societies and economies.
Each company
A Big Choice for
WORLD WAR WEB
Big Tech
Share Data or Suªer the
Consequences
Viktor Mayer-Schönberger and
Thomas Ramge
O
ver the last two decades, a few
technology giants have come
to dominate digital markets.
Google performs about nine out of every
ten Internet searches worldwide. Face-
book, the world’s leading social media
platform, has well over two billion users.
Together, the two companies have seized
well over half of the online advertising
market. Apple, originally a computer
manufacturer, now runs the world’s
largest mobile app store in terms of
revenue, with about 80 percent of the
market, and the second-largest music
streaming business, approaching a third
of the market. And Amazon captures
close to every other dollar spent online
in the United States. These companies
are what the economist David Autor calls
“superstar firms,” able to gain huge market
shares and translate their market power
into enormous profits.
Their success has brought tremendous
benefits to users—and grave dangers to
VIKTOR MAYER-SCHÖNBERGER is
Professor of Internet Governance and Regulation
at the University of Oxford.
THOMAS RAMGE is Technology Correspondent
for brand eins and writes for The Economist.
They are the authors of Reinventing Capitalism
in the Age of Big Data.
48 f o r e i g n a f fa i r s
hoards the information it collects and
uses centralized systems to run its huge
businesses. That hoarding has hampered
innovation and allowed the companies
to abuse user data, and their centralized
systems leave online markets vulnerable
to unexpected shocks, posing risks to the
wider economy.
The most common answer to the
problem of overly powerful firms is to
break them up, as U.S. regulators once
did to Standard Oil and AT&T. Yet that
would destroy much of the value that
these digital giants have created and
probably do little to improve competition
in the long run, since without structural
reforms, killing today’s digital superstars
would simply generate opportunities for
new ones to emerge. There is a better
solution: a progressive data-sharing
mandate. This would leave these com-
panies intact but require them to share
anonymized slices of the data they collect
with other companies. Such a mandate
would decentralize digital markets and
spur innovation as companies competed
to extract the best insights from the same
data. Much is at stake; if governments
fail to act, they will leave key parts of
Western economies and democracies
vulnerable to sudden failures.
MARKETS IN EVERYTHING
What sets the new digital superstars
apart from other firms is not their market
dominance; many traditional companies
have reached similarly commanding market
shares in the past. What’s new about these
companies is that they themselves are
markets. Amazon operates a platform
on which over $200 billion worth of
goods are bought and sold each year.
Apple runs gigantic marketplaces for

Your data or your life: at the Google office in Zurich, Switzerland, August 2009
music, video, and software. As the
world’s largest music-streaming service,
Spotify provides the biggest marketplace
for songs. The Chinese e-commerce
behemoth Alibaba manages the world’s
largest business-to-business marketplace.
Mean­while, Google and Facebook are
not just the dominant search engine
and the dominant social media platform,
respectively; they also represent two of the
world’s largest marketplaces for advertising
space. And home-rental companies such
as Airbnb and ride-sharing companies
such as Uber and Didi Chuxing match
workers with customers.
Markets have been around for
millennia; they are not an invention of
the data age. But digital superstar firms
C H R I ST IA N HART MA N N / R EU T E R S
don’t operate traditional markets; theirs
are rich with data, which they use to
improve transactions and thereby make
consumers better off. More data about
the products on offer and the preferences
of buyers and sellers helps people find
what they are looking for and allows
businesses to figure out how best to serve
A Big Choice for Big Tech
their customers. In traditional markets,
informing everyone about which prod-
ucts they are likely to prefer is cumber-
some and costly, so the information is
usually condensed into a single figure:
price. Relying on prices provides the
grease that enables conventional markets
to work, but it omits a lot of detail. If a
potential customer, after learning the
cost of an item, decides not to buy it,
the seller will not know why. Was the
price too high? Or was the product just
not what the buyer was looking for?
That loss of nuance hurts both sides of
the transaction.
Prices can also be deceptive. They
are easy to compare, so customers often
believe that doing so is an appropriate
way to choose the products that will suit
them best. But behavioral economics
has long shown that humans are poor
judges of their future needs and that
their ability to make objective compari-
sons can easily be skewed, resulting in
many transactions that should not happen.
By contrast, the data-rich markets oper-
September/October 2018 49
Viktor Mayer-Schönberger and Thomas Ramge
ated by digital superstars offer lots of
information about products and prefer-
ences, along with tools to search and
filter the available goods. On Amazon,
buyers can tick options to quickly iden­
tify the kinds of products they are looking
for. Several studies have shown that
Amazon rarely offers the cheapest choice,
but buyers value the ability to find
something easily that closely matches
their needs.
