The Secrets of Cybersecurity: Cyberwarfare as a tactic to beat competitors
The modern digital technologies market is experiencing dynamic growth. The digital revolution has increased the role of information, data processing tools, artificial intelligence, and machine learning. To better realize the role played by digital companies in the modern global economic system let us compare the ranking of companies by market capitalization in 2009 and 2020 respectively. Currently, 7 out of the 10 biggest companies in the world may be considered digital giants.
The competitiveness of companies is determined by their capacity to implement innovative solutions. The digital segment of the modern economy may be described as a unique system of relationships that has its own rules of competition. The main fields of the digital technologies market where competition intensifies are marketplaces, app stores, social media, and search engines.
When seeking to increase their market share companies may use non-competitive and often illegal methods to beat competitors such as market power abuse or pose threats to competitors’ cybersecurity. The phenomenon existing in the digital technologies market is cyberwarfare involving not only criminal groups or organizations but also companies and entities that commit cyberattacks in coordination with governments. At the same time, according to the information provided by cybersecurity company Hacken, the demand for cybersecurity services is rapidly increasing.
Cyberwarfare may be referred to as aggressive attacks against competitors in the virtual environment aimed at causing financial and reputational damage to them. The main global players engaged in cyberwarfare are the USA, China, Russia, India, Portugal, and North Korea. Let us consider the ranking of top-10 countries in the world by the number of committed ransomware attacks (attacks aimed at making a victim pay a ransom) against companies and the position of these countries in the global cybersecurity index ranking encompassing 160 countries in 2019.
It is reasonable to suggest that the countries whose subjects commit the biggest number of cyberattacks against their competitors are not among the global leaders in terms of cybersecurity since they are subject to the risks and loses associated with cyberattacks in reply.
Non-ethical business behaviour of market players may cause damage not only to other market players but also to society, in general. A clear understanding by regulatory authorities of the methods of non-ethical market rivalry applied by companies may protect the economy and information security of citizens from possible negative implications.
Methods applied by companies to beat competitors
Whey trying to increase their market power and mitigate the risks to their competitiveness associated with the business behaviour of their market rivals companies operating in the digital technologies market may apply the following methods to beat competitors:
Intentional abuse of market power
Companies operating in the digital technologies market may use the information provided by the clients of their platforms to effectively compete against them in the future. For example, Amazon is a platform where producers can sell their products and, at the same time, develops the production of goods sold on its platform. As a result, the clients of Amazon lose their competitive advantages. In 2019, Spotify filed a lawsuit in the European Commission against the company Apple. Spotify claimed that Apple acted both as a market player and a mediator in the market of online platforms that provide music streaming services and, as a result, gained significant competitive advantages over other players. One of the indicators of the abuse of market power by companies to preserve their reputation in the market is the concealment of information about the theft of users’ private data. As a result, there is a risk that such companies will not be able to address cyber risks on their own in the future.
A market leader may decide to get no profits to decrease the price of its services on a short-term perspective to create such market conditions under which competitors would be made to leave the market. After becoming a monopoly the company raises the prices of its services to maximize profits. A price of digital services below the level of variable costs required to provide them is considered predatory. Also, when trying to keep prices at the predatory level companies may cut their costs such as cybersecurity expenditures so that they may become vulnerable to cyberattacks.
Mergers and acquisitions
The main objective of this method of competition is to combine databases of two or more companies and create entry barriers for potential competitors. The regulatory authorities monitoring the digital technologies market should take into account the volumes of information owned by companies involved in mergers and acquisitions activities rather than their market capitalization.
Entry into adjacent markets
The provision of adjacent services to the existing and potential users. The company Alipay began its operations as a provider of payment services, however, later it started providing other services including asset management, insurance, credit, and credit rating review services. Companies that are considered giants in their markets may enter adjacent markets by acquiring the existing market players. For example, in 2012, Facebook acquired Instagram when the latter had 30 million users. In 9 years, the user base on Instagram has reached more than 1 billion users. To get the information required to enter into adjacent markets companies may apply non-ethical measures such as the steal of databases of potential competitors.
Exclusion of competitors from the market infrastructure
The pre-installation or integration of services constitutes the instrument used to exclude competitors from the market infrastructure. For example, Google obliged the manufacturers of smartphones to whom it provided its operation system Android to install Google services such as Google Chrome. The Competition Commission of India concluded that Google did not allow its competitors to enter the market since the users of smartphones did not install other browsers due to inertia.
