How a Few Thoughtless Words About Privacy Led To Huge Political and Economic Headaches

 
 

One of the most surprising developments in recent years is how privacy – something that by definition is about small, intimate things – has become a major global force in the spheres of economics and politics. Perhaps the clearest demonstration of that transformation involves data flows across the Atlantic, and the Austrian lawyer and activist Max Schrems.

As the New York Times reported in 2015, Schrems was a 24-year-old student studying at the Santa Clara School of Law in California, when lawyers from Silicon Valley came to talk to students about their companies’ approach to privacy. Schrems was “taken aback” when he heard them say that they didn’t take Europe’s privacy laws very seriously, since companies rarely faced any significant penalties for breaking them.

What was probably just an off-the-cuff remark by a lawyer touched Schrems, an Austrian national, personally. It spurred him to investigate how Facebook dealt with EU data protection laws. In particular, Schrems asked to see all the data the company had collected from him, as he was entitled to do under EU privacy laws.

He was surprised to see that Facebook had retained information that he had deleted, including highly personal matters. Schrems filed various complaints with the Irish Data Protection Commission, which regulates Facebook in the EU because Facebook’s European headquarters are located in Ireland.

The revelation by Edward Snowden in 2013 that the US National Security Agency could access the personal data of EU citizens, thanks to the Prism program, led to another privacy complaint by Schrems, which concerned the transfer of his personal data from the EU to the US.

Under the 1995 EU Data Protection Directive, which preceded today’s better-known General Data Protection Regulation (GDPR), that was only permitted if the receiving country offered “an adequate level of protection of the data”. Schrems claimed that Snowden’s leaks revealed that the US did not offer the necessary level of protection.

The Court of Justice of the European Union (CJEU), the EU’s highest court, agreed with him, and ruled that the Safe Harbor framework agreed between the US and the EU to legalise the transfer of personal data was invalid. That ruling made the transfers to the US of personal data concerning EU citizens much harder, since companies could not depend on the Safe Harbor framework.

To remedy the situation, a replacement for the Safe Harbor scheme was agreed between the US and the EU. However, as PIA blog reported in 2020 the Privacy Shield was also sunk by the CJEU, largely on the same grounds as before.

Since then, the US and EU have been working hard to come up with a third framework to allow the smooth transfer of EU personal data in a way that is legal under the GDPR. Businesses on both sides of the Atlantic were becoming seriously concerned about the delay. The US Chamber of Commerce of Commerce and BusinessEurope issued a joint statement on the topic, which includes the following:

We call on the European Commission and on the U.S. Administration to swiftly conclude a robust new framework for data transfers, addressing the problems which led to the invalidation of the Privacy Shield, and upholding our shared transatlantic values of privacy and security.

Finalizing a new agreement will not only provide a legal mechanism that is accessible to small and medium-sized businesses but also will remove growing uncertainty around the role of standard contractual clauses, which are relied upon for the bulk of cross-border data flows. We are confident that a new agreement is within reach that can provide long-term legal certainty and will in turn yield increased innovation, cooperation, and growth across the transatlantic economy.

Indeed, the President of the EU Commission, Ursula von der Leyen, has just announced that the EU and US have “found an agreement in principle on a new framework for transatlantic data flows.” However, there are few details yet. In particular, it is not clear whether it can deal with the fallout of an important recent judgment handed down by the US Supreme Court. An opinion piece in The Hill explains:

The U.S. Supreme Court’s decision this month in FBI v. Fazaga, a case challenging FBI surveillance, will make it significantly harder for people to pursue surveillance cases, and for U.S. and European Union (EU) negotiators to secure a lasting agreement for transatlantic transfers of private data.

The justices gave the U.S. government more latitude to invoke “state secrets” in spying cases. But ironically, that victory undercuts the Biden administration’s efforts to show that the United States has sufficiently strong privacy protections to sustain a new Privacy Shield agreement — unless Congress steps in now.

The future “Trans-Atlantic Data Privacy Framework” has “a new multi-layer redress mechanism”, and specifies that “intelligence collection may be undertaken only where necessary to advance legitimate national security objectives, and must not disproportionately impact the protection of individual privacy and civil liberties”.

