Germany v. Google
LONDON
– American tech companies are under unprecedented attack by European
Union regulators. The European Commission has charged Google with
abusing its near-monopoly over Internet search in the EU to favor its
own shopping services. It has also opened a probe of Google’s Android
mobile operating system. And, as part of its just-announced “Digital Single Market Strategy,”
the Commission is calling for a comprehensive investigation of the role
of (mostly American) Internet platforms, such as social networks and
app stores.
Questionable
practices by companies from any country should be addressed in a fair,
impartial way. But that seems unlikely to happen here. The key driver of
the EU’s regulatory onslaught is not concern for the welfare of
ordinary Europeans; it is the lobbying power of protectionist German
businesses and their corporatist champions in government.
Germany’s government
boasts about how “globally competitive” the country is, and its
officials lecture their EU peers on the need to emulate their supposed
reformist zeal. And yet, while the country remains a world-beating
exporter in industries like automobiles, it is an also-ran in the
Internet realm. There is no German equivalent of Google or Facebook.
Stymied at home by red tape and a risk-averse culture, the most
successful German Internet entrepreneurs live in Silicon Valley. While
US-based companies conquer the cloud, Germany is stuck in the mud.
With Germany’s
digital start-ups stifled by overregulation and underinvestment,
dinosaurs from the analogue world set the policy agenda. Traditional
media companies resent their reliance on Google to direct traffic to
their sites and its ability to sell advertising based on snippets of
their content. The partly state-owned Deutsche Telekom hates that it
does not earn additional revenue when people use its network to make
calls on Skype, send messages on WhatsApp, and watch videos on Netflix
and YouTube. TUI, the world’s largest travel agency and tour operator,
feels threatened by TripAdvisor. Retailers fear Amazon’s ever-expanding
empire.
Germany was the first
EU country to institute a national ban on Uber, at the behest of taxi
drivers fearful of competition. And Germany’s powerful industrial lobby
frets that American tech companies could eat their manufacturing lunch.
As Günther Oettinger, the EU’s (German) digital commissioner, put it,
“If we do not pay enough attention, we might invest in producing
wonderful cars, but those selling the new services for the car would be
making the money.” Whereas Oettinger’s predecessor, Neelie Kroes,
championed the potential of disruptive technologies to benefit consumers
and boost economic growth, Oettinger is unashamedly corporatist in
advancing German business interests.
German companies are
not alone in fearing American competition, but their influence within
the
European Commission is decisive. Indeed, Germany has never had more
clout in the EU. The debt crisis, which distracted France and alienated
the United Kingdom, has thrust Germany, the eurozone’s largest creditor,
into the European driver’s seat.
European Commission
President Jean-Claude Juncker owes his position to the European People’s
Party, the center-right political grouping dominated by German
Chancellor Angela Merkel’s Christian Democratic Union, which in turns
holds sway over the European Parliament. Juncker is also indebted to the
Axel Springer media group, the publisher of Bild, Germany’s
best-selling tabloid newspaper, which strongly backed him last summer
when Merkel was wavering. And his German chief of staff, Martin Selmayr,
ensures that his country’s concerns are heeded across the Commission.
Last year, Germany
pressured Joaquín Almunia, the EU’s then-competition commissioner, not
to settle its antitrust dispute with Google, enabling his successor,
Margrethe Vestager, to pursue it. In fact, the investigation into
Internet platforms comes at the demand of Germany’s economics minister,
Sigmar Gabriel. And its outcome seems preordained; in a leaked position
paper, Oettinger proposes a powerful new EU regulator to rein in online
platforms. He recently spoke of the need to “replace today’s Web search
engines, operating systems, and social networks.”
No one forces
Europeans to use Google as a search engine; competitors are only a click
away. For shopping, Europeans increasingly bypass it, searching
directly on Amazon or eBay, or navigating through Facebook. So Google
scarcely controls, much less monopolizes, this rapidly evolving
landscape. Nor have shoppers suffered. But, whereas US antitrust law
rightly focuses on whether consumers are being harmed, EU competition
authorities also consider whether rival firms have lost out – including
old-fashioned shopping portals, such as Ladenzeile.de, owned by Axel
Springer.
Creating a digital single market
makes sense. Whereas every American Internet start-up benefits from a
huge domestic market, their European counterparts are limited by
domestic regulations to smaller local markets.
Unfortunately, the
European Commission’s proposals are not focused on enabling Italians to
buy from British websites or opening a market of 500 million Europeans
to Spanish startups. Their main goal seems to be to constrain American
digital platforms. As Gabriel put it in a letter
to the Commission last November: “The EU has an attractive single
market and significant political means to structure it; the EU must
bring these factors into play in order to assert itself against other
parties involved at the global level.”
Instead of conspiring
to hobble its American rivals, stifle innovation, and deprive Europeans
of the full benefit of the Internet, Germany should practice what it
preaches and make the difficult reforms it needs to raise its game. It
should make it easier to start and expand Internet businesses. It should
boost investment in broadband infrastructure and digital technologies.
And it should throw its weight behind a genuine EU digital single market
that benefits consumers and enables startups to flourish, instead of a
backdoor industrial policy that favors Germany’s digital flops.
Philippe Legrain
MAY 7, 2015
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