Digital Corporations and Future of International Corporate Regulations

Author: Yashoda Gandhi, Shahaji Law College

Abstract

A digital corporation is a company that mainly runs through digital technologies. It grows through its online presence, utilizing online platforms, data, and automation to engage with customers, suppliers, and employees, while gaining a competitive edge over its competitors. The irony is that digital corporations like Google, Apple, and Microsoft, which started as businesses, have ended up regulating what customers view and what data is shared makes them de facto private regulators. These corporations are governed by the country's law, like the EU’s DMA/DSA, US antitrust, and OECD global tax rules. The problem with these laws is that they are limited to a particular nation. Whereas these corporations operate worldwide, creating a gap in regulating them, this allows them to regulate themselves without sufficient public oversight. To increase global transparency and mandatory interoperability among big tech companies, establishing global rules for digital corporations is the need of the hour. This research aims to map the problem, showcase case studies, and suggest a future roadmap for global regulation that protects both innovation and the public interest.

Keywords

Digital regulatory power, Platform governance, International tech regulation, Regulatory capture, Digital sovereignty, Corporate digital responsibility.

Introduction

Since the past decade, digitalization has been in a boom. Where the corporation has seized the opportunity to turn digital, which provides them with global reach, these digital corporations, mainly Apple, Meta, Microsoft, Google, and Amazon, have changed the Global economy and also reshaped societal as well as business norms. Since no present provision can assess each move of these digital corporations that takes place at the global level, it creates a gap that is further filled by their acting as de facto regulators.

Regulation evolved along with the technology. Current laws such as the EU’s Digital Markets Act and General Data Protection Regulation (GDPR) underscore the limited ability of national governments to manage the transnational influence and infrastructure power of major tech platforms. Since there are no regulations that transcend borders, these huge tech companies are led to self-regulate and set their own norms, standards, and operation mechanisms.

The purpose of this research is to understand whether the national and fragmented regional laws are enough to manage global tech giants or whether there is a need for harmonized international law that governs digital corporations at the global level. It is also important to understand how digital corporations are acting as private regulators by overlooking the public at large and how the public is impacted by it and to suggest to policymakers the need and the urgency of international regulatory coordination.

If there are no international laws governing these global tech giants, then they will continue to make decisions on privacy, competition, and consumer rights without involving the government and the people. In contrast, international laws can impose accountability and transparency on every action. The traditional and fragmented regulatory systems need to evolve to support the current scenario. Effective cross-border regulation is vital for preserving innovation, competition, and fundamental rights in an increasingly digital society.

Literature review

Shortcomings of the current regulation

The current regulations are not foolproof to hold these tech giants accountable for their actions. While they intend to be applicable in the current scenario, in reality, they lack. While there is no consensus regulation, the leading countries like the US, UK, China, and the EU have their own regulations to enhance oversight and tackle the harm that might be caused by digital corporations. While these fragmented regulations are so different from each other, they restrict internet openness and innovation. It is easy to say that the governance stresses accountability and transparency, but when it comes to their implementation, there is no proper method or rule that can question their effectiveness. So, they become a failure in implementing digital solutions within a corporation. There is an urgent need to introduce a policy that mainly revolves around the protection of human rights. Earlier, the state itself was responsible for it, but due to the current scenario, it is the state's duty to make it obligatory for these global tech giants to prioritize the protection of human rights in their every action.

Below are current regulations along with their limitations-

The US follows the state action doctrine, where the constitutional and public rights do not apply to private tech companies. Whereas the EU has made enough effort to blend private and public law, yet there's a gap.
The U.S antitrust law mainly focuses on price, market strategy, and competition, and overlooks the protection of human rights, freedom of speech, democracy, etc.
The Digital Services Act (DSA), as well as the AI Act, has implemented provisions relating to corporations, but, as per certain critics, it still focuses more on corporations rather than just the basic rights of individuals.

