Achieving a truly open internet is only possible through robust online competition free from the control of today’s digital gatekeepers like Facebook and Google. One of the key components of their power is data.
Editor’s note: The Following is based on a testimony given before the US Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights on September 21. Alex Petros, Policy Counsel at Public Knowledge, assisted in preparing this statement.
Data is everything to a digital platform. It is the lifeblood, the currency, and the fuel that drives Big Tech and many of the products these companies offer. Perhaps most importantly, data is a key component that platforms use to maintain their gatekeeper power. This should be a dynamic industry where innovation can flourish, but because of the hands-off approach policymakers have taken in the past, new disruptive innovators have not had a fair shot. Until we address that power, Big Tech will continue picking winners and losers in digital markets.
Gatekeeper power is at the root of the competition problems Big Tech presents. Expert economists and antitrust professors, policymakers here in the US and abroad, and advocates the world over have identified gatekeeper power—sometimes “bottleneck power,” or “strategic market status”—as the power that dominant digital platforms have over other businesses’ ability to reach their customers. As a result, these dominant digital gatekeepers also serve as the primary access point for key consumer data. These gatekeepers get to determine who can play the game in which they also compete. They have the incentive and ability to pick themselves as the winners of this game and pick potential competitive threats as the losers. These same gatekeepers can wield their superior access to data as a cudgel to ensure their gates remain closed—and they stay on top. We can’t expect gatekeepers to give up their power just because it’s the right thing to do. We need Congress to act to break open the gates and promote a competitive market.
Digital gatekeepers benefit from a triumvirate of market characteristics—network effects, economies of scope and scale, and the ability to control the choice architecture that influences user behavior. We see network effects when users naturally flock to the most popular services as their utility from a service is directly related to how many other people use it. The fact that most of your friends are on Facebook’s social network is probably what convinced you to join Facebook in the first place and what keeps you there now. The inherent economies of scope and scale in Big Tech’s products also turbocharge gatekeeper growth. It can be difficult for new platforms to compete with dominant ones, yet once a new platform gets going, each additional user results in negligible costs for the platform and exponential benefits in terms of additional data. Finally, gatekeepers have complete control over the user interface—what users see when they access the platform—and can use that interface to push them towards certain choices.
Big Data Fuels Anticompetitive Discrimination
The user interface of a digital gatekeeper has a much bigger impact than the interface of an average website or the layout of a physical store. Dominant digital platforms can pick winners and losers in the digital economy by prominently ranking someone at the top of a page or hiding someone’s listing away after lots of scrolling. There are many other tools at their disposal, too. For example, some Google search results get to take up a lot of “real estate” on the search engine results page. These results can have images, bold type, or multiple clickable links to different parts of a website to really grab the user’s attention. A user is much more likely to click on one of those results than one that’s given fewer engaging features. Amazon chooses which retailer wins the coveted Buy Box (the “Buy Now” button that most users click on to actually buy a product), but Amazon also leverages clever site design to make it seem like the Buy Box is the only way for a customer to buy a particular product. Most users don’t even realize there are other sellers offering the same product due to this design feature.
How these design choices influence user decisions is called the “choice architecture”. It can be extremely effective and misused to trick customers, a phenomenon researchers have termed “dark patterns.” To understand and use these tools of discrimination to their greatest effect, the platforms are constantly running tests on us, the users. Based on what I click or don’t click, dominant digital platforms can refine what they’re doing to more accurately get the next person to click. This applies to influencing me to stay on Facebook longer, or to purchase a particular product on Amazon. Dominant platforms meticulously optimize their user interfaces to push us to behave in a platform’s best interest. This could mean keeping us constantly engaged with a product or it might mean keeping us away from companies that could challenge gatekeeper dominance if they were given a fair shot on the platform.
Big Data is a Major Incumbency Advantage
Digital gatekeeper platforms also exhibit increasing returns to scope and scale, largely because of how the value of data increases so significantly when it’s merged with other data. Twice as much data isn’t just twice as good for a company, but many times more so. This is true both on an individual and a group level. A company that is able to aggregate multiple sources of data on you will be much more powerful than one that is relegated to a single or few sources. Think of a user fully integrated into the Google ecosystem. Google knows where you are by looking at your Android phone or your Google Maps app. They know what videos and shows you like from YouTube and YouTube TV activity. They know your interests from your Chrome web browsing and Google search history. All of this data can be merged together to build an in-depth profile about you and what you might be interested in right now. A company with just one of those sources of data can’t predict your behavior as accurately.
