The Digital Markets Act will regulate tech giants through a unique “gatekeeper” scheme. The Act imposes antitrust obligations only on the market’s largest actors – predominantly American companies. Is this fair? Will it work?
In this special episode of Borderlines, listen to Margrethe Vestager, Europe’s top competition regulator and the policymaker Silicon Valley fears most, discuss the bill at the 2022 Riesenfeld Symposium at Berkeley Law School. Professor Anu Bradford of Columbia Law School, one of the nation’s leading antitrust experts, offers additional insight and perspective.
Margrethe Vestager is the European Commissioner for Competition and the architect of the Digital Markets Act. She has led high-profile enforcement action against major tech companies for violating EU competition law. Professor Anu Bradford is an expert on EU law and global antitrust law. She is the author of The Brussels Effect. In her new book, The Battle for the Soul of the Digital Economy, she offers a comparative approach to internet regulation.
For more insights from the Riesenfeld Symposium, including the Chinese angle on tech giants and competition law, from Professor Angela Zhang of Hong Kong University, visit the Berkeley Law YouTube Channel.
Borderlines from Berkeley Law is a podcast about global problems in a world fragmented by national borders. Our host is Katerina Linos, Tragen Professor of International Law and co-director of the Miller Institute for Global Challenges and the Law. In each episode of Borderlines, Professor Linos invites three experts to discuss cutting edge issues in international law.
Listen to other episodes of Borderlines
Episode Transcript
Katerina Linos:
European Union lawmakers agreed on groundbreaking legislation; the Digital Markets Act to increase competition. New rules for the largest of the tech giants and gatekeepers of the internet will kick in. They will hit Google, Meta, Microsoft, Apple, and Amazon. Here at Berkeley, in February, we heard from Margrethe Vestager herself, the architect of the Digital Markets Act, and the regulator Silicon Valley fears most. She’s the European commissioner for competition and was awarded the Riesenfeld prize, traditionally given to a distinguished scholar or practitioner who has made an outstanding contribution to the field of international law. EVP Vestager explained why the huge fines she imposes are not enough and why new regulation is needed to level the playing field.
I’m your host Katerina Linos, Tragen professor of International and Comparative law. In this episode of Borderlines, you will first hear an edited version of EVP Vestager’s keynote address. Then a discussion with Columbia professor, Anu Bradford follows. Professor Bradford is an expert on EU law, and author of The Brussels Effects. She will explain the policies underlying the Digital Markets Act, explore whether it is protectionist and discuss how it might spread.
Margrethe Vestager:
Change is coming in so many ways. The shifting to political balance, the need for us to come together also over climate change. Then there is the reality of the digital transition. And I say reality because this transition has been happening now for actually quite some time. The pandemic of course, accelerated the shift and that adds to the urgency, to the challenge of writing good digital policies. In that of course, we are not starting from scratch. Our work on digital markets has been ongoing for years. Enforcing competition rules is one important part of that because we know how important competition is for healthy markets. Not just because it keeps prices down for all consumers and every consumer need affordable prices. But also because it spurs innovation and innovation is the key to so many of the problems that we face. But competition is also about fairness.
Here in the US, a new study shows that startups are often younger, more diverse, and more likely to be what you could call outsiders. By enforcing our competition rules we are acknowledging the fact that they deserve the same chance to compete as the bigger, more established players in the market. Competition is really about opportunity for everyone, no matter your background.
In 2017, our decision on the Amazon case focused on what is called most favored nation clauses, which forced sellers to offer Amazon the best terms when using its platform to sell eBooks. That same year, we adopted the Google shopping decision, fining Google nearly 2.5 Billion Euros for using a search engine to give illegal advantages to its own shopping comparison services. Consumers’ who search with Google saw its own results before getting to the results of competing services. In 2018, we fined Google over 4 billion euros for abusing its dominate position with the Android mobile operating system and apps, by tying the supply of the app store with search and browse services. Now users will see a choice screen and can select alternatives to the default search engine.
In November, the EU’s general courts upheld our decision in the Google shopping case. That of course, is good news because it constitutes, I think an important legal precedent on which we can build our future work. And that future work is already in the pipeline. This year, we proceed with a series of investigations into how large platforms might be harming competition. And that includes cases for which we already issued a statement of objection. For example, the case concerning Amazon’s use of third party data, Apple’s treatment of third party music streaming services. And there are other investigations in the making involving Google’s behavior in the app tech space and Meta’s use of advertising data when competing with rivals.
