This paper studies the European Union’s (EU) search for sovereignty in the digital realm. It does so, starting from the analysis of the dominant role of US-based tech companies in the digital space to understand how they influence the EU strategic development and therefore to contextualize the European claims for autonomy. The paper touches upon the Covid-19 pandemic in relation to this issue, particularly as evidence of Big Tech's dominance over digital space. Then the paper focuses on the ambitions of the new "geopolitical" European commission. The analysis is centered on the key themes of competition and data management and on the main actions undertaken and proposed to achieve digital sovereignty. Eventually, the paper argues that the relevance of this issue is central in EU politics since it affects its future development, and that the consequential initiatives for EU autonomy can potentially create tension with the United States.
Big Tech Geopolitical Relevance and their Influences over the EU
"We live in a cyborg world, where the physical and the digital are inextricably combined – and we can’t make the right choices for the future, until we understand that." 1 What Margrethe Vestager meant with this sentence was not a mere repetition of the importance of the internet in our daily lives, but to underline her understanding of the 21st-century geopolitical struggle. The digital sphere should not be considered a useful and secondary extension of the physical world, because its importance has grown to a point where the economic and social development of nations has become dependent on it. The right choices for the future in this envisaged scenario, originate first and foremost from the comprehension of the intrinsic political dimension of the digital sphere within our lives. Indeed, this "new" cyborg world is equally affected by power, authority, and money dynamics as the google free world which preceded it. The 21st-century geopolitical struggle is a political, legal, and economic fight to address power relationships in the digital arena.
The US-based Big Tech companies such as Google, Apple, Microsoft, Amazon, and Facebook dominate their fields, and each exercises an almost perfect monopoly on its respective market. Looking at Big Tech as merely common, even if particularly successful, industries would result in underestimating their real leverage. Through their data collection and platform functions, they exert economic and political power on the overall cyborg world comparable to the influence exerted by some nations. Indeed, they are progressively showing similar ambitions.
The collection of vast amounts of detailed data is at the base of these companies’ business models as it is incredibly profitable. Data gives them unrivaled social, political, and economic knowledge about people around the world that can be directly translated into sheer power. Facebook registered 2.7 billion monthly active users in the second quarter of 2020. The data Facebook has collected about these people, their identities, preferences, and their orientations likely exceed that which most national governments are entitled to know about their citizens. Indeed, Big Tech also provides the space in which cultural material is produced and offered (such as music, movies, pictures, and journalism), and where social and political debates are conducted and shared.
A third of the global market for hosting corporate data is dominated by Amazon. Meanwhile, Microsoft’s share is bigger than 15% and Google’s around 8%. 2 One of the political and economic declinations of this data harvesting occurs in the digital advertising market. Here Facebook accounts for a share of 19.7%. Today, its advertising can reach over 1.9 billion people. 3 In the US Facebook and Google together account for 60% of digital advertising expenditure.4 Through these means of ownership, Big Tech holds specific data which can make advertising accurately tailored and effective.
Furthermore, Big Tech companies by acting as platforms provide the technological infrastructure which allows the digital world to operate. This capacity represents a unique, government-like feature, giving private mono/oligopolies unmatched influence not on one specific market but on the industrial life of almost every business. Google’s share in the market for web searches in 2010 accounted for 90% and in 2020 for 88%. 5 More importantly, Google also holds prominence as a broker in online search advertising, since it accounted for a share of 70% in the EU market between 2006 and 2016.6 If a business wants to appear in the digital economy and tailor its products to the interested customer must deal with Google.
Big Tech knows in detail the demand and supply systems underlying the whole economic system and has the technical and logical infrastructure (servers and algorithms) needed to manage their evolving interactions. The information and capabilities they possess give them unrivaled authority and power over this public space and its functioning. Meanwhile, offline this leverage is tendentially exercised by governments or by the free market itself. The overwhelming influence on the digital market and consequently on all the physical industries based on it thus raises problems of both conflicting interests and unjust competition as well.
