By: Charlotte Slaiman (ProMarket)
Data is everything to a digital platform. It is the lifeblood, the currency, and the fuel that drives Big Tech and many of the products these companies offer. Perhaps most importantly, data is a key component that platforms use to maintain their gatekeeper power. This should be a dynamic industry where innovation can flourish, but because of the hands-off approach policymakers have taken in the past, new disruptive innovators have not had a fair shot. Until we address that power, Big Tech will continue picking winners and losers in digital markets.
Gatekeeper power is at the root of the competition problems Big Tech presents. Expert economists and antitrust professors, policymakers here in the US and abroad, and advocates the world over have identified gatekeeper power—sometimes “bottleneck power,” or “strategic market status”—as the power that dominant digital platforms have over other businesses’ ability to reach their customers. As a result, these dominant digital gatekeepers also serve as the primary access point for key consumer data. These gatekeepers get to determine who can play the game in which they also compete. They have the incentive and ability to pick themselves as the winners of this game and pick potential competitive threats as the losers. These same gatekeepers can wield their superior access to data as a cudgel to ensure their gates remain closed—and they stay on top. We can’t expect gatekeepers to give up their power just because it’s the right thing to do. We need Congress to act to break open the gates and promote a competitive market.
Digital gatekeepers benefit from a triumvirate of market characteristics—network effects, economies of scope and scale, and the ability to control the choice architecture that influences user behavior. We see network effects when users naturally flock to the most popular services as their utility from a service is directly related to how many other people use it. The fact that most of your friends are on Facebook’s social network is probably what convinced you to join Facebook in the first place and what keeps you there now. The inherent economies of scope and scale in Big Tech’s products also turbocharge gatekeeper growth. It can be difficult for new platforms to compete with dominant ones, yet once a new platform gets going, each additional user results in negligible costs for the platform and exponential benefits in terms of additional data. Finally, gatekeepers have complete control over the user interface—what users see when they access the platform—and can use that interface to push them towards certain choices…