Issue 01 - 2021 MAGAZINE Technology
gbo-analysis-big-techs-power-grab

Challenged by the big tech’s power grab

The growing dominance of technology firms has started to worry governments and policymakers globally

The growing dominance of tech firms has started to worry governments and policymakers across the globe. Be it in the EU, or the US, regulators are holding companies accountable for unlawful business practices or breach in competition laws. Recently, the UK said it will introduce new laws which will prevent the likes of tech giants such as Google and Facebook from using their dominance to push smaller firms out of competition. The EU has introduced new drafts to prevent tech giants from asserting their dominance, which many perceive as a threat to competition and even democracy. Beijing too, appears to have taken a harder stance against the country’s technology firms recently. However, Beijing is doing so to become a technological superpower in the coming years.

Recently, social media giants came together to indefinitely ban former US President Donald Trump for instigating his followers who stormed the US Capitol on January 6. While this was perceived as a welcoming move by many across the globe, few raised concerns about the social media giants’ influence in modern day. Not only that, many are also questioning the business practice of these companies. While Facebook is under investigation, the DoJ filed one of the biggest lawsuits against a tech company in almost two decades.

Will new competition laws curb dominance?
Last month, the UK said it will impose new competition laws in the region to prevent tech giants from asserting their dominance and to prevent them from pushing smaller firms out of competition. Britain’s competition regulator, the Competition and Markets Authority (CMA) said that the UK needs new laws to keep the tech giants in check. US-based Google and Facebook have dominated digital advertising, with both tech giants accounting for around 80 percent of the $18.7 billion spent in 2019. Google and Facebook earn a huge chunk of their profits from advertising, however, in recent times, they are increasingly coming under antitrust scrutiny as a result of complaints against advertising spending shifts to the web. With regards to the new competition laws, which are being drafted by the UK, both Facebook and Google have said they are committed to working with the British regulators and promote ethical business practices.

It is not just competition that worries authorities and governments. Many also fear the concentration of power in a small number of companies will limit growth and impact innovation within the sector. Some fear it will also negatively impact those who are associated or using the services of these tech giants for the benefit of their own business. The new laws are expected to give regulators the power to suspend, block and reverse decisions made by technology firms and to impose financial penalties for non-compliance. The new code will pinpoint what exactly represents acceptable behaviour when interacting with competitors and users and the biggest tech firm will be found to follow these laws. It is also believed that the new laws will demand greater transparency about the services they provide and how they are using consumers’ data from platforms that are funded by digital advertising.

Marketers for an Open Web (MOW), a coalition between technology and publishing companies, alleged that Google was modifying its Chrome browser and Chromium developer tools to give it greater control over publishers and advertisers. In its defense, Google said advertising practices needed to adapt to changing expectations around how data was collected and used. The CMA also said that it is looking into the matter and whether a complaint or a formal investigation will be necessary.

EU creates a level playing field
The EU also introduced new draft rules targeting tech giants like Google, Amazon and Facebook as it sees the tech giant as a threat to competition and even democracy. The recent developments come at a time when regulators around the world have increasingly become concerned about the financial and social power of big tech. The landmark proposals could change how tech giants go on with their business in the future, as unlawful practices could now mean million-dollar fines.

In response to the new regulations, Google said that they would study them, however, hinted that they believe these new regulations do target some of the companies in particular. Facebook, on the other hand, was appreciative of the new regulations. A spokesperson said the proposed regulations are on the right track to help preserve what is good about the internet. The new regulations are also seen as a way for authorities to tackle social media platforms when it comes to digital content such as extremist propaganda, hate speeches and fake news. For the past decade, the EU has taken the lead when it comes to keeping the big companies under check, for example slapping billions in antitrust fines on Google, but critics argue the methods have been ineffective and that the EU needs to adopt a much stronger approach. The EU has not only gone after Google. It has also ordered smartphone maker Apple to pay billions of euros in back taxes to Ireland; however, that decision was quashed by the bloc’s highest court.

US lawmakers urge Congress to look into tech monopoly
The growing dominance of the tech giants is also worrying authorities and lawmakers in the US. Recently, social media giants such as Twitter and Facebook came together to ban former US President Donald Trump from their platform. While many celebrated the move, others were concerned. Have these companies become too powerful? Recently, democratic lawmakers urged Congress to clamp down on the tech giants, as they believe these companies have too much power in their hands.

The Democrats called for a 16-month congressional investigation into Google, Amazon, Facebook and Apple. They believe these firms such as Google, Amazon, Facebook and Apple have too much power, and that power must be reined in. However, not all republicans agree to the proposal, some even calling the measures suggested as too extreme. That said, they are open to hear suitable remedies to deal with issues such as amendment in competition laws and monopoly of the tech giants.

