By Harsh Joshi
Regulating or Breaking up Big Tech? What lies in the future?
“Big Brother is watching you”
The famous (or rather infamous) quote from ‘1984’ is not really a farfetched idea from reality as per the many netizens that believe that Big Tech along with governments worldwide is keeping an eye out for them.
Amazon knows our shopping preferences, Facebook defines our social relationships andTwitter knows what we are currently thinking about. If this does not instil enough fear, take the following instance. In 2006, Netflix launched ‘Netflix Prize’, offering a prize of a million dollars to anyone who could significantly improve their recommendation system and released 100 million records from its 500000 users. The records were anonymised by removing all personal identifiers. The winning team used machine learning techniques to bag the bounty. But the revelations were something that would put the dystopian novel to shame. For example, a user was re-identified as a mother and a closeted lesbian living in America’s Midwest. Undoubtedly, Netflix was sued under a class action lawsuit.
The growing dominance of data driven companies have raised many eyebrows. Many governments are in the process of framing policies to regulate technology companies. The EU with the passing of GDPR1 remains at the forefront of policymaking, followed by the US, where a consensus among both the Democrats and the Republicans has emerged for the purpose of increasing scrutiny of Big Tech.
For the sake of coherence, it would be of prudence to first define Big Tech. Big Tech, when normally referred to, consists of the FAANG2 and Microsoft. Now, if we individually look upon the businesses of Big Tech, we find that these companies are not comparable. Google and Facebook earn a major chunk of their revenue from advertising, Apple sells electronic hardware, Microsoft is involved in an array of businesses, and lastly Amazon is actually a goods retailer. Out of these, some might not even fall under the conventional definition of a ‘technology company’. What links all these together is their business model – platform. A platform is a business model that facilitates the exchange of value between consumers and producers. Think of it as what Apple does for Apps, Youtube does for videos and Uber does for taxis. And because platforms’ margins increase as their networks grow, only one or two platforms remain to dominate the market. This is exactly the reason why the markets of Big
Tech have monopolistic/oligopolistic tendencies.
This, however does not entirely justify the need to regulate or break up Big Tech.
Governments cannot enforce stringent regulations on Big Tech just because their markets are oligopolistic. The need to regulate Big Tech gained prominence during the 2016 US Presidential elections, when social media platforms were used as a medium to censor right wing content, exploit algorithms in order to spread propaganda and misuse SPDI3 to specifically target minorities. Big Tech has also been accused of stifling competition and
innovation and violating individual privacy rights.
Break Up Big Tech?
The US Senator Elizabeth Warren has been vocal about breaking up Big Tech. What does it exactly mean to break up Big Tech? It involves separating Big Tech companies into smaller separate entities and unwinding Mergers. Breaking up Facebook would mean separating Instagram and Whatsapp from Facebook. For end users, this would mean less functionality and possibly pricing some services that were earlier available for free. So, how is Breaking Up even a plausible solution? The idea is that a platform itself cannot participate as a consumer or as a producer. It can only act a medium and not be a participant. Let us take an example. Amazon Basics is Amazon’s private label for everything right from cables to clothes. In addition to that, Amazon uses its enormous sales data about successful products launched previously to bolster its own brand i.e. ‘Basics’. In short, Amazon is cloning successes by giving products that it already knows people want, just at a cheaper rate.
Breaking up Amazon would level the field and create fair market conditions for other market players. However, it still does not address the socio-political issues associated with Big Tech like consumer privacy and spread of hateful speech.
Also, Break Ups take place under antitrust laws and these laws do not inherently condemn monopolies. Antitrust enforcement requires exclusionary conduct by dominant firms, meaning that the firm excludes its rivals to fortify its market position. Another significantpoint being that the US government has broken up corporations only twice (Standard Oil and AT&T). So, Break Ups would be defensible only against those firms that have used their own platforms to favour their own services over rival services. The antitrust laws also needs to
take care that it doesn’t discourage competing of Big Tech with each other.
Or Regulatory Roles?
There are many who don’t favour Break Ups, saying that it only becomes troublesome and fail to solve many other problems. They are of the belief that sector-specific regulations, among various other policies should be framed to reinvigorate the current technology laws.
Take the case of EU, wherein different regulations address the problems that could remain unsolved even after the Breaking Up of Big Tech. The European Union Competition Law addresses the issue of unfair competition and talks about policies that resolve consumer conflicts. The GDPR is a regulation on data protection and data privacy for individuals of the EU. “Policies must rely on solid analysis of the new market settings and of the market
failures which imply that the ‘invisible hand of the market’ must be supplemented by the
‘visible hand’ of the legislator”, as per the Competition Policy for the Digital Era, a report published by the EU commission. The aforementioned statement clearly depicts the seriousness with which the EU intends to take on the Big Tech. The $2.7 billion fine imposed by the European Commission on Google in June 2017, for leveraging its market dominance only re-establishes the above point.
Other measures include taxing digital advertising, as supported by Paul Romers (the recipient of Nobel Prize in Economics). This is supposed to make advertising more expensive so that the Big Tech go for other revenue models (subscriptions). Data Portability4 and Data Interoperability5 are also seriously being considered to be incorporated in future legislations
by the lawmakers.
One thing that is for certain, is that even if governments decide to Break Up the Big Tech, the need to regulate the technology sector will not cease to exist. Breaking up Big Tech is a step that would definitely garner the support of the masses. But the legislators should resist banking on popular sentiments and work on framing a more comprehensive and detailed
regulatory framework.
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