Digital companies use their technologies to distort competition in a coordinated manner. The Lithuanian developer of software (booking system) for online travel agencies Eturas was sending electronic messages to travel agents through its system offering them to provide only up to 3% discounts to customers. Upon getting their consent, the system automatically reduced to this level all discounts that were above 3%. In 2016, the company Eturas and online travel agencies that were using its software and did not inform the regulatory authorities about the messages received in the system were accused of forming a cartel.
Most favoured-nation regime
The agreement between companies and their partners regarding the provision of full information about the business behaviour of competitors or the obligation of partners to provide equal terms of cooperation to all competitors. Amazon obliged publishers distributing electronic books to provide full information regarding the terms of their cooperation with its competitors and in case the competitors of Amazon cooperated with the publisher under more favourable terms, Amazon had the right to get the same terms of cooperation. The European Commission concluded that due to the business practice in question competitors of Amazon had fewer stimuli to develop innovative solutions.
Provision of free services
To enter the market companies often use online platforms. The owners of these platforms may provide services to such companies for free in exchange for getting access to the information about these companies and their products as well as data on their users. As a result, the company that is an owner of the platform may develop its own products in the future using the obtained information to enter new markets.
Access to competitors’ files that are the objects of their intellectual property to obtain their commercial secrets. May be performed either through cyberattacks on companies’ websites by exploiting their system vulnerabilities or attacks with the application of the “active middleman” principle to intercept competitors’ communication. In 2019, German pharmaceutical giant Bayer made a statement regarding a number of cyberattacks committed against the company in 2018 that were aimed at stealing confidential information about the company’s production process through the installation of viral software. The investigation of this incident is still in the active phase, however, it is likely that the attacks were committed by the Chinese hacker group called “Wicked Panda” supported by the Chinese authorities for obtaining commercial secrets of the competitors of Chinese pharmaceutical companies. To prevent potential damage from being subject to this type of cyberwarfare companies cooperate with cybersecurity entities such as Hacken to eliminate any system vulnerabilities.
A cyberattack authorized by a government for disabling the critical infrastructure such as data transmission infrastructure of the competitor countries to cause material damage to their business entities. This method of competition is also applied to eliminate protection barriers to access without any authorization the databases of the companies operating in the competitor countries. In October 2020, the energy system of the Indian megapolis Mumbai was attacked by hackers. As a result, economic activity in the region fully stopped for some time. Presumably, the attack was committed by a group of hackers from China that coordinated its activities with the Chinese government to cause financial and reputational damage to India, the country where many corporations that are considered as the main rivals of the Chinese companies operate.
A distributed denial-of-service attack (DDoS)
A cyberattack focused on the web resources of competitors to make them unavailable to users for a certain period of time to cause financial and reputational damage to the owners of these resources. In most cases, is performed by overloading companies’ web resources with requests so that their common functioning process collapses and the resources in question start working slowly or cease functioning. In February 2021, the British cryptocurrency exchange EXMO experienced a DDoS attack that made it unavailable to users for a few hours. Currently, the exchange has not disclosed any details about the attack, however, one of the versions of the incident is an unethical business behaviour from the side of the company’s competitors. One of the services provided by cybersecurity companies is product penetration testing aimed at making companies’ resources DDoS-resistant. This service is provided by a reputable expert in the field of cybersecurity – the company Hacken.
The process of sending messages to competitors’ employees or clients to obtain desired and often confidential information that may be used to get competitive advantages in the market. Companies use social engineering techniques to perform this cyberattack. Phishing is also carried out by creating false websites of companies to collect information about their users.
Social media scams
Companies create fake accounts of their competitors on social media to establish communication with their clients to obtain their personal information or discredit competitors by asking their customers to send money or perform other activities that may make them lose their assets. Companies that apply this method of competition to beat competitors are focused on gaining the trust of competitors’ customers. Apart from the technological aspect, this method of beating competitors is focused on the use of psychological influence techniques.
Overall, to gain competitive advantages over their rivals companies may apply non-ethical methods to beat competitors. The role of information technologies in modern business is rapidly increasing and cyberattacks have become one of the most common tactics applied by companies to beat competitors by obtaining their confidential information or disabling their critical infrastructure. Rivalry among competitors should be analyzed with regard to the fact that a state is actively involved in this process. The application by companies of non-ethical methods to beat competitors results in financial and reputations loses not only from the side of companies that have fallen victim but also their clients. That is why the companies that operate in the digital technologies market should prioritize investing resources in cybersecurity while the companies that are cybersecurity experts, such as Hacken, should constantly expand the portfolio of their services to effectively react to current and potential cybersecurity threats.