While it is common for countries, states, and even cities to have business advocacy organizations in other nations, the European Union (EU) is doing a variation on this theme: setting up an office in San Francisco to constrain and exploit America’s tech companies.
The EU has half-heartedly acknowledged this, while launching a full-fledged campaign against the U.S. tech industry.
For starters, it is unfortunate that the EU has next to nothing it can advocate for regarding technology companies.
Annual rankings of the 10 to 20 largest global tech companies by revenue or market size typically do not have any companies from Europe, as the lists are dominated by companies from the U.S., China, and elsewhere in Asia.
As of this writing, the largest European tech company by revenue comes in at number 29 globally. Meanwhile, 16 of the top 28 are U.S. companies.
Europe has been a wasteland for spawning innovative, successful tech companies. Furthermore, Europe’s largest tech company by revenues, SAP, also just recently an office in San Francisco and is quite capable of advocating for itself.
Instead of creating a climate conducive to the growth of such companies, the EU is using the regulatory process to demand changes that will benefit its existing businesses and potentially provide an enormous source of government revenues, i.e., taxes or confiscated funds, through draconian fines.
This is tepidly acknowledged towards the end of a rambling June 28 press release announcing the San Francisco office, where it says, “The EU office in San Francisco seeks to promote EU standards and technologies, digital policies and regulations and governance.”
Those policies are atrocious for U.S. businesses and consumers.
For example, the Digital Markets Act (DMA) imposes requirements for technology “gatekeepers,” which the European Commission, the EU’s executive arm, defines as “an important gateway between businesses and consumers in relation to core platform services.” Companies designated as gatekeepers, i.e., those with undue influence, are Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft.
Yet, six of the eight Gateway services involve two or more companies. For example, four social networks allegedly have gatekeepers: TikTok, Facebook, Instagram, and LinkedIn. What is lost to the EU and EC is that there are four choices for social networks, all free of charge.
While demanding that the tech companies open these platforms on the EU’s terms rather than the companies’ terms may benefit a handful of European and other businesses, the central motivation appears to be money.
Companies that fail to comply with DMA can face fines of up to 10 percent of their global revenues, or more than $150 billion from the five U.S. companies. The EU seems to be following the approach of the notorious bank robber Willie Sutton, who when asked why he robbed banks famously quipped, “Because that’s where the money is.”
Fortunately, the EU has been called out on its actions by Senator Ted Cruz, ranking member of the Senate Commerce, Science, & Transportation Committee.
In an August 22 letter to Gerard De Graaf, who heads up the EU’s San Francisco office, Senator Cruz asks a series of questions and demands information. Senator Cruz and his office have done extensive research, which they share, to document the true agenda of the EU’s San Francisco office.
The Senator says, “The EU likely opened the San Francisco office to ensure that U.S. businesses comply with its new draconian regulations. Most obvious is your selection as the head of the EU San Francisco office and “Senior Envoy for Digital to the U.S.” given your previous roles as the Digital Markets Act’s and the Digital Services Act’s chief architect and head cheerleader.”
The U.S. government should stand up for U.S. businesses being attacked by the EU. A good start on this would be for the Biden Administration to demand an end to all international discussions between the Federal Trade Commission on antitrust and other business matters until the Digital Markets Act is suspended.