Digital superstars also use data in
another important way. They offer shop-
pers digital “decision assistants,” which sift
through huge amounts of information to
provide recommendations that are often
superior to the choices that consumers
might make on their own. Automated
assistants suggest music on Spotify,
movies on Netflix, and apps in Apple’s
App Store. A third of Amazon’s retail
sales reportedly result from customers
following the advice of the company’s
venerable decision assistant.
In each of these cases, the use of
data improves market matches, and as
customers keep shopping, the assistants
learn how to make even better recom-
mendations. Most of this learning takes
place completely or largely unassisted by
humans, as data is fed into machines that
continuously update their algorithms. It
is the combination of vast markets and
decision assistants driven by the data
those markets produce that makes these
companies such enticing places for
customers to spend their money. At least
so far, consumers, and not just the digital
superstars, seem to be winning.
THE RETURN OF CENTRAL
PLANNING
Yet these gains in consumer welfare
mask dangers for both individual users
50 f o r e i g n a f fa i r s
and the wider economy. As data-rich
markets replace conventional ones, compe­
tition withers. On Amazon, for example,
consumers can still choose from a variety
of products, but Amazon decides what
brands to carry—and it pushes its own
products, from batteries to food. If Apple
wants to ban a competitor from its App
Store, it can. (Some argue that it has
already done so by delisting apps that
offer services similar to Apple’s own,
although Apple disputes this.) Market
dominance isn’t illegal, but if history is
a guide, it commonly causes problems.
As Microsoft discovered in the late 1990s,
a thin line separates market dominance
and abuse of power. If a monopoly’s
stranglehold on the market enables it,
that monopoly will almost always raise
prices when it runs into trouble. Con-
sumers may pay only a small extra cost
per transaction as a result, but the profit
difference for the monopoly can be
sub­stantial. That is one reason why many
economists worry about the ascend­ancy
of digital superstars. Market dominance
also allows companies to squash com-
petitors, either by undercutting them
on price before they have a chance to
grow sufficiently large to survive a price
battle or by simply acquiring them.
Market dominance is not the only
problem raised by the ascent of digital
superstars. These companies gather
comprehensive personal data on their
customers and store that information in
databases that are enticing targets for
hackers. Reports of major data breaches
are mounting, and many people rightly
worry about how safe their personal
information is.
But digital superstars pose an even
bigger, more systemic threat to the wider
economy. By hoarding data and operating

their own, dominant decision assistants,
they undo the resilience of traditional,
decentralized markets. In a typical market,
if a buyer or a seller makes a mistake, it
may hurt that person or that company, but
it will not bring down the market as a
whole. In contrast, in many of the data-
rich markets run by digital superstars, the
company controls all the information
about customer preferences and transac-
tions, and the company uses that data to
help its own decision assistant learn.
Buyers still make individual decisions, but
they are greatly influenced both by explicit
recommendations and by the ways in
which options are filtered and presented.
These markets are much closer to centrally
planned systems than to resilient and
decentralized traditional marketplaces.
Digital superstars don’t want to
operate a centrally planned economy.
But given the complexity of the algo-
rithms that recommend products, it’s
always tempting for these companies
to manipulate the markets they operate.
Last year, for example, the European
Commission fined Google 2.4 billion
euros after finding that the company had
distorted its search results to favor its
own shopping service. And a company’s
motives don’t always matter: the hoard-
ing of data makes it far easier to system-
atically influence consumers’ decisions
even without intending to do so.
Central control of data means that
faults in a system have the potential to
influence not just a single consumer but
also every market participant. If there is
a systemic problem in Amazon’s recom-
mendation engine, everyone heeding its
advice may make needlessly poor deci-
sions. People may buy products that don’t
really match their preferences, shun a
particular brand without even being
A Big Choice for Big Tech
aware of doing so, or pay too much for
what they purchase. They may never be
shown the search results that best answer
their queries and never see the news that
really matters. This not only exposes
millions of consumers to the risk of
wasting their money and their time but
also endangers the market as a whole.
THE FAILURE OF ANTITRUST
Existing regulatory tools fail to address
the risks posed by today’s superstar firms.
Antitrust laws prohibit certain kinds of
anticompetitive behavior. Companies
can be fined for fixing prices or bundling
products together to stifle competition.
