One can summarise technology regulation quite simply: privacy and profit. Should tech
giants have unchecked access to information and the ability to gain from it? How do we tax
tech giants on profits from digital services? At what point does regulation become
repression, ultimately hurting the consumer? These are important questions that need to be
addressed by policymakers. Consequently, there’s a growing sense in the technology
industry that the incumbent giants are under assault.
The main theoretical argument for regulation is competition, or more specifically, the lack
thereof. In almost all cases, economically speaking, competition is good. Competition acts as
a control on prices, an incentive for firms to minimise costs and become more efficient in
production. Competition helps to prohibit predatory behaviour, whereby firms charge
excessive prices to consumers who have nowhere else to purchase from. Big tech’s critics
argue that the industry is fundamentally uncompetitive, marred by inconceivable barriers to
entry, monopolistic practices and is characterised by excessive prices and abuses of power.
Regulation’s role, therefore, is to provide incentives for innovative firms to enter the market,
to protect consumers and to ensure a supply of good quality products at fair prices.
Just this week, Apple faces a new class-action lawsuit, accusing the firm – with a market
capitalisation of over $1.2tn – of programmed obsolescence. The lawsuit comes from the
Portuguese Consumer Protection Agency, accusing Apple of deliberately releasing iOS
updates that slowly reduce the performance of an iPhone, forcing customers to upgrade
their devices. Would this happen in a saturated market with high levels of product choice
and competition? Saying that the question of how to ensure competition is a much more
nuanced and divided topic. Political wrangling can have unintended consequences, and in
data-rich, entropic industries like tech, policy can be misinformed or rendered quickly
obsolete.
One way to think about competition is how it works inside companies’ ecosystems, such as
Apple’s App Store and Amazon Marketplace. For example, Apple boasts paying out over
$120bn to app developers since its inception, but critics accuse Apple of Sherlocking -
incorporating some of the App Store’s developers’ best ideas into its own services. Apple
and other tech giants have essentially created their own markets in this sense, of which they
are judge, jury and executioner. They dictate terms of use, how companies connect with
users, and what is or isn’t allowed in the stores. Consequently, they have unmatched
jurisdiction over the services that consumers can access.
Controlling big tech is difficult, though. Axel Voss, a father of General Data Protection
Regulation (GDPR) – four words that will likely make any small business owner quake in
their boots – recently told the Financial Times that the flagship EU laws are already in need
of an overhaul. The German MEP argued, “We have to be aware that GDPR is not made for
blockchain, facial or voice recognition, text and data mining [and] artificial intelligence”. The
global pandemic has seen not only a widespread move to homeworking but also a radical
emergence of new and innovative technologies – technologies GDPR is ill-equipped to deal
with. The fourth industrial (technological) revolution is well underway, and with that comes
an evolving remit to regulate big tech and protect consumers.
Data privacy is also a grave concern. Since Facebook’s data-sharing practices came under
scrutiny following reporting on Cambridge Analytica, consumers and legislators have
sharpened their interest in big tech’s use of data. In response, many companies continue to
review, refine, and clarify their data practices for the alleged benefit of consumers.
However, as consumers become acutely aware of how their data is being harnessed, Apple
has managed to exploit stronger privacy as a competitive advantage. If Apple continues to
succeed, it could well dent Google’s and Facebook’s data-led advertising models or
surveillance capitalism as its critics call it. An intensification of ‘privacy by design’ is likely
to be welcomed by regulators. Despite this, regulation will remain essential to prevent
clandestine behaviour.
Tangentially, big tech's role in news dissemination, consumption, and their increasing
political power is particularly troubling. More than 300 advertisers jumped ship in 2020 - at
least temporarily - from Facebook’s advertising platform in response to the company’s
handling of hate speech. Massive companies such as Coca-Cola and Unilever - previously
some of the biggest ad buyers on the platform - joined a growing group of companies that
pulled their ad dollars from the social network around the NAACP’s #StopHateforProfit
boycott. Over the last 10 years, America’s five largest tech firms have flooded Washington
with lobbying money to the point where they now outspend Wall Street two to one. Big
tech has the ability to ascertain and influence political preference, track your behaviour, and
sell you products you didn’t even realise you wanted.
Add to this that the fact that big tech is top-of-the-game at tax avoidance, and you get a
delightful cocktail of tyranny, greed and malpractice akin to an old-testament verse. For
reference, Amazon paid £293m total tax on sales of approximately £14bn in the UK in the
tax year ending 2020. Facebook paid just £28m on record sales of £1.6bn. The repatriation
of profits and the evasive nature of digital services make taxing tech especially challenging.
Perhaps modern economies are making progress in this area though. Last week, the new US
Treasury secretary, Janet Yellen, announced the drop of a contentious part of its proposal
for reform of global digital taxation rules that had been the main stumbling block to an
agreement. This could be a promising sign for a multilateral agreement on digital taxes.
Cohesive reforms are needed on a global scale to prevent the exploitation of havens and fair tax practices.
Critics argue there is a case against tech regulation, however. Increased compliance, red
tape, tax reform and bureaucracy can actually deepen barriers to entry, as it represents
increased costs and reduced profitability for new firms trying to get a foot in the door. In
controlling big tech, regulators may very well extinguish competition for the market. As the
old adage goes, throw them to the wolves, and they’ll return leading the pack. Of course,
there’ll always be the free-marketeers who argue that any form of regulation is repression
and that the market should be left to its own devices to achieve the most 'efficient’
outcome. And equally, if that equates Amazon factory workers being fired for toilet breaks
to ‘efficiency’, maybe they’re right. But, if you’re inclined to think that data privacy matters,
firms should pay fair tax on the profits they make and that consumers and workers
should be protected, maybe you’ll think there’s more to be done.