Saturday, July 21, 2018
Is the European Union a Foe of the United States? Commissioner Margarethe Vestager Is
President Trump last week said “I think of the European Union is a foe, what they do to us in trade.” The EU may or may not be a foe, but Margarethe Vestager, the EU Commissioner for Competition, definitely is. She says she likes the United States, but her actions speak stronger than her words. She assessed a €4,342,865,000 fine against Google a few days ago, Google’s “sin” was giving the Android operating system for free to cell phone manufacturers on condition they preinstall a Google suite of apps, including Google Maps, Gmail, and the Google Chrome web browser The manufacturers were free to install other systems on their phones. Similarly. cell phone could can load competing apps on their phones. She held: “This of course will free up the market to allow mobile manufacturers to use other Android systems.” The Commissioner said: “Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere.” Every user of an Android based cell phone has the ability to load other web browsers on their android phones. If they don’t, it’s because they are satisfied with their existing options. Ask Microsoft why it failed on operating system for cell phones. Apple has always used its own system offering consumers a choice: Android or IOS. Nothing prevents Samsung, the largest mobile phone manufacturer, from developing its own operating systems. High tech winners and losers change almost overnight in the marketplace. For example, such highflyers a few years ago, as Nokia and Blackberry, which had their own systems, are now history. Motorola, once a highflier and now owned by the large Chinese computer manufacturer, Lenovo, is a shadow of its past success. Apple and the IPhone, the smart phone, disrupted the existing market. Many companies were slow in adapting to the new market. Motorola even used the Android system early. She held on August 16, 2016 that Apple got an unfair tax advantage from Ireland, and was therefore fined €14 billion plus interest. She assessed Amazon with a €250 million fine for back taxes to Luxembourg. A U.S. Treasury official in August 2017 said the Commissioner’s Office was acting like a “supranational tax authority.” An Obama Administration official called her staff “a bunch of plumbers doing electrical work.” President Trump told her boss “Your tax lady, she really hates the U.S.” EU law, in her view, precludes the member countries from extending special tax schemes to specific countries. EU member countries are discovering that they have given much of their national sovereignty to unelected nameless bureaucrats in Brussels, one of the reasons many Brits voted for Brexit.. Margrethe is no longer an unelected, anonymous, nameless, faceless bureaucrat. She is being touted as the next President of the EU, the reward for smiting the United States, albeit still unelected. She currently has a 900 unelected, bureaucratic staff for whom she is the public face. She reflects the underlying problem of Eurosclerosis in a May 9, 2017 Bloomberg/Business Week article: “A well-policed economy yields the largest and most widespread benefits for society.” Much of continental Europe believes the government rather than the market is the source of economic success. England had Adam Smith and The Wealth of Nations. The Continent historically chose statism. The Commissioner also said “If you want to do business in Europe, you must play by the European Rule Book.” What Rule Book? The only rule book is apparently what Commissioner Vestager wants it to be. No formula exists for assessing damages. It’s apparently up to her Ouija Board. She gave Google 90 days to change its behavior or Alphabet, Google’s parent company, would be fined 5% of its global revenues Her dictat was simple: “Google has to stop this behavior.” Her decisions have the impression of being legal, but she is the judge, jury and executioner. Her fines are effective immediately, albeit they can be placed in an escrow account pending an lengthy appeal to the European Court of Justice. The Google fine is not her first attack on American hightech firms, not even on Google. She fined Google €2.4 billion two years ago for giving preference to Its sites ahead of others. A third round is coming up against Google by the Commissioner. Google was not the pioneer in browsers. Remember Netscape, Internal Explorer (Microsoft), and Yahoo. Sergei Brin and Larry Page, two Stanford graduate engineering students, used Stanford’s algorithms to create a new web browser. They devised a new way of charging advertisers – pay by the click. They called the company Google. They beat out the existing web browsers by offering a superior product. Microsoft is down to 7.28%. Firefox (Mozilla), a non-profit is in second place with11.8%. The high-tech industry moves so fast that yesterday’s leaders are quickly condemned to the ashcan of history. Margrethe may think she’s wiser than the market, but she’s wrong. She fined Qualcomm €997 million in January 2018 for abusing market dominance in LTE baseband chipsets. The company is accused of paying Apple to use its chips on condition it doesn’t buy them from others, specifically Intel. Intel can take care of itself. Exclusive dealing contracts are very common in business. They often yield economic efficiency, and thus savings for consumers. A major purpose of antitrust law is protecting consumers against being gouged. The reality is that consumers have benefitted. If Apple thought it could save money elsewhere it would have done so. The EU added a new charge against Qualcomm three days ago. It is accused of selling chipsets below cost to drive Nvidia/Icera Corp. She fined Facebook €110 million in May 2017 for its acquisition of What’sApp. We have a proven anti-American animus on her part. Her predecessors were also antagonistic to American high-tech companies, taking off against the Wintel combination (Microsoft, Intel) Intel was fined €1.06 billion in 2009. Microsoft was fined €497 million in 2004 for anti-competitive activity. Microsoft had also run afoul though of antitrust law in the United States. There’s a wonderful video of Bill Gates’ oral deposition in which he came across as something less than brilliant. She explains her acts by saying “This is protecting European consumers. This is our mission, these are our vary basic values.” She said at a November 2017 tech summit in Lisbon: “We need to take our democracy back” from social media. Commissioner Margrethe Vestager, in her earlier life as a Danish politician, had upset an union. The union presented with a plaster hand with the middle finger extended in the universal one finger salute. She keeps it on office desk. The Finger has many levels of symbolism.