Ipast For decades, Europe and the United States have taken different paths in regulating large companies. Regulators in the U.S. have largely backed down as big business has gotten bigger, especially tech giants like Google, Apple and Facebook. In contrast, Europe sees the need for rein in large corporations. Its overseer became the most feared in the world, Margrethe Vestager, European UnionHead of Antitrust since 2014. Even if Europe fails to come up with its own tech giants, Silicon Valley faces the most scrutiny not in California or Washington, but in rainy Brussels, home to the European Commission.
Liberals, including this newspaper, eager to keep markets open and alive, applauded Ms Vestager and the toughness she embodies. Strong enforcement of competition rules means cheap airfare, phone calls and the like for European consumers. Meanwhile, Americans were duped by companies that were allowed to merge until there was little competition left. Perhaps surprisingly, Europe has even taken action against powerful tech giants, imposing multibillion-euro fines on the likes of Google and sometimes forcing changes to tech business models. A sweeping new set of rules known as the Digital Markets Act (DMA), effective this year, giving European Union More power over big tech companies. As the Biden administration seeks to reverse decades of lax antitrust enforcement in the U.S. starting in 2021, its regulators have borrowed many of Ms. Vestager’s ideas.
Europe may be flattered by this imitation. Still, it should now be asking itself whether its tough approach is still justified. Because even though its regulatory reasoning remains the same, the corporate context to which it is applied has changed. At least when it comes to big tech (antitrust’s thorniest issue), things haven’t gone as smoothly as Europe thought. This should prompt new thinking about how online champions are regulated.
The premise of Ms Vestager’s approach to regulation is that the consumer technology market tends to favor a winner-take-all outcome: Companies that gain an early advantage go on to gain unassailable status. Once you tell Facebook who all your friends are, it’s nearly impossible to move to a competitor’s network, even if that site offers a terrible experience. Google fine-tunes its services using reams of data, including years of users’ search and browsing histories. This bolsters its market power. Only by forcing incumbent technology companies to open up — for example by forcing Google to hand over data to potential competitors to help them train their products — can the playing field be somewhat leveled.
That’s the theory. But recent developments have shown that technology is far more in-demand than Ms Vestager imagined. Facebook is now struggling to keep existing users engaged, let alone attract younger people. Teenagers have turned to TikTok, a snappy short-video app from China. For the first time in two decades of dominance, Google is facing a challenge from the search engine that underpins its profits. Advances in artificial intelligence (artificial intelligence) are powering a new generation of competitors. Microsoft’s Bing, long the underdog, is the latest sensation. Future monopolies like Uber and Netflix are already firmly established. Across Silicon Valley, technology companies are now laying off workers. Shares in big companies have fallen as investors who used to fantasize about tomorrow’s unlimited monopoly profits now believe competition will drive down profit margins.
Is Big Tech’s weakening grip on consumers a sign that Europe’s approach is working? on the contrary. Regulatory action isn’t spurring rivals: Both Bing and TikTok rely more on ingenuity than on a helping hand from the state. The lure of capturing huge profit pools spurs innovation to the benefit of consumers. That’s what the antitrust school of American hands-off says will happen — and the European assumption won’t happen.
Charlemagne recently brought the case to Ms Vestager at her office in Brussels. For regulators, she is admirably open to those who wonder whether the assumptions behind the methods that made her an antitrust star are outdated. The Dane has taken note of the tech industry’s recent woes. But she still sees life in the strict way she used to. “Toppling digital monopolies may take time,” she said, “but time is not enough if you want to unlock the full potential of innovation.” In the years it takes for better search engines or social media platforms to emerge, there are plenty of markets Power can be abused.the power of artificial intelligence Breaking up monopolies could prove illusory, she said. Mass layoffs and falling stock prices are signs of fading hype following a pandemic-driven boom, not booming competition.
Ms Vestager deserves credit for her record of keeping competition alive in old world industries. Much of what she has done to constrain Big Tech — beyond barring large incumbents from acquiring potential future rivals, for example — still looks sensible. But now she’s motivated to do even more to control the titans. In the US, a new generation of antitrust zealots is now in power and has no time to accept the hands-off model that once prevailed there. They stretch the rules of competition to the limit in order to bring big corporations to their knees, often for ideological reasons.grateful DMA, Europe will gain enormous new powers to regulate large “gatekeeper” companies like Amazon and Apple, stopping anti-competitive behavior before it happens. Enemies of Silicon Valley want Europe to become a tech giant again.
Ms. Vestager doesn’t have to take on that challenge. Perhaps new evidence will emerge that the antitrust screws really need to be tightened. But a competent regulator like her should realize that the opposite may be required. Europe bases its decisions on the facts at hand; there is no shame in adjusting its approach if those facts change. Regulators should aim to be as flexible as the businesses they regulate. This may mean being brave in ordering thoughts and adapting to new realities. ■
Read more from our European politics columnist Charlemagne:
Germany is letting domestic squabbles pollute Europe’s green ambitions (March 9)
After seven years of Brexit negotiations, Europe is the clear winner (March 2)
Why Vladimir Putin will never stand trial in The Hague (February 23)
Plus: How the Charlemagne Column Got Its Name