Twin U.K. Reports on Platform Monopolies Come Up Short on Fixes

by Matthew Buck, Phil Longman, and Barry Lynn

Last week, the U.K. government and the House of Lords each released long reports detailing some of the growing threats that platform monopolies like Facebook, Google, and Amazon pose to individual citizens, businesses, and overall society. Unfortunately, both reports failed to provide a plan to deal effectively with the problem.

Former Obama Council of Economic Advisers Chairman Jason Furman led the Digital Competition Expert Panel, which is the longer, more detailed and more ambitious group charged with considering what the digital economy means for competition policy.  Entitled “Unlocking Digital Competition,” the report acknowledges that platform monopolists like Facebook and Google have “persistent dominance” in markets like digital advertising. Beyond mere dominance, the panel held, “there is reason to be skeptical of the notion that they face serious threats to their dominant positions in the future, unless there are changes to the current policy framework.”

This dominance, according to the panel’s report, can harm users in a variety of ways, including higher prices, lower levels of privacy and security, and slower innovation. The panel also noted how Facebook’s and Google’s dominance in digital advertising markets harms journalism.

The panel called for stronger merger policy to prevent big platforms from acquiring potential rivals, as well as for setting up a new governmental office to oversee digital competition. This office would be in charge of identifying platforms that have captured chokepoint positions in commerce and then would work with these platforms to develop “codes of conduct” to guide their treatment of customers. The panel also called for the UK to require platforms to allow users to move their data between sites to embrace open standards and make certain data, such as for mapping services, available to competitors.

Unfortunately, the panel offered weak, equivocating guidance on how to ensure that these corporations do not exploit their power.  Instead the panel devoted much of its time to defending the flawed and now widely questioned “consumer welfare” philosophy of anti-monopoly enforcement. The panel also embraced the use of the concept of “multi-sided” markets, even while acknowledging that the concept “mak[es] typical market definition exercises more complex.”

The House of Lords Select Committee on Communications’ report, entitled “Regulating in a Digital World,” also does a good job of describing the power of platform monopolists, observing, “Online communications platforms act as gatekeepers for the internet, controlling what users can access and how they behave … Providers of these services currently have little incentive to address concerns about data misuse or online harms, including harms to society.”

But the Committee’s report is even less aggressive than Furman’s in proposing fixes. Instead, it too spends time defending the consumer welfare philosophy, with its focus on narrowly defined efficiency. Perhaps most dangerously, it endorsed the idea of imposing a “duty of care” on the platforms. (For more on this concept, read Lina Khan and David Pozen’s recent paper.)

Other entities have recommended stronger solutions. For example, the Australian Competition and Consumer Commission calls for measures to address Facebook and Google’s power that include uncoupling operating systems from default browsers and search engines. This would begin to address some of Google’s incumbency advantages. Even more boldly, India has already restricted Amazon and Walmart from selling their own products which compete against other vendors hosted on their respective marketplaces.

For robust visions of public regulation in the US, one should look to Sen. Elizabeth Warren’s proposal to break up Amazon, Google, and Facebook. Remarkably, Warren says more in her brief blog post than Furman did in this 150-page report. The Massachusetts senator actually vows to appoint enforcers who would break up past anticompetitive mergers. Not only that, she calls for requiring platforms that bring online users together “to meet a standard of fair, reasonable, and nondiscriminatory dealing with users.” Such a standard, especially its nondiscriminatory part, would restructure online markets away from exploiting individual user characteristics and help realign platform monopolists’ motivations and business models toward working for people, not against them.