Fox in the Henhouse: The Delegation of Regulatory and Privacy Enforcement to Big Tech

Abstract

The Federal Trade Commission (FTC) has ordered tech giants to police the app developers that use their platforms, requiring them to remove apps that employ deceitful sales tactics or violate consumer privacy. Tech giants have often resisted FTC orders to police the companies on their platforms because policing takes significant resources and diminishes profits. But some firms, after paying modest fines for neglecting enforcement, have eventually complied with FTC demands, removing predatory apps and banning problematic developers. Other firms have continued to shirk enforcement obligations at the risk of escalating fines. What accounts for the differences? Using process tracing to track decisions by Apple and Facebook, we find that tech giants willingly police consumer fraud but not consumer privacy violations. Failures to police fraud leads to public complaints and negative press attention, while failures to police data breaches often go undetected by consumers, the media, and thus the FTC.