Hello, friends,
While the U.K. has been Brexiting from the European Union, it has also quietly been plotting an independent approach to policing Big Tech monopolies.
The first signs of a new approach became clear in 2019 when the U.K. competition regulator published a report by former Obama administration economic adviser Jason Furman titled “Unlocking Digital Competition.” The report called for the agency to go beyond the standard government practices of reviewing mergers and acquisitions and punishing antitrust abuses.
To keep up with the fast-moving technology sector, the Furman report called for the creation of a new agency that would enforce “a clear set of rules to limit anti-competitive actions by the most significant digital platforms while also reducing structural barriers that currently hinder effective competition.”
A year later, the competition regulator signaled its direction with a report titled “Online Platforms and Digital Advertising,” which concluded that Google and Facebook respectively dominated the markets for search advertising and display advertising in the U.K. and had an “unassailable incumbency advantage.”
Following the guidance of the Furman report, the competition regulator earlier this year set up a new entity, the Digital Markets Unit, which will be charged with enforcing a code of conduct for Big Tech companies. Its remit will likely include the ability to restrict default settings and to require data portability and that companies share data with competitors; the unit should also have the clout to require companies to spin off data assets.
However, the new agency needs legislation to confer these new authorities upon it. U.K regulators that oversee communications, privacy, and competition are working on legislative recommendations that are expected to be released in a few months. In the meantime, the new Digital Markets Unit has been funded and is operating as a “shadow” agency.
To understand the British approach to regulating Big Tech, this week I interviewed the top U.K. competition regulator, Andrea Coscelli, at the Open Markets Institute’s Center for Journalism & Liberty’s conference, “After Google and Facebook: The Future of Journalism and Democracy.” Coscelli is the chief executive of the Competition and Markets Authority in the U.K. Prior to his CMA tenure, he was director of economic analysis at Ofcom, the U.K.’s communications regulator. He has a B.A. in economics from Bocconi University in Italy and a Ph.D. in economics from Stanford University.
The interview is edited for brevity. (You can watch the full interview here.)
Angwin: As I understand it, you are taking a middle course between the EU, which has some proposals with very prescriptive rules about how to regulate Big Tech, and the U.S. which has—I think it’s fair to say—no rules but some enforcement cases. You have come up with this interesting approach, which is an agency that will try to be nimble and try to promote competition. And I want to ask a provocative question: Is it going to be enough?
Sure, it’d be nice if there were five search engines. I use DuckDuckGo and yes, I like the idea that you’re asking Google to share training data with them so they can make their search better. Maybe I want to sign up for more social networks? I don’t know. I’m actually exhausted by signing up for social networks.
So I’m just wondering, is more competition actually what we need here? Is that really going to solve the problem for newspapers and for democracy?
Coscelli: It’s a very good question. And that’s the reason why, to be honest, I spent a lot of my time talking to other regulators, both domestically, internationally. Whatever we do, I think it’s very much part of a package of solutions.
Regulators have been a bit behind the curve, and I think also you could have competition playing a more effective role. So it’s very important that these things happen at the same time. Competition is part of the solution.
I mean, the reality in social media for a number of people in the U.S., U.K., and many other countries is that it’s a bit of a take-it-or-leave-it offer because your circle of friends and family are on Facebook or Instagram. Even when people feel very strongly about it, they struggle to go somewhere else. I think if you have more options that creates potentially the right incentives to protect privacy more, to take care of your users in a different way.
In terms of your initial question about what’s happening in the European Union, I think it is quite interesting that the proposals going to the European Parliament are more prescriptive than what we’re proposing here. We will have to see what comes out through the two Parliaments. I think it is absolutely possible that we went in with a tailored bespoke approach, and we emerge with a more prescriptive proposal.
The advantage of the more prescriptive [proposals] is that you can get impact more quickly and potentially more effectively than what we are proposing. On the other hand, you lose some of the future-proofing. You lose, potentially, the ability to really react to changes in technology at the time.
I think our approach is good on that front, but potentially is a bit slower. And maybe you could argue [it’s] not going to have the same impact as quickly. At the end of the day, it’s for democratically elected Parliaments to decide exactly how to balance the various considerations. It’s not going to be our decision.
