EU antitrust authorities flex their muscles in tech and telecom
EU competition authorities recently closed their probe into whether American chip manufacturer Broadcom was restricting competition in markets where it held a leading position, particularly systems-on-a-chip (SoC) without a finding of wrongdoing, after Broadcom offered the European Commission legally-binding commitments to suspend all of its SoC exclusivity deals with TV and modem makers for seven years.
The swift and amicable resolution to the antitrust probe is likely to strengthen the hand of competition chief Margrethe Vestager, known for her hard-line stance on antitrust matters and notoriously wary of the argument that firms should be allowed to side-line EU consumers in order to build a “European champion”. In order to push for a quick resolution to the Broadcom probe, Vestager dusted off the Commission’s “interim measures” tool, an injunction that hadn’t been used since 2001.
It’s unlikely that it will be another 18 years before it’s used again. “If you have taken a tool out of a toolbox and have some experience in using It, it’s more likely that you’ll use it again”, Vestager remarked after the Broadcom settlement was announced. If Vestager is amping up her antitrust enforcement, the tech giants are sure to rank highly on her list of targets. Companies in the telecoms sector may also see some effects from an emboldened competition authority—particularly former monopolist Telecom Italia (TIM), which is currently trying to merge with its rival Open Fiber to create a single broadband provider despite serious antitrust concerns.
Big tech in the crosshairs
Even as the big tech companies have seen their balance sheets soaring, public opinion has steadily shifted against them. A poll in December 2019 found that 73% of people in nine countries across the world want their governments to do more to regulate the tech industry, particularly over privacy concerns.
Conventional wisdom has determined that Big Tech has become too big to fail and too powerful to manage. Vestager has been one of the lone voices pushing back against that impression, taking a hard-line stance against the tech giants which has endeared her to tech critics worldwide.
Under Vestager’s leadership, the European Commission has opened competition probes into most of the tech sector’s big names, including Amazon, Google, Facebook and Apple. The Commission has imposed whopping fines on some of these firms—including a trio of antitrust penalties totalling €8.25 billion slapped on Google—though actually getting them to pay up has proved tricky. Vestager has hinted that even those substantial fines did not go far enough—“if I knew what I know now about Google, I would be bolder”, she told a Politico conference last December—and suggested that her office is ready to try out other tactics to get tough on Big Tech, including breaking up companies as a “last resort” to preserve fair competition. With the interim measures strategy having worked well against Broadcom, tech giants are likely fearing a similar crackdown.
Dashed merger dreams in Italy?
Silicon Valley, however, is unlikely to be the only industry to face headwinds from emboldened antitrust authorities in Brussels. EU competition officials have long been sceptical of any major mergers in the telecom industry, after carefully breaking up the national monopolies which dominated the 20th century.
This anti-merger bent will now be put to the test as the Italian government and former telecom monopolist Telecom Italia (TIM) try to convince policymakers in Brussels that a merger between TIM and rival Open Fiber is the best way to bring Italy’s broadband network up to speed.
Bloomberg reported in September that European antitrust authorities were unlikely to greenlight the fusion over concerns that it would distort competition. Indeed, it would be extremely surprising if Brussels allowed TIM to revert to the same fixed-line monopoly that it held for decades, given that competition from Open Fiber has led to lower prices and better service for Italian broadband customers.
Worries about the potential merger have popped up on all sides. Italy’s own communications watchdog estimated that a single network entity controlled by TIM would be a “backwards step”. The fact that TIM has been repeatedly fined in the past for abusing its dominant market position, including this March for apparently impeding the rollout of ultrafast broadband in disadvantaged areas, has raised further red flags. As a former EU competition official recently noted, handing TIM control over a single network would only make it easier for TIM to engage in the anti-competitive practices for which it’s already been censured—and would slow down innovation, since as the incumbent TIM would have a natural incentive to delay the phasing out of its aging copper network to make way for state-of-the-art Fiber-to-the-Home (FTTH).
This week, consumer associations Euroconsumers and Altroconsumo added their voices to the chorus against the regression to a single vertically-integrated operator, penning a letter to Vestager and two other commissioners warning that allowing “TIM, a historic incumbent, [to] take control of the new entrant Open Fiber […] could create a dangerous precedent for other countries”. This question of setting a problematic precedent will undoubtedly be on European antitrust authorities’ minds as they ponder TIM’s proposal to fuse with Open Fiber, particularly given that the EU is rolling out its common approach for network development next March.
With other important rulings in the cards, including a November 5th decision on whether to approve the proposed merger of Liberty Global’s Virgin Media and Telefónica’s O2, Vestager’s deployment of the interim measures injunction is only the latest evidence that competition authorities in Brussels are unafraid to use any tools in their arsenal to preserve fair competition and prevent the distortion of the market. Industries from tech to telecom are sure to come under EU regulators’ scrutiny in the coming months.