From ideas devised in the dorms of Stanford and Harvard Universities, the likes of Google and Facebook are “scrappy, underdog startups” no longer. They have evolved into dominant, global data businesses, with users receiving ‘free’ services in exchange for their data, which is then monetised with advertisers. Stewarts’ white paper, ‘Big Tech regulation: not if, but how’, offers an in-depth examination of the worldwide regulation of Big Tech.
Various influential reports in 2019 and 2020, from the UK, EU, Australia and US, (among others), recommend the regulation of Big Tech. We appear to have reached a global consensus that it is no longer a question of if we should regulate Big Tech but how we regulate, with a flurry of legislative proposals in Europe and legal actions in the US jostling for attention in the final weeks of 2020.
In this white paper, we discuss:
Why Big Tech needs to be regulated
Most consumers want to and have to use the services of Big Tech. This was true pre-pandemic but is even more so while we cannot work, shop or play freely outside of our homes. While Big Tech offers us undeniable positives, the unchecked concentration of power in “digital monopolies” has negatively impacted people and businesses in the form of data practices, content and media control, and misuses of market power. Anti-trust laws have proven too slow-moving and ill-equipped to keep Big Tech in check. These novel companies, functioning in a new digital economy, need innovative solutions for effective regulation.
The EU, UK and US approaches
The EU is leading the pack with a range of legislative instruments, the flagship being the Digital Service Act package published on 15 December 2020. The Digital Markets Act targets Big Tech, providing for the ex ante regulation of “gatekeepers” to supplement existing ex post anti-trust laws. The act introduces a range of prohibited practices and obligations for “gatekeepers”, and grants the European Commission investigatory, enforcement and fining powers. The Digital Services Act sets out rules applicable to online intermediaries relating to the removal of illegal goods, services or content online, including hate speech. “Very large platforms” are subject to enhanced obligations and supervision.
The UK is also taking an ex ante approach, with a commitment for a new pro-competitive digital regulator, the Digital Markets Unit, sitting within the Competition and Markets Authority. The Digital Markets Taskforce has proposed rules for those with “strategic market status”, and there are also plans for a parallel mergers regime for Big Tech. On 15 December 2020, the government responded to the consultation on the Online Harms White Paper. It confirms that online platforms and search engines will be subject to a statutory duty of care to protect all users from illegal content and children from harmful content. It is a two-tier system, with the largest companies subject to additional requirements.
While historically reluctant to control its Silicon Valley expert, since October 2020, the US has appeared to be looking to the reinvigoration of anti-trust enforcement as an answer, given federal anti-trust investigations and suits against Google and Facebook.
The way forward
While the above proposals have much to commend them, we believe that long-term the most effective regulation will provide a holistic approach, considering competition, data protection and consumer regulation together. Historically, competition and privacy laws have been viewed as diametrically opposed, despite them having consumer interests at their core. This provides a pathway for privacy and consumer welfare to be incorporated into competition law as a ‘theory of harm’.
We look at the German Bundeskartellmart investigation into Facebook’s data gathering practises and how its approach demonstrates an interesting way to merge competition, privacy and consumer protection regulation effectively at a pan-European level. We consider that this approach should also apply to merger control, particularly post-Brexit. Such an approach would sound alarm bells about the proposed Google/Fitbit data-driven merger.
As with the GDPR, one of the key potential roadblocks to success will be a lack of regulatory enforcement and the absence of tools for compensation, such as a functioning collective redress vehicle. We also consider immediate alternatives to the break-up of Big Tech, including data sharing, data portability and interoperability, among others.
Click here to download a copy of the ‘Big Tech Regulation: not if, but when’ white paper.