Is the EU going to war against the digital economy? Two weeks ago, the European Commission, which is the executive arm of the EU, opened an antitrust case against Google. Now, prompted by the French and German governments (who are doubtlessly, as in the Google case, prompted by large French and German firms), the EC may be going after a much broader array of tech companies. The Financial Times reports:
In a draft plan for a “digital single market” encompassing everything from online shopping to telecoms regulation, the commission said it would probe how online platforms list search results and how they use customer data. The latest draft of the plan, seen by the FT, will be approved by the commission next week.
The plan could also bring in stricter rules for video-on-demand services such as Netflix and messaging apps like WhatsApp and Skype that have become big rivals to traditional European media and telecoms companies.
Companies such as Airbnb and Uber are also likely to be roped into any investigation into platforms, which will aim to determine whether they are abusing their market power in the so-called “sharing economy”.
Vested economic interests tend to be stronger in Europe than they are in the U.S. and have closer ties to their national governments. Big industrial and media firms in particular are bigger fish in smaller ponds; this magnifies their lobbying effort in Brussels—German and French companies can get their respective governments to fight their battles in Brussels, and France and Germany acting together make the wheels of Brussels turn.
Here we seem to be looking at an incipient rebellion against disruptive tech companies that threaten the business models of many large companies. And in addition to tending to wounded special interests, all the world’s major countries increasingly feel the need to promote domestic tech markets. Green with envy at what Silicon Valley and its tech wizards have done not only for the American economy, but for the competitive position of American firms and the military and intel power of the U.S. government, many in Europe want to block Google, Amazon, et al. while Europe prepares a tech sector of its own.
The combination of powerful companies threatened with disruption, fear of U.S. power (the NSA scandals continue to reverberate), and the urge for industrial planning is extremely powerful in Europe. Add one more thing: governments everywhere, including in the U.S., are becoming uneasy with the massive and as yet poorly understood power that tech companies can accumulate through the immense amounts of data they collect from billions of interactions. Eurocrats and national authorities across Europe are increasingly interested in regulating and controlling the companies and industries that look to be taking over the world.
It’s unlikely to work particularly well; protectionism and central planning don’t mix very easily with the tech revolution, and the EU is likely to pay a heavy price. But American investors, company managers and diplomats should not underestimate the determination and drive that the EU will bring to this project.