display

When the global financial crisis slowly subsided in the spring of 2010, the leading tech companies Google, Apple, Facebook and Amazon (GAFA for short) were valued at almost 450 billion euros on the stock exchange.

The companies were trend-setting drivers of innovation who, with their creativity and technological vision, were at the heart of a thriving tech ecosystem.

The social transformation that has taken place over the past decade through these corporations is unparalleled in human history.

We cover almost all of our professional and private lives with the products of these four companies.

During the Corona crisis, sales and the valuation of the tech giants even increased significantly.

The GAFA corporations currently have a combined market capitalization of six trillion euros, about five times as much as the entire Dax.

display

The dominance has become so great that individual governments can only subordinate themselves.

Google and Apple dictated the interface for the Corona app to the federal government and not the other way around.

When Australia wanted to introduce a new law on fair compensation for its publishers, Google threatened to shut down its search engine in the country.

It seems as if many of the German and European politicians have surrendered to the superiority of the GAFA.

Complex regulatory issues are not suitable for an election campaign.

The impotence is also reflected in the media debate - it simply does not take place.

I am firmly convinced that dealing with the American tech monopoly is a question of fate for Europe.

Never before in the history of our continent have so few companies been so powerful and have had such a profound impact on our lives.

US MPs want to limit the power of tech companies

Amazon, Apple, Facebook and Google, the big stars of the US economy, have been viewed with suspicion in Europe for years.

But now the supremacy of Big Tech is also uncanny for several MPs in their home country USA.

Source: WORLD

display

Even if it is hard to imagine: the technological revolution is not over.

On the contrary, we are still in their early stages.

If we want to, then we can shape our future according to our rules of the game.

But our room for maneuver is shrinking and time is pressing.

To understand what we need to do now, it is crucial to fully understand the mechanics of the tech monopoly.

Factories used to be valuable, now it's data

In the twentieth century, a society's wealth lay in factories, machines and skilled workers.

In Germany and the EU, our entire educational and economic system is geared towards this formula.

The problem is that the digital world works fundamentally differently.

Johannes Reck, the author of this essay, is the founder and head of the travel agent GetYourGuide

Source: GetYourGuide

The behavior of customers is evaluated in real time in digital space.

As a result, digital services can be continuously improved and tailored more precisely.

The more data you collect, the better the algorithms work and the more relevant the offers become for the customer.

display

The GAFA groups have gained an enormous competitive advantage here, as they control the operating systems as well as the search engines, the browser and the cloud infrastructure.

They also own the shopping marketplaces, communication platforms, networked household appliances and app stores.

OECD wants fair taxation of tech giants

Especially between the USA and France, the digital tax is currently a hot topic.

In order to avoid going it alone at national level in the future, the OECD is aiming for a new world tax treaty that is to be signed by 140 countries in 2020.

Source: WORLD / Isabelle Bhuiyan

To stay in the picture of the 20th century: The tech monopolies no longer only own factories and machines, they increasingly own the entire infrastructure of the value chain, including all business and all communication channels to the customer.

With every new customer, this value chain becomes more efficient and profitable.

Competition within this infrastructure is only allowed as long as the competitor pays the monopolist for it according to the rules of the game or helps him with further expansive growth.

Accept losses for years to weaken competition

The capital that the GAFA companies suck out of the system through this mechanism is put directly into the further erosion of that very competition or into the development of new business areas.

The sellers on the Amazon marketplace, for example, are just as dependent on the platform's goodwill as the publishers and media houses of Google or Facebook.

This goodwill can only be bought by making all of your content and data available consistently and thus continuing to feed the monopoly and making it more efficient.

The enormous profitability of these infrastructure services allows the corporations to invest in new business areas over the long term.

The monopolists are ready to accept high losses for years in order to weaken competition and build up market shares.

Because of their enormous market capitalization, they inevitably have to occupy new, large and lucrative markets in order to maintain the expansive system and increase their share price.

The most popular argument of the GAFA corporations, with which they distract from their power, is that the products are free for the consumer and improve our lives enormously.

At first glance, that sounds perfectly plausible.

However, it is an insidious deception: the products that are sold via the platforms have to finance the high profits of the GAFA groups.

display

Thus, the users pay very well indirectly.

Worse still, you will be forced to reveal your personal information.

The tech companies have no hesitation in analyzing their own users down to the smallest detail.

They know very well that we can no longer live without their products.

Our dependency makes it extremely difficult for the regulatory authorities, since they want to benefit the citizens and not harm them.

Life without an iPhone, Google Maps, WhatsApp or Amazon is difficult to imagine and hardly worth striving for for all of us.

