A turning point. The power and monopoly held by the GAFA have been further strengthened by the public health crisis. But the USA and Europe are waking up.
Over the space of 30 years, the digital industry has brought about the biggest and fastest technological revolution in history, connecting 4.8 billion of the 7.6 billion inhabitants of the planet, and reshaping all of our businesses and occupations. But it has also given birth to two monsters: the GAFA (Google, Apple, Facebook, Amazon) in the USA, and the digital arm of Chinese totalitarian capitalism, made up of Alibaba, Baidu, Huawei and Tencent. These companies are dividing the world up among themselves and are the tools of the technology war that is being waged between the two major powers of the 21st century.
In the West, the GAFA have built up a monopoly for themselves with a market power greater than that of the railways and oil companies in the 19th century, or the telecommunications companies in the 20th century. This monopoly has leapfrogged the rule of law and regulation by nurturing the myth of the freedom and neutrality of the internet, a one-sided view of the right to competition that centers on its advantages for the consumer and which is bolstered up by growing concerns over China’s ambitions of hegemony. Today, Google has cornered 90% of the market in search engines, 87% of the market in operating systems and 31% of online advertising. It is a major player in data storage and cartography with Google Maps and Waze, which enable it to identify and track consumers. Facebook has carved out for itself an ultra-dominant position in messaging with over two billion users, to which can be added the users of WhatsApp (1.6 billion), Messenger (1.3 billion) and Instagram (over a billion), giving it over 20% of global online advertising. Amazon accounts for almost 40% of e-commerce in the USA and 20% in Europe, thanks to its market position being linked to product sales, chain stores, videos and music, and backed by its formidable skills in data storage and exploitation. Apple’s market power resides less in its control over 11% of the smartphone market and 13% of operating systems than in its platforms for downloading music and videos.
The GAFA monopoly gives them an unsurpassed financial clout, because of a capitalization of almost $3,500 billion and profits that reached $122 billion in 2018, i.e. 18% of their turnover. This means they are able to buy up any company that might be in competition, to occupy the domain of essential services – notably the health sector – because of its command of data, to influence nations and challenge them even in their sovereign functions, as in the case of Facebook’s crypto-currency, the libra.
The Covid-19 epidemic, the increased number of lockdowns, and the explosion of online sales and teleworking, have given the GAFA an even greater hold. In the third quarter of 2020 alone, they generated $228 billion in turnover and $38 billion in profits. Google’s and Facebook’s income from advertising soared – to the detriment of traditional media; Amazon’s operations increased by 37%, its profits tripled and its staff numbers reached 1.1 million – with 200,000 extra people to be recruited in the coming weeks.
A machine that polarizes. The power of the GAFA’s monopoly has escalated because of the health and financial crisis and has become a major threat, not only to capitalism but also to national sovereignty and democracy. From an economic standpoint, the proliferation of unearned income from the monopoly, and the bias created by avoidance of regulations and taxation, are ruining competitors and are working against innovation, blocking growth and increased productivity. From a social standpoint, the GAFA have become a formidable machine that polarizes societies and increases inequality, making fortunes for app designers and reducing the status of operators in the field. From a fiscal standpoint, governments find themselves being bypassed and deprived of tax income from the digital economy, although they bear the economic and social costs of the technological revolution. As regards freedom, consumers are making a pact with the devil: in exchange for what appears to be a free service, they are renouncing access to and use of their personal data, and also giving up control over their own lives. On the political front, social media reinforce individualism and the radicalization of opinion, fostering violence and undermining nations. From the point of view of democracy, the GAFA have become a weapon of mass destruction aimed at political freedom, destroying the middle classes, spreading disinformation, and making populist movements, Jihadism and démocratures [a démocrature = a combination of dictatorship and democracy] into powerful channels of influence.
Cracks. More and more scandals have come to light and, with the Snowden affair, have underlined how real the risks are, from regular misappropriation and pirating of personal data to the dissemination of calls for hatred, bomb attacks and mass killings, as well as Russia’s involvement in elections in the USA and Europe.
Russia’s interference in the 2016 US elections marked the beginning of an aawareness that the GAFA needed to be regulated. The first turning point was in Europe when, at the instigation of Margrethe Vestager, Apple’s tax evasion practices in Ireland were the subject of a sanction – a decision unfortunately rescinded by the European Court of Justice last July – as was Google’s violation of antitrust rules. The European Union also instituted the first regulation for the protection of personal data in May 2018.
At the same time, cracks have appeared in the impunity that the GAFA have enjoyed in the USA. An unprecedented agreement was made between the Department of Justice and the Federal Trade Commission, enabling the former to investigate Apple and Google and the latter to monitor Facebook and Amazon. Within this framework, the Department of Justice, with the support of 11 states, began proceedings against Google for abuse of antitrust rules, comparable to proceedings that targeted Microsoft 20 years ago and obliged it to open its operating system to its competitors’ browsers. Above all, US politicians have been roused, changing from giving unconditional support to the GAFA to approving close surveillance.
On 6th October, after 16 months of investigations, the US House of Representatives published a report that concluded that the GAFA constituted a number of monopolies as powerful and as dangerous as those held by the oil industry and the railways in the past, and which systematically abuse their power in the market. From this, the call has come to integrate the digital economy into competition law, by recognizing the existence of essential infrastructures that must guarantee non-discriminatory access to all companies. This means the functional dismantling of platforms, the prohibition of self-referencing and the institution of an obligation to notify the competition authorities of any acquisition.
The absence of a Blue Wave and the probability that Joe Biden will have to deal with a Republican Senate make it highly unlikely that this legislation will be adopted, but the GAFA will no longer be able to avoid being subject to competition and tax laws.
Blinded. Notably under the influence of France, the EU and its member states have long been blinded by their frantic quest for revenue, which has led them to give top priority to taxing the GAFA and sweeping under the carpet the economic damage and threats to freedom that this situation has created. It is on its way to changing this, with laws affecting the digital market (the DMA [Digital Marketing ACT]) and digital services (the DSA [Digital Services Act]) as well as the Action Plan for European democracy, which will be presented on 2nd and 9th of December. Their intention is to begin to truly regulate the GAFA by prohibiting structuring platforms from promoting their own services and products, by prohibiting the use of data from other companies and so give themselves an advantage over the competition, by making it easier for consumers to change their service provider, by harmonizing the procedures used by national regulatory authorities, and by protecting European citizens from foreign interference during electoral periods and from disinformation. Sanctions in case of violation would no longer be limited to fines, which have proved to have little effect, but might go as far as dismantling in the case of the abuse of antitrust laws.
In this digital era, Adam Smith’s remark is still very true: “Monopoly, by favoring the small interests of a small class of men in only one country, harms the interests of all other classes in that country and those of all men in all other countries.” Like any technology, the digital revolution can either contribute to freedom or lead to servitude. Its regulation cannot be conferred on the digital enterprises that control the algorithms; it comes within the scope of the law and politics. It is not only the economic monopoly of the GAFA that has to be broken by dismantling platforms and questioning a model founded on the appropriation of personal data, it is their monopoly over internet governance which must be brought to an end.
(Article published in Le Point, 26th November 2020)