Can regulators protect travel companies from the growth of the technopoly?
By cameron in Uncategorized
In a report entitled Technopoly, experts from the think tank ResPublica call on officials in the UK and Europe to stem what they describe as the growing digital monopolies of technology companies such as Facebook and Google.
They summarize their key concerns as follows:
- Current competition law is not fit for purpose, regulators follow pro-monopoly standards
- Consumer choice and innovation should be the new norm, not just consumer welfare
- Competition law needs to stop privileging big business and focus on the benefits of small businesses and market structure
- Regulators should strip the wrongdoer of their profits for their wrongdoing
- Social media is media, and should be regulated in the same way as traditional media
- Current merger controls should be changed to meet challenges of the digital age
- Current UK inaction on merger controls is unsustainable
These companies, they say, stifle innovation and competition by their size, the protected status of their technology patents, and their ability to purchase any competitors that are in the way while stifling the innovations of their acquisitions, applying “anticompetitive ‘kill the crib’ strategies”.
Hidden (and not so hidden) costs
A shrinking list of companies holds a considerable share of consumers’ personal data, in turn controlling what messages they receive from media companies and advertisers.
The authors write:
“People think Big Tech equals free products – such as Facebook and Google’s services that come at no cost to the consumer. But the consumer does pay, not just with the unacknowledged surrender of their own data, but through other hidden costs.
Primarily, with big tech, consumers pay for the choices and services forgone, for the innovation and products lost to market dominance.
The major tech players simply pursue “kill in the crib” strategies, buying-out the most viable competitors in their infancy — before they can grow to a size and scale that would challenge the incumbents.
The net loss is the denial of all the other multiple centers of innovation and development whose products will never see the light of day. Market concentration, as we will argue, markedly reduces innovation and dramatically narrows the options for consumers.”
Tim Cowen, EU competition law expert and co-author of the report said:
“Until the Cambridge Analytica scandal, few in power showed any concern. Even fewer understood the business model, which saw affiliates profiteering from the large scale harvesting and mining of personal data.”
Phillip Blond, director of ResPublica added:
“The dominance of the big players is crowding out innovation and leading to higher consumer prices. This is widely seen in price mark ups that have increased dramatically in recent years. Research in the US by De Loecker and Eeckhout found that these margins have more than trebled from 18 per cent in 1980 to 67 per cent in 2014. It is reasonable to assume the picture in the UK and Europe is broadly similar.”
The authors argue that the impact Facebook and Google have had on media, because of their overwhelming control of ad spending and search results, has been damaging to consumers and society.
“If such players can accumulate control of visibility, they can threaten diversity of supply. Weakening of the press is the first step toward weakening of viewpoints, and it undermines democracy. Visibility is everything online. Control over what is seen or found determines what people see, read and, ultimately shapes what they think.”
The technopoly and travel
The dominance of these tech players in advertising has also impacted the travel space. While prominent travel search companies and OTAs face the creeping incursion of these technology giants into their basic business model – search and reviews – the travel companies also spend billions advertising on Google and Facebook, effectively relying on and financing a growing rival.
This considerable advertising revenue might be a deterrent for Google and Facebook to insinuate themselves too closely between the consumer and the travel company, but the experience of media companies might serve as a lesson. Despite traditional media supplying the basic product–reporting and storytelling–the search and promotion algorithms of Google and Facebook have suppressed some narratives while boosting others, putting some publishers on the brink of collapse and leading to fewer perspectives and in some cases the spreading of disinformation.
The authors also warn that the terms and conditions that Facebook and Google impose on consumers pose a threat:
“Success has to be based on the merit of products and services, based on business insight and innovation. Products should be designed around consumer needs. To be sure that they are designed to meet those needs consumers need to be in a position of bargaining power – otherwise the supplier can impose terms on the consumer. In circumstances where there is no choice but to ‘click and accept’ the terms of the relationship are dictated to and not agreed by the consumer.”
Responding to a question on whether Google is causing problems or giving everyone opportunities in the travel sector, industry veteran Rod Cuthbert, former CEO of Viator and now executive chairman of Rome2Rio, said:
“I’m surprised this audience saw Google as less of a threat. Their presence is a reality. What’s emerged is an unfair playing field. You have a company that is richer than all of us, has more people than all of us, has more data than all of us, and can use the data to increase its position of power and profit. It’s happening and people need to be aware of that threat.
“In the Google Hotels product consumers can book directly with the hotel and use Google Pay to complete their booking. There’s no opportunity in that transaction for third parties to add value: it’s all about Google. The EC might do something about it; let’s hope the Commissioner gets a bee in her bonnet about travel.”
The authors of Technopoly say that mechanisms already exist to stem the market dominance of the big technology platforms and urge regulators to apply regulations appropriately to fit the technology space. They make a number of detailed proposals to address each one of the areas of concern that they identified.
However, some of the regulations the authors call for may ultimately also affect travel metasearch and OTA companies directly. For example, with data protection.
“Protecting personal data is vital. However, controlling the use of data presupposes ownership and clearly establishing and protecting ownership of data is a necessary first step for the UK.
In the face of monopoly or market power, where lack of choice means that data ownership is meaningless, we consider that safeguards need to be put in place to redress the balance of bargaining power to ensure that users have real sovereignty over their data.
This may require regulation. It could be achieved by enforcing the existing laws against abuse of dominance.
“We also consider that advertising markets in general, and online advertising markets in particular, exhibit certain features that allow the interests of advertising customers (such as the merchants and their online platform intermediaries) to become divorced from the interests of their users, the end consumers. Users can become assets of the major platforms.
To address this issue, we consider that data ownership is more clearly established in law, so that end users can exert the primary driving force in the operation of competitive markets.”
Travel industry readiness for the EU’s General Data Protection Regulation (GDPR) can serve as an example of what comes next if more governments adopt these protections.
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