Current regulations leave critical regulatory gaps unaddressed, which makes digital corporations de facto regulators. And these de facto regulators aim only at maximizing their profit, overlooking the benefit of the public at large. While there is no transparency and accountability in the decision-making of these global tech giants, it becomes nearly impossible for the Government to take action against them. With the digital world being controlled by global tech giants, civil society organizations, researchers, and government officials are trying to find a balance where, with economic growth, people's rights are not overlooked.

Examples of digital corporations as regulators

FTC vs. Facebook (Meta)

The FTC sued Facebook (Meta) for purchasing Instagram in 2012 and WhatsApp in 2014, claiming that Facebook (Meta) is trying to maintain a monopoly in the social networking platform by purchasing the most used apps before they become huge. FTC also further argued that its purchase was not because people prefer their service but to kill their competition. This is unfair for consumers, and it restricts innovation. The case was filed in 2020, but due to the demand for stronger evidence, it was refiled in 2021, where judges agreed they had a stronger point.

It is important for FTC to win to put out that buying their competitors to stay on the top is not valid.

DOJ’s Ad Tech Case Against Google

The Department of Justice fought a legal battle against Google for violating the antitrust law. The DOJ accused Google of having control over every stage of the online ad system, like advertisers, publishers, and exchanges; it is acting as the decider of its own game. Google used this control to favor itself and push rivals out.

This creates a monopoly in the advertising and increases the prices, which violates the sole purpose of the Antitrust law.

DOJ asks for Google to break up its ad business, which can only bring an end to the monopoly. Where the DOJ won and Google was declared a monopolist.

Data Privacy and Security Issues

Digital corporations rely solely on digital data; without it, their growth is hindered. While these same issues become the point of concern for the general public as their data is circulated globally, sometimes with consent and sometimes without. This was seen when the data of U.S citizens was utilized in the political ad campaign in 2018, after which the concern of the general public was affected.

The Studies done for the Digital Business Indicators project show that out of 21 pilot countries involved in this study, ⅔ have implemented strict rules regarding data privacy and security. The Digital Business Indicators project works in three dimensions—the rights of people whose data is used, rules regarding data flying between countries, how security is maintained, and how rules are enforced. While a few countries like Russia and China have imposed most restrictions on cross-border data flow. France and Mexico have the most stringent provisions, requiring consent to be freely given, specific, informed, and unambiguous.

Global tech giants need to prioritize the prior consent of their users. They currently use a system where the tech giants share data of users, unless they manually opt out. Rather, they should use auto opt-out until the user chooses to opt in for data sharing. This will help in protecting democratic values, including human rights. While the Big Techs are now crucial players in all streams of the policy process, they set an example in every field they work. When they act as a regulator, making decisions about how a particular thing is going to operate without considering people's needs, it sets the wrong tone. It shows how they do not have to be accountable for their actions. This is serious because multiple standards, trends, and cultures have been started by these tech firms for their own profit, and the general public never gets the slightest hint of how they have been played by them.

Transnational democratic threat posed by Big Tech

The multinational companies, before the advancement of the digital sphere, were limited to a particular area, which also helped the government in tracking their advancement. Since the corporations have gone digital, they are spread globally, bringing together different parts of the world through the infrastructures created by these corporations, which work on the flow of information and help people communicate beyond national borders.

While political voice is encouraged, it also harms democracy. The active participation of the public in the issues of another country can lead to democratic pressure. Which, in one way, is good, but excess can only cause mayhem. The people who have certain views on Modern challenges, such as climate change, public health, and global economic integration, believe that democratic decisions in one country are influenced by global factors, complicating old ideas about national sovereignty. These issues can be addressed by nation-states to include global governance systems where people impacted by decisions can participate in or challenge those decisions.

