Daniel Schwanen: We don’t need new Big Tech competition laws

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Policy proposals for ‘big tech’ need to be considered on a case-by-case basis

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Canadian competition laws do not need to be fundamentally rewritten for “big tech”. The best approach to ensuring that Canadians benefit from digitization is not to develop new competition principles targeting a few large players, but to modernize the application of the principles we already have.

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Data has always been at the heart of relationships between companies and their customers and suppliers. There has also always been a market for attracting the attention of potential customers. What digital technologies have done is massively improve our ability to collect and analyze this type of data. Businesses can reach customers and suppliers on a scale previously unimaginable, but with pinpoint precision, an effect known as “mass personalization”. New business models based on digital technologies have challenged incumbents to do better in a wide range of industries.

These types of apps have proven to be very popular with Canadians. For some critics, it is only a step between this popularity and claims that “big tech” has become too important and is a threat to competition, innovation and even the growth of small businesses. But these reviews don’t show why that would be the case – in large part because of three mistakes.

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The first is the implicit assumption that the companies that make up “big tech” all have a similar impact. In fact, their business models are very different. Some compete in highly concentrated markets: Microsoft’s Windows and Apple’s MacOS together hold over 90% of the global desktop operating system market. This contrasts with other industries, like retail, where traditional operators like Loblaw and other “brick and mortar” retailers have taken Amazon and other online marketplaces by making customer data digitally accessible. for example via loyalty programs, a cornerstone of their strategy. Consumers are constantly shopping and switching stores for the best deal.

In other important markets, big tech companies compete fiercely: for example, many analysts have argued that the change in Apple’s iPhone privacy policy threatens Facebook’s business model. Large tech companies also face competition from emerging tech companies offering competing technologies and business models. A good example, still in retail, is the emergence of Shopify and other alternatives that allow producers and retailers to reach their customers digitally.

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In view of all this diversity, it should be clear that policy proposals targeting “big tech” need to be considered on a case-by-case basis.

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The second common fallacy is an excessive appeal to the ideal of perfect competition. Innovation is often driven by companies looking to differentiate themselves in the market by offering potential customers better and more practical alternatives. Online advertising now constitutes more than half of the advertising market in North America. It is led by Facebook and Google, which therefore now hold a significant share of the global advertising market. Other media that relied on advertising for their revenue had to adjust their business model, sometimes in ways they would not have preferred. But analysts and policymakers should not confuse successful technology or a popular offering with an unfair exploitation of market power. Being tall is not always the result of being bad.

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The third fallacy is that digital offerings sort of inhabit their own markets. This approach ignores both the substitutability and complementarity between digital offers and traditional modes of supplying goods and services. Both should be seen as part of a single market. The future is very likely “omnichannel”: from retail to food delivery services, there is a rapid convergence of different modes of service delivery by a single company. Consider how “big box” stores now offer sophisticated online shopping alternatives, or traditional restaurants offering deliveries through their own websites or apps.

A serious discussion of competition in the digital age requires recognizing that these mistakes are just that. The important point is that ensuring that markets are contestable and that competition rules are fair remains as salient in the digital age as it always has been, but no more.

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While competition authorities do not need new laws, they do need tools and resources to enable them to detect and enforce remedies for anti-competitive behavior, including blocking or modifying proposed acquisitions. that would reduce competition. In an age of complex and rapid business decisions made possible by digital technologies, competition authorities need what it takes to keep pace.

The digitization of business, research and government activities in Canada has had a positive impact on productivity. It has contributed to employment and economic resilience during the pandemic. We have an economy in which almost all players with the required connectivity and skills – across many industries – are now able to reach customers through various technologies that enable them to collect, analyze and operate Datas. Our approach to competition in the digital age must reflect this reality.

Daniel Schwanen is Vice President of Research at the CD Howe Institute.

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