Wordly Wise: Facebook's threat to Google lost on EU minds

What exactly is the European Union's beef with America's best technology companies?

Last week, the EU opened an investigation into Google Inc. for allegedly discriminating against competing services in its search results. Last year, it hit Intel Corp. with a €1.06 billion (Dh5.2 billion) fine. Earlier this decade, Microsoft Corp. got socked with a fine by the EU of almost €500 million.

At this rate, the people at Facebook Inc. and Twitter Inc. must be feeling distinctly nervous.

Can the EU really play policeman to the global technology industry? Of course not.

There are two big problems. First, the EU's trust-busters don't seem to have much of a clue as to the difference between a monopoly and a really, really successful company. Second, it looks like sour grapes, at best, and at worst, revenge. Europe's regulators keep picking on the most accomplished US companies while failing to do much to encourage competitors from their own countries. Antitrust policy shouldn't be a way of levelling the industrial score between continents.

Google is only the latest in a long line of US technology companies to get into trouble with Europe's regulators. Intel, the world's largest computer chipmaker, was fined for allegedly impeding competition in the computer-chip market. In 2004, Microsoft was fined after the EU ruled that it was taking advantage of its dominant position in the computer-operating systems used to run personal computers.

One more probe

In July, the EU started an investigation into International Business Machines (IBM) Corp over whether it was abusing its position as the dominant supplier of mainframe computers. Back in 2001, the EU blocked General Electric Co.'s $47 billion (Dh172.8 billion) purchase of Honeywell International Inc. on competition grounds, even though neither company was European. The list goes on and on.

The rights and wrongs of all those particular cases are for the lawyers to argue over. But there are two big issues that deserve a wider debate.

First, does the EU have a clue whether a technology company is dominating a market and abusing its power?

The one thing we have learned over the four decades during which the digital economy has emerged is that it has a natural tendency toward monopoly. We also know that these monopolies often are fleeting, with the time on top growing ever shorter.

IBM looked like a monopoly for a long time, before getting whacked by Microsoft and a host of companies that could make computers cheaper. Then Microsoft looked all-powerful, until the arrival of Google and the revival of Apple Inc. Google may seem dominant now, but Facebook is gaining ground fast. Will Google be as strong in a decade's time as it is today? You would hardly want to bet on it.

In fact, two forces are at work. In technology, there is a huge first-mover advantage. There also is a network effect. People use Microsoft operating systems because everyone else does. It's the same for Facebook. We log on that social network because it's where our friends are. A natural consequence of both forces is very high market shares.

The EU would be better off spending its time and money thinking about how Europe could start producing a few more technology giants, rather than attacking the American ones.

Maybe Google is a monopolist, and maybe it isn't. We need at least another decade before we can really start to reach a judgment on that. Even if it is, it's unlikely that Brussels is the best place to start breaking it apart.