But such laws do not regulate market
power directly; superstar firms operat-
ing data-rich markets can exercise a
dangerous degree of control without
violating any antitrust laws.
The legislators who wrote the existing
laws assumed that competition would
make it hard to concentrate market power
for long. To be sure, as companies grow,
the marginal cost of production usually
decreases. As long as there are sufficient
buyers, it pays for a company to get big-
ger. And for some products and services,
new users improve the value for everyone
else: when more users join a social media
platform, the existing users have more
people to interact with. But the advan-
tages of being a big, well-connected
company have long been balanced by the
ability of start-ups to take on established
firms by developing superior products or
better production processes. Antitrust
laws have been needed to stop only the
most egregious abuses; innovation has
eventually taken care of ordinary market
concentration.
That is changing. Innovation is
shifting to data-driven machine learn-
September/October 2018 51
Viktor Mayer-Schönberger and Thomas Ramge
ing. Insights are no longer the product
solely of human ingenuity. They are now
the result of the automated analysis of
huge amounts of data. More and more,
the success of a firm rests on its ability to
use the information it possesses. Because
only the largest firms have access to
enough data to compete, innovation is
losing its power to make markets fairer.
To solve this problem, some experts
have suggested breaking up digital super­
stars, so that they no longer control the
marketplace, the information that flows
among market participants, and the
decision assistants. The model would
be the robust antitrust enforcement that
led to the breakup of Standard Oil, in
1911, and AT&T, in 1984. A less drastic
alternative might draw inspiration from
the steps taken by regulators in the 1990s
to force Microsoft to stop bundling a
Web browser with its operating system
and, more recently, to prevent Google
from favoring its own services in its
search results.
But by reducing firms’ ability to use
large amounts of data, such measures
would reduce market efficiency and leave
consumers worse off. If, for instance,
Amazon were broken up into a market-
place and a separate tool to provide
recommendations, the latter would no
longer have access to the huge streams
of data generated by the former. Nor
would a breakup improve competition.
Alternative recommendation engines
would not see the market data either, so
their suggestions would be no better. It
would not really matter how regulators
broke a firm up—whether they created
many little Googles, for instance, or
split YouTube from Google Search—
because after the breakup, all the new
entities would have less information to
52 f o r e i g n a f fa i r s
learn from, leading to inferior products
and services overall.
Similarly, although restricting the
ways digital superstars can collect or
use data—through tougher privacy laws,
for instance—might fragment markets
and thus improve their resilience, the
quality of recommendations would dete­
­riorate absent sufficient data, leading
to inefficient transactions and reduced
consumer welfare.
TRUSTBUSTING FOR THE
DIGITAL AGE
Luckily, regulators do not have to
choose between structurally vulnerable
but efficient markets and resilient but
inefficient ones. There’s an easier way
to foster both market diversity and
resilience: a progressive data-sharing
mandate. Under this system, every
company above a certain size, say, those
with more than a ten percent share of
the market, that systematically collects
and analyzes data would have to let
other companies in the same market
access a subset of its data. The larger a
firm’s market share, the more of its data
others would be allowed to see. Data
would be stripped of personal identifi-
ers, augmented with metadata to make
clear what sort of information the data
provided and where it came from, and
selected randomly to prevent companies
from gaming the system (by granting
access only to largely useless data, for
instance). Participants would have to
agree to certain restrictions, including
rules against sharing data with third
parties. The role of regulators would be
limited to assessing market share, an area
in which they have already accumulated
expertise. If necessary, regulators would
also enforce access to data, but they

would not actively organize or operate
the sharing system.
Eventually, data sharing should be
mandated across the board. But countries
should start with online markets, as these
are particularly vulnerable to the dangers
of concentration. In the United States,
Congress would have to amend the
country’s existing antitrust regime to
develop a comprehensive data-sharing
regulation, and in Europe, the eu would
have to act as a whole, but a transatlantic
consensus would not be necessary. Both
the United States and the eu have enough
regulatory power and important enough
markets to make a mandate enacted in
either jurisdiction effective.
A progressive data-sharing mandate
would offer several advantages. Unlike a
tax, it would not impose any direct cost
on firms; companies would remain free
to use the data they collect, just as they
do now. It would allow many firms and
people to use the same data, which would
spur innovation; today, although huge
quantities of data are collected, it remains
underused. If a wide variety of firms had
access to market data, a firm’s competitive
advantage would rest on its ability to
extract insights, encouraging companies to
develop smarter algorithms and analytics.
