Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Big Tech has been slapped with billions of dollars in fines for allegedly breaking EU law over the past decade but critics say this has done little to open markets and enable competition. Break the companies up instead, they insist.
Google, for instance, has for years been contesting roughly €8bn in fines handed out by the European Commission for alleged anti-competitive behaviour in three landmark cases before the courts in Luxembourg.
More recently Apple said it would appeal against a fine of €1.8bn issued by Brussels for stifling competition from rival music streaming services. To be sure, these fines are high. The case involving Apple last month represents the third-highest fine ever imposed on a company by Brussels (after two penalties against Google). But even officials wonder whether the fines offer enough of a deterrent to stop big tech companies from behaving badly.
Other regulators have also gone down the path of imposing large financial penalties. In 2020 France fined Apple €1.1bn over distribution infringements, although the fine was later reduced to €372mn on appeal, and in 2021 Italy fined Amazon €1.13bn for alleged discrimination against third-party sellers.
More recently, the likes of Meta and Apple have braced themselves for hefty fines as Brussels seeks to determine whether they are properly obeying the landmark Digital Markets Act, a new law aimed at opening markets and nurturing European start-ups while also improving the experience of consumers. Offenders face daily penalties of up to 5 per cent of their global turnover.
Yet, regulators admit fines are not a cure-all for curbing the growing power of Big Tech. Margrethe Vestager, the EU’s executive vice-president in charge of digital policy, said as much last month. “The point of having cases is not to issue fines. The point is that we need to have these very strong deterrents for the gatekeeper to do as they are supposed to do which opens the market, makes it contestable and makes consumers have the benefit of that, which is innovation, lower prices, more choice. That is our mission.”
Big fines or not, rivals to big tech companies still complain that regulatory action has been slow or not sufficiently deterrent to increase competition. Music streaming app Spotify, for example, has for years complained that Apple is disobeying the law and hurting competition. Following changes introduced by Apple to comply with an antitrust order, Spotify insisted that the tech giant was still not complying and Brussels should impose daily fines. “It’s time for decisive action to once and for all give consumers real choice,” Spotify said. Apple said that the music streaming market was thriving and that eight years of investigations had “never yielded a viable theory explaining how Apple has thwarted competition”. It added that Spotify paid Apple zero per cent commission on sales of subscriptions.
Critics argue that big tech companies just see fines as part of the cost of doing business, when and if they are eventually paid. Damien Geradin, an antitrust lawyer who has represented companies in probes against Apple and Google, said fines did not work as deterrents. He said: “A fine is a cost of doing business for Big Tech and the level of profit of these companies is such that no fine will exceed the profit of ignoring the law.”
He added: “If you’re a chemical company and you are fined €200mn that may take more than your profit. We have historical examples where some companies could not even pay the fines. If you make €100bn or €50bn a year [in revenues] and make dozens of billions of net profit a year, it’s not €2bn, €3bn or even €4bn that will make the difference. The logic of a company like Apple might be: ‘Why don’t we go on as long as we can and as far as we can because in the meantime we secure our dominance’.”
Instead of tinkering around the edges with ineffective fines, some Big Tech critics have argued that the only way to effect change is to break companies up. Brussels is considering whether to force Google to sell part of its adtech business in efforts to bring back competition to the sector. Last June the EU said the only way Google could stop allegedly abusing its dominant position would be to sell off part of its business. Google said it disagreed with the commission’s assessment.
Proponents of structural remedies argue that smaller divisions of larger big tech groups would be forced to compete on price and innovation, therefore benefiting consumers. But Andreas Schwab, the MEP who led the negotiations on the Digital Markets Act, warned regulators should be wary of breaking up tech just to demonstrate their toughness. “The ultimate goal is that you bring back fairness to markets.”
Read the full article here