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European Union plans to rein in Silicon Valley via new competition rules are emerging as a serious irritant in the transatlantic relationship, just as the two sides have committed to deepening their ties on tech and trade.
Senior officials from Brussels and Washington gathered in Pittsburgh last month to inaugurate the Trade and Tech Council, a high-level initiative geared at repairing a relationship damaged under former President Donald Trump.
But behind the display of bonhomie, U.S. officials are growing increasingly worried about European tech regulation plans, which they feel unfairly target Silicon Valley giants like Facebook, Google and Apple.
“I am confident that we will have the kind of robust and honest conversations with the Europeans,” U.S. Trade Representative Katherine Tai said this month when asked about the proposed rules, which aim to limit the market power of so-called “gatekeeper” platforms such as Google, Facebook and Apple.
Now U.S. officials and industry representatives warn that the new rules, known as the Digital Markets Act (DMA), could sour efforts to build a common front on everything from artificial intelligence to chip production in the face of intensifying competition from China.
Summing up the view from Washington, Garrett Workman, senior director of European Affairs at the U.S. Chamber of Commerce, asked: “Why are you [Europeans] proposing these things that target almost only U.S.-based companies at the same time you’re asking to work together on artificial intelligence?”
U.S. officials are familiar with European regulatory offensives on everything from privacy, with the GDPR, to digital taxes. But the DMA represents a departure in the eyes of many.
“Rather than developing its digital economy, Brussels’ focus is fixated on regulating the GAFAM companies,” said Christian Borggreen who leads the Brussels office of the CCIA, a trade association which has all U.S. Big Tech companies as members. “We saw this with the now-abandoned EU digital services tax. But it has never been as pronounced as with the DMA now.”
Who’s the target
The DMA bill is going through the EU’s legal machinery and won’t come into effect before Spring 2023 at the earliest. But U.S. politicians are speaking up now because lawmakers in the European Parliament are embroiled in a fight over which platforms eventually will have to abide by the rules.
It’s highly likely that U.S. Big Tech companies — Apple, Amazon, Facebook, Google, and Microsoft — will fall under the spotlight. Some of the obligations and prohibitions they will have to abide by, like allowing users to use other app stores or not prioritizing their own services, have their name written all over them.
But it remains to be seen if they will be the only ones. The lead MEP handling the file, Andreas Schwab (EPP), started the debate end of May by tweaking the thresholds that will decide which platforms are targeted, including market capitalization, revenue and number of users, in such a way that mainly U.S. giants would be targeted.
Schwab says the focus should be kept narrow in order to make sure enforcers can cope with the workload: “We should have an outreach as broad as we can do with 80 people who are not as knowledgeable as the people that are sitting in Silicon Valley.”
“Let’s focus first on the biggest problems before we speak about normal problems,” he added.
That approach is welcomed by EU tech champions like Swedish music streaming service Spotify or fintech firm Klarna. They are both members of the European Tech Alliance, which is pushing EU politicians to opt for a “targeted approach” to regulation.
But the U.S. National Security Council said in June it was “particularly concerned” about the “protectionist policy” aimed only at U.S. companies, weeks after Schwab suggested focusing on Big Tech.
Schwab’s backed by the EU’s heavyweights — Germany, France, and the Netherlands, who also say the law’s scope should be “targeted.”
Germany is the home of software giant SAP and the Netherlands of (U.S.-owned) hotel platform Booking.com. Both exceed at least some of the thresholds, like market capitalization.
The debate has yet to be resolved.
Schwab has to find a middle ground with the Social Democrats and Greens, two groups that are pushing for a wider net that would include non-U.S. companies too. “We have to capture the gatekeepers, irrespective of their nationality,” German center-left MEP Evelyne Gebhardt said.
But landing on thresholds that everyone likes is difficult. Some tech companies argue that putting the size of a company at the center of the debate might have been the wrong approach. Jason Oxman, chief executive of ITI, a trade body that represents many of the world’s largest tech companies, said “our concern is that the DMA should focus on the potential harm to consumers” instead.
In the meantime, EU officials still have to placate anxious U.S. officials watching the debate from Washington.
“We can’t just focus on U.S. companies but rather build the approach on common transatlantic concerns and look at the potential damage of all overly dominant companies,” said Dutch MEP Paul Tang, who’s meeting with U.S. lawmakers on the subject on October 27.
The Commission’s competition chief Margrethe Vestager also tried to brush aside potential differences, by claiming on Wednesday that the EU and U.S. antitrust approach is not so different after all.
“Europe is ahead of the curve but only with a fraction. If you look at some of the proposals tabled in Congress, you see that they more or less mirror, what we would do in the Digital Markets Act,” she said.
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