The shift in the regulatory context globally compels tech giants to become more responsible
There is a global shift in policies to curb the power of big tech platforms. Europe leads the way with antitrust regulation, but others, such as China, Australia, and the UK, are catching up. Even in the liberal US, there are changes in the regulation of competition and labour. The changing regulatory landscape compels tech giants to become more responsible businesses.
Regulation is back in fashion. At the core of this shift, there is a shared view among policymakers, academics, and political leaders that the monopoly power of tech giants has gone too far and needs fixing. There have been some hefty penalties in the past but, these days, leading companies in the tech field need an antitrust lawyer more than ever before.
The common misconception is that this is a political issue, largely reflecting Europe’s obsession with heavily regulated markets. The argument goes that heavy regulation is also why Europe does not do well in the big tech platform business. Not surprisingly, the reaction to the EU’s Digital Markets Act by Apple’s CEO Tim Cook was to condemn it as a piece of “unnecessary regulation” that would hurt users. But these commonly held views are neglecting the sea change that is taking place in the regulatory landscape around the world.
Europe is leading the way with antitrust regulation
In Europe, the antitrust scrutiny of big tech platforms goes back to the investigations into Google, which started more than 10 years ago. The powerful Commissioner for Competition, and Executive Vice-President of the European Commission, Margrethe Vestager, has played an important role in driving this agenda. In the process of investigating big tech giants, the European regulators assembled expertise and know-how to better understand the platforms’ creeping monopolising behaviour.
In April 2022, another twist in the saga of investigations focused attention on Apple. Margrethe Vestager announced an antitrust probe for the way that Apple treats competitors vis-à-vis the Apple Wallet. Apple’s “closed system” is not the only concern of the regulators; parallel investigations of other companies are underway. But Europe should not be dismissed as a region that does not care about high-tech business. The aim of these investigations is to protect competition, but in a different way from the US. And Europe is not alone in this crusade to curb the monopoly power of big tech; other jurisdictions are catching up quickly.
Australia, China, the UK and the United States play catch-up
In China, the new state-run anti-monopoly bureau tightened its grip on big tech players and hit Alibaba Group with a record antitrust fine for abusing its market dominance in the digital platform Alipay. In Australia, the Competition and Consumer Commission (ACCC) released a report in 2021 as part of its digital platforms investigation. The report suggested that, even though Apple and Google competed with each other, the companies faced little competition in the distributions of apps on their platforms. In May 2022, the United Kingdom’s competition watchdog, the Competition and Markets Authority (CMA), launched an antitrust probe against Google’s advertising practices.
The US authorities have historically been ambivalent towards antitrust matters. There are some deep-seated institutional differences between the US and Europe regarding what is unfair competition, especially in the new terrain of digital markets. Traditionally preoccupied with a narrow concern over “consumer welfare”, the Americans will have to unlearn their knee-jerk response of turning a blind eye for fear of over-regulation. In a recent exchange of views published at the MIT Sloan Management Review, the attitudes towards antitrust have begun to shift among leading academics and commentators. The electoral victory of President Biden is helping with this. The US Department of Justice is bringing in a new cast of antitrust lawyers, who are well versed in digital platform markets and monopoly issues. But competition is not the only terrain for which regulation is making a come-back.
Regulation not only for competition, but also for labour issues
Big tech platforms frequently engage in “institutional toying”, i.e. gaming the system of labour regulations and standards. The employment status of Uber drivers is a case in point, and the courts forced Uber into compliance. Ensuring job quality and decent work through stringent labour regulation has traditionally been the playground of Europe. It is no coincidence that, in May 2022, Amazon management and employee representatives agreed to establish a European Works Council. This will empower employees from different European countries, giving them voice – in a company that is globally known for its hostility to employee representation.
But Europe is not alone any more, even on labour issues. The new US administration is pushing for a new bill, the PRO Act (Protecting the Right to Organize Act). The proposed legislation is intended to remove any obstacles to union-organising efforts by overturning employer opposition and extending new union rights. Big tech platforms like Amazon have developed a very bad reputation for the working conditions of their warehouse workers. Despite the hostility, union organisers managed to achieve a historic win at an Amazon facility in Staten Island, New York, which was even publicly endorsed by American President Biden.
A global requirement for responsible business
These incidents can no longer be dismissed as regulatory hiccups and tech giants cannot ignore the changing institutional context in Europe and beyond. If tech leaders’ strategies are context-blind, i.e. they do not understand the importance of regulatory and institutional constraints, they are bound to hit regulatory walls, time and again. For this reason, tech company leaders need to raise their game on regulatory issues.
The global changes in the regulation of competitive conduct and labour conditions can bring a positive change and put a lid on big tech platforms’ behaviour as “nasty monopolies”. Many of their users are looking for choice in their products and resent their “closed systems” or require respect for labour standards across their value chains. If big tech platforms do not learn to play fair and respect the regulatory and institutional context, in the long run they will hurt themselves. The changing regulatory landscape compels them to become more responsible businesses.
This article is originally published on September 16, 2022.
About the Author
Andreas Kornelakis is an Associate Professor (Senior Lecturer) in International Management at King’s Business School, King’s College London, UK. He has more than 15 years of experience in research and teaching in areas such as comparative management, European business, labour and institutional analysis.
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