Have we lost the regulatory plot? Is it time to use “R vs Big Tech” when it comes to giving the Digital Markets Unit more power?

This article is an opinion piece written by Tim Cowen, part of the legal team for Movement for an Open Web

Tech and digital markets are notoriously fast-paced. Worldwide platform companies have taken many markets by storm. The opportunity provided by market liberalisation since the 1990’s has allowed a small number of Big Tech players to build market dominating positions into trillion-dollar companies. They make more money than countries and are more powerful than many governments.

Their ‘MO’ is generally to “move fast and break things”, challenging the traditional and “disrupting” established practices. While their pursuit of the new and the better, often produces products that are improved and free of charge to the user, and are thus very welcome, their crashing progress includes breaking laws that society lives by. Laws designed to protect privacy and security, and prevent fake news, laws that aim to ensure a diversity of viewpoints and plurality of the media, and laws that seek to enable fair competition; all have been trampled.

Along the way, Big Tech firms have broken journalism. They are still busy attacking online news media’s most vulnerable positions – by interfering with news website’s relationships with their customers and advertisers. This is because Big Tech’s secret recipe for success is that each of us has to access every independent news channel, newspaper or news source via a browser. Google or Apple now control 97% of all browser use – with players as diverse as Brave, Vivaldi, and Microsoft’s Edge browser also now being powered by Google’s Chromium browser engine. Google’s default deal with Apple channels searches to Google Search: so, any internet access from pretty much every fixed or mobile device means that they know our needs, wants and desires more fully and can target their advertising more precisely than ever before. The data gathered enables them to “out-compete” other online advertisers, including the ad funded news media that employ the world’s journalists. Undermining advertising income undermines journalism and subscription income only goes so far in stemming the loss of sales, weakening at cornerstone of our democratic system.

When it is recalled that while tech platforms were mainly built for advertising, voters can also be targeted by these manipulation machines and elections swayed, it can also be better appreciated that both a market economy and democracy is under threat. People accessing their shiny devices multiple times a day can be fed misinformation and trapped in filter bubbles. False facts and propaganda can be spread very quickly. But the threat to democratic debate and unbiased discission is more insidious and ongoing. It is neither overstated nor confined to Facebook’s mishaps with Cambridge Analytica. It is systemic, and law enforcement has not been updated to tackle the digital world we now live in.

Policing the system under 20th Century rules

Policing our market system requires regulation. We also regulate to ensure that there is a free exchange of ideas from a variety of different outlets and editorial controls. We have recognised

for decades that neither plurality of the media nor democracy can be left to market forces but that markets need to be marshalled to support public goods. These public goods require protection which means enforcement needs to keep up with the changes to the way we live work and play – converse debate and discuss – including online. Enforcement also needs to be upgraded to move at internet speed and have the ability to change the behaviour of those that transgress: given their size that means being able to strip the wrongdoer of the profits gained from wrongdoing. If the major platforms were stripped of profits gained from anticompetitive advertising practices its likely their behaviour would change quickly. At present the law is backed by fines related to a cap on turnover – and in practice amount to the equivalent to a parking fine to Big Tech..

Enforcement is currently the job of a lot of different people in a lot of different authorities: competition and sector specific regulators such as the CMA and Ofcom etc all have competition powers. Tech platforms exploit the gaps between regulators given their different remits. Since the policing of laws designed to protect personal data, or plurality, or competition, each falls to different people in different authorities. So, a lot of people now need to know what is going on to regulate digital markets that straddle so many regulatory boundaries. However, knowing what is going on is a difficult challenge give that only those that run platforms or are deeply embedded in tech business really know what is happening: regulators are at best umpires when one side or the other appeals for foul play; at worst spectators on to a game they don’t understand.

Like other western market economy nations, the system of regulation in the UK is currently reliant on a last-century organising principle: each regulator would operate more effectively if they knew and understood the markets they each regulate. That design was built for 20th century industrial structures. Think Ofgem, Ofwat, Ofcom, or the FCA or FSA. These know electricity, water, communications, banking and financial services. They stand in stark contrast to the modern reality of digital transactions controlled by Big Tech where everyone’s electricity, gas or water bills have to pass through a Big Tech platform and can be paid in digital currency via Google Pay or Apple Wallet, embedded in our devices, and in competition with many further through these supply chains. Platforms compete with financial services, advertisers, news publishes, communications providers and through their rival payment methods and billing systems compete with offers from energy and utility companies and the credit and debit cards (and the banking systems that they represent) which often stay in our pockets.

