The European Commission (EC) is putting its foot down, and some of the tech world’s big hitters are in its crosshairs.
Following a mid-term review of its Digital Single Market strategy, the commission indicated in early May it could take action to tackle “unfair contractual clauses and trading practices” in the relationship between platform and business by the end of 2017.
While not naming any names, it is pretty obvious what “platforms” the commission is likely to target. Operating systems, app stores, search engines and other dominant platforms are all in the firing line.
Seemingly, the EC was propelled into action after a number of smaller European internet businesses, including music platforms Spotify and Deezer, said big internet platforms “can and do abuse their privileged position”, in a letter viewed by the UK’s Financial Times.
The EC said in its review “some online platforms” are indeed engaging in trading practices which are to the “potential detriment of professional users”.
This includes platforms removing (delisting) products and services without due notice, or without any effective possibility to contest the decision.
It also said the platforms may indeed favour their own services or discriminate between different suppliers and sellers, and highlighted a lack of transparency in search results.
Putting this all into a usable hypothetical scenario, Apple could be pushing its Apple Music offering by “discriminating” against a rival, for example music streaming service Spotify, on its app store.
The role of the gatekeepers
The EC’s planned intervention may lead to better conditions for these relatively smaller players, but it also raises an important debate around Apple and Google and their wider role on the internet in general.
Is it really their job to provide fair access to their dominant internet platforms, even if it means promoting the interests of a rival service?
Putting Apple and Google’s dominance into numbers, the companies together control more than 90 per cent of the world’s mobile operating systems, leaving little choice for smaller players but to bow down to whatever terms and conditions they set.
Other dominant companies in particular sectors have been highlighted by numerous reports, including Facebook, Amazon and TripAdvisor, as also being targets of possible EC scrutiny.
“The European Commission’s comments refer to the US tech giants of Google, Apple, Facebook and Amazon as gatekeepers of the tech industry, and that is absolutely true,” Vijay Michalik, industry analyst covering digital transformation at Frost & Sullivan, said.
Michalik explained the power dynamics of such tech giants have emerged “as a natural resolution of the internet’s development into a key battleground for services”, with the foundation of this centred in the “virtuous cycle of data”.
“The more data a platform accumulates from its users, the more it can improve its service and attract more users and engagement,” he said. “This however represents a serious barrier of entry for start-ups and gives the huge incumbents leverage to create unfair terms and stifle competition”.
There is no question, therefore, players like Apple and Google are in something of a privileged position.
However, plans to intervene over the issue could be somewhat drastic, and even premature, argues James Waterworth, VP of Europe at Computer & Communications Industry Assocation (CCIA).
CCIA is a tech lobby group representing numerous companies, including Facebook and Google, and spoke out against elements of the EC’s plans for a digital single market.
Waterworth told Mobile World Live the group was surprised to see the EC talk of possible action in this area: “given the very limited information on problems; information that has not been shared by the commission”.
“Firstly, we all need data to know if there are really many complaints,” he said, adding: “In a market economy, there are always complaints between trading partners, but that does not justify regulation in most cases. The commission must publish exact data on the problem types (if they exist) and absolute numbers.”
Waterworth also did not entirely back up the idea Apple and Google should be seen to operate in the fairest manner possible, given their dominance over the market, insisting the power of choice lies with the user.
“In a highly competitive and innovative market, with many free services, the biggest danger for companies is that platform users leave their platform and go to a competitor. If a company acts in a way that a user does not like, the user will simply switch.”
It will be interesting to see exactly what action the EC actually has planned, and whether it will introduce any concrete regulation by the end of the year.
Michalik believes while an interventionist approach will work in the short term, it will be new data and privacy platforms which will enable emerging platforms to compete in the future.
“These will grant emerging platforms the ability to compete by tapping into the same data networks and removing the friction, and data destruction implied by switching services.”
Waterworth, on the other hand, argues increasing the regulatory burden could “have the effect of entrenching the position of established players and make it harder for new competitors”.
“This should be avoided,” he warned.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.