Monday, March 26, 2018

EU competition commissioner Activistager going off the deep end with Google break-up talk

In Europe, there's already an abundance of signs of a continent in decline, with no realistic hope for a turnaround. Yet the EU--especially its executive government, the European Commission--keeps the bad signs coming. Here's the latest, courtesy of The Telegraph:

Give me a break. While Google's market share in the EU search market is a fact, it's not a result of any wrongdoing. There simply isn't enough innovation in Europe. Otherwise some European company could have built a great search engine with a focus on European languages and websites. Last year, the EU's "digital" commissioner (from Bulgaria, the least advanced but highest-crime country in the 28-member bloc) said in an interview that Europe didn't need its own Google. But apparently some people in Brussels believe they cannot leave Google alone either.

Breakups are the most extreme antitrust remedy. They're talked about far more often than actually ordered. But below a certain threshold it's simply inappropriate to mention the possibility of a breakup. Whatever charges the EU has brought against Google to date fall far short--"far" in terms of lightyears--of where a breakup could even be contemplated.

Apart from the Qualcomm case, where the EU Commission--for a change--joined the global competition enforcement mainstream, it's really hard to make sense of that multi-level crusade against American tech companies. Some alibi action taken against European companies such as IKEA aside, the EU is clearly applying double standards. In connection with state aid, that's particularly extreme:

  • When the Italian government bails out banks, it's not "state aid." Obviously, the eurozone's largest debtor country must be allowed to do this, though it won't help that uncompetitive country in any sustainable way.

  • Today a Dutch guarantee scheme named "Extended Growth Facility", under which the government of the Netherlands takes 50% of the risk of new loans to certain types of companies, was cleared by Brussels. It's no "state aid" to those bEUrocrats because the Commission argues the Dutch government would receive "an appropriate remuneration level" and the system would (which can obviously be based only on projections) be "self-financing." I know exactly how those schemes work because Germany had something similar in place in the 1990s--the tbg (Technologie-Beteiligungsgesellschaft der Deutschen Ausgleichsbank). A startup I had co-founded in 1996 received investments, and tbg made a promise of 50% risk coverage to our investors, and it gave us a loan (without any surety provided) of the same amount. We repaid tbg with a 30% premium (on top of ongoing interest payments) after we sold out to Telef√≥nica, and they never had to cover our investors, so I'm not saying it never happens that this kind of thing can be self-financing. But venture capitalists told me about the huge number of bankruptcies that occurred because investors made high-risk "other people's money" types of bets. Let's be realistic: no government would provide guarantees, even if in the Dutch case limited to "medium and large companies" (not startups), if those companies could receive money on the same terms from private-sector lenders, as the Commission incorrectly claims. There's no shortage of money, especially in the eurozone with the European Criminal Bank being just out of control and continuing to flood the markets with euros. Also, there's no shortage of insurance policies for credits in the private sector. The only reason a government would do this is because it wants to provide state aid.

  • The Madeira tax avoidance scheme is accepted by Brussels, too. Portugal is not as big a problem for the eurozone as Italy, just by virtue of being far smaller, but it's one of those strategically-lost Mediterranean countries, so obviously the Commission doesn't cry "state aid."

  • But when Apple simply follows international tax rules, including longstanding structural differences in global corporate taxation between the U.S. and Europe, the Commission feels that "state aid" comes in handy as a competition tool that can be misused to advance a political agenda, as the new "digital tax" proposal shows.

I'm way past the point at which I could understand the EU's absurd actions and inconsistent decisions. What I am concerned about is that the EU is continuing, and apparently even accelerating, its descent into madness.

Just like my favorite political commentator, Rush Limbaugh, who refers to Sen. Schumer as "Chuck-U Schumer" and to Sen. Graham as "Grahamnesty," I'm now going to give certain EU politicians new names.

I'll just call that left-wing political activist (disguising as a competition enforcer) "Activistager." There's the term "judicial activism," and it's what the EU court in Luxembourg is known for. Unfortunately, there is now some regulatory activism, too. It's like Attac designing the competition agenda for Europe...

The commissioner who presented the digital tax plans last week was a member of a Trotskyist group, and Trotskyism is the most radical, most oppressive and most violent form of communism. He may have distanced himself from such extremism, but he's so far left of the center that he's a "communissioner" rather than just a commissioner.

At the top of the organization there's a man whom another senior EU politician described as a "heavy smoker and drinker" in a TV talk show. A Polish politician described the problem in more drastic terms. YouTube videos like this one have raised questions. 12 years ago I was in Luxembourg for some meetings and a journalist told me about what kinds of beverages were spotted at press conferences even in the morning. Another Luxembourgian said that no one in that tiny country wanted to take the risk of libel lawsuits, but they do exercise their freedom of political speech by calling him "Jean-Claude Bokassa" and everyone understands what is meant. With the greatest respect, I'll just refer to him as "Dr. Uncker"--a rather subtle message.

There was a time when the EU's competition enforcement activity was constantly enhancing its reputation. America, not Europe, is the cradle of antitrust, but Europe appeared to take some actions, such as in the Microsoft cases (though I disagreed with the specific charges there), that other jurisdictions took note of. With respect to technology policy, Europe was seen as more open-source-friendly than other developed economies. But now that it is talking of a Google breakup without any such thing as a reasonable basis, that it is reducing the term "state aid" to absurdity by rubberstamping traditional state aid while manufacturing "state aid" cases out of thin air, and that it is at its wit's end with respect to innovation policy and focusing just on new tax schemes, the EU can't be a thought leader or a beacon for the rest of the world. Except in cases in which its decisions are consistent with other jurisdictions, the EU Commission can, at best, be considered backwards-oriented, and I increasingly doubt that the label "oriented" can be applied to it in any combination.

It's a different field of policy, but the EU is also arbitrary and capricious with respect to certain "autonomy" questions. Apart from Spain, the bloc wants to recognize and incorporate Kosovo; while Bulgaria is the most corrupt and highest-crime EU member state at the moment, it's not even playing in the same criminality league as Kosovo... Then the EU is the number one funder of the Palestinian Authority, thus also the largest contributor, through the "Martyrs Fund" (misnomer!), to the families of suicide terrorists. But when a Russian-speaking majority of autochthonous Crimeans unsurprisingly preferred to join the Russian Federation, the EU opposes this because it wants all of Ukraine, including Crimea (though this isn't going to happen), to join the bloc one day. And just yesterday, exiled Catalan ex-president Carles Puigdemont, who never advocated violence, was arrested in Germany. The EU consistently sides with the Spanish government, which is responsible for nearly 100% of the violence committed in connection with the Catalan conflict, and I'm convinced it's largely because even senior EU politicians such as Manfred Weber (leader of the "conservative"--in name only--group in the European Parliament) warned that the Catalan conflict could precipitate the next euro sovereign debt crisis (Spain could get into serious financial trouble, more serious than the one it already is in, without Catalan taxes; this could set off a chain reaction, especially with hedge funds placing bets against other countries, and could make the inherently unstable eurozone collapse).

In elections held earlier this month, roughly 50% of Italian voters supported strongly EU-skeptical parties, and another 20% supported parties that are somewhat EU-critical. It's not that hard to understand.

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