EU Regulators Can Barely Contain Their Desire To Attack Google And Facebook, Believing It Will Help Local Competitors

from the not-how-it-works dept

Look, we warned everyone. Back in December of last year, we told you that the EU Commission was looking to put in place new regulations that were clearly designed to hamper Google and Facebook with needless regulations. It was pretty obvious from the way it phrased its broken survey form, that this was the intent. We, along with a bunch of internet startups told the EU that this was a mistake. We explained that Google and Facebook are big and they'll be able to handle whatever regulations the EU throws at them, because they can just throw money at the problem.

But... everyone else? They're going to get screwed over. The folks over at Euractiv have got their hands on a leaked draft of the plan to regulate online platforms, and it's more or less what we expected, and what was hinted at a few weeks ago.

The EU Commission is trying to pretend it's not going to do what it's obviously going to do. On the one hand, it talks about not creating a one-size-fits-all solution. In the conclusion, it states:
Overall, at this stage, there is no compelling case for general ex-ante regulation of online platforms across the board.
However, elsewhere throughout the document, you can see that the EU is chomping at the bit to put some shackles on Google and Facebook and basically any American company, in the belief that it will magically open things up for EU competitors to take over the market. The document whines about the lack of EU companies:
However so far Europe is not driving the online platform revolution: at present the EU represents only 4% of the total market capitalization of the largest online platforms, with the vast majority of platform enterprises originating in the US and Asia. As online platforms increasingly capture new digital value chains, this particularly limits the competitiveness and growth of the EU. Given the growing importance of online platforms in the economy and the disruptive role they play in business, including acting as gateways to customers, the EU must ensure favourable conditions for the creation and growth of online platforms.
It really takes a bureaucrat's mind to look at the market and say that the problem here has to be not enough regulation on internet platforms, and not recognize that the overall conditions in the EU are not conducive to the kinds of internet innovations that create successful internet companies. Hell, one of the few truly successful European platforms, Spotify, is threatening to move the company headquarters from Sweden to New York, because the regulatory environment is so hostile. And yet, rather than setting things up to encourage more innovation, the focus is constantly on how can regulations be put onto the big companies to keep them hindered in the EU market.

Yes, there is some talk of things, but it's the usual misguided bureucrat's idea of how to encourage innovation: (1) throw money at it and (2) beef up intellectual property protections. On the first one, they talk about increasing funding for innovation. That's not a bad thing, per se, but it almost never works when the government is the one behind such a project. Governments rarely know how to truly invest for innovation. On the second one, it's no surprise that the legacy copyright industries are using this effort as yet another vector to attack internet players, and the EU Commission has bought it hook, line and sinker. It calls for "sectorial legislation" for "ensuring a fair allocation of revenues for the use of copyright-protected content." We keep hearing this line over and over again about "fair allocation." How does that work exactly? Will it mean that record labels no longer are allowed to take musicians' copyrights, and then charge them expenses against their advance so that they never make another dime beyond the advance (which they'll have to use to record)? Seems unlikely.

In fact, nearly all of the report uses bureaucratic speak for "we just need to stop these successful companies, and our own companies will grow." That's not how it works. You get a lot of "level playing field" claims throughout:
Online platforms have disrupted traditional business models and are increasingly regarded by users as equivalent or as substitutes of traditional services in various sectors. Current examples range from the media and entertainment sectors to the retail and communications sectors. As a general regulatory principle, the same activities must be subject to the same rules in the Digital Single Market. This principle is usually referred to as a "level playing field."
Yes, but too often the "leveling" of the playing field seems to be to push it back towards the way legacy businesses ran. The reason startups are disruptive is because they're innovative in ways that tilt the playing field towards them. Having government put its thumb back on the other end of the field doesn't help innovation. It doesn't help the public. It just helps legacy businesses remain static and feel less of a need to innovate themselves.

And yes, the report makes a brief nod to that potentially, noting:
Competition from online platforms can provide incentives for traditional market players to innovate and improve their performance, as well as point to a need to simplify and modernise existing regulation. This modernisation should seek to avoid imposing a disproportionate burden on online platforms business models. At the same time, in areas where competitive pressures have been increased, deregulation of traditional sectors may offer the most beneficial response to achieve a level playing field.
But none of the rest of the report seems to follow up on that. Instead it's just more ways to push the innovation back down.

The report also says "we know our intermediary liability protections are important, so we'll keep them... but... we really won't."
The public consultation showed strong support for the existing principles of the e-Commerce Directive, but also for the need to clarify certain concepts, including the scope of the safe harbour for intermediary liability, including for online platforms. Given this background, the Commission intends to preserve the existing liability regime.

However, with the rise of online platforms monetising users' content and data, and with the need for online platforms to contribute to making the Internet a safer place, the EU needs to further define its approach to their broader responsibility. As they occupy a special role in the economy and society with unmatched influence, online platforms should behave responsibly and have frameworks in place to take reasonable and effective action to protect their users from illegal and harmful activities.
Got that? The second paragraph totally undermines the first.

