Ger­many vs Google

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Amer­i­can tech com­pa­nies are un­der un­prece­dented attack by Euro­pean Union reg­u­la­tors. The Euro­pean Com­mis­sion has charged Google with abus­ing its near-mo­nop­oly over In­ter­net search in the EU to fa­vor its own shop­ping ser­vices. It has also opened a probe of Google’s An­droid mo­bile op­er­at­ing sys­tem.

And, as part of its just-an­nounced “Dig­i­tal Sin­gle Mar­ket Strat­egy,” the Com­mis­sion is call­ing for a com­pre­hen­sive in­ves­ti­ga­tion of the role of (mostly Amer­i­can) In­ter­net plat­forms, such as so­cial net­works and app stores.

Ques­tion­able prac­tices by com­pa­nies from any coun­try should be ad­dressed in a fair, im­par­tial way. But that seems un­likely to hap­pen here. The key driver of the EU’s reg­u­la­tory on­slaught is not con­cern for the wel­fare of or­di­nary Euro­peans; it is the lob­by­ing power of pro­tec­tion­ist Ger­man busi­nesses and their cor­po­ratist cham­pi­ons in gov­ern­ment.

Ger­many’s gov­ern­ment boasts about how “glob­ally com­pet­i­tive” the coun­try is, and its of­fi­cials lec­ture their EU peers on the need to em­u­late their sup­posed re­formist zeal. And yet, while the coun­try re­mains a world-beat­ing ex­porter in in­dus­tries like au­to­mo­biles, it is an also-ran in the In­ter­net realm. There is no Ger­man equiv­a­lent of Google or Face­book. Stymied at home by red tape and a risk-averse cul­ture, the most suc­cess­ful Ger­man In­ter­net en­trepreneurs live in Sil­i­con Val­ley. While US-based com­pa­nies con­quer the cloud, Ger­many is stuck in the mud.

With Ger­many’s dig­i­tal start-ups sti­fled by over­reg­u­la­tion and un­der­in­vest­ment, dinosaurs from the ana­logue world set the pol­icy agenda. Tra­di­tional me­dia com­pa­nies re­sent their re­liance on Google to di­rect traf­fic to their sites and its abil­ity to sell ad­ver­tis­ing based on snip­pets of their con­tent. The partly state-owned Deutsche Telekom hates that it does not earn ad­di­tional rev­enue when peo­ple use its net­work to make calls on Skype, send mes­sages on What­sApp, and watch videos on Net­flix and YouTube. TUI, the world’s largest travel agency and tour op­er­a­tor, feels threat­ened by TripAd­vi­sor. Re­tail­ers fear Ama­zon’s ever-ex­pand­ing em­pire.

Ger­many was the first EU coun­try to in­sti­tute a na­tional ban on Uber, at the be­hest of taxi driv­ers fear­ful of com­pe­ti­tion. And Ger­many’s pow­er­ful industrial lobby frets that Amer­i­can tech com­pa­nies could eat their man­u­fac­tur­ing lunch. As Gun­ther Oet­tinger, the EU’s (Ger­man) dig­i­tal com­mis­sioner, put it, “If we do not pay enough at­ten­tion, we might in­vest in pro­duc­ing won­der­ful cars, but those sell­ing the new ser­vices for the car would be mak­ing the money.” Whereas Oet­tinger’s pre­de­ces­sor, Neelie Kroes, cham­pi­oned the po­ten­tial of dis­rup­tive tech­nolo­gies to ben­e­fit con­sumers and boost eco­nomic growth, Oet­tinger is unashamedly cor­po­ratist in ad­vanc­ing Ger­man busi­ness in­ter­ests.

Ger­man com­pa­nies are not alone in fear­ing Amer­i­can com­pe­ti­tion, but their in­flu­ence within the Euro­pean Com­mis­sion is de­ci­sive. In­deed, Ger­many has never had more clout in the EU. The debt cri­sis, which dis­tracted France and alien­ated the United King­dom, has thrust Ger­many, the eu­ro­zone’s largest cred­i­tor, into the Euro­pean driver’s seat.

Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Juncker owes his po­si­tion to the Euro­pean Peo­ple’s Party, the cen­treright po­lit­i­cal group­ing dom­i­nated by Ger­man Chan­cel­lor An­gela Merkel’s Chris­tian Demo­cratic Union, which in turns holds sway over the Euro­pean Par­lia­ment. Juncker is also in­debted to the Axel Springer me­dia group, the pub­lisher of

Ger­many’s best-sell­ing tabloid news­pa­per, which strongly backed him last sum­mer when Merkel was wa­ver­ing. And his Ger­man chief of staff, Martin Sel­mayr, en­sures that his coun­try’s con­cerns are heeded across the Com­mis­sion.

Last year, Ger­many pres­sured Joaquin Al­mu­nia, the EU’s then-com­pe­ti­tion com­mis­sioner, not to set­tle its an­titrust dis­pute with Google, en­abling his suc­ces­sor, Mar­grethe Vestager, to pur­sue it. In fact, the in­ves­ti­ga­tion into In­ter­net plat­forms comes at the de­mand of Ger­many’s eco­nomics min­is­ter, Sig­mar Gabriel. And its out­come seems pre­or­dained; in a leaked po­si­tion pa­per, Oet­tinger pro­poses a pow­er­ful new EU reg­u­la­tor to rein in on­line plat­forms. He re­cently spoke of the need to “re­place to­day’s Web search en­gines, op­er­at­ing sys­tems, and so­cial net­works.”

No one forces Euro­peans to use Google as a search en­gine; com­peti­tors are only a click away. For shop­ping, Euro­peans in­creas­ingly by­pass it, search­ing di­rectly on Ama­zon or eBay, or nav­i­gat­ing through Face­book. So Google scarcely con­trols, much less mo­nop­o­lises, this rapidly evolv­ing land­scape. Nor have shop­pers suf­fered. But, whereas US an­titrust law rightly fo­cuses on whether con­sumers are be­ing harmed, EU com­pe­ti­tion au­thor­i­ties also con­sider whether ri­val firms have lost out – in­clud­ing old-fash­ioned shop­ping por­tals, such as Laden­, owned by Axel Springer.

Cre­at­ing a dig­i­tal sin­gle mar­ket makes sense. Whereas ev­ery Amer­i­can In­ter­net start-up benefits from a huge do­mes­tic mar­ket, their Euro­pean coun­ter­parts are limited by do­mes­tic reg­u­la­tions to smaller lo­cal mar­kets.

Un­for­tu­nately, the Euro­pean Com­mis­sion’s pro­pos­als are not fo­cused on en­abling Ital­ians to buy from Bri­tish web­sites or open­ing a mar­ket of 500 mln Euro­peans to Span­ish star­tups. Their main goal seems to be to con­strain Amer­i­can dig­i­tal plat­forms. As Gabriel put it in a let­ter to the Com­mis­sion last Novem­ber: “The EU has an at­trac­tive sin­gle mar­ket and sig­nif­i­cant po­lit­i­cal means to struc­ture it; the EU must bring th­ese fac­tors into play in or­der to as­sert it­self against other par­ties in­volved at the global level.”

In­stead of con­spir­ing to hob­ble its Amer­i­can ri­vals, sti­fle in­no­va­tion, and de­prive Euro­peans of the full ben­e­fit of the In­ter­net, Ger­many should prac­tice what it preaches and make the dif­fi­cult re­forms it needs to raise its game. It should make it eas­ier to start and ex­pand In­ter­net busi­nesses. It should boost in­vest­ment in broad­band in­fra­struc­ture and dig­i­tal tech­nolo­gies. And it should throw its weight be­hind a gen­uine EU dig­i­tal sin­gle mar­ket that benefits con­sumers and en­ables star­tups to flour­ish, in­stead of a back­door industrial pol­icy that fa­vors Ger­many’s dig­i­tal flops.

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