We calculate that over the last few years, competition authorities have imposed penalties in excess of $14bn on Big Tech companies for anti-competitive conduct – the majority of which have been levied at Google. But this mainstay of policing online platforms is changing.
Initiatives to move from ex-post intervention to ex-ante regulatory frameworks for Big Tech are gaining ground around the world. As was the case with comprehensive privacy rules, the EU is leading the way, but this time, US legislators appear serious about their intention to follow with rules of their own.
Meanwhile, competition authorities are carrying out extensive inquiries into digital platforms, which are proving to be a useful starting point when it comes to governments developing the legislative proposals. Australia and the UK are good examples of where such inquiries have led to the start of new rules.
Competition authorities have imposed fines totalling $14bn since 2017
In recent years, and particularly since 2018, competition authorities have repeatedly sounded the alarm with a rising number of competition investigations into alleged anti-competitive conduct by online platforms, and through careful observation of digital markets (e.g. the Australian inquiry into digital platforms). Our Platforms and Big Tech Tracker has counted 30 competition cases since 2010, a third of which were opened in 2020. Europe is by far the most active. Eight cases were opened by the European Commission, and a combined 13 by member states such as Austria, France, Germany, Italy, and Portugal. Outside of Europe, some activity is starting to take place in the US, with recent action taken by the Department of Justice against Google and Facebook in Q4 2020. More recently, China moved to curb the power of Big Tech, with the Government imposing a record $2.8bn fine on Alibaba, and warned other tech companies they should refrain from engaging in similar anti-competitive behaviour or risk similar punishment.
Almost half of the cases we tracked are still open – perhaps unsurprising given how many cases were launched in 2020. Of the 16 that have concluded, 10 resulted in a fine, whereas in six the authority mandated behavioural remedies or accepted commitments to change. Figure 1 shows the number of cases across different jurisdictions.
Overall, as a result of these investigations, competition authorities have levied fines of more than $14bn since 2017. Google has been the hardest hit, racking up $10.1bn worth, most of which came from the European Commission ($9.9bn). Among European countries, France’s competition authority has been the toughest ($1.5bn, of which $1.3bn was a fine on Apple in 2020) whereas Italy has issued far lower fines ($30m), but it has been the most active country in the world with six cases, four of which are still pending completion. The Italian regulator has also been the only one to impose a fine on Facebook for misleading its subscribers about the purposes for which it collects personal data. Figure 2 shows the amounts of fines faced by tech companies across the competition cases we have tracked.
Europe leads the way, but this time the US is likely to follow
While the attention has largely been on the number of investigations, and the sizable penalties imposed, there is now an established international trend towards ex-ante regulation of Big Tech. Regulators worldwide are starting to sing from the same song sheet, but addressing entrenched market dominance is hard, and often more powers are needed to address concerns. Hence the calls for stronger oversight of mergers (so that fewer cases slip through the net) and for frameworks in which companies can be designated as dominant and face remedies upfront, rather than rely so much on competition investigations ex-post.
Europe is leading this new way to regulate Big Tech. This is perhaps unsurprising, since it follows the trend set by the GDPR for data privacy in the previous decade, and which triggered a ‘race to the top’ elsewhere for countries to match the same levels of data protection. Unlike in the US and China, Europe has a relatively weak platform economy, in that very few large tech companies originate from here. This is likely to be a factor that has led European policymakers to regulate, in the absence of ‘champions’ to protect. However with GDPR, despite all the talk, the US is yet to reform its federal privacy framework (except for some states which went their own way). But this time there are signs of a stronger political will to change competition rules and curb the power of Big Tech on home soil.
Calls for a stronger merger control regime
Through our Platforms and Big Tech Tracker we have monitored attempts to regulate platforms ex-ante in eight jurisdictions. Of these, three have introduced a framework to designate platforms with substantial market power and give rise to the possibility of remedies being imposed. The EU was the first to introduce proposals to that effect with its Digital Markets Act (DMA) in December 2020. Despite this Europe wide initiative (or perhaps to influence its direction), Germany has already approved a reform of competition law of its own, giving its competition authority stronger powers to designate companies with a “strategic position” across markets, and prohibit conduct that may entrench these companies’ position or raise barriers to market entry. The UK is also on course to adopt a similar framework too. While we are yet to see a legislative proposal, the Government has set up a Digital Markets Unit (DMU) within the competition authority (the CMA), in line with the advice produced by a government appointed Digital Markets Taskforce (DMT).
