The Backpage Takedown and the Risks of Over-regulating Technology

by on April 11, 2018 · 0 comments

Last Friday, law enforcement agencies shutdown Backpage.com. The website has become infamous for its role in sex trafficking, particularly related to underage victims, and its shutdown is rightly being applaud by many as a significant win for preventing sex trafficking online. This shutdown shows, however, that prosecutors had the tools necessary to go after bad actors prior to the passage of the Stop Enabling Sex Traffickers Act (SESTA) last month. Unfortunately, this is not the first time the government has pushed for regulation of technology knowing it already had the tools and information needed to build a case against bad actors.

The version of SESTA passed by Congress last month included a number of poorly thought through components including an ex post facto application and poorly articulated definitions, but it passed both houses of Congress with little opposition. In fact, because the law was seen as a must pass and linked to sex trafficking, the Senate even overwhelming rejected an amendment to provide additional funding for prosecuting such crimes. Even without being signed into law, SESTA has already resulted in Reddit and Craigslist removing communities from their platforms within days of its passage. What this most recent event shows is the government already had the tools to go after the bad actors like Backpage, but failed to use them as Congress debated and passed a law that chipped away at the protection for the rest of the Internet and gave the government even broader powers.

This is not the first time that the government has encouraged through either its action or inaction damaging regulation of disruptive technology while knowing that it had tools at its disposal that could achieve the desired results without the need for an additional regulatory burden. In 2016, the government argued following the San Bernadino shootings that it need more access to encrypted devices like the iPhone when Apple refused to comply with a writ compelling it to unlock the shooters’ phones. The Senate responded to the controversy by proposing a bill that would require business like Apple to assist authorities in gaining access to encrypted devices. Thankfully, because the FBI was able to gain the information needed without Apple through a third party vendor, such calls largely diminished and the legislation never went anywhere.  Now, a recent Office of the Inspector General report has revealed the FBI “testified inaccurately or made false statements” regarding its ability to gain data from the encrypted iPhone.

It is highly concerning that when the government has the tools needed to engage in action to stop bad actors, but desires more regulatory power over tech it chooses to pursue regulation for all instead of using the proper tools it already has to pursue the bad actors. Rather than gaining new tools that risk ruining innovation, the government should first exhaust the tools they have to prosecute those bad actors. When they do use these tools against the likes of MyRedbook, Rentboy, and now Backpage, the prosecutions have been by and large successful. This continued pattern of behavior should raise heightened concerns about  calls for greater regulation of technology and whether the trade-offs such regulation would require are needed.

Neither the government’s desire for more regulation nor its negative impact is limited to technology. Research from the Mercatus Center has shown that the cumulative effect of regulation has slowed GDP growth by 0.8% per year since 1980. Particularly for new startups these regulatory burdens increase the cost of even entering the increasingly global marketplace due to both increased compliance costs and fears of company ending litigation.

With the awareness that these additional regulations are often unnecessary and harmful to both technology and the economy more generally, there should be heightened concern for calls to give regulators additional tools in light of specific events. These calls for regulation have once again arisen with recent fatal Uber autonomous vehicle accident and the Facebook scandals. These regulations may actually make problems worse not better by creating a regulated monopoly that prevents new entrants from improving quality and increasing competition. As Mark Zuckerberg noted while answering a question during Congressional testimony yesterday when there are more rules it is easier for larger companies to comply with them than smaller companies.  Additional regulations make it more difficult for us to get the next Facebook, the next Google, or the next Uber.

The overall framework of Permissionless Innovation put in effect during the Clinton administration has allowed the Internet to flourish and the US to become a global leader in Internet innovation and we must not let the failure to use the tools available deceive us into believing that such an environment does not work. Regulation is sometimes necessary, but over regulation, particularly of technology, poses significant risks that must be considered in more than just a reactive fashion.

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