EU and US regulators scrutinise Big Tech and digital ‘monopoly’
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If 2019 was about “techlash,” the public backlash against Big Tech, 2020 will centre on a race between the world’s largest platform companies — particularly Google, Facebook and Amazon — and the regulators that want to bring them to heel.
During their discussions at this week’s World Economic Forum in Davos, delegates will consider how to create a global consensus on deployment of so-called Fourth Industrial Revolution technologies. As for the big companies themselves, a crucial challenge this year looks likely to come from Europe.
Margrethe Vestager, EU competition commissioner, has new powers allowing her to bring together the issues of privacy, monopoly and security. She has called for the burden of proof in antitrust cases to be put on the larger companies (small ones often go out of business fighting the titans, who have deep pockets and big legal staffs).
Ms Vestager has floated the idea of using obscure rules that could force companies to “cease and desist” from activities considered problematic while waiting for the outcome of antitrust cases. These include competing in allegedly unfair ways on their platforms against their own customers, or refusing to allow audit of algorithmic bias.
We shall probably not see a big antitrust case resolved in 2020 (they tend to take years) but it is likely that the idea of consumer harm, and in particular consumer prices, as the final measure of monopoly will be challenged. US and European regulators are starting to look closely at whether traditional University of Chicago thinking on monopoly, which has reigned supreme for 40 years, makes any sense in the digital age.
Chicago School thinking held that as long as consumer prices were falling there was no competition problem. But when transactions are done in data rather than dollars, such ideas may be less relevant. Big technology companies offer services that seem to be free, yet consumers are paying with their own data in opaque and asymmetric transactions. Only the company itself knows how much the data is worth.
Ms Vestager has advanced the idea that Big Tech should have to show how it helps consumers, rather than merely that it does not harm them. She wants to connect the dots between how companies use data — and whether they might layer from different sources (search, handsets, apps, etc) in ways that are anti-competitive. A company like Facebook, for example, may garner unfair advantages by combining data from various apps that it has acquired.
The Federal Trade Commission, the regulator, is considering an injunction against Facebook on the sharing of data between Instagram, WhatsApp, and Messenger. This could force not only new disclosures on data value and how much it is worth to the company (something that states like California are pushing for) but also more algorithmic transparency about how data are used.
Regulators will probably dig into the buying and selling of digital advertising via companies like Google. Some policymakers believe these have an unfair advantage against competitors, because of their hold on advertising space. Google and Facebook together take most of the world’s digital ad dollars.
We shall see more scrutiny of whether Amazon, which dominates ecommerce outside China, has an unfair advantage against its own suppliers — since it both owns the network and also sells its own products on it, thus competing against them. History records that 19th century US railway companies, which owned networks and conducted commerce on them, were broken up as monopolies.
Finally, there will be growing pressure from politicians who want to turn back CDA230, the regulatory loophole that allows platform companies to avoid liability for nearly everything that users say or do online. This move is, in part, to combat the problem of election manipulation.
Big Tech continues to use its formidable lobbying power to push back against the onslaught. While the Trump administration seemed at one point to be critical of platform companies, the US government has inserted loopholes like CDA230 into the new US-Mexico-Canada trade deal. It is also trying to make it part of any new transatlantic deals.
Tech companies are building new caches of data in fields like finance and healthcare, with ventures that allow them to partner with and mine data from banks, hospitals, and insurance firms. They are also doing more sharing with each other — Apple, Amazon and Google have teamed up on standards for the smart home, in an attempt to avoid a turf war over voice assistants, like Siri and Alexa. Use of these devices is growing exponentially and help the companies farm ever more data, more persuasively. Research shows that consumers are more influenced by voice suggestions than those in text. The worry is that a company like Amazon could use Alexa to push consumers towards certain products that are more profitable for the company.
Already, regulators are looking into whether Big Tech’s forays into finance and healthcare may break existing privacy rules in those industries. But perhaps the biggest 2020 battle will be between the US and China which, despite a recent trade agreement, will continue to fight for control of the high-growth industries of the future.
Each side has its warriors, whether tech companies (Google, Apple, Amazon and Facebook in the US; Baidu, Tencent and Alibaba in China), or chipmakers (Qualcomm versus Huawei). One likely impact will be the continued “decoupling” of the US and Chinese tech supply chains. This is supported by the Trump administration and odd bedfellows from rightwing defence hawks to progressive labour advocates.
The same goes in China, where a nationalistic government seeks to ringfence the entire innovation ecosystem and make the Middle Kingdom independent from western technology within a few years. At the same time, it wants to spread the power, wealth and standards of the surveillance state into a host of new countries in Europe, Africa, the Middle East and beyond.
This battle could give cover to the US Big Tech companies. They will continue to position themselves as “national champions” in the fight against China.
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