Should we regulate Big Tech? Writing in CapX, I argue that there’s a risk that regulation could put smaller companies at a disadvantage.
Smaller companies are less able to comply with tough mandates to take down content. While a large firm can hire the best Machine Learning engineers on six figure salaries, smaller firms will struggle to automate content moderation and will instead rely on costlier manual moderation.
This isn’t just theory. GDPR, the regulation that provides the model for the Federal privacy law desired by Cook has stifled competition within Europe.
The EU’s privacy law has led to a consolidation within the market. Google’s market share increased, while Facebook’s fell slightly. But the real victims were smaller adtech vendors who saw 20-30 per cent falls in reach. Dozens of companies have blocked EU users or shut down services entirely in response to regulation.GDPR has also depressed VC investment in Europe. A recent paper from Illinois Institute of Technology found that aggregate investment in the EU’s tech ecosystem fell by 40 per cent once the strict rules came in. As the report’s author put it: “The lesson from GDPR is that whatever regulation you adopt, don’t make it overly burdensome for the youngest companies.”