In the wake of the U.S. election results and the victory of President-elect Donald Trump, current and former European Union (EU) leaders have responded to the rise of “America First” with calls for greater European independence. Thierry Breton, a recent Commissioner for Internal Market of the EU, posted on X, “Europe’s strategic autonomy, anyone?” Ursula von der Leyen, President of the European Commission, listed what she sees as the EU’s priorities, including, “[W]e must close the innovation gap with our global peers,” and “[W]e must reinforce our strategic security and reduce dependencies.” As always, however, actions speak louder than words.
For all the platitudes, the EU continues to do little more in the global competition and innovation spaces than extract enormous fines from American tech. Last week, the European Commission announced a €797 million (roughly $840 million) fine against Meta for supposedly violating EU antitrust law. The Commission alleges that Meta “illegally” tied its Facebook social media platform to Facebook Marketplace, its classified ads service.
To call the charges dubious and the European Commission’s logic strained would be a colossal understatement. There are five criteria under EU law for finding an abusive tying practice, per Daniel Mândrescu, Assistant Professor of EU competition law and tech regulation at Leiden University: “(i) [T]he concerned undertaking must have a dominant position in the tying market or the market of one of the bundled products, (ii) the undertaking must be tying or bundling two separate products (iii) customers are coerced into obtaining the tied and tying products or the bundled products together (iv) the tie has a foreclosure effect and (v) there is no objective justification for the practice.”
At a surface level, it’s hard to see how Meta and its Facebook and Facebook Marketplace products satisfy any of these. As Dirk Auer, Director of Competition Policy at the International Center for Law and Economics points out, “The Commission’s case critically depends on a gerrymandered market definition that completely excludes competitors like TikTok, Youtube, LinkedIn, X, Amazon, eBay.” In short, Meta’s “dominance” is a mirage manufactured by the manipulation of terms.
For tying two separate products, there are standalone sites for classified ads, but if the Commission prevails in this case (Meta plans to appeal), a chilling precedent would be set in terms of platforms pursuing additional offerings and services. Companies would be immediately deterred from creating new, innovative features for their customers and setting back competition.
Meta takes particular umbrage with the accusation of coercion in this case. In the company’s statement, they argue that the Commission “ignores the fact that Facebook users can choose whether or not to engage with Marketplace, and many don’t. The reality is that people use Facebook Marketplace because they want to, not because they have to.” In 2022, Mândrescu similarly argued that the element of coercion is lacking regarding Facebook Marketplace:
“When turning to the case of Facebook, it is hard to see on the face of things how the criterion of coercion would be met. When logging in to Facebook, the main interface does indeed display a tile of the Facebook Marketplace with which consumers can directly go to this section of the platform and make use of this service. The mere placement of this tile on the main interface and adding the Marketplace service to the platform as such can hardly be considered to coerce consumers to participate or make use of this service, actively or passively. So in a way, one may argue that there is no actual tying at all – but rather the parallel provision of multiple services on one multisided platform. The fact that consumers can switch from one service (social media) to another (Marketplace) with one click and without having to sign in to a different platform does not make such practice coercive in the sense of tying practices.”
As far as the foreclosure effect, Auer points out that competition in the marketplace of marketplaces is thriving on both sides of the Atlantic. Facebook Marketplace is nowhere near the market leader in either Europe or the United States, and new competitors are experiencing rapid growth. Even the Commission tacitly admits this, stating that Meta’s competitors only “may be foreclosed,” [emphasis added] not that any measurable harms have been proven.
Finally, the idea there is “no objective justification” for integrating Facebook Marketplace with Facebook seems obviously false to anyone that has used social media and online classified ads. There are great consumer benefits to marketplaces with large pools of potential sellers and buyers, as well as inherent safety benefits of putting real names and faces to exchanging parties.
Yet, none of these fairly evident points stopped the European Commission from levying a treasure trove of enormous fines against American tech companies. Per the U.S. Chamber of Commerce, “American companies are squarely in the sights of European regulators. Over the years, the EU and its member states have levied billions of dollars in fines and penalties against U.S. firms. Apple, Amazon, Google, Illumina, Mastercard, Meta, Microsoft, and Qualcomm, to name a few, have been slapped with competition fines ranging from hundreds of millions to billions of dollars. Again, none of these fine amounts is correlated to actual harm suffered by consumers.”
For all the talk of “self sufficiency” and “European independence,” the EU treats American tech like a piggy bank. Despite a larger population, comparable levels of education and development, and an economy that was roughly the same size at the turn of the century, the EU lacks any kind of comparable tech sector of its own compared to the United States. Rather, it seems quite dependent on extracting resources from American firms in an attempt to replicate the vibrant venture capital and start-up culture found stateside.
Shockingly, instead of standing up to the EU to stop this robbery, U.S. officials under President Biden have been willing accomplices. Open records requests and multiple congressional investigations have revealed the extent to which the Department of Commerce (particularly the U.S. Trade Representative’s office), Department of Justice (DOJ) and Federal Trade Commission (FTC) have actively colluded with EU regulators against the interests of American firms. However, the FTC and DOJ haven’t been particularly shy about all of this, bragging in 2023, “The agencies also announced planned liaisons of agency experts from the Antitrust Division and the FTC in Brussels, with each agency sending an official to assist with implementation of the Digital Markets Act (DMA).”
While the EU may consider American tech companies to be piggy banks, the reality is American consumers and taxpayers are paying the price for Europe’s self-serving antitrust enforcement. Fines are passed on to consumers through higher prices and reduced innovation while taxpayers foot the bill for American regulators to fly to Brussels and help run this racket. Hopefully, the incoming Trump administration’s focus on ensuring America’s competitiveness globally means that European rhetoric won’t be the only thing that changes.
Image generated by NetChoice using ChatGPT’s DALL-E.