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‘Catastrophic’ consequences if Facebook collapses

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A University of Oxford paper which explores the hypothetical collapse of Facebook has recommended a new regulatory framework for ‘systemically important technological institutions’, which draws on existing regulation for global financial institutions and public utilities.

Facebook going the way of MySpace is unlikely, with the company sailing mostly unharmed through its largest-ever advertiser boycott, increasing dissatisfaction from users, and intensifying pressure from regulators and lawmakers.

However, the hypothetical failure of a data-rich company like Facebook would result in “catastrophic social and economic consequences” far beyond those associated with the closure of other social media platforms and which current regulatory frameworks are not suited to deal with.

The Internet Policy Review paper suggests that Facebook would be most likely to fail under pressure from regulators – particularly if stricter data regulations squeeze its targeted advertising revenues – or due to shifting social media trends towards mobile-first apps such as Snapchat and TikTok.

This would have a disproportionate response on communities which depend heavily on Facebook. Facebook is a “critical economic engine” for many news outlets; a change in Facebook’s News Feed algorithm to prioritise content from contacts had serious consequences for the media industry, with some news outlets reportedly losing the majority of their traffic.

“If such a small change in its algorithms could lead to the economic disruption of an entire industry, the wholesale closure of the main Facebook platform would likely cause significant economic and societal damage on a global scale,” the authors of the paper warn.

Other dependent communities include pockets of the world lacking well-developed digital infrastructure and which rely heavily on tools such as Facebook Free Basics. In some communities, the researchers write, “Facebook effectively is the digital public sphere”. For instance, the language of Laos has not yet been fully indexed by Google, resulting in Facebook effectively becoming the Laotian web.

The harm done to Facebook users in the event of a collapse would not be limited to loss of services, particularly due to Facebook’s vast store of user data: “As long as the platform remains operational, users have a clear idea of who they can hold accountable for the processing of their data. Should the platform be forced to close, or worse still, sell off user data to a third party, this accountability will likely vanish.”

The collapse of Facebook would create an unprecedented situation which current data protection laws may not be able to address, the paper says. This would be particularly damaging for deceased users, which do not qualify for protection under existing data protection laws (while living users would need to give informed consent under GDPR to have their data sold or transferred). There would be no limitations on who could purchase deceased users’ data or for what purpose.

The researchers suggested that current regulations are inadequate for dealing with the disorderly collapse of a platform like Facebook, particularly if it were to occur due a crisis comparable to the Covid-19 pandemic. They argue that it could be necessary to regulate these platforms similarly to other systematically important institutions like global financial institutions or critical national infrastructure.

A new regulatory framework for Facebook and similarly influential platforms should draw on existing approaches to regulating systematically important institutions, such as with measures to fast-track insolvency proceedings to facilitate an orderly process and minimise harm to dependent communities.

The paper also recommends strengthening legal mechanisms to control their own data in the case of platform collapse and legal protection for data privacy after death.

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