Scrutiny has been increasing regarding the power of tech giants, specifically on companies like Google, Amazon, Facebook, and Apple. There have been concerns about tech giants destroying competition by not allowing a level playing field to smaller players. What is interesting is that countries that are absolute believers in the spirit of free markets are determining the survival of a company. The US in particular has called out big tech companies for undermining competition.
China also has joined the US in this call, however, and that is particularly intriguing because the two countries do not always find themselves on the same side of the divide. The Chinese government has asked China’s largest ride-hailing app, Didi Global Inc, to disallow new registrations on its app until a cybersecurity review is completed. It has even asked that the app be taken down from app stores in China. The government’s rationale is that it was acting to protect the interests of its citizens and prevent security breaches. Didi is not the first of China’s tech giants to face a crackdown from the government.
What happened to Didi?
China’s Cyberspace Administration said it would be conducting cybersecurity reviews on various other technology companies, like online hiring platform Boss Zhipin and truck logistics platforms Yunmanman and Huochebang. New user registrations have been put on hold until reviews are completed there as well.
Like Didi, the owner of the Yunmanman and Huochebang platforms, Full Truck Alliance also began trading its shares recently in the US market.
In June, China announced the enactment of a sweeping Data Security Law, which comes into effect from 1 September, mandating that individuals and companies seek necessary approvals from nodal authorities if any data from China has to be transferred to overseas entities.
Anyone found violating the law would be fined anything between approximately $310,000-$1.5 million and also faces the risk of having their businesses suspended.
What makes Didi’s case this appealing is its success story. The company controls the majority of China’s ride-hailing market. It boasts Tencent Holdings Ltd and SoftBank Group Corp as its major shareholders. It was profitable in the first quarter, which isn’t a very common occurrence in this industry. Its US market debut that took place last week was the second biggest by a Chinese company, selling 317 million shares, which is over 10% of what was originally planned.
Didi’s value is the same as what makes Beijing’s death grip on tech companies so strong—data. The company has access to huge amounts of sensitive data belonging to half a billion active Chinese users. The Chinese government has been trying to get control over this data to guard users from a data breach as well as to use it in a way that harnesses economic growth that is broad-based in nature rather than aiding the fortunes of a handful of billionaires who could challenge the government’s authority in the country.
The government has become more concerned about the threat from big data recently. The quarantine and health monitoring apps introduced during the Covid-19 outbreak made it amply clear that gaming companies like Tencent and e-commerce behemoth Alibaba had access to a vast amount of data.
The Chinese government has tried to tighten the noose around these companies over issues other than privacy concerns. Antitrust issues have also been picked up to corner the big corporates. Alibaba Group Holding was fined a whopping $2.8 billion recently because of antitrust violations. Several big tech companies have been similarly investigated or fined for allegedly violating the spirit of competition and discrepancies in financial disclosure.
As the digital space grows and the nature of business as we know it undergoes a sea of changes, governments are getting increasingly uncomfortable with how technology and geopolitics is getting intertwined. There is serious concern over how far these companies can threaten or jeopardise the sovereignty of a country. And these threats are getting more pronounced, not just with e-commerce or technology companies but also by gaming software companies. Technology has become the modern world’s biggest boon as well as its biggest bane.
Is China the only one?
England recently faced the threat of malware that brings businesses and public institutions globally under the threat of security lapses. The UK has blamed Russia for being behind these targeted attacks on its institutions. Most countries are getting concerned with the level of risk at which these companies place a country’s sensitive information.
This is unstable ground. Each country is trying in its own way to balance business and sovereign interests. The UK’s Competition and Markets Authority (CMA) announced in June that it would conduct a formal investigation into Google and Amazon following concerns that the companies failed to do enough to tackle fake reviews on their websites.
It said that it would be probing whether the companies might have broken consumer law by not taking sufficient action to safeguard shoppers from such fake reviews. An initial investigation by CMA in May had assessed various platforms’ internal processes and systems that identify and deal with fake reviews. CMA also expressed concerns that Amazon’s systems failed significantly in preventing sellers from manipulation of price listings.
It is not just the UK that has brought some of these companies under the radar. The US is contemplating bills that would significantly restrict the powers of these companies, while the EU has already begun summoning the big tech firms on antitrust issues. India has also enacted new laws in the e-commerce space that prohibit these companies from storing or sharing Indian data in overseas entities.
Sovereign security concerns cannot be disregarded. Data is the new oil, and it is crucial now in determining sovereign power. It is important, therefore, to manage it with utmost care but it is also important to strike a balance. Countries should resist the urge to become increasingly protectionist. Competition alone can judge survival.
So, while governments’ discomfort towards companies dealing with big data is understandable, it also must not trample on the spirit of competition that has been the guiding principle of business. Businesses must abide by the laws of the land, but the laws should not be created in a way that does not allow businesses to thrive.