More fines for the tech monopolies? Meh, the usual displacement activity—let’s also use technology to help tame the tech giants

There’s increasing talk of fining or even breaking up the big global technology companies because of anti-trust concerns. If you’re experiencing a sense of déjà vu, you’re not alone. It’s become a familiar pattern:

  • Phase 1: dominant players enjoy free rein for years while governments and regulators don earmuffs and say “Lalala” to anyone who warns of problems
  • Phase 2: much wailing and gnashing of teeth as the same governments and regulators realise they’ve been asleep at the wheel and start shouting “Something must be done!”, “How has this happened?”, “It’s an outrage!”, etc.
  • Phase 3: imposition of a fine on the guilty parties accompanied by much grandstanding and back-slapping
  • Phase 4: GOTO Phase 1

Amazon, Google/Alphabet, Twitter and Facebook in particular face accusations of stifling competition—gaming sales, search and social media in pursuit of better profits without any accountability for the consequences. Far from being neutral providers, they’ve allegedly manipulated both sides of their platforms, tilting everything to their own advantage.

We’ve been here before (many times)

None of which is new. We’ve seen break-ups of dominant players before – most memorably Bell Systems in 1982 – while the 2000 proposal to break Microsoft into two “baby Bills” came to nothing. More recently however the focus seems to be on imposing ever bigger fines. In 2008, the European Commission fined Microsoft €899 million for defying sanctions imposed for anti-competitive behaviour. And in 2017 the Commission fined Google €2.42 billion for abusing its search dominance by giving illegal advantage to its own comparison shopping service. The same year, it also fined Facebook €110 million for providing misleading information about its WhatsApp takeover.

The current approach—do nothing; panic; make a lot of surprised noises; settle years later for a fine—ignores the damage done. The jobs lost, competition stifled or bankrupted and markets distorted. Even when punished, the culprit usually remains in a strong position. You can’t recreate with a simple hefty fine the situation that would have existed had the companies been compelled to operate on a level playing field in the first place.

The lack of effective oversight of the global platform players is reminiscent of the poor regulation of banks that preceded the 2008 crash. Consumers ended up paying for that massively expensive governmental and regulatory failure, and no doubt we’ll similarly pay for the failure to adequately regulate the platform players. No wonder so many people have grown cynical about regulation: it so rarely seems to work in the way we expect. We seem stuck with Victorian regulators in a digital economy.

Time for a proper fix

An effective system of regulation could have curtailed and prevented market abuses. In particular, it could have prevented acquisitions that serve two mutually beneficial purposes for dominant players: accelerating their own growth, and the removal of competition. Good for them, but not for the rest of us.

Far from being serial innovators, the success of these global players is more often highly dependent on the unchecked acquisition of companies that are either genuinely innovative, or which threaten the dominant player (possibly both). But as the false promises given around Facebook’s purchase of WhatsApp have shown, assurances matter little. It’s some of the acquisitions themselves that should have been blocked.

The idea of more active intervention doesn’t fit well with the prevailing culture of “hands-off regulation” (surely an oxymoron?) despite its failure to ensure a level and competitive playing field. As we’ve seen with other acquisitions—Kraft’s takeover of Cadbury and the similar false assurances provided and the major consequences later—there’s a wider and more systemic failure of effective regulation at play here than simply the global technology companies.

While we may be re-entering Phase 3 of the pattern above, it’s too little, too late. Governments can impose penalty fines for anti-trust behaviour all they like but they can’t restore markets and competition to the state they would have been in had they done their jobs properly in the first place. The damage is already done.

So yes, impose fines on the current dominant players for their broken assurances and manipulative practises, and even consider breaking them up. But at the same time, we should be honest that such “remedies” rarely seem to fix the underlying problem.

So … how about using tech to help tame tech abuses?

If we’re going to break out of the infinite Phase 1 to 4 loop we need to move to a better approach. We need to modernise our approach to regulation and take advantage of technology to tackle anti-competitive practices, gathering near real time data about a company’s behaviour and its impact in the marketplace. Something which can be both “light touch” and automated—to provide sufficient evidence of regulatory compliance. Something similar to the systems in financial and trading markets monitoring for insider abuses and other indicators of rogue behaviour.

A more effective regulatory model must still enable new innovative companies, technologies and services to take flight without imposing premature or over-burdensome regs—and do so while ensuring fair competition and preventing anti-trust behaviour.

We also need to invest more in our regulators—giving them the resources, expertise and capabilities they currently lack. I wonder how much of the money raised from fines has previously been used to do this? Or how much has been directed into start-ups and innovators, particularly those working on democratic and positive uses of technology to co-create “tech for good” activity and counter the often-dystopian focus of some of the global companies? Or has the money from the fines all been lost into general treasury funds? If so, a real opportunity for improvement has been pointlessly squandered.

An approach that’s informed by real time data combined with the use of effective levers—such as blocking market-distorting acquisitions—seems as good a way of making this happen as any. I’m not claiming it’s the only action required, but it feels like an important part of feeling our way to a better approach than the one we have right now.

Original source – new tech observations from a UK perspective (ntouk)

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