Most importantly, Big Tech has sought an increase in revenues and expansion of its market. Particularly the latter ambition provides insights into how these companies operate and how they influence society. Nowadays tech giants are: investing in research and development in the most innovative technologic areas (AI, electric and self-driving vehicles, space missions, Big Data); replacing national governments (Facebook plans to issue its own cryptocurrency); and expanding their operational field (Amazon started from e-commerce and is now offering own hardware, streaming, music, and supermarket services). The issue at stake is how to concretely compete with corporations of this size, strength, and hunger. This is particularly relevant in this context where these companies provide the platform upon which industries rely and are also competing in the very same market with evident advantages (Google in his search engine favors his services, Amazon on his website includes his products).
Regulation is essential for fair competition and for the creation of a pluralist market which is important in the globalized digital context for the "sustainable" economic development of the nations. The extraterritoriality of Big Tech companies and their disruptive innovation, both for technologies deployed and business models adopted, has made it very difficult for the countries in which they have been operating to regulate them. Poor regulation has allowed for fiscal benefits such as minimal or no taxation at all; loose standards for collecting, managing, and selling personal data; the practice of acquisition, limitation of multi-homing, and interoperability resulting in unfair competition. This has consequently produced: huge revenues for the incumbents; the creation of an economy of scale (particularly relevant in the digital space) and massive information gaps between the insiders and newcomers, resulting in market barriers for new companies and, eventually, in the creation of powerful monopolies. The consequence of this is the undermining of industries' economic downturn and potential underdevelopment in the digital strategic sector. This is best described by Margrethe Vestager’s words: "The Internet of fifty years ago was also supposed to be a place that was free of the influence of power – an ungoverned space where everyone would have an equal voice. But power thrives on the absence of rules. A public space […] it’s also easy prey for any army that enters its territory. […] On today’s Internet, it’s often still the voices of the powerful that reach furthest. The voices of CEOs and governments." 7
So far, the United States has shown no little to no interest in applying strict data and financial regulations to its companies. As Big Tech thrives in this fertile environment, the US has enjoyed its increasing economic success and political influence while always maintaining the power of accessing their data anytime national security interests were at stake. And whenever the companies tried to oppose, the American government threatened them with financial or trade restrictions. A good marriage is made of mutual interest in reciprocal success. Indeed, Apple provided data from its servers to the US government in response to around 130 thousand requests from law enforcement agencies since 2013. 8 Similarly, only in the last half of 2019, Facebook reported having answered more than 50 thousand US government requests, 70% of which included a non-disclosure order prohibiting the company from notifying the concerned users.9
Moreover, the deep level of integration between American and European economies has led to a strong integration of the digital sphere. However, as appears now evident, the dominance of US-based companies has meant an almost completely univocal influence in the European common market. In light of the analysis conducted to date has been seen as a loss of sovereignty or lack of political authority of the EU in a strategic field for socio-political and economic development. The monopoly held by Big Tech and the lack of regulation necessary for fair competition make the EU heavily influenced by US giants. 10 At the same time, the EU has experienced serious difficulties in developing its own corporations because of their lack of market domination (among the largest tech companies by market cap, 6 out of 10 are American and none is European). 11
In addition, Big Tech has direct political influence over the EU. Their CEOs have personal meetings with Heads of State and ministers.12 In 2017 Denmark appointed an ambassador to the Silicon Valley. In fact, the Danish foreign minister announced it by stating that Big Tech has a larger economic influence on Danish society than those of many other states.13 In the list of EU largest business lobbies, Google and Microsoft hold the first two places and Facebook ranks fourth. Since 2014 Google has spent around 35 million while Microsoft around 50 million since 2010. Together these three companies have 8 EP passes and 26 lobbyists in the EU institutions.
