Large Tech within the period of Techopoly
By Rajesh Mehta and Govind Gupta
A few days ago, when Joe Biden took his oath at the presidential inauguration, the world watched the boast of one of the most notable attributes of democracy – the change of power.
This followed immediately after another turning point when Facebook and Twitter blocked Donald Trump’s account, sparking a disagreement over the influence of tech giants and the “accumulation of power”.
Amid recent allegations, be it of censorship, privacy or competition, it is an opportunity for India to guide and rethink the ethos of its regulatory regime to contain big tech as we enter an era of techopoly – a small number Technology firms exercise monopoly influence on the delivery of digital services. India’s market size makes it an important place to capitalize on these companies and this requires India to take ex ante action to establish the relevant rules before these companies become too entrenched in power.
The concern stems from the ability of big corporations like Amazon, Facebook, Google and Microsoft to own and operate a digital infrastructure on which to stilt the operations of the 21st century, affecting nearly every aspect of public life as a whole . With the accelerated adoption of digitization caused by Covid, Big Tech’s lawn is no longer just a corporate concern, but a public concern.
India’s Competition Commission is looking into recent mergers, antitrust litigation, and privacy issues, but regulations tend to always catch up with the undesirable outcomes. Political thinking about big tech cannot afford this and requires a forward-looking and comprehensive framework of core principles that players must adhere to. Ensiled and uncoordinated regulations will only compromise clarity and allow these technology firms to find workable ways to get around them.
Social media platforms are having a serious impact on democracy as they now generate loyalty and outrage in equal measure. The debate about freedom of speech and potentially dangerous content is urgent because of its influence on the shaping of political discourse and the increasing polarization.
However, it is complex and should therefore be approached with caution. The problem lies in the core of the business model of these media platforms, which thrives on viral engagement and thus some content, whether fake or stimulating, reinforced, is in the interests of the platforms. There must be a separation of roles between the conduit or platform and curating or moderating content. The suppression or blocking of content by the platforms themselves has sparked hate speech and censorship trouble even here in India.
A practical way might be to prevent platforms from being the gatekeepers of content. In a report, Stanford’s Francis Fukuyama suggests that for a legitimate and transparent test of what should be censored, curation must be outsourced to independent competitive “middlewares” who sit on the media platforms, tag content and give users choice how information is filtered and presented to you.
The range of goods in the digital economy has brought significant consumer benefits in terms of access to better, new and cheaper products. It has also facilitated the growth of existing businesses, reduced the costs of starting new businesses, and provided innovative ways for doing business. But there has also been a concentration of market power among a few giants. It reduces choice and suppresses competition. The giants can put their competitors under pressure and thus prevent market participants from accessing the e-commerce market. In addition, they can manipulate the product display for consumers with the huge user database. Ecommerce platforms also tend to be vertically integrated into their own product offerings and often try to undercut third-party providers.
India could set up a “digital market unit” for the e-commerce market, as Harvard’s Jason Furman suggests in a report to the UK government. The agency develops a code of conduct for large companies with strategic market status in order to avoid barriers to market entry. Promoting the openness of data through access to anonymized data would ensure that the benefits of big data are taken in a way that protects both privacy and competition.
Indian regulators are considering preventing e-commerce platforms from selling products from sellers in which they are directly or indirectly involved, so that they only act as a liaison between buyers and sellers.
The idea for the future should be to enforce a competition policy that will make companies choose their role: either they are the market or they are actors selling in the market.
Regardless of where they currently operate, Big Tech is now making strides in segregating different sectors. This will change the way certain industries work, and “financial services” is one area that has been popular with these companies. Apple has stepped into consumer finance, Facebook announced its cryptocurrency scales, and Amazon is taking out small business loans. With their size and access to a huge user base, the giants could actually dismantle and displace traditional channels.
A proactive regulatory stance designed to ensure a competitive landscape must consider the long-term banking and finance implications as major technical advances in these areas.
Looking back at the old demand for the collapse of big tech won’t be a viable exit for regulation because in an era revolving around the digital, companies simply cannot thrive in silos with different segments of their business. The integration of data centers and their interoperability is of crucial importance for companies in order to use analytics and to be able to compete efficiently. In addition, such regulations are unsustainable in the long run. Hence, new ways are needed to address the problem so as to avoid harmful uses of data while still enabling beneficial uses.
People’s fear of data breaches and user profiles is growing and they are moving to new safer non-profit platforms like Signal. Although India is making legislative efforts to understand the new tech milieu and to face the challenge of effectively regulating big tech, an efficient legal framework would need to be put in place by bringing together various regulators like the Chamber of Commerce, TRAI and the proposed Data Protection Authority.
Caution should be exercised in taming existing giants to address the above concerns so that we don’t just replace overseas companies with emerging domestic giants like Jio. In addition, controlling OTT platforms shouldn’t mean limiting creative forms of expression. Finding the arduous balance will be key.
India must actively lead by example on this front, making sure it is at the forefront with the EU and the US, ensuring better data protection, transparency and healthy competition.
Governments have broken new ground in the last decade as these new technology firms emerged and since then have scaled unregulated with overarching influences. The rules were set by the pioneers who created them and who worked for their private economic incentives. However, recent events have greatly eased the effects of excessive accumulation of power and made it clear that we are now on the threshold of action.
(Rajesh Mehta is a leading international advisor and columnist specializing in market entry, innovation and public policy. Govind Gupta is co-founder of IFSA Hansraj and researcher at Infinite Sum Modeling, Washington. The views expressed are personal and do not reflect politics or position of the Financial Express Online.)
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