The case for new regulation around digital monopolies and the monopolization of user data by big tech companies has never been stronger. While regulators have attempted to take on big tech before, the current rules mean we can only catch companies in the act, and it is imperative that new ex ante (‘before the event’) regulation and approaches are established to address the complexity of the digital economy, says GlobalData, a data and analytics company.
GlobalData’s latest report, Antitrust – Thematic Research, notes that big tech companies do not have much of an incentive to change their anticompetitive behaviour, despite facing large fines.
Laura Petrone, Senior Thematic Analyst at GlobalData, comments: “Existing antitrust rules are broad in scope and only allow enforcers to act after wrongdoing has been committed. Big tech companies have been fined billions for their anticompetitive practices over the last decade, however, these practices are still in the spotlight after years of scrutiny.
“Ex ante regulation – involving the application of strict, transparent rules to digital platforms before they engage in any anticompetitive behaviour – is a desirable solution because it allows regulators to address structural competition problems without finding an infringement of antitrust rules As an example, the EC’s proposed Digital Markets Act aims to abandon lengthy proceedings against large platforms in favour of ensuring minimum conditions to avoid monopolies. Europe is leading the charge, but other jurisdictions are following suit, including China and India.”
GlobalData’s report also notes that the full weight of antitrust regulation will be used against platforms providing internet services from a monopolistic position or as part of a duopoly. Digital platforms with excessive control of user data, such as Amazon, Google, and Facebook are the most at risk.
Petrone adds: “From online search to ecommerce, and digital advertising to social media, antitrust watchdogs could halt big platforms’ acquisitions of smaller players whenever they see this as damaging to competition.”
According to GlobalData’s deals database, GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) completed a total of 168 M&A deals between 2018 and 2020.The vast majority of these deals were not investigated, nor were competition authorities notified. Some regulators have introduced obligations for big platforms to notify antitrust agencies of all M&A activity, potentially resulting in more investigations and more acquisitions being blocked.
Petrone continues: “In the US, breaking up digital platforms has emerged as a popular remedy, but that’s easier said than done. It’s doubtful whether separating companies would increase competition in any key markets. While it would undoubtedly reduce each platform’s power in the short-to-medium-term, the underlying market dynamics, such as network effects and economies of scale, would continue to favour concentration”.
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