Antitrust regulators face vibrant competition—with each other

By Ludwig Siegele: US technology editor, The Economist, San Francisco

Feeling confused? It’s not your fault. Regulators around the world have launched a bewildering number of antitrust lawsuits and investigations against the big tech firms: Amazon, Apple, Facebook (now known as Meta) and Google. Each focuses on a different part of the conglomerate, from Apple’s App Store to Google’s advertising data. Scarcely a day passes without an existing case making headlines or a new one popping up.

That is unlikely to change in 2022. But instead of trying to make sense of this ever-changing legal smorgasbord, it is more edifying to follow what lawmakers are up to. While lawsuits drag on (and often end with not much to show for all the effort), 2022 will be the year when the world’s parliaments and regulators start to pass substantial rules to govern the tech industry. It will therefore be possible to guess which country (or region) might develop the world’s best competition framework.

In early 2021 it seemed that the European Union would win, hands down. Its executive branch, the European Commission, had just introduced the Digital Markets Act (DMA), the first law aimed at regulating big tech “ex ante”—that is, constraining firms’ behaviour upfront, rather than punishing them after the fact with antitrust cases. The idea is to prohibit the gatekeepers of important digital markets, such as apps and online search, from engaging in unfair practices, such as discriminating against rivals that use their platforms.

Yet lately experts have grown less enthusiastic about the DMA, which the European Parliament may vote on in 2022, says Tommaso Valletti, a former chief economist at the commission, now at Imperial College London. The main criticism is that the DMA applies the same rules to all tech titans despite the fact that their businesses, and their competition problems, differ.

The idea is to prohibit the gatekeepers of important digital markets from engaging in unfair practices

Other governments have caught up and in some ways overtaken the EU. For starters, there is China, which surprised the world in 2021 by seriously tightening competition rules for its internet giants. As in other policy fields, authorities in Beijing have taken more than one page from the EU’s book. Yet enforcement comes with Chinese characteristics. Firms are asked for swift “self-rectification”. And it is not clear if they have any official recourse if they feel unfairly treated.

China’s crackdown makes America look even further behind: although a regulatory and cultural “techlash” has raged for years now, the results have been meagre. That may change in 2022. As with antitrust lawsuits, a confusing number of tech bills have been proposed in Congress: the House of Representatives has moved forward with half a dozen. Some Republicans, who claim that the big platforms want to censor them, may yet team up with Democrats to pass DMA-like legislation.

There are two other candidates to be the leading tech regulator. One, somewhat surprisingly, is Germany. Andreas Mundt, who heads the country’s Federal Cartel Office (FCO), has turned his agency into a pioneer of tech regulation, in particular by going after Facebook’s data-harvesting practices. A new competition law allows the FCO to prohibit firms deemed of “paramount significance for competition across markets” from engaging in anti-competitive practices. This approach has the flexibility to cope with tech giants in different markets and their efforts to evade restrictions (though it is unclear quite how this will align with the EU’s DMA).

Yet it is Britain that appears to have the best setup so far, though it is not fully implemented. Its Competition and Markets Authority (CMA) now has a Digital Markets Unit (DMU). The government is working on new regulation, to be passed in 2022, that would empower the DMU, like Germany’s FCO, to give tech firms “strategic market status” and require them to follow stricter rules.

The main difference is that the CMA, even more than the FCO, has invested in relevant resources. Its researchers have published some of the best studies of the market for digital advertising. The CMA also boasts a Data, Technology and Analytics team, which consistently recruits data scientists in order to close the wide knowledge gap between tech titans and their regulators.

Even so, says William Kovacic, an antitrust veteran who now teaches at George Washington University, the architects of all these regulatory setups would be the first to admit that they are still experiments which could go wrong. Britain’s dmu could be politicised or captured by the industry, as has happened elsewhere. So the contest to be the best regulator in tech is as yet undecided, and highly competitive. It is good to see competition regulators practising what they preach.

Ludwig Siegele: US technology editor, The Economist, San Francisco■

This article appeared in the Business section of the print edition of The World Ahead 2022 under the headline “Race of the regulators”