Bank of Canada warns of leaving winner-takes-all digital economy unchecked
Access and control of user data could easily enable companies to drive out their rivals, official says
A top Bank of Canada official is warning about the risks related to the growing dominance of only a handful of big firms in the digital economy and, more specifically, their monopoly over user data.
Senior deputy governor Carolyn Wilkins said in a speech Thursday that policy adjustments should be a priority for governments concerned about the negative economic consequences of leaving the market power of some of the largest tech companies unchecked.
In prepared remarks of her speech, she said the digital economy is a promising way to raise economic growth and living standards — as long as efforts are made not to leave people behind.
However, the rise of so-called superstar firms can also lead to fewer jobs than those created by conventional companies and make it easier for some to avoid taxes because production isn't tied to a fixed location.
She also noted that the access and control of user data could easily enable companies to drive out their rivals and weaken the healthy, economy-wide benefits of competition.
"The winner-takes-all effect is magnified in the digital economy because user data have become another source of monopoly power," she said in her address in Montebello, Que., at a G7 symposium focused on innovation and inclusive growth.
"We are not going to get the full benefits of innovation if we leave market power unchecked."
Wilkins noted that the world's five biggest technology companies have a market capitalization of about $3.5 trillion US — almost one-fifth of the size of the U.S. economy.
She laid out several possible solutions like modernizing anti-trust and competition policy as well as exploring data-ownership rules, such as giving users control over their own data.
Wilkins also said more legal clarity is needed in many jurisdictions to deal with concerns over data privacy, security, intellectual property and consumer rights.
Her message on data came as leaders in Canada's tech community press governments to develop a plan to help the country reap the rewards and address the risks associated with the increasingly important world of big data.
A spokeswoman for Economic Development Minister Navdeep Bains has said there is a role for Ottawa in helping Canada become a leader in data and that discussions are underway.