For Chinese overseas enterprises, this "new Yamen" has different meanings in this special period. The political logic of Internet supervision differs from that of China's Internet surveillance authorities, and American-style Internet supervision is more adept at using "covert operations" to manage Internet platforms, especially abusing the rhetoric of "national security" to seize large baskets on Internet platforms. Under pressure, Chinese companies must be wary of new convergence political risks.
On February 12, U.S. Senate Majority Leader Chuck Schumer said he supported a nationwide ban on TikTok. The reasons remain related to national security concerns and potential social hazards.
Three days ago, Reuters reported on February 9 that at the request of some senators and social voices, the French Senate will also set up an investigation committee against TikTok to investigate whether TikTok harmed the interests of users. Since 2022, criticism of TikTok has been particularly fierce in various countries, with both the harshness of policy and legislative elites and the broader concerns from the social level.
Image source: Reuters
Cory Doctorow, an American activist and journalist, argues in his book TikTok's "Garbage" and the Death of Platforms that there is a trend of "garbage" on a business level, abusing users and business customers, and eventually leading to the gradual demise of platforms. There are also views that it is the "garbage" of platform content that has brought about a huge negative social perception and attracted the intervention of strong supervision by the state.
In recent years, China, the United States and the European Union have all been in such a strong regulatory situation. The large fines against tech giants are numerous. The difference is that China has entered a period of normalized supervision after two years of regulatory rectification, while Europe and the United States are still "layer by layer". The European Union has introduced some of the strictest legislation in history, such as the Digital Markets Act and the Digital Services Act. The United States is also constantly pushing for relevant legislation, but its attitude is more willing to attack foreign companies first. Under this international trend, Chinese overseas enterprises represented by TikTok will inevitably face greater and more complex regulatory pressure.
1 The so-called "garbage": a new face of a historical problem
When we talk about platforms, we generally mean a place (platform) that connects consumers and sellers. Platform business models are not new. In fact, they can be traced all the way back to the early markets, bazaars, and auction houses of ancient Rome. By the 20th century, platform business models also existed in malls and auction houses. Until the emergence of the Internet, the connotation of platform was completely changed in the 21st century, and it gradually evolved into a special form of "platform capitalism".
Out of the pursuit of economic value and profit, platforms will have the instinct to commercialize and monetize content. Many of the biggest tech platforms, from Amazon to Facebook and now TikTok, have a platform-specific business model. This business model will assume the role of building a large-scale public platform and providing public goods in the early stage, and commercialize and make profits in the later stage. Corey replaced this part of the description of commercialization with "garbage", but in essence, commercialization is at the heart of platform capitalism, not good or bad. Just like a private company undertaking highway construction, can you blame it for charging for passing vehicles after it is built? But just because who pays more money, you can't ignore traffic rules, speed or change lanes at will. In other words, how does the platform balance its public and commercial nature.
First, the platform attracts users with artificially low product prices. Then, attract sellers, such as advertisers or third-party retailers, by promising to reach a specific audience. These two phases are often synchronized and require a huge upfront investment. When these two phases are completed, the platform is initially built and enters a long-term revenue model, balancing and profiting users and retailers/advertisers at both ends.
Finally, the "garbage" part that Corey refers to: When companies try to maximize their profits, they harvest profits at both ends by commercializing and monetizing them. "From the mobile app store to Steam, from Facebook to Twitter, there is an enshittification lifecycle." Corey believes that under the business model of the platform, the surplus is first returned to the user to lock the user, and then the surplus flows to the supplier to lock the supplier, and finally the surplus will be handed over to the shareholders continuously, and at this time, the platform's original expectations and value for users and suppliers disappear.
The "garbage" of platforms is actually a discussion of public and commercial nature in the digital age. As a public good, the platform has a public character; As a product of the market, it is also commercial. Social platforms, search engines, these large platforms, have now become the necessity of people's lives like water, electricity, the Internet, roads, so they have certain public goods attributes. The "garbage" of public goods does not only refer to the proliferation of advertisements for profit and the decline in content quality, but also refers to the continuous monetization of platforms to hollow out the social value borne by themselves, which is a process of bad money driving out good money. From this point of view, "garbage" allows "junk content" to flood, and even condones algorithms to encourage and assist the production of "spam content", which is a commercial short-sighted behavior that not only harms society, but also accelerates its own demise. The biggest problem behind this is the imbalance between commercial and public.
The imbalance between commercial and public nature will inevitably lead to negative social effects, and thus produce different degrees of negative social perceptions. This is not a new discussion, but a recurring story of capitalism at various stages of history. In each story, excessive publicity will stifle commercial innovation and market initiative, while excessive commercialization will have a negative effect on society, harming sociality and publicity. For example, the earliest textile industry exploited child labor, heavy industry pollution to the environment, railway industry low wages and so on. Therefore, we are not talking about a brand new problem brought about by the platform economy, but a new face of a problem that has been repeated in history. There are two main concerns about platform capitalism at present.
