Google Ruling: The EU Just Picks Winners and Losers by Now

by Kai Weiss

It is quite ironic: Over the weekend, the Italian government bailed out two regional banks with taxpayers’ money. “The state will inject cash of about €4.8 billion, plus guarantee loans nominally worth €12 billion.” The EU Commission approved the aid quickly, even though the decision goes against all the new intentions of the Union. (But hey, who cares about two small banks after providing Monte dei Paschi, Italy’s third-largest bank, help just weeks before – breaking the same rules).

Flash forward to Tuesday: Margrethe Vestager, the European Commissioner for Competition, announced that Google has to pay €2.42 billion of fines to the European Union. Why? Because the internet giant has reached a dominant position on the market (ignoring the fact that, as Jeffrey Tucker wrote, “no one can presume that market dominance means permanent market control“) and favored its Google Shopping service on its own devices. “We congratulate you for being successful. But the applause stops when you stop competing on the merits,” Vestager proclaimed. Others quickly jumped on the bandwagon: Christian Lindner, the leader of Germany’s (supposedly) classical liberal party FDP, congratulated Vestager for the “courageous and consequential effort for the market economy.”

So everyone is happy! The “too big to fail” banks survive (and even the seemingly “too small” ones), while the evil company is put in its place once again. And let’s be honest, you can’t leave the internet to just a handful of companies. In the past, knowledge was stored in libraries, mostly operated by the state. Leaving it to the private sector now would be disastrous – people just care about profit there! (This is at least what the Sueddeutsche, a major German newspaper, thinks.)

In reality of course, the European Union is just picking winners and losers. While those who fail on the market – from Monte dei Paschi to small banks – get bailed out, those who are successful are penalized – like Google. Google is as dominant as it is precisely because it serves the consumers who voluntarily choose its devices and services. There’s nothing wrong with Google favoring its shopping service over others either: One can just switch platforms, there are many alternatives.

But this has been the approach of the EU for quite some time. During the financial and euro crises, banks – and states like Greece – got bailed out despite their very own failures. The Common Agricultural Policy (CAP) still to this day subsidizes farmers all around Europe with taxpayers’ money, even though many would go out of business if they couldn’t just take the money from their fellow citizens. Around €58 billion a year – 39% of the annual EU budget – goes to farmers, despite them only accounting for 3% of the population.

Meanwhile, Apple has to pay hefty fines and services like Uber and Airbnb are bullied around the continent (and soon possibly by the EU itself). The reasons could be manifold, from a simple interventionist ideology (“we,” i.e. the government, need to help out if a crisis could arise or a farmer goes broke, but those tech giants can’t get too big – they are private and private doesn’t work), to retaliation against Silicon Valley and the US economy overall, where regulations are much more lenient, making it impossible for Europe to compete. What this ruling is definitely not is a “courageous and consequential effort for the market economy.” The market economy chose Google. Penalizing the company is just penalizing those who are successful on the market – and only because they are successful.

Kai Weiss is an International Relations student and works for the Austrian Economics Center and the Hayek Institute.

2017-06-29T13:08:20+00:00

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