Europe’s War on Silicon Valley

What’s driving the European Union’s crackdown on U.S. tech companies? And how should U.S. policymakers respond?

European Union Commissioner for Competition Margrethe Vestager speaks during a media conference at EU headquarters in Brussels on June 27.
AP Photo/Virginia Mayo
July 6, 2017, 8 p.m.

Last week’s decision by the European Commission to levy a $2.7 billion fine on Google shattered the record for the world’s largest antitrust penalty. But it’s only the latest salvo in an escalating regulatory barrage against Silicon Valley’s operations in Europe.

Fresh off their decision to punish Google for allegedly promoting its own online shopping service over those of its rivals, Europe’s antitrust regulators are reportedly weighing an even larger fine against the company for shutting out competitors from its Android operating system.

It’s not just Google. Germany’s antitrust office is now investigating whether Facebook is “extorting” users into giving up personal information, and Amazon only recently settled a European Union antitrust probe by promising to change how it does business on the continent. Apple is still smarting over last year’s demand by the European Commission that the company pay nearly $15 billion in back taxes to Ireland. And in an interview with Financial Times this week, European Commission head Margrethe Vestager suggested that she was just getting started.

Some believe Europe is unfairly targeting U.S. tech companies. After all, the Federal Trade Commission looked into many of the same issues raised by Google’s shopping service as the European Commission, and decided against any enforcement action. “It seems apparent to most in the tech world that what’s going on in Europe is an effort to prevent American companies from being successful, because European companies have not been competitive,” Zoe Lofgren, a Democratic congresswoman who represents portions of Silicon Valley, told National Journal. “It’s really about Europe’s lack of innovation, not about American companies.”

But bald-faced protectionism doesn’t tell the whole story of Europe’s aggressive push against Silicon Valley. European antitrust jurisprudence differs from U.S. case law, making it difficult to accuse EU of acting in bad faith. And deep-seated European anxiety over the sweeping societal changes stemming from Google, Facebook, Amazon, Apple, and Microsoft—the so-called Frightful Five— is a more powerful driver of the crackdown than some Americans care to admit.

“It’s not just about whether Google is advantaging itself with regard to comparative shopping engines,” said Randal Picker, an antitrust professor at the University of Chicago. “Even though it’s $2.7 billion, from a social perspective that’s a small-potatoes issue if you’re sitting in Europe, compared to privacy or speech.”

“They’re not picking on Google,” said Barry Lynn, a senior fellow at the New America think tank in Washington. “What they’re trying to do is get their heads and their hands around these new type of companies—the platform monopolies.”

With the exception of Lofgren and a handful of others, U.S. policymakers have so far done little to push back against Europe’s campaign against American tech companies. Experts say that could change, as the Trump administration has a variety of options should it choose to take EU to task. But a wait-and-see approach on the impact of Europe’s new regulations—as well as concerns over Silicon Valley’s perceived opposition to Trump’s agenda—could prevent the White House from intervening.

Ed Black, the head of the Computer and Communications Industry Association and a critic of last week’s decision against Google, believes Europe’s case law on antitrust goes a long way to explaining why U.S. tech companies keep finding themselves in the crosshairs. Unlike the American focus on whether competition as a whole is harmed by a company’s actions, “The EU actually allows damage to a competitor to be a legitimate consideration in a way that U.S. antitrust law has learned not to.” Marginalizing specific competitors is a key part of how most U.S. tech companies—and especially Google—became successful, and it helps explain why they’ve repeatedly run afoul of European regulators.

But divergent case law isn’t the only thing causing the split between U.S. and European regulators on Silicon Valley. “The Obama administration was fairly interested in being aggressive,” said Picker. “But what they were not willing to do is say, ‘You’re big, and that’s a problem.’ The EU hasn’t done that, but I think they’re much more willing to think in those terms, and therefore more willing to find things as problems that we might not think are problems.”

That’s particularly true on privacy and the regulation of hate speech. Many Europeans have called on Silicon Valley to respect their “right to be forgotten,” a protection that does not exist in the United States. And European policymakers—particularly in Germany—have threatened action against Twitter, Facebook, and other firms unless they take aggressive action to remove illegal or improper speech from their sites. Experts say it’s impossible to extricate the perceived negative societal effects caused by big U.S. tech firms from the antitrust actions now under way.

Lofgren and other champions of Silicon Valley in Washington want the Trump administration to respond aggressively to the Europeans—whether that be through treaty, a push by the Commerce Department’s trade negotiator, or the strong-arm diplomacy that President Trump touts as his signature. “I think we need to call out the administration,” the congresswoman said. “So far they’ve been just a lot of talk.”

But others say it may behoove U.S. regulators to wait and see how Europe’s new rules play out. Gene Kimmelman, the president and CEO of progressive tech group Public Knowledge, says EU’s aggressive moves to insert itself into how tech companies do business could kill innovation and backfire on European consumers. “However, if the results in Europe yield better opportunities, more opportunities, lower prices for consumers, that will not go unnoticed in the U.S. and elsewhere,” Kimmelman said. “And there will be a lot of clamoring for treatment of American consumers as European consumers.”

A distaste for the U.S. tech industry’s progressive politics may also play a role in the Trump administration’s continued inaction. Berin Szoka, head of the free-market tech group TechFreedom, noted that in some Republican circles, Google and other Silicon Valley firms are viewed as virtual arms of the Democratic Party. While Szoka believes that the White House could push back on Europe by affirming U.S. antitrust principles, he worries that the Trump administration will instead join in on the regulatory dog pile.

“There will be multiple fronts in this war,” Szoka said. “These antitrust things are going to get worse, and there will be other ways that U.S. and European regulators will try to pressure these companies. And it’s going to get not just worse, but more political.”

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