The European Commission has just fined Google nearly $1.7 billion for abusing its dominance of search ads to make life difficult for its competitors. This is the third massive fine in the past two years. In June 2017, the commission fined Google about $2.7 billion. In summer 2018, it imposed a fine of more than $4.8 billion for other forms of anti-competitive behavior. This marks a new willingness of European regulators to intervene against big tech companies — and some U.S. politicians want to follow in Europe’s footsteps.
Antitrust is different in Europe
The European Union has a very different antitrust system from the United States. The big cases are handled by a special directorate-general of the European Commission. Unlike in the United States, the commission does not have to make or threaten a court action to exact a penalty. Instead, it acts on its own, and the penalized company has the opportunity to appeal the penalty to the European Court of Justice. This may sound like a minor difference, but it means that the commission has greater ability to set the policy agenda than its American equivalents. It has used this ability to carve out a big role for itself, not only taking action against companies but also against national governments that provide various forms of state aid for their firms. In the last year, it has seen pushback from powerful member states, who are now saying that Europe needs to build up champion companies, which can push back successfully against Chinese and American competitors. But there has been little domestic pushback when it looks to clip the wings of big U.S. firms.
There is one other important difference in antitrust doctrine. In the United States, thanks to the success of the law and economics movement, judges typically decide antitrust cases by figuring out whether there is direct harm to consumers. In the E.U., antitrust regulators also consider whether there has been harm to other companies that are trying to compete with the targeted business, or harm to innovation or to the E.U.’s Single Market. They are also less influenced by law and economics analysis. This makes it easier for the E.U. to take action.
The E.U.'s more distrustful of big tech
All this means that the E.U.’s actions aren’t just guided by economic analysis of consumer welfare. They are also responsive to a broader set of policy concerns, including privacy, and less impressed by arguments that light regulation and entrepreneurship go hand-in-hand. As my and Abraham Newman’s new book, “Of Privacy and Power: The Transatlantic Struggle Over Freedom and Security,” describes, the E.U.’s antitrust policy now goes hand-in-hand with a broader set of worries about data. As one European official described it to us for the book:
Silicon Valley Wild West digital capitalism has really gone out of control and we have to do something. The GDPR is a big first step of course, but we need to do more. We need to address it in terms of competition power and monopoly regulation. … One institutional aspect … that hasn’t become very public but may have been important in our institutional environment [is that] the European Data ProtectionSupervisor, BEUC, [which is] the consumer groups umbrella organization and the Competition Commissioner held a conference two years ago on how data protection, consumer protection and competition law can agree and reinforce each other, and work hand-in-hand, so to speak. I think that was a really interesting point, where also Margrethe Vestager [The European Commissioner for Competition] really understood that if she talked about competition, you also need to address the amount of data the company has.
Google should be worried about the U.S., too
Google will be very unhappy with the commission’s fine, and will almost certainly appeal it, as it has appealed other fines in the past. It is seeing increasing efforts by European regulators to tighten controls on its business model, through antitrust, through privacy law and through restrictions on content. What Google is probably even more worried about is the prospect that the European approach to fines and regulation could spread to its home jurisdiction. U.S. legal intellectuals like Lina Khan have gained increasing attention for their proposals for radical changes in U.S. antitrust enforcement, so that it would address the power of big tech companies like Google, Facebook and Amazon (The Washington Post is owned by Jeffrey P. Bezos, who is the founder, chairman and chief executive of Amazon). Candidates vying for the Democratic presidential nomination such as Elizabeth Warren and Amy Klobuchar have advanced proposals for beefing up antitrust and changing U.S. laws around data.
In a recent interview with Kara Swisher, Vestager noted that “the debate is really sort of taking off [in Washington]. When I’ve been visiting and speaking with people on the Hill … I’ve sensed a new sort of interest and curiosity as to what can competition achieve for you in a society.”
European and U.S. regulators have communicated with each other for a long time, to coordinate actions and not invade each other’s turf. In the past, most of the intellectual influence has gone from the United States to Europe. It’s possible that this may now be changing.
Henry Farrell is professor of political science and international affairs at George Washington University. He works on a variety of topics, including trust, the politics of the Internet and international and comparative political economy.