Sitting awkwardly beside each sector-specific regulator is the Competition and Markets Authority. The CMA has a narrow remit to address competition and whether anti-competitive activity is taking place. It has no power to investigate or make findings of breach of any other laws outside of its remit. It is here that the Government has chosen to situate the new Digital Markets Unit to address online competition. What happens if competitive advantage for the tech platform is borne out of privacy or security breach or from fraudulent trading or breach of banking laws? Who investigates and who decides? More fundamentally, how is each authority going to know about the issue? Who will receive complaints? Will each authority know the game that is being played?

Because each authority’s knowledge and remit is necessarily limited, defendant Big Tech companies can be expected to trip up each pursuing authority if they make decisions about matters that are within the job description of their brother and sister regulators. Let’s imagine a tech platform finds it profitable to outstrip rivals by data mining in breach of privacy and security laws or new online harms legislation. Is this a case for Ofcom? Or just the ICO or Ofcom as the regulator? or CMA/DMU as the digital competition authority? If the transaction is conducted using digital wallets and currencies what about financial services regulators?

Could an elaborate inter-authority “after you” conversation be imagined that wastes precious time while laws are breached, and bad behaviour goes unpunished? Can new inter-institutional protocols be established? Or is there a way to address breaches of all laws at the same time? At present, because tech platforms straddle so many areas, they can appeal any enforcement actions that take into account factors extraneous to their role, and exceed the job descriptions and regulatory remits of pursing officials employed by the different authorities. This is because each is only set up to police different laws, with no authority responsible for the broader picture or wider public interest.

Here we may have overlooked the fact that we already have a public interest enforcer of laws. The office of the Attorney General was set up in the thirteenth century to plead the interests of the State in court, with “R vs whoever” being the writ that is still issued. Since then, cases from serious fraud to family protection can be taken in the name of the Crown. It is the established mechanism for enforcement in the public interest and protecting the rule of law.

Why not use “R vs Big Tech”?

The lofty aims of securing the rule of law and democratic debate are arguably more vital than ever in digital markets. We have understood that the 20th century market economy required regulation to understand each sector and make them operate in the public interest. We realised that energy, communications and water would become monopolies if left to their own devices. In digital markets this is even more the case with each tech platform benefitting from new economy “tipping” economics where each additional user adds benefits for all and the biggest players capture the market with global reach. Add to that the very high capital investment costs which act as barriers to entry for smaller rivals and we can top off the ingredients with marginal incremental costs of production. They have lower interaction costs, meaning that rivals have to achieve global scale to exert competitive pressure. All the while any rival has to compete with the existing brands and systems, while relying on them to attract and keep customers. Is it really a surprise that we have seen so little competition emerge to challenge the Tech Titans? In such cases the benefits that come from consumer choice, innovation and media plurality need to be promoted and fostered if they are to prosper.

Where a handful of Big Tech companies can leave government regulators for digital dust, being able to use the writ of “R vs Big Tech” may be now be vital.

Enforcement of regulation takes time, and time is not a plentiful resource for all the smaller businesses who are the primary employers and taxpayers in the UK. It is these businesses

whose existence is dependent on, and threatened by, Big Tech, alongside the major news groups and publishers who are an outlet to advertise their products. The Government has recognised these issues and proposed the creation of a new “Digital Markets Unit” to enforce the law. Consultations have taken place and the policy proposal was in the Queen’s Speech in May. Enabling legislation should follow in October this year, so there is an opportunity to shape the powers and functions of the new body between now and then.

If the DMU were to be given powers to take cases in the name of the Crown, it could sue for breach of all laws and thereby prevent defendant Big Tech firms from tripping up authorities going beyond their individual industrial sector remits. Critically, this could help close the current enforcement gaps. Attorney General powers could also be used to apply for injunctions and other remedies available at common law through the ordinary courts. Swift action to nip in the bud an abuse of market power or restrain breach of laws and regulations, while investigation takes place, and pending its resolution, and would protect markets more effectively than piecing the car back together after it has crashed.

While this proposal may not provide redress for damage that has already occurred, it might help prevent the further impact on the diversity and plurality of the media and be used to support the promotion of competition in the wider public interest for the benefit of all, for the future.

Header image courtesy of AbsolutVision via Unsplash (Licensed for free use under the Unsplash License)