Business
Opinion: AI and privacy rules meant for Big Tech could hurt small businesses most
As lawmakers and regulators in the U.S. consider policy born of their Big Tech concerns such as data privacy and artificial intelligence, they should carefully consider how such changes could end up trampling the small and midsize businesses that drive innovation and competition.
While policymakers may have Google and Facebook in mind, the actual policies could unintentionally create new regulatory burdens that could deter investment in smaller businesses and prevent new companies from emerging. For example, calls to end Section 230 — part of a 1996 law that protects internet companies from some lawsuits — portray it as a handout to Big Tech, when in practice it would mean new social media companies would face liability early on, making it more difficult to compete and discouraging them from carrying user-generated content that provides new opportunities or ways of connecting.
In this way, regulations that policymakers may think target Big Tech could ultimately serve the biggest companies by placing increasing burdens on potential competitors.
In the U.S., the government has generally taken a hands-off approach to the technology industry, keeping barriers to entry low and fostering entrepreneurship. Today’s leading companies were once small startups, and regulators’ light touch allowed them to flourish, creating benefits for consumers that could not have been predicted. The economy and consumers need this approach to continue so today’s startups have a chance as well.
We can see this theory play out in the real world. Europe has taken a significantly different approach to technology policy, which has stifled small businesses. For example, after a European privacy law, the General Data Protection Regulation, went into effect in 2018, investment in small and startup businesses decreased, largely out of concerns that small companies would struggle to comply with the new rules.
In the short run, such investment decreased by 36%, and large players gained market share in the advertising sector. One effect of the regulation, according to a National Bureau of Economic Research study, is a “lost generation” of innovation; smartphone app stores have added nearly one-third fewer applications.
To protect consumers from exploitation by Big Tech, some policymakers in the U.S. have been flirting with a more European approach. However, many proposed policy changes would increase compliance costs or liability burdens on newer and smaller players that might not be able to afford them. This includes state-level data privacy policy that risks creating a burdensome and costly patchwork as well as calls by senators to impose AI licensing.
Beyond issues that have compliance costs such as data privacy and AI, some critics of Big Tech have called for antitrust enforcement to protect small businesses from the “kill zone” — the window of time in which a growing startup is bought by a big company before it can become a rival to that company. These critics also call for changes that would potentially limit mergers or acquisitions.
But this approach creates a false dichotomy between “big” and “small” business that misunderstands the way the startup ecosystem works. This strategy could hurt small businesses in many ways. Some may want to grow into challengers, but others were created with the hope of being sold; investors in startups are often looking for the right moment for the company to be acquired so they can recoup their money. That’s valid too; this cycle leads to more investment and more innovation.
Blocking mergers and acquisitions could force small businesses to stay small, or, worse yet, it could push them out of business. Antitrust rules that are preoccupied with curbing Big Tech would end up hurting the industry, the economy and consumers.
We saw this play out recently when regulators blocked Amazon’s acquisition of IRobot. The result is most likely not renewed competition but that consumers will have fewer options as IRobot faces a dire financial situation and lays off workers. If further burdens to mergers and acquisitions and a shift away from the focus on consumers continue, this could become a more frequent phenomenon, to the detriment of both small businesses and consumers.
Small businesses and startups play an important role in the tech ecosystem and have flourished under the light touch of U.S. regulators. After decades of experience, allowing policy to be shaped by today’s enmity toward Big Tech would be a dangerous swerve and could have unintended consequences for startups and consumers.
Jennifer Huddleston is a senior fellow in technology policy at the Cato Institute and an adjunct professor at George Mason University’s Antonin Scalia Law School.
Business
Heidi O’Neill, Formerly of Nike, Will Be New Lululemon’s New CEO
Lululemon, the yoga pants and athletic clothing company, has hired a former executive from a rival, Nike, as its new chief executive.
Heidi O’Neill, who spent more than 25 years at Nike, will take the reins and join Lululemon’s board of directors on Sept. 8, the company announced on Wednesday.
The leadership change is happening during a tumultuous time for Lululemon, which had grown to $11 billion in revenue by persuading shoppers to ditch their jeans and slacks for stretchy leggings. But lately, sales have declined in North America amid intense competition and shifting fashion trends, with consumers favoring looser styles rather than the form-fitting silhouettes for which Lululemon is best known.
“As I step into the C.E.O. role in September, my job will be to build on that foundation — to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world,” Ms. O’Neill, 61, said in a statement.
Lululemon, based in Vancouver, British Columbia, has also been entangled in a corporate power struggle over the company’s future. Its billionaire founder, Chip Wilson, has feuded with the board, nominated independent directors and criticized executives.
Lululemon’s previous chief executive, Calvin McDonald, stepped down at the end of January as pressure mounted from Mr. Wilson and some investors. One activist investor, Elliott Investment Management, had pushed its own chief executive candidate, who was not selected.
The interim co-chiefs, Meghan Frank and André Maestrini, will lead the company until Ms. O’Neill’s arrival, when they are expected to return to other senior roles. The pair had outlined a plan to revive sales at Lululemon, promising to invest in stores, save more money and speed up product development.
“We start the year with a real plan, with real strategies,” Mr. Maestrini said in an interview this year. “We make sure decisions are made fast.”
Lululemon said last month that it would add Chip Bergh, the former chief executive of Levi Strauss, to its board to replace David Mussafer, the chairman of the private equity firm Advent International, whom Mr. Wilson had sought to remove.
