Why governments are restricting Facebook and Google

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Since 2019, leading IT companies have been exposed to numerous threats in the form of regulatory initiatives and litigation initiated by government agencies. These challenges challenge their business models and require significant changes in their approaches to compliance. In the face of increasing government scrutiny, companies must adapt to new requirements to maintain their competitiveness and minimize risks.

Restrictions and corporate attacks are observed not only in the US but also in Europe, both at the European Union level and within national governments. Similar trends are being observed in Australia, India, and other countries. It seems that states are acting not as independent governments, but as representatives of a single biological species that senses a threat and begins to actively confront competitors.

Skillbox Media explains the reasons for this phenomenon.

• What do Trump's victory and mosque shootings have in common?
• States are tightening the screws.
• The battle for the main raw material of the digital age.
• The danger from Big Tech that we see is just the tip of the iceberg.

Experts, including lawyers, political scientists, and futurists, have been warning for over a decade about the risks associated with the unlimited growth of digital corporations. In 2012, the European Union passed the first law strictly regulating the collection of user data. This led to the appearance of cookie notifications when visiting websites. In the mid-2010s, major tech companies such as Facebook and Google began to face regular antitrust fines. These measures highlight the need to regulate digital giants and protect user rights in the face of rapidly evolving technologies.

However, many countries, including the United States, home to major tech giants, have until recently used outdated regulatory models that are not up to par with the digital age. This creates barriers to innovation and technological development, and makes it difficult to adapt to the rapidly changing IT landscape. It is important to update regulatory approaches to reflect modern realities and facilitate the growth of the digital economy.

For decades, antitrust law in the United States has focused on price and consumer welfare, notes NYT technology columnist David Straitfield. However, if a product is provided for free, then the question arises whether there is a problem. This circumstance has allowed companies such as Amazon, Facebook, and Google to offer their services either at extremely low prices or for free. As a result, they were able to achieve significant financial success and expand their market influence.

Until 2018, US antitrust authorities often turned a blind eye to the monopolistic practices of large tech companies like Big Tech, and in some cases even actively supported them.

In 2012, Amazon achieved a de facto monopoly on the US e-book market with its Kindle device. The company set a fixed price for digital editions of $9.99, which could be considered dumping, since this price was often lower than the cost of the book. In response to Amazon's actions, major publishers teamed up with Apple to raise e-book prices to $12.99 for iPad users. However, instead of taking action against Amazon, the US Antitrust Authority supported the company, accusing Apple and publishers of conspiring to create a cartel. This situation highlights the complex relationship between tech giants and traditional publishers in the context of pricing policies in the e-book market.

In 2018, the world woke up to the threats posed by the influence of big tech companies, or Big Tech, after American journalists exposed information about the British data analytics company Cambridge Analytica. It used the personal data of social media users to develop campaign strategies for election campaigns around the world. The case became a turning point, highlighting the importance of privacy and ethical standards in the tech industry. Since then, the public has begun to more closely scrutinize the actions of major players in the digital space and their impact on democratic processes.

A Cambridge University professor developed a psychological testing app that collected data from users' accounts. This practice violated Facebook's terms of service, but a vulnerability in the platform allowed the data collection.

In 2016, Facebook discovered the data collection from users and demanded that Cambridge Analytica remove the data. Despite the company's assurances that it had destroyed the information, it continued to use the collected data.

The analytics center created approximately 86 million digital profiles of social media users, primarily Americans. This data was used in Donald Trump's election campaign, particularly for targeted emails aimed at undecided voters. This underscores the importance of user data analysis in modern political campaigns and its impact on elections.

On March 15, 2019, a tragedy occurred in the New Zealand city of Christchurch that shocked the entire world. Twenty-eight-year-old terrorist Brenton Harrison carried out an attack on two mosques, killing 51 people and injuring 40. An investigation revealed that the attack was livestreamed on a Facebook page for approximately 18 minutes. Footage of the resulting violence quickly spread online through platforms such as YouTube and Reddit. Following this horrific tragedy, many Western politicians criticized Facebook and YouTube for their insufficient efforts to combat extremism and called for stricter content regulations on social media. Following these pivotal events, policymakers in the US and elsewhere have finally recognized the threat posed by the poorly regulated Big Tech sector. Citizens have also begun to recognize the problem, raising concerns about the security of their data and the destructive influence of social media on the spread of terrorism. As society grows increasingly dependent on technology, the importance of strict regulation becomes clear, requiring proactive action from government agencies.

State attacks on IT corporations have gained legitimacy and public support. Events such as the Cambridge Analytica scandal and the Christchurch tragedy have significantly undermined trust in large tech companies. Arguments from Big Tech lobbyists that regulation could negatively impact the market economy are perceived as unlikely. Amid growing concerns about data privacy and the impact of technology on society, demands for stricter oversight are becoming increasingly pressing.

Several restrictive initiatives have been adopted over the past year. These measures are aimed at regulating various areas of activity and can significantly impact the economic and social situation. Each of these initiatives has its own goals and consequences, which require careful analysis and assessment. It is important to monitor these changes to be prepared for potential challenges and adapt to new conditions.

