Time to regulate digital business? A few US and Chinese firms wield monopoly power

By Ajay Srivastava

A new term is being used to describe the business model of top digital firms. BAADD. It stands for Big, Anti-Competitive, Additive and Destructive to Democracy. Ownership of personal, business and social details of billions of individuals gives top online firms enormous power that extends in areas beyond the business.

Is there a case for regulating them? The path a country chooses would significantly influence its business ecosystem, job creation, and social fabric. Let us try to get the big picture. Online firms like Google, Facebook or Amazon have created high quality tools that hooked up the world. Over 2 billion users rely on them for email, web search, reaching out to friends, navigation, buying, selling, learning and many more needs on an everyday basis.


Being big is not a problem in itself. But the digital world created giant monopolies which hurt competitors who are so crucial for the growth of the sector. Most real-world monopolies are restricted to just one product group. A top car maker will not be in oil or any other business. But in digital, top firms have operations spread across the entire digital business space.

Consider Google’s interests. It earns money through web-based products like search tools, advertising services, development tools, operating systems, mobile applications, hardware, and services. End to end spread makes the life of new tech firms difficult.

A large tech firm’s business model for new firms is: make competition difficult for them, buy the promising ones and if nothing works, copy the best features. Facebook acquired WhatsApp in 2014. Google buys upcoming firms every month. Facebook copied Snapchat features when it refused a buy offer.

For many tech giants, their near monopoly status is not due to technical expertise alone. Becoming big requires deep pockets and government support. The deep pockets allow e-commerce firms to use billion dollar sales, deep discounts, and cash back to buyers. This is how a small businessman describes the model. “They sell a pair of shoes at Rs 500 even if they buy these at Rs 1000. And when most shoemakers shut shop, they will start charging high.”

Government support is equally vital. Even if some investments go bust, the US can always print more dollars. So the US with the dollar as reserve currency and China with surplus dollars are set to dominate the digital space. Take Flipkart. With promoters holding just 15% shares, it may soon become a Chinese firm, and there will be nothing illegal. In the long run, there may be no big national firms in the digital space.

Governments in many countries are coming to terms with the power of tech giants in influencing public opinion and business landscape. They remember how Russia manipulated US presidential elections in 2016 disseminating fake news through social media. There are online sites recruiting terrorists, peddling child porn, trafficking drugs. Should the online firms share the blame?

Governments also understand that even though the data belongs to users located in their countries, they have no control and get no revenue. National laws do not apply to tech giants. To many, a Google or Facebook seems to be saying. “I will catch fish from your pond and charge you for the fish curry. And even if the curry is bad, you cannot sue me.”

Many governments remember the day they signed the Information Technology Agreement (ITA) at the WTO in 1996. The resulting zero duty imports became the main reason no IT hardware and telecom industry could develop in India and many other countries. The push to include rules on e-commerce at WTO are efforts in this direction. Once adopted, countries will forego the right to regulate the sector.

EU, Japan and China have taken decisive steps in creating data rules. China’s policy to not allow Google or Facebook has paid off big time. Chinese firms Alibaba, Baidu and WeChat filled the vacuum. But we do not suggest that obstruction is the best policy.

Indian government has set up the Srikrishna committee to identify “key data protection issues” and suggest a draft data protection Bill. We need rules dealing with all aspects of the digital business. This will set the foundation for a thriving digital business space, no longer monopolised by a few.

(The writer is an Indian Trade Service officer. Views are personal.)