The first is the issue of adolescent health and protection. For companies such as TikTok and Facebook, the harshest criticism of American society is that excessive commercialization has caused some user groups (teenagers) to become seriously sticky to them and exposed to sometimes harmful content.
In January 2023, some public schools in Seattle, USA, jointly sued tech giants including TikTok, Facebook, Instagram, YouTube and Snapchat, accusing them of creating "a mental health crisis for American youth." In a 91-page lawsuit filed in U.S. District Court, tech giants have exploited the addictive nature of social media, leading to an increase in anxiety, depression and thoughts of self-harm. Schools and parents believe that the harmful content pushed by these companies to users, including extreme diets and encouraging self-harm, indirectly contributed to a 30% increase in students with depressive tendencies between 2009 and 2019.
The second is privacy protection and data security issues. In addition to the harm of the content itself, another issue that the platform has been accused of is its invasion of privacy and the danger of data breaches. Platforms including Facebook, Twitter, and TikTok all hold huge amounts of information about users and suppliers. The systems behind the platform record user and vendor behavior, browsing history, and various information every second, creating privacy and data security related issues.
2 punches, a rebalancing of commercial and public
In recent years, the European Union, the United States and China have begun to strengthen the regulation of the platform economy and the regulation of technology giants, and the internal logic behind it is that the imbalance between commerce and publicity has brought economic value to some enterprises, but has not continuously brought positive social value.
The positive value of society not only has the economic value created for a certain party, but also includes the economic value brought to more groups, the reduced business operation costs, and the final positive social effect. Not only platform enterprises, but also more enterprises should pay attention to balancing the gains and losses between their own economic interests, the overall economic interests of society and the overall value of society.
As society realized progress and heated discussions, most countries began to step in, strengthen regulation, and actively promote the balance of various values of enterprises.
In recent years, the United States and the European Union have been in a state of strengthening of regulatory legislation on science and technology. In July 2020, the US Congress held antitrust hearings against Facebook, Amazon, Google and Apple, and in the following two years, the United States continued to introduce draft on privacy legislation and platform responsibilities, including the US Data Privacy and Protection Act, the Digital Market Competition Investigation Report, etc., emphasizing the concept of platforms as "digital gatekeepers", the essence of which is to require platforms to assume their responsibilities to society. But since then there has been no major breakthrough.
The process in the European Union is much faster than that of the United States, and in 2021 the EU published the draft Digital Services Law and the Digital Market Law, which aim to clarify the responsibilities of digital service providers and strengthen the supervision of social media, e-commerce platforms and other online platforms. In 2022, the Digital Services Law and the Digital Markets Law have been settled, targeting global tech giants such as Apple, Google, Meta (formerly Facebook), Amazon and Microsoft.
On the one hand, it is aimed at the power held by these platform companies, that is, their "gatekeeper" nature (the ability to connect a large user group with enterprises and control key data resources). The "gatekeeper blame" requires platform companies not to use their market dominance to squeeze the survival space of other enterprises and platform users in the fields of app stores, search engines, social media, cloud services, online advertising and browsers.
On the other hand, it is aimed at platform enterprises to regulate the privacy and data security of users. In fact, as early as the legislative process, the EU has imposed huge penalties on technology giants with privacy issues through judicial rulings. In January 2022, French data regulator CNIL fined Google and Facebook €150 million and €60 million, respectively, for violating EU privacy rules. The EU also punishes privacy for reasons such as data misuse, opaque data sharing, non-consensual tracking cookies, and privacy transparency issues.
U.S. President Joe Biden reiterated his support for comprehensive privacy legislation in his 2023 State of the Union address. "This year, let's do this by enacting national legislation that restricts the collection, use and sharing of personal information by companies and protects children and youth from behavioral advertising," he said. This is long overdue. On January 11, 2023, Biden published an op-ed in the Wall Street Journal urging Democrats and Republicans to work together to further strengthen regulation and hold big tech companies accountable. The article called for "strict federal protections of Americans' privacy," explicit restrictions on how companies collect, use and share highly personalized data, and restrictions on targeted advertising, among other things.
In summary, the business model of the platform benefits from its huge user base and suppliers and advertisers, and in the early development, the groups at both ends of the platform are sticky to the platform because of the platform's unique commercial feedback mechanism. When the platform has a large number of user and customer resources and data at both ends, it begins to become commercial, that is, to "harvest" the resources and data it has. Commercialization is understandable to the market, but the problem is that the platform is a behemoth, and its over-commercialization or governance negligence will cause serious negative social impacts, such as youth protection and privacy violations. Therefore, the state will intervene through strong supervision to promote passive or self-discipline of the platform and keep commercialization within a moderate range.
