Prof. Dr. Kolja Raube (KU Leuven) Prof. Dr. Garret Martin (American University)
21 March 2022
1. Introduction (Author: Pavel Kolar)
Nowadays, Big Tech companies are undoubtedly among the most profitable businesses in the world. However, they have still managed to avoid taxes, especially the corporate tax rate, for years (Deane, 2021). It is acknowledged (Ibid.) that the reason is the obsolete global tax rules devised in the 1920s are not able to deal with digital operations. Furthermore, the COVID-19 crisis has not changed the current trend of their rising domination on the market. Instead, not only has the COVID-19 crisis positively affected the profits of ‘The Big Tech Giants’, but also accelerated the digital transformation, meaning further benefits for these corporates (BBC, 2021). The largest tech companies in question are, for example, Amazon, Apple, Google, Meta (Facebook), and Microsoft, which are all US-based.
Regarding the corporate tax, even though the US corporate tax rate diminished from 35% to 21% in 2017, these businesses have annually paid around 10–17% in total (Jolly, 2021). In their operations in Europe, the US Big Tech businesses exploit the so-called tax havens like Luxembourg, Ireland, or Cyprus. (Deane, 2021). In short, tax avoidance techniques are the most common characteristic of US tech companies (Jolly, 2021). In Europe, some companies have no 'physical' headquarters and use so-called virtual headquarters to avoid taxes there instead (Clarke, 2021).
For several years, there have also been allegations that Big Tech companies abuse their privilege and position on the market to make greater profits and have a monopoly (Bradford, 2021). Namely issues like favoring their own products in their personally managed online marketplaces and exploiting its access to consumer data for gains against the competition (Ibid.). As a consequence, countries have been failing to keep the market competitive (Albert III, 2021). Nevertheless, the EU and, more recently, also the countries of the key markets like the US and China have had enough of these practices. By the words of Anu Bradford (2021), “Big Tech has simply grown too big.” Therefore, there have been many efforts to regulate these businesses. Due to this proactive approach of states, Big Tech companies have been using lobbying as a tool to defend their interests. According to the Brussels Times, Big Tech companies spend approximately EUR 100 million each year to influence EU decision-making (Whitehead, 2021). As for the United States, seven large tech companies spent around USD 70 million on lobbying the government in 2021, exceeding the USD 65 million from the previous year (Zakrzewski, 2022).
As far as the US activities targeting Big Tech firms are concerned, there have been several ongoing actions, such as the Federal Trade Commission (FTC) pushing forward antitrust lawsuits and prosecution cases, Congress pushing to enforce antitrust bills and acts, the Department of Justice (DoJ) Antitrust Division scrutinizing big corporates, and there are also awaiting hearings aiming at companies like Apple, Google, Facebook, Microsoft, or Amazon (Cf. Feiner, 2021; Foroohar, 2022; Reyes, 2021).
The European Union is considered to be the world’s digital ‘policeman’ and the top regulator (Manancourt and Lau, 2021). Nonetheless, not many tech giants come from Europe, which appears to be a severe problem even for French President Emmanuel Macron, stating: “We need European financing, European solutions, European talent. Now when you look at the map, we have what we call the GAFA in the U.S., the BATX in China and GDPR in Europe” (Macron cited in Dillet, 2020). Within the Union, under the leadership of the Commissioner for Competition Margrethe Vestager, the European Commission is the crucial player challenging the ‘misbehaving’ corporates. There are three ongoing antitrust cases into Apple, two into Amazon, one into Facebook, and one into Google (Van Dorpe, 2022). Nevertheless, the struggle against the dominance of these businesses is not new, and several court rulings were already held in the past (Fertl, 2022). In addition, the Digital Markets Act (DMA) and the Digital Services Act (DSA) are expected to be agreed on and put in force in 2022.
Other states have united in dealing with the tax issues as well. Initially, G7 countries and, subsequently, 136 OECD member states agreed in 2021 to impose a minimum global corporate tax rate of at least 15% starting in 2023 (Cf. Clarke, 2021; OECD, 2021). Even Ireland, infamous for its low corporation tax rate of 12.5%, agreed on raising it towards 15%, resulting in possibly losing its label as the number one destination for US tech firms (Denton, 2021).
2. Competition policy: Its relevance and why it matters for the transatlantic order
(Author: Anita Cornelli)
Competition policy ensures a fair and vibrant market economy by enhancing consumer protection by upholding an open competitive market, in which a ‘level playing field’ is maintained by preventing companies from developing market dominance. Therefore, competition policy enables consumers to receive goods and services for the best value for money, while promoting innovation and efficiency (Cf. European Commission, 2021a; European Parliament, 2021; Mandel, 2018:2).
In recent years, with the fast development of Big Tech companies, it has become clear that “traditional competition law is often inadequate or insufficient to deal with competition issues in digital markets” (Jenny 2021 cited in Kira, Sinha, and Srinivasan 2021:1338). To ensure consumer protection in the digital age there is the need to formulate new regulations. Moreover, due to a more globalized world, “firms are able to operate across international boundaries and in online markets with ease” (Blaschke-Broad, 2022:99) and, as a consequence, competition law breaches occur at the international level; therefore, competition policy cannot be limited to national or regional borders.
