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Digital monopolies among tech giants expected to intensify

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 02 Mar 2021

Despite facing large fines from regulators, big tech companies do not have much of an incentive to change their anti-competitive behaviour – which is expected to increase the threat of digital monopolies.

This is according to GlobalData’s latest report, Anti-trust – Thematic Research, which provides an overview of the main trends shaping the anti-trust theme in the global digital economy.

According to the report, the increasing returns to scale in data gathering and processing has given rise to a growing form of monopoly by tech giants, referred to as digital monopoly. These have created new challenges for regulators and anti-trust authorities.

The battle over digital monopolies by tech giants such as Google, Facebook, Apple and Amazon is expected to intensify, and the case for new regulation around the monopolisation of user data by big tech companies has never been stronger, it notes.

While regulators have attempted to take on big tech before, the current laws mean they can only catch companies in the act, and not ex-ante (‘before the event’), says GlobalData.

Adequate regulation and approaches should be established to address the complexity of the digital economy, in order to combat the rising threat of digital monopolies.

“Existing anti-trust rules are broad in scope and only allow enforcers to act after wrongdoing has been committed.Big tech companies have been fined billions for their anti-competitive practices over the last decade; however, these practices are still in the spotlight after years of scrutiny,” notes Laura Petrone, senior thematic analyst at GlobalData.

“Ex-ante regulation − involving the application of strict, transparent rules to digital platforms before they engage in any anti-competitive behaviour – is a desirable solution because it allows regulators to address structural competition problems without finding an infringement of anti-trust rules.”

An example of ex-ante regulation is the European Commission’s proposed Digital Markets Act, which aims to abandon lengthy proceedings against large platforms, in favour of ensuring minimum conditions to avoid monopolies.

Europe is leading the charge, with other jurisdictions slowly following suit, including China and India, notes the report.

For the past several years, large tech companies have faced increased scrutiny from regulators and the public, for anti-competitive behaviour and their use of customer data.

The tidal waves of scandals include Google’s abuse of power and anti-competitive behaviour, which led to a $5.1 billion fine from the European Union, and Facebook’s data privacy violations through political consultancy Cambridge Analytica’s foreign meddling in the US election.

Full might of the law

As more laws are introduced to combat monopolies, GlobalData notes regulators will come after big tech companies in 10 main regulatory arenas: data privacy, data security, anti-trust, tax avoidance, misinformation, online harm, obstruction of justice, copyright, net neutrality, and fintech regulation.

This week, Australia’s Parliament passed a world-first law forcing Facebook and Google to pay local publishers for news content. The regulation, which is expected to set a global standard, will ensure news publications are fairly remunerated for content used on the platforms – which make billions in advertising revenue.

GlobalData notes the full weight of anti-trust regulation will be used against platforms providing Internet services from a monopolistic position or as part of a duopoly – digital platforms with excessive control of user data, such as Amazon, Google and Facebook, are the most at risk.

“From online search to e-commerce, and digital advertising to social media, anti-trust watchdogs could halt big platforms’ acquisitions of smaller players whenever they see this as damaging to competition,” adds Petrone.

According to GlobalData’s deals database, Google, Amazon, Facebook, Apple and Microsoft completed a total of 168 merger and acquisition (M&A) deals between 2018 and 2020.

The vast majority of these deals were not investigated, nor were competition authorities notified. Some regulators have introduced obligations for big platforms to notify anti-trust agencies of all M&A activity, potentially resulting in more investigations and more acquisitions being blocked.

“In the US, breaking up digital platforms has emerged as a popular remedy, but that’s easier said than done,” Petrone continues. “It’s doubtful whether separating companies would increase competition in any key markets. While it would undoubtedly reduce each platform’s power in the short- to medium-term, the underlying market dynamics, such as network effects and economies of scale, would continue to favour concentration.”



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