THE EU AND YOU: HOW BIG TECH GIANTS BREAKING LAWS SHAPES FOREIGN POLICY
Cathal Charker
The European Commission, one of the three major institutions and the executive body of the European Union, is often in the news abroad for it's crackdowns on technology firms.
The European Commission (one of the three major institutions and the executive body of the European Union) is often in the news abroad for its crackdowns on technology firms such as Google (Fined for €2.42 billion in June 2017), Qualcomm (€997 million in January 2018) and most famously Apple (€13 billion) in August 2016. These fines are either done for breaking laws or exploiting loopholes. In addition, there are also cases such as the Norwegian Consumer Council claiming that Japanese tech giant Nintendo is in breach of EU law by not allowing refunds for its software on its online store (the eShop). If this case goes through then Nintendo could be facing massive fines. The fact that a regulatory body in Europe is capable of affecting a Japanese business 9000+ kilometres away is indicative of the globalized society we now live in. Of course Europeans will love the fact their legislative board has this sort of power, it not only legitimises the strength of Europe but increases the quality of life of the citizens of the Union, whether through mandatory refunds or the ability to somewhat protect their privacy online. However, how do the foreign governments of the nations these multinationals come from view this?
How is this seen?
The most easily visible way of judging this is the reaction of the governments and people in power of these foreign nations. In a 2015 Recode interview then President of the United States, Barack Obama, stated that he believed that the, “European response is more commercially driven than anything else” and went on to claim that the EU was engaging in protectionist policies due to being unable to compete with American companies. This echoes current President of the United States, Donald Trump’s, recent announcements of retaliatory trade tariffs against the European Union.
These trade tariffs, a 25 per cent and 10 per cent tax on steel and aluminium imports respectively is designed to hurt the European Union and protect US industry (impart as a direct result of the EU commission fining several American companies). President of the EU commission, Jean-Claude Juncker, has promised a swift retaliation that would see the EU targeting several “iconic” American brands such as Harley Davidson motorcycles, Levi jeans and bourbon whiskey. This lead to the International Monetary Fund stating that restrictions would likely damage both the United States and the Global Economy. Obviously, Trump then “released a statement” (tweeted) stating that the US would escalate the situation and put a heavy tax on all European Car imports which represents about 10 per cent of all trade between the United States and European Union. This clearly shows that the US government does take it rather personally when the EU attacks its companies.
However, some US politicians and companies are actually supporting the European Union or at least standing against Trump’s trade war. Recently Arizona Senator and former Presidential candidate John McCain released a tweet stating that Trump’s tariffs would, “only serve to hurt American workers and consumers and alienate us from our most important allies and trading partners.” In addition, whilst the Google anti-trust case was still going on, seven US based tech companies and industry groups sent a letter to the European Commissioner for competition Margethe Vestager, who was in charge of the case, showing their support for the EU fine against Google. One could argue that these companies were purely acting out of self-interest, all of the signees of the letter are direct competitors to Google or have their business affected by the company. However, regardless of motivation, it can still be seen that there is a significant backing of the European Union’s actions in this regard.
Margethe Vestager, European Commissioner for Competition Source: Wikimedia
Make war not love
So why is there such a clash between Europeans and Americans? According to experts it’s a difference of culture. Europeans tend to believe that the government should intervene in the economy and especially fight back against unfair business practices and policies that could be seen to be uncompetitive. Americans tend to believe that government intervention will stifle the economy and that free market forces should be the sole decider in what company rules supreme. This difference can be seen in Microsoft Corp v Commission 2004 in which Microsoft was fined €497 million (the largest fine the EU had handed out ever at the time) for not releasing information to competitors about its operating system and for not having a version of Windows that did not include Windows Movie Maker. Americans at the time (including Microsoft themselves) found this to be preposterous, why should Microsoft be fined for not giving away its technology AND for including free software with its products? The EU saw this differently, it felt that Microsoft needed to provide information on its operating system so that software manufacturers could better develop for the near universal platform (PC sales being 60x than MacOS in 2004 alone) and that by providing a media player free of charge on every PC that Microsoft was creating an environment where opposing media player companies just could not compete, regardless of the quality of their products. So, to both Americans and Europeans this case came across as insulting and obvious, just for different reasons.
The American system used to be far more anti-monopoly, famously breaking up Standard Oil (Owned by renowned businessman J.D Rockefeller, the richest human to ever live with a net worth equivalent to $392 billion in 2016 dollars) in 1911 for being an illegal monopoly. However, this started to change around the 1960s when the thought switched to the idea that this was punishing companies for innovation, which could curb technological progress. The last successful anti-monopoly case in the USA was in 1974 where telephone company AT&T were forced to allow a company known as MCI (Microwave communications inc.) the right to use their telephone lines. MCI wanted to roll out their new microwave communications technology (go figure) which subsequently lead to the price of long distance calls being halved by 1990 and massive success for the company. This presents an argument for both sides of the debate, AT&T gained nothing from the this, losing about 70 per cent of its value purely because it was doing so well. However, one could also argue that the general public benefited greatly from this, and that it furthered the advance of technology, changing in essence how phone lines work. Since then, the USA has never successfully broken up another monopoly.
