Tuesday 24 April 2018

Competition regulations failing the age of data

'Coming up with competition regulations to govern the digital age will be fraught with difficulties and conundrums'. Stock photo: Depositphotos
'Coming up with competition regulations to govern the digital age will be fraught with difficulties and conundrums'. Stock photo: Depositphotos

John McGee

The history of competition law can be traced back to Roman times, when various emperors attempted to regulate the markets for important day-to-day staples like grain. Diocletian, the 51st emperor of Rome, was the first to get the ball rolling when he introduced an edict which set out the maximum price traders could charge for corn. Anyone caught violating it faced the death penalty.

Thankfully, competition and anti-trust laws around the world have evolved since then.

But from Roman times, right through to the Middle Ages and the early 18th and 19th centuries, governments around the world attempted to regulate competitive markets for goods and services to protect their citizens, foster competition and create a fair and equitable environment in which businesses could grow and compete fairly against each other.

Legal eagles point to the Sherman Act of 1890 and the Clayton Act of 1914 in the USA as two of the key foundation pillars for much of the anti-trust and competition law that subsequently evolved over the next 100 years.

Three years before the Clayton Act was introduced, the United States Supreme Court ruled that Standard Oil - the giant US oil producing, refining, transportation and marketing company founded by JD Rockefeller in 1870 - was a de facto illegal monopoly and ordered it to be broken up.

At the time, Standard Oil dominated the growing market for oil products and was accused by competitors of using underhand tactics, including aggressive pricing, to destroy competition and gain unfair market advantage at a time when the oil industry was hurtling towards the boom times and just as the growing automobile industry started to crank up production.

Such was Standard's coast-to-coast grip on the market that many companies found themselves having to deal with it at some part of the supply chain it had cleverly created.

This was not good for the economy, the Supreme Court opined.

The subsequent break-up led to the creation of a number of independent "baby Standards" some of which later morphed into global giants in their own right, including the likes of ExxonMobil and Chevron. Because of this, some economists and legal eagles have argued that the break-up of the company was doomed to fail from the start. Standard Oil is, perhaps, one of the better-known case-studies that competition experts around the world point to when it comes to anti-trust regulations working for the benefit of both consumers and businesses.

It also highlights the importance of competition regulations in any functioning, developed and competitive marketplace.

So, what has any of this got to do with the media industry?

Much of the competition and anti-trust legislation that followed the Clayton Act in various jurisdictions around the world, including the EU, was framed to deal with issues that arose in the industrial world of physical goods and services and with local and national marketplaces and consumers in mind.

In other words, it was never framed to deal with the many complex issues that have been spawned by the digital age.

In the digital age, data is the new oil.

And whether we like it or not, we are living in a data-driven economy and one which is set to increase exponentially over the coming years as the so-called Internet of Things and artificial intelligence pass into the mainstream.

Now, as we find ourselves scrolling, searching and buying on a daily basis, data underpins many of our actions. It's the oil that keeps giant digital machines like Facebook, Google, Apple and Amazon ticking over and it's the secret sauce that keeps their coffers overflowing.

While it might seem somewhat churlish to suggest that these companies own the internet, they are well on their way to cornering the market when it comes to data and this confers upon them enormous power (and revenues) while at the same time making it increasingly difficult for competitors - including large and small media companies - to compete against them.

It's an argument that's going to be raised with remarkable frequency in the future as media companies - and possibly companies from other sectors - face the imminent prospect of consolidation within the sector.

In the past, competition regulators have struggled to take account of the wider forces at play in the global and, indeed the local, media industry, mainly because they are operating within the confines of existing legislation.

Coming up with competition regulations to govern the digital age will be fraught with difficulties and conundrums and it may prove impossible to establish a level playing pitch, never mind any fair and equitable ground-rules.

Therein lies the challenge for policy makers around the world. The alternative is four or five global giants dominating entire sectors, not just globally, but locally too. And this is not in the best interests of competition and society at large.

Sunday Indo Business

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