The E.U., it seems, has given up hope of competing fairly with the United States. Instead, it’s simply using the American tech economy as its personal ATM.
If that sounds extreme, consider the evidence. Since the dawn of the Internet age, E.U. regulators have repeatedly taken aim at U.S. tech companies and their innovative business practices, even when those practices result in better, faster and cheaper services that European consumers have embraced by the millions.
Those penalties have included massive antitrust fines against Microsoft, Intel, Qualcomm and Google, as well as multibillion-dollar tax judgments against Apple and Amazon for taking advantage of E.U. safe harbors. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
Netflix and Amazon have been pressured into producing more of their original video content in the European Union, even as cloud service providers are being squeezed into storing data belonging to E.U. companies and consumers at local data centers. U.S.-based ride-sharing and apartment-rental services, including Uber and Airbnb, have been severely limited or banned altogether in Europe.
On the legislative front, laws draped in the rhetoric of protecting E.U. values and consumer rights have exclusively focused on the business practices of U.S.-based Internet companies. Earlier this year, for example, Europe implemented a massive expansion of longstanding restrictions on the collection and use of consumer data. The law, known as the General Data Protection Regulation, has already cost U.S. companies billions in compliance, and threatens them with astronomical fines for any infraction -- up to €20 million or four percent of gross revenues, whichever is greater.
And earlier this month, the union took up a measure that claims to “reform” European copyright law but which is widely seen as a naked attempt to tax web linking, forcing U.S. social media platforms to pay European news sources for the privilege of linking to their content. That latest action, which pretends to be enforcement of neutral antitrust law, is just another thinly veiled tariff.
The European Commission this time objects to three specific practices regarding Google’s freely-licensed Android operating system, which, the commission said, “all had the aim of cementing Google’s dominant position in general internet search.” These include bundling Google search and browser apps with the Google Play app store and prohibiting Android licensees from supporting uncertified versions of the operating system. A third practice, which involved Google paying device makers to make Google their only preinstalled search app, was discontinued at least four years ago.
In addition to the fine, the commission is demanding that Google discontinue the practices within 90 days or face additional penalties of up to five percent of its daily revenue for each day the company fails to comply. Google is appealing the decision.
This is the E.U.’s second attack against Google’s free software model in as many years. The commission fined the company $2.8 billion in 2017 for search practices that regulators said favored Google shopping applications over those of third parties. (Google is appealing that fine, as well.)
Neither claim stands up to the most basic understanding of how the smartphone market or Internet search has ever worked. The charge on the shopping app, for example, made no mention of the fact that despite Google’s alleged prioritization of shopping search results, it is Amazon and not Google that dominates Internet-based retail.
Last week’s judgment likewise ignores the fact that Android, especially in the United States, competes fiercely with Apple and its iOS operating system, which is far more tightly controlled by Apple than Google controls Android. In fact, complying with the E.U. demands may require Google to charge for software as Apple does, making Android devices more expensive -- hardly a benefit to E.U. users.
But protecting E.U. residents has never been the commission’s goal. Its latest moves point instead to a dangerous escalation in efforts to build trade barriers around Europe’s native tech industry.
Unfortunately, the E.U.’s real problem isn’t Silicon Valley entrepreneurs. It is, rather, the region’s stubborn determination in pursuing a failed industrial policy. While U.S. entrepreneurs operate almost exclusively with private funding, the E.U. has long been directly involved in the development of technology products and services. Beginning as early as the 1980s and the ESPRIT program, European governments have made repeated efforts to will a regulated tech industry into existence from the top down.
The efforts have all gone nowhere, due in large part to an unfavorable tax climate for high-risk investing, overly prescriptive labor laws that make it impossible to begin and end new start-ups quickly, and utility regulation for broadband infrastructure that has depressed investment in essential technologies, including cable, fiber and fixed wireless.
The E.U.’s most recent initiative was 2015’s much-hyped Digital Single Market, whose main goal was to remove barriers for electronic trade within the European Union that are actually getting worse. But it also threatened a vague expansion of antitrust enforcement against successful U.S. online platforms, including Amazon, Google and Facebook, even if their behavior didn’t satisfy traditional antitrust requirements of actual harm.
“[T]he way they use their market power raises a number of issues,” the DSM noted, “that warrant further analysis beyond the application of competition law in specific cases.” Expanded and creative punishments for U.S. tech companies that go well “beyond” competition law has, unfortunately, proven the only feature of the DSM to see much if any activity.
The results of such a lopsided approach speak for themselves. According to Internet analyst Mary Meeker’s most recent findings, not a single European company ranks among the top 20 most valuable Internet businesses. And every company on the list, with few exceptions, was created in the last two decades —meaning European entrepreneurs had just as much hope of hitting it big as those of any other country. Yet no European business has ranked since 1995.
President Trump was wrong to call the E.U. a “foe” of the United States. But in Silicon Valley, that description may not be too far off. This is a war we didn’t start and, without the support of our own government, one we have little chance of winning.