Big Tech in the era of Techopoly

Updated: January 26, 2021 11:12 AM

Governments treaded uncharted waters during the last decade as these new tech firms emerged and scaled unregulated with overreaching influences in the interim.

monopoly of big tech firmsThere is a rising angst among people about privacy breaches and user profiling, making them switch to new safer nonprofit platforms

By Rajesh Mehta and Govind Gupta

A few days back, as Joe Biden took his oath at the presidential inauguration, the world watched the pageantry of one of the most remarkable attributes of democracy – transition of power.

This followed on the heels of another watershed event when Facebook and Twitter blocked Donald Trump’s account, sparking a contention of views about the tech giants’ influence and the ‘accumulation of power’

Amid the recent salvos of accusations, be it about censorship, privacy or competition, it’s opportune for India to lead and rethink the ethos of its regulatory regime to rein in Big Tech, as we enter an era of techopoly – a small number of tech firms wielding monopolistic influence over the supply of digital services. India’s market size makes it a key place for these firms to capitalise on, and this necessitates India to take ex-ante measures in devising the governing rules before these firms become too entrenched with power.

The concern stems from the ability of the big firms like Amazon, Facebook, Google and Microsoft, to own and operate a digital infrastructure on which the operations of the 21st century shall be stilted, thus influencing almost every aspect of public lives at large. With covid-induced accelerated adoption of digitalisation, the turf of Big Tech is no more mere corporate concern, but is very much a public concern.

The Competition Commission of India is reviewing recent mergers, antitrust cases and privacy issues, but regulations tend to always play catch-up to the undesirable upshots; policy thinking about Big Tech can’t afford that and need a prescient and comprehensive framework of core essential principles which the players must adhere to. Siloed and uncoordinated regulations will only sacrifice clarity, and allow these tech firms to find workable ways around those.

Social media platforms have serious implications for democracy as they now manufacture loyalty and outrage alike. The debate around free speech and potentially dangerous content is pressing due to the influence it has on shaping political discourse and increasing polarisation.

However, it is strife with complexity, and thus should be approached with caution. The issue lies at the core of the business model of these media platforms which thrives on viral engagement, thus amplifying some content whether fake or inciting, is in the interests of platforms. There needs to be a role separation between being the conduit or platform and curating or moderating content. Suppression or blocking content by the platforms themselves has stoked ire even here in India with regard to hate speech and censorship.

A practical way could be to prevent platforms from being the gatekeepers of content. In a report, Francis Fukuyama of Stanford suggests that for a legitimate and transparent test of what should be censored, curation needs to be outsourced to independent competitive “middlewares” which shall sit atop the media platforms, flagging content and also giving users to choose how information is filtered and presented to them.

The digital economy’s offerings of goods have delivered substantial benefits to the consumer in the form of access to better, new and cheaper products. It’s also facilitated growth of existing business, lowered the cost of starting new ones and provided innovative ways of conducting commerce. But there has also been a concentration of market power amongst a few giants. It reduces choice and stifles competition. The giants can steamroll its competitors, preventing entrants’ access to the e-commerce market. Further, with their huge users’ database, they can manipulate product display to consumers. Ecommerce platforms also tend to become vertically integrated in their own product offerings and often try to undercut third party sellers.

India could establish a ‘digital markets unit’ for the ecommerce market as Jason Furman of Harvard proposes in a report for the UK government. The agency shall develop a code of competitive conduct applying to the large companies having strategic market status in order to prevent entry barriers. Promotion of data openness through access to anonymised data would ensure that the upsides of big data is availed in a way which preserves both privacy and competition.

Indian regulators are considering preventing e-commerce platforms from selling products by sellers in which they have direct or any indirect equity stake, so that they function only as connectors between buyers and sellers.

The idea going forward should be to enforce a competition policy which makes companies choose their role: either they are the marketplace or they are players selling in the marketplace.

Besides where they operate currently, Big Tech is now making headways segueing with different sectors. This shall transform how certain industries have been operating and ‘financial services’ is an area which has been a favourite for these firms. Apple has forayed into consumer finance, the Diem Association, with Facebook as one of its members, has announced its cryptocurrency Diem (formerly Libra), and Amazon is entering into small business lending. With their scale and access to a huge user base, the behemoths could in effect dismantle and displace the traditional channels.

A proactive regulatory stance designed to ensure a competitive landscape needs to consider the long-term implications for banking and finance as big tech forays into these.

Harking back to the old clamor of breaking down of Big tech won’t be a viable resort for regulations, as in an era which is pivoted around the digital, businesses just can’t thrive with different segments of their operations working in silos. Integration of data centers and their interoperability is critical for businesses to avail of analytics and compete efficiently. Moreover, such regulations aren’t sustainable in the long run. Hence novel ways to tackle the issue are needed so that harmful usage of data is eliminated while the beneficial utilizations are still enabled.

There is a rising angst among people about privacy breaches and user profiling, making them switch to new safer nonprofit platforms like Signal. Although, India’s making legislative efforts to understand the new tech milieu and take on the challenge of effectively regulating Big Tech, an efficient legislation framework would need to be designed by coming together of different regulatory bodies such as the CCI, TRAI and the proposed Data protection Authority.

Caution needs to be exercised while taming existing giants to address the above-mentioned concerns, so that we don’t merely replace foreign firms with emerging domestic giants like Jio. Furthermore, oversight over OTT platforms, shouldn’t mean the curbing of creative expressions. Striking the arduous balance will be the key.

India must actively lead through example on this front, ensure it is at the vanguard along-with the EU and US, ensuring better data protection, transparency and preserving healthy competition.

Governments treaded uncharted waters during the last decade as these new tech firms emerged and scaled unregulated with overreaching influences in the interim. The rules were decided by the very pioneers who created them, who worked for their private economic incentives but recent events have thrown into sharp relief the impact of inordinate power accumulation, making it evident that we have now reached the threshold for action.

(Rajesh Mehta is a Leading International Consultant & Columnist working on Market Entry, Innovation & Public Policy. Govind Gupta is the co-founder of IFSA Hansraj and researcher at Infinite Sum Modeling, Washington. Views expressed are personal and do no reflect policy or position of the Financial Express Online.)

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