Lili Lantos examines surveillance capitalism and the potential effects of US and EU antitrust regulations on big tech companies including Alphabet, Facebook, Amazon and Microsoft.
Amazon represents a market share of more than 40% of total online shopping in the United States. Facebook has over 2bn users each month, capturing an extraordinarily large segment of the media sector. In many countries, Google handles around 90% of all web searches — allowing the company to control two-thirds of online advertising revenues in the US, alongside Facebook.
The issue had been previously referred to as the “BAADD” problem, as in “big, anti-competitive, addictive and destructive to democracy”. These companies, as argued by many, are detrimental not only to our political systems, but they also threaten competition by creating high technological barriers to entry, reducing innovation and preserving monopoly power. One reason for their ability to achieve such market power stems from the wealth creation opportunities in their trading operations: surveillance capitalism allows these companies to capture data about human behaviour and experiences, establish prediction models through machine learning techniques, and create prediction products traded on ‘behavioural futures markets’ using mass customer data. “Surveillance capitalism”, a term first used by Shoshana Zuboff, Harvard professor and author, relies on monitoring the user’s behaviour regularly without users providing explicit consent, as they have become the product themselves solely through using social media platforms for free. The business model of these companies involves claiming “human experience as free raw material for translation into behavioural data…”. Another explanation to Big Tech companies' immense market power could also be good timing in terms of market entry. These technology giants entered an unregulated territory a few years ago, with Google Search scanning and storing books, Google photographing every street (and the planet), or Facebook implementing “beacons” (tracking and publishing user data). Therefore, these technologies companies were not only innovative by creating new markets for behavioural data, but also through tapping into yet-to-be legally supervised fields.
Amazon, Facebook, Google and Microsoft all seemed to benefit from both the pandemic and the US Presidential election. Once the election started leaning towards a Biden victory, the rise in equity value of these tech companies increased the Nasdaq Composite by 4%, while the S&P 500 Index increased by 2%, with Facebook and Alphabet gaining the most, followed by Apple. Although President-Elect Joe Biden warned against false information spread by social media and has previously highlighted the Obama administration’s regulatory inaction towards the big players of Silicon valley, breaking up Big Tech companies is not on the Biden administration’s priority list. However, Biden has established two points on his legislative agenda that would benefit these companies: the 2017 tax cuts would remain intact and interest rates would remain low for the foreseeable future.
Photo credit: FT
Biden is not alone in issuing warning against technology companies. The US government first planned on banning the Chinese-owned Tiktok for national security concerns, took legal action against Google for acting as an illegal monopoly over search advertising, and now some states are investigating Facebook for alleged antitrust violations. Similarly, recent news from October indicated that the EU Commission plans to enforce strict regulations against tech companies, forcing them to publish data to increase transparency and foster competition. The UK Competition and Markets Authority also investigates digital mergers which often are below the required thresholds for scrutiny. Would the breaking up of these companies be a good solution?
Breaking up monopolies, regulating them as public utilities, or using traditional regulatory tools such as price controls and profit caps all have drawbacks. A full-scale breakup could easily lead to worsened services offered to consumers. One solution could be to focus on current competition law —– for instance, to prevent mergers that could result in long-term threats, such as Facebook’s acquisition of Instagram and Google’s acquisition of Waze. The monitoring of competition complaints from rivals, which would be conducted by independent committees, is another option, , as in the case of antitrust regulations against Microsoft. Or, a more general solution would be to ensure that behavioural data is protected and controlled, by giving individuals ownership rights. This model would be similar to intellectual property. Just as banks are required to share customer’s account information today in Europe, social media users could opt to share their online data with rival companies. This way, a larger pool of companies would be required to share large amounts of user information, creating greater transparency which could result in greater innovation instead of monopolisation mechanisms.
Governments have multiple options to choose from when it comes to regulating these technology giants. In general, many stakeholders from consumers to businesses to political bodies seem to be in unanimous agreement that the large technology companies create a monopoly effect. Regulatory changes would not only increase innovation and benefit markets, but would also have a positive impact on individual’s data rights. Although many technology companies have benefited from the increased online presence of users as a result of the pandemic, governments seem to have had enough and we should expect tighter market regulations across different Western countries in the upcoming years.
The UCL Finance and Technology Review (UCL FTR) is the official publication of the UCL FinTech Society. We aim to publish opinions from the student body and industry experts with accuracy and journalistic integrity. While every care is taken to ensure that the information posted on this publication is correct, UCL FTR can accept no liability for any consequential loss or damage arising as a result of using the information printed. Opinions expressed in individual articles do not necessarily represent the views of the editorial team, society, Students’ Union UCL or University College London. This applies to all content posted on the UCL FTR website and related social media pages.