The debate about market power just went into overdrive, China in the lead

market power
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Market power and abuse of that power is becoming the focal point, and something needs to be done. So says almost every Government on Earth.

This market power is now being tested, and the battle is on from the struggle between the Australian Government and Facebook (and Google), where the Government won the fight to make Facebook pay news publishers (sort of), to India and nonchalance towards the Government that takes the breath away.

To the US, where a recent ruling by a Supreme Court Judge says that social media companies are ‘common carriers’ or utilities and should be regulated in the same way to stop them from abusing their market power.

Meanwhile, in China, the Government has just slapped Alibaba with a huge fine for abusing its market power for several years, and the Chinese competition watchdog is adding staff to cope with the implementation of regulations that are now needed. Yet with revenues of close to $100 billion last year, an eye-watering fine of almost $3 billion does not seem that large for a giant like Alibaba.

That said, what China has done to the Ant Group is, to say the least, very effective (and emasculating).

As Richard Windsor says, “The censure dealt to Ant Group is the exact opposite of that given to Alibaba that will destroy its proposition, ensure that it no longer threatens the banking sector and also supplies all of its data to the state”.

The question really becomes what can actually be done about abuse of market power.

Part of you wants to let sleeping giants lie because you know that tech companies will open another whatever door a government closes. If you split them up, you create smaller, possibly even more aggressive entities, and instead of one company abusing its market power, you will get three or four at some point in the future.

Ironically, the conversation about market power comes about because of the one thing that Governments generally believe in. Competition.

All of the companies accused of abusing market power came about through innovation and new thinking. Governments only got excited about the issue when they began to lose control.

The US’s ruling might be a step in the right direction, but will it change anything? Will it make a difference? Even if you rule that social media companies are publishers (not just common carriers) and will attract ever-larger fines for ‘publishing’ extremist or anti-social content, open platforms will always be used for distributing disgusting content. They are open. With Facebook et al. investing in people and technology that filter content already, it is difficult to see how regulation will help.

Discussions about market power are here to stay and the next weeks and months will be interesting times in which to live. Perhaps it is time to admit that China’s approach is, if not the right one, an effective one.

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