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The EU’s New Digital Trade War?

In the latest example of targeting U.S. technology firms, the European Commission (EC) has accused Google of using its Android Operating System (OS) to prevent the use of other search engines. However, the EC has provided little evidence that Google has market dominance or consumers have been harmed by Google’s practices. Google’s record fine and a myriad of other hefty fines levied on U.S. tech companies suggest that the EC is attempting to curb U.S. participation in the EU market.    

 

U.S. tech companies are facing heavy fines or taxes imposed by the European Commission.

  • Apple has accumulated €13 billion in back taxes in Ireland due to an EC ruling.
  • Amazon must pay €250 million for unapproved tax benefits extended by Luxembourg.
  • Last year, Facebook was fined €110 million for supposedly misleading regulators when purchasing Whatsapp.
  • Intel and Microsoft have been battling more than €1 billion in antitrust fines from the EC in the EU Court of Justice.
  • The EC announced a nearly €1 billion fine on Qualcomm for anticompetitive behavior at the beginning of this year.

 

The latest fine sets a new record for Europe going after American companies.

On July 18, 2018, the EC found that Google violated Article 102 of the Treaty of Functioning of the European Union, which prohibits businesses with market dominance from restricting competition. The fine was €4.34 billion ($5 billion), the largest single fine ever levied for an antitrust violation. The EC alleges that Google’s licensing agreements for Android OS systematically prevent competitors from introducing search apps and web browsers with a competing search engine. The EC maintains that the dominance of Google’s search in the digital space and Google’s discriminatory licensing practices constitute monopoly power and violate EU antitrust rules. The $5 billion fine is in addition to the $2.7 billion fine issued by the EC in June 2017 over the company displaying its products ahead of others on its Google Shopping search engine.

 

The Charges Against Google: How Can Legitimate Practices Stifle Competition?

Among the main charges against Google are two claims:

  • Device manufactures must preinstall Google’s Chrome browser and Google’s search bar to access Android’s “app store” through the Google Play app. This ensures Google is the default search engine for Android devices, which reduces competition.
  • While device manufactures can create their own offshoots (or “forks”) of Android, doing so precludes them from being able to include the original Android operating system on other devices they produce. Google has argued this is to provide consistency across platforms for app developers.

 

The EC’s antitrust case against Google may be part of a broader dispute between the EU and the U.S. tech sector.

The practices at issue seem to have legitimate reasons and benefit consumers, yet the EC relies on a narrow definition of the relevant market and does not account for competitors such as Amazon and Apple. Moreover, the EC does not clearly explain the harm to consumers of the practices it deems anticompetitive by U.S. tech companies.

 

Although the EC has opened several antitrust cases against non-U.S. tech companies, the EC has rarely issued fines against them. Even then, the amounts are far less than the billions of Euros levied against Google. Although the EC claims that U.S. companies are not the target of state aid or antitrust investigations, the targets are often U.S. tech companies, giving the impression that the EC is on a campaign to curb the influence of American technology companies in Europe.  

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