'Gamemakers' should be closely scrutinized

Digital technology has transformed the way we communicate, engage and consume, especially during the novel coronavirus pandemic. Our smartphones keep us connected 24x7, our services are personalized, and our voice-activated appliances are ready for our command.

We now chat, purchase and consume－whether videos, news or gossip－online. Our livelihoods and attention have shifted so much to online, that in many instances if it's not online, it doesn't merit our attention.

The digital markets seem competitive, with so many options vying for our attention. It may appear that with so many companies competing for our time by offering us better services, better quality and lower prices, we benefit.

But is this perceived competition actually benefiting us?

Not necessarily. Here lies the crux of the matter－over time, many online markets have come to be dominated by a few powerful digital gatekeepers. So whenever we visit their platforms, they ensure that whatever apps, products, services, videos, or songs we pick, they will somehow profit.

Imagine if someone could create at the very outset a seemingly competitive environment, but control it and use it to exploit the participants, while primarily benefiting the creator. In our recent book, Competition Overdose, we call these creators the "Gamemakers" after the characters who go by that name in The Hunger Games book and film trilogy.

These powerful platforms, like the Gamemakers, can design and manipulate our experience and choices. They can dictate what news articles we read, what products we are offered, and how we perceive the wider society. They also dictate the terms of competition for the many app developers and merchants, determining how they sell their products, how much "tax" they have to pay the platform, and on what terms they can connect and interact with us.

The Gamemakers then colonize new platform markets, such as the digital personal assistants in our home, the wearables on our wrist, and the video games our children play, to harvest even more data about us. After all, these data, and the advanced algorithms used to analyze them, give the Gamemakers power and enable them to target us with behavioral ads.

But why stop there? The Gamemakers use our data to exploit us, for example, through profiling and discriminatory pricing. As we are (de facto) locked into one platform or provider, we are subjected to its control and behavioral techniques. We face asymmetric information as to the costs, benefits, and availability of outside options.

Some of the Gamemakers also use the data and behavioral manipulation to increase our loyalty－stickiness－and addict us. The longer the time we spend on their apps－the more "eyeball time" we put in－the more personal data they can extract from us and the more money they can make by selling access to those data to advertisers.

"Your kid is not weak-willed because he can't get off his phone," one neuroscientist noted. "Your kid's brain is being engineered to get him to stay on his phone."

The same could be said of all of us. Developers fiercely compete to make their apps and games as addictive as possible, thereby eroding our capacity for free choice.

The Holy Grail is the so-called "diaper apps"－apps "so addictive" we "don't even want to get up to pee". And the Gamemakers stand ready to help the app developers create ever more addictive products, as they collect even more data from these developers which they use to help advertisers target us and our children with behavioral ads.

And so, our online economy, while seemingly still delivering on many aspects, has significantly transformed. It is increasingly characterized by innovations aimed at exploiting, rather than helping, us. It is increasingly controlled by a few leading platforms that leverage their market power and quash potential competitive threats and disruptive innovation.

If you were in the Gamemakers' position, you might do the very same－work hard to ensure that the competitive process you devised remains undisturbed. In this ecosystem, the Gamemakers set the rules, enforce them, and neutralize any potential threat (by acquiring them, copying their innovative features, or killing them). The Gamemakers also ensure the legal and political environment remains supportive of their efforts and try to stifle arguments in favor of any form of restraint.

Not surprisingly, the rise in the concentration and power of Gamemakers has attracted the attention of competition enforcers around the world. Until a few years ago, many were hoping that market forces will be sufficient to topple the Gamemakers.

But over the past few years, after they studied in depth these digital platform markets, including the Gamemakers' internal documents, they realized that these digital platform markets, characterized by network effects and economies of scale, do not easily self-correct. Some intervention is required.

The challenge, as always with competition enforcement, is to identify the adequate level of intervention and come up with policies and enforcement that can stimulate healthy competition, without distorting incentives to invest and innovate.

So agencies around the world have increased their scrutiny over possible monopolization, abuse of dominance, and exclusionary practices of these powerful gatekeepers. We have seen increased numbers of enforcement actions, as well as proposals for a range of regulatory tools. These actions bring hope for a more transparent and fairer digital economy, in which competition, innovation and investments actually benefit us, rather than exploit us.

Ariel Ezrachi is a professor of competition law and director of the University of Oxford Centre for Competition Law and Policy, and Maurice E. Stucke is a professor of law at the University of Tennessee. The views don't necessarily reflect those of China Daily.

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