3Under pressure, Chinese companies must be wary of new convergent political risks
Commercialization plays an important role in matching and connecting social needs and value innovation. The new economic format is inseparable from the technological revolution, and each technological revolution pushes capitalism to a new climax, and the secret of this is the ingenious and accurate capture of market demand by the commercial application of the technological revolution. We can say that commercialization is such a double-edged sword, excessive commercialization hurts people, but lack of commercialization will also suffocate people and technology at the same time.
How to find the real market demand and find the needs of the current people is a problem that the country and the enterprise need to think about at the same time, rather than over-commercializing or strangling commercialization in a certain aspect. In this case, the regulatory policies of China, the United States or the European Union have played a role in balancing the public and commercial nature, to a certain extent, to stop the inertia of the platform itself towards "garbage", and promote a sustainable path to release positive value.
Under the call of negative perception voices in society, the United States has also begun to enter a cycle of strong regulation of science and technology. The future will see more and more critical critics and lawmakers scrutinizing tech companies in the U.S. market with a more cautious eye. This also means that Chinese overseas enterprises will face more complex and diversified regulatory pressures. Under such pressure, large domestic companies that have sought to expand overseas in the past will have to consider this imminent risk.
The first is the risk of external and uncontrollable geopolitics. This is a difficult level for enterprises to decide, especially with the increasingly fierce competition between China and the United States and the trend of anti-globalization, so that the United States and some European markets have gradually built high walls, deliberately preventing and excluding Chinese enterprises. This new fusion of political risks integrates a variety of new political risks such as traditional data governance disputes, national security risks, national competition considerations, and value differences, creating an uncontrollable geopolitical risk for Chinese companies in the United States.
The second is the regulatory risk of excessive commercialization under the strong regulatory cycle. As the United States and the European Union gradually strengthen their regulation of the negative social effects of platform companies, the regulatory pressure faced by some Chinese enterprises has risen sharply.
In this regard, the essential problem facing Chinese enterprises is how to keep up with the rapidly rising social expectations and corresponding regulatory requirements of European and American societies. This may not be the fault of Chinese companies, but the face of a changing social consciousness and demand. In this era, it is difficult for the market and society to draw a clear line, any market behavior may have a positive or negative impact on society, and in the same way, social consciousness will also cause new opportunities or problems for the market. Therefore, the business model of platforms or more enterprises must inevitably adapt to this law and adapt to a changing society.
Image from the Internet
In January 2023, the U.S. House of Representatives established a new "new Yamen" for China: the U.S.-CCP Ad Hoc Committee on Strategic Competition, referred to as the House Select Committee on China. For Chinese overseas enterprises, this "new Yamen" has different meanings in this special period.
The political logic of Internet supervision is different from that of China's Internet supervision authorities, and American-style Internet supervision is more adept at using "secret operations" to manage Internet platforms, especially very good at abusing the rhetoric of "national security" to seize large baskets on Internet platforms in order to achieve its ultimate goal of "legal bullying".
It must be noted that this kind of "bullying" is ultimately not to make the company really "compliant". In addition to certain reasonable supervision, some policy considerations are to achieve the effect of "knocking" on domestic capital, and the ultimate goal is to make capital worry about the investment of enterprises with Chinese background, and ultimately curb the enterprise development and international image of relevant Chinese enterprises.
If enterprises blindly "admit it", in addition to making the European and American governments more arrogant, it will also make foreign people think that these enterprises "have their own problems", otherwise why will they blindly compromise, and ultimately damage the social image of the enterprise; But if they do not admit it, these companies will be sanctioned and punished for disobedience, which is the wisdom of the "two-ended blocking" of the US-style regulatory authorities.
TikTok's success in the United States is not only because it has successfully led the revolution of short video in the 4G era, but also because China and the United States have not yet found a revolutionary application in the 5G era. Zuckerberg once firmly believed that 5G is the era of the meta-universe, and constantly launched VR devices and applications, hoping to open a new era like the iPhone of that year. But now it has entered a situation where it is difficult to ride a tiger.
In such a window of "emptiness" and "anxiety", the anxiety about the lack of technological change that truly meets people's needs has also prompted regulators to look back at the current giants and examine its irreplaceable market throne in a short period of time.
At present, as China gradually enters the period of normalized platform supervision, many norms related to privacy, data security, and youth protection have been established one after another. Regulation can reduce and prevent excessive negative effects, so where is the sustainable release of positive value for enterprises? How to effectively match social needs and value innovation? Where is the next real technological revolution?