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
Brendan Bordelon
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Brendan Bordelon
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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