Washington, D.C. — Following the Antitrust Subcommittee’s remarkable hearing with the CEOs Amazon, Apple, Facebook, and Google, and as the Subcommittee prepares its final plan of action to take on big tech, the American Economic Liberties Project today released “Close to Home: How the Power of Facebook and Google Effects Local Communities.” Authored by Pat Garofalo, Economic Liberties’ Director of State and Local Policy, the paper analyzes the ways Facebook and Google have harmed local businesses and destroyed local journalism, exposes the political strategies they use to extract subsidies from local communities, and details solutions – at both the federal and local level – to readjust the legal underpinning of this dangerous business model.

“Facebook and Google present themselves as vital partners in local economies, but they create several demonstrable harms in our communities,” said Pat Garofalo, Director of State and Local Policy at the American Economic Liberties Project. “Their business models incentivize the spread of scams that hurt local businesses and customers, and their undermining of local newspapers aids in the deterioration of discourse and the spread of conspiracy theories. Both federal and local officials can and should take concrete steps to rein in these abusive and extractive monopolies in order to mitigate the harms we all experience.”

Facebook and Google are the platforms on which local shops and restaurants connect to customers, on which local news is disseminated, and on which citizens organize everything from school bake sales to local elections to neighborhood clean-ups. But their business models are not based on serving consumers with the most credible information and facilitating neutral communications among friends, family, and community stakeholders.

Facebook and Google’s power stems from the monopolies they’ve built in digital advertising. They sell user attention, enriched with data, to advertisers, often monetizing content they didn’t generate but are profiting from, with users manipulated into further engagement with their properties. And they use their monopoly power to dictate terms to local communities, demanding benefits from small and mid-size cities that they don’t need, as well as secrecy that prevents local voters from holding the companies and their elected officials accountable.

Reducing Facebook and Google’s harms at the local level requires both federal and local solutions. “Close to Home” outlines six, including:

• Breaking Up Facebook & Google: Structural separation is the place to start. For instance, splitting out Google’s general search from mapping or local reviews would disincentivize the company from self-preferencing its own content over those of its competitors, potentially improving local search tools and providing an opportunity for hyper-local search verticals to find traction. Reversing Google’s merger with DoubleClick and Facebook’s mergers with WhatsApp and Instagram would create more competition in the advertising and social media markets.
• Writing New Rules for Dominant Search Engines: The FTC should act to stop self-preferencing of search results, the conditioning of Google as a default search engine through the bundling of Android/Play on mobile devices, and payments to Apple in return for search positioning on iPhone’s Safari.
• Eliminating the Liability Shield of Section 230 of the 1996 Telecommunications Act: This would put traditional publishers on a more even playing field and incentivize a form of advertising based on building trust with users, rather than on clickbait and sensationalism.
• Building New Antitrust Suits Against Facebook and Google: Attorneys general in more than 40 states are currently investigating Google alongside the federal government. State attorneys general can also challenge acquisitions by Facebook and Google, if federal antitrust enforcers won’t.
• Ending State and Local Subsidies for Facebook and Google: States and localities should refrain from providing subsidies to the two companies. Legislation introduced in 14 states would prevent using incentives to poach businesses from other states; a bolstered version that also disallowed the incentivizing of new businesses would prevent the subsidizing of Google and Facebook’s expansion. Congress could also use its power under the Commerce Clause to prevent states from using company-specific tax incentives or could tie an abolition of such incentives to other federal funding.
• Preventing City Officials from Entering NDAs or Putting Restrictions on FOIA. For the purposes of economic development and prevent their own economic development agencies, states should block local officials from entering into NDAs with specific corporations, including Facebook and Google, as well as giving them preferential treatment on Freedom of Information Act requests.

Read “Close to Home: How the Power of Facebook and Google Effects Local Communities” here. 

Economic Liberties recent report on Facebook and Google, “Addressing Facebook and Google’s Harms Through a Regulated Competition Approach,” is available here.

Learn more about Economic Liberties here.

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Economic Liberties works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. AELP believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.