However, without full details of how those will work in practice, it’s impossible to say whether it is likely that the CJEU would rule that the new framework is invalid, as it did for the other two. Max Schrems has already indicated that he or others will bring a legal challenge if the new framework seems to offer insufficient safeguards.

Without a valid framework, companies will be forced to come up with expensive and messy ad hoc solutions that will act as a significant obstacle to the frictionless flow of personal data across the Atlantic. And all because of a few words said by a lawyer in front of one particular student.

By: Glyn Moody

Source: How a Few Thoughtless Words about Privacy Led to Huge Political and Economic Headaches for the US and EU political and economic headache

.

Critics:

By: Cameron F. Kerry

Recent congressional hearings and data breaches have prompted more legislators and business leaders to say the time for broad federal privacy legislation has come. Cameron Kerry presents the case for adoption of a baseline framework to protect consumer privacy in the U.S.

Most recent proposals for privacy legislation aim at slices of the issues this explosion presents. The Equifax breach produced legislation aimed at data brokers. Responses to the role of Facebook and Twitter in public debate have focused on political ad disclosure, what to do about bots, or limits to online tracking for ads.

Most state legislation has targeted specific topics like use of data from ed-tech products, access to social media accounts by employers, and privacy protections from drones and license-plate readers. Facebook’s simplification and expansion of its privacy controls and recent federal privacy bills in reaction to events focus on increasing transparency and consumer choice. So does the newly enacted California Privacy Act.

Our existing laws developed as a series of responses to specific concerns, a checkerboard of federal and state laws, common law jurisprudence, and public and private enforcement that has built up over more than a century.

It began with the famous Harvard Law Review article by (later) Justice Louis Brandeis and his law partner Samuel Warren in 1890 that provided a foundation for case law and state statutes for much of the 20th Century, much of which addressed the impact of mass media on individuals who wanted, as Warren and Brandeis put it, “to be let alone.”

The advent of mainframe computers saw the first data privacy laws adopted in 1974 to address the power of information in the hands of big institutions like banks and government: the federal Fair Credit Reporting Act that gives us access to information on credit reports and the Privacy Act that governs federal agencies.

Today, our checkerboard of privacy and data security laws covers data that concerns people the most. These include health data, genetic information, student records and information pertaining to children in general, financial information, and electronic communications (with differing rules for telecommunications carriers, cable providers, and emails).

.

More Remote Working Apps:

