Fraud Cartels Monopolize Big Tech. New Legislation May Stop That.

Americans lost billions of dollars to online scams originating on social media last year—more than on any other platform, according to new data from the Federal Trade Commission. Many of these schemes begin with advertisements purchased by fraudsters, including international fraud cartels, who use social media platforms to lure victims into fake investment opportunities, romance scams, and other financial traps. 

Regrettably, the big tech companies that profit from this advertising have done far too little to stop the problem. 

Fortunately, Congress is now saying enough is enough.

Bipartisan legislation, referred to as the American Innovation and Choice Online Act (AICOA), was introduced this month by Senate Judiciary Committee Chair Chuck Grassley, R-Iowa, and Sen. Amy Klobuchar, D-Minn. The bill makes it harder for dominant technology platforms to use their market power to suppress competitors and entrench their dominance.

Big tech companies have amassed extraordinary power over how Americans communicate, shop, and access information online. For consumers, that concentration has created a wide range of problems. One consequence of that concentration is an online scam epidemic that continues to grow while consumers bear the costs.

Big tech is well aware of the problem. It’s proven that it can police content aggressively when it wants to do so.

However, big tech makes hundreds of billions of dollars annually from digital advertising. Platforms have little incentive to crack down on the international fraud rings that are posting ads that milk innocent and unsuspecting Americans out of billions of dollars. 

If big tech companies were in a true competitive marketplace, they would face greater pressure to earn consumer trust and differentiate themselves by providing safer online experiences, but they aren’t. 

A mechanic with a monopoly in town can gouge on repair prices or, worse, charge for something that was never broken in the first place. However, that same mechanic will become concerned about his customers’ needs when he knows competitors are trying to take them away.

That principle applies just as much to Silicon Valley as it does to Main Street.

The Grassley-Klobuchar legislation seeks to restore some competitive pressures.

The legislation prohibits dominant technology platforms from engaging in practices that can entrench their market power, preventing covered platforms from unfairly favoring their own products and services over those of competitors. It also prohibits the use of nonpublic business data to gain an advantage over rivals and ends discrimination against businesses that depend on their platforms to reach customers. 

By opening markets to greater competition and making it easier for new companies to enter the marketplace, the bill would increase pressure on platforms to earn users’ business through stronger trust, safety, and consumer protection practices.

Famed bank robber Willie Sutton reportedly was once asked, “Why do you rob banks?” His answer: “That’s where the money is.” 

No legislation will eliminate the prevalence of international fraud cartels on big tech platforms overnight. But by creating marketplace incentives, the Grassley-Klobuchar bill will make it much harder for these companies to continue letting them run roughshod.

Americans deserve an internet where big tech works as hard to stop fraudsters as they do to attract advertisers. 

More competition will not solve every problem facing the digital economy, but it can help ensure that consumer protection becomes a business priority rather than a public-relations catchphrase. And that is exactly why the fraud cartels monopolizing social media should be worried.

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