Are governments doing enough to regulate unfair competition in tech?

Trillion-dollar firms like Apple, Microsoft and Google effectively control the tech market, but could their reign be about to end?

Big tech plays an important part of our lives, whether it's using Apple for mobile products, Google for its search engine, Microsoft for productivity software or Facebook for social media.

These companies have developed products and services that are synonymous with modern life, and it's hard to think what life would be like without them. But many people fear that tech giants have become too powerful and make it harder for small firms to thrive in the same markets.

More recently, Amazon has been accused of collecting the information of third-party sellers in order to gain competitive advantage, and Apple has come under pressure for setting unfair rules in the App Store. As a result, there's been an increase in governments launching antitrust challenges and developing regulations to keep these companies in check. Are they right to be worried?

 

Big tech is thriving

Although coronavirus has caused economic uncertainty, it's been a catalyst for the tech sector. With people relying heavily on internet platforms for things like working, shopping and communicating during lockdown, many tech giants have experienced huge growth. For instance, video conferencing platform Zoom saw its revenue surge by 169% as a result of huge demand from users.

While it's great to see companies flourishing during these difficult times, some experts are concerned that people have become too reliant on big tech and believe that tech startups are finding it harder to survive. Tech analyst Paolo Pescatore calls the sheer size and breadth of services of tech giants alarming, noting how they make it harder for any other provider to compete on price, value and choice.

"Arguably during this pandemic, consumers and businesses alike have become more reliant on these big tech services (cloud, apps, games, video, education and more). They've helped handle and maintain mass-scale working while entertaining users in homes at the same time to keep us entertained," he tells IDG Connect.

"This period represents a great opportunity for innovation and unique storytelling. It is unsurprising to see many of the leading tech giants have seen a surge in demand for their services. While they are not immune, they are most likely to come out far stronger than smaller start-up tech firms."

 

Regulating tech giants

Consequently, there's increasing pressure on governments and regulators to create an even-playing field for tech businesses of all sizes by introducing antitrust regulations. Pescatore says: "While regulation is not sexy, it is a hot area. This is already a contentious point given the strong concerns raised over the last couple of years over their anti competitive behaviour."

"Therefore, expect an even greater focus on regulation over the coming months as countries look to potentially overhaul existing online regulation. This is timely as the European Commission is to launch a public consultation on its own digital platform regulation." 

But that won't be an easy task, with Pescatore warning that more regulation will have a negative impact on the growth of tech giants. Instead, he says a cohesive global effort is needed. "A fine delicate balance needs to be struck to ensure consumers have choice rather than breaking up dominant companies," adds Pescatore.

"Furthermore, in light of the current climate, governments are keen to focus on improving their existing connectivity infrastructure and provide the right conditions for home grown tech start ups and business to thrive."

 

Governments are playing catch-up

New tech businesses are always emerging, and while they're no doubt developing impressive innovations, competing with the likes of Apple, Microsoft, Amazon and Google is incredibly difficult. All four of these US tech giants are valued at $1 trillion, have billions of users and are constantly acquiring smaller firms.

Gerard Pérez Olmo, partner and antitrust expert at multinational law firm DWF, says:

"Technology businesses have shown a new and special capacity to quickly expand their activities in their fields and to adjacent and connected markets - directly competing with new, less established entrants, like app developers, for instance. The reality is that big tech firms can easily act as gatekeepers and monopolise their market and adjacent markets, hindering opportunities for smaller new and existing players."

Lawmakers are beginning to introduce new rules and regulations to keep dominant tech firms in check, but it has been a slow process. "In our free market economies, national governments have only imposed limits, through ex ante regulations, once they have identified frequent competition problems arising in strategic markets, such as energy, telecoms, transport or postal services. This has taken a long time to develop, in most cases," explains Pérez Olmo.

The European Union, in particular, is working on plans to regulate big tech and ensure all firms can survive in an increasingly competitive market. Pérez Olmo says: "The European Commission has even recently launched an open consultation on a possible 'new competition tool' that would allow the authorities to impose some behavioural obligations to major players in order to ensure a normal functioning of the markets, without the need to identify actual infringements on a case by case basis. This would be the most dramatic development of competition rules in the last twenty years.

"The outcome of this debate is uncertain, but there seems to be a clear recognition that something needs to be done by governments and authorities as they are currently playing catch-up. Hopefully whatever change that is bought forward will allow for a greater balance between players in all markets."

European countries are also launching their own services to take on American tech giants and reduce reliance on them. Paul McKay, a senior analyst at Forrester, says:  "The French and German government formalized their commitment to setting up a European data sovereign cloud platform last month called GAIA-X, which they hope will allow companies dealing with use of sensitive IP and sensitive personal data to use a European sovereign cloud platform hosted in Europe and guaranteeing application of European rules and norms to how this information is secured and accessed.

"This is an intriguing move as it shows that governments in Europe in particular are getting more muscular at countering what they perceive to be unfair regulations and commercial practices perceived in countries like the US and others who have similar regulations."

 

Competition isn't a bad thing

Taking on billion-dollar tech giants may be difficult, but not everyone believes that this is a bad thing. Brad Nobbs, CEO and co-founder of technology company Licklist for Business, takes the view that there's room for firms of all sizes in the tech industry.

He says: "Tech is also an extremely competitive market which is largely dominated by the big players. That said, I believe the market is big enough and the opportunities are strong enough to sustain both the big players and smaller tech focused organisations like ourselves. The market needs the smaller organisations like us, who are in turn supporting SMEs during this pivotal time for the UK economy."

When it comes to developing antitrust regulations for the tech industry, Nobbs believes that such legislation should be about providing consumers with plenty of choice in the market and helping all firms to thrive.

"The UK government has been taking steps to develop its codes of competition, which I believe are important to ultimately ensure an environment which is most beneficial to customers; offering a variety of players, big, medium and small, all working to create and develop the UK into a world leading tech economy," he adds.

Healthy industries are defined by fair competition, allow every company to thrive and provide consumers with lots of choice. Although a small number of trillion-dollar businesses dominate the tech sector, it's clear that governments and regulators are taking action to create an even-playing field for every tech firm.