https://quintexcapital.com/?ref=arminham     Quintex Capital   https://www.genesis-mining.com/a/2535466   Genesis Mining   http://www.bevtraders.com/?ref=arminham   BevTraders   https://jvz8.com/c/202927/369164  prime stocks   https://jvz3.com/c/202927/361015  content gorilla   https://jvz8.com/c/202927/366443  stock rush   https://jvz1.com/c/202927/373449  forrk   https://jvz3.com/c/202927/194909  keysearch   https://jvz4.com/c/202927/296191  gluten free   https://jvz1.com/c/202927/286851  diet fitness diabetes  https://jvz8.com/c/202927/213027  writing job   https://jvz6.com/c/202927/108695  postradamus https://jvz1.com/c/202927/372094  stoodaio  https://jvz4.com/c/202927/358049  profile mate   https://jvz6.com/c/202927/279944  senuke   https://jvz8.com/c/202927/54245   asin   https://jvz8.com/c/202927/370227  appimize  https://jvz8.com/c/202927/376524  super backdrop  https://jvz6.com/c/202927/302715  audiencetoolkit  https://jvz1.com/c/202927/375487  4brandcommercial https://jvz2.com/c/202927/375358  talkingfaces  https://jvz6.com/c/202927/375706  socifeed  https://jvz2.com/c/202927/184902  gaming jobs  https://jvz6.com/c/202927/88118   backlink indexer  https://jvz1.com/c/202927/376361  powrsuite  https://jvz3.com/c/202927/370472  tubeserp  https://jvz4.com/c/202927/343405  PR Rage  https://jvz6.com/c/202927/371547  design beast  https://jvz3.com/c/202927/376879  commission smasher  https://jvz2.com/c/202927/376925  MT4Code System https://jvz6.com/c/202927/375959  viral dash https://jvz1.com/c/202927/376527  coursova  https://jvz4.com/c/202927/144349  fanpage https://jvz1.com/c/202927/376877  forex expert  https://jvz6.com/c/202927/374258  appointomatic https://jvz2.com/c/202927/377003  woocommerce https://jvz6.com/c/202927/377005  domainname marketing https://jvz8.com/c/202927/376842  maxslides https://jvz8.com/c/202927/376381  ada leadz https://jvz2.com/c/202927/333637  eyeslick https://jvz1.com/c/202927/376986  creaite contentcreator https://jvz4.com/c/202927/376095  vidcentric https://jvz1.com/c/202927/374965  studioninja https://jvz6.com/c/202927/374934  marketingblocks https://jvz3.com/c/202927/372682  clipsreel  https://jvz2.com/c/202927/372916  VideoEnginePro https://jvz1.com/c/202927/144577  BarclaysForexExpert https://jvz8.com/c/202927/370806  Clientfinda https://jvz3.com/c/202927/375550  Talkingfaces https://jvz1.com/c/202927/370769  IMSyndicator https://jvz6.com/c/202927/283867  SqribbleEbook https://jvz8.com/c/202927/376524  superbackdrop https://jvz8.com/c/202927/376849  VirtualReel https://jvz2.com/c/202927/369837  MarketPresso https://jvz1.com/c/202927/342854  voiceBuddy https://jvz6.com/c/202927/377211  tubeTargeter https://jvz6.com/c/202927/377557  InstantWebsiteBundle https://jvz6.com/c/202927/368736  soronity https://jvz2.com/c/202927/337292  DFY Suite 3.0 Agency+ information https://jvz8.com/c/202927/291061  VideoRobot Enterprise https://jvz8.com/c/202927/327447  Klippyo Kreators https://jvz8.com/c/202927/324615  ChatterPal Commercial https://jvz8.com/c/202927/299907  WP GDPR Fix Elite Unltd Sites https://jvz8.com/c/202927/328172  EngagerMate https://jvz3.com/c/202927/342585  VidSnatcher Commercial https://jvz3.com/c/202927/292919  myMailIt https://jvz3.com/c/202927/320972  Storymate Luxury Edition https://jvz2.com/c/202927/320466  iTraffic X – Platinum Edition https://jvz2.com/c/202927/330783  Content Gorilla One-time https://jvz2.com/c/202927/301402  Push Button Traffic 3.0 – Brand New https://jvz2.com/c/202927/321987  SociCake Commercial https://jvz2.com/c/202927/289944  The Internet Marketing Newsletter PLR Monthly Membership https://jvz2.com/c/202927/297271  Designa Suite License https://jvz2.com/c/202927/310335  XFUNNELS FE Commercial Drag-n-Drop Page Editor https://jvz2.com/c/202927/291955  ShopABot https://jvz2.com/c/202927/312692  Inboxr https://jvz2.com/c/202927/343635  MediaCloudPro 2.0 – Agency Rights https://jvz2.com/c/202927/353558  MyTrafficJacker 2.0 Pro+ https://jvz2.com/c/202927/365061  AIWA Commercial https://jvz2.com/c/202927/357201  Toon Video Maker Premium https://jvz2.com/c/202927/351754  Steven Alvey’s Signature Series 3rd Installment https://jvz2.com/c/202927/344541  Fade To Black https://jvz2.com/c/202927/290487  Adsense Machine https://jvz2.com/c/202927/315596  Diddly Pay’s DLCM DFY Club https://jvz2.com/c/202927/355249  CourseReel Professional https://jvz2.com/c/202927/309649  SociJam System https://jvz2.com/c/202927/263380  360Apps Certification Masterclass https://jvz2.com/c/202927/359468  LocalAgencyBox https://jvz2.com/c/202927/377557  Instant Website Bundle https://jvz2.com/c/202927/377194  GMB Magic Content https://jvz2.com/c/202927/376962  PlayerNeos VR

Experts Slam Apple’s Child Protection Phone-Scanning Technology

A group of leading cybersecurity experts has spoken out against Apple’s plan to detect child sexual abuse images on iPhones, claiming it amounts to mass surveillance and should be banned.

Earlier this year, Apple announced plans to introduce client side scanning, searching individual devices’ iCloud photo libraries for child sexual abuse material (CSAM). Images would be scanned using a technology called NeuralHash and then compared with known CSAM material, before being reported to the authorities.

