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Regulating Facebook

In 2010 three of the Internet's social networking giants—Facebook, Twitter, and Google—agreed to privacy audits for the next decade as part of a settlement with the Federal Trade Commission (FTC). A March report from the FTC brags about these "enforcement actions against Google and Facebook" and warns that more could be on the way. The report concludes that the "industry still has more work to do to promote consumer privacy" and proposes a "privacy framework" to guide future enforcement actions.

FTC bureaucrats aren't the only government officials who support regulation of social networks. Sen. Chuck Schumer (D-N.Y.) has called for privacy rules, and British Prime Minister David Cameron has suggested that individuals who discuss violent acts via networking services should be banned from them.

Implicit in many of the calls for regulation is the idea that social networking sites are public goods—essentially a new form of public utility, like water or power—and should be treated as such. Although "imposing new privacy protections will not be costless," the FTC's report says, "the Commission believes doing so not only will help consumers but also will benefit businesses by building consumer trust in the marketplace." 

But in a March white paper, Adam Thierer, a senior fellow at George Mason University's Mercatus Center, say it's a mistake to think of social networks as utilities. "If regulation spawns charges for social media services," he writes, "consumers might revolt since they have grown accustomed to an abundance of 'free' online services." Thierer admits there is no way to know what pricing changes, if any, Google, Facebook, or others might implement, but he argues that "anything more than the $0.00 they currently charge will likely shock consumers."