But staying on top of things, of course also means anticipating. That is why we are carrying out formal sector inquiries into areas of the economy where our transition is making big changes. One good example is the consumer internet of things. It’s a fascinating market with huge potential to make our lives better and probably also more fun. But as our report shows, there are also competition concerns around these issues, like interoperability, data accumulation, exclusivity. By shedding light on these issues, the sector inquiry can encourage businesses to rethink their practices, avoiding the need for enforcement altogether and enabling consumers to have the full benefit of competition.
When we started our Google investigation back in 2010 and in any time scale, that is really a lifetime ago, back then not many others were concerned about competition in digital markets. What you heard mostly was that digital players were driving down prices, increasing choice, so what was the problem? Perhaps there was, back then, a reluctance to look down that road. Now, digital markets stay on everyone’s agenda, as they should be. In the United States, the FTC investigation into Facebook is seeking a divestiture of Instagram and WhatsApp. The Department of Justice is looking into practices similar to the one covered by our Android complaint.
And it’s not just in America. There are also actions happening in the UK, in Australia, in Japan, in South Korea, in India. The fact that today multiple competition authorities around the world are looking at competition issues in digital markets is a good thing. It means that there is an international consensus that action needs to be taken to protect consumers, to protect businesses in this market in order to have fair contestable markets. It is basically as simple as that. That free open market access. I hope I have underlined that enforcement actions are vital and we are watching them really, really closely. But they’re not enough.
The fact is that we need new ways of safeguarding competition. With our Digital Markets Act, the EU is on the frontier of a whole new approach to regulating tech platforms. Recognizing the reality that a handful of key platforms now act as gatekeepers, a large part of the internet, including online markets, the Digital Markets Act will be there to remind them, with great powers comes great responsibility. The Act will set out a list of things that apply only for the gatekeeper. While the details are being finalized, more or less as we speak in the coming weeks, it will cover things like the use of data by gatekeepers, interoperability at switching default setting, self-preferencing, amongst other things.
Whether online businesses succeed or fail, well, that must be based on how good are their ideas, on how hard they work to serve consumers, not on decisions of a gatekeeper. We are still involved in discussions with the co-legislator on the final text, which means that the European Union’s member states, as well as the European parliament. Progress is good, but there’s still a lot of work to do and we remain hopeful for an agreement very soon, which means that it would come into force by 1st of January next year.
The reason why I mention this is that speed is important. These are fast moving markets. At the same time, we need to know that we get things right. If we want to see real change on ground, the legislation must be clear, it must be to the point because that is what is helping the enforceability. And that is the real test of any piece of legislation, that it can be enforced on ground and that citizen can see change coming. Effective enforcements, which of course includes the commission having sufficient resources to do so, will be key to ensure compliance. Some gatekeepers may be tempted to play for time or to circumvent the rules. Apple’s conduct in the Netherlands these days may be an example. As we understand it, Apple essentially prefers to pay periodic fines rather than to comply with the decision of the Dutch Competition Authority on terms and conditions for third party access to its app store. That will also be one of the obligations included in the Digital Market Act.
Another important point is that these rules are objective, they are non-discriminatory. Both our credibility as an enforcer, as well as our commitment to free and open trade, demand that our actions apply equally of course, regardless of the origins of the companies concerned. So gatekeepers will be designated based on the size and the reach within the European market. This is also why it’s important for us to think globally. The European Union has already led the way in areas like privacy rights, considered the impact of our general data protection regulation, including California’s own Consumer Privacy Act. We would wish for our work on gatekeepers to inspire in other jurisdictions in the same way. We see it happening. For example, in Japan, in the UK, in Australia, in the US, several bills are progressing through Congress and Senate. And there are many features that mirror what we have in our proposal for the Digital Markets Act.
This is really, really encouraging because it means that there is a huge degree of global consensus. Obviously, competition policy does not exist in a vacuum. Everything I have spoken about today is only one part of the European Union’s wider digital agenda, which covers everything from promoting trustworthy artificial intelligence, to improving e-government services, from investing in digital skills, to layering optic fiber and developing 5G coverage, too much for one speech. But there is one thing that I would like to highlight, which is the Digital Services Act. While the Digital Markets Act deals with how markets work and focuses on how a small number of gatekeepers should behave in the marketplace, the Digital Services Act has a different focus. It’s a horizontal law setting the rules online to mirror offline rules. It aims to protect online consumers from unsafe, illegal products and protect our right to speak freely online.
