Who’s the Daddy?

By Philip Marsden (College of Europe)¹

I love babies, I love running, and I love
water…especially tides. What does any of this have to do about competition
issues in the digital economy though?

This note is provoked by many visits I’ve made
recently to competition authorities and governments. They want to do something
about online harms and competition problems, but don’t know what to do, and
don’t think they have the necessary tools or – frankly – the economic might to
make a difference. I thus introduce some thoughts I was honored to debate at
the United Nations this summer, in a digital and competition conference of 193
member governments.

Digital giants are often perceived as all powerful,
and enormously complex…but this doesn’t mean that governments should throw up
their hands and say it is “all too difficult” or “what can one country do?” or
even “what if we get it wrong, won’t the sky fall in?” The tech giants are all
relatively young – Facebook is a teenager and Google in its early 20s – but
they don’t always act like grownups, sad to say. In fact, more often than not
they act like giant babies with very simple wants. Indeed, they may seem to be
providing us with amazing things, but they also take up a lot of our energy.
So, yes, like babies they are life-changing, and wonderful, and they let us see
the world through new eyes, and do things we could never have imagined. They
give us joy and add real value to our lives. But like children most of these
giant tech babies are exhausting, they are demanding, all they want is our
attention. Indeed, demanding attention and maximizing engagement is the core
business model for many of them – and they take, take…and take. Most of the
time the attention they seek is rewarded in development and growth, and we feed
them insights and lessons, which they can make their own as they mature.

But we have to remember that they are not the boss
of our lives. Their needs and development are not so difficult and demanding
that we should cede our authority over them – not even when they do grow up and
show that they can be responsible. And most of all, we have to stop being so
intimidated by these tech babies, and we must never say “gosh, understanding
them and raising them is so difficult, let’s just let them grow up on their
own.” That would be the feral path – and no one wants that, do they?

Yes, we see more and more of the world through their
eyes, and work and live online…spend hours rubbing a rectangular piece of
glass…but that does not mean that we live in their world. They live in our
world, and we have to remember “who’s the daddy?,” “who’s the mummy?” Who is?
We are. The giant babies are in our
house, and they have to live by our rules – they don’t get all of our
attention, they don’t get fed whenever they want – and they don’t get whatever
they think is best, not for them, and they definitely do not get to say what is
best for us.

Life is messy, and more often than not, babies need
a bath. As they grow into kids and teenagers, even more so sometimes. They need
a good wash sometimes, and particularly so until they can clean themselves, or
have the incentive to keep themselves relatively hygienic. Right now, it seems
to me that the giant tech babies are getting into a serious mess. If they
haven’t understood the need to keep themselves clean, then until they do,
sadly, the grownups need to step in. Obviously, whether human or digital, no
one wants to throw the baby out with the bathwater. But that often-used phrase
is not an excuse for never getting them to clean up their act.

Of course, we need to preserve tech giants’
innovation incentives, and of course our remedial wash must go with the grain
of technological developments. These days we clean with soap, after all, not
sand – and we shouldn’t add grit or friction to these fast-moving markets. But
it is our bath, it is our house, it is our rules, and we determine when they’re
clean enough to go to school or just out to play again.

So, are our rules adequate? This takes me to the
second love I mentioned: running. I think of proper competition in terms of a
race. A true competitive constraint is like the loud footsteps and hot breath
of the runner just behind you. In many of the digital markets there aren’t many
other runners, and even if there are, they are either way behind the leader, or
are busy running a different race entirely, though it may take place on the
same track. Just as a 10,000-meter runner is no constraint on a sprinter, so
too is the world’s fastest 100-meter star no constraint on the marathoner. As
such, it is back on mom and dad again to run after the kids and make sure they
play safe. We have to ask whether we enforcers are running quickly after these
giant lumbering babies, especially those who say that their operating ethos is
to “move fast and break things” – and so often then do break important things
like data security, invading our privacy, and hurting businesses, consumers and
citizens. Are we fast enough to catch and stop these giants? Of course we
aren’t.

