By Peter Martin
Australian academic Stephen King, a former member of Australia’s Competition and Consumer Commission and a current commissioner with its Productivity Commission, says we need to apply special tougher rules to takeovers by companies such as Google and Facebook.
Big tech grows bigger by takeovers
Usually we only block takeovers where the target is big. Instagram and WhatsApp were small. Instagram reportedly had 13 full-time employees at the time of its takeover, WhatsApp reportedly had 55 . Yet Facebook paid billions for them.
In the U.S. and the U.K. both takeovers were waived through.
Big tech companies can do things with tiny takeover targets that others can’t. Takeovers can give them access to vast networks of existing users and their data.
As King puts it, Instagram is big because it was acquired by Facebook, not because Instagram was necessarily the best target.
<STRONG>Read more: <INTERNET LOCATION="EXTERNAL" URL="https://theconversation.com/we-allowed-facebook-to-grow-big-by-worrying-about-the-wrong-thing-152190">We allowed Facebook to grow big by worrying about the wrong thing</INTERNET></STRONG>
In Europe the authorities were on to this possibility and approved the takeover of WhatsApp only after Facebook informed them it would be “unable to establish reliable automated matching between Facebook users’ accounts and WhatsApp users’ accounts.”
This statement was incorrect, Facebook has done it, and paid the European Commission €110 million for providing incorrect or misleading information.
Had Australia been tougher, had the U.S., the U.K. and the European Commission been tougher, Facebook and Google would be nothing like the behemoths they have become today. They might have peaked and be losing market share.
We are able to say no
Their future is largely in our hands. For big tech companies able to use the weight of their networks (and only for those companies) we could “just say no” to takeovers. It’s hard to think of a reason for one to proceed.
If needed, we could change the law to make “no” the default.
This wouldn’t shrink the companies in a hurry. Most of the users of Facebook, YouTube, Twitter and the like are locked in, because that’s where their friends are.
But where the friends are changes every generation.
Facebook and Google know this, which is why they are so keen to take over upstart competitors and emerging platforms in fields they haven’t thought of.
If we stopped them, we wouldn’t stop them growing straight away, but we would make it hard for them to fight the natural order in which the new and fashionable displace the old and predictable. It’s their deepest fear.
Peter Martin is a visiting fellow in the Crawford School of Public Policy, Australian National University. He is business and economy editor of The Conversation .
This commentary was originally published by The Conversation—The easy way to rein in Facebook and Google: stop them gobbling up competitors
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