TIGHTENING THE SCREW ON BIG TECH

The European union’s big battle to keep technology behemoths in check rages on.

 

THE European Union is on a mission to get US tech giants to stop avoiding tax, stifling competition, profiting from news content without paying and serving as platforms for disinformation and hate.

Last month, the European Commission announced that online retail giant amazon had agreed to make changes to its software to end two EU inquiries into its treatment of third-party sellers on its online marketplace.

the EU also warned Elon musk that twitter could be subject to sanctions under a future media law after the “worrying” suspension of several journalists from the messaging platform.

Here is a summary of the tussles between Silicon Valley and Brussels.

Stifling competition

The digital giants are regularly criticised for dominating markets by elbowing out rivals.

Last July, the European Parliament adopted the Digital markets act to curb the market dominance of Big tech, with violations punishable with fines of up to 10% of a company’s annual global sales.

Brussels has slapped over Us$8bil (rm37.7bil) in fines on Google alone for abusing its dominant market position.

In 2018, the company was fined Us$4.3bil (rm20.2bil) – the biggest ever antitrust penalty imposed by the EU – for abusing the dominant position of its android mobile operating system to promote Google’s search engine.

Google lost its appeal against that decision in September 2022, though the fine was reduced to Us$4.1bil (rm19.3bil).

the firm is also challenging a Us$2.4bil (rm11.3bil) fine from 2017 for abusing its power in online shopping and a separate Us$1.5bil (rm7.1bil) fine from 2019 for “abusive practices” in online advertising.

the EU has also gone after apple, accusing it of blocking rivals from its contactless iphone payment system, and fined microsoft Us$561mil in 2013 for imposing its browser, Internet Explorer, on users of Windows 7.

The European Commission is also looking into whether Facebook’s parent company, meta, broke antitrust laws by linking its personal social network to its classified ads service, Facebook marketplace.

Turning to taxation

The EU has had less success in getting US tech companies to pay more taxes in Europe, where they are accused of funnelling profits into low-tax countries like Ireland and Luxembourg.

In one of the most notorious cases, the European Commission found in 2016 that Ireland granted illegal tax benefits to apple and ordered the company to pay Us$13bil (rm61.2bil) in back taxes.

But the EU’S General Court later overturned the ruling, saying there was no evidence the company broke the rules.

The European Commission also lost a similar case involving amazon, which it had ordered to repay Us$250mil (rm1.2bil) in back taxes to Luxembourg.

In October 2021, following extensive lobbying by European countries, the G20 group of nations agreed on a minimum 15% corporate tax rate.

Personal information

Tech giants are regularly criticised over how they gather and use personal data.

The EU has led the charge to rein them in with its 2018 General Data Protection regulation, which has since become an international reference.

Companies must now ask for consent when they collect personal information and may no longer use data collected from several sources to profile users against their will.

Amazon was fined Us$746mil (rm3.5bil) by Luxembourg in 2021 for flouting the rules.

Meanwhile, Irish authorities have gone after meta twice this year.

Last September, they fined Instagram, a meta subsidiary, Us$405mil (rm1.9bil) for breaching regulations on the handling of children’s data.

and in November, they fined Facebook Us$265mil (rm1.2bil) over a massive data leak involving the details of more than half a billion users.

Fake news and hate speech

Social networks, particularly Facebook and twitter, are often accused of failing to tackle disinformation and hate speech.

In July, the European Parliament approved a Digital Services act that forces big online companies to combat hate speech, disinformation and piracy or face fines of up to 6% of their global turnover.

It comes into effect in 2023.

Paying for news

Google and other online platforms are also accused of making billions from news without sharing the revenue with those who gather it.

To tackle this, an EU law in 2019 created a form of copyright called “neighbouring rights” allowing print media to demand compensation for use of their content.

France was the first country to implement the directive.

After initial resistance, Google and Facebook agreed to pay French media, including AFP, for articles shown in web searches.

That did not stop the company from being fined Us$500mil (rm2.4bil) by France’s competition authority in July 2021 for failing to negotiate “in good faith”, a ruling Google has appealed.

Facebook has also agreed to pay for some French content.-AFP/The Star Malaysia 2 Jan 2023

Huawei could end up challenging Google

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BY imposing restrictions on Huawei Technologies Co, the administration of US President Donald Trump may force the Chinese company to do something that no one in tech has dared to do for a long time: Challenge Google’s control of the Android universe, which earned the US company a huge European fine last year.

