As a former journalist and head of TV-am – and possibly as a result of more recent circumstances – Jonathan Aitken will doubtless have cause to reflect that information is power. But that old clichÃ© is wide of the mark – it is, in fact, lack of information on the part of one’s rivals and detractors that provides the power. Had Aitken succeeded in withholding accurate information regarding his 1993 sojourn at the Paris Ritz – information eventually supplied from the powerful databases of British Airways – then he would still be in a position of power.
So it is with the modern providers of business information. It is not good enough to have the best information available for oneself – one has to deny it of one’s competitors. I’m not just talking about users of information, although it is undoubtedly the case that a company is going to be ahead of the game if it has good online information. I’m also talking about information providers – if access to the information I provide can be denied strategically, then that also places me in a powerful position.
Online information providers Maid and Reed Elsevier were told recently that they could no longer use Reuters’ news database for their business information libraries and to stop updating news stories in Profound and Lexis-Nexis, the on-line services provided by Maid and Reed respectively. By the autumn, articles from Reuters’ Textline will be removed completely and competitive access to its news wires will also be restricted.
Furthermore, Reuters insists that the likes of Maid and Reed display onscreen acknowledgments that they carry a narrower selection of services than the mighty news agency’s own catalogue. Maid is said to have adopted the attitude that Reuters can stick its pruned version of its news service, which presumably is the kind of reaction that Reuters was looking for, since it is relaunching Reuters Business Briefing next month, in direct competition with Profound and Lexis-Nexis. Maid is replacing the access to British newspapers that it lost when Reuters pulled Textline, with a deal to carry Times Newspapers and the BBC World Monitoring Service.
Much of this is tit-for-tat warfare and is no worse nor better than any other vigorously competitive emerging market. But the question does arise whether Reuters is begin ning to abuse a complex global monopoly of information.
Those familiar with online wars may recall that in 1995, a small start-up enterprise, Electronic Share Information of Cambridge, was threatened with extinction when the London Stock Exchange pulled its access to real-time share information, days before it launched its equities service on the Internet. After the media cried foul and the competition authorities sniffed around, the link was restored, but it demonstrated how the powerful information owner could flex its muscles to crush new competition if it so wished.
Reuters is a very powerful information owner. With a century and a half of heritage behind it, it has traditionally played the part of news agency and wholesaler of news, content to leave the distribution of news to the media, both old (newspapers and TV) and new (online services and Websites). But the boom in international business information services (witness the growth of Bloomberg), has inspired Reuters, along with newspaper owners such as Pearson and Dow Jones, to promote their own online services. That has progressively meant the denial of their own databases to rivals.
There is, again, nothing essentially wrong with these free-market practices, so long as a monopoly position isn’t being exploited. But it is often, on a global scale, difficult to establish in whose jurisdiction such competition issues should be examined.
Take Reuters’ marketing activity in emerging markets in Eastern Europe. In new equities markets such as Prague, Warsaw and Budapest, Reuters’ representatives have been selling hard a slimmer, cut-price version of its Reuters 3000 stock-market system – a “down-spec” product in the jargon of the industry – and, being nimble on its feet, Reuters has largely sewn up such markets and frozen out the likes of Dow Jones Telerate.
Using this experience, Reuters can now turn its attention to a down-spec product for the UK market. The market for online business information to date has held that more and better information is a good thing, with sophisticated price histories and so on. But as one head of a private-client brokerage apparently put it to a senior dealer: “If you need Reuters 3000 to do your job, it comes out of your commission.” At some 17,000 a year, that is likely to concentrate minds.
Rumour of a down-spec launch from Reuters in the UK is further fuelled by its recent purchase of HSW, which provides unit trust sector ratings and the like in competition with Micropal. This would be aimed at the increasingly lucrative market of independent financial advisers and fund managers.
This is all good stuff. But if Reuters can use its clout to corner Eastern European markets, which in turn provide the economies of scale to provide cheaper, down-spec services at tighter margins in the UK, then the best interests of competition may not be served.
A new Government committed to the proliferation of online services (particularly in schools) may not wish to stand in the way of progress. But such progress must be checked if it is to be at the price of uncompetitive markets with monopolistic players.