The plans were delayed last month, with Apple stating that feedback from customers, advocacy groups, researchers and others was prompting it to look for improvements.

Now, though, there’s more feedback, and from sources that it’s hard to downplay. In a paper titled Bugs in our Pockets: The Risks of Client-Side Scanning, security and cryptograhy experts Hal Abelson, Ross Anderson, Steven M. Bellovin, Josh Benaloh, Matt Blaze, Jon Callas, Whitfield Diffie, Susan Landau, Peter G. Neumann, Ronald L. Rivest, Jeffrey I. Schiller, Bruce Schneier, Vanessa Teague, and Carmela Troncoso claim the technology goes much too far.

“In this report, we argue that CSS neither guarantees efficacious crime prevention nor prevents surveillance,” they write.

“Indeed, the effect is the opposite. CSS by its nature creates serious security and privacy risks for all society while the assistance it can provide for law enforcement is at best problematic. There are multiple ways in which client-side scanning can fail, can be evaded, and can be abused.”

The main fear is the risk of abuse by repressive governments. While Apple says that only CSAM and terrorist material would be flagged, the researchers aren’t so sure.

“If device vendors are compelled to install remote surveillance, the demands will start to roll in. Who could possibly be so cold-hearted as to argue against the system being extended to search for missing children?” writes Ross Anderson, professor of security engineering at the University of Cambridge.

“Then President Xi will want to know who has photos of the Dalai Lama, or of men standing in front of tanks; and copyright lawyers will get court orders blocking whatever they claim infringes their clients’ rights.”

With the EU believed to be considering device scanning as a part of a new law on child protection, the researchers say that it should be a national-security priority to ‘resist attempts to spy on and influence law-abiding citizens’.

And, they point out, the Data Retention Directive has already been struck down on the grounds that such bulk surveillance, without warrant or suspicion, was an unacceptable infringement of privacy, even in the fight against terrorism. Client-side scanning is equally problematic, the researchers say.

“Instead of having targeted capabilities such as to wiretap communications with a warrant and to perform forensics on seized devices, the agencies’ direction of travel is the bulk scanning of everyone’s private data, all the time, without warrant or suspicion,” they write.

“That crosses a red line. Is it prudent to deploy extremely powerful surveillance technology that could easily be extended to undermine basic freedoms?”

I’ve been writing about technology for most of my adult life, focusing mainly on legal and regulatory issues. I write for a wide range of publications: credits include the Times, Daily Telegraph and Financial Times newspapers, as well as BBC radio and numerous technology titles. Here, I’ll be covering the ways content is controlled on the internet, from censorship to online piracy and copyright. You can follow my posts by clicking the ‘ Follow’ button under my name.

Source: Experts Slam Apple’s Child Protection Phone-Scanning Technology

.

Related Contents:

Google Pushes to Overturn EU’s $5 Billion Antitrust Decision on Android

BRUSSELS— Alphabet Inc.’s GOOG -0.88% Google started its appeal Monday to overturn a $5 billion antitrust fine imposed by the European Union, contending that its Android operating system for mobile devices has boosted competition rather than foreclosing it.

The tech giant presented oral arguments in Luxembourg before the EU’s second-highest court, in its appeal to overturn the 2018 decision from the bloc’s antitrust enforcer. In that case, EU authorities found Google had illegally abused the market power of Android to push companies that manufacture and distribute Android phones into agreements aimed at entrenching and expanding the dominance of the Google search engine on mobile devices.

That decision was the largest of three antitrust fines totaling more than $9 billion that the EU has levied against Google in the past half decade. It also ordered changes to the distribution agreements buttressing one of the company’s biggest growth engines: search ads on mobile phones.

“Android has created more choice for everyone, not less,” a Google spokeswoman said. “This case isn’t supported by the facts or the law.”

A verdict isn’t expected for months, and it can be appealed to the EU’s top court, the Court of Justice. Still, the litigation is a new test for the EU’s competition and digital-policy chief, Margrethe Vestager, who already faces a pending appeal of an earlier decision against Google’s alleged abuse of the dominance of its search engine to favor its online-shopping ads.