Basically it appears that, as we suspected from the way the report was set up, the plan here is to put some sort of "duty of care" or some such on internet platforms. This will mean that Google and Facebook will be fine -- they can staff up giant warehouses of people reviewing content. But it will become extremely expensive and risky for anyone else to enter the space, since they won't have the resources to satisfy the EU's regulators.
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Filed Under: competition, copyright, don't wreck the net, duty of care, eu, eu commission, innovation, intermediary liability, online platforms, platforms, regulations
Companies: facebook, google


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  • icon
    Mason Wheeler (profile), 29 Apr 2016 @ 12:08pm

    On the first one, they talk about increasing funding for innovation. That's not a bad thing, per se, but it almost never works when the government is the one behind such a project.

    ...
    ...
    ...
    seriously?

    Are you even aware of where the Internet, that you use to post that ridiculous line, came from?

    reply to this | link to this | view in chronology ]

    • icon
      Mike Masnick (profile), 29 Apr 2016 @ 1:29pm

      Re:

      Are you even aware of where the Internet, that you use to post that ridiculous line, came from?


      You're confusing two separate issues. Yes, the internet was initially dependent on government support and I've even written about that in great detail (https://www.techdirt.com/articles/20120723/11524619798/when-wsj-flunks-internet-history-blogs-step- to-educate.shtml). But that wasn't because of some decision to "fund innovation." That was a case of supporting a small project to help universities communicate.

      The real growth and explosion of the internet in terms of usefulness came later, with private investment money.

      What the EU is talking about here is trying to play the role of the VC. And that's never worked from a gov't standpoint.

      reply to this | link to this | view in chronology ]

      • icon
        Mason Wheeler (profile), 29 Apr 2016 @ 1:35pm

        Re: Re:

        So the Internet is OK, but the entire rest of ARPA, and the results it's produced, simply doesn't exist?

        reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 29 Apr 2016 @ 8:19pm

        Re: Re:

        That was a case of supporting a small project to help universities communicate.

        So that wasn't funding innovation? Good grief what are you talking about?

        reply to this | link to this | view in chronology ]

    • identicon
      George, 29 Apr 2016 @ 5:24pm

      Re:

      yes, we are aware ehere the internet came: from MIT which was NOT a state financed institution; btw. if you are curious what happens when the government gets involved in education and science check out what happened in former communist countries, in presently socialist ones like France or Italy ( and they wonder why European Union account only for 4% of online innovation); not to mention China where the state invests heavily in science and generates such an endless string of scientific breakthroughs

      reply to this | link to this | view in chronology ]

  • icon
    Dave Cortright (profile), 29 Apr 2016 @ 12:27pm

    When they say "level the playing field"...

    What they really mean is "significantly tilt the playing field in favor of EU companies"

    reply to this | link to this | view in chronology ]

  • identicon
    JustShutUpAndObey, 29 Apr 2016 @ 12:29pm

    Not a European Problem/Attitude

    This is not a European(exclusive) problem/attitude.
    By their nature, the solution to every problem is seen by bureaucrats, regulators and lawmakers the world over as regulation and more laws.

    It's the only tool they have: like the proverbial man with a hammer who sees everything as a nail.

    reply to this | link to this | view in chronology ]

    • icon
      Hephaestus (profile), 29 Apr 2016 @ 4:58pm

      Re: Not a European Problem/Attitude

      They do not realize that the rules and regulations that they created in the past, are the thing keeping innovation from happening now. So heaping a shit load of new regulation on top of old regulation is not going to help, just hinder innovation. The solution is to reduce regulation, and give companies breathing room to innovate, without government regulation and constant intervention.

      reply to this | link to this | view in chronology ]

  • icon
    Ninja (profile), 29 Apr 2016 @ 12:42pm

    Level the playing field eh? Exercising the imagination, it would be kind of funny to see how the field would be leveled considering the ice extractors back in the day or the buggy whip industry. Or hollywood, record indurtey against live performances.

    Instead of imposing more regulations against the big players why not remove barriers and incentivize smaller players so they will become big as well by taking burdens such as regulations and taxes from their shoulders till they are big and can afford it?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Apr 2016 @ 12:54pm

    the EU Commission is a self-appointed organisation that is full of it's own piss and importance! the EU would do well to throw this bunch into touch!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Apr 2016 @ 1:16pm

    The way the last quote is set up, seems to clearly identify the liability according to the e-commerce directive.

    What seems to be the intend of the second part is creating a framework for liability concerning data protection and system security in general.

    EU is the wrong place to introduce such legislation since they do not have the authority needed to make it effective in as diverse jurisdictions and any such attempts will be followed by yet another creep of "needed authority" in the next treaty.

