EU privacy – the next transatlantic ‘Microsoft’ battle?

Two things happened in the EU capital recently which should ring the alarm bells in Palo Alto and similar places. 

First, the European Union decided that it is backtracking from plans to allow U.S. internet giants to be regulated by a single data privacy watchdog in the EU. It is thereby killing the so-called one-stop-shop backed by Google and others. With U.S. companies such as Facebook, Apple, and LinkedIn having Ireland as their main European base for data-protection purposes, fighting privacy violations obviously resembled too much a battle between David and Goliath for thinly staffed agencies in some of the EU’s smallest nations. Big players like Germany and France will have a veto now – and thereby de facto control over the U.S. internet corporations. 

{mosads}Second, the European Parliament issued a Resolution to support consumer rights in the EU digital single market. Without saying so, this Resolution has one major goal: Breaking up Google. As a first step. The company’s motto: “Don’t be evil” – nothing but a lie? At least that’s what according to the Resolution the EU Parliamentarians obviously think. 

Are those representatives of the people of Europe just reactionary and backwards-looking, not understanding the positive potential of the Internet? Obviously not. According to the Resolution they are aware that the EU’s digital single market is one of the areas of progress which offers potential for high-efficiency gains that could amount to EUR 260 billion per year. It’s completion would create millions of jobs and potentially enable Europe to gain 4 percent in GDP by 2020. The app economy alone is expected to triple its revenue from 2013 to 2018, creating 3 million jobs in the same period. 

So why do they go after Google & Friends the same way as they chased Microsoft a decade ago? The overwhelming majority for the European Parliament’s Resolution surely has something to do with the last minute lobbying activity of some U.S. Congress members and senators, sending protest letters to Brussels. Especially the fact that most of them obviously had received money from Google during their last election campaigns did not go down well in Europe. 

But is that the reason for all the latest fuss? Google might have triggered the EU antitrust action through its uncompromising, arrogant, self-sufficient attitude as some say in Brussels. In so far they are just another Microsoft case indeed. But unlike in the Microsoft case, antitrust proceedings are not the limit of activity here. And Google is not the limit either. Both are just the beginning. 

The next step will be a massive enforcement of EU antitrust rules against Google. The European Commission just can’t act differently after this wake up call by the European Parliament. Then there will be a European “Google law” to follow up on the antitrust case. And that law will then be extended to other market players afterwards. In fact, Google triggered an EU regulation for the entire industry, also hitting at Facebook, Amazon, Apple, Yahoo, Uber, Dropbox and all the others in the market. 

Let’s look into this in detail: 

While the European Parliament in its Resolution “stresses the need to ensure a level playing field for companies operating in the digital single market in order for them to be able to compete”, calling on the European Commission to “properly enforce EU competition rules in order to prevent excessive market concentration and abuse of dominant position and to monitor competition with regard to bundled content and services”, this is by far not everything. 

In addition, the European Parliament suggests a legislative EU regulation to improve consumer protection inside the digital single market, noting that “the online search market is of particular importance in ensuring competitive conditions within the digital single market, given the potential development of search engines into gatekeepers and the possibility they have of commercializing secondary exploitation of information obtained.” In this context the European Parliament demands “to consider proposals aimed at unbundling search engines from other commercial services as one potential long-term means of achieving the aforementioned aims.” 

From there, the European Parliament takes the matter further, referring to “the dominant position in some Member States of only a few actors in the direct sale of physical goods or as a market-based platform for others to sell physical goods” stressing “the need at European level to monitor and prevent the abuse of such dominant positions.” It then finishes moving into cloud computing, pointing out that “if cloud services are provided only by a limited number of large providers, an increasing amount of information will be aggregated in the hands of those providers (…) in particular as regards sensitive data.” 

In a nutshell, this means that the EU will try to break the business power of every market player which potentially could become a Corporate Big Brother, abusing citizens’ private data over here. Uber might have had its share in that as well. It also shows that US companies still haven’t learned their lessons from the EU political market. Over here, we don’t let you operate and – in case you misbehave – hit hard. It’s not our political tradition. This is why we don’t have proper class action suits over here. And why we don’t send CEOs to jail in case of a cartel. We prefer to regulate beforehand instead of sanctioning afterwards. And now that you got the ball rolling, you need to play.

Geiger is managing partner of Alber & Geiger, a political lobbying and European government relations law firm based in Brussels.