If tech firms push the law to the limit, is that such...

If tech firms push the law to the limit, is that such a bad thing? | Alex Hern

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The themes have become familiar with repetition. Amazon pursued for back tax. Uber bought to heel and told to clear out of London. Facebook and YouTube castigated for the way criminals and extremists use them. Airbnb blamed for causing a housing crisis. Daily, fresh evidence of the uneasy relationship governments have with technology. They are either trying desperately to create the next Google, or trying equally desperately to control the current one. Often those two potentially contradictory objectives are being pursued at the same time.

It’s a game of cat and mouse, with the tech companies (appropriately enough) cast as the mouse. The mouse is always ahead; the cat – bigger, slower – playing catch up. The distance between them causes anger, bafflement, anxiety and sometimes amusement, all the while raising fundamental questions about the power of tech pioneers set against the efforts of governments to uphold a recognisable set of rules and regulations. But at the centre of this perpetual game is a conundrum: the cat isn’t really sure it wants to catch its prey.

The technology industry thrives on being at the cutting edge of the law. Often, that is where it needs to be to forge ahead and innovate. It is common for the problems thrown up to fester for years before courts and legislatures get around to examining them, in part because governments are loth to do it. They generate jobs by giving tech companies an easy ride, and consumers get plenty of other benefits. By accepting that tech companies operate on the edge of law, we all benefit. Are we really willing to give up those benefits to get the mouse in the trap?

Take Uber. The app-based minicab firm has faced different pressures in different markets, but in few has it escaped without some clash with local authorities. In London, there have been disputes with regulators over whether or not an app qualifies as a taxi meter. Now there is the larger conflict over whether it is fit and proper to even operate a minicab company at all. Across the UK there have been tribunal cases over whether its drivers are legally workers entitled to basic employment rights, such as paid holiday. Around the world, it has been attacked for not sharing enough data with authorities, for refusing to comply with safety regulations, and for invading customers’ privacy. And yet, who can deny that Uber is popular, or that its effect has been to force the taxi market to respond to what customers actually want?

Taxi drivers demonstrate against Uber in Rome in 2010.



Taxi drivers demonstrate against Uber in Rome in 2010. Photograph: Pacific Press/LightRocket via Getty Images

Airbnb has been accused of skewing the housing market in cities across the world, by encouraging homeowners to rent out homes – or even whole apartment blocks – to tourists rather than locals. As in the taxicab market, the laws on hotels, short-term rentals and tenancies are a mess, but Airbnb cuts through the Gordian knot with ease: it leaves it up to the homeowner to check that they comply with local laws. Airbnb argues that what it’s doing is no different from listings pages that connect renters with landlords, but listings pages tend not to create purpose-built “community centres” where tourists can pay to stay, as Airbnb has done in Japan. Don’t call them hotels, though. It doesn’t like that. But who wants to be the government that signals its lack of openness to tourism by attacking one of the most popular travel firms in the world?

Then there’s the tangle over tax. Amazon has been hit with a bill of €250m by the EU, which says the firm benefited from illegal state aid from Luxembourg, where its European subsidiary is based. On the same day, the European commission announced it intends to take the Irish government to court over an allegation of a similar sweetheart deal with Apple, in which the firm paid a total tax rate of 0.005% in a country with a corporation tax of 12.5%. Facebook has faced similar criticism, filing accounts that showed its UK revenues quadrupled over the past year but that it paid only a fifth more corporation tax. In each case, the cat chases the mouse. But from the governments’ point of view, it’s a mouse that is adding economic and social value. How committed will the pursuit be?

The chase on grounds of security is hotting up. In the UK, the government seems set on forcing new demands on the industry to prevent online radicalisation. The home secretary, Amber Rudd, has spoken about her desire to ban “end-to-end encryption” – a security feature that prevents third parties eavesdropping on conversations – in products such as WhatsApp. Banning it would make it easier for the authorities to tap into the chats of people of interest – but only if they didn’t just move to another encrypted messaging service, or simply set their location to the US to download a clean version of the app.

Rudd has also demanded that companies such as Facebook and Twitter do more to fight terrorists using their platforms to spread extremist propaganda. But again there is a gulf in understanding on the part of the Home Office. As the social networks have repeatedly argued, they already have far stricter definitions of extremism than the UK government does, and the millions thrown into tackling groups such as Isis have largely served to push members to smaller sites that don’t have the resources to do anything about it.

Amazon has been hit with a bill of €250m by the EU, which says it benefited from illegal state aid.



Amazon has been hit with a bill of €250m by the EU, which says it benefited from illegal state aid. Photograph: Graeme Robertson for the Guardian

Why do governments keep trying to apply old laws to situations where they don’t fit? Why not make the legal frameworks that govern these companies fit for the 21st century? The answer is mindset. Technology isn’t really about tech any more. There’s a reason why Uber is a tech firm but the taxi company Addison Lee isn’t, and it’s not to do with the apps. It’s a mindset best summed up by Facebook’s one-time tagline, “Move fast and break things.” It’s about asking for forgiveness rather than permission – or not looking before you leap.

Almost every technology giant has something in its history that shows that attitude. Search engines were on the borderline of legality the first time they began crawling through the web and saving copies of sites to their databases, and that fact causes occasional problems for Google to this day. When the iPod launched in the UK, there was essentially no legal way to get music on it: ripping CDs was banned, and the iTunes store didn’t exist – but that didn’t stop Apple.

Arguments involving Airbnb, Uber and other tech disruptors have even led to a new term being coined: regulatory arbitrage. The arbitrageurs make money not by providing a platform but by providing legal cover for individuals to do something that would be dicey without the support of a well-founded startup – be that picking up strangers on the street for a cab journey, renting out your home for long periods without registering as a hotel, or some as yet undreamed-of innovation.

Startups will always exist at the fringes of regulation. Once they become comfortable, regulated companies, they lose that spark that makes them dangerous and exciting. That doesn’t mean governments shouldn’t try to keep their excesses under control, but it explains why their attempts to do so have been quite so half-hearted and ill thought-through. They fear that via excessive regulation – by having the cat catch the mouse – the result might be to kill it.

Alex Hern is a technology reporter for the Guardian

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