The impact of our digital legislation will depend as much on what happens outside the Union’s border as within. And this is why we are so committed to the Trade and Technology Council, a renewed transatlantic partnership for finding common approaches on a number of these issues, especially for competition policy. But we have launched the new technology competition policy dialogue, which we built on actually a very long tradition of cooperation. The EU and the US may not end up with exactly the same laws, but it’s becoming increasingly clear that we share the same basic vision when it comes to developing digital policy to protect our citizens and to keep our markets fair and open.
It is true, not just for the transatlantic partnership, that the EU’s cooperation links, they are strong across the world and they are paying dividends. For example, a few days ago, we launched the inaugural Africa EU Competition Week, a platform for exchange and policy dialogue with our African partners. We are keen to enhance our cooperation with other parts of the world too because change is coming so fast and because we do live in a world of disturbing global tensions and unpredictability. I hope in my own way that I can continue to play a part in that work. Thank you, and thank you very much.
Speaker 3:
I wanted to focus my question on the relationship between antitrust and national security. EVP Vestager, you started your remarks by referencing Russia’s conventional attacks on Ukraine’s territory, and at the same time, they are surely conducting cyber operations in the Ukraine and likely around the world. In this changing geopolitical environment where China and Russia are not playing by the rules, what happens to core principles of antitrust, like a level playing field and no national champions? Does it make sense to have strict enforcement of antitrust laws against Western tech giants like Amazon, Facebook and Google, when Western governments absolutely need these companies to fight cyber criminals backed by a variety of states? Does it make sense to have harmonization initiatives like the Digital Services Act and the Digital Market Act, to ensure that gatekeepers on the Western side have very fair rules when there’s going to be a different set of rules for the digital economy that follows Chinese or Russian rules?
Margrethe Vestager:
Well, thank you very much for this, I think very important question. The thing is that for me, there is no contradiction between helping fighting hacking, misinformation, and then being a fair market player. Also, because we live for the future right now. So we need to reach short term and long term. And if we want to make sure that long term would have the best possible services, product available, then we need an open contestable marketplace because that is what gives you innovation. But of course, everyone enjoys the services provided by the businesses who are here right now. And it is important that those who play a role in the marketplace, that they play that role also when it comes to fighting misinformation, as they have been doing during the pandemic. We have this code of conduct that all big digital players have signed up for, also actually the Chinese ones, in order to make sure that people can get access to real information about the pandemic.
I think it’s really important not to see a contradiction between the two, because I think actually to think that because you take away misinformation that your platform is being used for, you should be allowed to keep down other completely legitimate businesses. I would find that to be really, really strange. I think it’s really important that we insist on being who we are because this what we defend. This is what we defend when we are attacked cyber. This is what we defend when we see others are being attacked as well. It is who we are, what we defend, which is why it’s really, really important to continue being who we are and I think that is actually our strength. Thank you.
Speaker 3:
How should a company reconcile privacy rules, the GDPR and other requirements with financial reporting rules such as those related to anti-money laundering and sanctions against states?
Margrethe Vestager:
Well, again, the fact that we as citizens have digital rights, also rights to privacy, these are rights that we consider to be for everyone. They are indeed for everyone in European Union. The fact a minority of people engage in money laundering, in other criminal activity, and that every citizen or any business one way or another should do what asked in order to fight crime, I think the two things they can endue indeed be reconciled. If you look at law enforcements in the offline world, while you say that, for instance, we have the privacy of letters and the privacy of your home, but police can read your letters and they can go into your home if they have a warrant. If they have asked and they have good course to do things, they can actually break the rights that everyone holds.
I think we would find it very strange if that was not the case also online. I think for me, the important thing that is happening these years, when digital started to grow and the digital world became more and more part of our human reality, it was a digital world without democracy. It was as if our democracy didn’t have any reach in that digital space. What we are trying to do now is indeed to say what we have decided that is illegal offline, and legal for that matter, should also be illegal online so that our democracy actually regain societal space also when that societal space is digital.
