Why tech giants like Facebook and Google are being torn down a strip by regulators

The team at Mobvista look at how regulators are finally starting to catch up to, and gain authority over, the internets biggest players

Computer keyboard gavelThe regulatory tide is turning on the tech giants and that can only be good news for the smaller ad tech companies that want to compete fairly on a more even playing field.

Many predictions are made about the digital marketing and the tech giants every year but one thing we can almost say for certain is that before the first quarter has passed, 2019 is shaping up to be the year the tech giants are changed forever.

That could be good news for the smaller desktop and mobile advertising business that try to compete with the might of the so-called duopoly of Facebook and Google which they believe has such a wide reach and so much data that they cannot be matched for targeted advertising.

It could also be good news for businesses that use the tech giants’ platforms to promote themselves only for some to find, in their opinion, they are not competing on a level playing field.

It is no longer just the EU tackling the might of the so-called FAANGs (Facebook, Apple, Amazon, Netflix and Google), the United States is fast catching up. There are two main points of action. One is privacy, the other market dominance abuse. The first deals with whether the tech giants used data to target advertising legally and the second whether they operate fairly. 

The pincer movement has led to multiple lawsuits and investigations being brought against Facebook in the US, eye-watering fines levelled against Google in the EU and a potential anti-trust case being brought against Apple, following a complaint from Spotify. Most recently the UK Chancellor called for the country’s Competition and Markets Authority (CMA) to tackle the power of the duopoly.

Anti-trust fines so far
We have already seen the European Commission hit Google with two massive fines. In 2017, it was on the sharp end of a 2.4bn Euros charge for manipulating search results in favour of its own businesses. The idea that Google can run the world’s most dominant search engine and then compete with other business for top listings was always going to lead to trouble, particularly when rivals complained the search giant appeared to be prioritising its own businesses against rivals.

A year later, the EC’s attention was on what it believed to be Google’s abuse of its dominance in mobile through insisting Android phone makers pre-install its search app and Chrome mobile web browser app as default options. The result was a record, staggering fine of 4.2 billion Euros.

Google has denied any wrongdoing and is appealing against both verdicts.

Privacy fines, so far
More recently focus has shifted to privacy with the French data protection agency, CNIL, fining Google 50m Euros for failures over enacting the EU’s new GDPR privacy rules. It was accused of confusing privacy notices and not gaining specific consent for users for targeted adverts. The UK’s Information Commissioner’s Office (ICO) has also confirmed it is investigating possible GDPR breaches. Again, Google denies wrongdoing.

The ICO also fined Facebook £500,000 at the end of last year for failing to safeguard the personal data of people caught up in the Cambridge Analytica scandal.

The fine was the maximum allowed under the Data Protection Act that applied at the time, which has since been replaced by the tougher GDPR. 

Since the new rules came into effect, Facebook’s privacy woes have been restricted to a telling off by the German competition watchdog, the Bundeskartellamt, which gave the social giant a year to restrict how it gathers data.

At the moment, Facebook collates users’ information across its three platforms, Facebook, WhatsApp and Instagram. It has the ability to do so despite being fined 110m Euros in May 2017 for not keeping Facebook and WhatsApp accounts completely separate, as it had promised to do when buying the messaging platform in 2014.

There could be more trouble ahead for Facebook, though. Not only does it face large class action privacy suits in America, the Washington DC Attorney General has launched a case against the social giant for its part in the Cambridge Analytica scandal. If found guilty, the eventual fine is estimated to possibly rise to as much as $1.7bn.

Amazon and Apple next?
So far, only half of the FAANGs acronym have been impacted but the European Commission is conducting an investigation into whether there is an antitrust case that could be brought against Amazon.

The Commission has also been invited to investigated Apple by its arch-rival in music streaming, Spotify. Those involved in mobile marketing may think there is a big name missing in all this. Google has come in for some eye-watering fines but what about the other big mobile player, Apple?

It has managed to dodge controversy and the ire of regulators because, unlike Google, it does not allow other phone makers to use its iOS platform. This means there is no fear of strongarm tactics to have its apps pre-installed because there is no other company involved. 

However, that could potentially be challenged. In the middle of March, Apple was the target of a request by Spotify for the European Commission to investigate anti-competitive behaviour.

Mobile app marketers will be all too aware of the App Store’s 30 per cent cut of download fees and subscriptions. However, Spotify claims this is not only a sizeable chunk of any potential revenue, it’s also unfair that it has to compete on the same platform as Apple Music. It also further claims that Apple makes it difficult for it to upgrade customers or reach out to customers it has acquired through the App Store with new deals and offers. It has a list of five complaints, summed up in a video, which also includes not being able to operate on Apple’s voice-activated speakers.

As far as the App Store complain is concerned, the complaint is that this a similar case of Google being accused of competing with rivals on its own platform but without first ensuring there is a level playing field. The decision whether to open an investigation is far from certain and will rely on the European Commission deciding whether Apple is using its ownership of the App Store unfairly.

Apple has already responded that it denies any wrongdoing and that free apps are not charged a fee, only those which use the company’s secure app payment system are faced with a 30 per cent fee, which halves a year later for renewals.

Regulators are changing, everything
It ought to be remembered the European Commission has already forced Apple to pay back $16bn in back taxes it believes the tech giant owes the Irish government. So, it will be keen to take a look at Apple, although expert opinion is split on whether there are grounds for opening an investigation.

Whatever is decided, one thing is clear. Massive privacy fines, ongoing investigations and anti-trust punishments are showing the tech giants they cannot carry on as normal. For smaller companies looking for a level playing field when using tech giant platforms and for those who cannot match the duopoly’s ad targeting capabilities, this can only be good news.

Regulators in the EU and US are effectively telling the tech giants they have to ‘play nice’ with rivals and customers alike, the days of using their power to get their way and to use huge databases however they like are coming to an end.