The bundling of the various services, such as the integration of maps in Google's search engine or the connection of the app stores to the smartphone operating systems, continues to make it difficult to break up the monopolies.

An army of lobbyists

The GAFA corporations have to be given the utmost respect for having understood this connection for years.

It is at the heart of their exculpation and defense strategy.

This is precisely where the political and regulatory challenge lies.

The corporations spend billions on image campaigns and employ an army of lobbyists in Berlin, Brussels and Washington.

There is hardly an association, an NGO or a start-up in the political sphere that does not receive benevolent support.

Politicians and entrepreneurs who point out alternatives are, with a few exceptions, quickly caught again by lobbyists and opinion leaders, fought against in the media or damaged by the company.

There are two possible exit scenarios for the end of the tech monopoly.

If we continue without strict regulation, the polarization of society will grow.

The economic opportunities of smaller companies will increasingly shrink due to the growing profits of the monopolists, and the GAFA groups can always incorporate new business fields.

The current corona crisis is accelerating this trend.

An ever greater concentration of economic power leads to the erosion of the market economy in the medium term.

And that easily leads to social strife, distribution struggles and an increasing destabilization of our liberal democracy, which can no longer master the inequality of the economy.

display

The harbingers of this development have become clear in the last few years, but our debate so far has focused on the symptoms and does not ask about the causes.

The facts have long been on the table: it is enough to see who has made record sales, increased profits and gained market share in the midst of a great European recession.

At the end of this gloomy scenario, in my opinion, there is the path to the populist, autocratic state.

The protectionist example of China shows this very clearly: The GAFA corporations no longer play a role there, and the Chinese have built their own tech ecosystem.

Chinese society pays for this system with the high price of an illiberal dictatorship in which politics arbitrarily decides who is allowed to achieve economic success.

Market economy only works for everyone

The second, optimistic exit scenario is a return to European sovereignty and our social market economy.

Ludwig Erhard already postulated that a market economy only works if it works for everyone.

In Erhard's sense, this means protection against interference by the state, but also against monopolists and cartels.

Today, Ludwig Erhard's heiress is EU Commissioner Margrethe Vestager, who, like no other politician in Europe, advocates the regulation of the tech giants.

But in contrast to the reform enthusiasm of the early Federal Republic, the EU is slower and unclear in its vision and its will to shape.

This is precisely the weakness that US corporations have been exploiting for many years.

In my opinion it is undisputed that a split up of the GAFA corporations can hardly be avoided in the long term in order to preserve the liberal democracies of the western world.

This is not only in the hands of the EU, it is ultimately a decision of the US government.

This is why the topic must be given one of the highest priorities in German and European foreign policy in the future.

display

The United States rightly urges us to take our security interests more into our own hands.

But the prerequisite for self-determination is a functioning market economy.

We must therefore call on the USA to modernize its competition law and, after the sharp debates in the Senate, to also take action in splitting up the big tech companies.

In the meantime, Vestager and the EU are taking the pragmatic path of smart regulation with the recently announced Digital Markets Act (DMA).

The DMA places large digital platforms under significantly stricter competition restrictions.

For example, the preference for own products on the marketplaces is prohibited under high penalty, as is currently practiced at Amazon or Google.

But that will not be enough to gain GAFA market power.

We have to define, isolate and regulate the critical infrastructure of these corporations.

This particularly applies to the evaluation of personal data and the allocation of your enormous profits.

Regardless of whether it is Google's search engine, Facebook's WhatsApp or the Amazon Cloud: data and profits from this critical infrastructure must not be used to expand into other markets.

Revolt by customers gives hope

We would not allow a power generator to make unlimited profits in order to compete directly with Miele, Siemens and Bosch.

It can't be any different with our digital infrastructure.

The data and algorithms of the monopolists must be accessible to all of us so that the market participants can compete fairly on the platforms for the benefit of the customer.

For a long time I was skeptical as to whether Europe would be able to cope with this enormous task.

But there is now cause for hope.

When Facebook recently wanted to force WhatsApp users to share all of their data in order to better target users with advertising via Facebook and Instagram, customers responded with an astronomical rush to alternative messenger services such as Signal and Telegram.

Both have been at the top of the app stores for weeks and stand out from the overwhelming competition in that they request significantly less personal data.

The turning point has begun and people are ready for a different future than the GAFA companies imagine.

The political decision-makers in Brussels and Berlin should follow this sign.

The social market economy is one of our greatest achievements and the pillar of our democracy.

We should fight for them, especially in the digital age, even if the opponents appear large and powerful.

Johannes Reck is co-founder and managing director of the GetYourGuide platform.