And I think that becomes even more important that the timing is now because we see that the metaverse is beginning to establish itself, which will invade more and more of our physical world. If you look at the numbers of hours that children spent online during the pandemic, I think one would be really worried if that online presence was without democracy, without rules, without everything that we agreed about both rules, but also some kind of orderliness in that online environment. So the timing I think is really good before the metaverse will be even more invasive as part of our life.
Speaker 3:
Thank you. Think we’ll get a question from Professor [inaudible 00:20:56].
Erwin Chemerinsky:
Thank you very much. Vice President Vestager for this wonderful presentation of the combination. I have, they may be related questions, but when you spoke of Apple, not willing to change its behavior and rather paying a series of fines that reminds me of course of the economic argument often put in the United States. That a company has a duty to break laws other of course than the heaviest of criminal laws, as a matter of doing business, if it is more profitable to do so. So my first question is, what tools does the commission actually have to go beyond the fine issue? My second, if I may just put it is a little odd, recently cleared this financial sector merger between the Austrian large player and the Hungarian one, the Hungarian government for nationalistic reasons, then declared it illegal and you have recently slapped their hands, so to say, for doing that. That’s a sort of a unique situation that’s been created there. I’d be interested in a little comment from you about that situation. Thank you.
Margrethe Vestager:
Well, maybe to start it from a different perspective, when we take a decision like the Google shopping decision, it has three elements. So there is a fine to punish past behavior. Then there is a cease and desist part of it saying, stop what you’re doing. And don’t put anything in place that would have the same effect. And then thirdly, you should remedy this situation that has been created. But the last part is the most difficult part because in digital markets harm happens fast. So it can be difficult for consumers to enjoy more different offers, if the harm has been ongoing just for some time. Because if companies online cannot be found typically by a Google search, they cannot get to their customers. So it is really important that there is this work on the restorative parts after illegal behavior.
And in that so far, we have seen both that companies, the ones that we’ve been dealing with, they pay their fine, they stop doing what they do. They put in place remedies to remedy the situation. If not, we would find them, or we could start a new case to say that they’re not in compliant with the first decision. If a company goes rogue, so to speak, then eventually we would have in our toolbox order to break up the company. But of course it all happens within a union based on rule of law. And that of course is the most important thing. This is where democracy is founded. This is where a free and open market comes from. That you can rely on everyone respecting what is authorized or decided by authorities and then eventually tested by the courts.
So we have these threefold elements in our decisions, and then we of course have increasingly sharp tools. And also of course, increasing fines in our toolbox, if there is not the proper response. But obviously since for us, we do a lot of efforts when it comes to a due process, the obvious right to defend yourself. Of course, we expect the same with companies that if authorities legitimate in a democracy takes a decision that then you live up to that decision. Weekly penalties, they are not there for the income of the authority, they’re there for the change of the behavior by the company. And we find that to be very fundamental and a fundamental thing in the respect of the laws in the jurisdiction where you do your business.
And indeed the question of rule of law has been one of the questions that has been back and forth between the commission counts on parliament and the Hungarian government as to what is the state of the rule of law. And we think of it as really important that it cannot be questioned, which is why the commission took the initiatives, as you mentioned, even though there has been an agreement with the companies in question and the Hungarian government. We think that it’s important to say, well, we are willing to defend the freedom of doing business, also, if sometimes the government in question do not find that it is in their immediate interest, we will take these actions and we are of course, willing to do it again.
Speaker 3:
Thank you so much. Let me ask a question about variation in opinion among EU member states and how that makes EU policy coordination more challenging. Could you discuss how this works out in EU competition policy? Is there a range of opinion of different member states on the right balance between encouraging fair competition and encouraging innovation for scalable technologies?
Margrethe Vestager:
I think first and foremost, what has been one of the really positive things in my work is the fact that we work so closely with member states. Also the National Competition Authorities in Europe, they use EU Competition Law in their work. And 85% of decisions taken based on EU Competition Law is taken by National Competition Authorities. Also, when we take decisions, the National Competition Authorities, they work as an advisory buddy. So we work very closely with member states on how to make sure that EU competition policy is a real thing in every market that be the entire European market, regional parts or national parts of it. And that corporation is really strong on the values of the law enforcement and enabling competition to have open contestable markets. Then of course, we have a lot of more policy discussions because no matter how much I like competition, it’s not a silver bullet.