The Covid-19 pandemic has made the EU’s reliance on Big Tech platforms and infrastructure for public policies and procurements even more jarringly self-evident. The whole societal re-organization required by the measure of lockdown imposed a forced digitalization of almost every aspect of daily life. Offices, schools, and universities - even friends and family meetings - were completely dependent on digital platforms (Amazon, Google Meet, Microsoft Teams, Skype, and Facebook WhatsApp) none of which is either European or provided by EU national governments. Moreover, the dependence of administrations on digital giants became even more apparent through the development of contact-tracing apps. Governments around the EU had to count on the knowledge, platforms, and data of these companies for the public procurement of a tool that could track and tackle the spread of the epidemic. Indeed, the operating system of smartphones, Apple and Google, with access to geo-localization and Bluetooth were the only ones that could effectively fulfill such requirements. The amount of data collected during the lockdown can only be imagined. As Big Tech increased its revenues, national economies were collapsing. Amazon sales increased by over 40% from April to June for a total of 5.2$ billion, the biggest revenue ever registered for the company in a quarter, which almost doubled compared to the 2019 value. Similarly, Facebook revenues in the same quarter rose by 11% and reached more than 5$ billion.14 As world governments and societies struggled with their pandemic responses, Big Tech clenched its grip on them.
In the same period, around 300 EU scientists and scholars wrote an open letter stating: "We are concerned that some ‘solutions’ to the crisis may, via mission creep […] allow unprecedented surveillance of society at large." 15 While the possibility of "business as usual" during a pandemic is a huge advancement for our civilization, the issue at stake at the European level remains the same: excessive unregulated power, which affects society and its development, is concentered in few foreign hands and not put under public scrutiny of the "nation" in which it is exercised.
New Ambitions of Autonomy for the EU
In 2019 a new European Commission was appointed. Its president, Ursula von der Leyen, announced the political guidelines that would guide the block for the next years, putting particular emphasis on making a ‘Europe fit for the digital age.’ On her ‘Agenda for Europe’ she wrote that: "Digital technologies [..] are transforming the world at an unprecedented speed. They have changed how we communicate, live and work. They have changed our societies and our economies. […] It is not too late to achieve technological sovereignty in some critical technology areas." 16 The new political leadership understood the geopolitical dangers of European dependence on Big Tech and decided to take an effort to change this as its flagship initiative. Von der Leyen nominated Margrethe Vestager as Executive Vice-President with special powers to achieve this mission which essentially entailed the achievement of strategic autonomy in the digital space. The choice of Vestager is particularly relevant because she had retested the role of Competition Commissioner in the previous mandate and in 2016 had fined Apple over tax evasion. It represented a sort of appointment of the knight who already fought many battles against the enemy.
Today, Vestager’s primary objective is to exercise political authority over the European digital space, intended as the platforms operating with European business and citizens, and processing their data. The aim is to do so through regulations in order to guarantee EU values and standards such as fairness, transparency, privacy protection, and plurality, both at the individual and market level. The commission wants to take the EU from being a rule-taking player to a rule-making one. This is an attempt to "export" the political and legal principles that regulate the physical European space in the digital field. As the cyborg world is equally affected by power, the ambition is to equally impose checks and balances. The regulation’s main foci are competition policy and data management. These two fields are essential to establish a level playing field where the EU digital industry can thrive without the predatory power of Big Tech monopolies. Moreover, in the long run, they may eventually decrease the influence of US-based companies on economic and political European life. This is best described by Vestager herself: "Success in the future will depend on how innovative we are […]. And the basic principles of Europe’s economic model – our commitment to openness and diversity and competition – are just the principles we need to succeed. So what we need isn’t a single, centralized approach to innovation, but an environment where different ideas can flourish. So Europe’s diverse ecosystem, with businesses of all types and sizes, is just what we need to do well." 17
The EU’s intent of developing digital sovereignty and its consequent implications have repeatedly upset the US government and many have argued that they represent a protectionist and discriminatory effort. Undoubtedly, it creates tension between those who seek power and those who already have it, however, this critique is hardly credible or even arguable since every action that has been taken until now or even those planned in the future are aimed at establishing common regulation, not specific provision, to which everyone acting in the EU digital space should abide by – European players included.
Actions Taken and Next Steps
Before the establishment of the 2019 Commission and its new political guidelines, Europe’s ability, or political will, to pass a regulation in the digital field has been very limited. The most relevant actions concern the General Data Protection Regulation (GDPR) and investigations on and fines for tech companies’ violations of existing competition rules.
