The European Parliament has called for the dismemberment of Google, the French want “les Gafa,” as they call Google, Apple, Facebook, and Amazon, reined in, EU regulators are under pressure to get tough with the Americans. And the leaders of Silicon Valley’s non-tax-paying, privacy-invading, dominant tech firms, to use EU descriptives, are surprised. They shouldn’t be.
Regulatory and competition policy is not created independent of the values of the countries in which commerce takes place. And those values in Europe are far different from the American values that spawned and drive Google, Amazon, Uber, and other disrupters, as they like to be known. Throw in the success-bred arrogance and insularity of our American companies, their unfamiliarity with bureaucracies their lobbyists cannot influence quite as much they can America’s politicians and regulators, the incentive their law firms have to fight to the last billable hour, and Silicon Valley may find future success in foreign markets more difficult to come by than need be the case.
Start with a deep-seated American belief that markets trump ministers when it comes to making decisions about the goods and services that the economy will produce, the prices to be charged, the wages to be paid, the innovations to be applauded. Yes, there are times when threatened competitors seek shelter from capitalism’s perennial gale of creative destruction. Still, it is fair to say that American bias towards competition and markets is not fully shared by our EU counterparts. No surprise, then, that American competition policy reflects a higher tolerance of risk-taking, a lower level of concern at the disruptive effects of innovation, than is common among EU policy makers. It is that cultural difference that is reflected in EU economic policy towards U.S. multinationals.
Approval of disruption has not been a successful American export. Uber revels in the fact that it has invented a system that makes life better for consumers. If that threatens the prosperity of the taxi industry, so be it -- indeed, so much the better, for their fans measure Uber’s success in part by the injury it inflicts on outmoded competitors. In America, a few local regulators try to rein Uber in, but sympathy for existing drivers, who have seen the price of their medallions (permits) drop 17 percent to $872,000 in New York City, is limited. In Europe, the culture is less favorable to disrupters, and more sympathetic to those whose livelihoods are threatened by new systems of delivering services to consumers. In America, the consumer is king, the agent for whom store hours are tailored, the person who should decide on how his news is delivered; in Europe, although this is changing, consumers’ interests in availability of services takes second place to the interests of workers and of established, usually small merchants, and of powerful newspaper interests. Change is considered socially desirable in the U.S., more threatening in Europe, especially when the change agent is a foreigner.
This difference in attitudes towards change plays itself out in the application of antitrust policy. Google is deemed dominant, although the EU authorities are insufficiently confident of their ground to attempt to prove that accusation, and the fact that such dominance is continuously under threat of obsolescence is given little weight. Regulation is seen as a more reliable protector of consumers than the threat of potential competition, and any slowing effect that regulation has on future change is seen as a cost to be borne, or is actually applauded. Meanwhile, American policy is designed to put at risk the sunk investment of incumbents in retailing, transport, energy, communications, media, and other sectors in which firms not in existence a few years ago emerge as disrupters.
Then there is the question of privacy. It takes a great deal to make Americans stop our incessant communicating, to sacrifice ease and speed of communication in the interests of personal privacy. In America, the sentence, “We know where you live” conjures up visions of movie-land Mafiosi who want to retaliate for some slight, like failure to pay protection money. In Germany it conjures up far darker visions of the Stasi’s files, and before that the Gestapo’s. Policies catering to Europeans’ understandable fear of a loss of privacy threaten the entire business model of such as Google, which earn their profits by gathering huge amounts of information about each consumer, and selling that information to advertisers. In return, these companies provide search and other services to consumers who are quite aware that they are paying not with cash, but with personal information about their purchasing habits and even the color of their cats. Privacy be damned, say most Americans: full speed ahead to Google, Amazon, and other web sites that meet our needs quickly and at reasonable cost.
Two further developments compound the problem our firms are having as they attempt to cope with the new EU hostility. The first is that EU regulators once got it right while America’s got it wrong. The congressmen who have complained to the EU authorities about the “targeting” of U.S. technology companies seem to have forgotten that it was the EU competition authorities who reined in the anticompetitive tactics of Microsoft and Intel while the George W. Bush Justice Department was somewhere between asleep and ineffectual. EU regulators feel history might be repeating itself, justifying their new aggressiveness.
Second, a whiff of hypocrisy is emanating from Silicon Valley, where outspoken support for competitive markets does not extend to labor markets. At the insistence of Steve Jobs many of the Valley’s CEOs cooperated in an “anti-poaching cartel” that ended competition for workers and kept wages down -- a cartel that when uncovered resulted in fines and damage payments and perhaps, although not certainly, a few red faces, but no insistence that the conspirators, convicted by their own e-mails, spend a bit of time in jail.
None of this is to argue that the American cultural model is superior to the European. Policies that trade off some economic growth and jobs for greater stability and job assurance, access to the newest productivity-enhancing technology for a less fraught life, competition for protection of incumbent enterprises, may quite sensibly reflect a nation’s culture. If American disrupters accept that, they might figure out how to adapt to the new EU regulatory assault.
__Disclosure: The author has at times consulted with News Corp., Google, and AMD on competition issues.__