In December, The Federal Trade Commission (FTC) ordered some of the biggest tech firms such as Amazon, Facebook and YouTube, to hand over information about how they collect and use data from users. The top US privacy regulator intensified the US government’s scrutiny of the tech industry’s business practices. The FTC also sued Facebook for alleged violations of antitrust laws. Not only that, the FTC is also reviewing the acquisition history of these tech giants. FTC commissioners said in a statement, “Policymakers and the public are in the dark about what social media and video streaming services do to capture and sell users’ data and attention. It is alarming that we still know so little about companies that know so much about us.”

DoJ slaps Google with the biggest lawsuits in two decades
Over the years, Google has established itself as one of the topmost companies in the world. However, the company has seen multiple lawsuits against it over issues such as privacy, advertising, intellectual property and various Google services such as Google Books and YouTube. During the first five years of business, Google’s legal department expanded from one to nearly 100 lawyers, and by 2014 had grown to around 400 lawyers. Most recently, the United States DoJ filed one of the biggest lawsuits against a tech company in almost two decades.

The justice department alleges that Google enters into exclusive contracts with other companies to set the company as the default search engine. The complaint said that it paid Apple $12 billion each year to make Google the default browser on Safari. It further alleges that Google’s 80 percent market share in search engine business was possible due to such exclusive contracts with other smartphone makers. This gave Google an edge over its rival and helped to capture a market with unethical business practice.

A group of 38 US states and territories also filed a lawsuit against Google. They allege that Google uses three forms of anti-competitive policies to maintain its monopoly in the search-related business. While the first argument is similar to that put forward by the justice department, the second argument is that Google restricts consumer freedom by restricting some specific sites and services out of its search results.

The third argument is that Google discriminates against services offered by specialised vertical providers because in some cases a transaction can be completed without the help of Google or its search engine. But Google wants consumers to begin their search from Google rather than going directly to these designated websites or apps. Another lawsuit alleges that Google and Facebook entered into a secret deal where the social media giants would reduce its moves in the advertising space for special treatment during Google ad auctions. Google, which controls one-third of the global advertising industry, has been accused of abusing its monopoly over the digital ads market.

South Korea’s administrate fine is just the beginning
South Korea also recently introduced new regulations that would require tech giants such as Google and Facebook to comply with or face an administrative fine of up to $18,000, which is equal to almost 2 million won. South Korea can also now hold online content service providers such as Netflix accountable in case of growing complaints against them. Under the revised Telecommunications Business Act, tech giants or online content providers will now have to report service errors to the Ministry of Science and ICT. The new rules will apply to those companies which have more than 1 million daily users or account for 1 percent or more of the country’s average daily data traffic in the last three months of a year.

According to the ministry, six companies namely Google, Netflix, Facebook and domestic companies Naver, Kakao and Wavve accounted for a total of 38.3 percent of the country’s average daily traffic in the final quarter of 2020. While Google accounted for a whopping 25.9 percent, it was followed by Netflix with 4.8 percent and Facebook with 3.2 percent. If we look at the domestic companies, top portal operator Naver held the top spot at 1.8 percent, followed by rival Kakao at 1.4 percent and video streaming service Wavve at 1.18 percent. Data released by the ministry also revealed that Google’s average daily user number during the period stood at 82.3 million, followed by Naver at 57 million, Kakao at 55.2 million, Facebook at 14.3 million, Netflix at 1.7 million and Wavve at 1 million.

China’s actions to become a tech ‘superpower’
China, on the other hand, is also amending laws to regulate its own tech giants are part of its broader push to become a technological superpower. Beijing appears to have taken a harder stance against the country’s technology firms recently. It was reported that China too, is working out how to regulate the technology sector when it comes to sensitive areas such as data protection and antitrust. Over the last two decades, Chinese tech firms have witnessed tremendous growth to find themselves among the biggest tech firms in the world. While already a number of regulations have come into effect so far, new regulations are further being drafted by China.

China has drafted new rules to stop monopolistic practices by some of its internet platforms. There has been a wide-spread call in China to regulate its large tech companies. Last year, authorities in China also started probing Alibaba over monopolistic practices. In November, regulators forced Ant Group, the finance affiliate of Alibaba, to suspend plans for what would have been the world’s biggest initial public offering (IPO), while the company dealt with regulatory changes. Last month, Alibaba and two other firms were slapped with a fine for not making proper declarations to authorities about past acquisitions. Prior to that, China released a draft personal data protection law aiming to regulate how companies process user data. All these developments are part of Asian superpower’s big push to establish itself as a major global tech power.

Kendra Schaefer, a partner at Trivium China, a research firm based in Beijing told the media, “Underneath all of this stuff I think China understands that if it’s going to become a technological superpower… then it has to lay a solid regulatory foundation. It has to lay that foundation in the way that it regulates company operations, but it also has to lay that foundation in terms of data. In fact, data might be the most important regulations that it has got to lay down. All of these things are foundational and it’s really just kind of setting a framework, a springboard from which China can develop and move forward faster.”

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