Home Economy Facebook and Google Are a Pain for Analog Regulators

Facebook and Google Are a Pain for Analog Regulators

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                Facebook and Google Are a Pain for Analog Regulators

                Facebook and Google Are a Pain for Analog Regulators

British Prime Minister Theresa May and Europe's top antitrust cop Margrethe Vestager are far from ideological soulmates. Yet the conservative and liberal politicians found themselves on the same territory this week as they separately tried to rein in some of the excesses of Silicon Valley.

Facebook's fine: €110 million

In her election manifesto, May promised a raft of protections for internet users, including a requirement for social networks to allow people to erase anything they posted as when they were under the age of 18. She also threatened an industry-wide levy on social media companies and some messaging services to raise funds to counter "internet harms," in the same way the U.K. gaming industry has to fund education and treatment for punters. 

Over in Brussels, Vestager  slapped a 110 million-euro ($122 million) fine on Facebook for misleading regulators during their review of the social network's 2014 takeover of WhatsApp. She chastised the company for initially saying that combining user data from the two services was impossible — only to do just that a year later. Turns out WhatsApp data like phone numbers and location are useful for targeting Facebook ads. Who'd have thought it?

Unfortunately, the reality is that May and Vestager are unlikely to have much impact.

May's idea to tax web companies is misguided and impractical, for starters. Good thing, then, that it's very unlikely to ever see the light of day. For years, France toyed with a so-called Google tax that would force internet companies that show online video to help fund the country's film industry in the same way traditional broadcaster do through a tax on advertising revenue.

The idea died because it was impossible to enforce in the slippery world of the web. For example, when Netflix Inc. wanted to launch in France in 2014, it deflected calls for it to take part in the program by basing its entire European operation in the Netherlands.

Meanwhile, Vestager's fine on Facebook is simply too small and too late to have any impact. It amounts to three days of the cash generated by Facebook's online advertising business. The deal won't be unwound or altered. Vestager can only hope to send a message to other multinationals that they can't mislead her in merger reviews.

But that's not to say that May and Vestager's are wrong to target the tech giants. 

European regulators have, in recent years, provided a useful check on the growing power of global tech companies like Facebook, Google, Apple and Amazon, in contrast to the hands-off approach of U.S. authorities. Their tough love has forced the industry to confront the issues of tax, monopoly power and privacy — and, as Gadfly has argued before, curb some impulses that that might ultimately end up being self-defeating. Look at how Vestager's decision to require Apple to pay 13 billion euros in unpaid taxes has forced companies to think twice about their tax optimization techniques.

The real problem is that the issues Europe and the web giants are grappling with are genuinely hard to resolve. Legal and regulatory frameworks conceived in the industrial era often don't translate to today's digital realities. Antitrust laws are looking particularly in need of an overhaul since companies like Amazon, Google and Facebook aren't old-style cartels whose growth leads to higher consumer prices. Tech superpowers must do better. So do the regulators.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

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