The 12 months the world gave up ready for Large Tech to repair itself |
The world’s largest tech companies faced a global reckoning in 2020 when the US, European Union and even China took dramatic steps to curb their dominance. This pressure will not decrease in the new year.
Dozens of states and the federal government sued Facebook and Google over allegations that the companies engaged in anti-competitive behavior that increased their influence on the online marketplace. Meanwhile, Europe recently unveiled laws giving regulators new ways to take over these American tech companies.
The regulatory passion has also spread to China. Last week officials announced an antitrust investigation into Jack Ma’s Alibaba and heated up finance firm Ant Group less than two months after blocking its blockbuster stock market debut at the last minute.
While many of these developments have developed rapidly in the past few weeks, the desire to contain big tech is not new. For years, governments have grappled with the massive impact these companies have on the online economy and the flow of increasingly valuable digital information.
But huge antitrust fines, onerous privacy laws, and endless hearings in Congress have failed to get tech companies on their toes, and politicians are now signaling they want to do more to prevent market abuse and an explosion of harmful online content and misinformation.
Advances in computing, data storage, and global digital connectivity have allowed large technology firms to grow, said Dipayan Ghosh, co-director of the Digital Platforms and Democracy Project at Harvard Kennedy School. Now a handful of these companies have developed sophisticated artificial intelligence systems that give them unprecedented control over content, advertising, and personal data.
“It’s always been inevitable, but when you have some kind of open, green field for market innovation, there will be some first movers,” added Ghosh. “We’re going to see some monopoly emerge, and that’s exactly what has happened in the last 10 years.”
While this global regulatory act seems to be unfolding all at once, analysts note that each of the world’s great powers has their own – and sometimes competing – reasons for expanding their oversight of the tech industry.
The United States and Europe have focused their efforts on limiting the power of the most powerful American corporations. In China, where Google and Facebook have been banned from the market for years, authorities are looking for ways to tighten control of their own tech giants.
A spate of lawsuits across the United States
The US government has been scrutinizing big tech for a while.
For example, a landmark federal lawsuit filed against Google in October followed a year-long antitrust investigation into the company. And in the months since then, US authorities have increased the heat even further.
Dozens of states have now sued Google over allegations that it has an illegal monopoly in the online search and search advertising markets. Facebook has received similar treatment and is now facing two antitrust lawsuits accusing the social media giant of abusing its dominance in the digital market.
While the US-led action has targeted these companies for antitrust reasons, the pressure comes from wider questions about their impact on democracy and the flow of information online. Misinformation and allegations of bias were at the forefront of concerns over the recent US election.
“I basically think what you see … is essentially a question of who controls that information and, consequently, access to the voters,” said Michael Witt, Senior Affiliate Professor of Strategy and International Business at INSEAD, the international company commercial School.
It is difficult to predict how these cases will be resolved. Some of the arguments the U.S. government is now making – including the fact that Facebook wiped out competition by buying Instagram and Whatsapp – may not persist as those acquisitions were approved by the authorities years ago.
“The government now wants a revision and is sending a terrifying warning to American business that no sale is ever final,” said Jennifer Newstead, Facebook’s vice president and general counsel, in a statement earlier this month.
And analysts have indicated that the United States may not be ready to put other forms of pressure, such as new laws, on the tech industry.
America will likely not want to enforce antitrust regulations to cope with the flow of information in many other parts of the world, Witt said, pointing to the great power that the technology giants of Silicon Valley have in Europe and elsewhere.
“I think there will be significant opposition to any attempt to do anything that could actually undo that advantage for the United States,” he added.
Finding a balance in Europe
Across the Atlantic, authorities have been focusing on containing tech companies for years. The European Union’s General Data Protection Regulation (GDPR) – a tipping point in privacy protection – was passed in 2018 and gave people far greater control over how their personal data is collected and used.
This year Europe has signaled that it wants to get even tougher. The European Commission released a series of draft directives earlier this month designed to give regulators new powers to take over US tech giants, face heavy fines, and increase the prospect of breakups or bans for repeat offenders.
The UK, which left the European Union earlier this year, has its own plans. Tech companies that fail to remove or restrict the distribution of illegal content will face fines of up to 10% of their annual sales.
“I’m outrageously pro-tech, but that can’t mean the technology is free for everyone,” UK digital secretary Oliver Dowden said in a statement earlier this month. “We are entering a new age of accountability for technology to protect children and vulnerable users, restore trust in the industry, and enshrine legal guarantees of freedom of expression.”
INSEAD’s Witt noted that there is strong political support for action across Europe. But he added that Europe’s options are somewhat limited. After all, the tech companies in the crosshairs of the European Union are all based in the United States.
“I think they will take some time and try to find something that is, on the one hand, legally watertight,” he added. “And on the other hand, something that the United States doesn’t bother with.”
Maintain control in China
Beijing has not missed the urge for more regulation, despite the fact that the country has taken a very different path to the West in terms of its tech industry.
“In China, you are dealing with a different group of homegrown gamblers,” said Nathan Bush, director of antitrust and competition for Asia at law firm DLA Piper.
American companies like Google and Facebook have long been excluded from the Chinese economy, allowing domestic companies Alibaba, Tencent, and others to thrive.
“China’s competition regulators will face the same issues they see in the rest of the world, but it’s a different line-up and you’ve effectively addressed all foreign investment and market access concerns because the door is already closed,” added Bush added.
The country’s leaders have identified antitrust concerns as a big issue for 2021. At a December 11 meeting, the Chinese Communist Party’s Politburo – the highest decision-making body – pledged to press ahead with reforms, “strengthening antitrust law and preventing” disorderly expansion of capital. “
It is too early to say how far Beijing’s campaign could go. Bush said he expected China to focus on consumer protection issues, among other things. That seems to have already happened: just last week, China’s top market regulator summoned representatives from Alibaba, Tencent, JD.com and other major internet companies, warning them not to dump goods at unreasonably low prices, create monopolies and misuse consumer data for profit . It also said it was investigating alleged monopoly behavior by Alibaba.
Bush and others also noted that China’s central government has many other tools besides conventional competition law to keep its tech companies in check.
For example, check out Ma’s Ant Group IPO, carried out after the Chinese billionaire’s meeting with government officials, and now faces the prospect of a massive overhaul. A little over a week before the bid was sinking, Ma had publicly criticized Chinese regulators for stifling innovation because they were too risk averse.
“In the end, the possibilities are endless,” said Witt. “The goal isn’t necessarily to increase competition in different areas. The goal is to make sure that the [Chinese Communist Party] remains in power. “