Ms. Vestager has since opened a new antitrust probe into Google’s ad-tech business, along with a wave of cases exploring whether companies including Facebook Inc., Apple Inc. and Amazon.com Inc. abuse their dominance to drive out smaller rivals. The companies deny wrongdoing.

A spokeswoman for the European Commission, the bloc’s top antitrust regulator, declined to comment.

While the appeal is under way, Google has had to comply with the decision, offering all users of new Android phones in the EU a choice screen of alternative search engines. But so far Google’s market share for search on mobile phones has remained relatively stable, according to Statcounter.

At issue in the hearing this week is whether Google’s Android is indeed dominant, as European regulators argue, and whether Google’s distribution deals for the operating system and its Google Play app store for Android were anticompetitive.

The Commission has argued that Google used those agreements to block the rise of potential competitors and secure the dominance of its cash cow search engine on mobile phones—an outcome far from assured at the time.

The Commission found Google had abused its control of the Android operating system by forcing phone makers to pre-install Google Search and Google’s Chrome browser if they also wanted to include Google’s Play store for apps, by far the most common way to get Android apps.

The Commission also found Google’s so-called antifragmentation agreements—deals that discourage official Android manufacturers from selling devices that run unofficial, modified versions of Android—illegally blocked the development and emergence of competing operating systems.

“Instead of an antifragmentation agreement, it should be called an anticompetition agreement,” said Thomas Vinje, a lawyer representing FairSearch, a group representing Oracle Inc. and other companies whose 2013 complaint led the Commission to open a formal case investigating Android in 2015.

Apple and Google have one of Silicon Valley’s most famous rivalries, but behind the scenes they maintain a deal worth $8 billion to $12 billion a year according to a U.S. Department of Justice lawsuit. Here’s how they came to depend on each other. Photo illustration: Jaden Urbi

Google argues that those analyses are flawed. It says Android devices must compete with Apple’s iPhone and iPad, and the Commission was wrong to largely exclude them from its analysis. The company argues that its antifragmentation agreements are necessary to keep Android phones compatible with apps, and aren’t a barrier to creating competing operating systems.

Google also says the allegation that it blocked competing apps is false because manufacturers typically install many rival apps on Android devices, and consumers can easily download others. The company says it has a right to recoup the money it spends developing Android, which it makes available free to manufacturers, by encouraging them to install Google Search, from which the company makes the bulk of its revenue.

Google and the Commission will be joined in this week’s arguments by nearly a dozen outside companies and trade groups that have filed their own supporting briefs in the case. Google’s supporters include the Computer & Communications Industry Association and two handset manufacturers.

Arguments on the Commission’s side will include some from German publisher groups and complainants in the case, including FairSearch.

By: Sam Schechner at sam.schechner@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

Source: Google Pushes to Overturn EU’s $5 Billion Antitrust Decision on Android – WSJ

.

Related Contents:

Zuckerberg Grows $5.1 Billion Richer After Judge Throws Out FTC’s Antitrust Case Against Facebook

Facebook CEO Mark Zuckerberg Testifies At House Hearing

A federal judge has given Mark Zuckerberg and Facebook investors a trillion or so reasons to smile.

Judge James E. Boasberg on Monday tossed aside several antitrust cases brought by the FTC and state authorities, turning away the most concerted campaign yet to police the social network. The decision sent Facebook’s stock sharply higher, allowing the company to cross the $1 trillion threshold in market value for the first time. These rising shares were a boon for common shareholder and billionaire alike: The 4.1% in stock price during after-hours trading added $5.1 billion to Zuckerberg’s fortune.

Boasberg’s decision—and the stock movement—underscore the complexities about Facebook’s future. The social network has developed a wide swath of critics from both sides of the political spectrum and received a major black eye for its handling of user data.

Led by New York Attorney General Letitia James, some of the company’s opponents had hoped antitrust legal action might deliver what they’ve long craved: A blow to Facebook to reduce its ballooning scale and importance and deliver a measure of regulation. The antitrust case revolved around Facebook’s 2012 acquisition of Instagram and its WhatsApp purchase two years later.