There are some striking similarities between these three frameworks in the remedies that could apply to firms found to have market power – such as preventing them from self-preferencing or other forms of discriminating, or granting their competitors access to data, or ensuring data portability. All three frameworks also introduce changes to the merger regime, making dominant companies subject to stricter notification or reporting requirements. In Germany, a new threshold for merger control has been introduced, based on transaction value, regardless of whether a dominant firm is involved. The frameworks differ however in the process through which a ‘gatekeeper’ is identified, with the EU proposal identifying clear criteria and a predefined set of markets in which a ‘core platform’ may operate, whereas in the UK a flexible approach with no formal market identification has been proposed. The status of gatekeeper would be reviewed every two years under the EU rules, whereas the timeframe could be up to five years in the UK.
Despite the long-standing American culture of light-touch regulation and the fact that the US is home to some of the world’s largest online platforms, even policymakers there now appear convinced new rules are needed to curb the market power of Big Tech. The idea that Amazon, Apple, Facebook, and Google act as ‘gatekeepers’ and can create obstacles to competition is now gaining ground in Congress, especially in the Democratic Party. On 16 April 2021, the Judiciary Committee of the House of Representatives approved a report published in October 2020, which found the four companies to have significant market power over “large swaths” of the US economy and points to evidence that these businesses have carried out acquisitions aimed at preventing the rise of competitors. The report concluded a 16-month long inquiry, and made sweeping recommendations to strengthen competition laws and give new powers to the FTC and to the Department of Justice. Some of these recommendations clearly show how US policymakers are taking a leaf out of Europe's book, in that they envisage imposing remedies on gatekeepers. The proposed restrictions on mergers are possibly even tighter, with a presumptive prohibition against future mergers for dominant platforms, and stronger laws on vertical mergers (the current US framework is relatively permissive with regard to that kind of operation). A regular mechanism to identify and review a firm’s status of gatekeeper is not specified – although this could be addressed once a detailed proposal for legislation is put forward. The Committee is already carrying out hearings on ‘Reviving Competition’ addressing the key issues highlighted in the report, which suggests it intends to act swiftly.
Regulators and policymakers can do more to cooperate internationally
While the trend towards ex-ante regulation is clear, and there are similarities between several ex-ante regulation frameworks that are being proposed, regulators largely lack effective cooperation and coordination of their efforts. The global nature of digital markets makes regulation more effective when it is consistent across jurisdictions. Regulators are obviously aware of what is happening outside of the respective countries, but this may not be enough in the absence of a common purpose. For example, the US will fall in line with Europe on ex-ante regulation only if there is the political will to prioritise competition over the success of US tech companies.
There are promising signs that cooperation is developing, but also warning signs that the road ahead will be bumpy. On 20 April 2021, the competition regulators of Australia, Germany, and the UK issued a joint statement on the importance of stronger rules on merger enforcement, and highlighted that it will be important to have other countries on the same page, including the US. On other fronts, there are still gaps to be filled between the US and Europe.
Inconsistencies between long-term political objectives are not the only problem. Reaching different conclusions on the same case can also cause difficulties, as was the case with the Google/Fitbit merger. The European Commission cleared the deal as it was satisfied with Google’s commitments to refrain from using Fitbit data for Google Ads, and to maintain third-party access to the Fitbit Web API and Android API so that rival manufacturers of wearable devices are not disadvantaged. However, in Australia the ACCC took a different view on the effectiveness of the same commitments, and refused them while extending the deadline to complete its investigation. Since the transaction was completed on 14 January 2021 (before the ACCC could complete its inquiry), the ACCC had to resort to an enforcement investigation of a completed merger – something that probably would not have happened had there been greater coordination between competition authorities. Much work to do.
