While US regulators dither, Europe is leading the way in imposing limits on the huge wealth and power accumulated by the Silicon Valley giants Google, Apple, Facebook, and Amazon (GAFA).
In the space of just two months, European lawmakers have made several moves:
The EU has slapped a huge fine of $1.7bn on Google (the third in two years) for uncompetitive practices in the advertising market.
The European Parliament has passed new copyright laws, hugely complicating the lives of content-sharing sites such as Facebook and YouTube.
France has imposed a 3% digital tax on web giants such as Amazon, Facebook, and Google.
The EU has launched an investigation into an antitrust complaint filed by Spotify against Apple.
The days of laissez-faire regulation for the digital sector are numbered. Several options on how to curtail the tech giants' dominance have been debated on either side of the Atlantic, including breaking them up, capping their profits, subjecting them to utility-like regulation, imposing data-privacy controls, and forcing them to offer a level playing field to competitors.
EU regulators have more or less dismissed the first three and are focusing on the latter two. In the US, the options are still up for debate, with one 2020 presidential candidate calling for the breakup of Facebook.
What most worries consumers is the relentless harvesting of personal and usage data that they are subjected to online by ad-revenue-dependent businesses. Not only because of the nuisance and intrusiveness, and the sometimes blatant invasion of privacy that ad targeting implies, but also because of the risk of personal data being hacked or exploited for misinformation campaigns (as seen with Cambridge Analytica, for example).
The General Data Protection Regulation (GDPR) was the EU's first step toward its expressed goal of giving consumers sovereignty over their data online.
Apple is the least dependent of the GAFA giants on advertising revenue, and it is trying to turn that into a competitive advantage. In the slew of media and financial services it unveiled on March 25, a common theme highlighted by Apple execs was that none of these services will involve the storage and sharing of user data. Any usage tracking will be done at the device level only, and not uploaded to Apple's servers. In essence, the message was: switch to our devices and services and your data will be safe with us.
But Apple cannot sit pretty and gloat in the face of the growing regulatory threat. It is also in the regulators' sights because of its powerful mobile app ecosystem (see Figure 1).
Figure 1: Global appstoretransacted revenue by ecosystem 2019
The App Store's terms and conditions effectively force app publishers to rely on Apple's billing platform and pay a "tax" of either 30% or 15% on any sales. At the same time, Apple's native apps have an unfair advantage over rival third-party apps, not only because they are preinstalled, but also because they are not subject to the same billing tax. These are the issues that Spotify is complaining about to the EU.
There is a growing backlash against app-store billing among top media companies, including Spotify, Netflix, and Epic Games – all of which have cut themselves off from the iTunes and Google billing platforms. And, this year, regulators are likely to join that backlash with rulings forcing Apple to loosen its grip over app billing.
The regulatory charge against GAFA dominance might be limited to Europe for now, but its ripples are already being felt in other jurisdictions and US lawmakers are also sharpening their knives.
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