    When that is said, it may be a good idea to give the separate jurisdictions a nodge towards some kind of legislation wrt. online security and the appaling use of clear-text data on users in easily hackable containers, sending data through an unsecured line.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Apr 2016 @ 1:20pm

    The EU already missed the boat by blocking making it easy for a start up to actually do that. Now that they are behind they tend to think more will make it better.

    Problem with this is that the US is rapidly creating the same sort of atmosphere through taxes and the insistence on spying on everyone, everywhere.

    Many corporations are abandoning the US over those two issues, especially the tech ones. If no one trusts your product globally, they are not going to buy it or use it.

    So I look for some other country to be the next great innovator as the innovations often follow where the money and freedom to actually innovate occurs.

    While the US created the internet through methods to communicate by military sponsorship, the US government has been steadily chipping away, causing the innovation to wither on the vine. Support to keep the incumbent industries protected has chopped the ability off to actually innovate and expand services.

    There's a reason the US lags the other first world counties in capacity/speeds for the internet, medical field lagging in actually being effective for it's population, and everywhere you are seeing potential customers being gouged for goods and services that are far exceeding the ability to actually pay for them.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Apr 2016 @ 2:36pm

    Awwww, poor Google and Facebook. Always getting picked on.

    *crocodile tears*

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 29 Apr 2016 @ 8:14pm

    At least with a record label advance a band gets some dollars. Compare that to the pennies Google pays musicians.

    reply to this | link to this | view in chronology ]

    • icon
      That One Guy (profile), 29 Apr 2016 @ 11:16pm

      Left a few words out

      At least with a record label advance a band gets some dollars which they are obligated to pay back several times over on laughably terrible terms before they are considered 'recouped' and can actually make any money from 'their' music.

      If musicians, or more accurately labels aren't happy with the 'pennies' they get from services like YT they're more than welcome to not use the service and enjoy the nothing they get from doing so. Maybe they can make their own service and see how well that works out for them, anything to avoid the 'pennies' from Google after all.

      reply to this | link to this | view in chronology ]

    • icon
      Mike Masnick (profile), 30 Apr 2016 @ 11:35pm

      Re:

      At least with a record label advance a band gets some dollars. Compare that to the pennies Google pays musicians.

      This is a ridiculous apples to oranges comparison.

      First off, one is about being a gatekeeper and choosing a certain select few artists to give some money to -- but then to take all their rights. The other is just an open platform that anyone can use for free.

      Lots of companies don't pay artists. Why are you so obsessed with Google?

      Labels pay MOST ARTISTS $0 and do absolutely nothing for them. It just tells them to get lost.

      The artists that labels *do* give an advance to, the advance is structured in a ridiculous way such that the artists actually get very little money.

      They need to use that money to record a certain number of albums. Out of that, they need to pay their manager, agent, other help. They also have to split it up among band members. Anything they spend then also gets added to their tab.

      And then what awful royalty rate they get from sales (usually 15%) never actually goes to the artists, because it goes towards "recouping" the advance.

      Meanwhile, Google has paid out over $3 billion to artists.

      Google turns away no one. If you're good you can make money.

      Google provides a platform and tools that have allowed many, many, many content creators to make money where as in the past they would have made none.

      For artists who actually learn how to make use of the internet in a useful way, Google has helped launch the careers of many successful artists (think of the number of YouTube stars these days) or those who became stars because of YouTube.

      So, your comparison is just weird and suggests an ignorance of reality combined with an unhealthy infatuation with Google.

      Why is that?

      reply to this | link to this | view in chronology ]

  • identicon
    Skeeter, 30 Apr 2016 @ 3:01am

    No Different than CE

    This is actually no different than Europe's CE-Certification for products. 'CE' is more a 'our workers and product's users are safe from this device' statement, than anything. Claimed to be 'for the assurance that faulty goods aren't sold in Europe', it was actually a way to lock out foreign products to safeguard smaller companies in Europe that manufactured products. We couldn't cheaply or easily get products into Europe, and Europeans couldn't buy lower-priced non-EU products easily. To get that little 'CE' stamp on your product, it costs the manufacturer quite a bit. I once worked with a company that sold a base-product in the states for $85 per unit. A European importer wanted them in Europe, as they weren't made there at all. We sent them one, they didn't get the product. It was held up in Holland because 'no CE stamp'. We look into how to get a CE stamp, and after jumping through hoops with Lloyds-of-London (a CE certifying agency too), we managed to build one product for $1870, and sold it to them for $3500. 4000-percent increase. We were able to drop prices by offer to a sustained $525 per unit if they would contract for 1,000 units per year. They did for 1 year, until they could get their own plant built - then they ripped off our patents for their own product.

    Moral of the story? Welcome to the EU's plans to show intellectual and service products what CE certification looks like. You won't compete, you won't endeavor - and I assure you, this will lock you out of the market as soon as ANYONE in Europe wants to do what you offer.

    reply to this | link to this | view in chronology ]


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