A year when the tide turned against big tech

It is no coincidence that 2017 is the year in which the term ‘big tech’ has gained popular currency. It is not complimentary. Other industries that have earned the dubious distinction—big tobacco, big oil—have long been seen as rapacious and careless of the public good. The big tech firms make similarly tempting targets by virtue of being at the top of the capitalist food chain; Apple, Alphabet, Facebook, Amazon and Microsoft are the five largest US companies by market value and now outspend Wall Street two to one on lobbying efforts in Washington, DC. Indeed, the commodification of data over the past decade or so has caused public debate and hand-wringing to an extent. And the European Union (EU) has always been more sceptical of such big firms than the US. But it took until 2017 for the tide of public and political opinion to begin to truly turn.

The catalyst was US President Donald Trump’s election late last year. Claims that his victory was due to Russia ‘hacking’ the election via fake news disseminated on social networks arise more from political partisanship than logic. That said, the fact that substantial Russian interference took place is indisputable after US congressional hearings late this year. This has troubling implications for future democratic processes in the US, India and elsewhere.

The Russia angle in the wake of the election also caused a shift in perception across the political spectrum in the US—big tech’s most important battleground—that led to their market dominance being viewed with an increasingly jaundiced eye. This intersection of big tech’s market power, innovative energy and consumer benefit is the heart of the matter. Its market dominance is indisputable. Together, Google and Facebook control almost 70% of global digital advertising. From being an online book store two decades ago, Amazon now offers almost 400 million products. Its vertical and horizontal integration are unprecedented in the retail industry. In this, it’s following the big tech script—acquire companies with offerings that could be potentially disruptive, or outspend them into the ground.

There is no evidence yet that this is harming consumers when it comes to product offerings and price levels—quite the opposite. But the potential for monopolistic behaviour to the detriment of consumers and innovation is undeniable. This raises the question: Is the dominant Chicago School of antitrust theory, which focuses on those two factors in conventional markets, adequate for dealing with a tech sector that is far more liable to produce winner-take-all outcomes due to network effects? Until this year, political and public attitudes in the US and EU stood on opposite sides of the argument. Now, they are converging; there have been calls from credible political and academic quarters in the US for breaking up the big firms or regulating them as public utilities.

Their tax avoidance woes haven’t helped when it comes to public perception. Nor has Silicon Valley’s sexual harassment problem, which brought down Uber co-founder and CEO Travis Kalanick earlier this year. The fear of automation in developed economies seen against the backdrop of income inequality; the growing realization that technology and the spread of the internet are not panaceas that will disrupt inegalitarian socio-economic structures but may in some instances entrench them; the vexed question of data privacy; the struggle to find a solution for monitoring online speech without stifling it—they have all contributed to big tech’s image problem in 2017.

A flurry of EU rulings against the big tech firms this month means they are ending the year on a bad note. The EU’s top court has ruled that Uber must be regulated as a transportation service, not merely a platform, which raises the regulatory burden considerably. German and French regulators have taken Facebook to task for alleged misuse of user data, whereas Italian authorities have ordered Amazon to pay $118 million to end a tax evasion probe.

Similar challenges—antitrust, privacy and more—await big tech in 2018. Will the backlash stifle innovation and industry growth to the detriment of consumers? That seems unlikely in the immediate future; their troubles notwithstanding, they wield too much market and economic influence to succumb easily. But 2017 has made one thing clear: The tech sector’s ‘move fast and break things’ philosophy is increasingly unacceptable to governments and the public alike.

How should the big tech firms be regulated? Tell us at views@livemint.com