On the Rise: Competition Policy Challenges in Europe, Part Two

This is a follow-up to an earlier commentary, which discussed how the European Commission and various European Union member states are seeking to expand their antitrust powers, particularly to limit the growth of large tech companies and digital platforms. For example, European antitrust enforcers are seeking to address “structural competition problems” within industries, rather than analyzing the merits of arguments case by case, and proposing to pursue potentially anticompetitive practices before these practices even happen and to force digital platforms to share data with smaller rivals.

Europe’s hardening stance on antitrust causes new challenges and uncertainties for U.S. technology companies. It also risks politicizing European antitrust enforcement and backfiring on Europe itself—undermining investor interest in European startups whose main exit strategy is often to sell to a big technology company; benefiting non-European companies such as Chinese tech companies; undermining European consumers’ access to larger networks that would make them better off; and undermining a key desirable of competition policy—innovation—which is, to a great extent, funded by large tech companies. In the tech sector, the five largest U.S. tech companies spent $76 billion in research and development in 2018 alone, critically contributing to new AI capabilities that are key to U.S. security and U.S. and European businesses.

Europe’s policy proposals are founded on reams of assumptions that lack an empirical basis—as reflected in Europe’s own key policy pieces. For example, the 140-page Furman report now guiding the United Kingdom’s antitrust debate uses the words “potential” or “potentially” 142 times, and the 133-page 2019 European Commission flagship report “Competition Policy for the Digital Era” does so 82 times, as in “potentially anti-competitive mergers,” “potentially anti-competitive conducts,” and “potentially self-preferencing.” The lack of empirical basis for Europe’s proposals is precisely what makes the European Union’s sweeping proposals so worrisome.

What should the United States do to respond to Europe’s antitrust policy proposals?

The United States has a weaker hand today than some years ago to oppose the European Union’s competition policy proposals. The thinking around competition policy, led by the Federal Trade Commission (FTC) and the Department of Justice (DOJ), is shifting and increasingly political in Washington. In a July 2020 House hearing, both parties attacked technology companies; in September, in a move that can be read as political in light of November’s presidential election, the Justice Department announced it would accelerate an antitrust complaint against Alphabet’s Google. Numerous state attorneys general are also probing Google.

However, there are still measures that the United States can take to depoliticize antitrust in Europe and perhaps also build more constructive antitrust policy approaches on both sides of the Atlantic, such as:  

• Form a transatlantic “antitrust brain trust.” The business and academic communities can come together to form a transatlantic group of wise persons tasked to systematically review investigations and decisions on the objective grounds of consumer welfare, innovation, and competition in the marketplace. The group would essentially put antitrust officials, who are currently rather unchecked, under the microscope and provide an objective and empirical analysis of the grounds for each case.

• Use innovation as the test for antitrust. The United States and European Union share an interest in a key desirable but underapplied test for antitrust: innovation. Innovation in the digital economy is key for creating new value for consumers, enabling ecosystems, and bolstering national security. It needs to be woven into antitrust policymaking and thinking more systematically, including through dialogue among national regulators, antitrust experts, and innovation experts that tend to occupy different universes in universities and government agencies.

• Learn from Canada’s antitrust policy. Canada has produced a particularly thoughtful antitrust policy for the digital era. Canadian Competition Commissioner’s 2018 report “Big Data and Innovation: Key Themes for Competition Policy in Canada” recognized that the rise of technology companies that control and exploit data can raise new challenges for antitrust enforcement, but it also reinforced the long-standing Canadian and U.S. view: if hard-knuckled competition and savvy investments lead to concentrated markets with a few dominant firms that do not act in a way detrimental to consumer welfare, so be it, and no particular changes to antitrust enforcement are needed.

• Work with Europe’s small, tech savvy D9 economies in promoting more liberal digital regulatory models. These countries often feel steamrolled by France and Germany in EU policymaking. The United States can support such partners as Denmark, Sweden, Finland, Estonia, and Ireland to highlight their policy ideas and innovations, and develop more liberal approaches to the governance of the digital economy.

• Make competition officials listen to startup investors. The startup investor community will suffer if firms they invest in cannot get bought by big tech or acquire other firms themselves. The European startup investment community’s views need to be brought more systematically into antitrust policy dialogues in Europe, perhaps in three ways: annual surveys with investors on their views on policy proposals; semiannual events between competition policymakers, startup policymakers, and startup investors; and investor participation in the antitrust brain trust that shadows antitrust enforcers.  

• Convince Europe of the need to treat China and the United States differently and collaborate with the United States on the unique competition policy and trade policy challenges that Chinese state-backed companies pose to both U.S and European firms. 

Regulators around the world, especially in Europe, are feeling the populist techlash and mounting pressures to “do something” about technology companies, partly because less digitized domestic firms want protection and to keep America’s innovative firms out of sectors they regard as traditionally “European,” such as financial services, high-end vehicles, healthcare, and transport. Yet the public interest that European antitrust enforcers claim to champion can quickly become a public bad if antitrust undermines consumer welfare, startup investments and formation, innovation, and national security.

In the United States, the presidential administration and Congress need to address concerns with European antitrust policy ideas that are detrimental and even discriminatory against U.S. businesses in Europe, and counterproductive to Europe’s fortunes in the global digital economy. American policymakers should fight fire with fire if needed, but ideally address these issues through collaborative, empirically grounded dialogues and partnership.

Kati Suominen is an adjunct fellow (non-resident) with the Europe Program at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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