[ad_1]
In today’s digital era, tech giants hold immense power, moulding user experiences, shaping business landscapes, and even influencing state policies. With the explosive growth of internet users and e-commerce, their influence is stronger than ever. In the first part of the article, we delve into the inherent risks confronting users, businesses, and governments in this ever-evolving digital realm. The second part will uncover a promising solution on the horizon: a ground-breaking European Union law poised to reshape the tech industry’s rulebook.
THE GROWTH OF DIGITAL MARKETS
Today, the issue of digital market monopolisation extends beyond economic and legal concerns. Over the past decade, we’ve observed remarkable growth in digital markets, illustrated by various metrics.
According to Data Reportal’s Digital 2023 Global Overview Report, the number of internet users worldwide has grown from approximately 1.97 billion in 2010 to about 5.16 billion in 2023.
The e-commerce industry is also showing equally impressive growth: according to Statista, global sales through e-commerce will reach $5.72 trillion in 2022, up from $1.3 trillion in 2014. This figure is projected to increase by 43% over the next few years, reaching approximately $8.1 trillion by 2026:
Yet, the most compelling proof of digital market expansion lies in the transformations of market structure. These alterations become apparent when we compare the top 5 companies by market capitalisation in 2010 and 2023:
This comparison highlights a significant shift towards the technology sector over the past decade. In 2010, only two of the top five most valuable companies were rooted in digital technologies (Apple and Microsoft). Still, by 2023, four out of five belong to the tech industry.
GROWING CONCERNS IN DIGITAL MARKETS
As the market expands, so does the range of concerns surrounding digital companies, stemming from various levels: users, businesses, and public policy.
Digital platforms and users
Mark Zuckerberg is credited with a phrase that referred to a question from colleagues about the algorithms for customising Facebook’s news feed:
“A squirrel dying in your front yard may be more relevant to your interests right now than people dying in Africa.”— Mark Zuckerberg, Cofounder, Meta Platforms.
This quote is not an expression of exceptional cynicism of the creator of the social network, but only a description of the effect called “filter bubble”, which each of us experiences daily.
A filter bubble is a space filled with information that matches your preferences. After entering a website with a personalisation algorithm, it starts tracking our actions. After accumulating enough information to make a decision, the algorithm begins to adjust the content output.
In essence, having free access to any information, we find ourselves locked inside our “mini-Internet”.
Eli Pariser introduced the concept of the filter bubble. In his works, he cites the example of a query in a global search engine as an adverse effect of the filter bubble:
- one user entered the query “British Petroleum” into the search bar and received investment news and reviews of the oil and gas market;
- another user, sending the same query, received information about the Deepwater Horizon oil rig explosion.
Pariser concludes that the filter bubble effect can create a distorted view of reality by relying on algorithms that are pre-programmed and repeatedly used, rather than being grounded in objective facts.
Business community
One of the key accusations against IT giants is the infringement of competitors. This is exemplified by the most significant antitrust investigations of recent years. For example, in 2019, the European Commission initiated an investigation against Amazon under the following circumstances:
- Amazon creates preferences for its own goods on the platform. That is, acting as both a marketplace and a seller on the marketplace, Amazon, in response to a customer’s request, displays its own goods in the first output results. At the same time, it demotes the goods of its competitors, making them less popular.
- If Amazon does not produce the product a user wants, Amazon still makes every effort to capitalise on it. In such a case, Amazon creates preferential treatment for the goods of those sellers who use Amazon’s services not only as a marketplace but also as their logistics and delivery services (“Buy Box” and access to the Prime Loyalty program).
In December 2022, Amazon signed a settlement agreement with the European Commission for all antitrust investigations. Under the terms of the deal, the company:
- agreed not to use seller data for its own retail business;
- agreed to create a second “buy window” in a prominent location for a competing product if it differs in price and delivery terms from the product in the first window;
- agreed that sellers within Amazon Prime may choose their own delivery services other than those approved by Amazon.
Digital platforms and the state
It’s essential to acknowledge that digital giants have extended their influence beyond invading user privacy and limiting competition. Some have even started imposing their conditions on governments.
In February 2021, the news that Zuckerberg had “deleted Australia from his friends” was all over the international media headlines.
It happened because Australia passed the law (News Media and Digital Platforms Mandatory Bargaining Code) requiring Google and Facebook to pay royalties to news outlets if they hosted their content. The law was designed to protect the interests of Australian media, as the extreme power of Google and Facebook in the advertising market has primarily destroyed the usual business model of even prominent publications.
“The market power of Facebook and Google is a problem not just as a matter of competition policy but also as a matter of media policy. If incumbent news media businesses are losing eyeballs and turn advertising revenue to Facebook and Google, then they become weaker financially, they employ fewer journalists, stories become shorter and less detailed, investigative journalism is harder to fund, and media outlets start to go out of business.” — Paul Fletcher, Australian MP, ex-minister for Communications
Google agreed to the new terms, but Facebook decided to act differently. In response to the law, the social network banned all users from sharing links to Australian news sources and banned pages of Australian publications from posting any of their own content. Australian users were barred from sharing links to any news at all.
The standoff ended less than a week after the mass blocking began. Facebook agreed to restore news pages and lift user restrictions after reaching an agreement with the government to change some law provisions. Due to the agreement with the Australian government, it turned out that Facebook retained the right to set the terms and conditions of payments to publications.
This situation showed the world that if Big Tech companies obey the law that affects their interests, they will do everything possible to lobby for their own terms of its application. And they have the resources to do so.
WHAT CAN BE DONE WITH DIGITAL MONOPOLISATION?
A web of risks in today’s digital landscape shadows user experiences, business competition, and governmental influence. Filter bubbles confine us to tailored information, distorting our view of reality. Tech giants push the boundaries, infringing on competitors and dictating terms to states. Amid these challenges, a beacon of innovation emerges — the European Union’s Digital Markets Act (DMA). Don’t miss our next article as we delve into the DMA’s potential, reshaping the digital market landscape.
This article was written by Catherine Smirnova & Alexandra Zviagintseva of Digital & Analogue Partners. Visit dna.partners to learn more about our team and the services.
Be digital, be analogue, be with us!
[ad_2]
Source link