Will Google get broken up by the EU, just as the US tried to do to Microsoft in the 1990s? It is no longer inconceivable now that the European Parliament took the unprecedented step on America’s Thanksgiving (of all days) of backing a non-binding resolution urging the EU’s Competition Directorate to “unbundle” search engines from their commercial activities. Parliamentary members have been clear that the resolution is aimed at Google.
I have some sympathy for the Europeans. On narrow antitrust grounds, I join them in worrying about potential abuses by firms with dominant market positions, and indeed spent about seven years of my life, in and out of the U.S. Justice Department, litigating against Microsoft, and later (albeit unsuccessfully) urging its breakup, for taking unlawful steps to entrench its operating system monopoly and extend it to other markets.
On broader grounds, Europeans are right to feel frustrated about the sluggish pace of their recovery from the Great Recession, and even to have some anger toward the policies in the United States that contributed to excessive subprime lending and financial institution leverage that led to the financial crisis precipitating that recession. But that anger is misdirected as it has nothing to do with Google. As for technology companies, in particular, there is much also much understandable angst over the way in which they have been used by the U.S. government in its intelligence gathering activities.
For the EU, there are bad and good ways to accelerate their recovery. The bad way is through protectionist punishment of U.S. technology companies, dressed up in antitrust clothes. The good way is to adopt policies that encourage growth through more entrepreneurship, of the kind that produced two recent European successful tech stories, Skype and Spotify. Let me briefly elaborate on each.
Take the alleged misdeed by Google: giving greater visibility to its search results for products, services and their prices than competing websites, including those of the companies identified in Google’s searches. The Federal Trade Commission in the United States looked into similar allegations several years ago and decided not to pursue them (full disclosure: I co-authored white paper on Google’s behalf arguing that it’s search algorithms did not constitute “unfair competition” under the FTC’s statute). Google has since offered to settle with the EU’s antitrust investigators by giving more prominence to rivals’ websites, and almost appeared to have reached a deal, but the political pressure on the Competition Directorate to impose something stiffer has ratcheted up for any number of unrelated reasons: continued weakness in European economies, and concerns about privacy and copyright relating to American tech companies.
Although it is impossible to know at this point how the new Competition Director, Margarethe Vestager, will respond to the Parliamentary vote, one thing should be clear: whatever Google has done, it can be rectified by means well short of breakup, since all that is involved is how Google’s search engine presents its results. The Microsoft situation was entirely different, involving multiple acts of abuse and where the costs of switching operating systems were much greater than switching search engines.
Instead of trying to help existing and new European companies compete by punishing American tech successes, Europeans and the rest of the world would fare far better if EU policymakers concentrated on ways to promote the formation of new tech companies. Two particular ideas stand out.
One is for European national governments to make computer coding part of their K-12 school curriculums, which they can more easily do than the United States where education policies are set at the state and local levels, and thus might give Europe a competitive advantage over the US. Talk to most tech startup founders, or even established tech companies, in the United States and the most binding constraint on their growth is finding good coding talent. This has to be just as true in Europe. Indeed, why wait for K-12 reforms? Europeans should copy and “one-up” the multi-week “code academies” that are sprouting all over the United States, enabling college graduates find the jobs that their liberal arts degrees won’t earn.
The second idea is to import more immigrant entrepreneurs. Foreign born entrepreneurs have a great track record in the United States, founding many successful tech companies in particular (Sergey Brin of Google is just one example). Spain, which has just launched a startup visa program, is showing the way. Don’t worry about backlash: companies launched by immigrants will employ European citizens.
Why would an American like me urge Europeans to do what even American policymakers find difficult doing? It would be good for Europe, and an economically healthy Europe is good for America. Moreover, if Europe could pull off either or both these reforms, it may encourage gridlocked U.S. politicians to do what is in our best interest, too. Economies on both sides of the Atlantic would be better off, as would the global economy.