The greatest economic threat facing Europe is of falling hopelessly behind the US and China in adopting the next generation of technology. That is the view of many across Europe’s industrial and financial sectors who watch with wonder the proxy battle between the US and Chinese administrations on behalf of their tech giants.
Business leaders from Dublin to Warsaw are open-mouthed – not so much at the often-bizarre tug of war between the two sides as at the fact that these economic blocs can lay claim to almost all the world’s tech giants.
Some blame EU competition commissioner Margrethe Vestager, whom tech billionaires now regard as one of their few true foes. It was she who forced Apple to pay €13bn in back taxes after ruling that its tax deal with the Irish government amounted to illegal state aid. Vestager has also taken on Amazon and Facebook and Google and Microsoft and forced them to pay hefty fines or reparations.
Last week, the former Danish MP said she wanted to take “a very close look” at whether Amazon’s business practices broke EU antitrust rules. This is a separate probe from the examination of Amazon’s dominance of e-books. Now she has targeted Amazon’s treatment of third-party sellers, which generate around 58% of sales. An investigation of Apple’s dominance of music streaming, triggered by a complaint from Spotify, is expected soon.
Donald Trump says Vestager is motivated by a hatred of the US. And some in the UK believe this roll call of prosecutions is stifling the adoption of digital commerce.
Evidence for either view is scant. Rather than this being the EU “taking a tough line” against overbearing US tech companies, Washington seems to have forgotten how to implement its own antitrust laws.
There was a time when Congress would seek to limit corporate power. Probably the last hurrah for anti-trust campaigners was the break up of telecoms giant AT&T in the 1980s.
The House of Representatives has recently woken up to the problems of tech power and only last week a subcommittee of the House judiciary committee quizzed senior executives from Amazon, Apple, Facebook and Google.
But while the Democrat-controlled House is stirring itself, there is little sign that either the Senate or the White House have any appetite for a crackdown.
That leaves the EU as the only body with any power prepared to examine the influence of an army of tech firms that handle a growing number of commercial transactions, and store and manipulate data to increase their dominance further in ways that few understand.
In an interview with this newspaper in 2017, Vestager denied that the subtext of her investigations was to harmonise tax rules as part of an EU superstate or to stifle tech advances. “We are doing this because people are angry about tax avoidance,” she said. “The thinking was: ‘Let’s try to do something different within the system we have’.”
Should the UK quit the EU, it will come to miss Vestager’s rigorous questioning of market dominance and data privacy. Britain will simply lack the clout to take on the US behemoths, even in the unlikely event that a Tory government seeks to protect its citizens from what is brewing into the most colossal market failure in digital commerce.
As for Europe’s failure to develop any of its own great tech firms or even a robust and superfast digital infrastructure, maybe Vestager, who has been promoted to be one of two deputies to new EU commission boss Ursula von der Leyen, will find herself with the economic brief and move as quickly to create digital businesses as she did to limit the power of wily foreign invaders.
Ashley and the wrong kind of shopping spree
Mike Ashley’s acquisition strategy at Sports Direct is baffling. It seems to involve bidding for any high street chain that struggles to stay afloat, from Evans Cycles to sofa.com to House of Fraser. Now Sports Direct’s auditors also appear baffled. Grant Thornton wants more time to complete its audit of the numbers for the financial year that ended in April.
The figures have to be published soon, whatever “complexities” have been created by the integration of House of Fraser. Sports Direct gave itself until 23 August. But non-Ashley shareholders will want to see more than just the numbers.
First, they’ll want a plan for HoF beyond boasts about making it “the Harrods of the high street”. How much investment will be required, on top of the £90m paid to buy the department store chain out of administration last year? Does Ashley know how many stores are viable in the medium term? And, since help from landlords and councils was previously described as crucial, has it been forthcoming? At the moment, the financial projections for HoF are a mystery.
Second, Sports Direct should show it has the capacity to manage its now sprawling empire. Karen Byers, a key lieutenant for 28 years, has left. Will she be replaced? One of investors’ worries is that Ashley’s obsession with new retail adventures is leaving the core Sports Direct business exposed. JD Sports is now a FTSE 100 company; Ashley’s creation isn’t.
Third, does the HoF purchase mark the end of the big deals? It should. Ashley’s record as a buyer of stakes in other people’s businesses is dreadful. The doomed attempt to buy Debenhams involved a write-off of £150m, a financial disaster that would have cost other chief executives their job. That won’t happen, obviously, because Ashley owns 62% of Sports Direct. He does, though, still have a duty to demonstrate to other shareholders that he won’t squander more of their money on speculative punts.
Google brings Viagogo to heel
No matter how lengthy the queue to condemn Viagogo, the controversial ticket resale site marches on, unscathed and apparently impervious to criticism.
It twice refused to turn up to select committee hearings, brushed off calls for a boycott from the digital minister, and even sued global pop megastar Ed Sheeran’s management team. This week it stared down the Competition and Markets Authority and accused the regulator, which is pursuing court action against the company, of being ill-suited to judging whether it is compliant with consumer law.
But Viagogo may finally have met its match. In the world of nebulous, apparently unaccountable web-based entities, Google is very much the alpha.
Viagogo has prospered in large part thanks to its use of Google’s AdWords service, which allows companies to pay to appear in the adverts featured at the top of search results.
Unwitting fans desperate to see their idols often click on the first link they see, never stopping to question who they’ll end up buying from – often a professional tout charging massive mark-ups.
Now Google has responded to the chorus of concern about the company by suspending Viagogo’s ads, something campaigners have long called for.
The result is that its tickets site appears have tumbled down the list of search results, making potential customers far less likely to spot it among its competitors.
That presents a clear and present danger to Viagogo’s business model. Swiss law allows the Geneva-based company to keep its accounts secret, so the effect on its top line will probably never be known.
But its timid response to Google – a brief couple of lines offering to work with the search engine giant to resolve its concerns – was in marked contrast to the chest-thumping defiance with which it has responded to everyone else.
That tells its own story.