Big regulation for big tech

Breaking up big tech is a 19th century competitive solution to a 21st century competitive problem. There is a better way.

What should regulators do about the power of big tech companies? In America, the House Judiciary Committee’s antitrust panel has just completed a 16-month investigation into Amazon, Apple, Google and Facebook and found that “big tech” has “monopoly power” in key business areas and has “abused” its dominance in the market a wholehearted condemnation of the giants. The panel complains that there is “significant evidence” that the anti-competitive behavior of BigTech has hampered innovation, reduced consumer choice and even weakened democracy.

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The breakup of large corporations seems to me to be an already outdated industrial age response to the post-industrial economy. Data is not the new oil.

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So what to do I was honored to direct Professor Scott Galloway, author of The Four, an excellent book on the power of internet giants (specifically Google, Apple, Facebook, and Amazon – hence the title), at a conference in Washington. He made a compelling case for regulatory intervention to manage the power of these platform businesses. Just as the US government had to intervene in antitrust law in the late 19th century and deal with AT&T in the late 20th century, Professor Galloway argues that it must intervene again for the same reason: to save capitalism.

Professor Galloway argues that the way to do this is to break the internet giants apart. Should Congress go that route? Well, one of the members of the panel, Ken Buck (Republican), agreed with the diagnosis, saying that the Democrat-led panel’s proposal to force platform companies to separate their businesses (i.e., break them open) is wrong on way forward. I agree. Forcing Amazon to outsource Amazon Web Services (to use an obvious and much discussed example) will not affect Amazon’s role in the online retail world.

Google is not US Steel and I don’t think the data is the new West Texas Intermediate or that Facebook is the new Standard Oil. However, the idea of ​​focusing regulation on the refinement and distribution of an economy’s vital resource is logical. We need this to protect competition in today’s world, and as Angela Chen explained in the MIT Technology Review last year, there are many alternatives to breaking up technology companies. Perhaps the most fruitful way into the future is an approach based on a future capitalist framework, as Viktor Mayer-Schönberger and Thomas Range in Foreign Affairs called a “progressive mandate for data exchange”.

There are many informed observers who say America should see what is going on in Europe to formulate such an approach: Here at Forbes last year, Robert Seamans and Washington Bytes highlighted data portability as a potentially valuable approach pointed to the UK’s open banking regulation as a source of ideas. I think this makes a lot of sense, and a good way to see what some form of data-centric remedy might look like is indeed to look at the open European banking regime. Begin more precisely with what went wrong: Because this mistake is the germ of a solution.

As early as 2016 I wrote about regulators demanding that banks open their APIs to gain access to customer data: “If this argument applies to banks, they have to open their APIs because they have a special responsibility to society, why should this Principle does not also apply to Facebook? “My point was, I thought, pretty obvious. If regulators believe that bank hoarding of customer data gives them an unfair advantage in the marketplace and undermines competition, why not big tech?

When I said regulators were going to give Big Tech a boost in Wired World in 2018, no one paid any attention because I’m just a technician. But when Ana Botin (Executive Chairman of Santander) started talking about the lack of a mutual requirement that these giants have to open their customer data to banks, regulators, lawmakers and politicians got together and announced. She suggested that organizations maintaining accounts for more than (for example) 50,000 people should be subject to some regulation to allow API access to consumer data. Not only banks, but everyone else should provide open APIs for accessing customer data with the customer’s permission.

This is in line with the implementation in Australia, where open banking is part of a broader approach to consumer data rights and, in fact, some form of symmetry is imposed by rules that prevent companies from collecting banking information without disclosing their own information. The Australian Competition and Consumer Commission (ACCC) has already received inquiries from international technology companies interested in participating in open banking. Banks and many others want this opening method to be expanded beyond the so-called “designated” sectors, currently banks and utilities, so that a social media company would like to have access to Australia’s banking information (for example) an “accredited data recipient” that is, they must provide their data (in a format established by a consumer data standards agency). This approach would not prevent Facebook, Google and the others from storing my data, it would prevent them from hoarding it to the exclusion of competitors. As Jeni Tennison pointed out for the Open Data Institute in the UK, such a framework would “enable data portability to encourage and facilitate competition at a level above these data stewards among applications that provide direct value to people,” such as the Regulators hope the customers – focused fintechs use the data source of the banks.

At this year’s SIBOS (it’s kind of a Burning Man for bankers), ING’s newly appointed CEO Steven Van Rijswijk (above) reiterated the need for reciprocity and said he wanted regulators to develop an equivalent for banks, “The flow of data can in go two directions. ”Well, this might be emerging. As the Financial Times noted, an early draft of the new EU digital services law shows that big tech companies will be forced to share their “great treasures” of “customer data with competitors. The EU says that Amazon, Google, Facebook and others “are not allowed to use the data collected on the platform … for their own commercial activities … unless they make it available to business users engaged in the same commercial activities”.

It seems to me that US regulators could use this approach to kill two birds with one stone: Big Banking and Big Tech must grant API access to customer data. Why shouldn’t my bank be able to use my LinkedIn chart as input for a loan decision? Why shouldn’t my Novi wallet access my bank account? Why shouldn’t my IMDB app be able to access my Netflix, Prime and Apple TV services (it would be great to have a single app to view all of my streaming services together).

This symmetrical exchange of data can lead to a creative realignment of the relationship between the sectors and make it easier for competitors to develop both. Rather than reverting to the antitrust remedies of the 19th and 20th centuries against monopolies in railways, steel and telecommunications, open banking may be a model for the antitrust remedial action of the 21st century against all oligopolies in terms of data, relationships and reputation. The way to deal with the power of BigTech is not to break it open, but to open it up.