In the early years of the last century, Louis Brandeis of America’s Supreme Court believed that markets, without regulation, would destroy their most treasured characteristic, competition. It was Justice Brandeis, above all others, whose actions curtailed the oil industry’s “robber barons” and brought about the age of “antitrust”.
Today, for the first time since, anti-monopolists are in senior positions in the White House again, with their attention on Big Tech not Big Oil. These new officials, most notably Lina Khan, the young Chair of the Federal Trade Commission, wear the tag “neo-Brandeis” with pride. For all their sound and fury, however, little legislation has yet to emerge.
Instead, it is in Europe that change is afoot. This week, the European Union agreed the most far-reaching regulation the tech industry has seen in decades: the Digital Markets Act. They have done so despite a Big Tech lobbying effort so fierce that Google was forced to apologise for the manner in which it targeted Thierry Breton, the brains behind the reforms.
The Act is sweeping indeed. It targets companies with a market capitalisation of over €75bn who run an online platform with at least 45,000 active users, bringing Amazon, Google and Facebook well within its sights.
According to Cedric O, France’s digital economies minister, the goal is subtly different from Brandeis’: not to break up the tech giants, but instead to “break them open.”
In practice, this means forcing technology firms to give consumers more choice. Soon, you will be able to delete Google and Apple apps from your Android or iPhone. Messenger apps, like Whatsapp, will be forced to be interoperable, meaning a message from one can be sent to another.
While these changes might sound small, they are a direct affront to the business models that the technology firms are predicated on. The tech firms will no longer be, as the jargon has it, “gatekeepers” with competitors barred entry to their platforms.
This legislation marks a monumental shift in regulatory thinking which, in America particularly, once focused exclusively on “consumer harm”. If prices were low, the theory went, monopolies were not problematic.
While this sounds rational, it has failed to keep pace with the revolution in digital technology. Here, consumers only appear to receive products for free. In reality, they are engaged in a barter that few understand, with their behaviour tracked and the data sold to advertisers looking for targets. The platforms meanwhile have kept their competitors as far away from their customers as possible.
It is little surprise that European regulators have moved before their American counterparts. Though the likes of Lina Khan occupy senior positions, a protectionist instinct is still evident in high places. The US Commerce Secretary recently called the Digital Markets Act “disproportionate”. Its crime, apparently, was to target Big Tech companies which are, disproportionately, American.
Europe certainly has much to gain from breaking America’s stranglehold on the technology sector, and Britain does too. Here, we have many consumers and few businesses. These reforms could pave the way for a new generation of technology firms, outside of Silicon Valley, to disrupt yesterday’s disruptors.
Regulation alone won’t do it, of course. It is still far harder to find start-up funding in Britain than it is in the United States. But things are changing here too. More venture capitalists are now making a new home in London, not least Sequoia Capital, Silicon Valley’s most storied VC fund.
There are positive signs in Britain’s start-up scene too. The UK’s tech ecosystem is now worth $1tn, a fact that the Department for Culture Media & Sport celebrated with one of the more unusual tweets of the year, replete with dancing unicorns (it really has to be seen to be believed).
The Tech giants have, predictably enough, opposed the Digital Markets Act fiercely. They argue that it will stifle innovation. The opposite seems far more likely.
Louis Brandeis was withering about the monopolists of his age, calling them “clumsy dinosaurs, which, if they ever had to face real competition, would collapse of their own weight.” Today’s dinosaurs are about to experience some competition themselves. The result will be a better tech sector, and perhaps a more British one too.