The EU versus American high tech companies

As it were, virtually all the companies that have gone through this EU “anticompetitive baptism” have been American high tech companies – Microsoft, Intel, Facebook, Amazon, you name it, which is not surprising, since American companies disproportionally dominate the world of high tech.Let’s take a quick look at the history: Microsoft paid $3.4 billion in […]

As it were, virtually all the companies that have gone through this EU “anticompetitive baptism” have been American high tech companies – Microsoft, Intel, Facebook, Amazon, you name it, which is not surprising, since American companies disproportionally dominate the world of high tech.
Let’s take a quick look at the history: Microsoft paid $3.4 billion in fines to EU regulators, in cases that started in 1993 and lasting 20 years, over what EU called anticompetitive use of Microsoft’s dominant position in the operating system for personal computers. Well, Microsoft paid the fine, but its Windows operating system (OS) still drives most of the PCs out there. The question today might as well be whether or not the dominant position that Microsoft enjoyed and still enjoys has much significance, since now the focus seems to have drastically shifted away from PC computing (to mobile computing – tablets and smartphones).
Intel, the company that manufactures the computer chips inside a large majority of the world’s PCs, is still battling and appealing an antitrust case brought against it by the EU 15 years ago, with no visible end in sight. However, Intel appears to be more powerful now than it was when the EU case was initiated.
Anticompetitive issues are not the only legal problems that American high tech companies face in Europe. EU regulators are investigating some low-tax schemes apparently devised for Apple in Ireland, and for Amazon – another American high tech company, in Luxemburg. Facebook is also in the loop for scrutiny as European privacy people are examining the manner in which the company handles people’s data online. Furthermore, it seems as if the EU watchdogs are also not happy with the apparent control that Internet platforms like Amazon and others have over how Europeans gain access to online services.
A pre-emptive move by Facebook in 2010 might have mostly served to bring the company into the focus for the EU regulators: Facebook established a regional headquarters in Dublin, Ireland, a country that is believed to be less aggressive in matters of privacy practices. With the Irish connection, Facebook was hoping for some kind of insulation from the heavy hand of the EU regulators. This might have just been wishful thinking, as some watchdogs in such EU countries as Belgium, France, Germany, Italy, Netherlands, and Spain are investigating Facebook as to whether or not the company’s ostensibly Ireland-inspired new privacy policies align with the regulations in those countries. A class-action lawsuit in Austria claims that Facebook has not respected the online privacy of rights of its users. A case before EU’s high court contends that Facebook moved the data of its European users outside of the region.
Can it be that EU folks are more critical of US companies because of the U.S. National Security Agency (NSA) revelations? This could be a factor. For some background, on 9 June 2013 the world was led to the discovery of massive covert data collection exercise on individuals and governments alike by the U.S. government, with the help of American high tech companies. The revelations were made by Mr. Edward J. Snowden, the former NSA computer technician who worked on classified projects at an NSA-contracting company (Booz Allen Hamilton). While Mr. Snowden’s target in the leakage might have been the U.S. government, it is unfortunate that the real victims have been American high tech companies. Simply put, other countries don’t trust them!
Journalist Stephan Drner, in the 20 August 2014 issue of the Wall Street Journal, writes on the proliferation of so-called “NSA-proof” products and companies across Germany and Switzerland, two countries that are particularly “pissed off” by the spying exercise. The two countries seem intent on getting even in some manner. I am not sure of the extent of counter-intelligence, but it is rumored that German lawmakers have considered legislations that would make it costly or even technically impossible for American tech companies to operate inside their borders.
Last fall, to pacify the Germans, Amazon decided to open a data center in Germany for its web services (AWS) division. Note that both Germany and the EU have regulations forbidding storing some of their citizen’s personal data across regional or even national boundaries.
The NSA revelations can obviously not explain all of the motives behind the EU’s actions, for the EU has being on this for decades – for example, as far back as 1993, for Microsoft.
A question to answer is whether or not the various EU’s antitrust cases have had the intended effects. Yes, the publicity is good for the psyche of the average European – our government cares about our privacy. But have the cases really affected the way the tech companies play? It appears that the outcomes might not have always justified the efforts – somehow, the accused companies end up retaining their leads in the respective technologies.
Moreover, it seems that disruptions by newer tech companies usually render the EU cases impotent. That is, it appears that if the EU regulators have cooled their nerves, the normal process of tech disruption would have taken its course and the average European would have ended up being just fine after all. Or, is it the case that watchdogs do in fact enhance the emergence of tech disrupters? We’ll dig deeper in next week’s article.