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What will the future of Big Tech regulation look like? Europe offers some clues

August 16, 2021, 10:00 AM UTC

The rise of Big Tech has completely changed the business landscape over the past two decades, creating massive disruption and unprecedented riches. Now, the law is starting to catch up.

In the U.S., President Biden is pushing hard for pro-competition reform, while putting radical thinkers in charge of enforcement. In Europe, new legislation is on the table, and regulators have already begun attacking Big Tech in packs, melding antitrust with consumer protection and privacy law so they can tackle behavior that impacts all these areas. And in China, antitrust is becoming a tool for reining in the increasingly powerful tech sector. We examined the roots of America’s current antitrust landscape—and how things are changing in other countries, and may soon change here, too.

What’s the goal of current U.S. antitrust regulation?

Antitrust laws are supposed to keep markets operating competitively for the benefit of companies and consumers. In the United States those protections stem largely from the 131-year-old Sherman Antitrust Act, which took aim at anticompetitive cartels and at individual, market-monopolizing companies. American antitrust law has, of course, evolved since then to also address behavior such as discriminatory pricing and mergers and acquisitions that could seriously reduce competition. However, since the 1970s the U.S. legal system has effectively narrowed the scope of antitrust enforcement so that it focuses on cases of demonstrable harm to consumers, rather than harm to competitors.

Antitrust regulation and philosophy has remained stagnant in the country since 1981, when former President Ronald Reagan decided that the ultimate goal of the Federal Trade Commission was to keep prices low for consumers. The authority of the agency was largely curtailed, and antitrust cases were brought with one guiding principle: Is the company engaging in predatory pricing?

But that may be changing. There aren’t many issues in U.S. politics these days that enjoy bipartisan support, but antitrust reform is one of them. Some factions on both the left and the right have soured against Silicon Valley titans like Apple, Amazon, Google, and Facebook (known collectively as the Big Four, or the Four Horsemen) that maintain market dominance, in part, by keeping prices artificially low and either starving or gobbling up smaller competitors. 

Will Lina Khan crack down on Big Tech?

Which brings us to Lina Khan, the 32-year-old whom the Senate has confirmed as head of the FTC. Khan has forged a strong reputation in the antitrust community as a fierce critic of Big Tech’s increasing market dominance, and as a defender of America’s anti-monopoly laws. President Joe Biden has also indicated that he will be working unilaterally to curb monopolies in the U.S. through a series of executive orders which call on the Justice Department and the FTC to update their criteria for examining proposed corporate mergers. 

The House Judiciary Committee also recently approved a six-part package, the Ending Platform Monopolies Act, based on the outcome of a series of hearings with experts and tech leaders. The package specifically targets the Big Four, gearing up for what will likely be a long and expensive showdown between companies with hoards of influence and lobbyists in D.C. 

It’s still unclear if any of these efforts will result in real, lasting change, but the federal government is coming at these corporate superpowers from multiple angles and doesn’t appear to be letting up. 

Europe is ahead of the U.S. on antitrust regulation, right?

In a word, yes. Protecting consumers is a key concern in the European Union, too, but so is preserving free trade within the EU’s near-sacred single internal market, and ensuring that companies across the union have sufficiently low barriers to entry. Protecting companies against unfair competition remains a big deal in Europe. For example, the European Commission currently has an antitrust case against Amazon that revolves around how the company surreptitiously uses the data of third-party merchants on its platform to compete against them.

Particularly under current antitrust chief Margrethe Vestager, the European Commission has been testing the limits of where competition law can go.

So far, the most novel application of Vestager’s antitrust toolkit has been in the field of taxation—specifically, cracking down on multinationals’ deals with certain countries’ tax authorities, on the basis that those deals amount to illegal, market-distorting state aid. The commissioner has taken this creative approach in a variety of cases, most notably one involving Apple and its arrangements in Ireland.

In 2016, Vestager told Ireland to reclaim around $14.5 billion, plus interest, in back taxes from Apple. “The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” she said at the time. But four years later, the EU’s General Court annulled the ruling, saying Vestager’s department had failed to prove that the tax deal had given Apple such an advantage over other companies. Some similar rulings have also been overturned; some have prevailed in court.

Despite these legal blows, Vestager told Fortune earlier this year that her state-aid–based tax cases “have been helpful in the momentum of change” toward rules that will ensure tech multinationals pay more tax in more countries.

Meanwhile, national competition regulators are also increasingly treading on unfamiliar turf as they try to take on Big Tech. A couple of years ago, Germany’s Federal Cartel Office (FCO) told Facebook to stop collecting personal user data from third-party websites and using it to profile people without their consent—a data-protection violation, but one that the regulator saw as being a competition issue because the practice helps Facebook amass yet more market power.

In the U.K., which is no longer an EU member, the Competition and Markets Authority (CMA) has officially started working with the Information Commissioner’s Office (ICO), the privacy watchdog, on work involving tech firms. “In our increasingly digital world the links between data protection, competition, and consumer rights regulation make our joint work timely and important,” ICO chief Elizabeth Denham said in May.

One of the core problems of regulating Big Tech is the speed at which it operates—investigations into companies such as Google take many years, and by the time they conclude, the market-distorting damage has already been done. So the European Commission has proposed a new law called the Digital Markets Act, which would try to stop antitrust abuses by “gatekeeper” companies before they actually happen—and potentially break them up if they refuse to behave.

Germany already passed a similar law at the start of the year, giving the FCO the power to say a company has “paramount cross-market significance” and ban it from potentially anticompetitive practices.

Where is China when it comes to regulating Big Tech?

In China, antitrust law is one of the many regulatory tools—also including data protection—that the government has recently been using to hit the country’s nascent tech sector.

It started in April with a $2.8 billion fine for Alibaba, which was found to have illegal exclusivity deals with merchants using its online shopping platforms, and the forced separation of Ant Group’s payment platform and financial products. The food-delivery service Meituan is also the subject of a major competition probe.

In recent days, the Chinese antitrust authority told Tencent to give up the exclusive music licensing deals it had with labels around the world, because of the extraordinary power it had gained through the purchase of China Music Corp. It also stopped Tencent from merging the leading game-streaming sites Huya and DouYu. And Tencent and other big Chinese platforms have been ordered to step up their interoperability, so users aren’t locked into their “walled gardens.”

There is a widespread perception that the Chinese regulatory crackdown, in antitrust and other areas, is about bringing an increasingly powerful tech sector to heel: The assaults on Alibaba and Ant Group notably came soon after founder Jack Ma criticized the Chinese regulatory system. Some, such as legal expert Angela Huyue Zhang, say Beijing’s aim is trying to force Chinese tech giants to become more innovative, to help the country as a whole compete against the U.S.

But whatever the political motivation, the logic is similar to that being wheeled out in Europe and the U.S.: Tech giants should not be able to lock their users into their own services; they should not be allowed to use their heft in one sector to take over another; and they should not unfairly suppress competition.

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