Editorial 

The Guardian view on big tech: a new era needs new rules

Editorial: Google, Apple, Facebook and Amazon are too big and too powerful. Regulation has to catch up with the changing character of the digital economy
  
  

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‘Facebook is in trouble because its users are the product. The company’s most lucrative asset is the intimate self-portraits in data that people have fed into the site.’ Photograph: Karen Bleier/AFP/Getty Images Photograph: Karen Bleier/AFP/Getty Images

One beneficiary of the scandal surrounding a massive data leak from Facebook has been its fellow technology giant Amazon. Tens of billions of dollars were wiped from Facebook’s value in just a few days. Other tech companies, including Google, also suffered.

But Amazon was spared. Earlier this week the online retailer overtook Alphabet, the parent company of Google, to become the second-highest-valued company in the world: worth $768bn. The leader is Apple, with a market capitalisation of $889bn.

The resilience of Apple and Amazon relative to Facebook reflects a market judgment that their businesses are more anchored in the analogue world. Their users acquire tangible products – phones or books. Facebook is in trouble because its users are the product. The company’s most lucrative asset is the intimate self-portraits in data that people have fed into the site. The Cambridge Analytica breach shows that Facebook is not to be trusted with that information.

But then consider how much information Amazon has about its users. The goods that you buy say a lot about who you are. Amazon is also in the TV streaming business. It is reported to be looking for ways into the healthcare business. Via Alexa, its “home assistant”, it is in the domestic service business. Who, really, does Alexa serve?

Google, Amazon, Facebook, Apple – or Gafa as they have come to be known – represent something entirely new and all too familiar. Their penetration into the personal lives of citizens is vast, on a scale once imagined only in dystopian fictions. But they are also an old-fashioned oligopoly. Would-be challengers struggle to grow in their shadow. Many users of Instagram and WhatsApp, for example, probably do not even realise that those services belong to Facebook.

There is nothing intrinsically wicked in businesses wanting to grow and make money. It is rational behaviour by successful market players. But there is a reason why regulations exist to stop any individual or group of players having disproportionate dominance. US antitrust laws came into existence towards the end of the 19th century as it became clear that the accumulation of power by vast conglomerates, in the oil and transport sectors, for example, was suffocating competition. The law needed to keep up with the changing character of industrialisation. The same is true now.

A difference is that today’s corporations transcend national borders. They are not above the law but it is not always obvious which laws apply where. The government of a small or medium-sized country has limited capacity to impose its will. That is one reason why the EU’s competition commission – pooling the authority of 28 nations – has been able to challenge Google over alleged abuses of its capacity to skew internet shopping searches, tilting them towards its own services. (The company was last year fined €2.4bn.) The European commission is also looking at methods for taxing digital revenues across the EU, judging that tech giants currently avoid paying their fair share by booking profits in lenient national jurisdictions. It is notable that Theresa May has identified competition law as an area where she envisages the UK staying closely aligned with the rest of Europe after Brexit. Global businesses listen to continent-sized regulators.

But the Gafa challenge goes beyond the application of existing rules. It raises questions about the adequacy of protections designed for an analogue economy. The existing rules have, over time, come to be seen largely as tools of consumer protection. They still have that function, but antitrust law was also originally conceived as a device to correct big structural imbalances in the economy. The current moment requires a regulatory intervention on a vast scale: a back-to-basics approach that addresses the systemic dominance of a few titanic corporations. The nature of their businesses was not imagined when existing laws were written and their power is of an order that now rivals that of the governments that would regulate them. This is bad for the market, bad for the consumer and bad for democracy.

 

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