Google collects the user data used for targeted advertising. It sells advertising space to third parties. It interposes itself as a broker between those advertisers and consumers. It restricts the ability of third parties to access the user data while making it available to its own ad intermediation services like Double Click. It wants to stop third parties placing their “cookies” on its web browsers.
With the adtech stack generating about 80 per cent of its $US225 billion of advertising revenue last year – out of total revenues of about $US280 billion – the threat of forced divestment or massive fines of up to 10 per cent of its global revenues is a dire one.
Google has described the actions against its adtech stack in the US and Europe as based on flawed arguments and claimed that, if they were successful, they would slow innovation, raise the cost of advertising and restrict the growth of small businesses and publishers. It will inevitably challenge any action taken by the EC, as it has done when fined in the past.
While the anticipated action against Google dates back to 2021, the Europeans have gained, or are about to gain, access to two powerful pieces of legislation that will regulate digital content and commerce.
The Digital Services Act (which primarily regulates social media content, the use of user data and user privacy) and Digital Markets Act (which regulates digital platforms, which are regarded as the gatekeepers to online commerce, and which has a competition policy focus) came into force last November but won’t be fully enforceable until February/March next year.
The thrust of the legislation is to strip market power from the platforms and give more of it to users and competitors, with the threat of fines, divestment and bans the enforcement tools. Between them, the two pieces of legislation are a serious assault on mega tech dominance.
The platforms have built that dominance via innovation and acquisitions and by what was, until relatively recently, a somewhat laissez-faire attitude towards big tech in the US, which regarded them as national commercial champions and exemplars of US technological supremacy, and pushed back against efforts by other jurisdictions to regulate their activities.
That’s changed. The Biden administration has, perhaps surprisingly, been joined (albeit for different reasons) by congressional Republicans in its concern about the market power and behaviours of the tech companies, along with (again for different reasons) the content they carry but aren’t liable for.
The US and EC have held a series of discussions, including one in March this year, about co-operating on their approaches to regulating digital markets and the digital economy to ensure fair competition. Liaising on proposed mergers, developing broadly common approaches to digital monopolisation and co-operating on enforcement are key elements of the dialogue.
Any material consensus between regulators and legislators in the two biggest Western markets for digital commerce would become de facto global standards, or least the standards for the rest of the Western world – although it should be noted that China has been engaged in a very significant and disruptive crackdown on anticompetitive behaviours and structures within the big end of its own tech sector.
The commercial power and social significance of the platforms and the disruption they have caused to traditional commerce meant it was inevitable that they would eventually be covered by some level of regulation, with the Europeans likely to create the most prescriptive laws and the Anglosphere a more principles-based regime.
While there’s little doubt that the ecosystems or “walled gardens” that are a common feature of the mega tech business models do generate consumer benefit and convenience, they also restrict competition and consumer benefit.
The deployment of generative artificial intelligence on these platforms, with the ability to revolutionise the way we live and work and companies compete, will only add to the scrutiny and efforts to control what they do and how they do it.
The freewheeling era – the past couple of decades – during which the mega techs built their dominance seems to be ending. Now, it appears, they will be fighting a rearguard action, in the face of quite intimidating regulation, to preserve as much of that dominance and the revenues it generates as they can.
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