Business

Why Europe is defending itself from big US tech firms

Google logo in background of two people on laptops Image copyright AP

The big US technology companies are poised to break out into areas that European businesses have traditionally done very well in, like car production and healthcare. Plenty of Europeans are determined to stop them.

There is a war brewing. We've seen the first skirmishes, armies massed, a few shots fired. But the big conflagration is yet to come.

The battleground is Europe, and the enemy - as many Europeans see it - is Silicon Valley, California's renowned technology hub.

It all amounts to something rather sinister, according to the American journalist and commentator Jeff Jarvis. He's even coined a term for it - "Eurotechnopanic".

"I think there is a lot of fighting against Google and other American tech companies, in terms of publishers trying to protect their own turf," he says.

And it is easy to see why some feel so threatened. Technology blows competition into parts of the world that were previously unreachable - by distance, by language and by regulation.

It is now possible for a company based in California to take on and beat European businesses which have been dominant in their markets for decades.

And in the digital age, there is no prize for second place. For the cost of reaching a thousand customers you can reach a million, or a billion. Thus the winner in any market quickly begins to look like a monopoly.

Image copyright AFP
Image caption Silicon Valley is home to Google, Microsoft, Apple and Facebook among others

Right now, one company comes in for more criticism than all the others put together. For the past five years, Google has been the subject of an investigation by the European Commission.

The charge is that they use their market dominance to promote their own services and downgrade those of their competitors.

Just before Christmas, the European Parliament voted that if Google doesn't sort itself out it should be broken up. Quite what MEPs could do to force Google to comply isn't clear, but in reality this vote is designed to put pressure on the commission to get on with its inquiries.

The man behind the vote was the German MEP Andreas Schwab. He looks and dresses just like the forty-something technology types who inhabit Silicon Valley, but is determined to curb some of the Californians' power and - as he puts it - "level the playing field".

Image caption Andreas Schwab wants fair competition between US and European businesses in the digital age

"We can make sure that European companies - be it from the UK, Germany or France - can play a role in [the technology] market," he explains.

"We have some very innovative businesses, but so far - on the level of regulation - they are not really on the same level as our American counterparts.

"Therefore I think we have to come to that level playing field," he adds.

'Consumer deception'

Google has come in for protest and criticism because of what is known as "vertical search".

If you are searching for, say, a flight between Manchester and Barcelona on Google, you will see the top results are paid adverts and after that comes a box with some actual flights for you to book. This box is a Google service.

"We see that Google has been giving preference to its own services to the detriment of competitors," says Kostas Rossoglou, of the European Consumer Organisation (BEUC).

"This is not made clear to the consumer so we are talking about consumer deception. There's also a lack of consumer choice," he adds.

This has been disastrous for some companies that used to make their living providing online price comparison. They now face a stark choice - pay Google for a top spot or disappear from the first page or two of results.

In an open letter to Google's chairman Eric Schmidt, the chief executive of the German publisher Axel Springer - Mathias Dopfner - described Google's business model as demanding "protection money" from competitors - which, he said, effectively amounts to saying: "If you don't want me to kill you, you have to pay me."

Image copyright AFP
Image caption Axel Springer chief executive, Mathias Dopfner, says his company is afraid of Google and its power.

Indeed, if you look behind many of the organisations that are agitating against Google and other American technology companies, you find publishers who have seen their business models squeezed by the search giant.

Google's European communications director Peter Barron insists that the company is not abusing its position - it has demoted price comparison sites because they were getting in the way of users finding what they were looking for, he says.

"If you go back a few years," he explains, "you'll remember whenever you used to search for, say, a digital camera, you wouldn't get direct to the product - you would get to a whole set of price comparison sites.

"And sometimes, actually, you might get 10 links that were all price comparison sites. You would then need to go to that site to find the one you were looking for."

"Now that was a very bad experience for users - and users fed back to us saying that's not what we want. So over the years we've evolved the way we rank - and demoted sites that aren't, we think, adding value to the consumer."

But the conflict in search and price comparison is just the beginning. Transport is set to be the next big area of disruption, according to Thilo Koslowski of analysts Gartner.

Image copyright Google
Image caption Google hopes its self-driving cars will "improve people's lives by transforming mobility".

He says the technology companies "are not interested in inheriting the century-old business model from the automotive industry - they're looking at providing new value, new mobility solutions to consumers, and to interact with them differently.

"So that is one of the conflicts I anticipate we will see starting this year and over the next couple of years."

Disruption from taxi apps like Uber, and eventually self-driving cars, will see far fewer cars on the roads, and far fewer being bought. That promises to be very challenging for Europe's car makers.

MEP Andreas Schwab believes it's important for Europe to get the rules right now, before US companies destroy any more European businesses.

It is important, he says, for the digital, automotive and health sectors - among others - to have "a level playing field, to make sure that innovations are done in all areas of the world and not only in one place - in this case Silicon Valley".

See David Grossman's full report on BBC Two's Newsnight, Friday 6 February from 22:30 GMT - or catch up online.

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