But bringing Facebook to heel won’t be as easy as its detractors might’ve hoped. Boasberg dismissed the states’ case over timeliness, saying it too much time had elapased since those acquisitions. Meanwhile, Boasberg tossed out the FTC’s argument and argued in a 53-page opinion that regulators hadn’t produced enough facts to support their argument. The FTC could still tak

The other thing is: Despite a steady drum beat of negative news for much of the past four years, Facebook’s stock has been a winner. Its shares have doubled since March 2018, when the full ramifications of the Cambridge Analytic become public, igniting this new era in Facebook’s history. Over that period, the S&P 500 went up less than 60%—while Zuckerberg, his position at the company bolstered by the company’s increasing share prices, has watched his fortune go from less than $60 billion to nearly $100 billion.

Follow me on Twitter. Send me a secure tip.

I’m a senior editor at Forbes, where I cover social media, creators and internet culture. In the past, I’ve edited across Forbes magazine and Forbes.com.

Source: Zuckerberg Grows $5.1 Billion Richer After Judge Throws Out FTC’s Antitrust Case Against Facebook

.

Critics:

An antitrust suit against Facebook by the FTC and several states had the wind taken out of its sails today by a federal judge, who ruled that the plaintiffs don’t provide enough evidence that the company exerts monopoly control over social media. The court was more receptive, however, to revisiting the acquisitions of Instagram and WhatsApp, and the case was left open for regulators to take another shot at it.

The court decision was in response to a Facebook motion to dismiss the suit. Judge James Boesberg of the D.C. circuit explained that the provided evidence of monopoly and antitrust violations was “too speculative and conclusory to go forward.” In a more ordinary industry, it might have sufficed, he admits, but “this case involves no ordinary or intuitive market.”

It was incumbent on the plaintiffs to back up their allegation of Facebook controlling 60 percent of the market with clear and voluminous data and a convincing delineation of what exactly that market comprises — and it failed to do so, wrote Boesberg. Therefore he dismissed the complaints in accordance with Facebook’s legal argument.

The company wrote in a statement that it is “pleased that today’s decisions recognize the defects in the government complaints.”

On the other hand, Boesberg is sensible that lack of evidence in the record does not mean that the evidence does not exist. So he his giving the FTC and states 30 days to amend their filing, after which the complaints will be reevaluated.

Google’s Huge Market Share Doesn’t Automatically Make It a Monopoly

This week the United States Department of Justice (DoJ) filed a lawsuit accusing Google of using “anticompetitive tactics to maintain and extend its monopolies in the markets” for search and advertising.

It is the most significant antitrust case since the US government took on Microsoft in 1998 for using its dominant position as the provider of the Windows operating system to force PC makers to bundle its Internet Explorer web browser.

That case was fought out in US courts for years before Microsoft agreed to settle in 2001. This case will no doubt be heavily litigated, and likewise take years to conclude. But it’s not too soon to consider the basic economics.

The bottom line is more complicated than one might think. Yes, Google has a huge share of the search-engine market – 92% globally according to statcounter.com, compared with 2.8% for Microsoft’s Bing, 1.6% for Yahoo! and 0.5% for DuckDuckGo.

But does that give Google a lot of “market power” – the ability to charge high price or produce low-quality products? Probably not.

To judge if a company like Google is really a monopolist, it is crucial to understand the difference between ordinary markets (like those for clothes, cars, or breakfast cereal) and technology markets (like those for internet search, social media, or ride sharing).


Read more: The US is taking on Google in a huge antitrust case. It could change the face of online search


Markets with ‘network externalities’

Any introductory economics textbook will tell you a large market share is smoking-gun evidence of market power; and that with market power comes the ability to shut out competitors, charge high prices and even get away with producing low-quality products.

Economists of all stripes agree that regulating monopolies and making markets more competitive benefits consumers, through lower prices and better products.

Indeed, this was the motivation behind the so-called “trust-busting” movement in the US in the early 20th century. The most famous scalp was John D. Rockefeller’s Standard Oil, which the US Supreme Court ordered in 1911 be broken up into 34 separate companies. (The break-up made Rockefeller the world’s richest man).

But internet search isn’t like oil. Neither is social media, ride sharing or platforms like Amazon. These are what economists call “markets with network externalities”. That is, when more consumers use the product, it becomes more valuable for other consumers.


