacy protection is a value that society demands but just not in the market, and instead must be made manifest through extra-market solutions, such as GDPR-like comprehensive digital privacy legislation. If true, antitrust is the wrong approach on privacy. To discipline the market with non-market values would likely require a “Blue Model“-like accommodation between big tech and big reg: companies with the size to withstand the compliance costs, which, in turn, will favor consolidation.

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