The term interoperability was included in the new words list of the Oxford English Dictionary back in 2013. It is one of those arcane terms used by IT professionals to baffle non-initiates such as myself, but it essentially refers to the ability of computer systems or programs to exchange information.
It is at the heart of recent policy deliberations by the Competition and Markets Authority (CMA). In common with an increasing number of overseas regulatory bodies, the CMA has been looking at online platforms and digital advertising; areas which have attracted increased scrutiny because of the dominance of Facebook (NASDAQ: FB) and Google.
As you can imagine, antitrust issues are to the fore. The CMA estimates that Google accounts for over 90 per cent share of the £6 billion search advertising market in the UK, while Facebook attracts more than half of the £5 billion given over to display advertising, facilitated by “limited competitive threat due to the strong network effects”.
The CMA realises that market dominance on this scale can have the effect of crowding out competition, thereby stifling innovation. The trouble with monopolies and oligopolies is that they tend to increase the prices of goods and services within a given industry – insufficient competition prefigures stagnation.
Ensuring a level playing field doesn’t seem to be a priority for Google executives. The platform forked out $1.3 billion (£1 billion) through 2018 to ensure it was the default setting for mobile devices in the UK, most of which ended up in Apple’s (NASDAQ: AAPL) coffers. Strictly speaking, this wouldn’t fall under the heading of cartel behaviour because no one is forcing you to buy an iPhone, but it certainly illustrates the influence wielded by the FAANGs.
So, the UK competition regulator is consulting on a range of potential interventions, including a code of conduct and rules to give consumers greater control over their data.
For Facebook, the CMA highlights a lack of interoperability with rival services. This could conceivably trigger prescriptive measures governing “the ability to post content across several platforms simultaneously; the ability to view posts from friends on other social platforms; and how the standards surrounding these features should be developed and monitored”.
Facebook would probably resist any reforms which threatened its primacy in the social media space, but the CMA has refused to rule out future support for the nuclear option - a move to break up Facebook and its subsidiary Instagram platform – though the regulator admits that it needs to be “pragmatic about what changes could efficiently be pursued unilaterally by the UK” in the face of a “truly global antitrust challenge”. Any attempts by regulators to take a hard line may grind up against US trade tensions and issues over global jurisdiction.
The European Commission has signalled that it may need to beef-up regulatory strictures to improve competition in the sector. The introduction of General Data Protection Regulation (GDPR) has been hailed as a success from the perspective of breach notification, though less so when it comes to the imposition of fines on companies for mishandling personal data. Short of any demonstrable action in this regard, the introduction of the framework could be viewed as little more than window dressing.
The European Union (EU) may have been at the forefront of efforts to curb the influence of the US tech heavyweights, but it is still far from certain whether we will witness any meaningful reforms. EU officials have hit Google with antitrust fines amounting to over $9 billion over the past few years, yet most Europeans still choose the search engine as their default setting.
Google’s ongoing battle with regulators invites comparisons with Microsoft’s (NASDAQ: MSFT) spat with US officials at the turn of the millennium, when it was faced with antitrust issues over its practice of bundling Internet Explorer in Windows, as Microsoft software was then sold alongside nearly every Intel-compatible PC. The pioneering software firm seems to have fared well enough following its brush with regulators, though there is a greater political element this time around.
