In 2017 corporate size is no longer the sole determiner of unfair competition
Recap of ‘data is now more valuable than oil’
The exponential growth of digital data translates into great opportunity for businesses. Specifically, new data analysis tools are improving product development and customer service while reducing operating costs. When used effectively, AI-supported algorithms reveal not only emerging trends but also the relative probability of success for alternative strategies. In the manufacturing and extraction industries, these data tools ensure proactive equipment maintenance that prevents downtimes.
Big data gives tech giants a tremendous competitive advantage
Tech giants Google, Facebook, Apple, Amazon, and Microsoft house enormous volumes of data. This has allowed them to improve their products, which in turn has attracted bigger audiences, thereby generating even more data. These five most valuable corporations in the world take in huge net profits—25B in the first quarter of 2017 alone. Other indicators of their dominance–(1) half of all online dollars in the U.S. now goes to Amazon, and (2) Google and Facebook accounted for almost half of all digital advertising revenue growth last year.
These corporations have utilized their enormous data resources to develop powerful surveillance systems to discover and then buy out promising new startups. For example, in 2014, Facebook bought the small startup, WhatsApp–with only 60 employees–for $22B. This seems to have been motivated by a strategic decision to absorb their technology and eliminate them as a potential long-term rival.
Differences between 21st-century tech giants and 19th-century monopolies
Whenever strong demand for a new commodity creates a profitable, mega industry, antitrust regulators are supposed to restrain those who control it. Over a century ago, antitrust regulators targeted Standard Oil, resulting in its dissolution in 1911.
While digital data may be ‘the oil of the internet,’ there are significant differences between these two commodities in historical context. The Standard Oil monopoly did not serve the interests of consumers. By contrast, 21st-century users wouldn’t know what to do without Google’s free search engine, or Amazon’s quick delivery, or getting their Facebook fix every day. We ‘pay’ these corporations by giving them our data. This, of course, includes a loss of privacy. However, consider that IF these corporations were to be split up, their data would likely be released for wide distribution, making us even more vulnerable to our data falling into the wrong hands.
Most economists believe that if a tech giant like Google were broken up, one of the ‘Googlets’ would in time establish dominance over the others. Size was the determining factor a century ago, but not as much in 2017. Today, a tech corporation may gain an unfair competitive advantage by, for example, using hidden algorithms to control prices. Also, if a tech company is willing to pay an unprecedented amount in purchasing a small company this should alert regulators. In short, antitrust administrators need to carefully assess current market dynamics in determining whether a tech giant has too much control over a market.
A few possible reforms for 2017-
- We could give more control to those who supply data. In this scenario, corporations would be required to reveal how much information they have about us and the revenue they gain from sharing our information.
- More controversial–governments could manage parts of the data economy as a public infrastructure while at the same time encouraging new services by opening up their data vaults.
In my next article, I’ll discuss the importance for organizations to stay abreast of legal and regulatory data governance requirements that impact their businesses.
