The European Commission has had many motives attributed to its recent decision to launch a competition investigation into the practices of Google in relation to its mobile devices in the European market. Google automatically installs its android programme on its devices prior to distribution. While Google does not charge for the android operating system, the Commission nonetheless accuses the global giant of distorting the market, by automatically putting its competitors at a disadvantage when it comes to the sale and distribution of their commercial apps.
Much of the response from the US, both at official level and amongst the incensed Commentariat, focuses on the protectionist motivations of the European authorities. There is no doubt that there are myriad domestic issues at play. Many EU member states have an innate dislike and mistrust of US tech companies. They see them as a threat to indigenous industry and even in some instances as an assault on traditional European culture. This suspicion inevitably spills over into the attitudes of the European institutions and cannot be separated from the legislative agenda of these institutions. However, there is more to it than just that.
One has to understand the psychology of the European Union and how diametrically opposite it is to the ‘live and let live’ approach of the US authorities to regulation in the tech sector. This is a cultural difference more than anything. Arguably, this cultural divergence has allowed a vibrant tech ecosystem evolve in the United States, generating phenomenal global successes such as Google, Apple, Facebook, LinkedIn and so many more. By contract the stifling approach on this side of the Atlantic has caused European tech companies to wilt.
The main driver of the Commission’s moves against Google, and indeed its extraordinary catalogue of restrictive legislation planned during the lifetime of this Commission, is a fear of technological advances which it simply cannot control. The European institutions fear the unpredictability of the tech sector and feel the need to put in place tight regulation in anticipation of innovation. Crazy as it may seem, the EU feels an urgent need to control and restrict tech evolution, even before it has happened.
This is obviously not a healthy approach to innovation and threatens both indigenous and foreign technology companies alike. However bizarre and frustrating the EU attitude may be, it is essential that corporates, especially those multinationals headquartered in Dublin, do not bury their heads in the sand, or swagger about expecting the EU institutions to eventually bow to their might. Microsoft can perhaps offer some counsel in this respect, having been fined a whopping €561 million in 2013 by the Commission for failing to comply with its commitments to offer users a choice for their preferred web browser.
Tech companies are best advised to take the EU regulatory concerns seriously. They do not exist in a vacuum and often reflect the privacy concerns of European citizens (particularly France and Germany). Rather than railing against the EU bureaucracy, the smart thing to do is try to understand and shape it.
President of the European Commission Jean Claude Junker, sees forcing changes in how multinational technology companies operate in the EU, as being a key objective of his period in office.
The US Technology sector has few friends in the European Commission or the European Parliament, and it will have to rely heavily on those Member State in the Council with whom there is a common interest in supporting the sector.
Sudden and unforeseen dangers, such as Google has felt, can come from the EU Competition Commissioner who by megaphone diplomacy or simply off the cuff remarks is impacting upon market sentiment, while EU legislative proposals are a lengthier and drawn out affair. These can be influenced.
One of the key allies for technology companies is the United Kingdom. It is clear that if Britain leaves the EU on June 23rd, this will be a wholly negative outcome for US technology companies, who will have lost an important ally at the negotiation table when legislative proposals in the area of data storage, or taxation are being deliberated upon.
Understanding the nuances of 28 Member State politics, a Parliament that has 751 members and European Commission politics is essential for any technology company that is seeking to ensure that balanced outcomes are arrived at, either by way of legislation or potential EU competition investigations. Burying their heads in the sand is simply not an option, or at least may prove to be a very costly one.