How Canada is trying to rein in Big Tech as data becomes more powerful

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This article was published 24/04/2023 (1252 days ago), so information in it may no longer be current.

TORONTO – Whether you’re catching a flight, opening a new bank account or picking up groceries, a small group of big names takes up most of the market share. Competition Ltd. is a Canadian Press series that explores what this means for products — and prices — in the country.

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It’s been 20 years since Marc Poirier co-founded search management platform Acquisio, but he’s never forgotten how Google kick-started its decline.

It was 2015. The tech giant had just reorganized its subsidiaries under the Alphabet banner and was evaluating whether recent forays into riskier ventures like self-driving cars, internet-beaming balloons and smart city infrastructure could replicate the success of its search engine business. As advertising revenues and growth slowed, the company felt pressure to boost profits, leaving Marc Poirier’s Brossard, Que., company caught up in a no-win scenario.

“I experienced first-hand Google going from partner to fierce competitor,” said Poirier. “They started selling the same stuff that we built.”

Revenue growth at Acquisio, which sold software helping marketers manage bids and budgets for Google, Yahoo and Microsoft search campaigns, almost immediately stopped and then began to tumble. Poirier started thinking about selling, which he eventually did with a Web.com deal in 2017.

Experiences like Poirier’s along with growing concerns around the globe about the sheer size and power tech companies have over users and their privacy, communications and data have made reining in Big Tech a top priority for regulators across the globe.

Google did not address Poirier’s specific case, but spokesman Shay Purdy noted that Alphabet underwent significant changes in the period between 2015 and 2017, including its multi-faceted restructuring and said that external factors at play then included an economic downturn after a plunge in oil prices.

While Canada is edging toward new legislation that will redistribute some revenue from social media companies to news publishers and better protect privacy around consumer data, many are also hoping an ongoing review of the country’s Competition Act will level the tech playing field.

However, investigating and unravelling monopolies in a constantly-evolving industry that once operated under Silicon Valley’s “move fast and break things” ethos is no easy task and tech companies, who know regulators are hot on their tails, are making the feat even tougher.

Much of the work has fallen to the Competition Bureau, Canada’s monopoly watchdog, which has investigated concerns ranging from Amazon’s dominance, private equity firm Thoma Bravo’s purchase of oil and gas software company Aucerna and Ticketmaster’s misleading price advertising. But the bureau and tech observers say the federal government must hand the regulator more power, if meaningful change is to happen.

The challenge for the bureau often begins with collecting proof of anticompetitive behaviour. Technology businesses are famously secretive, relying on strict non-disclosure agreements and limited staff access to keep their products from leaking ahead of their buzzy launches or competitors getting to the market first.

Krista McWhinnie sees companies getting even more intentional about how they document their decision making or make any move that has a whiff of anticompetitive sentiment, making it harder to find a paper trail.

“That alone can stop us from being able to remedy conduct that is having potentially quite a big impact in the market,” said the deputy commissioner of the bureau’s Monopolistic Practices Directorate.

Even if the bureau has proof that a company’s practices are causing substantial harm to competition, it’s not enough to warrant action under Canada’s competition laws. The bureau must also prove that a company intended to engage in anticompetitive behaviour too — “a very high bar” and “relatively unusual” requirement in other countries.

“Often that’s an incredibly resource-intensive, challenging task,” said McWhinnie. “It’s very, very time consuming and it’s one of the reasons why we see difficulty being able to bring these cases in a timely way.”

The bureau has faced criticism in recent months over how slow it has been to advance an October 2021 probe into whether Google has engaged in practices that harm competition in the online display advertising industry.

The investigation is based on the notion that Google’s dominance in online advertising may be impeding the success of competitors, resulting in higher prices, reduced choice and innovation and harmed advertisers, news publishers and consumers.

“Every day that Google is allowed to monopolize ad revenue, more harm is inflicted on the Canadian news industry, which has a negative impact on democracy as a whole,” said Lana Payne, Unifor’s national president, in a press release.

Google directed The Canadian Press to an economic impact report showing its Google search, cloud and advertising tools and YouTube provided $37 billion in economic activity for Canadian businesses, non-profits, publishers, creators and developers. This is equivalent to 1.5 per cent of Canada’s gross domestic product, it said, which is more than the economic impact created by the forestry and aviation industries combined.

Jim Balsillie, former chief executive of BlackBerry and chairman of the Council of Canadian Innovators, believes Canada’s competition woes stem from the country doing a poor job of protecting consumer rights in the digital age and lacking the tools it needs to address monopolies.

Many large tech companies derive their power and dominance from the sheer volume and specify of the consumer data they collect and the way they can combine it with artificial intelligence to uncover intimate insights and influence people.

“They can play the music that makes you dance what they want you to dance,” Balsillie said.

“The more you have data, the more you get powerful.”

Data collection isn’t just a Big Tech tactic.

Balsillie points to pharmacies, which have reams of health data on consumers, wireless carriers, which know your location within 10 metres, and banks, which know what you’re buying.

Measuring the potential value of all that data — a key part of determining whether companies are being anticompetitive — is not easy, added Jennifer Quaid.

It’s hard to capture quantitatively what impacts a merger or tech company’s policies have on innovation, creativity and consumer behaviour, especially when the company deals in data “that isn’t necessarily valuable at the time but ends up becoming valuable when it’s aggregated with other information,” said the competition law professor at the University of Ottawa’s Civil Law Section.

Quaid and Balsillie agree the task would be easier if the Competition Bureau had a more expansive tool kit that allows it to levy more meaningful penalties and reworks some policy frameworks that have allowed some monopolies to go unchallenged.

Among Balsillie’s top asks is for the efficiencies defence, which he said the Competition Bureau is “shackled” by, to be dumped because it often keeps the watchdog from taking action.

The defence is a provision allowing anticompetitive mergers to move forward as long as they produce gains in efficiency that are greater than and offset by the deal’s anticompetitive effects.

Meanwhile, Quaid wants the country to be more “bold” in its approach to competition and thinks co-operation between regulators could help.

She points to an agreement the competition commissioner signed with Meta, which was then called Facebook, in May 2020 that saw the company pay a $9.5 million penalty and admit it made false or misleading claims about the privacy of Canadians’ personal information.

The agreement came on the heels of Facebook agreeing to pay a record-breaking $5 billion penalty and restructure its approach to privacy. Last week, a judge dismissed the Canadian federal privacy watchdog’s bid for a declaration that Facebook broke the law governing the use of personal information in a case flowing from the Cambridge Analytica affair.

It was revealed in 2018 that British consulting firm Cambridge Analytica gained access to the personal information of up to 87 million users by paying a Facebook app developer for access to the data.

“There needs to be some regulatory coherence and an overarching system of how we approach these issues when they come up,” said Quaid.

“How do we share information and make sure that we’re actually doing things that work and not … redundantly doing the same investigations but from a slightly different angle?”

As for Poirier, he hasn’t thought much about how he’d like tech competition matters to be handled, but knows it’s “tricky” because companies rely on online advertising.

“They need the Google traffic … to survive. Their Google ads stop working, a lot of companies go under,” said Poirier, who co-founded a new advertising software company called Klever in 2020. “It’s what puts food on the table for many people.”

But at the same time, he thinks it’s important for people to realize Google controls the cost of ads and can make it hard to compete,

“They love Google because they can search, but if they’re not exposed to the horrors behind the scenes, they’re not going to care.”

This report by The Canadian Press was first published April 24, 2023.