British think tank ResPublica has claimed current competition law is not fit for purpose, and runs the risk of companies such as Google and Facebook creating digital monopolies and ultimately a losing position for the consumer.
In its latest report on the industry, ‘Technopoly and what to do about it: Reform, Redress and Regulation’, the think tank argues competition law needs to stop privileging big business and focus on the benefits of small businesses and market structure. The team is pointing towards the ‘kill in the crib’ emerging trends, with the super-powers of tomorrow acquiring any business which is deemed a potential threat in the long-run. Of course this is standard business practise, but without a more stringent view on what should and shouldn’t be allowed, acquisitions could lead to the death of competition.
“Digitalisation and the new world of Big Data are already conferring vast benefits… Not such good news are the new threats that digitisation poses to competition and the weakened capacity of insurgents to be lode-bearers of the new,” the think tank warned. “Investment in patents, copyrights and computerised systems has become a new form of intellectual capitalism.
“The company that gains first mover advantage (with the creation of the fastest growing network of digital users) is the company on the way to establishing a monopoly position, which can be further entrenched – as monopolies have always been – by buttressing that position through making its services as distinctive and non-reproducible as possible. If unconstrained by competitive alternatives, there is a danger that these companies can eliminate all potential competition through acquisition strategies.”
This is of course not a new argument, but we are starting to see the negative benefits of such dominance. Revenues are only widening, meaning the predatory nature of the major players will continue to increase as well as the vast amount of cash being thrown into R&D departments. We don’t think the argument of ‘they’ll be more innovative because they have more money’ offers much credibility, Facebook and Google are entitled to spend the billions however they please, but such a strangle hold on the consumer means more than reduced competition; it means less variety.
Such a dominance over revenues will mean a less stable business for the traditional media players, some of which are already facing the threat of extinction. The social media giants have already stated they do not wish to have editorial control over the news content on the platforms, though they will continue to fight fake news, threatening the ability for the general public to remain informed.
“The ‘Fantastic Four’ (Google, Facebook, Amazon and Apple) are now widely recognised to be dominating the technology sector and controlling the media,” the report states. “They have wrapped the planet with their platforms and inhabit all, or almost all offices, schools and homes. Their impact on communication is pervasive and the consequences for freedom of expression and press freedom is only now becoming clear.”
The main threat for ResPublica seems to be the suitability of current legislation. This is of course not the first time the readiness of the red-tape maze has been questioned, but it certainly is worth continuing to ask the question until it is answered. There does seem to be a lot of busywork taking place, but few governments or bureaucratic bodies seem capable of tackling the internet giants in the complicated, and often unruly, digital landscape.
“This is an exciting time in the sector, as companies seek to exploit the potential of AI, which could double economic growth rates in industrialised countries like ours – But the dominance of the current behemoths puts this at risk,” the report states.
“By tolerating anti-competitive strategies, failure to penalise bad behaviour and make law breakers pay, we are damaging innovation. This is why we propose a pan European approach to dealing with the sector, support for small and medium size enterprises to gain market entry and the use of the states’ purchasing power to ensure greater choice and diversity.”