In the current scenario, people are so stuck that they are not ready to be open about other possibilities. This happens because they are in a closed group where like-minded people have the same views on each debate and discussion. This is further used by big tech, where they filter the information as per the users' past behavior and beliefs to show them what they will find pleasure in, which limits the exposure of diverse ideas and makes it impossible for one to have an open mind. The few big tech firms are the deciders of what and how information flows, rather than showing the truth and real information. They act as gatekeepers of free speech and public opinion, which poses a threat to democracy.

The political voice is important nationally and beyond borders, while it helps one expand the horizons of their thoughts. The role played by Big Tech in this process controls the communication infrastructure globally, which limits political participation. For such reasons, there is an immediate need to rethink the regulation beyond domestic frameworks toward cooperative global solutions that recognize the transnational power and effect of Big Tech platforms.

GRIP for Technology Governance

Technology, on one hand, is taking a boom and governance of such technology is still on standby. This affects the growth of any technology if it is not bound by the governance of the country. Various opportunities are missed, and at the same time, people become hesitant to show their willingness to use such technology. The world needs new approaches for governance of such technologies that match the speed and complexity of the innovations that were created for our support. Innovation can never be a success if they are not backed properly with regulation to avoid the misuse of the innovation and serve its purpose.

This growing challenge was addressed by the World Economic Forum in collaboration with the UAE’s General Secretariat of the Cabinet by finally launching the Global Regulatory Innovation Platform (GRIP). GRIP is a new initiative designed to foster human-centered, forward-looking, and globally coordinated approaches to regulation. Its goal: to build trust, reduce uncertainty, and accelerate innovation that serves the public good. As the traditional system fails due to its inability to keep pace with modern technology, GRIP is the modern solution to the regulatory problems of innovation.

People's expectations of the technologies are increasing. While these technologies make everyday chores easier, the public is still reluctant about whether they are safe, fair, and in their own best interest. Technology utilizes a person's personal data, so it's only fair for them to demand transparency, inclusivity, and accountability if anything goes wrong. To keep a check on whether the innovations are limited only to public benefits and are not being misused. GRIP puts these concerns at the center of regulatory innovation, working to ensure that emerging technologies serve society rather than disrupt it. It helps in recognizing that the problem faced in one jurisdiction can benefit others facing similar challenges. GRIP is an invitation to all the innovators, regulators, and communities to reimagine the way we govern the technologies. It seeks to create a global movement for agile regulation that learns continuously, adapts quickly, and prioritizes human outcomes over bureaucratic processes.

A regulatory framework that is responsive and clear helps the innovation to reach great lengths. This also gives confidence to the investors to invest in such innovations, and public confidence to rely upon such innovations and leaders to guide such technologies for the public interest.

Need for multilevel, strategic, and political action.

Regulation of big tech is not just the role of policymakers or courts; it requires the involvement of political leaders, different parts of government. Since big tech is habituated to bending the laws in their favour, it will take a lot more than policymaking for their regulation. These big tech companies are linked with our daily key services like payment, communication, and public services, and taking them on will encourage a pushback, like legal challenges, political pressure, and economic threats. While they are financially so strong, they can use it to carve out their way by influencing public opinion and lobbying the government.

While the government takes on the role of regulating these big techs, they will have to be patient enough to handle the problems that might come their way, including disruption to consumers and businesses in the short term. The government should also make sure that the regulatory method is updated as per the digital era and not just any old school method, or it will not be able to command the big techs. If they are not regulated, they will soon start to control the public information and future artificial intelligence, reducing government power and public oversight.

Conclusion

For the Protection and preservation of human rights Regulation of Digital corporations at the earliest is the utmost need. While big tech has brought in a lot of innovation that proves to be of dire need to the public, they should not profit at the cost of the basic rights of people. For this proper regulatory system has to be formed that looks after the creation, innovations of the big techs to avoid these innovations being misused. The big techs should make sure they focus more on accountability, transparency, and inclusivity of the general public, because then only the general public will be able to have faith in them.

Fragmented regulatory bodies should come together to form one regulatory body that unanimously works on the regulation of big tech around the world under one act.