The free market will never fix technology policy issues

Over the weekend, I was listening to “This Week in Law” episode 384¬†as I mowed the front yard. While the panel was talking about the public relations fiasco that Unrollme experienced after reports surfaced that they sold user data to Uber. The conversation revolved around the terms of service for free services and how users can protect themselves and their data. Host Denise Howell asked if the free market could address the issue instead of requiring government intervention (e.g. by Federal Trade Commission regulations).

My first thought was “no”, but after giving it further consideration, it’s a more developed “no”. Here’s the thing:

The free market will never fix technology policy issues.

And why is that? An effective free market solution requires informed consumers. But consumers are not informed when it comes to technology services. As one of the panelists mentioned, it would take 76 work days per year to keep up with the privacy policies for the average¬†user. That’s entirely untenable, and it’s probably gotten worse since that article was published five years ago.

One possible solution is a standard TL;DR (too long; didn’t read) format for privacy policies. This would at least allow users to “read” policies in something approaching a reasonable time. I’m not convinced that the industry could develop and widely adopt such a standard. It would probably take at least some degree of nudging from the FTC or other regulatory body. In likelihood, it would probably be more like the FDA’s requirements for nutrition labels.

But let’s assume that a privacy TL;DR standard developed and gained wide adoption without government intervention. It still doesn’t fix the problem. Access to information is not sufficient. Being informed also requires having the sophistication to process the information. Does the average user have the necessary knowledge to understand the implications of the privacy policy?

So a basic premise of a free market solution does not apply. But there’s another issue, too: competition. For services like Unrollme, it’s relatively easy for new competitors to spring up. If Unrollme does unsavory things with data, users can switch. That’s less the case with services like Facebook where the whole point is to be in the same place as your friends. Ask the Google+ team how easy it is to be an effective competitor against Facebook. Where there’s a network effect, there’s an effective lack of choice. Everyone these days wants to develop a network effect because that’s how they hold on to users.

The point of all of this is to say that it will probably never be reasonable to expect market effects to prevent user-hostile terms of service. While the free (or free-ish) market may be effective in some areas, technology policies is not one of them. User protection will only happen by way of regulation or legislation.

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