Big Tech may not be afraid of a boycott. But it might fear a regulator

The exodus of Facebook advertisers gets headlines, but a British proposal to rein in the giants may be more effective
  
  

A woman walking past Google's offices in London
Google and Facebook are likely to lobby hard against a statutory ‘digital markets unit’. Photograph: Facundo Arrizabalaga/EPA

Mark Zuckerberg is taking a relaxed view of the boycott by major advertisers over the proliferation of hate speech on Facebook. They’ll be back “soon enough”, the founder was reported to have said last week.

He may be right. When your annual advertising revenues are $70bn (£56bn), you can afford to suffer a few dropouts. Boycotts have fizzled out in the past. But will Zuckerberg be so chilled about an attack – or potential attack – that is regulatory and economic in nature?

To less fanfare than the boycott campaign, the UK’s Competition and Markets Authority last week unveiled the fruits of its year-long study of the digital advertising market, which is worth £14bn annually in Britain. The report ran to more than 400 pages and diagnosed a serious problem: Facebook and Google enjoy dominant positions and the lack of competition is so severe that an entirely new regulatory regime is required.

The tech duo enjoy “such unassailable market positions that rivals can no longer compete on equal terms,” said the CMA. Weak competition in search and social media leads to less innovation and “consumers giving up more data than they would like”. And, if the £14bn – or £500 per household – is being inflated by lack of competition, consumers may be paying more than they should for hotels, flights, electronic gadgets, books, insurance and other goods.

As an analysis, it looks spot on. So, too, the description of Google and Facebook’s business models as “self-reinforcing”. Having more data and more users going to the same two companies makes barriers to entry more formidable. This leaves threee key questions, though. What to do about it? Who should enforce changes? And when is reform likely to happen?

The CMA volunteered a few ideas on remedies. Google could be forced to open up its data so that rival search engines can tweak their algorithms and compete properly. And Facebook users could be given the right to opt out of personalised advertising. The tech twins, you can bet, would fight those game-changing proposals every inch of the way.

Who, then, should be the enforcer? That is where onlookers started to fret. The CMA is not volunteering for the job. It has dropped the idea of launching a full market investigation, the normal prelude to an intervention to shake up a sector. Its remarks about how a formal probe would impose “burdens” on affected rivals struggling with Covid-19 sounded weak. A cop-out, cried critics.

Actually, though, the CMA’s reasoning looks sound. A market investigation can only deliver one-off interventions. What the CMA is proposing is permanent supervision by a new “digital markets unit” that would have powers to police a “code of conduct”. That approach feels right, in theory. Facebook and Google are shape-shifters, so effective regulation also needs to be adaptable and quick, which the CMA is not (its investigations can take two years).

But there’s still a practical difficulty. The CMA has, in effect, booted the ball to the government, inviting it to create a new regulatory body with serious powers to challenge the behaviour of two of the world’s biggest companies. The lobby backlash will be intense and the fear is that legislative reform will be watered down. It might also take 18 months to get a new body up and running, and the same again to see actual action. That’s a long time to tolerate anti-competitive conditions.

One can say that the CMA has produced a good plan – but a very slow one. Other countries, notably Germany, Japan and Australia, are moving in the same direction, so the UK is not alone. Ministers need to seize this report and push it hard and quickly. Over-privileged Big Tech needs accountability, competition and strong regulation, It would be a disgrace if the CMA’s proposals, which should have been made years ago, are allowed to fizzle out.

The US can’t keep this pace of recovery up

The US has long had a reputation for being a jobs machine – and it showed why in June. Getting on for 5 million Americans were added to the payroll last month, knocking market expectations out of the park.

The other piece of good news was that an increase in hiring cut the unemployment rate from 13.3% to 11.1%. At this rate, half the increase in unemployment caused by the coronavirus will have been unwound by the end of the year. That process took four years after the global financial crisis.

As he prepares for this week’s package of measures, Rishi Sunak will clearly be hoping that something similar will happen in the UK. The chancellor should, however, be wary of reading too much into events on the other side of the Atlantic.

It is not just that the official US payroll figures underestimate the real rate of unemployment, or that the data for new jobless claims suggests that America is still shedding jobs at a rate of more than 2 million a week.

Rather, it is the real risk that the improving trend will slow markedly over the next couple of months.

The first threat comes from the restrictions that are being reimposed as a result of the increase in Covid-19 cases in 40 US states.

Even before the closure of bars and restaurants in states such as Texas and Florida, there was evidence of a more cautious mood among consumers. They will be even warier now, and that will slow the pace of both economic recovery and hiring.

The second threat is that the extra financial help currently being provided for 30 million American jobless claimants will end abruptly at the end of July. Taken together, fear of the pandemic and a loss of spending power point to a long and difficult winter ahead.

Pandemic job losses hit women hardest

Three months is a long time in retail. One minute shop assistants are prized key workers, up there with doctors and A&E nurses, regaled for keeping the nation fed during the crazy initial weeks of the coronavirus pandemic. The next they are expendable. In their thousands.

Last week was one of the worst ever for retail workers, with 6,000 jobs disappearing in a single day as the full force of the steamroller driven down the high street by Covid-19 was felt. Neither high street nor high-end retail was immune, with the cuts at Sir Philip Green’s Arcadia group and luxury department store Harrods adding up to 1,200 jobs lost. The dearth of commuters also spelled heavy redundancies at SSP, owner of the Upper Crust and Caffè Ritazza chains, with 5,000 jobs axed.

Last year a RSA Future Work Centre study of how the UK labour market had altered over the 2010s reckoned that 289,000 “traditional” high street roles had been eliminated by the rise of online shopping. Eight out of 10 of these entry-level jobs – positions like sales assistant and checkout operator – were held by women.

“The carnage on the high street has hollowed out many jobs traditionally held by women, but jobs in areas of growth related to e-commerce, such as van driving, are going more to men,” the thinktank said. As a result low-skilled female workers – many of whom combine shop work with childcare and other responsibilities – were ending up in low-paid, less secure jobs.

Despite the fact that retail is the biggest private-sector employer in the UK, with a workforce of about 3 million, it is not a sector politicians ever get misty-eyed about – in the way they do with, say, shipbuilding or steelmaking. Even the most optimistic careers adviser would struggle to plot an overnight switch from retail to building the schools and roads outlined by the prime minister, so these workers’ route back to a job is far from clear.

 

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