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Defeating the Digital Oligopoly

The digital democratic market has failed. Might cooperative economics be the answer?

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It wasn’t meant to be this way. The internet’s supposed low barriers to entry were going to allow for a competitive, democratic marketplace. Instead we have digital oligopoly. Despite their protestations and proclamations, the internet’s giant corporations - be it Google in search, Amazon in publishing or Facebook in social media – are monopolies, pure and simple. We shouldn’t need to argue the fact.

What we must do instead is think long and hard about how we can inject a little equality into the digital marketplace.

At this year’s HowTheLightGetsIn Festival Phillip Blond, Aditya Chakrabortty and Google’s very own Adam Cohen came together to do just that in the debate Markets, Monopolies and Freedom.

Blond, the author of Cameron’s Big Society project, argued that there are deep structural problems with the internet as a marketplace. More than any form of capitalism we have known, the digital variety is a “rigged game for dominant players”. Take for example the ‘self-preference’ phenomenon, wherein the internet giants seed smaller companies and pick winners. Google is a particular fan of this ploy. The details are pretty gory. Google buys a company, advances it up its search engine, prioritising it in its results above everyone else, and then watches as the revenues rise. This type of market manipulation is more than a little frightening.

But perhaps the biggest concern, as Blond himself points out, is that “we don’t have the conceptual or legislative tools to deal with internet monopoly”. Stringent, fully-enforceable competition laws would be the obvious starting point. But implementing effective global competition law is easier said than done. Another option is a balkanisation of the internet, and with it the digital marketplace. China offers an extreme, highly imperfect example. China’s national firewall has been successful in keeping foreign internet giants at bay. But domestic clones of Facebook, Twitter and Google have merely taken their place. A more compelling example is the idea of an EU internet, something Angela Merkel backed only a month ago. This would undoubtedly present a real challenge to the largely American internet giants.

A change in the laws and structures of the internet is certainly necessary. Enforceable, stringent, global completion laws would prove invaluable in the fight against digital oligopoly. An EU internet would likely see at least some control wrestled from Silicon Valley. But there’s still something missing.

As well as tightening the rules and conditions of the game, we need to change both the structure and ethic of the players. In Markets, Monopolies and Freedom Blond calls for a restoration of “the commons” in relation to the digital marketplace. “I would like to see user ownership rights. The more you use Twitter, FB, Google, Amazon – the more of your data that you give to them – you get shares and assets in the company. After all it’s your property (data) that has been privatised.”

This is by no means a radical idea. In fact we have an economic model that does exactly as Blond would like. It’s called a consumer cooperative. I would argue that if internet giants were structured as consumer cooperatives, the problems of digital oligopoly and data proliferation would surely begin to disappear.

The UN declared 2012 the International Year of the Cooperative – an attempt to share the cooperative success story with the world. When one takes the time to look at the facts and figures, you can see why.

The world’s ninth largest economy, the cooperative sector has 1 billion members. Yet despite these fairly modest figures, it employs 10 per cent more people than all the multinationals and their subsidiaries combined. The world’s oldest cooperative, Spain’s Mondragon Corporation, has outperformed private sector companies on employee compensation and, during several bleak recession years, unemployment rates. During the very worst of the recession, whilst unemployment in Spain as a whole was 25%, unemployment in the province of Guipuzcoa, where Mondragon is based, was 13%.

Consumer cooperatives, as well as worker cooperatives, have been hugely successful around the world. 70% of America is now served by rural electricity co-ops. The agricultural markets of all three provinces of Western Canada are structured almost entirely on a cooperative basis. All are thriving.

The economy of Emilia Romagna in Italy, and particularly its largest city, Bologna, presents another story of cooperative success. Bologna’s worker and consumer cooperatives are multi-billion-dollar businesses that compete successfully in the global market. The key point here is that if the world’s internet giants were to be structured cooperatively, they would continue to run as successful enterprises.

On a local scale, user-ownership is spreading. Around the UK more than 300 communities now run their village shops as cooperatives, an attempt in part at grassroots level to counter the monopolistic power of supermarket giants.

To combat ever-increasing digital monopoly, and to counter the proliferation of personal data within the digital economy, we should look to the cooperative movement for answers. We should, as Blond argues, instate a real ‘digital commons’. Cooperative economics is not idealistic or fantastical. It is applied successfully around the world today across sectors. We must wake up and embrace it in the context of the internet and the digital economy. Now.

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