When It Comes to Big Tech, Regulatory Ambition Ignores Consumers’ Choices

In the halls of the Federal Trade Commission (FTC) and across the Atlantic in the chambers of the European Commission (EC), not to mention within the borders of Florida and Texas, government officials seem to believe they are better suited than market forces to shape the futures of successful tech platforms like Amazon, Apple, Facebook, and YouTube. Instead of letting consumers and investors vote with their time and wallets, these regulators prefer the blunt instrument of government authority to impose their visions on an industry already pulsing with innovation and competition.

The FTC, driven by Chair Lina Khan, is fixated on reengineering markets by, for example, breaking up Amazon and Meta, ignoring how customers have flocked to the large and successful companies that she seeks to shrink. Khan wants to make Amazon more like eBay, which saw a notable decline in its user base during the pandemic. Her fixation fails to acknowledge the vibrant ecosystem that drew millions of customers to Amazon while eBay shrunk. The story is similar with Facebook and Instagram, with the latter’s pre-acquisition struggles to create a functioning business model casting doubt on the wisdom of forcibly decoupling these two.

Across the pond, the EC’s Digital Services Act (DSA) and Digital Markets Act (DMA) are imposing sweeping reforms on the information technology sector. Focusing on smaller businesses, the DSA is a rulebook for practices such as digital advertising and online content management, while the DMA targets large US tech companies and TikTok with do’s and don’ts. The regulation imposes interoperability, limits data gathering, requires user and rival access to data, and restricts the scopes of platforms’ relationships with users. Such regulations erode these companies’ abilities to differentiate their products in response to customer needs. For example, although more people use Android phones than iPhones, iPhone users value many features that go away under the DMA, including how Apple manages apps and provides cyber security and what they perceive as a likable, trustworthy, and integrated environment. The EC’s regulatory zeal threatens to dissolve many of the intricacies that endear users to their preferred platforms and devices.

Stateside, Florida and Texas are not to be outdone in their regulatory ambitions for social media. Florida’s social media law threatens to curtail the autonomy of tech platforms in content management, especially with respect to political candidates and journalists—a move many view as antithetical to the platforms’ First Amendment right to curate their spaces. Texas takes a similar stance, demanding, among other things, algorithm disclosure and reports on content moderation decisions, that could compromise the platforms’ abilities to offer curated experiences customers value.

If upheld by the Supreme Court, the Florida and Texas laws could drastically alter the social media landscape for users, potentially stripping away what they value. Only one-third of social media users access the types of platforms Florida and Texas seek to create and only 6 percent of adults get news from such sites. In contrast, over half of users favor practices currently in use by Facebook and YouTube and one-third regularly get news from Facebook.

These various regulatory initiatives may be well-intentioned, but they misread the room. Consumers have ever-growing choices in e-commerce and social media, and sites are constantly trying new practices. By deciding among these increasing options, customers are signaling a preference for many of the business practices that the FTC, EC, Florida, and Texas seek to prohibit.

These regulators should take lessons from history. The business models that the US imposed at the breakup of AT&T failed because the authorities misunderstood customers and technology. The industry now thrives only because of deregulation and market-driven innovation, mergers, and divestitures. Also the DISH Network 5G broadband service that US regulators effectively created four years ago as a condition of permitting the T-Mobile/Sprint merger is hemorrhaging customers and is in danger of closing its doors.

The tech landscape is ever evolving, with newcomers like TikTok illustrating the vulnerabilities of companies once thought to be unassailable. In this landscape, it is the market—complex, unpredictable, and responsive—that should dictate the future of these companies, not the rigid hand of regulatory ambition.