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
Add to Briefcase
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.”

What We're Following See More »
KIM CALLS TRUMP A “DOTARD”
North Korea Threatens H-Bomb Test Over Pacific
2 days ago
THE LATEST

"North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after President Donald Trump vowed to destroy the reclusive country, with leader Kim Jong Un promising to make Trump pay dearly for his threats. Kim did not specify what action he would take against the United States or Trump, whom he called a 'mentally deranged U.S. dotard' in the latest bout of insults the two leaders have traded in recent weeks."

Source:
INFORMS CONGRESS RE: EXECUTIVE ORDER
Trump Makes Good on Promise of New North Korea Sanctions
3 days ago
THE LATEST

President Trump this afternoon announced another round of sanctions on North Korea, calling the regime "a continuing threat." The executive order, which Trump relayed to Congress, bans any ship or plane that has visited North Korea from visiting the United States within 180 days. The order also authorizes sanctions on any financial institution doing business with North Korea, and permits the secretaries of State and the Treasury to sanction any person involved in trading with North Korea, operating a port there, or involved in a variety of industries there.

SOUTH KOREA WILL SEND AID
Trump Promises More Sanctions on North Korea
3 days ago
THE LATEST

In response to a reporter's question, President Trump said "he’ll be looking to impose further financial penalties on North Korea over its nuclear and ballistic tests. ... The U.N. has passed two resolutions recently aimed at squeezing the North Korean economy by cutting off oil, labor and exports to the nation." Meanwhile, the Guardian reports that South Korea's unification ministry is sending an $8m aid package aimed at infants and pregnant women in North Korea. The "humanitarian gesture [is] at odds with calls by Japan and the US for unwavering economic and diplomatic pressure on Pyongyang."

Source:
HIGHLIGHT ISSUES FACING KIDS
FLOTUS to Speak at UN Luncheon
4 days ago
THE LATEST
PRESSES CASE FOR REFORMS
Trump Meets with UN Leaders
4 days ago
THE LATEST

President Trump on Tuesday night met with UN Secretary Guterres and President of the General Assembly Miroslav Lajcak. In both cases, as per releases from the White House, Trump pressed them on the need to reform the UN bureaucracy.

×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login