U.S. Tech Firms Feel the Heat in Europe

By Natalia Drozdiak in Brussels and Jack Nicas in San Francisco Features Dow Jones Newswires

The European Union's antitrust watchdog has handed down a string of big decisions in recent years against top U.S. technology firms, in what might look to U.S. companies and officials like a trend by Brussels to train investigations on large American companies.

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EU officials deny any bias.

"We don't go against Google because it's an American company but because it's a company abusing its dominant position in our market.... If it were in Brazil, we wouldn't care," a senior EU official said, referring to the EU's EUR2.42 billion ($2.71 billion) fine Tuesday against Google for unfairly favoring its shopping ads in its search results.

EU competition officials are, to a large extent, constrained by antitrust rules and legal precedents when making decisions against any companies, be they American, European or otherwise. But unlike Washington, where U.S. enforcers need to prove their cases before a judge, the EU's competition directorate acts as prosecutor, judge and jury in competition cases -- and only needs to convince itself.

Experts say American tech companies are currently getting increased scrutiny because they happen to dominate the industry. This comes at a time when one of the top priorities for the European Commission, the bloc's executive body, is to ensure the EU's common market functions more efficiently online and across borders.

Asked Tuesday about the perception by some American officials and companies of an anti-U.S. bias in the bloc's decisions, EU antitrust chief Margrethe Vestager said she had reviewed recent cases in different enforcement areas and consistently found that only a small number of the companies affected were American.

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"I can find no facts to support any kind of bias," Ms. Vestager said.

The EU's decision on Tuesday to fine Alphabet Inc.'s Google follows other recent tough decisions against large tech firms.

The EU last August ordered Apple Inc. to pay Ireland EUR13 billion in allegedly unpaid taxes and in May fined Facebook Inc. EUR110 million for providing incorrect information or misleading authorities over the acquisition of its messaging unit WhatsApp. A spokesman for Facebook, which didn't appeal the decision, said at the time: "We've acted in good faith since our very first interactions with the commission and we've sought to provide accurate information at every turn."

The series of decisions come at a time when European tech firms have fallen behind their U.S. counterparts. While Europe led the way in the global smartphone push, it hasn't been able to foster its own Apple, Facebook or Google.

That backdrop has critics of the EU's moves crying foul.

Apple said in December when it appealed the EU's tax decision that regulators were unfairly targeting the company. "It's been clear since the start of this case that there was a predetermined outcome," an Apple spokeswoman said at the time.

Former U.S. President Barack Obama in 2015 said the EU's investigations into U.S. tech companies like Google and Facebook were "more commercially driven than anything else."

"Their service providers who, you know, can't compete with ours -- are essentially trying to set up some roadblocks for our companies to operate effectively there," tech news website ReCode reported Mr. Obama as saying in an interview.

The European approach to regulating tech companies clashes with that of authorities in the U.S., which have recently used a more hands-off approach, experts say.

"The vast success of Silicon Valley has been fostered by a deregulated marketplace, but this causes problems when these businesses do business against the very different legal backdrop operating in Europe," said Susan Hall, a Manchester, England-based partner at law firm Clarke Willmott LLP who specializes in intellectual property and information technology. Ms. Hall represents clients ranging from multinationals, government departments, universities to start-ups.

Particularly in cases involving tech firms' handling of personal data, Europe's more ingrained sensitivities about privacy have taken precedence over what, in the U.S., would be deference to the First Amendment in regard to the freedom of speech and press. For instance, French regulators have ordered Google and other search engines to comply when a European asks the companies to remove links in searches for their own name, if the information is old, irrelevant or infringes on their privacy.

In the U.S., the Federal Trade Commission closed its own probe into Google's search practices in 2013, after the company agreed to voluntary changes. That decision came despite internal recommendations by the agency's bureau of competition to bring a lawsuit challenging three Google practices. A separate report from the FTC's economic bureau didn't favor legal action.

The FTC appears unlikely to restart an investigation of Google soon, in part because the commission's leadership remains uncertain and three of the five commissioner slots are vacant. Acting Chairwoman Maureen Ohlhausen, a Republican, voted to close much of the antitrust investigation into Google four years ago. An FTC spokesman declined to comment.

Still, Trump administration officials have considered Utah Attorney General Sean Reyes, a vocal Google critic, for the leadership post, and he has been backed by several firms opposing Google, including Yelp Inc., Oracle Corp. and News Corp, the owner of The Wall Street Journal and an interested third party in the shopping case, meaning it can participate in the investigation. News Corp has also formally complained to the EU about Google's handling of news articles in search results. The EU doesn't have an active case/probe of Google's handling of news stories.

The nominee for the Justice Department's antitrust chief, Makan Delrahim, has also pledged to make international antitrust issues a priority, but his nomination is one of many awaiting confirmation from the Senate.

Some U.S. senators have also been critical of Google in recent months. Sen. Richard Blumenthal, (D., Conn.) called on the FTC to investigate the tech giant. The EU action is the latest "evidence suggesting Google has repeatedly and consistently abused international competition law," he said. "Here in the United States, the FTC must confront the mounting evidence that Google is manipulating search results in anticompetitive ways and possibly running afoul of our antitrust laws."

Sen. Amy Klobuchar (D., Minn.) said Tuesday that dominant internet platforms increasingly affect users' information and shopping choices and small businesses' economic opportunities. She said she is committed to ensuring "the internet is an engine to increase economic opportunity and protect consumers in the 21st century economy."

The beneficiary of the regulatory moves in Brussels often aren't just European firms. Many of the complainants in the EU investigations into Google, for instance, are U.S. companies that have sought antitrust action in Europe after the FTC closed its investigation of Google.

Yelp, Oracle, News Corp, Expedia Inc. and TripAdvisor Inc. have all filed formal complaints in some of the EU's cases against Google. And there are more unnamed U.S. companies lobbying European regulators for action, said Luther Lowe, Yelp's head of public policy.

"The not-so-well-kept secret of this process is that U.S. companies have been doing the lion's share of the work," Mr. Lowe said in an interview. Yelp has complained that Google's use of its own user reviews in its search results, instead of those of Yelp or other user-review sites, is bad for consumers.

Mr. Lowe said U.S. firms could push for action in their home country, making the case that European internet users enjoy better protections than American consumers. "Suddenly the FTC or state attorneys general must be asking themselves: Why don't consumers in my state or country have those same protections?" he said.

--Valentina Pop and Brent Kendall contributed to this article.

(END) Dow Jones Newswires

June 27, 2017 20:00 ET (00:00 GMT)