Europe can’t rely on the US to regulate tech giants like Google and Facebook
It would be nice to think that European and American regulators are indifferent to the nationality of the companies they regulate, but I am afraid they are not
The push to control the US high-tech giants is gathering pace, with the UK and Europe so far making the running. Notable elements in this drive have included last week a fine of €1.5bn (£1.3bn) on Google by the European Commission for blocking advertising rivals, last month the Digital, Culture, Media and Sport Select Committee’s report on fake news, and the report of the Digital Competition Expert Panel, chaired by former chief economist to President Obama, Professor Jason Furman, which came out 10 days ago.
There will be much more to come from this side of the Atlantic, and there are two main reasons why Europe should be taking the lead. The first is that these companies are all American, so any attack on them is not attacking domestic business. The second is that Europeans have different ideas about privacy from Americans – and indeed from each other.
It would be nice to think that European and American regulators are indifferent to the nationality of the companies they regulate, but I am afraid they are not. Take diesel emissions: it took an unofficial US study to reveal that Volkswagen cheated on emissions tests, and European standards have until recently not attempted to control emissions in normal driving conditions, as opposed to the artificial conditions of lab tests. But the car industry is relatively more important to the European economy, and particularly that of Germany, than it is to the US.
And so there is a temptation to see US regulators going soft on the American high-tech giants, whereas Europeans have no such scruples. That may change, and it is fascinating to see that one of the potential Democrat presidential candidates, Senator Elizabeth Warren, has called for the giants to be broken up.
Whether that is realistic is another matter, but it is worth noting that there is a deep tradition of trust-busting in America, going back to Theodore Roosevelt, US president from 1901 to 1909, who divided monopolies into good ones that gave an efficient service at a fair price, and bad ones that needed to be curbed. I suspect a similar, if a bit arbitrary distinction will be made about this generation of monopolies, or near monopolies.
That is for the future. The privacy issue is where the action is now. This is tricky. Europeans care a lot about some forms of privacy, but not about others. For example, tax records are public in Norway. That is not something that would go down well in the UK or the US – except in the case of people going for public office. In the UK people are not required to carry identification, but seem to be happy to be photographed by security cameras.
Europe’s General Data Protection Regulation, now running for nearly a year, has been seen as an example of pioneering protection, but it is hard to see it being transposed to the US. One of the frustrating effects is that people in Europe cannot have access to a number of American news sources. It is easier for some of them to block access to Europeans, rather than go through the hoops of compliance.
That leads an issue that that I think will become more and more evident: to what extent is it worthwhile for a US company to provide a service in Europe?
For the giants the answer is probably yes. At a very rough estimate, for it varies from company to company, Europe provides about one-quarter of the revenues of the big technology firms. Of that, some 60 per cent is the UK and Germany, markets which are about the same size. I cannot see Google denying Europeans access to its search engine, though that would set the cat among the pigeons were it to do so.
For smaller US companies, however, it may not be worth exporting services to Europe. I suppose the obvious example is Uber’s main rival, Lyft, now about to go for an IPO. It started operating in Toronto over a year ago, but so far has not looked beyond North America.
That in turn leads to a final point: this is not just about privacy – it is about business practice.
All businesses in all sectors of the market try to beat their competitors. But there is fair and unfair competition, and there have been troubling instances of abuse of dominant market position. We will hear more about these in the months ahead.