The GDPR addressed the huge amount of data harvested by Big Tech in relation to people’s privacy. It introduced in 2016 new legal standards in the collection and management of personal data such as lawfulness criteria, consent, and data subjects’ rights. This increases people's knowledge of when, how, and why their data are processed and gives them the possibility to decide whether to do it or not. However, GDPR specific relevance goes beyond the necessity or righteousness of the provisions. Indeed, it is the first successful attempt to impose a regulation reflecting EU social values and political will on its own digital space and also on the Big Tech themselves which had to accordingly adjust their practices to the new directives. It also highlights the EU idea of the digital space as a place where rights and rule of law are applied not differently from the physical space, where transparency is ensured and people empowered.
The Commission in recent years has repeatedly opened investigations against many of the tech giants. These represent the first efforts undertaken by EU institutions to publicly examine whether, and how, its market has been harmed by unfair competition. This is also the process through which the political understanding of the necessity of strategic autonomy has been built. In 2017, Facebook was found guilty of violating merger regulation with misleading information in the WhatsApp acquisition and was fined €110 million. In 2019, Google was fined €1.49 billion for violations of antitrust rules since these established unfair competition practices such as restrictions rules and self-preferencing. Namely, Google was found to have abused its market dominance, forcing phone-makers that wanted Google Play store on their devices, to install the services of Chrome and Search as well. Thus, acting as a platform, Google was able to systematically favor its own services. In 2020, the Commission opened investigations against both Amazon and Apple. In the former case, the accusation is of distorting competition and could be fined potentially for up to 10% of its annual global revenue. Amazon, as a retail business, is both a platform and a seller and thus has a comparative advantage because of access to non-public data about its own competitors. In the latter case, the investigation is based on a potential antitrust violation caused by the rules on app distribution for its devices. Apple indeed limits the supply of apps to its own purchase system, which charges 30% commissions on paid content and moreover does not allow app developers to sponsor other buying alternatives. Essentially it acts as a gatekeeper imposing tolls to those who enter its platform for business interests and also limiting customers’ information of other market possibilities.
These investigations are demonstrating that Big Tech companies operate in a way that is harming the European market and its industrial development, but at the same time are showcasing the desperate necessity of updated regulation to prevent these systemic violations and establish a required level playing field. It is these sorts of issues that are addressed by the two regulations proposed in December 2020 by the Commission.
The Digital Service Act (DSA) and the Digital Market Act (DMA) are the innovative legal solutions proposed to establish authority and regulate the European digital space as the first step towards autonomy. The Commissioner for the EU Internal Market, Thierry Breton, Vestager’s partner in this mission, underlined their ambitions: "With today's proposals, we are organizing our digital space for the next decades. With harmonized rules, ex-ante obligations, better oversight, speedy enforcement, and 7 deterrent sanctions, we will ensure that anyone offering and using digital services in Europe benefits from security, trust, innovation, and business opportunities."18
First of all, it is a comprehensive EU-wide legal framework with mechanisms for coordination with the Member States to ensure its proper implementation across the Union and impose sanctions in case of violations. Both the provisions are aimed at a sort of democratic liberalization of data to create an open European data space, abiding by EU values and rules, with clear governance mechanisms where European industries and citizens dispose of their data and have access to relevant information and services.
The DSA regulates the relations between users and digital services to guarantee the respect of human rights, transparency, circulation of information, freedom, democracy, equality, and the rule of law. This is the proposal through which the Union wants to shape the digital space, both economically and politically, according to its values empowering people as costumers, producers, and citizens and granting safeguards. The DMA instead targets market regulation. It provides the legal definition of gatekeeper for large online platforms, under which fall practically all Big Tech companies, and establish regulations for their operations in the EU internal market. This could seem like a "discriminatory" measure, however, it targets specifically gatekeepers, as they are not simple business competitors but real "business enablers" therefore having specific obligations, that nonetheless apply equally for every company with this powerful influence on the markets. The DMA aims at striking the gatekeepers’ power over who and how enters the market and, in general, their power to manage demand and supply interactions. Mainly, DMA forbids the practice of self-preferencing and establishes the duty of granting multihoming and interoperability. It allows "unlocking of costumers", meaning that businesses will be able to promote their products on a platform but conclude the provision outside it. Moreover, it allows businesses to access their data produced on the platform. The enforcement mechanism provides for Commission investigations and potential fines of up to 10% of the world revenues of gatekeepers.
This proposal package reflects the Commission’s ambitions to build sovereignty through regulation on its digital space and to reach autonomy by establishing fair competition and demolishing market barriers that will favor economic and industrial developments.
"All these challenges can seem daunting. But we have a good starting point to face those challenges ahead of us."19 Even though this geopolitical struggle for strategic autonomy can appear a "mission impossible" for the EU, as Vestager noticed, the Union has the capacity to achieve its goals. The main weapon in the EU's hands is the strength of its single market. The Union's economic power has international influence. The EU is the biggest trading partner for more than 80 countries -the US included. In the field of technology, the US in 2017 exported to the EU $190 billion of ICT. 19 The level of deep interdependence between the two economies represents an important leverage power in EU hands. While the US and its companies have opposed any statement about a redefinition of power relations in the digital space, the GDPR example underlines that if the EU has the political capacity to pass new regulations, the companies operating in the region cannot do anything but complying to maintain access to the biggest economy and trading block of the world.
The EU is not fully exerting political and legal authority on its public digital space. The monopolies held by tech corporations on the market and its relevant infrastructures, together with poor regulation and consequently unfair competition, impair the concrete European development in this strategic field. The EU is also heavily dependent on Big Tech companies for general industrial and economic prosperity, these latter being at the base of the common market and eventually the foundational strength of the Union itself. This is where it becomes both a strategic and a security problem. Additionally, Big Tech is only theoretically extraterritorial since they are in practice at disposal of US broadly defined "national security" demands, and therefore the issues of European digital autonomy arise in this context.
The imbalance of this power relation as well as the potential European decline in economic relative power makes it imperative for EU institutions to address this 21st-century geopolitical struggle. The EU aims to do so through the imposition of legal authority. The new Commission aims to achieve a new power balance in the digital space, and this inevitably entails an attenuation of the overwhelming influence of US-based tech companies. However, EU institutions do not want to keep the power for themselves, neither to build the equivalent of a Silicon Valley. The EU's broader goal is instead to create a more democratic and pluralist digital space, where sovereignty, regulations, and political organization are applied in a similar way in which it is applied on the physical world. And this should be seen as a positive development for the whole digital space. Clearly, the indissoluble interest in that is to shape a digital space where fair competition allows EU industries for economic growth and technological development so that the Union could hold the same economic power in the future. And how the EU tries to do it is through the leverage of its most renowned regulatory and economic power.
While the package proposed by the Commission correctly addresses the main criticalities, it lacks fundamentally in the field of tax. This is particularly relevant for the complete exercise of European authority and the correct development of the digital economy and does not concern only US-based Big Tech. The extraterritoriality of digital companies allows them to work with millions of customers in Europe, making huge revenues, paying little or no tax at all. As the whole economy progressively becomes increasingly digital it creates a structural problem of resources for governments. Moreover, the differences in fiscal regimes around the EU create holes in the internal market that can be easily exploited.
The success of these movements towards European sovereignty lies in the political will to bear its potential costs. Namely, they will inevitably create tensions with the United States, which always reacted negatively to European claims for strategic autonomy. It is difficult to imagine that this particular new package of reforms, even if approved by the EU parliament, can lead to something more than dissents or heated arguments since essentially does not damage revenues and the number of data managed by big techs. However, similarly, it could be naïve to imagine that the new US president will not use their power, including a commercial war, to limit or influence European actions, especially in the field of taxation.
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7. Aslam, 2020
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10. more than 90% of Western data is stored in the US.
11. Burwell & Propp, 2020.
12. In 2019, Mark Zuckerberg met President Emmanuel Macron at the Elysée Palace as well as the German Minister of Justice and Consumer Protection
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19. Burwell & Propp, 2020.