Silicon Valley Vs. Europe. The Big Showdown.
Some people in the Far East see the Old Continent as little more than a large open-air museum, where you can visit the Colosseum and the Eiffel Tower. The majesty of the former (hated) colonial powers has dwindled and Europe seems to be increasingly wiped out between China and the US – whether it’s about online services, AI or self-driving cars. Fifteen of the 20 largest tech companies today come from the USA, not even one from Europe. While the Old Continent is struggling with digitization, giant tech empires like Alibaba, Tencent or Baidu are rising.
However, even though Europe looks old next to the US and China, one fact shouldn’t be forgotten so easily – the EU is still the largest economic bloc in the world. That is why its power should not be underestimated. The US giants are increasingly feeling this power as Brussels becomes more determined to punish the Silicon Valley companies.
It’s slowly getting expensive. The European Commission fines the Internet company with a billion penalty already for the third time.
- 2019: €1.49B for abusing its dominant position in “AdSense for Search”
- 2018: €4.34B for illegal practices in Android
- 2017: €2.42B for favoring Google Shopping in the Search Results
The effect of these EU fines goes beyond the fact that Google has to pay billions. The company is also reshaping its products in Europe. One example – in the future, Android plans to pre-install alternatives to the Chrome browser so users can make their own choices.
In addition, next Tuesday in the European Parliament the final vote on the copyright reform takes place. If it passes, the “link tax” (aka Article 11) may enter into force, which would require Google to pay media publishers for their content when it appears in the search results. Google has been lobbying against copyright reform for months, warning that it will no longer be able to offer Google News and YouTube in the familiar form in Europe.
Spotify, one of the flagship Internet services in Europe (more specifically, Sweden), accuses Apple of exploiting its dominant position and claiming an “Apple tax” from Spotify and others requiring 30% tax on purchases made through Apple’s payment system. Apple Music, the direct competitor of Spotify, is so preferred because Spotify would have to offer its services expensive. The EU competition authorities have already announced that they want to take a closer look.
Apple countered immediately. Spotify would only want to exploit the App Store as a platform without contributing. Meanwhile, Spotify would make money from the work of others – the musician. As the case goes on, the results of EUs examinations are yet unclear.
Both in Germany and in Austria there are investigations of Amazon because of unfair business practices. Authorities are now trying to determine whether Amazon applies practices in breach of the competition rules that harm small retailers. In Brussels, there’s a similar ongoing investigation.
A €10M fine in Italy, a €110M fine in Brussels, a €565K fine in the UK – even Facebook had to pay for illegal data practices in Europe. Further penalties could follow.
London, Paris, Berlin, Vienna, Sofia, – the list of cities where Uber deals with ads, bans or restrictions is long. While the Silicon Valley company plans its $100B IPO, major EU cities are pushing the company away. Meanwhile, the European Commission has allowed the merger of the car sharing services of Car2Go (Daimler) and DriveNow (BMW) which will create a new future giant in the mobility business.
A narrow ridge for Europe
The Economist argues in its latest issue that Silicon Valley should fear Europe. The focus on data protection and fair competition could also serve as an example in other regions of the world. California, for instance, has taken the GDPR as a model for a new data protection law, and Facebook could face a billion-dollar fine for the Cambridge-Analytica scandal. Meanwhile, US policymakers are reaching for ideas with a European touch. The US Senator and possible future presidential candidate Elizabeth Warren, for example, has expressed some will to giant tech companies such as Amazon, Google and Facebook broken up.
In the same time, Europe is in danger of being sidelined in areas such as AI by its own restrictive laws. Data protection is good for consumers. Yet, for companies that operate with big data (indeed important also for autonomous driving), it is much more difficult than in China, where privacy matters less.
Next week, the final vote on the EU’s copyright reform is due. And this will determine the way content is monetized in Europe in the future. While this might not sound as important, take a second look at the matter – the EU is in danger of being known not only for GDPR but also for upload filters, also understood as censorship machines.