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Europe is walking a tightrope with its looming antitrust reforms

October 12, 2020, 10:16 AM UTC

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Good morning. David Meyer here in Berlin, filling in for Alan.

The Financial Times reports that the European Commission is drawing up a “hit list” of Big Tech firms that need to be reined in with stronger and more easily enforced competition rules. Unsurprisingly the list is said to include major U.S. players such as Facebook, Apple, Google and Amazon.

The Commission has been planning for some time to reform its antitrust rules, which look set to finally appear next year. There are many reasons for this, including a desire to allow the creation of “European champions” where competition rules currently make this difficult (case in point: the Siemens-Alstom merger, the thwarting of which earned competition chief Margrethe Vestager significant criticism from Germany and France.) But one of the biggest drivers is the growing mismatch between the lightning pace of technological development and the glacial pace of European antitrust enforcement.

As Alan pointed out last week, regulatory measures are sometimes ill-conceived. And perhaps the worst situation can be found where rules are designed to be hard-hitting but, as times change, become practically ineffective.

That is arguably the case with the EU’s regulation of competition in the tech sphere. The bloc may have fined Google nearly $10 billion for various antitrust abuses over the last few years, but a) that’s a limited deterrent for a company with annual revenues north of $160 billion, and b) it took the best part of a decade to get to that point, during which time Google’s abusive activities continued largely unchecked.

As one unnamed insider told the FT, “the immense market power of these platforms is not good for competition.” Hence the Commission’s reported desire to force the companies to share business data with their rivals (a longstanding aim of Vestager’s) and to stick to tougher rules than those applying to their smaller competitors.

The Commission is certainly walking a tightrope here. There is a risk of its antitrust reforms being seen as protectionist, even though U.S. firms’ likely dominance of the Big Tech “hit list” would mainly be a function of those companies’ market dominance in Europe. (The situation is not helped by the fact that Competition Commissioner Vestager’s other role is that of EU digital champion.)

But on the other hand, few people would argue that the current EU antitrust system is working as it ought to in the digital context. As in the U.S., where lawmakers are also calling for severe antitrust remedies including the potential breakup of Big Tech firms, there is a clear problem that needs to be fixed.

As for whether the solution makes sense, well, the devil will be in the detail. More news below.

David Meyer
@superglaze

david.meyer@fortune.com

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This edition of CEO Daily was edited by David Meyer.