European Union Commission Executive Vice President Margrethe Vestager made a presentation in Brussels this month on unfair competition.
Photo: kenzo tribouillard/pool/ShutterstockFor all the noise they have generated, European Union efforts to regulate U.S. tech giants haven’t exactly kept investors awake at night. But that might be starting to change.
Earlier this month, EU competition enforcer Margrethe Vestager announced formal probes into Apple’s App Store and payment service, two of the company’s growth areas. Meanwhile, Amazon awaits its charge sheet and enforcers are looking closely at Facebook and Google—again.
Shareholders shrugged off the investigation into Apple, just as they have previous ones against Google and others. These are multiyear battles that may result in billion-dollar fines but have had little success in materially altering a company’s business model or competitive position.
The future could look different, though. Tiring of the current stalemate, the EU is now trying to improve its chances of success by building bigger weapons and making more overt use of industrial policy.
Two mooted changes in particular have the potential to upend the European operations and profitability of U.S. tech companies, including Google, Apple and Amazon, that operate so-called gatekeeper platforms.
The first is a new tool for antitrust enforcers designed to “address certain structural competition problems that the existing competition framework cannot tackle.” With it the EU will be able to investigate any market it thinks might be tipping in favor of one company and force changes without having to prove anyone behaved illegally. Britain has a similar tool and is using it to scrutinize online platforms and digital advertising.
The EU’s market-investigation rules were developed for digital markets but could be used in any sector. Veteran antitrust lawyers worry the new powers are too broad and leave big companies with few options to fight back.
The second change is a new regulation called the Digital Services Act that is separate from the antitrust division. It would create an EU-level regulator to police the gatekeepers and outright ban some common behaviors, such as companies giving preferential treatment to their own services.
Digital services are one of two big priorities the EU set for itself in a €2 trillion recovery package last month—the other being green energy. The EU seems willing to use a more active industrial policy than in the past, openly aiming to create space for some of the region’s 10,000 small- and medium-size platforms to challenge the U.S. tech giants.
Europe is an important region for Silicon Valley, accounting for roughly 23% of Apple’s revenues last year and 31% of Google-owner Alphabet’s, for example. Moreover, since European antitrust authorities have been a trendsetter for many other national enforcers, its new approach could have an impact globally.
True, both changes are still being debated. Officials intend to have a final proposal ready for the end of this year, but it will be longer before any new powers are in place. That means the European authorities will have to make do for now with their current, weaker antitrust rules to fight the new Apple case and the coming Amazon one.
Brussels isn’t backing away from its efforts to curtail the power of American tech giants, though. Given that it makes its own rules, investors may not be able to safely ignore antitrust for much longer.
Write to Rochelle Toplensky at rochelle.toplensky@wsj.com
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