The US is striking out against the tech companies with several legislative initiatives. There are also efforts in Europe for stricter regulation.
Berlin in Germany, the debate about stricter regulation of large internet companies is gaining momentum. The reason for this is the efforts in the USA to enable the unbundling of dominant companies, as well as the plans of the EU Commission to subject the digital economy to new rules and to improve the competitive conditions of smaller European providers.
“It is not without reason that there is talk of an industrial revolution in the context of Industry 4.0,” said the digital policy spokesman for the SPD parliamentary group, Jens Zimmermann, to the Handelsblatt. Such epochal changes require appropriate regulatory instruments. “For me, due to the massive accumulation of capital and market dominance, this also includes breaking up individual corporations.”
Just because this instrument has not been used or has only been used very rarely in the past decades does not mean it is unsuitable. “If companies accumulate too much market power, the alarm bells should always sound,” said Zimmermann. This is increasingly the case with the large US technology companies.
In this respect, he welcomes the possibility created by the reform of the Act against Restraints of Competition (GWB) for the Federal Cartel Office to take action against distortions of competition more easily in the future if market-dominant digital companies exploit their position. “It is important to sharpen the European agenda here too,” emphasized the SPD politician.
The CDU digital politician Tankred Schipanski made a similar statement. “Breaking up companies should only be the last resort to break up overgrown monopolies,” Schipanski told Handelsblatt. It is better to prevent the so-called tipping of markets, i.e. reaching a critical mass on one side of a platform market, in advance. The GWB offers extensive possibilities here and should serve as a model for the planned EU law on digital markets (Digital Markets Act, DMA).
The DMA is part of a comprehensive legislative package with which the EU Commission wants to limit the market power of large Internet companies. The Digital Markets Act deals with the competition law aspects. The Digital Services Act (DSA) addresses societal issues. Before the proposals can be implemented, the EU states and the European Parliament have to agree on a line.
More powers for the Federal Cartel Office
Germany is already further. At the beginning of the year, the Bundestag decided on new powers for the Federal Cartel Office. The GWB amendment consists primarily of a new paragraph 19a. This allows the Cartel Office for the first time to determine the “overriding cross-market importance” of digital platforms and then to prohibit certain practices.
For example, it should be ensured that the Internet giants do not offer their own products on their platforms in preference to products from competitors. Antitrust proceedings are to be accelerated so that the authorities can ensure fair competition more quickly.
Business combinations should only be subject to control if a participating company in Germany has an annual turnover of at least 50 million euros instead of the previous 25 million and another participating company also has an annual turnover in Germany of at least 17.5 million euros instead of the previous five million.
In the USA, on the other hand, concrete steps against the market power of large digital corporations are already being prepared. The House of Representatives in the US Congress has tabled five bills that could drastically curtail the power of Gafa (Google, Amazon, Facebook and Apple). It is planned, for example, to simplify the break-up of dominant companies or to make it more difficult for large corporations to buy up smaller competitors. Facebook did it with Instagram and WhatsApp or Google with YouTube.
FDP calls for a strong digital EU single market technology pact
“Right now, unregulated tech monopolies have too much power over our economy,” said House Antitrust Subcommittee Chairman David Cicilline. They can “determine winners and losers, destroy small businesses, raise prices for consumers, and put people out of work.”
The Munich competition economist Monika Schnitzer expressed sympathy for breaking up large corporations. “The advantage of structural solutions is that they require significantly less regulatory effort and immediately create more competition,” Schnitzer told Handelsblatt. The insight that structural measures are necessary if decades of regulation are unsuccessful led to the break-up of the US telephone company AT&T as early as 1984.
In contrast, the EU has so far been “very cautious” when it comes to breaking up large digital corporations. In the draft of the EU Digital Markets Act (DMA), this is only provided as a last resort. “Earlier EU competition cases, for example Google Android, have shown that the behavioral requirements were not effective because Google found ways and means to essentially circumvent these requirements.” Schnitzer is a member of the most important economic policy advisory body of the German government the council of experts to assess macroeconomic development.
Opposition politicians also see a need for action. “A split of Google, Amazon and Co. has to be a very realistic option,” said the Greens’ chairman in the Bundestag’s digital committee, Dieter Janecek, the Handelsblatt. He justified this with the fact that the past few years had shown “that we shouldn’t be naive when dealing with the big tech companies and trust their good behavior”.
“If we want to limit the constantly growing market and capital power of the IT giants and ensure fair competition in the digital economy, then we need sharp instruments of competition law and must also be ready to actually use them.”
EU and USA forge technology pact against China
The chairman of the Bundestag digital committee, Manuel Höferlin (FDP), on the other hand, like the CDU, sees the breaking up of companies only as a last resort. “Before the EU puts the chainsaw on the international digital corporations, it should first remove its own construction sites,” said Höferlin to the Handelsblatt. “That would help the European digital companies enormously.” Because the most effective means against the American and Asian supremacy is a strong digital single market.
“Unfortunately, there are still too many obstacles to growth and too little funding, especially for our innovative start-ups and young companies,” complained Höferlin. Due to a lack of funding, many of these companies would be bought up by the big ones before they could even grow up.
This has always been one of the biggest obstacles for the European digital economy. “That is why better growth conditions must finally be created for our digital start-ups, in particular through better conditions for venture capital and relief from bureaucratic effort,” warned the FDP politician.
The USA and the EU are now striving for cooperation on technology issues. At their summit on Tuesday in Brussels, both sides want to announce the establishment of a transatlantic council for technology and trade.
The aim is to defend democratic values in the digital era, also and especially against big data dictatorships like China. With a view to the technology pact, Schnitzer spoke of a “difficult balancing act”. “It makes sense for the US and EU to join forces to establish common technology standards and norms, not just for economic reasons, but also for security reasons,” said the economist.
“At the same time, the EU should take care not to become a junior partner in such a council, but to build up its own capacities in order to be able to act confidently.” But more competitive European companies in the digital sector are urgently needed for this.
