Archives For Tim Wu

Today ICLE released a white paper entitled, A critical assessment of the latest charge of Google’s anticompetitive bias from Yelp and Tim Wu.

The paper is a comprehensive response to a study by Michael Luca, Timothy Wu, Sebastian Couvidat, Daniel Frank, & William Seltzer, entitled, Is Google degrading search? Consumer harm from Universal Search.

The Wu, et al. paper will be one of the main topics of discussion at today’s Capitol Forum and George Washington Institute of Public Policy event on Dominant Platforms Under the Microscope: Policy Approaches in the US and EU, at which I will be speaking — along with a host of luminaries including, inter alia, Josh Wright, Jonathan Kanter, Allen Grunes, Catherine Tucker, and Michael Luca — one of the authors of the Universal Search study.

Follow the link above to register — the event starts at noon today at the National Press Club.

Meanwhile, here’s a brief description of our paper:

Late last year, Tim Wu of Columbia Law School (and now the White House Office of Management and Budget), Michael Luca of Harvard Business School (and a consultant for Yelp), and a group of Yelp data scientists released a study claiming that Google has been purposefully degrading search results from its more-specialized competitors in the area of local search. The authors’ claim is that Google is leveraging its dominant position in general search to thwart competition from specialized search engines by favoring its own, less-popular, less-relevant results over those of its competitors:

To improve the popularity of its specialized search features, Google has used the power of its dominant general search engine. The primary means for doing so is what is called the “universal search” or the “OneBox.”

This is not a new claim, and researchers have been attempting (and failing) to prove Google’s “bias” for some time. Likewise, these critics have drawn consistent policy conclusions from their claims, asserting that antitrust violations lie at the heart of the perceived bias. But the studies are systematically marred by questionable methodology and bad economics.

This latest study by Tim Wu, along with a cadre of researchers employed by Yelp (one of Google’s competitors and one of its chief antitrust provocateurs), fares no better, employing slightly different but equally questionable methodology, bad economics, and a smattering of new, but weak, social science. (For a thorough criticism of the inherent weaknesses of Wu et al.’s basic social science methodology, see Miguel de la Mano, Stephen Lewis, and Andrew Leyden, Focus on the Evidence: A Brief Rebuttal of Wu, Luca, et al (2016), available here).

The basic thesis of the study is that Google purposefully degrades its local searches (e.g., for restaurants, hotels, services, etc.) to the detriment of its specialized search competitors, local businesses, consumers, and even Google’s bottom line — and that this is an actionable antitrust violation.

But in fact the study shows nothing of the kind. Instead, the study is marred by methodological problems that, in the first instance, make it impossible to draw any reliable conclusions. Nor does the study show that Google’s conduct creates any antitrust-relevant problems. Rather, the construction of the study and the analysis of its results reflect a superficial and inherently biased conception of consumer welfare that completely undermines the study’s purported legal and economic conclusions.

Read the whole thing here.

William Buckley once described a conservative as “someone who stands athwart history, yelling Stop.” Ironically, this definition applies to Professor Tim Wu’s stance against the Supreme Court applying the Constitution’s protections to the information age.

Wu admits he is going against the grain by fighting what he describes as leading liberals from the civil rights era, conservatives and economic libertarians bent on deregulation, and corporations practicing “First Amendment opportunism.” Wu wants to reorient our thinking on the First Amendment, limiting its domain to what he believes are its rightful boundaries.

But in his relatively recent piece in The New Republic and journal article in U Penn Law Review, Wu bites off more than he can chew. First, Wu does not recognize that the First Amendment is used “opportunistically” only because the New Deal revolution and subsequent jurisprudence has foreclosed all other Constitutional avenues to challenge economic regulations. Second, his positive formulation for differentiating protected speech from non-speech will lead to results counter to his stated preferences. Third, contra both conservatives like Bork and liberals like Wu, the Constitution’s protections can and should be adapted to new technologies, consistent with the original meaning.

Wu’s Irrational Lochner-Baiting

Wu makes the case that the First Amendment has been interpreted to protect things that aren’t really within the First Amendment’s purview. He starts his New Republic essay with Sorrell v. IMS (cf. TechFreedom’s Amicus Brief), describing the data mining process as something undeserving of any judicial protection. He deems the application of the First Amendment to economic regulation a revival of Lochner, evincing a misunderstanding of the case that appeals to undefended academic prejudice and popular ignorance. This is important because the economic liberty which was long protected by the Constitution, either as matter of federalism or substantive rights, no longer has any protection from government power aside from the First Amendment jurisprudence Wu decries.

Lochner v. New York is a 1905 Supreme Court case that has received more scorn, left and right, than just about any case that isn’t dealing with slavery or segregation. This has led to the phenomenon (my former Constitutional Law) Professor David Bernstein calls “Lochner-baiting,” where a commentator describes any Supreme Court decision with which he or she disagrees as Lochnerism. Wu does this throughout his New Republic piece, somehow seeing parallels between application of the First Amendment to the Internet and a Liberty of Contract case under substantive Due Process.

