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Image: Pexels / Markus Spiske
Image: Pexels / Markus Spiske

UK should follow the USA's example to protect SME data

This year, the US judiciary stepped in to protect its startup ecosystem. If countries don’t follow suit, they risk leaving their SMEs alone on the savannah, exposed to predatory big tech firms.

The Department of Justice went straight for the jugular. The lawsuit was against Google’s search engine monopoly, the heart of its operation, and it accused the tech giant of monopolistic practices that violated competition laws. This isn’t an isolated phenomenon. There are other lawsuits against Google for its ad business, and the FTC is squaring up to Amazon. The justice department is ramping up its probe into Apple.

This is good news for small businesses. SMEs are particularly vulnerable to anticompetitive activity, and the most sensitive pressure point is data. SMEs need to access large quantities of specialised data to provide services and develop their businesses. Without it, they will not survive. This goes beyond tech. As more and more industries digitise and rely on new technologies, from computer-driven trains to virtual reality in construction, data becomes the foundation on which many businesses build.

So, the reason for this spate of lawsuits is unsurprising. The tech big boys have established monopolies over their respective turfs at a level that is not replicated in other sectors. This gives them enormous power over emerging startups; and they are more than happy to wield it.

What is surprising though, is that this showdown is happening in the US. Big tech is finding that their home turf isn’t so hospitable all of a sudden. The political headwinds have shifted. Big tech cashed in during the pandemic, and now, with electorates struggling with high interest rates and inflation, it’s an easy electoral win for the government to come and take back some of that pandemic boom.

The fact that these lawsuits are in the US only make the UK’s lack of action all the starker. I’ve founded and scaled my own tech startup in the UK and have first-hand experience of just how vulnerable you can be to the whims of these big players.

The problem is that big tech firms hold all the cards. Their services squat across different sectors, so they have accrued the specialised data that your startup needs, whether you’re in proptech or biotech; and they don’t provide access on the cheap.

This in itself is not anticompetitive. It’s not nice, but they’re just charging a premium for a service. That’s how markets work. It becomes bad for competition when a smaller firm starts to provide free access to specialised data. The bigger firms then buy them out, put the data behind a paywall and squeeze the market.

Practices like this threaten the UK’s entire tech ecosystem. If smaller firms cannot access and use this data, then they will starve. The real innovation and creativity happen at the startup level. If these SMEs can’t survive, then the UK’s globally renowned tech sector will wither away, as talent, investment, and expertise leak elsewhere.

The recent Procurement Bill is an example of just how much of a blind spot data monopolisation is for the UK government. In the bill, the government aims to streamline the procurement process for SMEs by reducing the application channels from five to three. This is sensible; bureaucracy does hold back small startups from applying for lucrative government contracts.

What it completely misses though, is that it doesn’t matter how slick the application process is if SMEs cannot access the data that they need to provide their services in the first place. Without the data, no startup will apply for a government contract because they know they run the risk of failing their KPIs. With the new Debarment List and broader categories for disbarment, they will then be prevented from winning contracts in the future.

Government contracts have been a reliable income stream for SMEs in markets dominated by some of the biggest companies in the world. Governments prefer local firms because they employ local workers and are embedded in communities. SMEs also bring specialised knowledge that cannot be replicated by global corporates.

If SMEs are priced out of the data they need, they cannot win these contracts. If they cannot win these contracts, they won’t survive. This isn’t just a problem for the firms themselves. Without SMEs, which are the backbone of industry in the UK, especially outside of London, the whole economy suffers.

This is why I want to see some action from the government. I’m calling on them to look across the Atlantic and step up to the plate, because monopolistic activity isn’t just bad for competition and bad for innovation. It’s also bad for business.

Tom O Sullivan 11

Tom O'Sullivan is founder and CEO of Animus Bytes, a developer of advanced operational intelligence applications.

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