The Trouble With Regulating Facebook and Google

The number of Americans who regard the threat to online privacy as a “crisis” is growing—61% share this view, according to recent polls by SurveyMonkey, which is a 10% jump from a year ago.

All of this has fueled momentum from both ends of the political system to regulate companies like Facebook and Google. But while the desire for regulation is growing, there is little consensus of how the U.S. should go about this—and some are warning of unintended consequences if Congress jumps in too quickly.

At Fortune’s Brainstorm Tech conference in Aspen, Colo. Tuesday, Kai Ryssdal, host of public radio’s Marketplace, hosted a town hall in which figures from the left and right warned more federal oversight of tech companies could be a mistake.

“Bureaucracies are neither unbiased nor altruistic,” warned Diane Katz, a senior research fellow at the Heritage Foundation, who added that more regulation could perversely favor tech giants like Facebook and Google, which have the legal resources to handle new compliance burdens in ways that smaller competitors do not.

Meanwhile, Corynne McSherry of the Electronic Frontier Foundation said the public should be wary of big tech companies’ recent support for federal privacy legislation, saying this is a tactic to stall tougher state privacy laws.

“Federal regulators are often not very good at it,” said McSherry, adding it’s a poor idea to impose one-size-fits-all laws on the technology sector.

Others, including Luigi Zingales of University of Chicago Business School, argued regulation can work, providing it’s well-targeted. He gave the example of laws requiring cellular companies to port phone numbers to competitors—a result that has produced lower prices for consumers and better quality stemming from competition.

Zingales decried the current approach to governing the tech industry, saying the government has effectively outsourced regulation to private entities—a point echoed by Karla Monterroso of the non-profit group Code2040, who argued the five biggest tech companies have more power than nation states, and that Congress has surrendered control over many aspects of policy and infrastructure to them.

While many decried the fecklessness of Congress in overseeing the tech industry, others pointed out it’s a two-way street.

“As clueless as Congress is about tech, tech is as clueless about Congress,” quipped venture capitalist Roy Bahat. “The fact that [Senator] Orrin Hatch is clueless is partly our fault.”

Ultimately, much of the current crisis over tech is rooted in a concentration of power, said Zingales. But addressing this poses particular problems, notably when it comes to Facebook and Google. Even though it would be possible to break the social network into three separate companies—Facebook, Instagram and WhatsApp—he predicted one of them would consolidate monopoly power all over again.

As for Google, Zingales said it would be easy hive off YouTube but that applying antitrust remedies to its search engine is much harder. It’s not viable to split up control over search results into the letters A-L, he noted. Zingales also cautioned that aggressive regulation could to lead to the innovation culture of France—a country that’s long failed to produce Silicon Valley-style companies.

Others went even further in defending the U.S. tech sector. Chris Tolles, CEO of content aggregation site Topix, said Facebook and Google are “national treasures in some ways” and that blowing them up could create a vacuum filled by Chinese companies.

As for the challenge of regulating speech on platforms like Facebook, this too proved a divisive issue. Despite plenty of toxic content—the Anti-Defamation League provided ample examples to the Fortune gathering on Monday—Katz of Heritage said hate speech can be too nebulous to define, and that the best solution is a market-based one in which consumers simply quit platforms that offend them.

Zingales, however, argued that hate is “not a bug but a feature” of platforms like Twitter, and part of a business model that relies on incendiary behavior to attract attention and users. This provided a rare moment of unanimity at the Fortune town hall: For better or worse, everyone agreed that President Trump’s stream of divisive tweets has been great for Twitter’s business.