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Google shouldn’t worry while EU commissars fight over policing tech giants

That's another fine turf war you've got me into

By Andrew Orlowski, 18 Sep 2015

Comment Try getting through a day without using Google, Facebook, Amazon, PayPal or a music service. Even if you heroically avoid stepping on any of their properties, it’s likely that your activity will have been tracked and recorded.

Few things affect your online life more than “platforms”. They’re almost impossible to avoid, and the markets in which they operate are dominated by large (mostly) Silicon Valley companies.

That’s why they’re often referred to as “plantations” – they take the place of a market economy, and sharecropping is the only option you have if you’re going to work on one.

The UK parliament has launched a parallel inquiry into these internet “platforms”, mirroring the EU Commission’s inquiry. We gave you leaks of the latter this week.

Both the commission and the UK want to know whether the platforms are treating their suppliers fairly, or whether they’re abusing a monopolistic position.

They also want to know whether each market is healthy, or whether customers are locked in. If switching costs are high (say from Apple to Microsoft, or Google to Apple), then it’s a warning sign.

While the commission is quite open about asking whether any regulation is needed at all – whether “market dynamics” will suffice, for example – neither inquiry seems to ask the vital question: who should the regulator be? It’s important, and overlooked, and while you haven’t heard it asked yet, you soon will – for it’s going to become a classic Brussels turf war.

Ominously, Brussels’ inquiry into platforms emanates from the Directorate for the Digital Agenda, or DG-CONNECT. I say “ominously”, because DG-CONNECT spent much of the five years sucking up to the platforms it could end up regulating.

Last year I described DG-CONNECT under previous commissioner “Steelie” Neelie Kroes as being as “Californian as a karaoke Beach Boys surfboard”, because in a desperate, your-dad-at-the-disco attempt to be “digital” and hip, DG-CONNECT officials regurgitated every fad Silicon Valley could offer.

Europe became America’s 51st State – or California with long lunch hours and high taxes.

Political economists have a technical term – “regulatory capture” – for this, but it doesn’t quite describe the phenomenon we're seeing adequately. If we’re to use metaphors of capture then maybe Stockholm Syndrome is more accurate.

Kroes’s DG-CONNECT saw its role as making life easier for Silicon Valley giants to do anything they want in Brussels, in the hope that some of their magic would trickle down onto European business. It was beginning to resemble a weird cult.

Since then, a new commission has been appointed and DG-CONNECT has replaced one commissioner (the techno-utopian Kroes) with three new roles. I’ve heard that DG-CONNECT staff needed to be “de-programmed” after Kroes left: a decompression process (as they call post-Burning Man) was needed to reacquaint officials with reality.

Yet traces (and officials) from the recent kumbaya era remain. So on the face of it, DG-CONNECT is the last institution you’d want policing the tech oligarchs.

Someone who strongly agrees, not surprisingly, is the EU’s antitrust commissioner, Margrethe Vestager, at the Competition Commission (DG COMP). If a business has a monopoly, and is accused of abusing it, then it’s the antitrust department that should be doing the investigation.

Vestager hasn’t been shy since taking charge, with Hollywood and Google among her targets, and surprisingly blocking telco mergers. Telcos grumble that while foreign companies can dominate markets, including internet markets, they’re not allowed to consolidate and enjoy the same economies of scale.

We have the laws already

In June, Vestager offered a clear “get off my patch” to DG-CONNECT. It’s daft to spend years making new rules when you already have rules, she said at a London conference.

“The risk is that you don’t have a piece of legislation that solves the present-day problem, not to speak about future problems,” Vestager said. “We have very good tools that have been tested [over] time,” she added, concluding: “Our challenge is to keep them sharp and to understand what we’re dealing with.”

But the problem is, are the remedies from DG COMP effective? Brussels acted pretty swiftly with Microsoft, but the software giant then spent years appealing.

In the end an eye-watering fine was imposed. But did this have the effect intended? If Microsoft is less dominant today, how much can be attributed to regulation and how much to market dynamics?

Google was on cosy terms with Vestager’s predecessor, the Spanish trade union economist Joaquin Almunia, but now faces a much more rigorous and demanding antitrust commissioner.

Yet even if the EU imposed a fine ten times the €561m imposed on Microsoft, would Google change its behaviour? Or even mind so much? That’s about a third of its annual profits, so it might worry a little.

But it hardly needs to worry about a shareholders' revolt. It might even be a price worth paying for dominating so many markets – and it could pay in instalments.

It looks like a classic Brussels turf war: DG CONNECT wants to expand its role, encroaching onto the turf of the older, more established (and certainly respected) DG COMP (Directorate-General for Competition), responsible for establishing EU competition policy. ®

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