Khadra Mohamed examines what antitrust, anti-competition and monopoly style tactics used by the likes of Google, Facebook and Apple reveal about the changing relationship between regulation and innovation.
What are anti-competition, antitrust and monopoly style tactics?
Such practices limit the scale of competition across the technology market and consolidate the monopoly power of established businesses. Anti-trust is different as these are laws or statutes which protect consumers from exploitative business practices to ensure equal competition. Examples of anti-competition and monopoly style practices include bid-rigging price-fixing and tacit collusion, meaning that firms undertake measures to minimise a competitive response.
These are harmful tactics which undermine the ethics of business and ensure those at the forefront of the industry remain unchallenged, stunting business diversification. Evidence of these practices have been compiled into numerous cases against companies such as Google, Facebook and Apple. This indicates that governments are starting to challenge their leading position.
What cases have been brought forward against these companies?
Most notably, the US government alongside 48 states filed lawsuits against digital giant Facebook due to alleged anti-competition and antitrust practices. The case argues that Facebook blocked market access to its competitors to avoid its dominant position being threatened.
The case is unique as it is consistently backed by a majority of the American states and districts indicating a no-tolerance approach in tackling these harmful practices. The second case was built on a year-long investigation of Facebook and was also brought forward with a collaboration with attorneys and the US Federal Trade Commission arguing that this company engaged in a systematic pattern of anticompetitive conduct. The aims of this case include a permanent injunction which could lead to Facebook selling its subsidiaries WhatsApp and Instagram, showing that Facebook sought to acquire “its competitive threats to maintain and expand its dominance.”
Similarly, France has hit Apple with an antitrust complaint as Apple’s plans to restrict trackers used for mobile advertising are anti-competitive. This was backed by France’s advertising and publishing companies who had been affected by Apple’s plans. The Interactive Advertising Bureau France argues that Apple will make it harder for smaller advertising technology companies to track customer preferences. Also, it would limit publishers and game developers to sell personalised advertising. What is striking about this case is that it is the first time antitrust rules have been used to challenge measures intended to enhance consumer privacy. This intervention is intended to regulate Apple’s dominance, while also supporting smaller companies in the digital advertising sector.
The case against Google is similar to the cases faced by Facebook and Apple. The European Union spent a decade pursuing Google on antitrust charges. The investigation led to a fine of $10 billion for using illegal tactics to abuse its dominant position on the market.
What was the outcome of these cases?
In France’s legal case against Apple, an antitrust fine of €1.1 billion ($1.23 billion) was issued, as the company and two wholesalers agreed not to compete and prevented distributors from lowering prices on its products, which might indicate an intention to monopolise.
However, there continues to be a debate on the best way to deter companies from engaging in such practices especially when fines can be considered as pocket change, which has led to calls for tougher punishments from lobbyists and think tanks.
In the Facebook case, what was proposed in hearings was a series of ways to strengthen American antitrust law which could ensure businesses affected by the practices of larger companies can pursue legal actions. What is also recommended is a dramatic transformation of current antitrust powers to better equip justice agencies and independent organisations to tackle this issue. There is another case which is ongoing and more may be revealed about the extent of these practices, although it is likely due to the COVID-19 pandemic that there will be significant delays which could impair the rate of regulation.
What do these cases suggest about the direction of future regulation?
While Big Tech companies have enjoyed substantial growth and dominance across markets, the measures and practices used by these firms are likely to be challenged. Questions will continue to be raised such as how effective government interventions are? This debate will likely increase considering how current regulations on anti-trust, anti-competition and monopoly are dated and how monetary fines are considered a slap on the wrist for these empires.
What has been revealed by these cases is how innovation has come at a steep price, harming smaller businesses which proves this intervention to be justified, as well as a step forward in limiting the impacts of these harmful practices.
What is happening now in terms of regulation?
Regulation across the digital sectors has grown and is continually developing, this is evident in the recent announcement of two new EU laws involved: the Digital Services Act and the Digital Markets Act. The first act is centred around online safety, increasing accountability of tech companies and ensuring freedom of expression. While the second act will introduce regulation of leading firms who act as gatekeepers to reduce the level of unfair advantages. Both acts are comprehensive pieces of legislation which tackle the core issues of monopoly.
In the UK, there has been a collective drive to strengthen and transform regulations, although these are yet to come into effect. For example, the Competition and Markets Authority has created a plan with tailored codes of conduct for each company like Google to "proactively shape the behaviour" of the companies. An additional measure planned by the Competition and Markets Authority is the creation of a Digital Markets Unit which would have powers to fine tech companies up to 10% of their turnover if they fail to comply. However, these plans are contingent on legislation being drawn up, therefore it is unlikely that these will be implemented soon.
These acts are monumental as they are likely to influence other countries to transform existing legislation related to the digital sector. However, only time will tell just how effective these acts are going to turn out and there will likely be continuing developments between regulation, authority, and the digital economy.
Further reading
https://www.theguardian.com/technology/2020/dec/09/facebook-lawsuit-antitrust-whatsapp-instagram-ftc
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