It’s not a wonder drug that can solve everything because sometimes you see market failure, you see failures where the market cannot deliver what is actually in demand, which is why we have in our EU competition rules, the ability to authorize subsidies when you want a project that is needed in the market, but where the risk is too big for the individual company to go in. An example could be, for instance, the design of next generation of batteries for cars, including the digitization of batteries and the establishment of a planned European recycling system. I don’t think any CEO would be met with applause in the board if most likely he would come and present such a product. They would say, oh, come on. This is our business. This is what we do.
So here we can say, well, member states can come together. They can enable businesses coming together and supporting them to do something, benefiting themselves, but also benefiting the entire European market within this area. And we have projects of that on batteries, we have one already on semi conductors. So of course, sometimes it’s important where the market cannot deliver for a more policy driven initiatives actually to fill out where there is a market failure. And then obviously, since we are 27 different countries with different histories and different trade patterns and a difference in industrial fabric, there are differences in opinion.
And I see that as a strength because this means that we discuss things and in the discussion things are being turned around and looked at from different perspectives before decisions are taken. And I think that gives stronger decisions. I also think that that is the case in most jurisdictions, that there are differences in opinion as to how best proceed. And of course, in every democracy that discussion time can look a bit, are they ever going to agree? But once you agree, then you are also able to execute in a common way to make sure that you produce results on [inaudible 00:29:25].
Speaker 3:
We have many more questions, but we are out of time, EVP Vestager, thank you so much.
Katerina Linos:
Professor Anu Bradford from Columbia university is author among many other things of the Brussels Effect, which explains why European regulations are so successful the world over. In her new book, The Battle for the Soul of the Digital Economy, she offers a comparative approach to internet regulation and tells us what underlies the American, the Chinese and the European Project. Professor Bradford, we heard from Commissioner Vestager about EU enforcement action to promote competition in the digital markets, as well as major legislative efforts currently underway. Could you share your perspective on the EU’s evolving policies? What is the strategy behind the digital markets act? How has it been received? Is US criticism of the EU’s competition policies justified?
Anu Bradford:
Thank you so much, Katerina. I am delighted to be here and share this conversation that I feel particularly deeply about. So I would say that now is the time where the world starts to agree on the importance of leveraging antitrust law as an important tool to regulate, in particular, the largest, most powerful companies in the technology sector. But the EU has been on this for a while. If you think about the past decades, the EU has been the enforcer that has been most in the news. And the one that I would say has been most feared, not just by the companies in the EU, but in particular, many of the American companies that have been targets of European antitrust enforcement. So if we take a few examples from the tech sector, Google is one of those companies that has been fined three times in the last decade by the European Commission with the fines totalling about 10 billion. So that is obviously not insignificant.
Before that, if you go back another decade, Microsoft was the one that generated the biggest headlines, but interestingly, the tables had turned and it was actually Microsoft that had approached the European Commission, asking the commission to investigate the anti-competitive practices of its rival, another American company, Google. So this is one of the reasons we care so deeply about what the EU does in the US, because it is often the US companies that find that it is Brussels and not Washington DC, that is constraining their practices the most. I singled out Google, but I would mention that now it’s a rare time since last summer for the first time, there is an open investigation by the European Commission against Google. So another case against Google against Facebook, now Meta against Amazon and against Apple. So the year is really pursuing a multi front battle against the tech industry. And leading the way as there are other regulators around the world that are now increasingly following the EUs lead.
Another current topic in addition to these individual cases where I really would want to single out the specific role that the EU is playing in leading the way, is this significant legislative development that is now underway. So the EU has proposed the European Commission, you have heard about from Commissioner Vestager earlier, she was the one shepherding this effort within the commission. They unveil a very ambitious new regulation known as the digital market stack. And the motivation behind this regulation, it really stems from this recognition that these individual cases, despite the large fines have not really unlocked competition in the European marketplace. So we still have Google being as dominant as it has ever been despite these big cases against the company. And it seems to be that these big tech giants are treating these fines as the price for doing business in Europe. But what we haven’t really seen is the fundamental change in the business models of how these companies are conducting their business.
