UK digital competition review: Forget money, we should consider 'balance of harms' during tech mergers

A competition review into the giant digital platforms commissioned by the UK's Chancellor of the Exchequer, Philip Hammond, has recommended a new watchdog and greater data rights for users.

Data portability is one of the strongest recommendations of the Digital Competition Expert Panel, which was headed by the chief economic advisor to former US president Barack Obama, Professor Jason Furman. The team was given the job of examining competition in a "winner takes all" network effects, where large players emerge who then dominate the terms of trade for both consumers and the supply chain.

The review also recommended a new Digital Markets Unit should be established to take rapid action on complaints.

"Over the last 10 years, the five largest firms have made over 400 acquisitions globally. None has been blocked and very few have had conditions attached to approval, in the UK or elsewhere, or even been scrutinised by competition authorities," the panel notes.

For example Amazon's oligopsonistic power allows it to set strict terms for third-party vendors. This week Amazon promised to remove "most favoured nation" clauses from third-party suppliers in the United States which obliged the vendors to guarantee Amazon had the lowest price.

The decision of regulators to permit Facebook's acquisitions of Instagram and WhatsApp – approved at the time because neither firm had any real revenue – is now criticised by politicians who want a more proactive approach to mergers. A "balance of harms" should be considered when a large tech company seeks to buy a smaller one, the panel said.

Consumers should be able to transfer their data from one platform to another, it added. This should be obvious and easy with interoperable formats developed. Google has been developing such a service, Takeout, since 2011.

Digital Competition Expert Panel Report https://t.co/LQdm9EA4cY "A distinctive feature of these digital platform companies is the reach and scale of services they offer." incl significant sections on "importance of data" 1.35-1.42 and "data as barrier to entry" 1.79 #FurmanReview pic.twitter.com/T78JFeJZlB

— Jen Persson (@TheABB) March 13, 2019

The panel also recommended that the Competition and Markets Authority (CMA) should launch its own investigation into competition in the digital ad space (Facebook and Google, anyone?), which is currently being probed by the European Union. The CMA had said that Brexit was getting in the way.

You want a probe of Facebook & Google power in online advertising? Well, Brexit is getting in the way. ⁦@CMAgovUK⁩ considering an enquiry but “its ability to launch new projects is heavily dependent on the outcome of EU Exit negotiations.” https://t.co/T8aXDbaCcD

— Lewis Crofts (@lewis_crofts) March 13, 2019

Panel members professors Diane Coyle OBE and Amelia Fletcher, both enthusiasts of behavioural economics, managed to jimmy the Noughties fad into the list of recommendations. It may play a role in "nudging" consumers to switch from one platform to another, they suggested.

The panel also encouraged the government to campaign against extending patents into unwarranted parts of the digital economy – but admitted the "panel has not studied the proliferation of patents in the UK in the time since Hargreaves' report".

However, while encouraging greater individual "control" over data, the panel shied away from demanding stronger individual property rights over data ownership that might, for example, allow individuals to command a price from the platforms for their personal data.

And for now, the tech giants need only promise to be good and honest. They should draw up a Code of Conduct. With populist politicians calling for much stronger regulation of the platforms, and other industries calling for their breakup, this is gentle stuff.

More here. ®