High-street shops have been shuttered as Amazon deliveries continue apace; cinemas have been closed while viewers stream more content from Google-owned platforms; citizens across the world have flocked to publishers for information about Covid-19 while their advertising revenues are eaten by Facebook. The tech giants have been strengthened by the global pandemic. Their power grows with every click, as does their influence over policy. But if our regulators only really listen to the titans, how can they curb their power?
Last week the government said it was setting up the Digital Markets Unit (DMU) to address the multiple challenges and threats that tech platforms pose. This is part of a flurry of initiatives: the government has also launched a Digital Markets Taskforce to help the Competition and Markets Authority (CMA) design better policy, and commissioned a broader review of UK competition policy under John Penrose, which is due to report by the year’s end.
Will these initiatives deliver? Early signs indicate that the government does not yet appreciate the scale of the problem. Secretary of state for digital Oliver Dowden prefaced his diplomatic reference to a “consensus” of concerns about the sector by saying he is “unashamedly pro-tech”. The report accompanying the DMU announcement confidently promotes the “huge benefits” and economic contribution of the tech firms, while equivocating on “potential harms”. What we’re seeing, broadly, is the spell that a free-market, “tech solutionist” ideology casts over our authorities, allowing monopoly power to run wild, encouraging waves of mergers and paying little attention to questions of power, democracy or inequality.
The latest UK government initiatives are the fruit of last year’s Furman review to protect digital markets – and already some of its strongest proposals seem to have been kicked into the long grass. A recommendation that has survived is a “code of competitive conduct” to govern companies with “strategic market status” (likely to include Facebook and Google). This code, they say, will be “mandatory” and “enforceable”, which is surely the least we might expect.
No code of conduct ever reshaped a market. The new code promises “clear expectations over what represents acceptable behaviour”. This sounds like a very British approach towards companies that are busy smashing up our small businesses, newspapers and high streets, remaking markets for their own benefit.
Without strong enforcement, this is little more than a polite note asking the big kids to play nice. In this way it resembles the groceries code, which requires big supermarkets to provide fair terms and reasonable rights to farmers and suppliers. But both codes take the structural power of the dominant firms as given, and do little to disperse it.
The CMA’s strongest suggestions in its report into Facebook and Google’s duopoly over online ads – to separate the companies’ advertising businesses from their other operations and force interoperability and data sharing – are not being implemented, at least for now. The government says weakly that “more work is required” to understand any “unintended consequences”. This is curious, since the 12-month-long official investigation has already been done. Draft legislation indicates that the EU will be moving ahead with these measures soon. Without these stronger tools, the code of conduct won’t be the flexible regulatory tool that the Furman review recommended.
An example of what’s needed is the case of Richard Allen, whose music business was destroyed by the tax haven schemes of online retailers, and who now campaigns for small businesses. Sellers on Amazon’s platform, for instance, are like players in the game of Dungeons & Dragons, where Amazon acts as the Dungeon Master, dictating the play. “If you are a seller they can shut you down, make you penniless – and there is nothing you can do in law,” he said. “You are in Amazon’s dungeon.” He argues for an online marketplace act that would, among other things, outright prohibit such firms from selling on their own platforms.
The Furman review said merger policy needs urgent overhaul. The tech giants have been on an acquisition spree in the last decade – and not a single merger has been blocked. Authorities are hamstrung by having to prove that mergers are harmful: a tricky business at the best of times. It is time to reverse the burden of proof so that instead it is the firms that must prove that the deal serves the public good. We should also hold companies to their word: if they have pledged that a tie-up will result in lower prices and efficiencies then these must materialise, on pain of unwinding the merger.
We must also look more closely at who is enforcing UK merger law. In the most complex cases the decision to approve or block a merger does not sit with the regulator but with independent panels, appointed by the secretary of state for business. Those panels tend to be drawn heavily from the merger-friendly “competition establishment” of former corporate lawyers and other big business advisers.
The government will be consulting on the new regime in early 2021, “drawing on industry and technical expertise”. But who will be listened to? Weak rules will become an exercise in self-regulation by the strategic companies. “Industry” must include small businesses that are reliant on tech platforms for their livelihood but currently too fearful of retribution to speak up. Tommaso Valletti, the former chief competition economist at the European commission, warns that big tech knows very well how to lobby and bend the regulatory process. Transparency groups point out that the EU falls into this trap too, recently kicking off its own new digital regime with a closed meeting with the tech companies.
The Penrose review should support more robust enforcement, and insert small businesses, employees, and civil society at the highest levels of influence in the UK’s antitrust regime. As post-Brexit Britain steps out from under Europe’s regulatory umbrella, it is going to need laws, policies – and gumption – if it is to have any hope of restructuring Britain’s markets so that big tech companies serve Britain’s people, and not the other way around.