By Matthew Karnitschnig | 2/14/19, politico.eu
BERLIN — It’s official: Silicon Valley’s most important regulator is Europe.
Despite years of intense PR and behind-the-scenes lobbying, U.S. tech giants failed to convince European lawmakers to ditch their plans for new copyright rules. That matters for a whole host of reasons that Silicon Valley will have to digest in the weeks ahead. Most immediately, the move is a challenge to the business model of Google built around unfettered access to information online.
More importantly, perhaps, it again signals Europe’s willingness to confront American tech on other fronts that affect the sector, in particular the ongoing debate over digital taxation. And then there’s the first mover advantage: By pressing ahead with tough rules on issues from tax to privacy and copyright before the U.S., Europe is establishing its claim to be the de facto standard-setter for the emerging digital world.
Keep in mind this isn’t the EU’s first crack at trying to tame the “Big Five.” Last summer, the European Commission slapped a record €4.3 billion antitrust fine on Google for what it called “serious illegal behavior,” a reference to the pressure the platform exerted on smartphone manufacturers to pre-install apps for its Android operating system. That penalty followed a €2.4 billion antitrust fine leveled against Google by the Commission in 2017 in connection with its online shopping business.
On another front in 2016, the Commission ordered Apple to pay Ireland €13 billion plus interest, rejecting the company’s decades-old sweetheart tax arrangement with Dublin that enabled it to pay almost no tax.
Brussels’ run-ins with American tech have prompted howls in Washington. President Donald Trump complained to Commission President Jean-Claude Juncker last year that the official behind the fines, antitrust chief Margrethe Vestager (whom Trump referred to as “your tax lady“), “hates” America.
Meanwhile, Europe is turning up the dial. In addition to the EU-level actions, individual countries are stalking U.S. tech over everything from privacy to tax. Just last week, German authorities took aim at Facebook’s practice of tracking users and collecting their data, the heart of its business model. The ruling by Germany’s cartel office, which Facebook is appealing, prompted Wired to quip: “German regulators just outlawed Facebook’s whole ad business.” France, meanwhile, decided in December not to wait on the EU to come up with a digital tax and proceeded alone with a law that took effect in January.
Whatever spin emerges from Silicon Valley in the coming days over how to interpret Europe’s decision on copyright, one shouldn’t lose sight of the bottom line: Silicon Valley lost.
And not only in Europe. For all of the EU’s dysfunction, if there’s one thing it’s good at, it’s regulation.
Despite years of planning, Europe’s introduction of new digital privacy rules last summer caught many U.S. companies flat-footed. With fines for GDPR violations totaling up to 4 percent of a company’s global annual revenue, U.S. firms scrambled to comply, spawning a cottage industry for lawyers and consultants.