When Google fails fine, rewrite the rules

There’s a good reason smashing tech giants is the nuclear option: it’s a deterrent. If everything works as expected, you should never have to.

On Tuesday, EU Competition Union chief Margrethe Vestager and Internal Market Commissioner Thierry Breton announced a range of new tools to tackle the excesses of the West Coast’s best, including the possibility of dismantle them. If the legislation has the desired effect, the most extreme measures will remain intact.

The EU is right to arm itself. A decade of antitrust efforts against parent company Google Alphabet Inc., including imposing fines amounting to 8.2 billion ($10 billion), has done little to deter other tech companies from pursuing seemingly anti-competitive behavior. The European Commission is now looking at Amazon.com Inc., Facebook Inc. and Apple Inc. In the United States, the House subcommittee on antitrust is developing its own new legislative proposals for the same reason: legal structures existing systems were not adequate. deterrent.

The regulations the European Commission proposed on Tuesday – the Digital Markets Law and the Digital Services Law – aim to address this problem. The DMA will classify certain online platforms – for example, those with annual sales in Europe exceeding 6.5 billion euros and more than 45 million users in the region – as “gatekeepers”, subjecting them to new rules. that prohibit activities that unfairly disadvantage competitors. .

Violators could be fined 10% of income, in accordance with existing antitrust laws. (Although in practice companies are often fined less, a 10% penalty would mean, say, $27 billion for Apple, based on last year’s revenue.) And content, with fines of up to 6% of sales.

Fines of the size discussed can be easily swallowed by tech companies, given that their free cash flow will average 19% of sales this year. This is why the DMA also states that repeated violations that serve to strengthen the dominance of the carrier company could lead to forced divestments – the aforementioned nuclear option.

The new tools the EU wants to crack down on Big Tech

The new legislation could be written into the statutes within a year and enter into force six months later. This will of course depend on how long it takes to get through the European Parliament and the Council. But so far the proposals appear to enjoy broad support from member states – Ireland being the only notable exception.

This shouldn’t come as a surprise. As the seat of many of the West Coast giants’ European headquarters, Ireland is responsible for ensuring they comply with existing rules, such as the General Data Protection Regulation. Yet it failed to do so, much to the chagrin of its European partners.

In fact, the DSA implicitly berated Ireland for its irresponsible management of these companies. While the European country of domicile of a company would still be responsible for administering the new rules, the Commission, unlike the GDPR, will retain the possibility of intervening and taking over if the Member State concerned does not do so. . It was a not-too-subtle dig to Ireland’s apparent indifference.

This position further suggests that the EU takes law enforcement more seriously. But as with any nuclear option, the proposed weapons can only be considered a success if the powers in place never have to deploy them. It’s in the best interests of tech companies not to motivate them.