One of the most important arguments against greater regulation of the technology companies is the view that despite their large market shares they enhance consumer welfare. And since consumer welfare is the primary objective of market regulation, there should not be any regulation of these companies.
This is a view that can be traced to both the ubiquity in our daily lives of the convenience value of these innovations and the recency of these markets. We routinely engage with all of these innovations - e-commerce, social media, search engines, streaming video, fintech etc - in our daily lives. The have enriched our lives in some way or the other, and continue to do so.
The relatively early stages of their market evolution also mean that their benefits stand out more than their costs. In other words, there is a representativeness bias towards their benefits over their costs. But it's only a matter of time before the benefits recede in our individual and collective cognitive selves and their gradually manifesting costs become increasingly salient.
Regulators and judges are no less immune from these biases and influences.
In this context, if regulators across the world were looking for exhibits on the enormous and potentially dangerous control that the big technology companies exercise in their markets, then they need to look no further than the ejections of @RealDonaldTrump from Twitter and Facebook, Parler from Amazon Web Services, Fortnite from Apple Pay, and PayTm from Google Play.
There are two distinguishing features in all these cases - the consequences of disproportionate levels of market access and market concentration. The first concerns the balance of market power and the unilateral nature of the decisions by the technology companies, and the second is the effective loss of market access for each of those ejected.
A logical extension of the first confers on the technology companies a vastly disproportionate power to turn off the market access tap on any user of its services. This is unprecedented since unlike regulated markets like infrastructure services, there are no proximate regulators in these markets. The legal recourse is most often long enough to effectively eliminate the aggrieved user (or company).
The second is a demonstration of the massive market power that these companies enjoy. It is true that these technology companies pioneered the creation of their respective markets. But those markets have come into being, it is only appropriate that it be subjected to the same set of rules that govern all other markets. The platform nature of the markets only means that the original market has since spawned several other inter-connected markets, thereby making market concentration even more dangerous.
These are powers that previously only governments had. As a comparator, if you consider internet as the highways system, it's like a large vehicle manufacturer having the power to both prohibit someone from using the road and also make competing vehicle manufacturers unattractive (say, because of inadequate servicing options) for users. Or, if you compare internet advertising with with television advertising, it's like the cable operator controlling what advertisements can be displayed and what content can be seen on your television.
The growing pile of high-profile and market disrupting ejections may well be the triggers that regulators and judges need to tip over their cognitive selves from being dazzled by the convenience of these innovations and into recognising the costs and dangers of market concentration.
The unambiguous takeaway, one that will become increasingly evident in the coming years, is that market concentration on the one hand and market competition and consumer choice on the other cannot co-exist. They are the impossible dilemma. Worse still, in the absence of competition, innovation and economy-wide dynamism suffers. This has been historically acknowledged for all markets, and digital markets are no different. Perhaps even more so for them given the network effects and their platform nature, both absent in case of regular markets.
I have blogged earlier here (beginning of anti-trust actions in US and Europe), here (Google and anti-trust challenge), here (anti-trust challenge in US), here (market monopolisation), and here (Amazon's market abuse of startups) on the problems with market concentration and the need for regulation. This points to what Google founders themselves though about data monetisation and digital advertising. I have blogged here, here, and here on the problems with regulatory arbitrage and here on the market service quality problems due to limited and poor regulation. And we are not even talking about the several other distortions arising from such market concentration, especially the valuation bubbles in the financial markets - see this and this.
Finally, this is a summary examining the dynamics of digital markets and how it offers a different perspective on these markets, and this is a summary of how the big technology companies have become digital gatekeepers to large and critical markets.
Update 1 (23.01.2021)
The Australian legislators have opened up a new front in the battle against Big Tech with a new law that would compel social media groups like Google and Facebook to pay news organisations and publishers in exchange for circulating stories. If Google is making money from advertising on a page with a link to New York Times which is what is attracting people to that page, why should not NYT demand a share of the advertising revenue that Google attracts due to positioning the NYT link?
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