The policy would not differentiate
between different players that crossed
the necessary threshold; even Amazon
would have access to data from smaller
competitors as long as their market
shares were greater than ten percent.
But since smaller firms would have less
data to share and machine-learning
algorithms produce diminishing returns
for each new data point, a company
like Amazon would gain far less than
its smaller competitors. A data-sharing
mandate would lift all boats, but to
A Big Choice for Big Tech
different degrees. That would support
diversity, innovation, and competition.
Once companies had access to the
necessary raw material, they would
launch alternative decision assistants.
People might still shop on Amazon or
listen to music on Spotify, but they
might use a third-party recommenda-
tion tool to choose products and songs.
Today’s decision assistants mostly serve
the digital superstars. Tomorrow’s more
independent decision assistants could far
more convincingly represent the interests
of consumers. Price-comparison sites
already let people find the seller offer-
ing the lowest price for a wide range
of products. Independent decision
assistants would help them identify the
best product match, as well.
Creating competition among assistants
and markets would eliminate the need to
break up digital superstars, because they
would no longer enjoy an insurmountable
competitive advantage. And because the
shared data would be chosen randomly,
each competitor would train its systems
on slightly different data sets, reducing
the risk of systemic failures.
Some may worry that mandated data
sharing would only boost the power
that firms have over consumers. But
so far, regulators have mostly failed to
counter power imbalances between
users and companies by strengthening
individual privacy rights. Even in Europe,
which has enacted the strongest privacy
protections, most people routinely click
“OK” and accept companies’ privacy
terms rather than exercise their right to
choose what information they share. The
problem is that current privacy regula-
tions focus too narrowly on the relation-
ship between each consumer and each
firm, rather than considering the market
September/October 2018 53
Viktor Mayer-Schönberger and Thomas Ramge

as a whole. Mandating progressive data legislative aim is similar: to break the

sharing would not solve the privacy stranglehold incumbents maintain on data
challenge. But preventing a small number and create a competitive market full of
of digital superstars from monopolizing innovative data-driven services. Both the
data would better distribute the power European Commission and members of
that flows from exclusive access to infor- the European Parliament are studying
mation. Requiring firms to strip obvious how to legislate progressive data-sharing
personal identifiers from their data before mandates, and Andrea Nahles, a leader of
sharing it would also greatly limit the Germany’s ruling coalition, has thrown
potential exposure of their users, spread- her support behind the idea.
ing power more equally among companies Requiring companies to share their
without compromising privacy. data will come with challenges. Govern-
ments will have to overcome several
MAKING IT WORK organizational and technical hurdles,
The idea of forcing companies to share and making such a policy effective will
their data may seem novel, but it has been require some fine-tuning. But the success-
employed successfully around the world. ful cases of regulated data sharing in
In the United States, the federal govern­ the United States and Europe, and the
ment sometimes requires firms to share rising interest in such policies, suggest
data as a condition of allowing an acquisi- that regulators will be able to find prag-
tion. For example, in 2011, when Google matic solutions.
bought the airline reservation company If, on the other hand, governments
ita Software, the Justice Department leave accelerating market concentration
forced Google to continue to offer access untouched, they will threaten more than
to ita Software’s travel data to third competition. They will allow the most
parties, including Google’s competitor efficient digital markets to become also
Microsoft. The situation is similar across the most vulnerable, both to deliberate
the Atlantic. In Germany, for instance, attacks and to accidental failures that
large insurers must let smaller insurers cause systemic breakdowns. Allowing
access some of their actuarial data, so that superstar companies that run centrally
the smaller firms have enough informa- planned systems to maintain their domi­
tion to calculate risks. nance will erode the most important
Recent eu legislation has boosted the quality of capitalist markets, the decen-
idea of data sharing. Thanks to new rules, tralized way they make decisions. Worse
a consumer can now force companies to still, this centralization has begun to
provide competitors with access to his or spill over into politics. Just as healthy
her banking data (as part of so-called open markets rely on people making inde-
banking), as well as any other personal pendent decisions, democratic systems
data (as part of the new General Data are founded on the individual choices
Protection Regulation). This approach, made by voters. Yet today, much of
which the eu has dubbed “data portability,” public discourse is shaped by a few
will not have the same effect as a data- companies with exclusive access to vast
sharing mandate, since it requires each quantities of voter data. Ignoring the
consumer to act independently. But the problem is no longer an option.∂

54 f o r e i g n a f fa i r s