To my surprise the European Commission this afternoon during prime “news dump time” in the late Friday afternoon on September 5th in Brussels announced another €2.95bn fine on Google for abusing its dominant position in the display advertising technology industry (‘Adtech’). This decision is a surprise, as the Commission has been careful to promote the “trade detente” negotiated with Donald Trump early in August, and as noted in earlier notes one of the unwritten elements of the US-EU trade deal might have been that the Commission would “go easy on the enforcement of EU technology industry rules”. This was noticeably brought back to focus by Donald Trump’s recent tweet condemning European (and other countries’) digital regulations restricting the operations of U.S. technology firms, warning of possible penalties and in extremis the unraveling of the recent “US-EU trade realignment”. That interpretation has now clearly been superseded by the Commission’s decision, but this represents more a calculated political risk by the European Commission than a renewed desire to rekindle a full-blown trade confrontation with the United States. For several reasons, it remains unlikely that the US-EU trade war will now restart.
First of all, as pointed out to me by Kim Wallace, the timing of the Commission’s action is likely to be related to the ruling this week on the DoJ Court case against Google for many of the same monopolistic practices in the search ad field. This case, originally filed during the first Trump Administration, saw a U.S. Court impose significant remedies on Google for “unlawful monopolization to help restore competition in search and search advertising”. In short and in a superficial political sense for many of the same type of practices harming US consumers that the Commission fined Google for doing against European consumers. While obviously, one should not underestimate Donald Trump’s ability to overlook such legal similarities, if he wants to restart the trade fight with the EU, the Commission is nonetheless likely right in having concluded that the US court case makes it less likely that this new EU fine on Google will trigger a hostile response from Donald Trump. Trump himself raised the issue of the DoJ case with the Google CEO at a recent event with US tech sector CEOs, so is clearly aware if the existence of the case. The fact that Alphabet stock rose nearly 10 percent this week (more than $230bn in increased market cap), following the court ruling that rejected the most severe remedies – the forced sale of its Chrome web browser – will moreover make it a lot less likely that Alphabet will choose to aggressively politically pursue the issue of the EU fine – worth at most just 2-3 percent of this week’s rise in market cap – with the Trump Administration. It is just not likely to be worth it for Google to kick up a fuss about this.
Meanwhile in Brussels, the timing of this fine against Google will be exceedingly politically opportune for Commission President von der Leyen, coming just days before her September 10th State of the European Union Speech to the European Parliament, in which she will lay out her policy agenda for the next 12 months and surely seek to defend her recent trade arrangement with Donald Trump before skeptical members of the European Parliament. This task will have become a lot easier now that it is clear from the Google fine that she has not in fact entered into some kind of “unwritten tech enforcement ceasefire” with the Trump Administration. This in turn should help secure passage in the European Parliament of the legislative changes needed to implement the recent US-EU trade arrangement, and likely also the announced procedure to ratify the recent EU trade deals with Mercosur and Mexico. Parliamentary passage of these items in the coming weeks and months would greatly politically strengthen Ursula von der Leyen’s political position in Brussels.
It is hence understandable that she and the Commission have here chosen to take a calculated risk by fining Google again. Trump remains a wild card and could react negative, but it should not be the base case that this fine restarts the US-EU trade war.
Jacob
