December 20, 2019 / 9:19 AM / a month ago

Breakingviews - Margrethe Vestager will open tech’s walled garden

European Commissioner-designate for Europe Fit for Digital Age Margrethe Vestager of Denmark adjusts an earphone during her hearing before the European Parliament in Brussels, Belgium October 8, 2019.

LONDON (Reuters Breakingviews) - European Competition Commissioner Margrethe Vestager will in 2020 swap her sledgehammer for a scalpel. A new, more surgical approach to antitrust regulation could finally make it easier for Alphabet-owned Google and Facebook’s rivals to compete with these behemoths.

The Dane has yet to really earn her reputation as Big Tech’s slayer-in-chief, despite slapping 8 billion euros worth of fines on Google. Facebook got off with a 110 million euro charge for providing misleading information about its WhatsApp acquisition. Amazon.com has been largely unscathed, while Vestager’s tilt at Apple was mostly about taxes.

She certainly hasn’t dented their share prices. These four companies’ combined market capitalisation has increased around 150% to $3.5 trillion in the five years since Vestager’s term started. Google still processes almost all web searches in Europe. It and Facebook suck up about three-quarters of digital ad spending in the bloc’s five largest economies, eMarketer calculates. Apple’s App Store and Google Play control the discovery and distribution of mobile applications.

Such dominance is sustained by so-called network effects, or self-perpetuating advantages that make it hard for others to compete. A budding Instagram competitor would struggle to get off the ground, since early adopters of a newbie could no longer interact with friends who stayed on the Facebook-owned site. It’s the same for online marketplaces such has Amazon, or app stores. Meanwhile, Google’s search algorithms get better the more they are used. Dominance begets ever greater dominance.

Vestager, now starting her second term in the job, could break the loop by introducing what antitrust wonks call interoperability – basically, shared technical standards that apply across competing services. As with email, users of different social networks could seamlessly interact and move their data around. Rival digital-marketing companies could slot advertisements on to Google’s web pages, allowing them to undercut the search giant’s ad prices. Entrepreneurs could build rival app stores which work on Apple’s phones.

True, hammering out details will be tricky. But the mobile-phone sector shows that industry-wide technical standards are possible. Similarly, British banks now build their IT systems so that customers’ accounts interact with third-party apps. Forcing Big Tech to do something similar might feel less satisfying than a huge fine. But it would give Vestager a better chance of breaking their stranglehold.

This is a Breakingviews prediction for 2020. To see more of our predictions, click here: bit.ly/38Xs7IK

Breakingviews

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