Global Spectator, by Andrés Ortega

China, the US and the EU: three ways of confronting Big Tech

Esta entrada también está disponible en: Spanish

Big Tech. GAFAM-Alphabet-empire. Photo: Katchooo (CC BY-NC-ND 2.0). Elcano Blog

Big Tech. GAFAM-Alphabet-empire. Photo: Katchooo (CC BY-NC-ND 2.0)

There is a general mobilisation on the part of states and governments against the power of Big Tech, the great technological monopolies or oligopolies, from the US, cradle of these corporations in the West, to Brussels (and London), but also China. The World Economic Forum, in its latest Global Risks Report for the years ahead, ranks the risk of ‘digital power concentration’ in sixth place (by probability, not by impact). To prevent it, there is no consensus among these actors regarding either the goals or the methods chosen, apart from not wanting to stifle innovation.

China

The Chinese regime has thwarted the stock exchange debut of the Ant Group, the fintech arm of the Alibaba conglomerate, founded by Jack Ma, who had publicly criticised the archaic model of Chinese banks. This stems from fear of losing control of the lines of credit that, as Eugenio Bregolat rightly points out, are so important for the Chinese system, and the fear of instability being created in the system. The decision must have been taken with the approval of the highest echelons, namely President Xi Jinping himself, as Nikkei Asia suggests in an analysis well worth reading. Alibaba has been on the receiving end of an antitrust investigation. Ma had already resigned, and his replacement at Alibaba, Daniel Zhang, has made a public apology.

It is a matter not only of crushing Jack Ma’s rebellion and prominence but in a general sense regaining control of the Chinese tech titans, after years of laxness about their growth and oligopolistic practices. The monopolies watchdog, the State Administration for Market Regulation, has for the first time published a report proposing rules to prevent large Internet platforms stifling competition. The Bank of China has made proposals along these lines for its own sector. In some respect the Chinese regime goes further than Western regulators, since it does not restrict itself to monitoring market share, but also the interests of consumers. The regime proposes to limit Ant’s room for manoeuvre, and even buy a stake in these private conglomerates. Chinese capitalism is changing.

In other words, the movement within China goes beyond the case of Jack Ma. Perhaps the regime has learnt from the Russians how to break the power of the oligarchs. The platforms are an instrument of political control, and in China too the profusion of social media and news aggregators makes censorship more difficult. Baidu, Alibaba and Tencent (known collectively as BAT) each have more than one billion users and pursue an aggressive policy of buying start-ups. Regaining control is thus one of the priorities of the regime. There is even a degree of rebellion among consumers against sales and service platforms in China, which use the personal data they harvest to inflate prices.

The US

There has been a growing movement in the US to limit the power and scope of the technology giants, especially the group known as GAFA (Google –or its parent company Alphabet–, Amazon, Facebook and Apple). Proceedings have been instigated by the Department of Justice (which seem likely to continue under the Biden Administration) against Google and Facebook, by the Federal Trade Commission and by 46 states. Before the elections the staff of the Congressional Justice Committee’s Antitrust Subcommittee had drawn up a report on an ‘Investigation of competition in digital markets’ proposing a range of possibilities.

Rather than changing the rules, the idea is to change the situation. It seems unlikely that the Biden Administration, which is fighting fires on so many fronts, will view new pro-competition, or antitrust, legislation as a pressing priority, but rather that it will rely on existing laws, basically the Sherman Antitrust Act of 1890, which has again been invoked against Google. But the Biden Administration will not be as permissive with Big Tech as Obama’s was. California, by contrast, is being stricter with its regulations, but for this reason alone some companies, particularly start-ups, are leaving Silicon Valley –the techxodus, it is being called– for other, more benevolent jurisdictions.

A basic goal is to encourage competition, innovation and creativity, and to this end block some of the acquisitions made by Big Tech, precisely to swallow up potential competitors. This is what happened when Facebook bought Instagram and WhatsApp, and Google bought YouTube. It is also a matter of preventing deals between giant corporations that limit competition, such as the one that led Apple to include the Google search engine on its devices and carving up digital advertising.

There is considerable reluctance in the US to split up the technology titans, as once happened with the oil, electricity and telephone companies. There are cases where it would be relatively simple (for example, separating WhatsApp from Facebook). But often the technologies are intertwined. Moreover, these companies invest heavily in artificial intelligence and other technologies where the US is vying with China, with geopolitical consequences.

As in Europe, amid efforts to spread disinformation, the question has also been raised of making the platforms responsible for the truth of the messages they carry, something that is also difficult to achieve without depriving social media of a major part of the way they operate. The fact that Apple and Google have delisted from their stores –and Amazon from its servers– an app like Parler, with its far-right content, poses a key problem: is it the large private platforms that should regulate the public debating space, or it is the public authorities, as the Europeans tend to argue, that should perform this task? It is in Europe, specifically in the form of Angela Merkel, where, citing freedom of expression, the strongest criticism of closing Trump’s accounts on Twitter and Facebook, among others, have come. Europe wants the platforms to be regulated so that they are held responsible for the content they carry, but cannot endorse this type of censorship. It is unacceptable that the large social media platforms take such decisions off their own bat, the European Commission has said.

The EU (plus the UK)

Unlike the US, in the wake of various member states requesting it in October, the EU wants to bring in rules to change the ways in which Big Tech firms operate. The EU is proud of the global scope of some of its regulations (such as the General Data Protection Regulation). It has a strict competition policy and in March fined Google €1.76 billion for abusing its domination of the online advertising market. The European Commission, which has been advised on these matters by Jason Furman, who worked for the Obama Administration, submitted two initiatives of major scope at the end of last year: the proposals contained in the Digital Services Act, essentially to make the platforms liable for content (with the threat of large fines), and the Digital Markets Act to limit the activities of some of Big Tech companies, particularly the gatekeepers, because other companies have to use their services for their own businesses, and they are capable of dictating how markets operate. These proposals have been bitterly rejected by some large US corporations, but the Competition Commissioner, Margrethe Vestager, has warned them that the alternative to European legislation is a multiplicity of national regulations, some more strict. The British Competition and Markets Authority is also proposing a new code of conduct and a new Digital Markets Unit with the power to impose significant fines.

Given the new Administration in Washington, with which it wants to rebuild transatlantic relations, it seems unlikely that the EU will seek to carve up the large US corporations on its own, despite the warnings of commissioners Margrethe Vestager and Thierry Breton. But it wants to open up spaces for its own companies. According to one report, Europe is now said to have created 120 unicorns (tech companies worth in excess of US$1 billion) in the last decade.

In Europe, in an inverted mirror-image of the Chinese situation with Ant, traditional banks are calling for fintech businesses to be regulated in order to be able to compete on level terms to remain in business. Ana Botín, for example, the executive chair of Santander, argues that ‘large tech companies are becoming lending platforms without having to comply with most banking regulation’.

All state actors –Europe, the US and China– seem to be engaged in an apparently similar tussle with Big Tech, albeit with significant differences, which was inevitable after these companies went through years of untrammelled growth. From the governments’ perspectives (and the EU’s), it is also a matter of being well placed to compete for international standards, including the taxes that are going to be due from these companies.

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