Sunday, April 1, 2018

Radicalization of European politics: growing chorus of calls for Facebook breakup

I wish this were just an April Fool's Day post, but sadly it's true that politicians in the EU are making ever more radical proposals concerning U.S. Internet giants. While I don't expect anything extreme to actually happen in the near term, calls for or speculation about breakups of large corporations contribute to a climate in which it becomes increasingly hard to find reasonable solutions, and to focus on actual wrongdoing by abusers of dominant market positions. It's a climate of thoughtlessness.

About a week ago, EU competition commissioner Margrethe Vestager, more descriptively named Activistager, told the Telegraph that a breakup of Google into multiple smaller entities would have to remain on the table as an option for competition enforcement. No one seriously believes this would be the outcome, but just mentioning the possibility is a kind of saber-rattling that appears totally disproportionate. One may or-as the U.S. Federal Trade Commission concluded in 2013--may not consider any of Google's business practices anticompetitive. But even if one agreed with the EU Commission's charges, one can't seriously think about a breakup. Maybe some minor remedies and limited fines, but that's the maximum extent of it.

Unfortunately, socialist anti-business radicalism is on the rise in Europe. The European political coordinate system has always been clearly to the left of American politics. By way of comparison, even someone like Hillary Clinton would be clearly to the right of the center of European politics--and on some issues even closer to parties considered "far-right" by European standards than to Merkel's Christian Democratic Union, which is conservative in name only, or Macron's En Marche, a movement in the tradition of French statism. But in the past there still was a huge difference between the more egalitarian, statist European approach and what would sooner or later result in five-year plans.

The European debate over Internet giants and the power they accumulate--and the way they leverage their reach and their network effects--needs more reasonableness. The current trend is worrying. Mrs. Activistager should be isolated. But the "nuclear option" of breaking up companies comes up way too often in the European debate.

Just this weekend, two senior German politicians said in interviews that a Facebook breakup may be necessary as a last resort. Robert Habeck, the co-chair of the German Green Party, told a newspaper that governmental intervention is warranted where there isn't enough competition. Mr. Habeck described Facebook as a "data superpower" that owns too many services, including WhatsApp, and aggregates all of their data. Therefore, he believes competition law needs to evolve in order to be able to break up such giants.

In Europe, the Greens are more influential than anywhere else in the world. They regularly join government coalitions in different European countries, and in the European Parliament they sometimes have the power to tip the scales in narrow votes. Most of the time they side with center-left parties, but sometimes also with European conservative-in-name-only parties. Merkel and her closest circle of allies and advisers tried to form a government with the Greens last year, but failed because the somewhat libertarian Free Democratic Party didn't just want to provide the missing votes to Merkel's strategic alliance with the Greens.

The reason I described the Free Democratic Party as "somewhat libertarian" is that it, too, increasingly adopts left-wing populist positions. For instance, the FDP supports Activistager's "state aid" case against Apple and the EU Commission's "digital tax" plans. And the vice chair of the FDP group in the German parliament, Michael Theurer, told Germany's leading financial daily, Handelsblatt, that a corporate breakup would be a "massive governmental intervention and, besides governmental regulation, a last resort"--but even he, while preferring to explore ways to build competitive pressure through innovation, didn't want to rule out a breakup of Facebook.

Mr. Theurer says that the "platform economy" has a tendency to result in monopolies and "a high concentration of power." Therefore, the libertarian-in-name-only politician, like the Green leader I mentioned before, believes competition law as it exists is insufficient to address the digital economy and urges its "further evolution."

While former Pirate Party leader and social democrat Christopher Lauer is far less influential, the leading Berlin newspaper, Der Tagesspiegel, published an op-ed of his last week in which he demanded the "nationalization" of Facebook.

Whatever conclusions Facebook may have to draw from the Cambridge Analytica affair, politicians in Europe, and especially in the largest EU member state, should be more careful about the measures they propose. Radical ideas, even if described as a last resort by some (not all) of their proponents, distract from real issues (such as Europe's abysmal failure in the digital platform economy) and from the quest for real solutions, and are particularly unhelpful on the brink of a trade war.

Europe should try to stay in the global competition enforcement mainstream. But in the Age of Activistager, that may be too much to ask for.

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