Digital Monopolies Competition Watchdogs Need Better Tools

Digital monopolies like Facebook and Google cannot be prevented, but they can be monitored more effectively. Competition watchdogs need better ways to protect consumers, though.
Facebook's Mark Zuckerberg with Martin Schulz, President of the European Parliament, and Mathias Doepfner, CEO of Axel Springer during an awards ceremony in Berlin.

New Internet services like Facebook, Google and WhatsApp come with an inherent problem that is extremely difficult for lawmakers to solve: The so-called platform economy has a strong tendency toward monopolistic structures.

It's the nature of these services. The more people use them, the better they become for users. The result is that they use just one search engine, one social network and one messenger service.

So what can be done? The German Federal Cartel Office is leading the way with careful monitoring and the exhaustion of all legal means to protect users. The competition watchdog wants to examine whether Facebook has abused its power in the marketplace to enforce illegal data privacy conditions with its users.

The only reproach that could be leveled at the cartel office is that it didn't pursue this sooner. Consumer advocates have long criticized Facebook for the way it treats users.

A confirmation of the cartel office's suspicions would come as no surprise. The essence of the platform economy practically invites the operators to exploit their power. Facebook is a prime example of a company that has turned its users' dependence into a business model. More data means more revenues, and anyone who knows how to extract this data from users would be an ineffective businessman if they didn't take advantage of this knowledge.

The platform economy is still oriented toward its extremely successful pioneer, Google. The pursuit of the Google principle has long been part of the business model of Internet companies. Profits? Unimportant. The most important thing is to grow, regardless of the cost. There is always time to turn a profit, once all other competitors have been rendered insignificant. Once the monopoly has been established, the possibilities are practically endless.  

 

The Facebook Community-01OPED

 

Of course, users also have themselves to blame for their own captivity. After all, they still have a choice. And that, too, presents a problem for competition watchdogs. If a user is unhappy with Facebook's thirst for data, Google Plus is an alternative, at least symbolically. If a user feels uneasy about messenger service WhatsApp, Threema, Signal or a flat-rate text message package are alternatives. But users themselves are unwilling to do without the convenience offered by the sheer size of networks and messenger services. 

But in addition to endangering users' rights, the new monopolists come with other drawbacks inherent to monopolistic structures, like impeding innovation. What search engine operator would bother going to battle with Google? Never say never, of course. There are some who believe that the digital business world is so dynamic that anyone can be toppled at any time, even Google.

Regardless, competition watchdogs can't prevent monopolies from forming. All they can do is keep an eye on offenders and protect users. But they need better tools. An important step, for example, was the European Union's General Data Protection Regulation, which ensures uniform security for users in all member states.

Another instrument is better monitoring of proposed mergers, which transform strong companies into even stronger ones. In the digital age, established benchmarks like sales are increasingly irrelevant. The currency of the future consists of user numbers and market power. A company's buyers know this, which is why they attach high price tags even to companies that are losing money. The Federal Cartel Office should also be allowed to use this benchmark in its assessments.

It's also important to adapt watchdog methods to new, dynamic developments in the platform economy. Take the European Union's case against google, which has been underway for six years. Even if the European Commission's suspicion the company is actively engaged in eliminating competitors is ultimately confirmed, Google will already have had plenty of time to force many out of the market.

 

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