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Good morning. David Meyer here in Berlin, filling in for Alan.
The Financial Times reports that the European Commission is drawing up a “hit list” of Big Tech firms that need to be reined in with stronger and more easily enforced competition rules. Unsurprisingly the list is said to include major U.S. Players such as Facebook, Apple, Google and Amazon.
The Commission has been planning for some time to reform its antitrust rules, which look set to finally appear next year. There are many reasons for this, including a desire to allow the creation of “European champions” where competition rules currently make this difficult (case in point: the Siemens-Alstom merger, the thwarting of which earned competition chief Margrethe Vestager significant criticism from Germany and France.) But one of the biggest drivers is the growing mismatch between the lightning pace of technological development and the glacial pace of European antitrust enforcement.
As Alan pointed out last week, regulatory measures are sometimes ill-conceived. And perhaps the worst situation can be found where rules are designed to be hard-hitting but, as times change, become practically ineffective.
That is arguably the case with the EU’s regulation of competition in the tech sphere. The bloc may have fined Google nearly $10 billion for various antitrust abuses over the last few years, but a) that’s a limited deterrent for a company with annual revenues north of $160 billion, and b) it took the best part of a decade to get to that point, during which time Google’s abusive activities continued largely unchecked.
As one unnamed insider told the FT, “the immense market power of these platforms is not good for competition.” Hence the Commission’s reported desire to force the companies to share business data with their rivals (a longstanding aim of Vestager’s) and to stick to tougher rules than those applying to their smaller competitors.
The Commission is certainly walking a tightrope here. There is a risk of its antitrust reforms being seen as protectionist, even though U.S. Firms’ likely dominance of the Big Tech “hit list” would mainly be a function of those companies’ market dominance in Europe. (The situation is not helped by the fact that Competition Commissioner Vestager’s other role is that of EU digital champion.)
But on the other hand, few people would argue that the current EU antitrust system is working as it ought to in the digital context. As in the U.S., where lawmakers are also calling for severe antitrust remedies including the potential breakup of Big Tech firms, there is a clear problem that needs to be fixed.
As for whether the solution makes sense, well, the devil will be in the detail. More news below.
David Meyer
@superglaze
[email protected]
TOP NEWS
BA CEO
British Airways CEO Alex Cruz is out, in one of the first big moves made by new IAG chief Luis Gallego. Cruz, who becomes non-executive chairman with immediate effect, is being replaced by Aer Lingus boss Sean Doyle (IAG is the parent of both BA and the Irish flag carrier). Gallego: "I want to thank Alex for all that he has done at British Airways. He worked tirelessly to modernize the airline in the years leading up to the celebration of its 100th anniversary. Since then, he has led the airline through a particularly demanding period and has secured restructuring agreements with the vast majority of employees." Evening Standard
Hyundai recall
Hyundai is extending its Kona electric-vehicle recall to the North America, China and Europe. Last week the South Korean automaker issued a recall for over 25,000 cars back at home; now it's expanding that to twice the number across other markets. Hyundai says there's a potential fire risk due to faulty manufacturing of battery cells, but battery supplier LG Chem said this wasn't the cause. Reuters
Hong Kong
The U.S. Government has begun blocking Hong Kong residents from accessing at least two U.S. Federal websites, namely those for the Bureau of Labor Statistics and the Census Bureau, both of which refer to the move as a security measure. It's certainly not very helpful for analysts working in the financial center, though they can access the data they need through a virtual private network or a Bloomberg or Eikon terminal. Financial Times
Google News
Google's News Showcase deal with press publishers, announced less than two weeks ago, is already cancelled in Australia. Google is blaming the "pause" on its dispute with publishers and lawmakers over a new arbitration code for judging the fees it must pay for reproducing news content—though the dispute predated the News Showcase announcement by some margin, so it's not entirely clear what Google is playing at here. Engadget
AROUND THE WATER COOLER
Election indicators
What do Wall Street's favorite indicators say about the outcome of the upcoming election? S&P 500: Trump has a shot. The dollar: maybe good news for Biden? Manufacturing data: also favoring Biden. But overall, uncertainty is the order of the day. (And here's a guide to 10 stocks that should do well no matter who wins.) Coins2Day
CEOs WFH
Some CEOs are enjoying one benefit of the pandemic: they get to spend more time with their families, eating together and even doing a few household chores. Anne Fishel, director of the Massachusetts General Hospital family therapy program: "What they’re finding is these are the activities that provide ritual routines and the glue of family life." New York Times
Workers WFH
Some Silicon Valley firms have been planning salary cuts for employees who are working remotely from cheaper locales. It's a big shift from the tech sector's standard drive to endear itself to its workers. Stripe workers, for example, face a cut of as much as 10% for moving away from San Francisco, New York or Seattle, while VMware workers moving from the Bay Area to Denver may lose as much as 18%. Wall Street Journal
Reforming capitalism
With the COVID-19 response, and the "stakeholder capitalism" push of the U.S. Business Roundtable, we may be "on the cusp of structural transformation of society toward a new era of state capitalism," writes Karthik Ramanna, professor of business and public policy at the University of Oxford’s Blavatnik School of Government. Ramanna's observations: "The first is that while deregulation is a myth, regulation often becomes captured by private interests. The second is that both privatization and nationalization disappoint, because both processes are frequently marred by expropriation." Coins2Day
This edition of CEO Daily was edited by David Meyer.