Yes, many of the practices of the big tech firms are
analogue models in digital clothes – old wine in new bottles – and we’ve seen
them before and know what to expect. We know about exclusionary tactics and
exploitation of power imbalances – we’ve seen kids shutting other playmates
down, freezing others out, or outright bullying, so we know what to expect. Our
legal framework, broadly speaking, is adequate and it can evolve to handle new
harms. But whether we know what to expect, or are just being vigilant for the
future, we have to be close enough to matter. More often than not, enforcers
are too far behind the action. And when we have to bring the courts with us to
tackle new harms, we cannot wait for the glacial evolution of judicial
precedent, we have to lead the charge.

When people tell me that enforcers can never catch
up and that tech markets are too fast for us to comprehend, they sometimes
argue that we should do nothing, for fear of scaring the horses. But that’s
rubbish – these markets are not that difficult to grasp. We know what the
ad-funded tech babies want – our attention. We know they take our data and they
change it into interesting new things that provoke more engagement and data
release from us, and they make money off that. In the process, sometimes they
are greedy and starve others, and sometimes they get leaky. So, follow the
data, follow the money, are good overall policies, but when we start to hear
complaints of actual harm, we need to act fast or cake-grabs or
lunch-money-thefts by the bullies can lead to starvation and worse. If we see
this stuff on the playing field, we have to blow the whistle fast – use interim
measures and call a time-out. The sky won’t fall in, it really won’t. And we
need to get faster at detecting and acting on such harms for two reasons. One,
it’s the right thing to do, and if we don’t, we are not fulfilling our
responsibilities as enforcers. But second, if we don’t act, then with the
rising tide of populist revolt against the tech giants, some other regulator
will step in, and they won’t care a jot for baby’s welfare. The regulatory bath
they draw will be cold, it will be full of grit and will chill any growth or
innovation.

Finally, speaking of water, I mentioned I like
tides. A tide is coming in. It is indeed a cold tide and it is aimed at
regulating online harms in digital markets. No swimmer should ever try to fight
a tide – we can’t hold it back, that’s for sure. But we can channel it, and we
can use its tidal momentum, its force, and use it to drive regulatory
innovations.

I’ve said we want to help clean up the worst
practices of the digital babies, not throw them out with the bath water, and
make them work harder, and face a genuine race, so they work harder for
consumers and users, even if it means they have to sweat a bit more than they’d
like.

In our report of the Digital Competition Expert Panel – Unlocking Digital Competition – in March 2019 we proposed improvements to competition law – to help enforcers run faster. But we also proposed a complementary layer of pro-competitive regulation because, first, it is the right thing to do, and second, because it is needed to handle the features of digital markets that create the opportunities for problems but which are not themselves issues for competition law: so network effects, economies of scale and scope, the transformational use of data, tippy markets, entrenched dominance and consumer and user inertia and dependence on the big platforms. This dependence means we have a duty as enforcers to ensure that platforms’ great power is balanced with a great responsibility – to act appropriately. So, we proposed a code of conduct for companies with strategic market status, to help clean up these markets of the most toxic exclusionary and exploitative practices. This would make the tech giants behave better, ensure a more competitive and fair ecosystem, create opportunities for innovators and consumers, and take the pressure off competition agencies or governments to Just Do Something ill-thought-out. So, we are proposing to “ride the tide” of the momentum for strong digital regulation, but aim it at the worst practices. So, to conclude: like good parents we clean the baby, we teach it right from wrong, we ensure it has what it needs (not just want it wants) we teach it to run and compete fairly, and we ensure that its environment is safe for it, and all participants, whether incumbents, entrants or consumers. If we have to ride a tide of tech regulation to make that happen, then so be it. We’re the Daddy, and don’t you forget it.

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1 Professor of Competition Law and Economics at the College of Europe, Bruges and Deputy Chair, Enforcement Decision Making Committee, Bank of England.