EU Proposes New Laws to Rein in Big Tech

Posted on July 30, 2020 by Paul Thurrott in Amazon, Apple, Google with 69 Comments

EU Competition Commissioner Margrethe Vestager (Source: The New York Times)

Lawmakers in the EU have had it with Apple and other Big Tech firms unfairly favoring their own offerings over those of rivals. So they’re going to introduce several new laws that make this business practice explicitly illegal.

The news comes amidst several antitrust investigations into Amazon, Apple, Facebook, and Google in both the United States and EU. More important, it comes in the wake of several guilty verdicts against Google especially, which EU lawmakers say have done nothing to slow down these juggernauts or rein in their illegal business practices.

The problem is many-fold. These companies generate many billions of dollars every quarter and can afford to pay fines in Europe, no matter how expensive, without materially undermining their businesses. And the legal system moves slowly in Europe, too, meaning that by the time a belligerent Big Tech firm has been found guilty of some illegality, it has long since moved on to other strategies.

So the EU is looking to cut down on the time by simply making certain behaviors illegal and cutting down on years of investigations and court cases. The idea is to simply prevent these firms from operating as they do now, helping consumers and competitors alike.

Apple is a classic example. Its App Store charges an egregious 30 percent on all in-app charges, including for some reason subscription services which pay Apple every month or year in perpetuity for doing literally nothing (the free reduces to 15 percent in subsequent years). But in requiring these fees Apple also cuts off each developer’s access to its own customers. It prevents those developers from even telling their customers that they can make these payments elsewhere without incurring Apple’s fees. And Apple does not allow developers to use non-Apple payment systems or load their apps on iPhones or iPads outside of its store.

So Apple plays a gatekeeper role on its own platforms. But it can also see which services are doing well on those platforms and then offers its own alternatives, none of which “pay” a 30 percent fee on each in-app transaction, and each of which is subsidized by iPhone and other hardware sales. So Apple Music, for example, can artificially compete with Spotify and other music services because its costs are much, much lower. Apple gives its own services an advantage that competitors can never match.

Apple argues that it doesn’t dominate the smartphone market, so it shouldn’t be held to monopolistic standards. But Apple actually controls 40 to 50 percent of the market in the United States and in many EU countries, and its app store earns more money than does the supposedly dominant Android, despite its relatively small worldwide marketshare. So Apple is very much a dominant player, despite its protests, and it ensures that the playing field is not level on its own platforms.

And now the EU wants to make sure that that behavior is illegal. It seeks to create business practice boundaries for search engines, social networks, and app stores. It wants to slipstream investigations to cut down on the amount time wasted while the abuses continue. And it wishes to enact all this by 2021.

Many hope, of course, that the very threat of this action will trigger real change. And we’ve already seen it happen. To continue with Apple example, Apple this year will for the first time allow its users to configure non-Apple applications as the default web browser and email application on iOS. And the firm has quietly made several changes to address the many complaints about its insane app store policies. It’s reasonable to expect further concessions in order to evade antitrust problems both in the US and the EU.

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