So determined to change that, the European Commission now unveiled the digital market stack, which is basically a big shift from being an exposed enforcement regime and ex anti regulation. It is the kind of regulation that only applies to what is known as digital gatekeepers. So the biggest, most significant tech companies that play the kind of role in the marketplace, that really create the kind of gatekeeping roles, the bottlenecks that make it really difficult for other companies to enter the marketplace and compete them. So instead of forcing the European Commission to accumulate the evidence, like we do in antitrust cases and show that competition has been harmed, that we actually are compromising consumer welfare, this regulation sets out certain practices that are presumed to be illegal. That these companies needing a certain threshold cannot simply engage in. And this now tackles many of the practices that the commission has to date address one by one, including if you think about one of the biggest cases that was decided also by the European court where the commission prevailed, was the shopping case against Google.
So the idea that the Google had engaged in self-referencing by amplifying, giving a better ranking to its own comparison shopping service, and demoting the search results of those that advanced by tribals. So this took a long time to litigate. This is almost a decade of work, and often the markets already moved at the time we finally come up with a remedy. So when the Digital Markets Act will enter into force, and I would predict that this is something that the European Union can get done through its legislative process by let’s say, June, July. So it might even be out in this first half of this year, this kind of practice would already be prohibited. You would not need to show that it’s anti-competitive, you would not need to show that the practice harms are consumers. So obviously this fundamental approach into changing how you regulate these companies is of a tremendous interest in the United States because the thresholds that single out who are the gatekeepers, who will be targeted by these regulations is primarily showing to be the American companies.
The thresholds are so high that in practice this only applies to Google, to Meta, to our Microsoft, to Apple, to Amazon, potentially to couple of the Chinese rivals, but it seems like the European companies would basically be off the hook. Now, the big question is, is this really a regulation that is targeting, purposefully, American companies? Is it an instrumental protectionism as opposed to an instrumental preservation of competition. And you might have seen in the news how there has been a certain amount of criticism leveraged not just by these tech companies whose practices are threatened by this regulation, but also for instance, the commerce department. Biden administration has warned the Europeans off the regulation that really seem to be targeting American companies. European responses, and I am quite confident that Commissioner [inaudible 00:37:13] today as well, is that this is not protectionism. This happen to be the largest companies. They nationality does coincide with them being Americans, but they are the companies that have the greatest ability to act as gatekeepers and to harm competition on the marketplace.
So interestingly, this big question that has been haunting the Europeans for a while, is whether this aggressive push to be the global regulatory hegemony, including in the domains of antitrust, is motivated by regulatory protection. And I have previously argued that I doubt this to be the case. And let me just offer you a couple of examples why I believe that to be true. So I already mentioned who was the company that brought the complaint against Google. It was an American company. So often in these cases, there are American companies on both sides of the dispute. Another high profile case that has been recently in the news because of the court decision was against Intel, who was the main beneficiary of the fines against Intel? It was another west coast company, [AMD 00:38:21].
In many of these instances, it is basically American companies fighting a civil war on the European territory, resorting to the European regulators when Washington has been unwilling to extend remedies in the antitrust domain. So there is no European search engine that the commission is trying to protect when going after Google. There is no European social media company that would compete against Facebook. At the same time, even though that has been at the position that I’ve taken, I do acknowledge that the conversation is shifting. And there are now, not only in Europe, but in many parts of the world, creator set of voices that are calling for industrial policy, that are calling for more government involvement through instruments like antitrust law. There was a very good example of this recently in the EU when there was a rail merger, a significant one that was proposed between French and German companies.
And that merger was prohibited by Commissioner Vestager and her team. And there was an outcry in Europe because the acknowledgement in Germany and France in particular, was that this was our opportunity to build a European champion and compete against the Chinese companies. Yet the commission held firm in saying, our job is not to build European champions. We are not political. Instead, we are protecting a European consumers. And as far as China is concerned, there was a quote by Commissioner Vestager saying, “Let Chinese be Chinese. They are much better at it than we are.” So Europeans do it, but Germans and French were not content. The next thing we saw was a manifesto where they asked for a revision of European competition laws, whereby there would be a political veto in some of those instances. Thus far that has not gone forward. But I want to recognize that there certainly is a conversation whereby these proposals have been advanced in some circles.
