Europe’s antitrust policy must not ignore China – TechCrunch

The TechCrunch Global Affairs project examines the increasingly intertwined relationship between the tech industry and global politics.

Europe has a well-deserved reputation for regulating Big Tech, for taking the lead in privacy, data protection and above all competition. Today, new antitrust legislation that introduces criteria to identify major online “gatekeepers” is making its way into the European Parliament. But while the Digital Markets Act is expected to target a number of US tech companies, if used strategically, DMA – and European antitrust and competition policy at large – can also be a tool to compete with China.

In recent years, Europe has slowly awakened to China’s challenge of transatlantic technological leadership. Although many Europeans are slowly converging on perceptions of Washington’s threat, Europe still lacks the tools and political will to meet the challenges emanating from Beijing’s behemoths.

If the transatlantic political responses to China are to be aligned, they do not necessarily have to be the same. The United States and Europe should use their respective strengths and toolkits to tackle China’s market-distorting practices in technology. And Europe should use its comparative advantage – develop and enforce competition policy – to compete with China, starting with DMA.

Beijing’s tech giants are vying for the size and control of the global tech ecosystem – a dynamic that transatlantic partners cannot afford to ignore. The Chinese Communist Party (CCP) has set itself the goal of dominating the market for its biggest tech companies. To achieve this objective, the CCP has engaged in anti-competitive behavior in order to improve the positions of its companies in the market. In addition to state subsidies, the PCC often offers privileged deals to companies to improve their market position.

The 5G case study illustrates this dynamic. The Chinese government has provided 5G champion Huawei with state support of $ 75 billion through tax breaks, updated resources and financial assistance. Meanwhile, the Chinese domestic market allows state-backed champions – including Huawei – to take advantage of very little competition and a high market share in China to offer services for a fraction of the price in third country. Faced with this reality, the main European producers of 5G technology, Nokia and Ericsson, previously struggled to compete with Huawei in their home market. Beijing’s domestic economic policy therefore has global consequences.

Over the past year, European countries have put in place investment screening mechanisms to tackle Beijing’s growing footprint in Europe. Yet they still have work to do. Of the 27 Member States, only 18 have put in place investment screening mechanisms, although six more are under development. There are also reasons to question the effectiveness of the mechanism. The European Commission blocked only eight of the 265 projects it examined. Only 8% of the projects examined were Chinese projects. And they don’t explicitly address anti-competitive behavior.

This is starting to change. In May 2021, the European Commission proposed a regulation on foreign grants that distort the domestic market, which introduces tools to investigate and potentially stop financial contributions from a non-EU government involving foreign grants. But while Europe’s nascent efforts are encouraging, they are not enough to remedy the market positions of Chinese companies and the distorting policies of the Chinese government.

Nevertheless, Europe is well placed to take advantage of its regulatory momentum. Given China’s multi-faceted playbook, Europe should think beyond subsidies. To effectively compete with Chinese tech giants and address the unfair market position of Chinese companies, Europe must use antitrust regulations to target Chinese companies engaging in anti-competitive behavior, including by calibrating the Digital Markets Act (DMA) . Combining investment screening with antitrust policy would give Brussels many tools to fight Beijing’s anti-competitive behavior.

Tackling China’s anti-competitive behavior through an anti-trust policy is a logical extension of the European toolbox. While the United States has traditionally viewed antitrust policy from the perspective of consumer welfare, Europe often views antitrust policy from the perspective of market competition. In addition, Europe is often loath to view Chinese companies through a national security or anti-China framework. While investment screening mechanisms focus on national security, antitrust and competition policy is pursued to ensure market competition in Europe. This framework makes the fight against Beijing’s anti-competitive practices through antitrust policy a natural solution for Europe. In fact, members of the European Parliament argued last week that DMA should be extended to China’s Alibaba.

Such an approach would also correct perceived anti-American bias in antitrust enforcement. Commission officials argue that Chinese companies are not doing enough business in Europe to be subject to DMA. But this approach means that American companies are almost exclusively targeted by European regulators. Yet, seen through a geopolitical lens, China’s national tech champions pose a greater threat than US tech companies to Europe’s innovation ecosystem. This continues to be a point of contention in Washington and threatens to weaken the transatlantic relationship.

While Europe often bristles with the United States’ anti-China framing on technological issues, moving forward with an affirmative pro-democracy agenda – Europe’s preferred framing of the challenge – requires states United and Europe that they strengthen their respective innovation ecosystems. The exclusive targeting of US companies in the Digital Markets Act threatens to hamper potential transatlantic cooperation and hamper an affirmative transatlantic agenda.

While the Digital Markets Act is not wrong to hold US tech companies accountable, it is an opportunity for Europe to use antitrust and competition policy to recalibrate an approach to the Chinese challenge that matches perceptions and to European forces. Europe should not miss this opportunity to tackle China’s market-distorting behavior and add another tool to its toolbox to fend off anti-competitive behavior from China.
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Mary I. Bruner