From October to December 2020, the US Department of Justice and attorneys general in most states filed three antitrust lawsuits against Google. These lawsuits are aimed at investigating possible antitrust violations related to Google's dominant position in the search engine and digital advertising markets. These actions by authorities highlight growing concerns about the influence of large tech companies on competition and consumer choice.

The corporation is accused of monopolistic dominance in the online advertising market and inflated prices. It is also accused of entering into deals with other companies, including major computer and smartphone makers, to promote its services. These actions are raising concerns among competitors and users who demand fair competition and transparency in the market.

According to the charges, Google pays Apple between $8 and $12 billion annually to host its search engine in the Safari browser. Another lawsuit alleges that Google promotes its services on its platforms to the detriment of competitors. For example, when searching for "translator" on Google, Google Translate appears as the first result. The American judicial system views this as evidence of monopoly, while company representatives argue that such practices are legal and natural.

In December 2020, the European Commission presented a draft version of a package of bills aimed at protecting the market and society from the negative impact of large tech companies. The strictest measures will be applied to "gatekeeper companies" whose services are used by more than 45 million users. This list will undoubtedly include such giants as Facebook, Google, Apple, Amazon, Netflix, Booking.com, Spotify, and eBay. Formal discussions on the bills are just beginning, and they are subject to significant changes, with their final adoption potentially taking more than a year. Key aspects of these bills include regulating algorithms, protecting user rights, ensuring transparency in the activities of IT companies, and combating monopolization.

• gatekeepers will be required to provide the state with access to all internal data;
• they will be prohibited from giving their products preferential treatment in advertising - for example, Google will not have the right to promote its cloud platform Stadia in the search engine;
• they will be prohibited from merging accounts from different services - for example, automatically signing in to a YouTube account when signing in to a Gmail account. This trick also allows for the collection of user data.

In February 2021, the Australian Parliament passed the News Code Bill, which requires Google and Facebook to pay creators of news content posted on their platforms. Lawmakers believe that this initiative will allow large corporations with significant profits to support local media, which have suffered greatly from their market dominance. The law aims to restore justice in the media industry and ensure a sustainable future for news organizations in the digital economy.

The law has caused a storm of discontent among large corporations. Facebook representatives announced their intention to block Australian users' access to news content, while Google warned of the possibility of suspending its search engine in Australia. In response to the protests, the government decided to make concessions and gave companies and media outlets two months to negotiate. If the parties fail to reach an agreement within the specified timeframe, the state will intervene and propose its own terms.

Meanwhile, the Indian government implemented new rules regarding online content control. Services are now required to remove "illegal" content upon government request and provide the ability to monitor user communications. These measures are aimed at strengthening online security and combating the spread of prohibited information.

The recent regulation has sparked widespread outcry among human rights activists and critics of the Indian government, as it violates the end-to-end encryption used by most popular messaging apps. In May, the new regulation came into effect, and WhatsApp filed a lawsuit against the Indian government, arguing that the requirement to provide access to conversations violates the right to privacy. In response, Indian authorities pointed out that similar laws were passed in countries such as the UK, US, Australia, New Zealand, and Canada between 2018 and 2020. At the moment, the court has not yet decided on the lawsuit, and the case may take a considerable amount of time to resolve.

In early June 2021, UK and European antitrust authorities launched investigations into Facebook. The company is suspected of creating competitive advantages for its services, such as Facebook Marketplace and Facebook Dating, by exploiting its monopoly position in the market. Shortly thereafter, the French antitrust agency imposed a €220 million fine on Google for abuse of market power in online advertising. These events highlight the growing scrutiny of the antitrust practices of large tech companies and their influence on the market.

In late June 2021, a new bill was introduced in Australia that requires companies to closely monitor content. Under this legislation, companies are required to remove any calls to violence, threats, and pornography, and to report violators to the authorities. Furthermore, users may face penalties for online harassment, including the possibility of up to five years in prison. The law aims to improve online security and protect users from harmful content.

A dedicated government official will oversee enforcement. Previously, Facebook, Google, and Twitter removed objectionable content in accordance with their internal policies. However, with the new law, private censorship will effectively be replaced by government censorship. This will lead to changes in approaches to content moderation and the platforms' liability for user posts.

Meanwhile, a group of lawmakers introduced a package of antitrust bills in the US Congress aimed at curbing the influence of IT companies. This package contains radical proposals that propose significant changes to the regulation of large tech corporations. These initiatives could fundamentally alter the competitive landscape in the tech market and impact the business models of many companies. Lawmakers are seeking to ensure fairer competition and consumer protection in the face of the growing dominance of tech giants.

• Completely and permanently ban digital corporations from promoting their services on their own platforms.
• Prohibit them from acquiring competitors if this would strengthen their monopolistic position in the market. Under this provision, Facebook** would not be able to buy Instagram* and WhatsApp.
• Prohibit them from owning businesses that cause a conflict of interest. For example, Amazon will have to get rid of the Amazon Basics brand, which produces tools and household goods sold on the online platform along with similar products from other companies.

