Europe launches plan to tackle US online dominance

The European Commission wants to improve competition across the continent's single market, including an investigation into Internet giants like Google and Facebook.

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Andrus Ansip, the EC's vice president, discusses the Digital Single Market in Brussels earlier this year. Emmanuel Dunand/AFP/Getty Images

The European Union has unveiled a 16-point plan to ensure Europe's tech industry can compete with established US online giants.

President Jean-Claude Juncker and Vice President Andrus Ansip of the European Commission, the EU's executive branch, announced the Digital Single Market Strategy in Brussels today. The document, which Ansip describes as a "starting point", argues that "Europe has the capabilities to lead in the global digital economy but we are currently not making the most of them. Fragmentation and barriers that do not exist in the physical Single Market are holding the EU back."

One of the most potentially significant initiatives in the new plan is a wide-ranging inquiry that will look into whether big Internet companies like Google, Amazon and Facebook are abusing their market dominance to promote their own services.

"Some platforms can control access to online markets and can exercise significant influence," the strategy document says. "This has led to a number of concerns over the growing market power of some platforms. These include a lack of transparency as to how they use the information they acquire, their strong bargaining power compared to that of their clients, which may be reflected in their terms and conditions (particularly for SMEs), promotion of their own services to the disadvantage of competitors, and non-transparent pricing policies, or restrictions on pricing and sale conditions."

In the case of Google, antitrust regulators are concerned the American search giant prioritises its own shopping results, to the detriment of rival retailers. There's also concern that Android's preinstalled apps stifle competition in the mobile app landscape, calling to mind past controversies over Microsoft's preinstalled Internet Explorer and Windows Media Player software on Windows PCs.

"We are supportive of legislation which moves us closer to a true European Digital Single Market without limiting innovation and growth," Facebook said in response to today's announcement. "We will assess the proposals individually as they are published."

Individual national privacy regulators in France, Spain, Italy and other nations are already looking into how Facebook collects user data. The social network responded with a stark warning last week that potential new regulation would see "Facebook's costs increase, and people in Europe would notice new features arriving more slowly, or not at all. The biggest victims would be smaller European companies. The next big thing might never see the light of day."

"A Digital Single Market is one in which the free movement of goods, persons, services and capital is ensured," says the strategy document, "where individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence."

To that end, the Digital Single Market Strategy seeks to reform copyright rules; remove geographic barriers across different member states for both online geo-blocking and real-world parcel delivery; and standardise complex VAT (value-added tax) regimes across different countries.

It also updates regulation of the telecoms sector in the face of competition from services like WhatsApp and Skype. Free online services like these have contributed to a huge decline in the use of texting, eating into the revenue of traditional telecoms operators. And with Wi-Fi calling starting to gain traction, telecoms networks are facing a challenge to their most long-standing source of revenue.

Although the competition inquiry could challenge the dominance of big US companies, other provisions of the Digital Single Market Strategy could actually benefit them. "Running through the Commission's agenda is a distaste of the market strength and practices of certain big US tech companies," notes Adam Rendle, senior associate at law firm Taylor Wessing, but "it is ironic, then, that the big US tech companies are in a strong position at present to benefit from prohibitions on geo-blocking given they have the scale, resources and market penetration to provide the pan-EU offerings that the Digital Single Market Strategy allows.

"Of course, what the Commission hopes is that the Strategy will create the conditions for EU versions of the big US tech companies to develop, because they would suddenly have a huge, pan-EU potential market for their services."

US companies are under the microscope in Europe at the moment: Apple faces a huge tax bill over tax avoidance in Ireland, Google is in trouble over the " right to be forgotten", and Microsoft's Skype brand has been ruled too similar a name to British broadcaster Sky.

Google and Amazon did not respond to requests for comment.