Technology

EU’s win against Google provides reminder of its regulatory prowess

Push from Brussels to regulate big tech making headway despite divisions

The EU court upheld the €2.4 billion fine Brussels had imposed on Google. Photograph: Brenda Fitzsimons

Martin Sandbu
Wed Nov 17 2021 - 05:30

If EU lawmakers were at risk of forgetting that their bloc can be a regulatory superpower, Frances Haugen was quick to remind them.

Testifying to the European Parliament last week, the former Facebook data engineer turned whistleblower said: "The Digital Services Act (DSA) that is now before this parliament has the potential to be a global gold standard. It can inspire other countries including [the US] to pursue new rules that would safeguard our democracies."

That was not the only event last week that illustrated what is at stake in the EU's push to regulate big tech. Two days later the European Commission won a legal victory against Google.

Divisions among party groups include whether targeted advertising should be limited and how to reform exemptions from liability

The EU court upheld the €2.4 billion fine Brussels had imposed on the tech giant for abusing its market power in search by favouring its own shopping comparison against rival websites. That is precisely the sort of behaviour to be regulated by a proposed new Digital Markets Act (DMA), the companion to the DSA.

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The antitrust verdict “is a major win for EU competition authorities”, says Francesca Bria, president of the Italian National Innovation Fund and innovation adviser to the commission.

“Politically it is very important for [competition ]commissioner [Margrethe] Vestager, and the DMA is empowered by this judgment.”

It proves that Vestager’s policies can withstand court challenges – all the more significant as more antitrust cases are in the pipeline, and Vestager’s prestige had suffered a blow when she lost a high-profile subsidy case about Apple’s tax breaks in Ireland.

The content of the ruling supports the commission’s “mantra that ‘self-preferencing’ in digital markets is harmful, that informed the last decade of antitrust action in Brussels”, says Bria. The court will have emboldened this thinking and its justification for more restrictive rules on internet “gatekeepers” in the proposed DMA.

Parliamentary divisions

As for the Haugen hearing, Christel Schaldemose, an MEP and DSA negotiator for the centre-left group in the European Parliament, says: “I honestly thought having Frances Haugen [testify] would ease the talks [in parliament]. But when I try to negotiate ... it is difficult for me to see it reflected” in what parliamentarians manage to agree.

Divisions among party groups include whether targeted advertising should be limited and how to reform exemptions from liability. Still, “I do see progress. We are moving in the right direction,” says Schaldemose.

Compromise is emerging between member states as well. One point of contention has been whether digital services should still be regulated by the “country of origin” – where the service provider is based. Some worry that states hosting global tech companies’ EU operations – Ireland is frequently mentioned – are unable or unwilling to hold them to account. Similar concerns are heard in the parliament.

“We cannot repeat what has happened with GDPR,” says Schaldemose, referring to Dublin’s lagging enforcement of EU privacy rules on the US tech giants based there.

Direct enforcement

Member state ambassadors have agreed a compromise version of the DMA and should soon achieve one for the DSA, in which the commission will get direct enforcement powers over the biggest tech companies.

By the end of the year both the council (representing governments) and the parliament could have adopted their preferred versions, setting the scene for talks between the institutions.

There is no time to lose, says Bria: “After 20 years of big tech dominance there is an emergency, competition has been killed and the industry moves very fast.” But she worries current drafts do not do enough to limit market power. For example, “the DMA without integrating merger control to deal with killer acquisitions [absorbing rivals that pose a competitive threat] loses efficacy.”

Schaldemose points out that public opinion largely supports holding big tech accountable for online harm. The question is how – and the answers will reverberate beyond Europe. The US government has reportedly warned EU authorities against data-sharing rules that would hurt its tech companies’ dominant position.

“This is the time for EU policymakers to show real leadership,” says Bria. Whether they do will shape the digital world for decades. – Copyright The Financial Times Limited 2021

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