Angwin: Let me ask another provocative question about journalism. When I was a reporter at The Wall Street Journal, we made all our money selling ads because we were basically the only way you could reach a middle-aged, middle-manager guy who golfs and has a BMW. If you wanted to reach that guy, you had to buy a full-page ad for hundreds of thousands of dollars in The Wall Street Journal. That was what you call contextual advertising.
What happened next was the creation of behavioral advertising, which allowed companies like Google and Facebook to build these networks that track users across the internet, which meant you could find that golfing BMW guy somewhere else, and at a much cheaper price. So the creation of these networks is, in my opinion, one of the main reasons that the press and the financial structures that support it are collapsing.
The question is: Is there an argument for getting rid of behavioral advertising altogether? And if so, how are you guys going to address that?
Because if you create incentives and create and re-establish contextual advertising, that actually builds an incentive for building a quality product that attracts a quality audience. And right now there’s no incentives for that in the markets.
Coscelli: This is a key question. We are technologically neutral. If we do our job properly, we need to be agnostic about potential changes in business models, but that needs to be done in the context of proper regulations being in place and proper enforcement of regulations.
That’s the catch-22 here, because at some level it’s not a right for us potentially to argue that there should be some form of advertising over another. And obviously the old business models are highly unlikely to be the right ones in the future.
The problem we have here is there are a number of things that probably should have been regulated and have not been regulated in the U.S. and Europe. If you think about the situation on privacy in Europe, you have an Irish regulator who is not a very large regulator who is technically regulating and enforcing privacy legislation on behalf of this massive market in Europe.
Today we are seeing the combined effect of changes in business models, potentially a lack of regulations and potentially underenforcement. We, as competition authorities, are to some extent picking up the pieces.
I’m a strong advocate for proper enforcement of privacy regulation because I think it will also help us. Right now we’re working very closely with our privacy regulator on the Google Privacy Sandbox case. But also we’re working together potentially on a joint statement trying really to do something which is holistically combining a privacy regulation and competition in a way that I think is useful for us and potentially for others internationally to use as a benchmark.
Angwin: In case you’re wondering, there are some publishers who are resisting Google’s new plan, including my news outlet, The Markup. We’ve opted out of Google’s Privacy Sandbox proposal because it tracks users without any clear way for them to opt out at the moment.
The problem with privacy is that it’s hard to put all of that tracking back in the bottle. And the threats to journalism are so urgent. In Australia, they came up with this proposal to try to put some of the money back into the pockets of the publishers. I would love to hear what you think about that approach and whether the U.K. might go in that direction.
It was a very crazy thing to watch these tech companies aggressively negotiating with a democratically elected government in a way that you would normally see between two private enterprises.
Is there some way that you as a competition authority could change that dynamic, by giving publishers or the government more heft in those negotiations?
Coscelli: Yeah, we think that the bargaining power is not in the right place, so something needs to happen. We think legislation bringing in a code of conduct and potentially having some extra structure around the relationship between publishers and platforms is important. Our role is as an expert adviser to government and to Parliament. So as of now, we don’t have the legislation.
I think what the Australians have done is very relevant for the U.K. It was a very smart way of thinking about it. Ultimately, I think the U.K. Parliament would have to decide on this.
I was as surprised as many others when I saw that kind of public spat between two large private companies and a democratically elected Parliament, which I regard as very much a symptom of the problems we have been talking about in terms of the very significant power that these platforms have at the moment.
Angwin: Picking up on that, what do you think about the fact that many people say these tech platforms and their ability to control speech worldwide are actually a threat to democracy?
I don’t know how you, as a competition market authority, are supposed to address that, but I would like to hear your thoughts on what the threats are and how you hope to mitigate them.
Coscelli: Yeah, as you say, it’s a bit outside of our current remit. But certainly I think the time has come to consider whether, in terms of the powers that you give to competition authorities, you also need to take into account the political risk when you go beyond a certain level of economic power.
As always, thanks for reading.
Best,
Julia Angwin
Editor-in-Chief
The Markup