The new battle in technology is between Europe’s tax lady and America’s president man. It’s Margrethe Vestager versus Donald Trump in a daring regulatory scrap for supremacy. At stake? The fates of Apple, Amazon, Facebook, Google and just about any other sprawling, market-dominating American technology company you care to name.
“Your tax lady, she hates the US,” lamented US president Donald Trump in private remarks made to European Commission president Jean-Claude Juncker earlier this week. The barbed comment was aimed at Margrethe Vestager, the EU’s antitrust chief, who has in recent years issued Google with billions of dollars in fines for anti-competitive behaviour and ordered Apple to pay €13 billion in back taxes to Ireland.
Vestager, an experienced and eminently sensible politician, insists her rulings against US companies have nothing to do with politics. “I very much like the US,” she told a news conference following her announcement that Google will be fined €4.3bn over its illegal use of Android to cement its dominance of the search and web browser markets. Vestager argues that her enforcement of established competition law isn’t political. “We do it in the world, but we do not do it in political context,” she told reporters.
But in Trump’s America, all is war and politics. Vestager’s perceived politicking will enrage a protectionist United States. Despite the commission’s protestations, the latest antitrust ruling against Google did not occur in a vacuum. Just days ago, Trump told CBS that what the EU did to America in trade made them “a foe”. Handing Google one of the biggest antitrust fines in history will not help matters.
For a flavour of what’s to come, take a look at the world of finance. Spooked by an increasingly unstable eurozone, many lenders have sought to ringfence problems within national boundaries, creating a fragmented, or balkanised financial sector. Since the global financial crisis of 2007-08, this behaviour has been encouraged by regulators on both sides of the Atlantic, who, either intentionally or by happy coincidence, have hurt foreign firms while protecting their own. As a result, accord between regulators in Europe and the US has fizzled away.
This regulatory balkanisation has many in the sector spooked. Mario Draghi, president of the European Central Bank, has urged the industry to “repair this financial fragmentation”, while Mark Carney, the governor of the Bank of England, has argued the trend poses a threat to “the efficient operation of the international financial system”. That was in 2014. Four years later, things have only gotten worse. Layer upon layer of regulation has raised the cost of doing business and created a more fragmented financial sector. That’s bad news for the free flow of capital but great news for protectionism. The lesson from the regulatory balkanisation of the financial sector is clear: when the US and EU clash, and respective regulators fail to agree on fundamental issues, it creates major headaches for big business.
Read more: Europe vs Silicon Valley: behind enemy lines with the woman deciding Google's fate
Fast-forward to 2018 and the US is now engaged in an escalating global trade war, with levies and tariffs being thrust about like sabres. As a result, the tit for tat retaliations that have haunted the financial sector for years now risk spilling over into everything from aluminium imports to antitrust fines against technology firms. In the case of Google, many in the US will view the EU’s latest ruling with a mix of suspicion and derision.
That the EU and US disagree on how to regulate gargantuan technology firms is nothing new. Since the Clinton administration, American politicians have criticised the EU’s more heavy-handed approach. But under Trump, such decisions are made in a tinderbox that risks further inflaming EU-US relations. It remains to be seen how, if at all, the EU’s continued pursuit of American corporations will be countered by the Trump administration. But now, perhaps more than ever, such rulings risk widening the divide between two political powerhouses.
While the EU’s aggressive pursuit of Apple, Google et al. looks at odds with US regulators, that’s more down to American inaction than European protectionism. In 2013, US regulators closed a near two-year investigation into Google’s market dominance without taking any action. And rather than edge closer to Europe’s regulatory approach, the US has skulked determinedly in the other direction.
In February, Makan Delrahim, picked last year by Trump to head the Justice Department’s antitrust division, said EU rulings against big US technology firms risked stifling innovation. "Where there is no demonstrable harm to consumers, we are reluctant to impose special duties on digital platforms," Delrahim said in a barbed address delivered in, where else, but Brussels. The US, he said, favours an evidence-based approach. In its protestations against the EU, Google has criticised it for failing to prove consumer harm.
Vestager would likely argue that all this drama is a distracting political sideshow. Facts are facts: Google has broken EU competition law and must pay the price. Yet the threat of balkanisation is clear: the commission’s approach to antitrust is now totally at odds with the US. For technology firms accustomed to doing business at scale across national borders, this presents a problem: will how they operate as the EU and the US drift further apart?
A regulatory war between the US and EU could, at its most extreme, force the creation of two Googles or two Amazons. Vestager has continually stopped short of demanding that Google be broken up, but against a reactionary US administration the risk of political retaliation should have everyone on edge.
This article was originally published by WIRED UK
