In the era of British colonialism, imperial administrators boasted that they ruled an empire on which the sun never set. Today, the CEOs of Google, Facebook, Apple and Amazon might make a similar claim. Their demesnes stretch so far they are without end.
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Consider: each day, millions of people wake up, reach for their smartphones and, with their very first act, enter Facebook. Perhaps something lures them there: a friend request; a message on WhatsApp; a few likes on Instagram. But very often there is no conscious choice at all. By default, your browser reports your activity to Facebook when you visit any page with a Facebook "Like" button, even if you never click it. Simply by using a smartphone, you are walking on Mark Zuckerberg’s land.
Thinking of companies such as Facebook as apps or websites – or even, indeed, as companies – hardly does justice to their all-encompassing architecture. In the digital economy, data gives rise to economies of scope: the more you have, the further and clearer you can see. The large platforms have grown until they can glimpse almost everything we do – and, increasingly, that is a problem.
The so-called fake news scandal shows this very clearly. Portrayed as a crisis of media, it is in fact part of a wider crisis of public institutions, which are being bypassed in the process media scholar José van Dijck calls “platformisation”. What begins when social and political activities are turned into algorithmic relations ends when, as van Dijck puts it, “there is no longer any public space, because it has been overwhelmed by platforms”. The rules of the platform dictate what counts: public interests come a distant second.
The old model of public space had many flaws, not least of which was that it was, in many cases (most obviously the media), hardly public at all. But its problems were well understood and came with a remedy, which was that, if any single institution grew too big, then it should be forced to reduce in size. This is the liberal model of public space – public good by plurality. Its instrument, the well-developed field of competition law.
But although platforms look very much like monopolies, competition regulators have struggled to get to grips with their power. In Europe, competition commissioner Joaquin Almunia watched a lengthily-negotiated settlement with Google collapse at the last minute, a failure which cast a pall over his tenure. In the United States, the Federal Trade Commission (FTC) closed its investigation into Google’s search business – only later, when the even-numbered pages of an internal Federal Trade Commission memo were mistakenly sent to the Wall Street Journal, did it emerge that FTC officials believed Google was abusing its monopoly power in ways that directly damaged users and business rivals. Staff wanted a lawsuit – management shut the case.
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Some of regulators’ difficulties have been straightforwardly political, the result of effective lobbying from companies with money and glamour. They also stem, however, from the technical understanding of platforms as a form of economic activity.
Take, for instance, the classic indicator of market dominance: high prices for consumers. If there's a monopoly or a duopoly in the provision of one service – such as, to take a recent case, broadband access within a particular community – then there isn't going to be the kind of constraint on prices to that found in a more competitive situation. Prices will go up, and that's when regulators will act.
But platforms don't follow this pattern of behaviour. Instead of selling one product to consumers, they sit in the middle, mediating flows of data, becoming what economists call a multi-sided market. Facebook supplies its service to users, while simultaneously selling a slightly different version of that service to advertisers. It can charge low prices to users by making up the difference with the advertisers (who are never given exact data or access to the matching algorithms they’re paying for). From the users’ point of view there is still an economic exchange going on: they are selling their data. All the regulator sees are the low prices: so low, in fact, they’re free.
“The problem that competition regulators and antitrust regulators have had,” says Julie Cohen, professor of law at Georgetown University Law Center, “is that all the economic understanding and modelling have been oriented around the one-sided market. That modelling informed everything: the ways experts would come and testify, the ways courts write opinions, the ways regulators frame guidance or decide what enforcement actions to take. There's starting to be an awareness that we need different models.”
But new economic models won’t be able to capture the power of platforms unless they look beyond the narrow framework of “consumer welfare”. A recent Yale Law Journal paper by Lina M. Khan showed how Amazon has grown “to control the essential infrastructure” of the digital age, governing everything from book publishing to trucking to server infrastructure. For consumers this might not matter – they get cheap, fast streaming and near-instant delivery, at least at first (often the prices go up once they’ve been locked in). But for citizens, this dominance poses a very real problem.
As Khan writes: “Focusing on consumer welfare disregards the host of other ways that excessive concentration can harm us – enabling firms to squeeze suppliers and producers, endangering system stability (for instance, by allowing companies to become too big to fail), or undermining media diversity, to name a few.”
It is in this context that the decisions being made by European competition commissioner Margrethe Vestager are so important. When I spoke to her earlier this year, she made a point of mentioning a case being undertaken by the German national competition authority. This is the first case to take dominance in social networking as the starting point for a competition investigation – a sign that the regulators understand how control of the social graph can extend to other areas.
Vestager is also looking at extending competition law to allow the Commission to look at mergers where data is part of the exchange. At present, the Commission only takes into account the monetary turnover of the companies when deciding to investigate takeovers. This proposed reform would allow it to include data in its calculations, bringing acquisitions such as Facebook’s of WhatsApp and Microsoft’s of LinkedIn under closer scrutiny.
Just as importantly, Vestager sees beyond the narrow “consumer welfare” approach to competition policy. “Technology is, in many respects, an enabler for an open, transparent society,” she says. “But it's also an enabler for supervision to a completely unforeseen degree. And for commercialising personal space to an unforeseen degree.” On her phone she keeps location tracking turned off. She wants, she says, to choose her own path, without being given the answer by an algorithm. “Part of being a not only a liberal but I think a human being is to make your own decisions.”
Decisions are the key to Vestager’s political philosophy: in this sense, she is a good liberal. Yet her approach – applying the liberal model of public space – may struggle to be effective, simply because the power of the platforms has already grown too great. Their ability to influence renders any decision-making model meaningless.
“It is very naive to assume that we can restrain companies in that way,” says van Dijck. “Choice and competition don’t work if you have a system that cannot be well-informed.” So what else can we do? “I’m really struggling with our options,” he admits. “We’re increasingly governed by platforms, but the governance of platforms isn’t there.”
This article was originally published by WIRED UK