So let me know, maybe just say a few words of the Brussels Effect and generally why it matters around the world, what the [inaudible 00:40:35]. So, first of all, it matters because often the targets are foreign companies. But mind you, there are also tremendous regulatory activity that targets European companies. But because antitrust does not respect the kind of borders that some other domains of law, when you can choose your jurisdiction or decide where you incorporate your company, in antitrust domain, often it is the most stringent jurisdiction that wins in case of a conflict. So the EU law prevails in the settings where there are different competing regulatory regimes at play. But the real reason why also we are so interested in what the EU does is what I have termed the Brussels Effect. And by the Brussels Effect, I refer to the European Union’s unilateral ability to regulate the global marketplace.
So the EU is one of the largest and wealthiest consumer markets in the world. And there are very few global companies that can afford not to trade in the EU. So as the price for accessing the European market, these companies need to obey European rules, including the European antitrust rules. But often they conclude that it is in their interest to extend those rules across the global marketplace so that they can avoid the cost of complying with multiple different regulatory regimes. So we often see these companies, for instance, decide that if we need to organize our distribution relationships so that we are in compliance with the EU rules, we don’t just do it with respect to the EU market. We extend it across our global practices. So these are the examples where all the EU needs to do, is to regulate the single market. It is then the global companies and their business interests that are transposing the EU laws around the world.
So in antitrust law, we sometimes see this when the EU imposes remedies, even if the remedy is only required to be implemented in the EU, sometimes it is cheaper to do that worldwide. If the EU prohibits a merger that let’s say America would allow for, the merger cannot be operational in the US. It is the EU prohibition that governs the entire merger. So this obviously doesn’t happen every single time. Sometimes like the Google shopping case that I mentioned, Google was able to restrict the remedy to the EU alone. But if you think about the various demands that the new Digital Markets Act imposes on these companies, many of them are like to be such that these companies either face a lot of costs in trying to offer different products in different markets, or then they do choose to extend the European rule across the global marketplace.
There’s an additional reason why I think that the DNA would be particularly powerful around the world. It also provides a regulatory template. It provides the kind of model that is easy for the other jurisdictions to copy. And this is another element of the Brussels Effect, which I’ve called the [inaudible 00:43:44] Brussels Effect, where we see that governments, not the companies, but the governments around the world start copying the European regulations. We already see the DNA being replicated in the legislative drafting in different parts of the world. So I would want to end with this idea that generally America has been the one that has resisted copying the European regulations, but that may be changing now as well. If you are following the conversations that are unfolding in the US Congress, there’s a tremendous bipartisan agreement that something needs to be done to reign in the powerful tech companies.
And antitrust seems to be the tool that people tend to agree that offers the best solution, the best regulatory instrument to address that. We also see a very different enforcement machinery based on that the appointments made by president Biden, both my former colleagues at Columbia, Lina Khan heading the FTC and [Tim Woo 00:44:47], being an advisor on antitrust matters in the White House. So there’s now a revival of antitrust if you think about the new cases that have been brought by the US government against Google, for instance, and against Facebook. There the big question is whether the shifting discourse in the US will actually translate into concrete legislative action in Congress. And whether the US courts are willing to buy into the kind of antitrust revolution that the enforcement agencies are now seeking to bring about.
Arun:
Isn’t it convenient that the Digital Markets Act threshold is set at a level that large European tech and media conglomerates like Bertelsmann, Vivendi, Spotify, Ericsson, Nokia, SAP, Siemens, Deutsche Telekom, and so on, don’t seem to be covered, why that’s at lower levels that would still capture these large tech companies?
Anu Bradford:
So, thank you, [Arun 00:45:46] for the question. I think it is the question that the US government has been asking as well, suggesting that really to alleviate the concerns of protectionist, there’s another way to draft this regulation and choose the threshold so that they are not as conveniently targeting the American companies. The response by a key member of the European parliament, that was a so-called [inaudible 00:46:09] in charge of this particular legislative file, said that we are not going to change the threshold so that they hit some European company chance to alleviate these concerns about protectionism because that’s not what’s going on. We are targeting the biggest problems. And the biggest problem happen to be American companies, but they are also largest companies. So the question is, should we try to change the threshold when there’s no competition law related reason for doing so, just to try to make sure that it is the near of protectionism would disappear.
And here, I think there are a couple of reasons. There’s one reason that suggests that enforcing this regulation is not probably going to be as easy as the commission has envisioned. So their thinking is that since we have these ex anti rules, it basically will be self-enforcing. None of these gatekeepers will engage in practices that are prohibited. I think that’s all optimistic. And there probably will be a lot of litigation whereby gatekeepers say, we are complying with the regulation and the commissions say, they’re not. So they still would need to battle over those substantive provisions. And if you are dealing with a large number of companies that will get more complicated. So the idea is that let’s address the biggest problem of all. And then we’ll see whether we need to change that group later on.
