In the coming years jealous nation-states will first use economic instruments to contain what they see as political encroachments on their primacy.
This is from The Intersection column that appears every other Monday in Mint.
The European Union appears to have taken upon itself the heroic task of taming the world’s big technology companies.
A few days ago, it levied a $1.7 billion fine on Google for abusing its dominant position in online advertisements. Including the $5 billion fine it imposed on the company for anti-competitive behaviour pertaining to the Android operating system last year, Europe’s anti-trust regulator has collected almost $9 billion from Google alone over the past two years. This is an order of magnitude higher than what it collected from Microsoft more than a decade ago. However, unlike Microsoft, which put up a long and ultimately unsuccessful legal battle against the order, Google is paying up and moving along.
Yet the European Commission’s action against Google might be just as consequential as its taming of Microsoft: in other words, rather pointless.
Was bundling Internet Explorer and Windows Media Player to the Windows operating system something for regulators to be so concerned as to impose close to a billion dollars in fines? Even as the antitrust battle was dragging through European courts, technology turned several cycles, new browsers emerged on new platforms created by new firms and music came to be played in very different ways. It is impossible to prove the counter-factual, but I don’t think the European Commission’s antitrust decisions had much to do with the fact that today Microsoft has less than 10% of the desktop browser market share. Creative destruction is more likely to topple Android and AdSense 10 years hence.
Anti-trust is not the Commission’s only line of attack against Big Tech. Privacy and copyright are two more arrows that regulators are using against Google, Facebook, Apple, Amazon, Microsoft and others. In a surprisingly gushing article praising Europe’s approach, a recent issue of The Economist argues that it “offers a new vision, in which consumers control their privacy and how their data are monetized. Their ability to switch creates competition that should boost choice and raise standards. The result should be an economy in which consumers are king and information and power are dispersed. It would be less cosy for the tech giants.”
Maybe. Europe is a big wealthy market but has few big players of its own in the technology space. So it’s easy for Europe’s rulers to turn antitrust into the latest crusade. This is not to accuse the European Commission of an anti-foreigner bias, but rather to suggest that the balance of interest in Europe is different from that in the United States, India or China. So The Economist is wrong to advise the rest of the world to take a page out of Brussels’ regulatory book. What is more, there is a growing sense within the EU that its antitrust regulations are holding back the growth of domestic firms. Angela Merkel, the German Chancellor, and Emmanuel Macron, the French President, want to reform competition regulations to make it easier for European firms to acquire global scale.
Actually there is a reason for governments to be concerned about big technology firms, but it is not anti-competitive behaviour. US senator Elizabeth Warren got close to identifying the problem when she charged that “today’s big tech companies have too much power—too much power over our economy, our society and our democracy” (emphasis added). While she too is looking from an antitrust lens, she correctly identifies that the problem is more political than economic. Willy nilly, private firms like Facebook, Google and the others have acquired political power that is beginning to worry the nation-state.
Consider an example. In March, Dhruv Rathee, a popular anti-BJP YouTuber announced that Facebook had suspended his account for 30 days for posting an excerpt from a book on how the Nazis rose to power in Germany. He alleged that this could be because his account had more engagement than Narendra Modi’s and the suspension would shut him down during the entire election campaign. In the event, Facebook admitted that it made an inadvertent mistake and apologized, but the incident reveals how easily it can—if it were to so intend—influence politics.
There is nothing new in big corporations influencing and even some capturing policy. Democracies have learned how to live with that, if not build safeguards against it. As David Runciman, a British political scientist, puts it, “Google and Facebook are very different beasts from Standard Oil. Each has a far greater reach. They don’t just monopolise one thing. They monopolise many things at once…we rely on their platforms and products in order to communicate. At the same time, they influence what we say to each other, by shaping what we see and hear. [Mark] Zuckerberg is both an industrialist and a media magnate: Rockefeller and William Hearst rolled into one.”
Unlike the old big firms that captured the top, Big Tech can capture both the top and the bottom, by influencing what people think, like and want.
There are many more The Intersection columns here
Overzealous regulation of big technology companies is unwarranted, but can it check political power? Perhaps. What we can expect in the coming years, though, is that jealous nation-states around the world will first use economic instruments to contain what they see as political encroachments on their primacy.
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