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Europe needs its own Google!

17 November 2020
- by Marc Salomon, professor of Decision Sciences and Dean of Amsterdam Business School, UvA

On October 20th 2020, the US Department of Justice announced a lawsuit against Google for violating antitrust laws. On November 18th and 19th 2020, the GAIA X Summit will take place. The GAIA X project, a collaboration between the German and French governments and industry, aims to build a European cloud infrastructure for data. Although these two events seem unrelated, they share one clear objective: to limit the power of the existing Big Tech elite.

The pros and cons of the existing Big Tech elite

The US and Chinese Big Tech elite deliver us many benefits. Not only have they been a driver of innovation, but also a creator of thousands of jobs. The technology that has come out of these companies has enabled us to stay in touch with our family and friends, access all kinds of information or media and even automate large parts of our lives (think online shopping and payments).

These services are often offered to us under the guise of being “free”, but is it really free? No, of course not. How could any company employing hundreds of thousands of people survive by delivering free services? For many of these services the unknown cost is our data. With every click, swipe and scroll, information is collected which often leads to adverts and other suggestions from the platform. But what is wrong with this? The following three arguments stand out in my opinion.

1. Consumers ultimately lose

Consumers pay too much for goods and services. To demonstrate how, imagine a relatively small retailer R uses Big Tech platform P to sell its goods. If P detects that R is doing well, it could start to compete with R by selling similar goods or services at a lower price. This could even be below cost price, because P has “deep pockets”, much deeper than R. At some point in time it becomes unprofitable for R to sell via P and R leaves the platform. Then, P takes over and increases its prices. This is called “predatory pricing”. Lina Khan wrote a well-cited article about predatory pricing in relation to Amazon. Khan explains that in most cases, predatory pricing is forbidden, because in the long run consumers pay too much, due to lack of competition in the market. 

Another example of the consumer ultimately losing can be illustrated in search results manipulation. In 2017, the European commission fined Google €2.4 billion, for placing their own shopping comparison service “Google Shopping” in a more prominent position in their search results compared to their competitors. This gives Google an unfair advantage in what consumers see. This opportunity occurs for Google due to “vertical integration”. Both, “Google Search” and the platform “Google Shopping” are owned and controlled by one company. The European Commission argued that consumers are harmed by this way of using vertical integration and fined Google.

2. The invasion of our privacy

We assume our data is private, but when you look at the terms and conditions of the Big Tech platforms, this is often not the case. Our data is sold to third-parties or used by a different division of the Big Tech company where we have no control over how it is used. For example, your fitness tracker data could be shared with the financial services division of the same company. This could lead to you being denied access to certain health insurance, however you were unaware of the use of your data for this purpose. There is also the infamous case of Cambridge Analytica, where private Facebook data was used for political gain. 

Another privacy threat that is not so much the fault of the US or Chinese Big Tech elite, but more the national security laws in their home countries. These enable governments to obtain access to all the data a company stores and processes. Governments could use these laws for all kind of good purposes, e.g. to prevent terrorism, but also for bad purposes, e.g. to restrict “freedom of speech” or protests or (corporate) espionage. An example is the US Patriot Act, while a similar law applies in China.

3. The competitive position of Europe

Big Tech’s dominance hurts the European (knowledge) economy and production. Many countries in Europe want a knowledge and technology based economy, but find their top talent is recruited by US and – to a lesser but growing extent – Chinese Big Tech companies. This is something we experience in the Amsterdam region. By drawing talent away, the Big Tech elite further extends its technological superiority and erodes Europe’s power to innovate. In the end, this is very costly to European production, GDP and the labour market. Furthermore, our economy becomes increasingly dependent on the US and China.

How can we protect ourselves?

There are many ways to fight against the three issues above. On the consumer level, this includes better education about the dangers of “free” services, and naming and shaming offending companies. On a regulatory level, we can design better laws, improve law enforcement, fine or split up companies, for instance separating the infrastructure (e.g. the Google browser) from the other services (e.g. Google Search). We could even separate the services from each other (separate Google Search from Google Shopping).

However, these actions are primarily defensive and I have reservations whether they alone can deal with these issues satisfactorily. Furthermore, many of these actions will be very difficult and time-consuming to implement, while there are also strong doubts about their applicability and effectiveness. Some of them might even have the opposite effect and decrease competition.

For these reasons, I am a strong supporter of combining these defensive actions with a more offensive approach: building our own European alternatives. GAIA-X might be a first step for Cloud Storage, but we also need other applications, such as our own AI apps, similar to the suites that Amazon, Microsoft and Google offer.

The big question is of course: how do we create this from scratch? We will face obvious challenges: who and how much should invest in such a project during this difficult economic period in Europe. Do we have the right know-how to develop high quality products and services, and will we really be able to compete with the current Big Tech elite? Although many doubt our ability, there is precedent for such collaboration. Airbus is a prime example of a successful project with multiple European countries and companies involved. Time is ticking as we deliberate over these challenges. We need our own Google, before it is too late….!

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