Google and Facebook’s Next Big Fight

Google and Facebook- For many people, it probably sounds a little rich to hear the European Union accuse Silicon Valley of being a graveyard of innovation. But that’s where we are in 2019. Regulators are hitting the likes of Alphabet Inc.’s Google and Facebook Inc. with a flurry of antitrust fines and data-privacy probes, implying that they regard tech billionaires as more John D. Rockefeller than Nikola Tesla.

The end-game, according to Brussels’ top data watchdog, is to make sure new startups aren’t blown out of the water by Big Tech (or gobbled up), which should ultimately benefit consumers by allowing them more choice.

Tackling this so-called “kill zone,” where fledgling tech companies are acquired or copied out of existence by deep-pocketed incumbents, is a prime ambition for European Data Protection Supervisor Giovanni Buttarelli, nicknamed “Mr GDPR” after the data-privacy law. When I met him in Brussels recently, Buttarelli checked off the barriers to entry for a startup: It needs to first outbid the likes of Inc., Facebook and others for engineering talent; then sell its product through an app store probably run by Google or Apple Inc.; and finally compete against big players with established networks and huge cash piles. And even it clears all these hurdles, it’s still vulnerable to being taken out.

There’s a connection between this dominance of Big Tech – which is proven by the decline in venture-capital financing for upstarts, as my colleague Noah Smith has written – and harm to consumers. The EU view is that the “free” price tag of social media and apps is not a public good if it’s underpinned by a business model that hoovers up data from users without consent. And if the profits from that are spent on blocking competition, there’s less chance of a market-based alternative. Google and Facebook rebut this view, insisting that a disruptive rival could unseat them anytime. But regulators have given up waiting for one.

The recipe for fixing things, according to Buttarelli, is threefold. He wants more competition through antitrust enforcement, more data protection through GDPR, and more fairness and transparency for customers from the tech giants themselves.