Brad Smith was a top lawyer at Microsoft when the company was locked in epic regulatory battles with the U.S. and European governments in the 1990s, so he knows a thing or two about antitrust. Today, he believes that attitudes about corporate monopolies are changing and that this could bring about significant modifications in policy.
Speaking Monday evening at Fortune‘s annual CEO Initiative in New York City, Smith said he believes U.S. regulators will start to look beyond consumer prices to companies’ overall behavior as a test for anti-competitive behavior.
Smith agreed with the assessment of Fortune executive editor Adam Lashinsky, his interviewer, that the American government is prepared to adopt elements of “hipster antitrust.” The term, defined by a view of antitrust that goes beyond the traditional consumer welfare standard to include a range of socioeconomic issues, began as a tongue-in-cheek phrase but is now in use by academics and even the American Bar Association.
A shift in political attitudes is making officials look more favorably upon the hipster version of the law, Smith said.
“Obviously, the public atmosphere has changed really quite remarkably,” Smith said. “It used to be that you’d be from the tech sector and everyone would say ‘that’s fantastic’.”
Today, regulators likely feel more remorse that they didn’t act more aggressively to stop earlier mergers such as Facebook’s acquisition of Instagram and WhatsApp, Smith said. He added that regulators will also focus their attention on the role of online platforms in building monopolies.
“Apple-Spotify will be first real case on how operating systems use app stores,” said Smith, referring to the European Union’s recent decision to investigate Apple following a complaint by audio streaming service Spotify that the iPhone maker was hurting competition.
Smith also noted hipster antitrust may gain traction as more people view personal data as a form of currency.
Microsoft on Facial Recognition and the Housing Crisis
Smith’s antitrust comments came in the context of a broader discussion about tech companies’ responsibility to confront social issues at a time of diminishing trust in capitalism. One of these issues is the housing crisis wracking top West Coast tech hubs like Seattle and San Francisco.
According to Smith, the housing crisis has joined education and transportation as Microsoft’s top priorities. (Microsoft is headquartered in Redmond, Wash., a Seattle suburb.) Homelessness is just the tip of the iceberg, Smith said—such cities also face a severe housing shortage for low- and middle-income residents.
“You can’t have a healthy company without being in a healthy community,” said Smith, adding that many teachers, nurses, and emergency workers now face punishing 90-minute commutes.
That’s why Microsoft recently invested $500 million to expand housing options in Seattle, Smith said. It has also worked with mayors of nine nearby cities to address the crisis.
The other social issue that’s top of mind for Smith is facial recognition, which he described as “the first real concrete application of artificial intelligence.”
Smith recounted how Microsoft declined to supply facial recognition to California law enforcement on the grounds the technology is still experimental, and because its deployment could result in people of color being wrongfully arrested.
Currently, facial recognition is unregulated in the U.S. outside of San Francisco, where city officials barred its use by law enforcement. Smith predicts that more cities and states will begin to pass laws to oversee its use, but that federal regulation is unlikely to occur prior to 2021.
The topic resonates with Smith, who describes the ethical issues surrounding facial recognition and other new technologies in his new book Tools and Weapons: The Promise and the Peril of the Digital Age. Said the executive: “Cities, states, and countries will have to make a decision on how they want this technology to be used.”
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