Data from large groups of individuals is similarly more and more valuable with each new user added. Data about other users can fill in the few things a company doesn’t know about you by looking at people who are similar to you on the data points they do have. If other white women my age who live in my neighborhood, work in Dupont Circle, and follow Epic Gardening on Instagram like something, Big Data analyzers can assume I will like it, too. Combining a variety of data points helps to more effectively influence users and discriminate between them.
The dominant platforms sometimes argue that data ages rapidly, so a new competitor could quickly amass the data needed to compete. This is theoretically true, but it is not just old data that today’s dominant digital platforms control. Users are still today locked in to these platforms through their gatekeeper power, so the platforms continue to have access to ongoing data streams. These data streams can be used to continuously update algorithms to stay on top. They can also keep platforms updated about the users so as not to rely on just static or past data about them. This allows platforms to not just “know” their users, but see how their users change over time—often in response to the algorithms that platforms created using older user data. This cycle of collection, use, and iteration gives platforms significant power over their users.
By taking advantage of the significant increase in the value of a data stream when it’s merged with other data streams, vertically integrated and conglomerate firms like the dominant digital platforms can exacerbate barriers to competition. The wide variety of products Google offers gives an illustrative example. Google can see from my calendar and my email that I have a meeting coming up across town. Using Google Maps, it can tell me exactly when I should leave for said meeting. There are competitors that offer different navigation apps, calendars or email clients, but it’s very difficult for a smaller company to offer all three. Simultaneously entering multiple markets to compete with multiple arms of the Google leviathan at once is called dual-market entry, a notoriously difficult feat according to antitrust economists. Consumers could lose out on a better single product if innovative entrepreneurs are blocked from the market unless they can debut multiple great apps at the same time. This huge entry barrier is one way that vertical integration and conglomeration results in less competition against Big Tech and fewer options for consumers.
Finally, gatekeepers can prevent rivals from getting the data they need to effectively compete. This is perhaps best seen in the infamous episode of Google starving Bing of data it needed to effectively challenge its market power in online search.
Competition is not a panacea for the challenges of Big Data. We also urgently need new privacy laws to protect users, as well as a digital regulator to comprehensively address the policy questions surrounding digital platforms. We can’t afford a race to the bottom on privacy with companies scrambling to maximally exploit consumer data. It’s not the realm of antitrust or competition policy to decide what markets are just too harmful to people and, thus, not worth having at all. A comprehensive federal privacy law can be pro-competitive by creating a level playing field for dominant incumbents and new entrants alike.
At the same time, we need new laws and rules focused on promoting fair competition on and against dominant gatekeeper platforms to give back some real control to consumers and business users. Until we have a real choice to leave these platforms if we’re not happy with them, they won’t care about doing what is in their users’—our—best interest. Thankfully, there’s already a template for legislative change that could have a major impact on the power of Big Tech and Big Data. The package of antitrust bills focusing on Big Tech that recently passed through markup in the House Judiciary Committee represents a key piece of the solution, as does broad antitrust reform as Senator Amy Klobuchar (D-MN) has proposed in the Senate. The recently introduced Open App Markets Act from Senators Richard Blumenthal (D-CT) and Marsha Blackburn (R-TN) is also an important part of the reform solution. These solutions aren’t mutually exclusive. Both sector-specific and economy-wide antitrust reforms are needed.
For decades now, Washington has taken the perspective that we need to let digital businesses run wild to see what great innovations they might come up with. But today, unscrupulous data practices and consolidated power have led us to a place that isn’t anyone’s dream of what the internet was supposed to be. These largely unregulated platforms have been allowed to amass powerful gatekeeper roles in multiple markets, where they need not fear competition or government intervention. For users to really have control, we need to have a real choice to leave these platforms. We need real competitors and we need switching to be easy. To get those things, we need new laws and rules to promote fair competition on and against gatekeeper platforms like Google and Facebook. Congress has already done laudable work of introducing a series of bills to combat these harms. The best time to pass them was 10 years ago. The second-best time is now.
Disclosure: Charlotte Slaiman is the Competition Policy Director for Public Knowledge. Public Knowledge has previously received funding from Big Tech companies, including Amazon, Apple, Facebook, Google, and others. More information about Public Knowledge supporters can be found here.