Over the coming few weeks, alongside the regular coverage of the Clark Center’s polls and other news, On Global Markets will be reporting on the discussions held at the Economic Experts Conference 9/10 October. Most of those sessions were held under the Chatham House Rule.
Big Tech is of increasing importance to the American economy. Since at least 2022, tech stocks have been the major driver of US markets, and investment by tech firms, or in tech products, has become an increasingly important prop to GDP growth. A session of the Clark Center’s Economic Experts Conference was devoted to the economics of Big Tech, covering competition policy and regulation, artificial intelligence and data protection, privacy, and potential consumer harms. Today’s column will deal with the fascinating discussion around questions of regulation and competition.
Over the last few years, a number of polls of the Clark Center’s US and European Experts Panels have touched on questions around regulation and anti-trust policy as it pertains to Big Tech and, interestingly enough, highlighted some cross-Atlantic differences in view.
The US and European panels were asked, in September 2023, whether “constraints on the anti-competitive behavior of dominant firms in the digital economy can in principle be effectively implemented using the existing tools of competition policy and antitrust enforcement”? Weighed by confidence, 46% of US respondents either strongly agreed or agreed, with 30% expressing uncertainty. That can be read as a relatively optimistic view in favour of the ability of existing tools to shape behaviour. By contrast, 51% of European respondents expressed uncertainty, with 24% agreeing and 25% disagreeing – a notably less conclusive result.
There was broader cross-Atlantic agreement, although still a noteworthy gap, on whether “The nature of the market dominance of technology giants in the digital economy warrants either the imposition of some kind of regulation or a fundamental change in antitrust policy.” This time around, 53% of American panelists either agreed or strongly agreed, while 88% of European panelists did.
In general, American experts have more faith in the existing system of antitrust and regulation than Europeans, but both agree that serious reform is required.
There is, as one participant noted, a long history of worrying about the effectiveness of US antitrust policy. Looking back at the landmark cases of the last few decades, such as IBM (which began in the late 1960s), AT&T (dating back to the late 1970s), and Microsoft (which began in the late 1990s), the picture is very mixed.
One thing all of these cases had in common was that they took years to play out. And in markets where technological change and innovation is occurring rapidly, that presents a major handicap on effective policy. The example was given of the recent case on Google search, where – in the words of the judge – the emergence of generative AI during the litigation has changed the nature of what was under discussion. As the judge put it, “unlike the typical case where the court’s job is to resolve a dispute based on historic facts, here the court is asked to gaze into a crystal ball and look to the future. Not exactly a judge’s forte.”
One participant had little sympathy for the judge in question, arguing that remedies in such cases are always about the future, even if the uncertain path of AI development does make the future especially murky at the moment. Although most participants agreed that major antitrust cases tend to move too slowly. This, it was widely agreed, is partially a question of the resources available to the anti-trust authorities and partially about the process of litigation itself. It was suggested by one participant that the system might be helped if judges had permanent access to court-appointed technology experts, especially in cases dealing with the edges of the technological frontier.
There was a wide-ranging discussion on Europe’s Digital Economy Act (DMA), an attempt by the European Union to move towards ex ante regulation on Big Tech platforms. Both the European and US Expert Panels have previously been polled on this. Under this legislation, 24 business lines or products of seven major firms – the majority of them American-based – have been designated as gatekeepers and subjected to heavy regulation, with a long list of conduct restrictions and threats of heavy fines (up to 10% of global revenue) for breaches. Predictably enough, Big Tech has argued that such rules will harm innovation and hurt consumers, especially in Europe.
Asked whether “constraints on the anti-competitive behavior of dominant firms in the digital economy would be more effectively implemented than at present with ex-ante regulation such as Europe’s Digital Markets Act and other forms of public utility regulation?”, 42% of US Experts Panel respondents either agreed or strongly agreed compared to 63% of European Panel respondents (as ever, weighted by confidence).
For one participant, the DMA approach reassembled that of the United States Telecommunications Act 1996 – a piece of legislation not fondly remembered by many economists, in which an attempt to move towards ex ante regulation degenerated into many long cases of litigation, and technological change rendered many of the provisions obsolete quite quickly.
Another participant, though, saw potential merit in the approach whilst acknowledging that it would take time – a few cases of litigation – for the system to become effective.
Brazil, Australia, Japan, and South Korea were all, it was noted, moving towards DMA-type legislation, something seen as very unlikely in the United States. That might, it was speculated, lead to something of a “Brussels effect”, whereby US firms are reluctant to run differing versions of the same product and so European rules have an outsized global impact.
Of course, in reality, this is tricky to separate from the kind of geopolitical factors discussed in previous sessions. Europe’s need to keep the United States involved in the war in Ukraine may mean that US tech firms get an easier ride than they otherwise would have. It was noted that the first enforcement actions from the DMA were already delayed in order to avoid the suspicion that they represented a form of retaliation for the Liberation Day tariffs.
As with so many other parts of the economy, it is increasingly tricky to strip out the politics.
