I am in DC today, talking on a panel organised by CCIA. I have been asked to adress the following questions: “Is competition policy approach to tech dividing the US/EU? Increasing influence of the EU in the US debate or vice versa? Possible solutions? Future predictions?”. Hereafter are my remarks.
The idea that EU and US antitrust policies on tech diverge — with the EU being stricter against tech companies — is essentially a misrepresentation of the facts, conveyed in the works of business reporters incentivised to make headlines with good stories. All readers are familiar with the press idea that “when it bleeds it leads”. Since GE-Honeywell, the US v EU divide is an abundant well that never runs dry for the antitrust press.
But when one looks closely at the facts, the tech clash on antitrust policy is much less clear. First, one should distinguish DG COMP’s antitrust policy from the European Commission broader initiatives. Interventionist policies introduced at the EU Commission level like the digital tax or the DSM platform regulation do not necessarily capture the mindset of DG COMP when it comes to antitrust cases in the tech industry.
Second, one must again draw a distinction between what AAG Delrahim called on Tuesday “speech-related advocacy work” and enforcement. The antitrust leadership in the EU occasionally speaks in somewhat hyperbolic terms of the tech industry. Like President Trump, Commissioner Vestager is never in short supply of tech threats, though they admitedly come in a gentler hand. Last week, it was reported that the Commissioner did not exclude the idea of a Google “breakup”. But in the parallel world of enforcement, decisional initiatives have steered clear of media catchwords. Concrete decisional initiatives have been humbler, as can be seen in the Google search case. If one looks at its scope and its remedy, the Google search case is quite a narrow one. True, we have seen a big €2.42 billion fine. But most antitrust experts know that fines are a sideshow, and not the primary concern for the deep pocket likes of Google, Facebook or Apple.
Third, the claims of bias against US tech firms should also be looked at more generally. The EU traditionally allocates resources and set priorities on sectors where industry concentration is high bc this is where collusion and monopolization risks are deemed most serious. In banking, most cases concern firms from Switzerland and UK. In the chemicals, most cases featured German companies. And in utilities, most if not all Member States incumbents have been in the crosshairs of the DG COMP. In tech, US firms dominates the industry. They are thus logically subject to antitrust scrutiny.
Fourth, it is short sighted to talk of a EU Commission bias against US tech firms, when most if not all tech disputes in the EU arise from complaints from US companies. Microsoft was the initial complainant in the Google search case. Apple is the de facto complainant in the Qualcomm case. Salesforce was very proactive in the Microsoft/LinkedIn merger investigation (btw is an old feat: Sun Microsystems was the complainant in the Microsoft server case).
This brings me to my fifth point. There has been a historic division of labor between the US and the EU in relation to large tech firm conduct, but this may come to an end. Until recently, the picture was as follows: technology wars take place in the Silicon Valley, regulatory ones in Europe. That division of labour was made possible by the existence of a lower standard of liability in EU antitrust law in general, and in unilateral conduct law in particular. But the Grand Chamber judgment of the EU Court in Intel v Commission from last year has made clear that the competition enforcement should (i) be evidenced-based; (ii) that harm to competition is an empirical question, not a rhetorical one; (iii) that the rule of reason is the proper mode of operation to adjudicate unilateral conduct cases; and (iv) that efficiency is the theology underpinning Article 102 TFEU. With this background, tech cases that were started before the Intel judgment, but concluded post Intel, may be based on an obsolete – and potentially unlawful – interpretation of unilateral conduct law. Having sunk large investigative resources in such cases, the Commission may have had no other choices but to decide them on the basis of a now outdated approach (I develop this point in a recent op ed in Competition Law and Policy Debate).
As to future predictions, I don’t want to bet the farm but I see three things coming. They are ordered there from conventional to heretical.
In doctrinal terms, the EU and the US antitrust systems are converging towards an economic approach in unilateral conduct cases, based on a consumer welfare (“CW”) standard or something close. The US case-law has traditionally been oriented this way, and the leadership at the US DoJ has just this week reiterated its commitment to an effects-based approach in unilateral conduct cases. In the EU, the case-law has moved more slowly, but has eventually seemed to embrace an efficiency standard. True, the leadership of DG COMP has not yet come full circle on this, though a 10 years old soft law instrument already follows a CW approach. And granted, the legal service of the EU Commission which represents the Commission before the EU courts may stick for a time to the old version of the competition law software. But this is essentially transitional, and the byproduct of short term litigation and political incentives.
As to enforcement initiatives, several interesting questions may arise for antitrust in the aftermath of the Cambridge Analytica scandal. One is what do we do if Facebook implements the Zuckerberg threat of introducing an ad-free but paying version of its service? Is this a deviation from consumer welfare? My take is no. We may see more price discrimination on Internet platforms as a result of the Cambridge Analytica scandal. And this possibly represents an opportunity for disruptive entry by competitive platforms whose business model is less advertisement-centric.
At the political economy level, there’s an elephant in the room, and this is China. Let’s not fake to ignore that Chinese competition policy is about helping Chinese firms dominate non-Chinese markets (and about preventing non-Chinese firms dominate the Chinese market, think of Google or Uber). Tech giants and startups in the Silicon Valey are growing increasingly concerned of the competition from Chinese firms. They’re unhappy of their lack of market access and of the risk of technological disruption carried by Chinese firms. As consumers, if the next big thing is invented by China, are we sure that we will obtain full access to functionality? And more importantly on what terms? I wish to recall here that China is building a massive surveillance state, and as much as I don’t like my data leaked to Cambridge Analytica, I like even less the thought that it may be openly accessible by the Chinese Communist Party.