Ms. O’Neill climbed the organizational chart at Nike for decades, working across divisions including consumer sports, product innovation and brand marketing, and was most recently its president of consumer, product and brand. She left Nike last year amid a shake-up of senior management that led to the elimination of her role.
Analysts said Ms. O’Neill would be expected to find ways to energize Lululemon’s business and reset the company’s culture in order to improve performance.
“O’Neill is her own person who will come with an agenda of change,” said Neil Saunders, the managing director of GlobalData, a data analytics and consulting company. “The task ahead is a significant one, but it can be undertaken from a position of relative stability.”
Business
Angry Altadena residents ask officials to halt Edison’s undergrounding work
Eaton wildfire survivors’ anger about Southern California Edison’s burying of electric wires in Altadena boiled over Tuesday with residents calling on government officials to temporarily halt the work.
In a letter to the Los Angeles County Board of Supervisors, more than 120 Altadena residents and the town’s council wrote that they had witnessed “manifest failures” by Edison in recent months as it has been tearing up streets and digging trenches to bury the wires.
The residents cited the unexpected financial cost of the work to homeowners and possible harm to the town’s remaining trees. They also pointed out how the work will leave telecommunication wires above ground on poles.
“The current lack of coordination is compounding the stress of a community still reeling from the Eaton Fire, and risks causing further irreparable harm,” the residents wrote.
The council voted unanimously Tuesday night to send the letter.
Scott Johnson, an Edison spokesman, said Wednesday that the company has been working to address the concerns, including by looking for other sources of funds to help pay for the homeowners’ costs.
“We recognize this community has already faced a number of challenges,” he said.
Johnson said the company will allow homeowners to keep existing overhead lines connecting their homes to the grid if they are worried about the cost.
Edison’s crews, Johnson said, have also been trained to use equipment that avoids roots and preserves the health of trees.
The utility has said that burying the wires as the town rebuilds thousands of homes destroyed in the fire will make the electrical grid safer and more reliable.
But anger has grown as work crews have shown up unexpectedly and residents learned they’re on the hook to pay tens of thousands of dollars to connect their homes to the buried lines.
Residents have also found the crews digging under the town’s oak and pine trees that survived last year’s fire. Arborists say the trenches could destroy the roots of some of the last remaining trees and kill them.
Amy Bodek, the county’s regional planning director, recently warned Edison that a government ordinance protects oak trees and that “utility trenching is not exempt from these requirements.”
Residents have also pointed out that in much of Altadena, the telecom companies, including Spectrum and AT&T, have not agreed to bury their wires in Edison’s trenches. That means the telecom wires will remain on poles above ground, which residents say is visually unappealing.
“While our community supports the long-term benefits of moving utilities underground, the current execution by SCE is placing undue financial and planning burdens on homeowners, causing irreparable harm to our heritage tree canopy, and proceeding without adequate local oversight,” the residents wrote.
They want the project halted until the problems are addressed.
Edison announced last year that it would spend as much as $925 million to underground and rebuild its grid in Altadena and Malibu, where the Palisades fire caused devastation.
The work — which costs an estimated $4 million per mile — will earn the utility millions of dollars in profits as its electric customers pay for it over the next decades.
Pedro Pizarro, chief executive of Edison International, told Gov. Gavin Newsom last year that state utility rules would require Altadena and Malibu homeowners to pay to underground the electric wire from their property line to the panel on their house. Pizarro estimated it would cost $8,000 to $10,000 for each home.
But some residents, who need to dig long trenches, say it will cost them much more.
“We are rebuilding and with the insurance shortfall, our finances are stretched already,” Marilyn Chong, an Altadena resident, wrote in a comment attached to the letter. “Incurring the additional burden of financing SCE’s infrastructure is not something we can or should have to do.”
Other fire survivors complained of Edison’s lack of planning and coordination with residents.
“I’ve started rebuilding, and apparently there won’t be underground power lines for me to connect with in time when my house will be done,” wrote Gail Murphy. “So apparently I’m supposed to be using a generator, and for how long!?”
Johnson said the company has set up a phone line for people with concerns or questions. That line — 1-800-250-7339 — is answered Monday through Saturday, he said.
Residents can also go to Edison’s office in Altadena at 2680 Fair Oaks Avenue. The office is open Monday to Friday from 8 to 4:30.
It’s unclear if the Eaton fire would have been less disastrous if Altadena’s neighborhood power lines had been buried.
The blaze ignited under Edison’s towering transmission lines that run through Eaton Canyon. Those lines carry bulk power through the company’s territory. In Altadena, Edison is burying the smaller distribution lines, which carry power to homes.
The government investigation into the cause of the fire has not yet been released. Pizarro has said that a leading theory is that a century-old transmission line, which had not carried power for 50 years, somehow re-energized to spark the blaze.
The fire killed at least 19 people and destroyed more than 9,400 homes and other structures.
Business
Oil Prices Rise as Investors Weigh Cease-Fire Extension
Oil prices rose and stocks moved slightly higher on Wednesday as investors tried to make sense of President Trump’s decision to extend the cease-fire with Iran despite doubts about the status of another round of peace talks.
An adviser to Mohammad Bagher Ghalibaf, the influential speaker of the Iranian Parliament, dismissed the cease-fire announcement, saying that it had “no meaning.” He equated the U.S. naval blockade with bombings, with commercial vessels coming under attack near the Strait of Hormuz, the crucial shipping lane that has been at the center of a growing energy crisis.
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