Huawei faces two big threats from US technology export restrictions. One is the loss of American components for its products, a blow it cannot parry immediately if it wants to keep making top-flight smartphones.

The other is the potential withdrawal of its Android license, which would stop Huawei from preinstalling the latest Google-approved version of the operating system and some key services Western users see as necessary - above all Google’s Play Store, the biggest repository of Android apps.

This particular obstacle could, under the right conditions, turn into a Huawei strength in Europe, a market that accounts for almost a third of the company’s smartphone unit sales, according to market analytics company IDC.

Last July, the European Commission fined Google €4.34bil for imposing illegal restrictions on smartphone manufacturers. In exchange for the right to preinstall the Play Store, they had to agree, among other things, not to sell devices running versions of Android not approved by Google: so-called Android forks. These operating systems are developed from the open source version of Android, which anyone can use, including Huawei if the US bans it from using American technology. Amazon.com Inc’s Fire OS is the best-known Android fork today, though there are others around.

The commission wrote that by obstructing the development of Android forks, Google and its parent company Alphabet Inc “closed off an important channel for competitors to introduce apps and services, in particular general search services, which could be pre-installed on Android forks.”

In its ruling, it made a strong case for forks as platforms for Google-independent innovation that, if they were allowed to spread widely, could have curbed Google’s market dominance in various areas.

Google has appealed the ruling, but it has also removed restrictions on handset makers to avoid further fines. This, however, hasn’t led to the proliferation of alternative platforms based on open-source Android: Big phone makers are locked into comfortable relationships with Google and see no need to experiment. Days after the European Union fined Google, Huawei, at the time the biggest phone manufacturer that provided an easy opportunity to install alternative Android-based operating systems on its devices, ended the programme without explanation.

If Google takes away the Android license, it’ll yank Huawei out of its comfort zone. The company isn’t likely to give up the European market without a fight, after spending billions of dollars developing a customer base. Consumers in some European countries now appear to be put off Huawei by the US attack, although, paradoxically, it appears to have fuelled the brand’s popularity in France.

France for Huawei

Percentage* of consumers who say they'll consider buying a Huawei device when they're next in the market for a smartphone

Source: YouGov BrandIndex

The company has said it developed its own operating system (likely an Android fork), and it’s been trying to lure developers to its app store.

If the US stops Huawei from preinstalling the Play Store, the Chinese manufacturer probably won’t spend much time educating consumers on how to install it on their own (the way people do now with phones bought in China).

That’s not what most users expect on a new, expensive device. Instead, Huawei will want to offer developers an easy way to sell apps not just in the Google store but also in one preinstalled on Huawei devices - to “multi-home” them.

Huawei hasn’t been eager to get into an open confrontation with Google, which was a valued partner.

But a breakup ordered by the US government changes things. Huawei, with plenty of resources of its own (and most likely with support from the Chinese government, determined to fight back against the US), could soon be investing heavily in the marketing and improvement of an Android fork. Given Huawei’s marketing potential, the effort isn’t necessarily doomed. And it could boost Asian and European developers deterred from competing in some areas - such as mapping, video services or even search - by Google’s enormous power.

Given the pushback in recent years against US tech companies’ relentless data collection and the widespread mistrust of Trump’s administration in Europe, there could well be demand for a Google-free phone from a major manufacturer known for superior hardware.

I know I’d be interested, and the French would probably lap it up, judging by their reaction to the US threats. The EU regulators, too, might be intrigued to see evidence that perhaps the Google antitrust ruling didn’t come too late.

This is something of a utopian scenario, I know. Huawei may never need to go on the warpath against Google: The US and China could strike a trade deal that would make the specter of restrictions go away.

Or, if Huawei is banned from buying US technology, it could find itself unable to produce marketable phones for a while. And, of course, it is a company from Communist China, making it difficult for European regulators, and even for private developers, to embrace it as a savior from the overly dominant US tech companies.

Monopolies in tech don’t last forever, however.

Sometimes they just need a push to start showing cracks. If the US moves against Huawei, it might be unknowingly giving such a push to Google in the smartphone market. — Bloomberg Viewpoint

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China will emerge victorious from US tech crackdown folly

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But it needs a lot of time. During this process, China cannot avoid paying a price and will have a difficult time. But Huawei still has a domestic market of more than a billion Chinese people and the market of the Third World countries. When the Trump administration cracks down on Huawei, the US also goes through hard times. The final victory will certainly be China's, but China must have adequate determination and endurance.

