Europe is putting its foot down against tech giants

Social Media

If there were ever a David and Goliath situation going on between the biggest tech companies in Europe and European Commission (the EU’s executive arm whose many jobs include the regulation of said tech companies), the latter would emerge wearing an “Officer Goliath” badge.

Although calling the world’s largest tech corporations David is quite a stretch. In 2019, the European Commission is making a name for itself as the top cop of tech regulation in Europe, slapping several of these so called “tech giants” including Google and Facebook with billions of dollars in fines.* The United States is ramping up its efforts as well, but it’s the European Commission that’s actually showing its teeth. So, what are these tech companies doing to deserve such punishment? That’s what this Vestle article will focus on.

It’s always been a matter of ‘antitrust’

It all comes down to antitrust laws, or competition laws, as they’re called in the UK. These are regulations with three main purposes:

  • To prohibit agreements or practices that restrict free trade and competition between business entities
  • To curtail and ban abusive behaviour or anti-competition practices committed by a firm with market advantage that could lead to that firm achieving market dominance
  • To supervise mergers and acquisitions of large corporations with a focus on preventing transactions that can threaten the competitive process altogether”

The European Commission enforces these regulations with the ferocity of a mother bear and her cubs. The problem lies with the fact that in the US, antitrust regulation isn’t as centralised as in Europe. But here, with one regulator in charge of everybody, the laws are much clearer so if a violation is detected, the European Commission can act accordingly – and, if what’s happened already in 2019 is any indication – swiftly to impose punishment.

Such punishment usually takes one of two courses. Either the Commission can opt to force the company in violation to change its business practices by breaking up into smaller components, or slap them with a fine, just like it did with Google to the tune of $9.5 billion.

Who’s been affected so far?

The first victim of the European Commission’s trade against big tech domination was Google who, back in 2017, was fined by the Commission for $2.7 billion. What did it do? The Commission alleged that by favouring its own comparison-shopping service over its competitors’ search results, Google was “abusing its dominance as a search engine.”

Then in 2018, they piled on another $5.1 billion fine for anti-competitive practices on Google’s Android devices, alleging the company had forced device makers to pre-install its own apps. Finally, in March of this year the Commission added on another $1.7 billion fine for “abusing its dominance in the online advertising market” by restricting competitors’ ads in its search results altogether, bringing the grand total to $9.5 billion.*

Not too far behind was Facebook, who’s facing the fine-slapping from both sides of the pond. Most recently, in July of 2019 the US Federal Trade Commission fined Facebook $5 billion – the largest fine ever levied on a tech company by the FTC – for privacy violations. And you think they would’ve learned their lesson considering the $122 million fine they received back in 2017 from the European Commission for misleading users about the company’s acquisition of WhatsApp (a $19 billion transaction). When the merger was first announced, Facebook as unabashed about admitting that it would share WhatsApp data with the rest of the company to help bolster its online advertising business. However, further action by Dutch and French privacy watchdogs around the same time found the company to have broken various data protection rules, resulting on the Commission’s $122 million ruling.**

Everything is not just fines

When you think about how much money these tech giants rake in every year, these fines can feel like chump change. For example, according to Statista, Google’s 2018 revenue topped $136.22 billion in 2018, making a measly $9.5 billion in fines seem small.*** However, the European Commission knows this, as well as the fact that Google’s revenue in 2018 was 23% higher than the year before, and that it’ll most likely follow a similar trend this year. So in addition to putting pressure on the purse strings of these big tech giants, the Commission is also harnessing them by imposing stricter laws and regulations targeting such things as hate speech, violence and misinformation.

Here comes an unexpected twist: many companies are actually appreciative of such regulations because they ultimately relieve the companies themselves of having to grapple with claims of censorship and the stifling of freedom of speech by their users. And who really suffers here? You guessed it – users like us. David Kaye, an American law professor appointed by the UN to spotlight government efforts to restrict free speech was quoted in a New York Times article saying, [with the growing body of European legislation] “there will be a lower standard for protection of freedom of expression.”

A solid case-in-point comes from Germany, where political activist Jorg Rupp had his Twitter account banned after tweeting “derisive words about asylum seekers and Chancellor Angela Merkel” thanks to Germany’s Network Enforcement Act, one of the world’s strictest anti-hate speech laws. Rupp claimed his tweet was satire, that he was only mocking the lingo and rhetoric of the right-wing groups he was attempting to lampoon, but considering it was one of more than 500,000 complaints lodged against posts last year, Twitter justified its actions in blocking Rupp’s account saying his post violated its terms of service.

Another example is in Spain, where Amnesty International claimed that more than 60 people have been convicted for online posts under a similar antiterrorism law.**** And with the British government constantly committing to comb the internet and remove “harmful content” – whatever that means – who knows who will be the next to find themselves confined to the next worst thing besides jail, that being a suspended account?

Who is winning the fight?

At this point, there’s really no way to tell. On one hand, it’s nice to see the European Commission is doing so much to prevent unfair competition, and that they’re not afraid to act with aggression. On the other, at the same time they’re working with the very tech companies they’re fining to impose further regulations that some construe as challenging free speech. It’s fair to say that since all of this revolves around unprecedented and ever-evolving technology, it’s difficult to be certain of what’s right and what’s wrong. All we can do is watch the story unfold and try to avoid getting our accounts blocked.

With three such massive companies on the table – Google, Facebook and Twitter – it’s no wonder that some people, namely traders and those with an eye for the financial markets, are keeping an eye on how they’re performing. At Vestle, we offer the opportunity to track the performance of companies like Google (traded under parent company Alphabet), Facebook and Twitter, as well as hundreds of other instruments, and trade on their price volatility – both up and down – in the form of Contracts for Difference (CFDs). Since all trading comes with inherent risk, you’re better off learning as much as you can about it first, so you can weigh the advantages against the disadvantages. At Vestle, we offer free education, trading signals, graphs and video tutorials to help navigate the trading platforms and the market.

The materials contained on this document have been created in cooperation with Vestle and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 86.9% of retail investor accounts lose money when trading CFDs with Vestle. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. Full disclaimer: