By Daniel Lyons

It’s safe to say that Federal Trade Commission (FTC) chair Lina Khan is no fan of Mark Zuckerberg. Yet one could argue that her first few months in office are epitomized by the Facebook cofounder’s cheeky motto, “Move fast and break things.” However useful this may be as business advice, for many reasons it’s a suboptimal theory of regulatory policy.

Moving fast: Risks to
transparency and accountability

Bold strokes have marked the beginning of the Khan FTC. In
short order, the commission has withdrawn several key agency policies.

• On July 9, the commission rescinded its 2015 Statement of Enforcement Principles explaining how it would exercise its Section 5 powers.

• On July 22, the agency revoked a 26-year-old policy statement that allowed mergers to proceed without FTC approval unless they raised a credible risk of unlawful conduct.

• And on September 15, the commission withdrew the vertical merger guidelines developed last year with the Department of Justice.

This breakneck pace of reform, with each change accomplished
with minimal notice by 3–2 party-line votes, has prompted concern about
transparency and accountability. Commissioner Christine Wilson unsuccessfully called for the agency to seek public comment before
rescinding the 26-year-old approval statement mentioned above. Wilson and
fellow Commissioner Noah Joshua Phillips similarly criticized the vertical merger decision for proceeding, in
Phillips’ words, “with the minimum notice required by law, virtually no public
input, and no analysis or guidance.”

This criticism is more than mere sour grapes. Unlike
Congress, agencies are not directly politically accountable to the public they
serve, and constituents cannot simply call their representatives to voice their
opinions on a proposal. Typically, agencies cure this deficiency through the
notice-and-comment process, which allows for a period of public comment on
proposed agency action. Comments allow affected parties to raise potential
concerns with the agency so that agencies are fully informed of the potential
effects before action. And while the notice-and-comment process is not required
for changes to policy statements, it remains good practice on important issues
such as these to make sure that (in the words of one court) “major issues of policy [are]
ventilated” by the agency.

Breaking things:
Risks of the ultimate antitrust remedy

In the litigation arena, the FTC filed an amended complaint in August seeking to break up
Facebook for alleged antitrust violations. To be fair, this case precedes Khan, and the cry to break up Big Tech has been bipartisan lately. But breakups are the biggest
sledgehammer in the antitrust toolkit, and the government should think carefully
before reaching for it as a remedy.

Will Rinehart has written at length about antitrust cases gone wrong. As he explains,
a successful breakup requires finding points of cleavage where the company can
be separated with minimal disruption to economies of scale. Standard Oil was
broken up along geographic lines, which largely worked. But a similar approach to American Tobacco
had little effect on firm behavior or prices.

In the tech space, these points of cleavage aren’t obvious.
A regional Facebook would be useless to me in Boston trying to reach friends in
Los Angeles — and would be even less useful to the Arab Spring protesters
trying to get their message out to the world. As Rinehart notes, firms like
Facebook and Google are highly integrated, with multiple teams working across
departments to solve problems and increase firm productivity. Splitting up the
firm risks losing that cross-divisional support and cooperation, making each
unit less valuable on its own.

Trust-busting would also require breaking up the companies’ technologies. Facebook has developed its own suite of software to address unique problems dealing with vast troves of data: BigPipe to load pages faster, Haystack to store photos efficiently, and Unicorn to search its social data, among others. Many of these technologies operate across the company’s myriad consumer-facing platforms. A breakup that allocates each technology to only one part of the firm would erode the consumer experience of the other platforms. It would also stymie innovation, as the firm would have fewer options to leverage current success to push the envelope of new technologies (as Facebook is currently doing with virtual reality).

“Move fast and break things” is a fair summary of Schumpeterian creative destruction at work. It works in the private sector because the public benefits from companies throwing ideas against the wall to see what sticks. Most ideas fail, but the costs are absorbed primarily by shareholders, who are rewarded for the risk if one product takes off. But good statecraft requires careful deliberation, with input from affected parties and public dialogue to build legitimacy and accountability and careful cost-benefit analysis before undertaking bold moves. Reckless experimentation should not be a hallmark of regulatory policy.

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