Huawei Accuses U.S. of Bullying as It Seeks Support From Europe - WSJ

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Solar wars threaten climate fight

Amidst gloomy news in the deteriorating climate change situation is this bright spark – the cost of solar energy has been going down dramatically.

 THE source of clean and renewable energy is seen as one of the major saviours that could help power the world without emitting greenhouse gases.

The drawback is that solar energy has traditionally been more expensive to use than carbon-intensive coal or oil.

But in recent years solar power has become much cheaper. Energy experts predict that its cost could match that of conventional fuels in the next few years in some areas.

Solar cell prices have been falling, from US$76 (RM235.52) per watt in 1977 to about US$10 (RM30.99) in 1987 and only 74 cents (RM2.29) in 2013. Between 2006 and 2011, Chinese cell prices dropped 80% from US$4.50 (RM13.95) per watt to 90 cents (RM2.79) per watt.

Factors for this include a drop in price of the main raw material polysilicon (due to oversupply), increasing efficiency of solar cells, manufacturing technology improvements, economies of scale and intense competition.

The use of solar energy has shot up as the cost goes down. Global installed capacity jumped by 28.4 gigawatts (one gigawatt is 100,000 megawatts) in 2012 to reach 89.5GW. The 100GW milestone will be crossed some time this year.

All this is good news for the fight against climate change. Now comes the bad news.

The growing global demand has prompted the rise of solar panel manufacturers, and the competition is fierce, with a number of companies facing closure. China’s biggest solar energy company Suntech is in serious trouble.

But China has even bigger problems. The United States government, receiving complaints from US solar panel manufacturers, has slapped high anti-dumping tariffs on Chinese imports.

Now the European Commission also plans tariffs averaging 47% on Chinese solar products which it claims are selling below cost.

China is taking these threats seriously. Premier Li Keqiang in a visit to Europe last week took up the issue with European leaders.

Senior trade officials say China will retaliate. A full-scale trade war is thus imminent.

In a surprise turn of events, Germany and 16 other European countries have told the European Commission they are against its move.

But EC Trade Commissioner Karel De Gucht will apparently still slap on the tariffs provisionally, which is within his power to do.

So the solar wars between China with Europe and the US will likely proceed. This is a real pity, as the commercial interests of the countries are coming in the way of rapid progress in solar energy and the fight against climate change.

The expansion of the solar panel industry in China has played a crucial role in getting prices down, making solar energy more and more competitive, and driving its explosive growth.

Yes, China subsidises and promotes its solar industry. But the US and Europe also provide massive subsidies and supports.

The US has provided its solar companies with loan guarantees, research grants and tax deductions including investment tax credits and accelerated value depreciation.

European countries have given subsidies to consumers using solar energy, and incentives to producers including through the feed-in tariff scheme, in which solar energy providers are paid prices higher than what is charged to electricity users with the price difference being met by governments.

Without the subsidies, the solar industry would not have grown. Trade protectionist measures taken by one against the other, or by all against others, would be a recipe for disaster – for trade, the solar industry and the environment.

Well known solar energy advocate and chairman of Solarcentury Jeremy Leggett uses the following analogy to illustrate the trade war: “A planet faces an asteroid strike. Its inhabitants manufacture rockets with which to head off the threat. But, as the rock nears, they descend into international bickering over who pockets what from rocket-making.”

No one wins in this trade war, because of global solar supply chain, explains Leggett. Solar ingots, the upstream feedstock, are mostly made in Europe and America. The midstream products, cells and modules, are mostly made in China.

If China is hit on the mid-stream products it exports, it could retaliate with tariffs on the upstream products it imports.

For example, in Europe, the tariffs against China would wipe out thousands of jobs because most are not in manufacturing but in the companies that install the modules, regardless of where they are made.

The solution, he adds, is for the leaders of the few countries where most solar panels are manufactured to make a deal that coordinates the subsidies required in the various parts of the solar chain, and which is required for the few years that some countries need to bring the price of solar energy to parity with that of conventional energy.

An apt conclusion is made by Leggett: “The world will have to embrace common security on a bigger scale. Engaging in international competition while clinging to the illusion that markets always work will never solve our common problems of energy insecurity, poor air quality and resource depletion, never mind development. We will keep on maiming industries that can save us.”

Global Trends
By MARTIN KHOR