China's new antitrust probe into Google and Donald Trump's warnings to the EU over picking on US tech may signal the start of a new era of politicized enforcement. This will increase the risk for companies of getting caught up in politically driven probes, and it may put regulators’ enforcement credibility in jeopardy. The European Commission countered today that antitrust shouldn’t become a “tool in trade disputes.”
China's move to investigate Google under antitrust law and US President Donald Trump's vitriol against EU probes of Big Tech have thrust competition powers into the heart of international trade disputes. While the topic of politics has historically bubbled under the surface of competition enforcement, the last few weeks have seen it break into the open. Antitrust is viewed as a weapon to be wielded in global economic tensions, not just as neutral law enforcement.
Traditionally, enforcers maintain that their work is based on law and facts and is immune to political cross-winds. But Trump's arrival in the White House has put trading partners on notice that probes into US companies will be seen as an act of aggression.
That makes China's decision yesterday to investigate Google all the more notable: part of Beijing's response to a tariff war is to deploy its antitrust powers.
This will increase the risk for companies as they get caught up in politicized probes. And it increases the risks for regulators whose enforcement credibility is put at risk.
In recent days, Trump has ramped up tensions with trading partners such as Mexico, Canada, China and the EU, imposing tariffs to defend American domestic interests.
While Mexico and Canada have reached an interim truce with Trump, a 10 percent tariff on Chinese imports came into effect today and Beijing retaliated with tariffs on US products, including 15 percent on coal and 10 percent on crude oil.
But among the counter-measures, a new front was opened: antitrust. In a brief announcement yesterday, China’s State Administration for Market Regulation said it was launching a probe into Google. It gave no details of the nature of the scrutiny (see here).
Google has a very limited online advertising business in China, dwarfed by the likes of Alibaba, ByteDance and Tencent. But its Android business is sizeable, given the operating system's huge presence on mobile handsets in the country.
The SAMR move follows explicit calls by Trump for the EU to back off probes of companies such as Google and Apple. In his eyes, sanctions under antitrust, state aid and tech regulation amount to a "tax" — and that requires retaliation.
This positioning means antitrust is being dragged into the burgeoning global trade war, making probes less predictable and straining prior claims that enforcement is dispassionate and neutral.
There may be short-term gains in trade relations or mid-term benefits of shackling competitors in costly investigations. But the weakening of some enforcers' carefully curated independence could be a longer-term loss.
— Europe —
The European Commission has always pushed back hard against accusations it has been picking on companies, either through tech regulation, digital taxes or antitrust enforcement.
But its recent move to slow-pedal probes into some of the tech companies while working out how to engage with Trump's new administration shows that officials are conscious of the political fallout of concluding such investigations with sanctions.
While regulators wait, the risk of political fallout from any intervention may be increasing by the day. When they do finally act, the atmospherics could be even more acute.
Today, the commission spoke out in defense of dispassionate enforcement, stressing that its probes looked into harm in Europe and were “agnostic” as regards the nationality of the companies under scrutiny.
“Competition enforcement should not become a tool in trade enforcement,” a spokesperson told reporters today.
— Politics —
It is wrong to suggest antitrust has never been political. Fights over tech companies have triggered repeated political outbursts from lawmakers and even from US presidents, believing their companies are under unfair attack.
Meanwhile, US tech companies have seen their mergers held up by Chinese enforcers, feeling the sharp end of political interest in their deals. Just ask Qualcomm and its aborted pursuit of NXP in 2018.
But the latest moves present antitrust enforcers with a dilemma. Either they hold off application of the laws for some companies, fearing the political backlash. Or they move ahead and risk their probes becoming the plaything of diplomatic negotiations rather than legal enforcement.
But none of this means antitrust is going away. It would be wrong to interpret Trump’s warnings on foreign interference as translating into a free run for American tech companies.
His administration will likely continue pursuing lawsuits into the monopoly conduct of tech companies, even going as far as to seek stiff interventions into corporate structure and behavior.
In Europe, competition enforcers are facing political calls for more economic pragmatism in their work, helping companies build scale — think: airlines and telecom companies — so they can gain scale and improve investment.
Any retaliation from Brussels may be more likely through a trade tool conceived during Trump’s first term as US president. The anti-coercion mechanism gives the EU sweeping powers to dissuade foreign governments from engaging in economic coercion to force policy change (see here).
Whatever the choice of tool, international enforcement just got a lot more complicated.
Additional reporting by Joanna Sopinska, Khushita Vasant and Nicholas Hirst.
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