Read more: Lawmakers keen to break up ‘big tech’ like Amazon and Google need to realize the world has changed a lot since Microsoft and Standard Oil


Facebook is useful because it connects one with lots of other users. A thousand little, disconnected social media platforms would be much less useful. Amazon connects lots of sellers with million of consumers. This is hugely valuable for both. Google connects lots of consumers with advertisers and information. Again, this is valuable to both sides of the market.

Because network externalities mean — all else being equal — the bigger the market share the more valuable the company’s product is to consumers, we tend to see one dominant company and a few smaller ones in such markets.

Just because tech companies have a big share of the market now, however, doesn’t mean they are destined to keep it.

Remember Netscape? In the mid-1990s it had a 80% share in the browser market, before losing it to Microsoft’s Internet Explorer.

Netscape Navigator Version 1.11
Netscape Navigator version 1.11. OiMax/flickr, CC BY-NC-ND

But Internet Explorer’s dominance, peaking at 95% share in the early 2000s, didn’t last either. It now claims barely 1% of the browser market.

This is why companies in markets with network externalities are never asleep. Uber and Facebook are constantly running experiments to innovate their products, as are other companies like Amazon and, you guessed it, Google.

Influencers and defaults

An important part of the Department of Justice’s suit against Google is that it allegedly pays Apple as much as US$11 billion a year to be the default search engine on the Safari browser on every iPhone.

This is a bit like paying for a social media influencer to plug your product — with a twist. Making something the default doesn’t mean the user has to use it, but the small effort to choose an alternative means most don’t bother.

But if it really wasn’t a good product and didn’t deliver good search results, wouldn’t consumers (a) remove it and (b) be less likely to buy iPhones?

There’s a big difference between something being a default and there being no choice. Articulating this difference may end up being an important part of how the Google litigation plays out.

Indeed, Microsoft making Internet Explorer the default browser in Windows has been an ongoing source of back and forth with US and European competition authorities.


Read more: Twitter is banning political ads – but the real battle for democracy is with Facebook and Google


Ultimately misguided

As with the suits against Standard Oil and Microsoft, the case against Google will be decided by the courts, perhaps ending with the US Supreme Court. The outcome will be instructive as to whether other tech companies like Amazon, Facebook or Uber will also wind up in the firing line.

Ironically, at a time of extreme polarisation in US politics, breaking up big tech companies is popular on the left and the right.

But we should remember that consumers are huge beneficiaries from these tech companies. Think about how much it used to cost to take and print photographs. A 2018 International Monetary Fund report cites research suggesting US consumers would need more than US$25,000 a year to compensate for the loss of free services from tech companies.


International Monetary Fund, Measuring the Digital Economy, 2018

That’s a lot.

What is crucial for competition regulators around the world to note is that the markets in which big technology companies operate are not like other markets. Because of network externalities they tend to have big “in” firms (with a large market share) and smaller “out” firms (with small market shares but providing competitive discipline).

That doesn’t mean these markets aren’t competitive. It means the “in” companies have a lot to lose by being leapfrogged by a small competitor. Which is why they work so hard to innovate and keep prices low.

By: Richard Holden Professor of Economics, UNSW

.

.

Fox Business 1.28M subscribers The Justice Department is expected to file an antitrust suit against Google claiming anticompetitive conduct by tech giant. Subscribe to Fox Business! https://bit.ly/2D9Cdse Watch more Fox Business Video: https://video.foxbusiness.com Watch Fox Business Network Live: http://www.foxnewsgo.com/ FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Headquartered in New York — the business capital of the world — FBN launched in October 2007 and is one of the leading business networks on television, having topped CNBC in Business Day viewers for the second consecutive year in 2018. The network is available in nearly 80 million homes in all markets across the United States. Owned by FOX Corporation, FBN is a unit of FOX News Media and has bureaus in Chicago, Los Angeles, and Washington, D.C. Watch full episodes of FBN Primetime shows Lou Dobbs Tonight: https://video.foxbusiness.com/playlis… Kennedy: https://video.foxbusiness.com/playlis… Follow Fox Business on Facebook: https://www.facebook.com/FoxBusiness Follow Fox Business on Twitter: https://twitter.com/foxbusiness Follow Fox Business on Instagram: https://www.instagram.com/foxbusiness

%d bloggers like this: