EU Regulators Can Barely Contain Their Desire To Attack Google And Facebook, Believing It Will Help Local Competitors

from the not-how-it-works dept

Look, we warned everyone. Back in December of last year, we told you that the EU Commission was looking to put in place new regulations that were clearly designed to hamper Google and Facebook with needless regulations. It was pretty obvious from the way it phrased its broken survey form, that this was the intent. We, along with a bunch of internet startups told the EU that this was a mistake. We explained that Google and Facebook are big and they'll be able to handle whatever regulations the EU throws at them, because they can just throw money at the problem.

But... everyone else? They're going to get screwed over. The folks over at Euractiv have got their hands on a leaked draft of the plan to regulate online platforms, and it's more or less what we expected, and what was hinted at a few weeks ago.

The EU Commission is trying to pretend it's not going to do what it's obviously going to do. On the one hand, it talks about not creating a one-size-fits-all solution. In the conclusion, it states:

Overall, at this stage, there is no compelling case for general ex-ante regulation of online platforms across the board.

However, elsewhere throughout the document, you can see that the EU is chomping at the bit to put some shackles on Google and Facebook and basically any American company, in the belief that it will magically open things up for EU competitors to take over the market. The document whines about the lack of EU companies:

However so far Europe is not driving the online platform revolution: at present the EU represents only 4% of the total market capitalization of the largest online platforms, with the vast majority of platform enterprises originating in the US and Asia. As online platforms increasingly capture new digital value chains, this particularly limits the competitiveness and growth of the EU. Given the growing importance of online platforms in the economy and the disruptive role they play in business, including acting as gateways to customers, the EU must ensure favourable conditions for the creation and growth of online platforms.

It really takes a bureaucrat's mind to look at the market and say that the problem here has to be not enough regulation on internet platforms, and not recognize that the overall conditions in the EU are not conducive to the kinds of internet innovations that create successful internet companies. Hell, one of the few truly successful European platforms, Spotify, is threatening to move the company headquarters from Sweden to New York, because the regulatory environment is so hostile. And yet, rather than setting things up to encourage more innovation, the focus is constantly on how can regulations be put onto the big companies to keep them hindered in the EU market.

Yes, there is some talk of things, but it's the usual misguided bureucrat's idea of how to encourage innovation: (1) throw money at it and (2) beef up intellectual property protections. On the first one, they talk about increasing funding for innovation. That's not a bad thing, per se, but it almost never works when the government is the one behind such a project. Governments rarely know how to truly invest for innovation. On the second one, it's no surprise that the legacy copyright industries are using this effort as yet another vector to attack internet players, and the EU Commission has bought it hook, line and sinker. It calls for "sectorial legislation" for "ensuring a fair allocation of revenues for the use of copyright-protected content." We keep hearing this line over and over again about "fair allocation." How does that work exactly? Will it mean that record labels no longer are allowed to take musicians' copyrights, and then charge them expenses against their advance so that they never make another dime beyond the advance (which they'll have to use to record)? Seems unlikely.

In fact, nearly all of the report uses bureaucratic speak for "we just need to stop these successful companies, and our own companies will grow." That's not how it works. You get a lot of "level playing field" claims throughout:

Online platforms have disrupted traditional business models and are increasingly regarded by users as equivalent or as substitutes of traditional services in various sectors. Current examples range from the media and entertainment sectors to the retail and communications sectors. As a general regulatory principle, the same activities must be subject to the same rules in the Digital Single Market. This principle is usually referred to as a "level playing field."

Yes, but too often the "leveling" of the playing field seems to be to push it back towards the way legacy businesses ran. The reason startups are disruptive is because they're innovative in ways that tilt the playing field towards them. Having government put its thumb back on the other end of the field doesn't help innovation. It doesn't help the public. It just helps legacy businesses remain static and feel less of a need to innovate themselves.

And yes, the report makes a brief nod to that potentially, noting:

Competition from online platforms can provide incentives for traditional market players to innovate and improve their performance, as well as point to a need to simplify and modernise existing regulation. This modernisation should seek to avoid imposing a disproportionate burden on online platforms business models. At the same time, in areas where competitive pressures have been increased, deregulation of traditional sectors may offer the most beneficial response to achieve a level playing field.

But none of the rest of the report seems to follow up on that. Instead it's just more ways to push the innovation back down.

The report also says "we know our intermediary liability protections are important, so we'll keep them... but... we really won't."

The public consultation showed strong support for the existing principles of the e-Commerce Directive, but also for the need to clarify certain concepts, including the scope of the safe harbour for intermediary liability, including for online platforms. Given this background, the Commission intends to preserve the existing liability regime.

However, with the rise of online platforms monetising users' content and data, and with the need for online platforms to contribute to making the Internet a safer place, the EU needs to further define its approach to their broader responsibility. As they occupy a special role in the economy and society with unmatched influence, online platforms should behave responsibly and have frameworks in place to take reasonable and effective action to protect their users from illegal and harmful activities.

Got that? The second paragraph totally undermines the first.

Basically it appears that, as we suspected from the way the report was set up, the plan here is to put some sort of "duty of care" or some such on internet platforms. This will mean that Google and Facebook will be fine -- they can staff up giant warehouses of people reviewing content. But it will become extremely expensive and risky for anyone else to enter the space, since they won't have the resources to satisfy the EU's regulators.

Filed Under: competition, copyright, don't wreck the net, duty of care, eu, eu commission, innovation, intermediary liability, online platforms, platforms, regulations
Companies: facebook, google