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'Too big to care': 2020 was the year that Europe got serious about tackling Big Tech

Amazon, Google, Facebook and Apple all faced heavy regulatory scrutiny in 2020.

Image: Shutterstock/Ascannio

“THERE IS A feeling in Brussels that online platforms have become too big to care”.

This quote from Thierry Breton, EU Commissioner for the Internal Market, became ubiquitous in 2020; a year in which powerful, money-spinning American companies like Apple, Amazon, Google and Facebook became even more profitable and influential.

In the past decade, regulators like EU Competition Commissioner Margrethe Vestager have launched numerous probes into anti-competitive practices by US companies.

Billions of euros of fines have been levied against most of the tech giants in the process.

But despite hefty financial penalties, policymakers say that abuses are still rife within European digital markets — costing consumers, not to mention European businesses, dearly.

This fact was remarked upon by the European Court of Auditors in a November report.

It gave the distinct impression that EU regulators had, to a large extent, been chasing their tails when it comes to enforcing competition rules on Silicon Valley companies.

The auditors highlighted that between 2010 and 2019, the Commission imposed some €28.5 billion in fines against companies for various breaches.

“While the level of the fines imposed by the Commission is among the highest in the world,” the ECA said, lawmakers have not been able to evaluate whether they have had anything like a deterrent effect upon these businesses.

New rules

It might have gotten slightly lost in the Brexit furore but the European Commission unveiled two landmark pieces of legislation in early December — the first major overhaul of European tech rules in over a decade.

Legal experts say the Digital Markets Act (DMA) and the Digital Services Act (DSA) represent a tactical shift in the bloc’s approach to regulating Big Tech.

Combined, the proposed laws create a new framework for enforcement. 

The DSA takes aim at tech companies over illegal material and disinformation posted on their platforms. It puts a greater onus on them to police content, improve transparency around advertising and give watchdog groups and regulators access to internal data.

If they fail to follow the new rules, companies can be fined up to 6% of their annual revenue.

Meanwhile, the DMA is aimed at tackling thorny competition issues.

Chiefly, the act is concerned with mega-corporations like, for example, Amazon and how they act as ‘digital gatekeepers’ — guarding access to the market but also competing with merchants who use their platform to sell their own products.

For failing to comply with the new rules, the EU will be allowed to levy fines of up to 10% of the company’s total worldwide annual turnover and “periodic penalty payments” of up to 5%.

Crucially, it also means the Commission can order tech outfits to sell off parts of their business “where necessary to achieve compliance”.

But this the EU we’re talking about and it could take two years for the new framework to clear the legislative process.

In 2020, the EU was still playing with a weakened hand. Even still, however, regulators made some significant decisions this year and started the clock fresh antitrust investigations.

In some ways, it could be seen as the year that Europe got serious about tackling Big Tech. Here are some of the highlights:

Amazon

It’s an understatement to say that the global e-commerce giant was everywhere in 2020.

While most ‘brick and mortar’ retailers faltered, Amazon’s market valuation skyrocketed this year to something ridiculous like $1.6 trillion, cementing founder and chief executive Jeff Bezos’ status as the world’s richest man.

Neither strikes, nor legal actions by France’s biggest trade union nor scandals over employee welfare at its warehouses — where, in the US alone more than 20,000 workers have tested positive for Covid-19 — have managed to slow Amazon’s roll.

india-amazon-ceo-jeff-bezos-attends-amazons-annual-smbhav-event-in-delhi Amazon founder Jeff Bezos cemented his status as the world's richest man in 2020 Source: SIPA USA/PA Images

The online retail behemoth generated $128 billion from sales this year and a further $40 billion through its cloud services operation. And that’s before you add in the $68.6 billion generated by third-party merchants who use Amazon as a platform to sell their products.

But on both sides of the Atlantic, the winds of regulatory change have started to blow in Amazon’s face.

In November, the European Commission announced a set of formal charges against the Bezos-front company over alleged breaches of EU competition law. It followed a nearly two-year investigation.

At issue, is whether or not the company’s dual role within the online retail space as both a platform for third-party sellers and a seller of goods in its own right gives Amazon an unfair market advantage.

A preliminary investigation by the Commission found that Amazon employees have huge access to non-public data generated by sellers who use the platform.

It then uses this information, according to the Commission’s charges, to tailor its own retail offerings. Regulators came to the “preliminary view” that these practices allow the company “to avoid the normal risks of retail competition and to leverage its dominance in the market”.

Amazon faces a potential fine as high as 10% of its global turnover if it is found guilty of breaching competition law — about $19bn.

Google

In many ways, the European Union’s ongoing skirmish with Google over regulatory issues is emblematic of its struggle to deal with the power of Big Tech generally.

In November, when an auditor’s report broadly criticised the bloc’s efforts to curb the dominance of these massive corporations, it probably had Google in mind specifically.

Despite saddling the search engine giant with billions of euros in fines for breaches of competition law over the past ten years, little has changed. In fact, Google is still appealing a €2.4 billion levied against it by the commission in 2017 over certain behaviours including its preferential treatment of its own Google Shopping product over other, smaller competing platforms.

It’s hoped that the new Digital Markets Act will allow European regulators to subject companies like Google to stricter rules, labelling them as marketplace gatekeepers and subjecting them to new, ‘before-the-fact’ rules and obligations.

press-conference-on-the-european-competition-day EU competition commissioner Margrethe Vestager launched fresh antitrust probes into Amazon, Google and Facebook in 2020 Source: DPA/PA Images

However, the Commission did launch a fresh probe into a specific bit of business that Google did last year: its €1.8 billion purchase of Fitbit.

In August, Vestager said, “Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition.”

What the Commission was trying to establish is whether or not buying the company and its user data would allow Google to unfairly fortify its already strong position within the smartwatch market. Concerns were also raised that the purchase would strengthen Google’s dominance in digital advertising, increasing the “already vast” store of user data it can use to target ads.

But the investigation concluded in mid-December with the Commission granting Google the all-clear, subject to a few conditions and commitments by the company.

“We can approve the proposed acquisition of Fitbit by Google because the commitments will ensure that the market for wearables and the nascent digital health space will remain open and competitive,” said Vestager in December.

The commitments will determine how Google can use the data collected for ad purposes, how interoperability between competing wearables and Android will be safeguarded and how users can continue to share health and fitness data, if they choose to.

Facebook

This year, on the other side of the Atlantic, Facebook was one of the biggest antitrust lawsuits in American history.

It’s aim? To curb Facebook’s dominance and possibly even unwind some of its major acquisitions like WhatsApp and Instagram.

In Europe, things are moving a bit more slowly.

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Last year, the Commission launched a two-pronged probe into alleged breaches of competition law by the social media giant. Focused on whether Facebook is distorting the classified ads market by promoting its free ‘Marketplace’ feature to users, that investigation was reportedly slowed down in the first half of the year by the pandemic.

munich-security-conference Mark Zuckerberg's company is facing intense regulatory scrutiny on both sides of the Atlantic Source: DPA/PA Images

During the summer, Facebook slowed things down even more.

The company — through one of its Irish entities — sued the Commission investigators over “the exceptionally broad nature” of their orders to hand over certain internal documents and information, winning a temporary reprieve from having to hand over the data.

A full hearing in the General Court of the EU in October ended in a kind of stalemate.

The investigation can proceed but, as Bloomberg reported at the time, “the European Commission can’t force the social network giant to hand over potentially sensitive records without a detailed review.

Instead, the EU must work with Facebook in identifying such information and store it in a ‘virtual data room.’

To cap off a dramatic year, Facebook moved to wind down two of its Irish holding companies used to channel billions of euros of profits through the controversial ‘double Irish’ tax loophole.

That structure was formally abolished last January. In February, Facebook’s the US Internal Revenue Service is pursuing the company for $9 billion in unpaid taxes over its decision to move its profits to Ireland in 2010.

Interesting times for the Zuckerberg-fronted tech giant.

Apple

At long last, there was some movement in the long-running Apple tax case.

In July, the General Court of the European Union ruled that the iPhone maker will not have to hand back €13 billion in unpaid taxes to the Irish taxpayer.

It’s an important milestone in the saga that began in 2014 when the Commission launched an investigation into two Irish tax rulings that it eventually concluded provided “illegal tax benefits” to the tech giant.

Naturally, the decision was broadly welcomed in Irish political circles.

But as Sinn Féin finance spokesperson Pearse Doherty said at the time, “this is only halftime” in the row.

In September, the Commission appealed the landmark decision to the highest court in the EU, which could take between 18 months and two years to deliver a final decision.

Experts believe it unlikely that the decision will be fully overturned. It is, however, possible that elements of the ruling could be reversed but the initial judgment was certainly a black eye for Vestager, who is starting to run out of tools to tackle alleged tax avoidance by the giants of Silicon Valley.

Separately, the Commission in June launched two investigations into how Apple operates its App Store.

Like Amazon, regulators are concerned by the companies ‘gatekeeper’ role in digital markets, particularly around music streaming.

It follows a 2019 complaint by Swedish streaming platform Spotify that Apple uses its dominant position to limit consumer choice and promote its own Apple music service.

A similar complaint by Japanese company Rakuten about Apple’s conduct within the e-books market resulted in a second investigation by the Commission.

A withering public response from Apple took aim at “baseless complaints” made by “a handful of companies who simply want a free ride”. 

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