To Rein In Big Tech, EU Thinks Privacy, Not Prices

(Bloomberg) -- Europe has taken the lead among democracies in policing the web business. With a mixture of legal actions and new rules tailored for the digital world, the European Union and its member states are trying to rein in the mostly American companies that dominate the internet and social media. Some critics say the actions don’t go far enough or come too late to meaningfully change the online landscape. But they’re already providing a regulatory roadmap for places such as South Korea and California.

1. What’s Europe’s approach?

EU Competition Commissioner Margrethe Vestager and her counterparts at national regulators are going after behavior they say tilts the playing field or locks out competitors, such as favoring certain apps on a smartphone screen. They’re also looking at data -- the currency of the online era -- and how companies use it to make money and gain competitive advantage. That’s different from traditional antitrust enforcement, which focuses on whether monopolies harm customers by, say, forcing them to pay higher prices. The older approach doesn’t fit when the companies in question, such as Amazon.com Inc. or Google parent Alphabet Inc., play in dozens of niche markets and drive down consumer prices or offer services for free.

2. How’s this playing out?

The EU fined Google more than $9 billion in three separate cases for using its dominance to disadvantage potential rivals -- for instance, by promoting its own shopping service in search results ahead of alternative offerings. Germany ordered Facebook Inc. to restrict how it combines the data it collects about its own customers with information about their browsing outside the social network.

3. Is there more coming?

Almost certainly. The EU is probing whether Amazon uses data it gathers about companies selling goods through its Marketplace platform to introduce competing products of its own. Competition cops are also weighing a complaint by Swedish music streaming company Spotify Technologies SA, which argues that Apple Inc. rigs the game in favor of its own music service by charging rivals high fees for customer referrals.

4. How is Europe changing the rules?

It’s erecting limits on how tech companies operate. A landmark 2014 European court ruling gave consumers the “right to be forgotten” on the internet, which means they can request removal of outdated or irrelevant information about themselves from search results. That idea has been baked into broader legislation called the General Data Protection Regulation, or GDPR, which sets rules for what websites can do with user data. They must now get the unambiguous consent of visitors to collect information about them. Vestager says Europeans are more concerned about data privacy than Americans are. The memory of Nazi and communist regimes spying on citizens is still relatively fresh there.

5. What else is different about Europe?

The EU is also trying to defend European culture and content creators. By the end of 2020, online services such as Netflix Inc. and Google’s YouTube will have to ensure that a third of their local catalogs are European works. And to protect artists and publishers, a new directive sets rules for how sites must compensate copyright owners, opening the way for creators to squeeze money from aggregators. That requires sites such as YouTube to screen uploaded content for possible copyright infringement, prompting concerns over new kinds of censorship.

6. Is this all just protectionism?

Americans have long harbored that suspicion, given the comments from politicians insisting that Europe mustn’t become a “digital colony” of the U.S. During his presidency, Barack Obama called the EU’s regulation “commercially driven.” The EU denies it’s biased, and points to American companies that have sought help from regulators in Brussels to fight their rivals back home. California-based chipmaker Advanced Micro Devices Inc. was squarely behind a 2009 European antitrust case against Intel Corp., while Microsoft Corp. and Yelp Inc. pushed the EU to take action against Google because U.S. authorities appeared unwilling to act.

7. Who has the EU influenced?

Jurisdictions around the world have started to follow the EU’s lead. California, the center of the U.S. tech industry, passed the toughest privacy regulations in the country, guided by Europe’s GDPR. India fined Google $21 million in 2018 for “search bias,” while antitrust regulators in South Korea and Brazil have also probed the company. Meanwhile, tech firms are pushing for more uniform regulation themselves, as spreading rules governing the way they operate drive up compliance costs. In March, Facebook Chief Executive Officer Mark Zuckerberg called for regulations on hateful and violent content, along with rules to protect election integrity, data portability and privacy. He said, “It would be good for the internet if more countries adopted regulation such as GDPR.”

The Reference Shelf

• EU Competition Commissioner Margrete Vestager interviewed on Bloomberg TV.
• QuickTakes on global tech regulation, the GDPR and the European Copyright Directive.
• Bloomberg Businessweek profile of the EU’s Margrethe Vestager.
• Columns from Bloomberg Opinion on Brussels enforcement, the impact on Google, tech company breakups and EU antitrust after Vestager.
• The U.S. Federal Trade Commission’s guide to antitrust laws.
• Facebook CEO Mark Zuckerberg op-ed in the Washington Post.

--With assistance from Stephanie Bodoni.

To contact the reporters on this story: Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.net;Aoife White in Brussels at awhite62@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Andy Reinhardt, Nate Lanxon

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