Governments are flexing their muscles over bad corporate behaviour, starting with social media firms

What made social media companies so successful also makes them easy targets for government muscle-flexing, says Merryn Somerset Webb.

180723-zuckerberg
Mark Zuckerberg's grilling proves Facebook is not above the law

Over the last few years we have pointed out over and over again that when governments feel like being in control, they can take control. This is something the global corporations that have spent the last 20-30 years behaving as if the world is mostly their oyster (low taxes, minimum regulation, cheap labour, minimal shareholder oversight) are finally beginning to grasp as are governments.

You see it in the increasing interventions by governments into corporate behaviour: demands for gender pay gap data; the conversation about revenue based taxation; and the rise in interest in pay ratios across the board. The FT reports that the government is tabling legislation to force firms to to publish their CEO's salary as a multiple of the average worker's salary. We saw it last week in Mark Zuckerberg's suit at the hearings in the US he doesn't normally feel he needs to dress to please the establishment but he is beginning to get it.

And you see it all over the place in the attitude of sovereign states to big tech. Five years ago they were considered too big and powerful to even think of controlling. This week Jeremy Hunt has written them a letter telling them that their failure to prevent children using social media is "unacceptable and irresponsible." He is irritated that, six months after setting up a working group including Facebook, Google and Snapchat to discuss child mental health and social media, no progress has been made in preventing the underage from signing up. So he has now given them one week to come up a proper plan their answers will inform the legislation he now says he is planning.

Another interesting challenge came today from UK personal finance guru Martin Lewis. He's suing Facebook for allowing scammers to use his name and picture over and over again to sell nasty products (in that if you use them you are all but guaranteed to lose money) in areas such as binary trading. His case is simple. "Enough is enough. I've been fighting for over a year to stop Facebook letting scammers use my name and face to rip off vulnerable people. I feel sick each time I hear of another victim being conned because of trust they wrongly thought they were placing in me. One lady had over £100,00) taken from her."

The key point here is that Facebook is not above the law it cannot be allowed to sit back and let its systems corrupt Lewis's hard won reputation, for example, or to ignore the over use of its platform by children. That's something Lewis and Hunt clearly intend to prove.All of this represents progress. As The Times says, Facebook "needs to accept that it is not just a commercial entity... it is also a media company with social responsibilities."

However, there is one important thing to note about the backlash against social media firms: they are an exceptionally easy target for governments wanting to show a little muscle they are much easier for governments to have a go at than most other firms. After all, the withdrawal of their services (should there be flouncing out of any markets) might be irritating for many, but it would be incidental to the structure of the economy their services aren't exactly vital. There is even a chance that we would be better off without them (would productivity be higher without the distraction of Facebook?).

The social media firms are also made vulnerable by the things that have in the past made them look so invincible: they pay very little tax and have relatively few staff (Facebook's headcount isn't much more than 1,000 in the UK) and so have very little leverage over the UK government. You can't say the same for the likes of car companies, utilities, or Big Pharma, for example. That suggests that you might soon see them increasingly heavily regulated (and taxed) in a way the rest of the corporate world is not. Governments need to look like they are taking action against bad corporate behaviour and this is easy action.

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