Legislation, litigation … transformation? Why the EU, not the US, will reform Big Tech
Olivia Moul discusses data regulation, with a specific focus on the EU's GDPR and Digital Markets Act. This piece examines the dichotomy between preventative regulations and those seeking purely to hold 'Big-Tech' firms accountable after the fact.
Speaking to the Financial Times in December 2020, Google’s CEO Sundar Pichai wondered if ‘regulation can get it wrong’ because ‘the answers are nuanced’.[1] He was referring to the EU’s General Data Protection Regulation, which took four years to bear fruit. Tough, 99-articles dense, and carrying hefty fines upon breach, the GDPR sets the standard not just for Member States, but for global companies wishing to trade with the bloc: the ‘Brussels effect’ creates a global standard for organising data far more exacting than any other. Proponents salute its provision of new terms which re-form the right to privacy for a digital age (because ‘data subjects’ have the ‘right to be forgotten’[2]). Critics claim its cost and heft favour large companies over small, as its structural demands are better suited to, even entrench, the dominant position of Big Tech.
The aim of the EU’s recently announced Digital Markets Act is the same as its series of court cases: to increase competition in a technology industry monopolised by an expert few. The mood has changed, however, from overwhelmed, anticipatory weariness to a jaw-clenched, statute-waving resolve. Targeting platforms with more than 45m monthly active users and with a market capitalisation of €65m, the DMA defines ‘gatekeepers’ as those who provide a ‘core platform service’, or failing that, are designated as such by a European Commission decision.[3] With an eye to future companies which have not yet been founded, the criteria still easily ensnare Alphabet, Amazon, Apple, Facebook and Microsoft.
The Act imposes broad obligations, marking a shift in ex-poste to ex-ante tactics. Sensing that rounds of antitrust cases have achieved little in changing corporate behaviour (despite financial penalty: Google was fined €8.5bn in the last three years), this legislation instead reflects five years of investigation by the Commission.[4] Significantly, the DMA requires gatekeepers to ‘open up’ by sharing ranking, search, click, and view data to smaller rivals.[5] For example, where Google currently owns this valuable data and sets prices for digital advertising, under the DMA, smaller rivals such as Qwant or DuckDuckGo may benefit from the data distribution.
This is legislation which unwinds companies' dominant market position in industries they effectively built themselves; a dominance enabling Google to hold onto to its 90% share of the £7.3bn search advertising market in the UK.[6] For both consumers and rival businesses, the ecosystem of 21st-century online behaviours might no longer cluster around a few key names.
No wonder Pichai is so wary.
Across the Atlantic, Washington is bothered by the same power wielded by the product of its own protectionist capitalism and lack of scrutiny. Ex-Democratic candidate Elizabeth Warren floated a scheme to break-up ‘platform utilities’ (annual global revenue of more than $25bn / €20bn), by prohibiting the ownership and use of the same platform; e.g. Google’s ‘OneBoxes’ favouring its own services in search results or Amazon’s similar self-preferential treatment.
With United States v Microsoft Corp (2000) in mind, it is this spirit of disassembly which informs recent litigation against Silicon Valley. Only a few years after approving the same acquisitions, the Federal Trade Commission’s suit against Facebook aims to splinter-off WhatsApp and Instagram. Under the same section 2 Sherman Act 1890 which stalked Microsoft, the Attorney General and several states filed a suit against Google in October 2020, followed shortly by another from even more states. The varying reasons for these lawsuits seeking the same result betray what is actually a fragmented solution to over-mighty tech companies: faced with a wide set of problems kicked up by lack of regulation, US antitrusters seek legal basis in size itself.
Filing antitrust lawsuits is a short-term term solution and reveals a competition law which is not fit for technology monopolies. The Sherman Act, despite its age, well serves modern antitrust cases thanks to broad wording and interpretative instruments which accumulate round, rather than strictly define, ‘monopolization’. But it imposes a heavy evidential burden, and the wording of the Google filings at once strains the legislation to its limits, and exposes a priggish sensibility to public opinion: Google was once ‘the darling of Silicon Valley as a scrappy upstart … That Google is long gone’. Linguistic phenomenon is used as evidence; the company ‘so dominant that “Google” is not only a noun … but also a verb’. The (valid) accusation that Google’s distribution agreements — to make it the default search engine in devices — are anti-competitive is reasoned simply: they ‘lock up scale for itself’. Abstract, furiously aerated with rhetoric and written with posterity in mind, the first filing exposes the difficulty of attacking monopolies under evidence requirements which are hard to meet for digital mechanics.[7] Similarly, the second filing finds ‘Google enjoy[ing] virtually untrammelled power over internet search traffic that extends to every state […] indeed, into nearly every home and onto nearly every smartphone used in the United States’. Hyperbolic, but more nuanced than the first in terms of what Google actually does, this lawsuit makes clearer from the outset the alternatives to a monopolistic search engine.[8]
The spectrum of reasons provided by these filings is a dazzling legal flourish of argument, but is also indicative of the potential inefficacy of court-based scrabbling. Methodology in the States and the EU diverges even where the desired outcome is the same. The US is conceptually wedded to break-ups in a way that mirrors the EU’s fondness for regulation, but as the European Commission has discovered, suing or even breaking-up Big Tech will not fundamentally change corporate or consumer behaviour. The oft-cited comparison with Standard Oil’s breakup into 34 separate companies in 1911 is thus misleading but productive for a few reasons.