The idea that economic regulation should receive little judicial scrutiny is not new. In fact, it has been the operating law since at least the famous Carolene Products footnote four. However, the idea that only insular and discrete minorities should receive First Amendment protection is a novel application of law. Wu implicitly argues exactly this when he says “corporations are not the Jehovah’s Witnesses, unpopular outsiders needing a safeguard that legislators and law enforcement could not be moved to provide.” On the contrary, the application of First Amendment protections to Jehovah’s Witnesses and student protesters is part and parcel of the application of the First Amendment to advertising and data that drives the Internet. Just because Wu does not believe businesspersons need the Constitution’s protections does not mean they do not apply.

Finally, while Wu may be correct that the First Amendment should not apply to everything for which it is being asserted today, he does not seem to recognize why there is “First Amendment opportunism.” In theory, those trying to limit the power of government over economic regulation could use any number of provisions in the text of the Constitution: enumerated powers of Congress and the Tenth Amendment, the Ninth Amendment, the Contracts Clause, the Privileges or Immunities Clause of the Fourteenth Amendment, the Due Process Clause of the Fifth and Fourteenth Amendments, the Equal Protection Clause, etc. For much of the Constitution’s history, the combination of these clauses generally restricted the growth of government over economic affairs. Lochner was just one example of courts generally putting the burden on governments to show the restrictions placed upon economic liberty are outweighed by public interest considerations.

The Lochner court actually protected a small bakery run by immigrants from special interest legislation aimed at putting them out of business on behalf of bigger, established competitors. Shifting this burden away from government and towards the individual is not clearly the good thing Wu assumes. Applying the same Liberty of Contract doctrine, the Supreme Court struck down legislation enforcing housing segregation in Buchanan v. Warley and legislation outlawing the teaching of the German language in Meyer v. Nebraska. After the New Deal revolution, courts chose to apply only rational basis review to economic regulation, and would need to find a new way to protect fundamental rights that were once classified as economic in nature. The burden shifted to individuals to prove an economic regulation is not loosely related to any conceivable legitimate governmental purpose.

Now, the only Constitutional avenue left for a winnable challenge of economic regulation is the First Amendment. Under the rational basis test, the Tenth Circuit in Powers v. Harris actually found that protecting businesses from competition is a legitimate state interest. This is why the cat owner Wu references in his essay and describes in more detail in his law review article brought a First Amendment claim against a regime requiring licensing of his talking cat show: there is basically no other Constitutional protection against burdensome economic regulation.

The More You Edit, the More Your <sic> Protected?

In his law review piece, Machine Speech, Wu explains that the First Amendment has a functionality requirement. He points out that the First Amendment has never been interpreted to mean, and should not mean, that all communication is protected. Wu believes the dividing lines between protected and unprotected speech should be whether the communicator is a person attempting to communicate a specific message in a non-mechanical way to another, and whether the communication at issue is more speech than conduct. The first test excludes carriers and conduits that handle or process information but have an ultimately functional relationship with it–like Federal Express or a telephone company. The second excludes tools, those works that are purely functional like navigational charts, court filings, or contracts.

Of course, Wu admits the actual application of his test online can be difficult. In his law review article he deals with some easy cases, like the obvious application of the First Amendment to blog posts, tweets, and video games, and non-application to Google Maps. Of course, harder cases are the main target of his article: search engines, automated concierges, and other algorithm-based services. At the very end of his law review article, Wu finally states how to differentiate between protected speech and non-speech in such cases:

The rule of thumb is this: the more the concierge merely tells the user about himself, the more like a tool and less like protected speech the program is. The more the programmer puts in place his opinion, and tries to influence the user, the more likely there will be First Amendment coverage. These are the kinds of considerations that ultimately should drive every algorithmic output case that courts could encounter.

Unfortunately for Wu, this test would lead to results counterproductive to his goals.

Applying this rationale to Google, for instance, would lead to the perverse conclusion that the more the allegations against the company about tinkering with its algorithm to disadvantage competitors are true, the more likely Google would receive First Amendment protection. And if Net Neutrality advocates are right that ISPs are restricting consumer access to content, then the analogy to the newspaper in Tornillo becomes a good one–ISPs have a right to exercise editorial discretion and mandating speech would be unconstitutional. The application of Wu’s test to search engines and ISPs effectively puts them in a “use it or lose it” position with their First Amendment rights that courts have rejected. The idea that antitrust and FCC regulations can apply without First Amendment scrutiny only if search engines and ISPs are not doing anything requiring antitrust or FCC scrutiny is counterproductive to sound public policy–and presumably, the regulatory goals Wu holds.

First Amendment Dynamism

The application of the First Amendment to the Internet Age does not involve large leaps of logic from current jurisprudence. As Stuart Minor Benjamin shows in his article in the same issue of the U Penn Law Review, the bigger leap would be to follow Wu’s recommendations. We do not need a 21st Century First Amendment that some on the left have called for—the original one will do just fine.

