European regulation of Big Tech is primarily political — efficiency is secondary
The number of probes against the tech giants is growing fast. So far, none of them have led to profound structural changes.
Since 2010, Europe has launched no less than 36 probes against Big Tech, including 10 from the EU Commission, and 25 from individual European countries. Altogether, more than 70 probes have been launched, according to a compilation made by The Information ($).
The latest salvo is a fine of €500m ($590m), imposed last week against Google by the French antitrust watchdog for dragging its feet in its mandatory negotiations with the French press (more on this in a moment).
Here are a few charts and observations:
A weirdly uneven treatment
The distribution of the probes has nothing to do with the toxicity of these companies toward the competitive field or society as a whole. Ask any expert, they will tell you that Facebook is the most dangerous player in the digital world. The social network’s business model is based on fracturing society, spreading false information ranging from the “stolen” election of 2020 to antivax propaganda. As for Amazon, its behavior is a textbook model of leveling the competitive field of e-commerce, such as imposing its will on the merchants who joined its marketplace by forcing them to buy ads if they want to be visible. Add to that the ever-present risk of the dreaded “Amazon Basics” copycat those merchants face if their product is too successful, etc. Amazon might not be a monopoly in the traditional sense (none of the Four are, actually), but the company is a rare collection of near-perfect predatory practices.
Apparently, the EU and its members are tallying things up differently: each of these two companies are getting globally half of the scrutiny of the global regulators that Google does!
If we look by geographic zone, the Eurozone is leading the offensive with more than 50% of the probes launched by either the EU Commission and various countries individually.
When it comes to Google, the European Union surpasses the US, as the Commission’s actions started in 2010 with investigations about Google favoring its shopping engine over the competition. Then the EU Commission came back in 2015 over the alleged mandatory preinstall of the search engine apps on phones, and in 2016 a new probe involved Google’s Adsense barring websites from placing ads for competitors. The three cases led to a total of $9.4B in fines (appeals are pending).
Note also that the investigations took respectively 7, 4, and 3 years to come to conclusions. Brussels has its own time scale — despite a staff of nearly 1000 for the competition department. More is coming as there are currently 20 legal actions in process.
As for Apple, there is a serious acceleration, with 12 probes out of 19 flaring up over the last two years, most of them around the app store. Again, EU states are quite active.
For Amazon, the EU Commission didn’t wake up until 2019, which borders on incompetence from Margrethe Vestager, the EU Commissioner in charge of competition at the time. As for Facebook, the United States — at the federal or state level — was much swifter to act.
Why such delay? I ask many people, but nobody knows for sure. The only certainty is the core of Amazon’s anti-competitive behavior was already well-documented at the time. But no one gets fired in the EU: Vestager who didn’t see the obvious anticompetitive and toxic behavior of Amazon and Facebook, was promoted to VP of the Commission and her former staff is digging in.
Political motives and “F** you pay me” attitude
Any antitrust action is supposed to lead to a change in market structure more than penalizing a behavior. Now, over the only three EU probes against Google that lead to a fine, guess how many led to a tangible modification of market structures? Zero. And given the time it takes to investigate — four years on average — we won’t see structural changes initiated by the EU soon.
In fact, changes will most likely come from the United States, with the novel political will expressed by the Biden administration, the fact that there is a bipartisan consensus to act on Big Tech abuses and new leadership at the Federal Trade Commission with its new chair Lina Khan in a rather offensive posture.
The latest move of France’s antitrust body is another example of the degree of politicization of the game. The €500m fine levied last week against Google is motivated by the delay it took for Google to negotiate proper compensation to French media for the “neighboring right,” a strange intellectual construct which, in short, imposes on Google the obligation to compensate the media for the use of snippets in its search engine. I already explained the intricacies of the French dealings with Google and how its legal team devised a complicated system to pay something to the French media without yielding to the idea that the search engine was paying for the infamous snippets.
Last year, the French law gave three months to Google to negotiate in good faith. But between the constraints of the pandemic and the lack of a united front among the publishers (that’s an understatement, in fact, many were throwing their weight and influence to get a better deal for each of them), the discussion dragged on. Finally, a framework agreement was concluded in mid-February; over recent weeks Google also agreed to make a bespoke agreement with Agence France-Presse, which is about to be signed.
But the French antitrust authority thought that Google had bogged down the discussion and wanted to make its point. Hence the €500m fine, in retribution of the three months of allegedly slow negotiation, even if most of the issues are settled.
Several reasons lead me to believe it is essentially a politically motivated decision:
- The French presidential election is just a year away. Already some headlines suggested that the public’s attitude toward Big Tech will test Emmanuel Macron’s resolve not to soften his pro-market stance.
- The French executive was under pressure from the media, who wanted Big Tech to become the new, endless supplier of subsidies. You don’t give up an addiction that easily. Plus French publishers have convinced the French government that the blatant asymmetry between the depletion of their economics and the fat profit of “Les GAFA” should open the way to some “reparations”. And, in the version they tell the French president, they didn’t want to wait any longer.
- There is no way that the chair of the French antitrust authority could have imposed a fine of such magnitude without, at least, the approval of the executive branch.
At a time where Macron is facing an uphill battle with new measures to contain the pandemic, going after Google is an easy, no-risk move. Plus half a billion euros is a nice sum that raises spirits and makes good headlines.
