Why is the ACCC backing off Big Tech crackdown?
AI increases the urgency of proper regulation. So why did the government defund and disband the competition watchdog’s world-leading team of digital markets experts?
Many articles concerning so called “big tech” can come across as anti-tech. But we can be pro-tech and also recognise that entrenched big tech oligopolies and the proper functioning of markets can be incompatible.
The big tech companies are constantly buying smaller and start-up companies both to gain skills and to avoid or kill future competition. They leverage their market power to self-preference their own products or services in other markets and they extract large economic rents. The up to 30 per cent app and adtech fees, for example, come at the expense of consumers and businesses.
The big tech companies are constantly buying smaller and start-up companies both to gain skills and to avoid or kill future competition.
In the ad tech market, Google is dominant on the supply side, on the demand side, and it effectively runs the market that brings this all together. This control of a market would not be allowed in financial markets.
With AI, there is no pretence of the lean startups toppling the fat incumbents. The old powers lurk at every layer of the AI stack. Cloud computing, – the essential infrastructure – is dominated by Amazon, Microsoft, and Google. The foremost AI models lie with OpenAI (bankrolled by Microsoft), Anthropic (funded by Amazon and Google), and Google itself.
ChatGPT has said that it seeks to meet all your digital needs. All apps would be accessible on their platform. You would no longer need to browse the internet, just go to this one source of information.
Who decides what is presented to you? Who decides what apps succeed? The potential for misinformation on steroids is enormous. Then think of the interest the government of the day has in what is presented. And think of the financial benefits companies can extract from the government of the day in return.
Economics and politics collide. The link is competition. You cannot have a free society without competition.
“We first need to recognise the failure of antitrust to deal with these issues, and that doing what we are doing now clearly will not work.”
So what to do? This question was discussed in Oxford recently by several ex-heads of competition agencies which I was privileged to attend. The aim of the gathering was to build the momentum for change given the threats to our economies and our democracies.
We first need to recognise the failure of antitrust to deal with these issues, and that doing what we are doing now clearly will not work.
We considered some basic principles. First, markets cannot remain free while conflicts of interest are allowed to fester – when a company can both own a platform and compete upon it. This principle already applies in other markets, when we do not allow transmission companies to own electricity generators.
Second, we must curb the cross-ownership and circular investments across the AI stack that echo the trusts of the Gilded Age. Third, we must prevent acquisitions that risk entrenching market power.
Fourth, we must act against exclusionary conduct that builds data moats and drowns innovation. Finally, we must broaden our antitrust lens beyond a narrow focus on prices. A strong competition policy must protect the process of competition.
To take these principles forward we need international cooperation from like-minded countries who can then operationalise these principles in their own ways.
Some could enforce them by antitrust agencies making clear statements and then taking stronger enforcement cases. Others could use their pro-competition regulation, for example the EU’s Digital Market’s Act or the UK’s Special Market Status regime. Others could rely on specific legislation.
In this context, it is worth mentioning that until recently the ACCC had one of the best teams of digital market experts in the world. The Government defunded this team and it has now disappeared. This is a severe loss to Australia.
And then we have Mr Trump’s threats to damage any country that seeks to regulate big tech. But consider what other countries would do if the only country making cars in the world insisted that they must be driven only on roads without speed limits?
If the US imposes huge restrictions on how governments must treat US tech players, perhaps some governments may decide that they need their own big tech service providers. The US actions in relation to TikTok could set a precedent.
Our economies urgently need an infusion of competition. Around the world, faith in market-based systems is eroding; not because markets have failed, but because large companies with market power have hollowed them out from within.
It does not have to be this way. Governments have the tools to act. These tools are not “red tape”. Competition is the lifeblood of innovation, opportunity, and democratic resilience.
This article was first published in The Australian Financial Review and is authored by Rod Sims, Enterprise Professor at the Melbourne Institute of Applied Economic and Social Research, Faculty of Business and Economics, University of Melbourne, and Chair of The Superpower Institute.