🎩 Big Tech: Monopoly's Second Moment?

Big Takeaways re: Big Tech

Two weeks ago, I “went” to a conference held by the Rotman School of Management. I wanted to share some of the thinking that stood out for me (and yes, I 100% crave a mini-report on the conference or a reference of everyone’s printed opening remarks!).

🇺🇸 The U.S. Context

Back in the summer (what is time?) House Antitrust Subcommittee Chairman David Cicilline’s arguments against Facebook, Google, Amazon and Apple centred around three core themes:

  1. That these companies are each “a bottleneck for a key channel of distribution”;

  2. They use their “control over digital infrastructure to surveil other companies”; and

  3. Abuse their control over current technologies to extend their power.” 

We should also be asking ourselves - would we apply the calls we have on/for “big” technology companies to firms in Canada like Shopify or Loblaws? Why or why not?

🍽️ Some more food for thought 🇨🇦

Last month’s Speech from the Throne pledged to address “corporate tax avoidance by digital giants” and pointed to other ways that the largest tech companies might have their revenue redistributed or better captured. The potential digital tax is super specific to firms that sell online advertising and have at least $1B in global sales and earn at least $40M in Canada. The bar is as precise as is it high. Why?

Canadians can conveniently “other” companies like Facebook, Amazon, Apple, Netflix, Google, and even Microsoft because they aren’t homegrown. It’s a little easier to hold *them* to account when we’re not holding them close to our chest (aka a hug, because they create jobs and economic value in our country and we are thirsty for innovation). 🤗

That relationship (government + large technology company) is likely to evolve as Shopify continues to grow, and as Loblaw continues to leverage their data assets in new spaces like finance and health. What we need to ask ourselves in the interim if the arguments we make for large technology companies and/or platforms would or should apply to Shopify - and then interrogate why or why not?

  • When we muse that Airbnb or Uber should directly report host and driver earnings to the CRA, do we demand that Shopify do the same? 🤷

  • Do we ever propose that Shopify automatically collect and remit HST on certain firms earning more than $30k? 🤷

  • Should Shopify treat solopreneurs on the platform like employees and offer them extended health and dental benefits and/or pay into the employment insurance system for them? 🤷

  • Should Shopify stores “show” shoppers a certain amount of Canadian merchandise? 🤷

  • Should the Canadian government levy more (like 3%) taxes on the revenue that Shopify’s platform generates in Canada? 🤷

*I don’t mean to suggest that Shopify is avoiding tax - the SFT used specific language because it is directly targeting a specific tax loophole which does not apply to Shopify. However, there are other ideas kicking around out there that are related to platform governance and taxation that could be considered in this light.

**Not all these analogies hold - but you get the point. 😉

📝 FWIW, here are my notes from that Monopoly conference —

  • Giant technology companies have tremendous impact on commerce, consumption and communication;

  • Size, scale, and power of these giant tech firms across the political spectrum;

  • These companies are effectively American - Canadians have a long history of having to deal w/ foreign ownership and foreign control in their economy ;

  • Monopoly’s Moment [The organization and regulation of Canadian utilities] is an award-winning study by Armstrong + Nelles.

  • Referenced: Hunting the Big Five: Twenty-First Century Antitrust in Historical Perspective;

  • Adam Smith’s “Wealth of Nations” reviewed;

  • Data viewed as electricity or a natural resource, as it “powers” a lot of the digital capabilities;

  • The “actual” problem with big tech occurs when big tech companies over-extend or impact productivity or innovation (*a person from a bank said this!);

  • Challenge: we have spent the last hundred years building up a regulatory state and a way of regulating the state. Historical context = we are at a transitional moment. In the 20th century we built the regulatory state as the control.

  • Today = emergence of the platform economy, and the digital space is a very different domain to be regulating. Focussed on: need to be re-thinking how we regulate in this new environment, and we can’t follow our conventional approaches of markets out there.

  • The most important property laws we have now are our trade secret laws, which are not as deliberately designed as our patents and copyrights;

  • Not going to be adequate to say: let’s write a new law or get the court to adopt a new economic theory in their decision-making. We are going to have to be thinking about new methods of regulation.

  • Long history of the obligation of the entities that build these services, making them available - e.g. railroads and communication.

  • Trying to understand why “big tech” doesn’t invest more in broadband connectivity and assuming that there is some sort of cost/benefit calculation that is made;

  • Problems with the WTO/idea of setting standards/internet of things - huge problem w/ current global infrastructure that we have, no immediate solutions BUT there are historical examples re: how this has been overcome

  • Data as: utility, natural resource

  • Different types of “standards” can “stifle” innovation - discussion re: encouraging/balancing the ambition of information

  • Cybersecurity [WeChat, WhatsApp] - role of international borders, standards, privacy, security?

  • Need “some sort of framework that we are all following.”

  • We live in a very complex regulatory environment and this is a barrier to entry - there is a sense that some of the calls for regulation around facial recognition and other AI will benefit the larger companies even more.

  • What makes all this difficult = there’s not a set of challenges that are shared universally by big tech companies.

  • e.g. Amazon - they both control the market AND sell products in it based on knowledge of that market

  • SOME Competition Bureaus are looking at - what does a broader set of consumer harms look like?

  • e.g. issues like abuse of data, the lack of consumer choice that individuals have

  • Understanding is that the Competition Bureau of Canada is very reluctant to take this broader view

  • Starting to see a broader platform governance agenda emerge, where we have competition policy - there are some things small companies countries can do, like push back against mergers and acquisitions and collaborate on some investigation practices

  • But really where the “game” probably is for countries like Canada is: in more serious data privacy policy, data mobility policy that allows company data to move across competitors, more transparency/regulation in the ad market, content regulation policy - there's things that we actually have clear jurisdiction on and can do, and will push back against some of these more pernicious attributes of the companies we're talking about.

  • Our regulation model in Canada is a law enforcement model with limited political interference

  • We live in a multipolar world where Canada is a middle power. Canada is both expected to be an active player in competition law enforcement, doing its part to enhance competition and ensure fair global markets, and yet Canada is not really in a position to go it alone and craft an ambitious new competition policy.

  • Internationally the governance of competition law remains very fragmented, there is agreement on broad principles, but much of the existing international like hard competition law is confined to bilateral cooperation agreements which focus primarily on information sharing.

  • The international context suggests that Canada has a bit of a tightrope to walk and not straying too far from either of these nationalist or slash supranational camps.

  • Canadian competition policy actually seems whether rather well suited to this is this flexibility built into the mandate.

  • There's likely a significant diversity of views on the specifics for how competition law should respond to big tech, and that Canadians, looking for a clear denunciation and strong government response may be disappointed in the tools and natures of Canadian competition law, which can be slow moving and often relies on a cooperative enforcement strategy that might not produce the kinds of blockbuster fines or sanctions that can use might be expecting.

  • We're unlikely to see any broad and comprehensive policy reform in Canada, but still lots of opportunities for perhaps more narrowly tailored/strategic innovations.

  • DANGER in the public dialogue that we mix up discussions around digital and data - useful to separate out discussions about platforms.

  • Also look at intellectual properly - not just way to “defend your turf” but can be weaponized.

  • [maybe] We need to be governing the types of things that serve goods/services/social interactions that occur ON platforms, not the platforms themselves.

  • Biggest change around the world - probably going to be national security