First Paper Second Draft - Is digital autonomy a requirement for effective regulation and protection

-- By JeanPettiaux - 13 Mar 2022

Departing from a European-born vision

As a European, it is sometimes too easy to see the good sides of the European Union without taking the necessary step back to realize that the Union is and has been lagging behind in many important domains. This is an attempt to depart from my European-born view by questioning the EU attempt at the Data Privacy system which is too often presented as an example, without demonstrating its efficacy. While the EU economy is thriving in many areas, it is strongly lagging behind in the tech industry, compared to other international economies. Looking at the biggest tech companies in the World (Apple, Samsung, Microsoft, Google, Huawei…) one may easily notice that none of them have been created in the EU. The EU tech market is weak, tech companies sell out early and have difficulty scaling their business to world dominant size as it has been the case in the US and Asia. In comparison, the Financial Times observed in 2016 that “Europe’s eight most valuable companies are only worth about 10 % of Facebook or 6 % of Google”. It is hard to argue that the EU (and its Members States) have much regulatory and market steering power over tech companies headquartered and/or created in other jurisdictions. while the EU boasts of having an advanced consumer protection system (including privacy protection), my premise is that the EU cannot effectively act in this area if the tech market is virtually non-existent on its territory. One cannot rule in a territory without credible subjects. When it comes to private data protection, I am of the opinion that the ability to act (to protect data) is primarily held by the data subject itself (who might take steps not to share or to protect its data) and by the big tech companies – data collector on which most of us heavily rely (search engine, smartphone, computers …).

Europe is active but ineffective

The EU loves regulations. When it comes to data privacy, the Data Protection Regulation is often presented as one of the toughest privacy laws in the world. The GDPR is far-reaching as it protects the personal data (defined as information that relates to an individual who can be directly or indirectly identified) of EU citizens or residents and protects the rights of these individuals even if they are not in the EU. However, a Regulation can hardly reach its goals without a strong enforcement authority. Yet, in many cases, the European Commission does not hold enough political authority to offer concrete results that do not offend one of its Members States. To solve this issue, many have called for a European Federalism, which is hardly conceivable nowadays. Others, such as the UK simply decide to left the EU to regain full autonomy. The European over-regulation can be counterproductive as it may drive companies out of the market or impeded the expansion of important players in a market due to the lack of EU political will. In 2019, the EC prohibited Siemens' proposed acquisition of Alstom on the basis that it would create a big important player in the European common market, despite the fact that both Germany and France express the need to create a company strong enough to compete worldwide.

Strong regulation in a weak market

The EU is an important exporter of regulations (sometimes referred to as the “Brussels effect”) but when it comes to tangible products in the digital markets, the EU stands very low. European digital companies sell out early. Just to cite a few, Priceline (US) acquired Booking.com (NL) in 2005; between 2016 and 2019 the Chinese internet giant Tencent acquired majority participation in Supercell, a Helsinki-based mobile game maker; and in 2018, Apple closed its $400M acquisition of Shazam later announcing that it will integrate Shazam’s core product into its service. Other big tech companies are simply pushed out of the market, due to their lack of innovation in a fast-moving market: after enjoying unrivaled dominance in the mobile segment for several years, the Finnish Company Nokia lost most of its market share due to an important lack of innovation compared to its competitors. Microsoft eventually bought Nokia's phone unit in 2013 and later sold I to Foxconn (Taiwan). Aware of the weakness of its digital market for many years, the EU recently passed the “European Chips Act” in another attempt to put Europe back in the tech race. It is very hard to see how this limited act (chipset market) will really help the EU digital market catch up. This is not the first attempt to foster the digital markets and so far, it has not shown any real success as any market incentive is followed by a flurry of regulation and other limiting measures.

Call for a bottom-up approach instead of a top-down regulation

I think the weak EU tech and digital markets do not call for even more regulation but need strong political action at the Member States' level to foster public interest in tech. Such action would inevitably start by teaching tech to the young generations at schools and by strengthening universities tech programs across the continent. While in the US, the Silicon Salley brings a sentiment of empowerment and future success, the same feeling does not seem to prevail in the old continent where computer science is often despised in comparison to classic old studies, lawyers, doctors, civil engineers… Hermann Hauser, founder of several tech companies well summarized this sad reality by saying: “_If you’re a young chap in Europe, and you work for Siemens, and you have a great job, with credibility, and profile, and you have your pension, and your life ahead of you – and then you give it up to take a job at some futuristic start-up, your girl-friend would give you up. But in Silicon Valley, your girlfriend would leave you if you didn’t leave Siemens to join a start-up_.”