Tough regulation might benefit consumers. It will certainly benefit platforms
“I believe we need a more active role for governments and regulators.” Thus wrote Mark Zuckerberg in his blog and Washington Post op-ed at the weekend. He goes on to identify four areas in which he says regulation is required (harmful content, protecting elections, privacy and data and data portability). Given the grilling that Facebook has suffered over the last 12 months as the platform most firmly in the firing line, it could be argued that his comments were merely an acceptance of the inevitable and that co-operation was not only a better look than opposition, but “engage and shape” was a better strategy. However, it may be that Facebook has less to worry about than many people think.
For an instructive, if uncomfortable lesson, we can turn to the tobacco industry. Beginning in the 1960s, countries in the developed world progressively introduced policies designed to curb smoking. From health warnings, to advertising, then sponsorship and promotional bans, restrictions in distribution and at point of sale, plain packaging and punitive taxation, the result has been to create barriers to entry that have served to entrench the dominance of incumbents.
“The Enlightened Tobacco Company” was one challenger that dared to attempt market entry with the admirably honest “Death” cigarettes, launched in 1991, and their brilliantly incisive light brand, “Slow Death” (later re-branded, somewhat disappointingly, “Death Light”). By 1999, when the company finally gave up, the large tobacco companies had cemented their place as the darlings of investment managers, so reliable were their revenues and so cavernous their margins. Moreover, freed from having to invest in any marketing in developed countries, big tobacco was able to re-direct its efforts towards developing markets with entirely different cultural attitudes towards smoking. It’s taken the disruptive influence of “heat not burn” for them to feel any heat.
For the avoidance of doubt, the comparison drawn here between platforms and tobacco is not in terms of harm, but policy. Most agree that regulation is both inevitable and necessary, but the burden will always favour legacy participants with established market shares and deep pockets – you can be sure that the major platforms will argue strongly against any exemptions for smaller companies, especially now that the era of buying up their competition is over. The lesson from the tobacco industry is simply this: if you think the likes of Facebook, Twitter and Google are too powerful now, it might be that you haven’t seen nuthin’ yet.
Russell Seekins, 3 April 2019