The newest tech boys on the block are the likes of Google and Facebook who the EU seems to have plenty of problems with, fining Google €2.42 billion for abusing its position as the number one search engine and Facebook €110 million for lying about its data sharing intentions due to its purchase of Whatsapp. But why didn’t the American legal system feel the same way? Again, it’s a cultural issue. From an American perspective, Google should be congratulated for its victory over other search engines and allowed to use its number one position how it wants. Similarly, Facebook should be lauded for its innovation to social media, including its often controversial but successful data policies.
Other than the fines, there is also the times where EU law has affected the policies of multinational corporations. Going back to Google, the EU’s introduction of the Right to be Forgotten has affected everyone on the internet. The Right to be Forgotten in essence gives people the right to have their data removed from public listing on Google, for example if you didn’t want your Facebook account to be searchable, Google is obligated to remove it now. This affects people searching from anywhere in the world, not just European citizens searching for other Europeans. Another example is the Right to Withdrawal which affects online sales, including digital software sales. This is a big issue in the video game industry as now all online stores need to provide some way to acquire a refund. Most comply, Valve famously tried to skirt around this by putting a clause in its terms of service (TOS) that would waive ones right to the Right to Withdrawal however public pressure forced them to implement a refund system before any legal debate could be had. Currently the Norwegian Consumer Council (NCC) is fighting with the Japanese Tech giant Nintendo over their refund policy who pulls a similar trick to what Valve used to do, with a TOS that waives a consumer right to refunds. The NCC claims this isn’t a valid method, where Nintendo states that it is fully compliant with EU legislation. This will be an interesting case to follow if it escalates further. In a sense, one could argue that it is a case of the EU pushing its beliefs onto other nations as it pushes its government over corporations philosophy. This is again similar to criticism levelled against Sony in 2015 for their lack of refunds available. In this situation, no litigation was taken against Sony but actions by Watchdog, a subsection of the BBC lead to a slight change in policy. Though it isn’t just the Japanese video game industry that gets in trouble with the EU. Far from just American multinationals, the EU is also quite fund of using its anti-trust procedure to fine Japanese companies.
THE RIGHT TO BE FORGOTTEN:
First drafted in 2012, the Right to be Forgotten allows citizens to request their data be removed from search engines such as google. Between its full introduction in May 2014 and 2017, Google received 2.4 million requests for URLs to be removed. 89% of this came from private citizens with the other 11% coming from corporations, children and public figures.
THE RIGHT TO WITHDRAWAL:
The right to withdrawal refers to legislation that allows EU citizens up to 14 days where they can return an item bought online for a full refund, no questions asked. Principally this is based on the idea that as an online sale you would not be able to see the product till it arrives at your door, thus you don’t truly know what you’re getting into.
The Right to Withdrawal is often brought up in digital marketplaces, however many places get around this by forcing you to sign a TOS which waives away your right to withdrawal.
In addition, the right also means the seller is required to provide the following information about the item:
the identity of the trader, such as his trading name and his geographical address
the main characteristics of the goods or services
the price of the item including all taxes
delivery costs
details of the payment and the delivery
In terms of economic policy, the Japanese are also quite protectionist. This is again a result of their culture which is a result of their history. From the period 1633-1853 Japan’s number one foreign policy was that of “sakoku” (closed country). This was as a result of fears over European colonialism and an attempt to solidify power by the Tokugawa Shogunate (the government at the time). This period came to an end in 1853 when an American naval force under Matthew Perry (no, not the one you’re thinking of) forced the country to open its trade through gunboat diplomacy. This forceful intervention of foreign powers lead to the Meiji Era of Japan where Japan rapidly industrialised in an attempt to gain equal footing to the western powers. All of this has led to a rather protectionist policy for Japan, though some economists point to the so called “Flying Geese” policy (Coined by Japanese economist Akamatsu Kaname) which describes how Japanese businesses break into a western dominated industry, wipe out the competition and then outsource to smaller Asian economies. Though this could still be seen as rather protectionist as it doesn’t involve opening up the economy to western investors but breaking into their economies. This is all raises the argument of how do the Japanese view the EU?
President of the European Council Donald Tusk and Japanese Prime Minister Shinzo Abe before the EU-Japan summit in 2017 Source: Flickr
Well, to say they view it very differently to the United States is a bit of an understatement. For starters, just last year, at a EU-Japan summit, a trade deal was reached that would lower tariffs on various imports from the EU to Japan and vice versa. Quite the opposite to the US and EU raising tariffs against each other in a trade war. Furthermore, Japan has backed the EU in the Brexit debate, repeatedly warning the UK of the mistake that it is making. On the flip side the USA backs the United Kingdom, often talking about how much better trade will be without the EU and talks of the re-ignition of the “Special Relationship” between the two nations. An interesting contrast between how the EU is viewed abroad by two nations whose tech industries often get in scrapes with it.
In conclusion, there is a lot of difference between the way technology and innovation is seen worldwide. All three nations are to some extent protectionist. Trump calls for tariffs on steel to protect American Jobs. The EU fines companies for using its lands as a tax haven. Japan is often cited as a country that prefers its own products and companies. But both Japan and the EU want to work together, to share technology and innovations, whilst working out what’s best for everybody. The USA however, wants to focus on bolstering its winning position, perhaps it’s as simple as not having to work as hard if you are at the top and finding the EU fines as just advanced jealousy but an argument can be made that it’s down to cultural differences. Maybe the American dream is just incompatible with European Ideals.