This is because the Constitution’s protections can be dynamically applied, consistent with original meaning. Wu’s complaint is that he does not like how the First Amendment has evolved. Even his points that have merit, though, seem to indicate a stasis mentality. In her book, The Future and Its Enemies, Virginia Postrel described this mentality as a preference for a “controlled, uniform society that changes only with permission from some central authority.” But the First Amendment’s text is not a grant of power to the central authority to control or permit anything. It actually restricts government from intervening into the open-ended society where creativity and enterprise, operating under predictable rules, generate progress in unpredictable ways.

The application of current First Amendment jurisprudence to search engines, ISPs, and data mining will not necessarily create a world where machines have rights. Wu is right that the line must be drawn somewhere, but his technocratic attempt to empower government officials to control innovation is short-sighted. Ultimately, the First Amendment is as much about protecting the individuals who innovate and create online as those in the offline world. Such protection embraces the future instead of fearing it.

As you may have heard, Columbia lawprof and holder of the dubious distinction of having originated the term and concept of Net Neutrality, Tim Wu, is headed to the FTC as a senior advisor.

Curiously, his guest stint runs for only about four and a half months.  As the WSJ reports:

Mr. Wu, 38, will start his new position on Feb. 14 in the FTC’s Office of Policy Planning, and will help the agency to develop policies that affect the Internet and the market for mobile communications and services. The FTC said Mr. Wu will work in the unit until July 31. Mr. Wu, who is taking a leave from Columbia, said that to work after that date he would have to request a further leave from the university.

Mr. Wu’s claim that the source of the date constraint is Columbia doesn’t pass the smell test.  Now, it is possible that what he says is literally true–and therefore intentionally misleading.  Perhaps he asked only for leave through the end of July and would indeed have to request further leave if he wanted it.  But the implication that Columbia would have trouble granting further leave–especially during the summer!–and thus the short tenure seems very fishy to me.

So what else could be going on, while we’re reading inscrutable tea leaves?  Well, for one thing, it could be that Wu has already signed on for some not-yet-public role at Columbia that he prefers not to imperil.  Maybe associate dean or something like that.

But I have another, completely unsupported speculation.  I think the author of The Master Switch (commented on by Josh and me here) and one of the most capable (as far as that goes) proponents of Internet regulation in the land is being brought in to the FTC to help the agency gin up a case against Google.

I think with Google-ITA seemingly approaching its denouement, the FTC knows or believes that Google is either planning to abandon the merger or else enter into an (insufficiently-restrictive for the FTC) settlement with the DOJ.  In either case, not a full-blown investigation and intervention into Google’s business.  So the FTC is preparing its own Section 5 (and Section 2, but who needs that piker when you have the real deal in Section 5?) (for previous TOTM takes on Section 5, see, e.g., here and here) case and has brought in Wu to help.  Given the switching back and forth between the DOJ and FTC in reviewing Google mergers, it could very well be (I haven’t kept close tabs on Google’s proposed acquisitions) that there’s even already another merger review in waiting at the FTC on which the agency is planning to build its case.

But the phase of the case requiring Wu’s full attention–the conceptual early phase–should be completed by the end of July, so no need to detain him further.

More concretely, I would point out that it says a lot about the agency’s mindset that it is bringing in the likes of Wu to help it with its ongoing forays into the regulation of Internet businesses.  By comparison, I would just point out that Chairman Majoras’ FTC brought in our own Josh Wright as the agency’s first Scholar in Residence.  Sends a very different signal, don’t you think?

[Cross posted at Technology Liberation Front]

We’ve been reading with interest a bit of an blog squabble between Tim Wu and Adam Thierer ( see here and here) set off by Professor Wu’s WSJ column: “In the Grip of the New Monopolists.”  Wu’s column makes some remarkable claims, and, like Adam, we find it extremely troubling.

Wu starts off with some serious teeth-gnashing concern over “The Internet Economy”:

The Internet has long been held up as a model for what the free market is supposed to look like—competition in its purest form. So why does it look increasingly like a Monopoly board? Most of the major sectors today are controlled by one dominant company or an oligopoly. Google “owns” search; Facebook, social networking; eBay rules auctions; Apple dominates online content delivery; Amazon, retail; and so on.

There are digital Kashmirs, disputed territories that remain anyone’s game, like digital publishing. But the dominions of major firms have enjoyed surprisingly secure borders over the last five years, their core markets secure. Microsoft’s Bing, launched last year by a giant with $40 billion in cash on hand, has captured a mere 3.25% of query volume (Google retains 83%). Still, no one expects Google Buzz to seriously encroach on Facebook’s market, or, for that matter, Skype to take over from Twitter. Though the border incursions do keep dominant firms on their toes, they have largely foundered as business ventures.

What struck us about Wu’s column was that there was not even a thin veil over the “big is bad” theme of the essay.  Holding aside complicated market definition questions about the markets in which Google, Twitter, Facebook, Apple, Amazon and others upon whom Wu focuses operate — that is, the question of whether these firms are actually “monopolists”  or even “near monopolists”–a question that Adam deals with masterfully in his response (in essence: There is a serious defect in an analysis of online markets in which Amazon and eBay are asserted to be non-competitors, monopolizing distinct sectors of commerce) — the most striking feature of Wu’s essay was the presumption that market concentration of this type leads to harm. Continue Reading…