There are serious reasons to believe that the current measures are only the beginning of a long-term and large-scale war against large tech companies. For example, US Democratic Senator Elizabeth Warren advocates breaking up giants such as Facebook, Google, and Amazon into several smaller, more competitive companies. This proposal highlights growing concerns about monopolistic practices and a lack of competition in the digital space, which can negatively impact consumers and small businesses. Such steps could lead to a healthier market environment conducive to innovation and improved service quality.

Most restrictive measures are aimed at protecting markets from the monopoly of large tech companies. These measures help create a competitive environment, fostering innovation and improving the quality of services for users. Protection from the dominance of Big Tech giants promotes a more balanced development of all market participants.

The fight against monopolies is an important aspect of the market economy and capitalism. This is not an anti-market policy, but, on the contrary, a traditional approach that allows the state to maintain a healthy competitive environment. Monopolies can negatively impact the market, leading to higher prices and lower service quality. Effective antitrust policy promotes competition, which in turn improves conditions for consumers and entrepreneurs. Maintaining a competitive market is the key to sustainable economic growth and innovation.

Market mechanisms are built on the principles of competition between producers. When one company displaces all competitors in its niche and becomes a monopolist, it gains the ability to set prices for its goods independently, which can lead to a decrease in product quality or a decrease in production volumes. Adam Smith, one of the first theorists of market economics, actively advocated for laws protecting competition and preventing the formation of monopolies. Such measures are important for maintaining a healthy market climate and protecting the interests of consumers. Competition promotes innovation, improved quality, and lower prices, which ultimately benefits the economy as a whole.

Google has dominated the search engine market for many years, processing almost 90% of all queries from various devices. In addition, YouTube, which is part of Google, is the largest video hosting site in the world, where most video content is uploaded and used to view it.

Facebook, along with its Instagram and WhatsApp subsidiaries, are leaders in the social media and messaging space. Their main competitors are primarily national platforms such as Russia's VKontakte and China's WeChat. Amazon, meanwhile, maintains its leadership in the global e-commerce market, with monthly visits to its website comparable to the combined total of the ten largest companies in the segment. These factors underscore the dominance of Facebook and Amazon in their respective fields and their influence on the global digital economy.

The vast majority of mobile apps are downloaded to the Google Play and App Stores. These platforms do not compete directly with each other, as user choice often depends on smartphone and operating system preferences, rather than a specific app store. This creates conditions under which they can set high prices.

A striking example of monopolistic behavior is Google in the online advertising market. Since acquiring DoubleClick in 2007, Google has dominated the targeted advertising industry. According to a lawsuit filed by sixteen US states, Google profits from advertisers three times: first, by acting as an intermediary for sellers of advertising space, second, by acting as an intermediary for advertisers, and third, by displaying ads to end users. This behavior raises important questions about competition and fairness in the online advertising market.

US prosecutors allege that Google's actions have led to an unreasonable increase in the price of online advertising. This increase has negatively affected not only manufacturers but also all Americans, since rising advertising costs lead to an increase in the market price of goods.

Corporate representatives respond to accusations of monopoly by pointing out that their key services, such as the Google search engine and the Facebook social network, are provided to users free of charge. This means that traditional anti-monopoly approaches are inapplicable in this context, and market mechanisms remain intact. However, it's important to understand that even free services can impact competition and consumer choice, which requires deeper analysis and possible adjustments to antitrust policy.

Large tech companies like Google and Facebook not only offer their services to users but also actively collect extensive data about them. This data represents a valuable resource that, with the exception of minor technical and operational expenses, is effectively obtained at no cost to the companies. Collecting information about users allows these giants to improve their services, target advertising and increase their profits.

Some researchers, in particular the British political scientist and economic theorist Nick Srnicek argues that data is the fundamental resource of the modern economic order. Only high-tech companies that operate on the platform principle—the infrastructure that defines the framework for user interaction—can collect data. This puts traditional businesses at a disadvantage. Platform companies, with access to massive amounts of data, can more effectively adapt to the market and offer users personalized services, making them competitive in the digital economy.

Google, one of the leading search engines, extracts a significant amount of valuable information from analyzing user search queries, allowing it to improve search results. Uber, the taxi platform, receives data on traffic congestion and the actions of both drivers and passengers, which helps optimize routes and improve service quality. Facebook, the social network, offers extensive capabilities for analyzing private user interactions, allowing it to better understand their needs and preferences. All of these platforms demonstrate how data can be used to improve user experiences and increase service efficiency.

Large tech companies aren't monopolists in their fields, but Google, Facebook, Amazon, and Apple do hold a significant market share in data processing. Their business models provide them with certain advantages. For example, the more friends you have on a social network, the more motivated you are to join, as Srnicek notes. Increasing the number of users on a platform allows for the collection of more data, which, in turn, fuels the continued growth of these large companies. Thus, their business model provides them with sustainable and continuous growth in a competitive environment.