Why regulating Big Tech is often pointless

Why regulating Big Tech is often pointless

Mumbai: There are moves afoot to regulate Big Tech in India along the lines of what the EU is doing, and the most recent developments in the US where Apple was sued for ‘abusing’ its dominant position. The un-funny thing about technology regulations is that it has a long history of failure. Despite that, governments persist with it. For all practical purposes, most of it is mere optics.

(Representative Photo)

That said, the ministry of corporate affairs (MCA) released a draft of the Digital Competition Bill to identify anti-competitive practices of tech companies last month. It is open for comments until April 15. Without going into the technicalities, those who fit the framework are Big Tech companies operating from India.

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What makes this interesting is that the US has also ratcheted up antitrust scrutiny and enforcement actions against Apple. This is in line with its actions against Google, Amazon and Meta. The sum and substance of their arguments have been that these companies have gotten too big, are a threat to start-ups in the ecosystem, and must be broken up. Let’s call this the ‘Lina Khan School of Thought’, which now dominates the Joe Biden administration. Khan has a reputation for being a formidable lawyer and is full-time faculty at Columbia Law School, from where she is on leave to serve as an advisor to the US government.

But reputations do not change history. Consider the landmark antitrust case against Microsoft in the late 1990s. At the time, Microsoft was depicted as an unstoppable monopoly. After a lengthy legal saga, the federal government’s touted “solution” was merely subjecting Microsoft to a series of technical restrictions and oversight.

Microsoft continued growing and cemented its dominance in computer operating systems and productivity software. Microsoft’s hegemony finally got disrupted by an upstart, then called Google. It had pioneered a game-changing technology, which was a powerful engine. Since then, it has gone on to challenge Microsoft’s core businesses, such as the Office Suite it sells to retail customers by offering its own solutions, including Gmail, G Docs, Google Sheets and all else that Microsoft has to offer. The point here is that Microsoft did not get disrupted by regulatory oversight but by another upstart.

In much the same way, as Google started to grow large, regulators started to grow wary of what it would do next. But even as debates began about whether it ought to be broken up, ChatGPT emerged and disrupted Google. The company’s response to ChatGPT until now appears shoddy. Ironically, ChatGPT was acquired by Microsoft to keep pace with AI disruptions.

Closer home, when digital wallets were launched, PayTM was the first off the block. In the mad scramble to acquire customers, it appeared pretty clear this entity promoted by Vijay Shekar Sharma would sweep the market. Sharma did not see UPI coming. This is the payment layer of India Stack, which has been in the works for a few years. The identity layer of India Stack is what all of us know of as Aadhaar. With UPI coming in, all wallets were compelled to integrate it into their offerings. This also meant wallets had to be interoperable.

Simply put, in the early days, a PayTM user could transact only with another PayTM user. With UPI coming in, it did not matter which wallet your money was in. All wallets, including GPay, PhonePe and PayTM, got to be on equal footing overnight. The emergence of one technology disrupted the dominance of the market leader.

This takes us back to where we started. It makes little sense for India to follow the EU or Khan’s prescriptions. The current antitrust assault on Apple is unlikely to chip away at its core strengths or pre-eminence in premium hardware and integrated software services. Instead, the future disruption and displacement of Apple as an industry titan is far more likely to come from an innovative entrepreneur who simply out-innovates and renders Apple’s current services obsolete.

The overarching lesson from past antitrust battles against market leaders is this: By the time regulators recognize monopolistic behaviour and aim at reining in a dominant firm, that company is possibly already getting disrupted by nimble start-ups. More often than not, today’s monopoly is tomorrow’s bewildered behemoth struggling to adapt.

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