Putting the Genie Back in the Bottle - or Adapting to the New Reality? Response to the CMA's 'Online Platforms and Digital Advertising' Market Study Interim Report

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Abstract

Online platforms grow exponentially. Unexpectedly for most, they have reached the top of the world rankings of the companies with highest market capitalisation. Today they keep demonstrating an unprecedented dynamic of further expansion, increasing vertically and horizontally, entering new geographic and product markets, synchronising, synergising and cross-fertilising their data, algorithms and user experiences. Like King Midas, everything they touch, they turn into gold, instantly creating added value for their customers and shareholders. The fuel that keeps the engine on, is big data: collecting –> categorising –> profiling –> synchronising –> predicting ¬–> targeting –> recommending –> satisfying –> and thereby being able to collect more: this is how the perpetual business cycle of Bentham’s digital panopticon and (again Bentham’s) digital ‘happiness machine’ functions. Being by its very nature rather sluggish and inert, the mainstream perception of online platforms was until recently deeply embedded in an outdated narrative of garage-entrepreneurship, egalitarianism, liberal-democratic altruistic evangelism, helping humankind to bid a final farewell to authoritarianism, obscurantism and propaganda by eliminating borders and multiplying possibilities for everyone. It is only the recent turbulence caused by fake news and the post-truth society, epitomised in the CambridgeAnalytica scandal, that has triggered a reconsideration within mainstream societal opinion as to the multifaceted role of online platforms. UK/EU law and policy try to take a lead in these processes of reconceptualisation. They aim inter alia to regulate the uncontrolled growth of online platforms in order (i) to protect competition and consumers, but also implicitly (ii) to mitigate the ever-expanding gap between the UK/EU on one hand and the US and China on the other, catching up the time and momentum that was lost in the decade of digital naivety. As the Interim report explains, both online search- and online display advertising markets are highly oligopolised with Google for the former and Facebook & Google for the latter not only holding significant shares of the markets (referred to in the Interim Report as ‘platforms with ‘Strategic Market Status’ (SMS)) but also demonstrating a continuous, incontestable dynamic of further increase. Such well-known and widely discussed principles of the business of digital advertising as (i) network effects, (ii) the power of big data, (iii) the winner-takes-most and (iv) competition for the market convincingly show that the trend is stable, and the current incumbents will continue strengthening their dominance. The inevitability of such universally observed systemic features of the digital economy as network effects and winner-takes-most also raise a more fundamental question: is it even possible to expect any meaningful and stable form of effective competition from the markets that demonstrate these characteristics as inherent, or would it not perhaps be a more realistic option to design the regulatory framework in a way that would internalise it from ‘bug to feature’, treating platforms with SMS as natural monopolies / de facto standard setters / public utilities / undertakings providing services of general economic interest or as common carriers? Putting it less controversially: would it not make more sense to perceive both approaches as non-conflicting and mutually supportive? Measures taken to protect the competitive process and consumer interests also help to set expectations for higher accountability from platforms with SMS. And vice versa, imposing stricter regulatory requirements on the platforms with SMS would also provide their competitors (and consumers) with a better chance of competing (and consuming) from a specific platform on the merits. The scope of the market study, and the overall legitimacy mandate of the CMA, requires it to focus on the issues related to the interests of consumers and competition. However, this does not mean that the broader spectrum of remedies, related to shaping the regulatory landscape in ways which would create room for newcomers by making the incumbents more fiscally accountable, should be beyond consideration. Both approaches constitute the subject matter of competition policy sensu lato, particularly given that the most plausible outcome of the market study will take the form of a recommendation to the government.
Original languageEnglish
TypeResponse to CMA public inquiry
Number of pages12
Place of PublicationLondon
Publication statusPublished - 12 Feb 2020

Keywords

  • online platforms
  • market capital
  • added value
  • market studies

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