Germany vs. the US on Digital Antitrust

When it surfaced a couple of months ago that the U.S. Federal Trade Commission had suppressed recommendations that the FTC pursue Google for antitrust violations, what was remarkable was how bipartisan the decision had been by the Commissioners to give a free pass to digital corporate concentration.  

Partly, this is due to what economist Robert Reich has noted is a general American abandonment of antitrust as a policy tool (see his Whatever Happened to Antitrust?).  Partly this is due to the particular political influence of Silicon Valley and Google on the Obama Administration (see my own FTC Dropped Google Antitrust Action Staff Wanted - But Why Should That be Surprising?).

But what is striking is how completely at odds the debate is in the U.S. versus Europe, where there is an active ongoing antitrust investigation into Google and more likely to be opened.  This focus on antitrust in Europe is not confined to just some of the EU countries but is in fact spearheaded by Germany, led by the conservative party headed by Angela Merkel who on other economic matters is the bête noire of progressives on the Continent.

Yet in the last year we had the German government helping to push forward the EU investigation into Google, with its Vice Chancellor and Economic Minister Sigmar Gabriel referring to big data platforms as engaged in "brutal information capitalism" and arguing that the company should be broken up if it has abused its dominant market positions. Earlier this month, Gabriel voiced worries that Google's expansion of its Android operating system is undermining competition on the Internet.

The media in Germany has been filled with debates on what to do about economic concentration in digital markets, not just on whether to take action but getting down to specifics on what should be done.   The quite establishment German newspaper Frankfurter Rundschau recently outlined a number of options short of breakup for reining in Google's market power.  As the paper argues (translation courtesy of Google):

A whole number of proposals under discussion. These include restrictions on the display of search results - Group-owned service about when shopping online should no longer be shown preference. It could also be a matter that the part forcibly using Google Mail for Android smartphones is prohibited. In addition, competition experts have campaigned hard to introduce permanent government supervision, as is customary with the major telecommunications companies in Europe.

The appointment of a permanent government commission to regulate search engines would be a quite important step in placing the importance of ongoing monitoring and regulation of the digital economy on par with other industries subject to regulatory oversight.

Within Germany, one of the voices urging restraint on antitrust action is a government-sponsored think tank of experts dubbed the Monopolies Commission. Yet even they in a recent report advocated regulatory action considered radical within the U.S. policy debate.   The Commission noted in their report that use of data by Internet companies is not always for the benefit of their users and "the increased collection of data can result in negative welfare effects":

This can be to the detriment particularly of consumers that are insufficiently informed of the use and application of their data and who are not aware, for example, of the possibility of price differentiation on the internet based on observable characteristics or habits.

Even if governments do not pursue a breakup of Google or other digital companies, the Commission noted the importance of taking steps to "strengthen the position of consumers. In order to enable users to exercise more effective control with regard to the use of their data, legislation could require mandatory user consent in cases of collection and commercialization of user data (opt in)."

Note the last word "opt in" is the flash point for outrage among anti-regulatory forces in the U.S., since it would mean that consumers could not blithely be given a boilerplate small print option to hold back their data, but would have to affirmatively agree on when and how their data can be sold off to the highest bidder.  Data companies know that most consumers would refuse such affirmative agreement to commercialization without much higher economic inducements than they are currently offered, so oppose opt-in privacy protections with every lobbying threat they can muster.

Some dismiss the German and European focus on digital antitrust as a product of "protectionism," but then Germany actually has a higher-wage job market worth protecting.  Germany has a long tradition of fighting economic concentration in favor of an industrial landscape made up of smaller, often family-owned mid-size firms -- called collectively the Mittlestand -- that are extremely competitive in international trade. 

Google's Eric Schmidt has been touring Europe on a "charm offensive" but the company's ultimate goal to achieve global economic concentration was clear in his statement in one interview that:

"There's an old way and a new way; the new way is global and digital, the old way is local and proud, and there's nothing wrong with it, but the old will be displaced."

Given an explicit threat to destroy "local and proud" industries in Germany, it's hardly surprising that antitrust authorities are taking action.  It might be time for communities and industries outside Silicon Valley to rise up and demand U.S. policymakers take action as well to protect local jobs and fight economic concentration.