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The Backlash Against US Tech Companies In Europe

The ‘Frightful Five’ are facing opposition from the European Commission

9Jun

In 2013, EU trade ministers struck a deal that exempted the French audiovisual sector from a free trade agreement with the United States. In what has been called a ‘cultural exception’, EU ministers put together a deal that would protect French culture from the US dominance growing thanks to a handful of tech behemoths. Fears over such dominance are twofold - partly, there is a worry that the reach of the US tech giants is a step toward US hegemony given how inherently deferential they are to the US government. Secondly, though, there is the concern that the companies may become so big as to be able to essentially create their own laws within the market.

The New York Times dubbed them the ‘Frightful Five’ - Amazon, Alphabet, Microsoft, Facebook and Apple - and all are facing issues with not only their European expansion but their growth the world over. Google, Amazon, Apple, Microsoft and Intel have all been examined by the European Commission (largely on antitrust, privacy and taxation issues) who are far more stringent than US regulators in the way they protect competition.

Google is a particularly interesting case, given that both the UK and French governments have come after the giant recently with regard to its tax situation. In May this year, 100 tax officials raided Google’s Paris offices under the accusation of €1.6 billion ($1.8 billion) in unpaid taxes. The case is still open, but the situation in the UK is equally murky. Google Ireland Holdings - its European headquarters - has its cost center in Bermuda (where corporate tax is a foreign concept). The Californian company’s tax set up is so complex that, for example, Google allegedly pays tax in the Republic of Ireland despite the sales appearing to relate to the UK.

January of this year saw public outrage as Google agreed a deal with the UK tax authorities to pay an additional £130 million ($189 million) in tax, drawing scorn over what appears an incredibly small amount for such a mammoth company and given the circumstances. Even so, it seems the relatively easy ride given to the US giants is coming to an end, as the European Commission and individual governments acknowledge the will of their citizens, which are largely in favor of demanding higher corporate tax payments. Microsoft have also paid almost €2 billion in fines in the past decade, in a protracted antitrust dispute, while Facebook announced in March that it would have to make changes to how it paid tax in the UK - which could see it pay much more. And the battle is far from over. In April, the EU announced plans to enforce companies with over €750 million in sales to disclose more details of their tax affairs, including their activity in some tax havens.

Tax is just part of the story, though - culture is also disproportionately swung in the favor of US companies, much to the panic of the European Commission. It’s not necessarily that US movies, TV shows and music is outmuscling that produced by Europe, it’s that the companies that facilitate the content are US produced. France, for example, insists that radio stations play a certain amount of French music and has quotas in its film industry, but such measures are made partly void when the citizens consume almost all of their content through US smartphones, tablets or laptops, and a handful of tech companies dominate supply. Book sales? Amazon. TV? Netflix. Music? Apple. The American tech industry is so powerful that the nation’s soft influence extends even to countries with defense mechanisms in place.

The European Commission is again working on ways to combat this invasion, though. Privacy regulations and antitrust investigations are one thing, but according to the New York Times rules are being considered that would ‘require streaming companies like Netflix to carry and even pay for local content in the markets they serve.’ ‘My assumption is that this is only the beginning,’ Dongsheng Zang, director of the Asian Law Center at the University of Washington School of Law, said. ‘We’ll be seeing more of these governments make their own demands, and the problem is a fragmentation of the global tech companies. This could be a problem for America in the 21st century.’

It’s in the interest of everyone but the big five for competition to be encouraged across Europe. US companies will continue to legally exploit tax loopholes as long as they exist, and its the job of both the European Commission and individual governments to close them sooner rather than later. Culture is more difficult to legislate for, though, and the ubiquity across the continent of US manufacturers and services is a problem for Europe to contend with. However successful the backlash is, though, at least it’s begun. 

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