The technology sector is struggling with several big problems that can have a significant impact on an important asset for companies like Google, Facebook and Amazon: their reputation. However, protecting privacy, filtering out fake news and managing the implications of artificial intelligence are not the only problems - accusations of abuse of dominant market positions are increasingly popping up. A variety of measures have been proposed, up to even breaking up some companies. The consequences could be huge, but for the moment no draconian measures are on the table. What is an issue is the possible damage to the companies' reputation. Google will soon need to explain itself over how it manages the Android ecosystem without harming competition in services.
Abuse of market dominance
We look at three possible cases of abuse of a dominant market position, a standard violation of competition law:
- Facebook has a near monopoly in chat with WhatsApp, forcing people to download the app, claims the German justice minister. She suggested mandatory interoperability with other platforms as a solution. This does not appear a realistic option, as other chat apps and SMS are platforms that consumers must actively choose as well.
- Google has already been fined by the European Commission for abusing the dominant position of Google Search in order to promote its own Google Shopping service, disadvantaging other comparison services. Another fine is expected to be announced soon for similar practices with Android. In a recent editorial, the Boston Globe proposed breaking up Alphabet. This could happen in a number of ways, such as separating Google Search from the rest of the activities and opening up ad placement to third parties. A counter-argument is that consumers are not experiencing any direct harm, and in fact benefit from many Google services, such as Search, Maps, YouTube.
- Amazon is accused of abusing its e-commerce platform to favour its own brands (of which there are around 100) over other products. Its current turnover of USD 12.5 billion could double within four years. Tools used to allegedly favour its own brands include the review service Amazon Vine and the 'big data' it holds on visitors to its websites. However, this data is available for sale to competing brands. Remedies are not obvious, for two reasons: Amazon is helping push down consumer prices, not increase them, and its share on the overall retail market is still limited.
There is also the duopoly of Google and Facebook on the market for digital advertising; together they are estimated to hold around 80 percent. This is a consequence of their popularity, in terms of inventory and time spent. Amazon is also increasingly challenging that duopoly and growing its own ad revenues quickly. Just as Google is challenging Amazon on the e-commerce market.
Monopolies not per se a problem
A priori there is nothing wrong with a monopoly that emerges from organic growth of a popular service. The problem starts when the monopoly drives up prices or pushes other players out of the market. The latter could be an issue in Google's recent investment in a competing mobile operating system. If Google acquires the whole company and takes it off the market, that could be a source of concern for competition.
Another problem is if the monopoly tries to extend its position into new market segments, in a form of tied sales. This was the case for Microsoft, when it was fined for bundling Internet Explorer with the Windows OS. This is a kind of conflict of interest that requires a Chinese wall. The telecom market is familiar with the problem, as network operators sell wholesale capacity (often as a result of regulation) to providers with which they compete on the retail market. A certain degree of separation (structural or otherwise) creates the necessary Chinese wall. Amazon is a company that shows how to solve this well: on the retail market it competes with Netflix with Amazon Prime Video, while it also has a wholesale deal with Netflix for Amazon Web Services.
No break-up
Google is likely to face another fine from the EU for favouring its own apps on Android (tied sales) as it requires smartphone manufacturers to include its services in order to gain access to certain Android features. It will need to come up with a solution to ensure that the Android platform does not destroy competition in the services market. Radical steps such as a break-up of the company are unlikely. The internet majors offer a wide range of services free, helping to limit price inflation. Only transparency is needed to ensure their reputations don't suffer.
