Opinion piece by Clark Parsons for the Financial Times
Financial Times print: No. 39,846 on July 30, 2018, p. 9 © The Financial Times LTD 2018
Source: IE.F
It is clear that some market-dominating tech companies cannot police themselves
With its landmark decision and €4.3bn fine against Google, the European Commission reached another milestone in its quest to rein in market-dominant internet platforms. The EU ruled against Google’s practice of using its Android mobile operating system to pre-bundle Google’s apps such as search and the Chrome browser, thus making it difficult for competing apps to reach potential customers.
Leading up to this decision, Google published ads in Europe profiling small apps providers who say they owe their success to Android. But Google is not the only big tech company now on alert: a recent Apple-funded study similarly tallies up the benefits of the app store and its revenue to European developers. The implied message is that innovative apps could only succeed if Google and Apple’s mobile operating systems and app stores remain untouched by regulators.
Google’s argument for Android boils down to the proposition that so-called “fragmentation” of the mobile operating system market would somehow be bad for app developers, and thus for consumers. But let’s get things straight: as three decades of IT history have shown, “fragmentation” equates to competition, in the sense that platforms compete with one another, and apps and services on those platforms compete with one another too. Competition is inherently a messy business, but it has shown itself invariably to lead to more innovation, better choices and lower prices.
Even within individual mobile operating systems, app developers have suffered from the existence of only two platforms and their practice of bundling their own comprehensive app suites. Platform owners can extract a huge portion of third-party app developers’ profits just for the privilege of being on an app store.
No one denies that there are benefits — efficiency and convenience — to having only two major mobile operating systems and standards. But with dominant market power comes the responsibility to remain neutral towards competitors which rely on that infrastructure.
There is now a recognition — on both sides of the Atlantic — that some market-dominating tech companies cannot police themselves or be expected to provide fair marketplaces for competing services on their own platforms. This is stifling competition and innovation.
As an American living in Europe, I had to get used to the idea that governmental bodies could actually safeguard competition. In the US we have long been programmed to equate “ regulation” with inefficiency or anti-business thinking. But the EU in recent decades has created stronger market economies via smart regulation that fosters competition and prevents the concentration of market power. The telecom sector is a great example. This pro-competition philosophy must now be extended to the digital realm.
Perhaps surprisingly, the European digital sector has welcomed the clear message sent by the commission in favour of competition. If Europe is going to become more successful in this realm, its own digital platforms and services, and especially its apps, need a chance to compete on a level playing field.
At a time when many of the bedrock institutions of the west are coming into question, it is reassuring to see the EU asserting itself so strongly in this area. Europe might currently lack the digital dynamism and scaling power of the US or China. But it does not lack the courage to apply its own laws regardless of the political context and take a stand for free markets.
The Commission’s pragmatic decision against Android will benefit companies and consumers alike by enabling more competition. May the best apps win: Vive la fragmentation.