Firstly, in any competition case, there exists the problem of market definition: prosecutors will want to define Google as the most dominant search engine; the defence will want to portray it as merely one single player in the larger digital world. This is more pertinent in the rapidly-developing tech industry than it was for energy a century ago, with murkier definitions and fewer people industrially literate.
Data may be the new oil, but its re-usability makes it an essentially different commodity: oil is owned and used once; the energy (i.e. value) it provides extinguishes. Data, however, reincarnates: it may attract or repel value depending on its use in wider data sets, how it connects with other types of data or its rich accretion. Consumer-led micro-trends are made possible by the hyper-personalisation of the commodity itself (such as Google’s DoubleClick creating personalised ads); no such personalisation exists for oil — its value was based on perceived necessity. It is the opposite quality — of novelty, detail, individual habits — which makes data such a luxurious commodity.
This second quality — of luxurious individuality — is connected to the second reason why data is essentially different from oil: the issues created by monopolistic companies are far more wide-reaching than consumer prices. Standard Oil was dismembered to ensure prices were not artificially high. Big Tech allegedly limits user experience by preventing alternatives from existing. It also keeps prices high for would-be digital advertisers and centralises control of individual data, posing privacy risks. Lastly, it causes direct tension between freedom of expression and abusive content. The network effect of these platforms means that dismemberment alone of Instagram from Facebook, or DoubleClick from Google, will not solve these intersectional issues.
Thus, in an industry where innovation itself shapes the narrative, method and experience of technology, the so-called ‘Chicago School’ of consumer-first protection from monopolies by way of break-ups is ill-suited to control Big Tech. It is true that legislation cannot solve all problems either; the DMA is late in the making, so does not have more obvious time benefits than drawn-out court cases. Clunky EU legislative process apart, regulation is still nimbler than litigation, for the way in which legal theory may move in-step with technological development. Law — even civil code systems — does not exist in a vacuum, and the DMA does not try to solve or even anticipate all problems at once. As the first gambit in an increasingly regulated industry, the Act will be one of many pieces of legislation for technology, just as a fan of rules covers different issues in the motor industry.[9] The US litigation is a politically convenient hit-and-run in familiar territory. Conversely, the EU has learnt from its own litigation attempts and places the same values on a statutory footing. Rather than using resources to fight court cases, attention to legislation adherence will result in a changed corporate behaviour from the inside out and will demand exactly the kind of ‘nuance’ Pichai appreciates.
Written by Olivia Moul.
[1] Richard Waters, ‘“Regulation can get it wrong”: Google’s Sundar Pichai on AI and antitrust’, Financial Times, 23 December 2020 <https://www.ft.com/content/9debcf65-7556-4247-8abb-1d165391343f>.
[2] GDPR, Article 17 (Right to erasure).
[3] European Commission, ‘Proposal for a Regulation of The European Parliament and of The Council on contestable and fair markets in the digital sector (Digital Markets Act)’, 15 December 2020 < https://ec.europa.eu/info/sites/info/files/proposal-regulation-single-market-digital-services-digital-services-act_en.pdf> p. 2.
[4] Euronews, ‘EU investigators launch probe into Google's plan to takeover Fitbit’, 4 August 2020 < https://www.euronews.com/2020/08/04/eu-investigators-launch-probe-into-google-s-plan-to-takeover-fitbit>.
[5] European Commission, ‘Proposal for a Regulation’.
[6] Competition & Markets Authority, ‘Online platforms and digital advertising: Market study final report’, 1 July 2020 <https://assets.publishing.service.gov.uk/media/5fa557668fa8f5788db46efc/Final_report_Digital_ALT_TEXT.pdf>
[7] United States Department of Justice, ‘Google Complaint’, 20 October 2020<https://www.justice.gov/opa/press-release/file/1328941/download> pp. 3-5.
[8] State of Colorado et al, ‘Google Complaint’, 17 December 2020 < https://coag.gov/app/uploads/2020/12/Colorado-et-al.-v.-Google-PUBLIC-REDACTED-Complaint.pdf> p. 5.
[9] Benedict Evans, ‘Regulating technology’, 23 July 2020 < https://www.ben-evans.com/benedictevans/2020/7/23/regulating-technology>.