So the UK, for instance, has its own gatekeeper regulation. They look at companies with a strategic market status and they do it differently. So they don’t have these generic set of rules for all the companies that meet certain thresholds. They basically are envisioning specific rules for Facebook, specific rules for Google. They do it company by company. So there are different ways of doing it. And I think all of them have some cost and benefits. And ultimately the question is, how can you tell the difference between protectionism. And sort of non protectionist objective motives, where you basically have a correlation between nationality and the size of your company.
And interestingly, within the US government, some prominent voices like Elizabeth Warren has been criticizing the US for going after the EU and basically trying to question the Digital Markets Act because many of those same provisions that now the EU is using to target American companies are embedded in those bills that are pending before the US Congress. So it undermines this administrations and Democrats legislative agenda, by basically saying that Europe should not be going off of these companies. Where at the same time, they’re trying to make the case domestically that these companies and these practices are a big problem. But I understand where your question is coming from. And I can see that it’s hard to definitely say what is motivating and whether you should do it just to avoid having the conversation like we now have to have.
Katerina Linos:
Thank you so much, Anu. I was curious, what are your thoughts about comparable measures we might see in the United States terrain in big tech? What will happen not only in the antitrust domain, but also across other areas. What about privacy governing online speech? Will we see cooperation between the US and the EU, on these fronts?
Anu Bradford:
So I think it’s a terrific question. And I might suggest that we may see all of them, but how successful they are a different question. So we might see more legislation or regulation because this is one of the issues that congresses anti big tech agendas probably furthest along. So there’s a question whether we will be rewriting section 230 of the Communications Decency Act and start revising the way we think about the permissible speech and impermissible speech online. There’s some who suggest that what we need is a federal privacy law, guide of those. And it’s more likely that some of these antitrust bills that are now in the making, will make it through. But at the same time, there’s this sort window closing with the midterms approaching. And even though there is a consensus that something needs to be done, there’s no real agreement on all the details.
So I wouldn’t count on it, but I think it is possible that we will see legislators move forward with this. In terms of enforcement, a lot comes down to whether we’ll agree to revisit the way we think about consumer harm and to embrace the more novel theories that are needed if you want to successfully litigate these cases. But in terms of corporation, though, all these other elements are pointing towards greater corporations. So just the fact that the US is debating this within the Congress. The fact that US is bringing these cases, aligns the US more closely with what the EU is doing. As I mentioned earlier, it is hard for the US to credit [inaudible 00:51:07] post the DMA, if it is trying to adopt similar regulations in its own Congress. What we haven’t mentioned, we have a new instrument or vehicle for Trans-Atlantic corporation in particular, that is called Trade and Technology Council.
So there is an attempt not to harmonize the rules, but to have a better dialogue and understanding and see where we can find pathways forward to reduce the Trans-Atlantic friction when it comes to regulation of technology and trade. And here, I would say that there’s another factor that is pushing the US towards the EU. So not only is there greater understanding that big tech has become too powerful and needs to be regulated, but there’s also growing concern of China’s growing influence in the technology sector. And this idea of what is the technological future if China gets to set the norms. So there is a fear of digital authoritarian norms, shaping not just that internet and the digital economy in China, but those norms also of being exported across the world. So that is another reason why the US is seeking to create a corporation with the EU and might be willing to put aside some of its regulatory differences in an effort to try to find a common line in its bigger fight, if you like, against China.
Katerina Linos:
I hope you enjoyed this episode of Borderlines. Despite questions I had about protectionism, I was ultimately comforted by EU rules, regulating the gatekeepers of the internet. I was convinced that new rules are needed to make sure that Google, Meta, Microsoft, Apple, and Amazon create a level playing field. In this episode, we explored the European approach. As a European Commission, especially under EVP Vestager, has been very proactive. But in the reason felt symposium itself, we heard from scholars and practitioners from around the world for more on other approaches, please turn to the show notes. I particular recommend the remarks of professor [Angela Young 00:53:13] from the University of Hong Kong as understanding the Chinese approach to Antitrust Regulation is critical.