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An Overview of the Evolution and Enforcement of Antitrust Laws in the European Union and United States

Jessica Hayashi

An Overview of the Evolution and Enforcement of Antitrust Laws in the European Union and United States
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Antitrust law, or competition law, is the law that regulates business practices to promote fair competition and consumer protection. Most people know antitrust to be an area of law that is complex and fundamental to market stability. Less apparent are its connections to the historical, political, and cultural aspects of the markets it regulates. Unsurprisingly, political systems have developed their own versions of antitrust law arising from their own histories and according to their own needs. The United States and the European Union each possess one of the largest markets in the world today. Because globalization has made these markets more integrated and interdependent, it is interesting that important differences exist between US and EU antitrust laws. For multinational companies, navigating these differences is a key challenge to regulatory compliance and success.

US antitrust law is based on the prohibition of collusive practices that restrain trade, of mergers that dampen competition, and of the abuse of monopoly power. EU competition law aims to provide consumers favorable terms, encourage efficiency and innovation, and reduce prices. Its two central principles are prohibition of agreements that restrict competition and of abuse of a dominant market position by, for example, charging unfair prices, limiting production or innovation to the disadvantage of consumers.

Similar Ideas, Many Differences

These two sets of laws are based on similar ideas, but there are also many differences. US antitrust laws are enforced with the aim of lowering prices, an indicator of economic efficiency, and it often equates high prices to consumer harm. Because US rules generally require a showing of consumer harm, much of the enforcement centers around price.

Advocates of the US model say that economic analysis plays a more central role compared to the EU model, which takes a broader approach by including in its legal analysis a greater number of noneconomic considerations. These considerations include more extensive consumer protection, market fairness, and preservation of the European Single Market based on four freedoms—the free movement of goods, capital, services, and labor. Critics say US antitrust rules have not evolved fast enough in the digital world and have too narrow a focus.

There are important historical and cultural distinctions that have influenced the evolution and enforcement of antitrust law in the European Union and the United States. Many facets of American life reflect an exaltation of individual spirit over government intervention—in other words, the American culture of freedom.

The European Union has a stronger socialist tradition that puts more faith in the state to care for its citizens, who, in turn, enjoy greater protection from its governments. This model of freedom limits its citizens’ choices so you, as a citizen, and other fellow citizens, are free from potential mistakes that may negatively impact not only yourself but also society at large.

The American model of freedom removes many obstacles and leaves you alone with both the good and bad. It is mostly up to you alone to decide what is and is not good. More of the burden of protection—of citizens from themselves and from each other—shifts from the government to its citizens. America, given its birth arising from mainstream religious persecution, its self-proclaimed legacy of exceptionalism, and its frontier culture of individualism, reflects this version of freedom in both law and culture.

Despite the Differences, European and American Markets Are Closely Connected

Businesses operating in both markets may face in Europe greater scrutiny of business practices and more robust antitrust enforcement. The most recent example of this is the European Commission’s €4.3 billion (about $5 billion) fine against Google for forcing, by contract, major cell phone manufacturers to pre-install together several Google apps, the Google search engine, and Chrome browser on Android phones. Other US companies, including Yelp, Microsoft, and Oracle, had already sought legal action within the United States against Google’s anticompetitive practices. They failed, despite evidence of anticompetitive behavior and abuse of monopoly power in a manner that harmed consumers.

This $5 billion fine follows another €2.4 billion ($2.7 billion) fine, from last year, by the European Commission against Google, also for abusing its monopoly power. The basis for that fine was Google’s practice of placing its own shopping search results at the top of the first page and those of its competitors farther down. Google also incorporated content from other websites, such as TripAdvisor and Yelp, decreasing traffic for those websites and thus depriving them of advertising revenue.

Although $5 billion and $2.7 billion are record fines for anticompetitive behavior, they are readily absorbed by a company as massive as Google, whose revenue in 2017 was around $110 billion (much of it from advertising). The commission’s fines are limited to 10 percent of the overall annual revenue of the company. It also allows Google to self-impose the remedies, which was ineffective in Google’s $2.7 billion shopping case. Google’s remedy was auctioning off advertising spots on its search engine. Most bidders are reluctant to cut into their already small profits, and a vast majority of those spots remain unfilled.

The popularity of tech giants, such as Facebook, Amazon, and Google, has fallen in recent months, but that does not necessarily translate into a consumer boycott. They are too dominant and too entrenched in our lives. The most obvious question, then, is whether even the stringent European standards are enough to deter giants such as Google. But also, how will the legal differences between the European Union and the United States affect companies’ practices in each location and elsewhere? In this global market, it will be interesting to see how companies can navigate the different rules as well as how regulators can respond effectively to businesses and their technologies.