Furthermore, the necessity of cooperation between competition policy agencies is even more evident in relation to issues that affect different regions or states. An example of this is the case of the growing number of mergers at the regional and international level which affects competition policy agencies across borders. Therefore, to find common solutions and to prevent inconsistencies or contradictions among the requirements for merging parties, it is essential that a dialogue exists between competition policy agencies in order to promote coordination and convergence of regulations (Cf. Competition Directorate–General of the European Commission, 2016; Monti, 2001).
Moreover, the establishment of Big Tech companies that operate transnationally is exposed to another issue that traditional competition policy is failing to deal with at the national and regional level: data protection. In fact, in order to uphold consumer protection, “the potential harm of data-driven mergers and abuses of dominant companies built on data” (Stucke and Grunes, 2016:3) cannot be overlooked, as this will put into danger the privacy of the user and limit their ability to choose what to read, buy, etc.
The European Union is ahead in the establishment of a more modern and suitable competition policy, especially in regard to data protection, however as Big Tech companies are predominantly North American, transatlantic cooperation is fundamental.
Furthermore, cooperation between competition policy agencies will be beneficial for the United States as well. This is because, the EU currently has the possibility “to decide which countries have so-called adequacy, or the legal right to move EU data to their own jurisdictions” (Scott, 2021), in addition, many companies are now aligned with EU regulations, which is limiting the authority of the United States in relation to competition policy at the international level. Furthermore, transatlantic cooperation between competition policy agencies will be also economically beneficial for the United States, as “Europe’s hardening antitrust stance poses significant problems to U.S. business interests in Europe’s giant digital market” (Suominen, 2020).
Nevertheless, the EU would also benefit from closer transatlantic collaboration, as the antitrust agencies of the United States have been more active “in advocating for the break-up of large Big Tech platforms” (Liberatore, 2021), an area in which European competition policy has been lackluster.
3. Areas of Divergence Between Transatlantic Actors (Author: Julian Kasapov)
“What goes up must come down. And, if the truism holds, then 2022 will be a tipping point for Big Tech” (Foroohar, 2022), that is the prediction that the author of the piece in Financial Times holds. The European Union, just like the Government of the United States of America, has for several years tried to curb the “Big Tech” companies’ growing influence and rising market shares. In fact, the European Union has proven to be able to set the playing rules for the tech giants by for example introducing the (EU) 2016/679 (General Data Protection Regulation) but also the Data Protection Law Enforcement Directive concerning the protection of personal data (Mantelero, 2017). In the United States, however, this hasn’t necessarily been the case due to the existing interests of tech companies and the existing division between lawmakers on what the best way to combat undue influence is (Kang and Mccabe, 2022).
The European Union and the United States established a Trade and Technology Council back in June 2021, aimed at mutually coordinating the diverging approaches to matters relating to trade, economy, and technology. This was also aimed at furthering the transatlantic trade through anchoring it in shared democratic values (European Commission,). This has yet to be reflected in the mutual partnership between the two actors. Nevertheless, the European Union has time and time been praised for its more proactive stance on regulating the digital sphere, one example being the intense work on the legislative proposal known as the Digital Services Act. Margrethe Vestager, who is behind the proposal, has become something of the European embodiment for a battle against Big Tech. Under her supervision, the EU has initiated probes into the unfair behavior of certain tech hegemons and become a role model for how to actively regulate the Big Tech (Strauss, Evdokimova, and Semenova, 2022).
Meanwhile, the United States has not adopted any regulation that matches the like of its European counterpart. The January 6 riots in Washington DC made US policymakers across the aisle wary about the power that tech firms possess. Despite that, it still remains to be seen how it is planned to counteract Big Tech’s overwhelming influence (Van der Loo, Vandenbussche, and Aktoudianakis, 2021). US antitrust laws have long been shaped according to Wall Street interests and the oligopoly that Big Tech constitutes. The merger guidelines that Ronald Reagan set in place made antitrust and anti-monopoly policies have the same bootless effect (Teachout and Sanders, 2020) as the samples one receives at the opening of a new store. The existing Federal Trade Commission (FTC) plays an important role in defining the illicit methods of competition and could in theory, with the right legislative will make mergers illegal if they run the risk of making the market vertical (Teachout and Sanders, 2020).
What we saw from the previous POTUS when he ordered an investigation into France’s new tax on large tech companies e.g., Apple, Google, and Facebook (now rebranded Meta), was a bold display of mercantilism vis á vis its Transatlantic partners (Christensen and Hearson, 2019). Digital taxation has been a point of friction due to the diverging national interests surrounding tax allocation. The discussions around the tax policy of the “Big Tech” have therefore reflected negatively on the EU-US relations. While the US benefits disproportionately from the generated economic dominance of companies such as Google, Meta and Apple the EU is left empty-handed (Christensen and Hearson, 2019). Despite the hopes of the European Union, to see a more reconciliatory US in the face of Joseph Biden’s administration that has not necessarily been the case. There is clearly an improvement in diplomatic cooperation but not in terms of welcoming the EU’s increasing ambition in achieving greater strategic autonomy(Csernatoni, 2021). The US under Biden appears, in general terms, willing to cooperate with the EU on areas relating to Big Tech regulation and innovation but taxation policy and antitrust competencies remain points of divergence. The EU-US TTC could be the forum to smoothen out any differences and ensure mutual guarantees. Nonetheless, any future common processes need to take into account the fact that US political culture often prioritizes “competitive entrepreneurship over governance” (Csernatoni, 2021, p.162).
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