#20: No More EU Fines for Big Tech

The EU takes an aggressive stance toward American Big Tech. Citing concerns about privacy and monopolization, it has enacted countless regulations, and fined Google and Meta for billions of dollars. In the last six months, EU regulators have kicked this motion into overdrive:

• They adopted the Digital Markets Act (DMA), which they used to immediately open investigations into Apple, Google, and Meta.

• They adopted the AI Act to constrain AI applications.

• They slapped Apple with a $2B fine.

• In July alone, they opened antitrust proceedings against Nvidia, antitrust investigations into Google, and threatened to fine Twitter over seemingly-trivial Blue Checks.¹

The posture is clear: the EU is not satisfied with the bloodletting-to-date and is raising its demands from Big Tech. The AI Act and DMA both may assess penalties as a percentage of global turnover, and are so broad in scope that European regulators are emboldened to pursue tech giants for practically limitless amounts of money.

But the EU is overplaying their hand. They have been able to make their demands to-date because it is easier and cheaper for Big Tech to pay and comply than to resist. Of course, this encourages the EU to make even more demands, but eventually those will become too onerous and expensive. We’re about to be at that point.

Kissinger wrote that relations between states are best understood in terms of power and legitimacy:² in this essay, I will argue that the EU’s actions against Big Tech lack, and have always lacked, substantial legitimacy. Furthermore, the EU vastly overestimates its own power in this relationship: when push comes to shove, it is Big Tech that actually holds the cards, and the EU would do well to change its course. Indeed, the current course cannot, and will not continue.

A Brief History of Fines

For quick background, below is a non-exhaustive list of $100M+ fines that the EU has assessed on American tech companies over the past decade:

• June 2017: Google fined $2.7B (Antitrust over Google Shopping)

• July 2018: Google fined $5B (Antitrust over Android)

• March 2019: Google fined $1.5B (Antitrust over advertising)

• September 2021: Meta fined $266M (GDPR over WhatsApp)

• July 2021: Amazon fined $887M (GDPR)

• January 2022: Google fined $169M (GDPR)

• September 2022: Meta fined $427M (GDPR over Instagram)

• November 2022: Meta fined $275M (GDPR)

• April 2023: Meta fined $1.3B (GDPR)

• March 2024: Apple fined $1.95B (Antitrust over Apple Music)

That’s a little under $14.5B over seven years, or just over $2B a year. For scale, the US exports $592B to the EU annually, and EU-originating annual revenues for these companies sum up to over $100B.³ So, there’s still plenty of room for the EU to escalate upwards. This is what the EU appears to be preparing.

Context on EU and US Relations

The EU’s aggressive position on Big Tech does not exist in a vacuum. There’s important historical and contemporary context:

Asserting Leadership

Many international treaties and regulations were led by Europe. That’s true both in the distant past (see the Geneva or Hague Conventions) as it is more recently. The EU led the charge on international standards for chemical safety and carbon emissions trading, and its stringent regulations on consumer products, tobacco, and anti-money-laundering have set the pace for the EU’s global trading partners.

The EU is attempting to similarly set the pace with GDPR, the AI Act, the DMA, and other technology regulation. However, the international community generally isn’t following. That is an important break from history. It is no surprise that when the EU tries but fails to assert leadership, it will try again more forcefully. I read the EU’s mounting efforts to shape global norms to both assert and seize power and relevance.

Trade Generally

The US-EU trading relationship, while valuable and productive, is fraught with many sharp-elbowed negotiations at the margins. For example:

• Disputes over Boeing (US) and Airbus (EU), each accusing the other side of providing anti-competitive subsidies to their home aerospace giant, leading to billions in retaliatory tariffs, including in unrelated industries.

• Disputes over a 2018 set of US tariffs on steel and aluminum imports. The EU retaliated with tariffs, again including unrelated industries.

The US-EU trading relationship involves continuously testing boundaries and tit-for-tat exchanges. What’s different in Big Tech regulation is that it’s entirely one-sided: the EU doesn’t really have Big Tech of its own that the US could regulate in retaliation. Ironically, if it did, the EU’s regulatory efforts would probably seem fairer — just part of a tit-for-tat between roughly equally strong market participants.

The EU may view its Big Tech regulations as just another small negotiating chip in a much larger $1.3T annual trading relationship. However, the one-sided optics encourage the rest of the world to see it as unfair.

Bad Precedent

The EU’s framework goes so far as to assess fines on a percentage of global turnover:

• GDPR: up to 4% of global turnover (top-line revenue);

• AI Act: up to 7% of global turnover;

• DMA: up to 20% of global turnover;

These just keep getting more expensive! The idea of issuing fines based on global revenue for local violations of law is a brazen stretch of legal convention:

1. Penalties must be commensurate with damages;

2. Courts may assert their authority only over subjects in their jurisdiction.⁴

The legal convention would be for the EU to assess fines based on EU revenues, not global revenues. Permitting fines based on global revenue would set disastrous precedent: if the EU can set fines based on global revenue, why can’t any other country? Any other big market with a little bit of leverage could try to extract a slice of the pie. Why shouldn’t India, which has ~500M Meta users, start fining Meta for 10% of its global revenue? Why shouldn’t Brazil do the same? Or Nigeria? And why should they keep their fines to Big Tech? Why don’t they fine Exxon Mobil for a percentage of global revenue?

Permitting this scope would set terrible precedent, and it has no legal legitimacy. Not only must Big Tech refuse to comply, but the US must reject it as a matter of national interest and international order.

Illegitimate Fines

EU fines have been asserted under GDPR, and will soon be asserted under the AI Act and DMA. All three of these operate on the notion of consumer protection: that EU persons have rights, most often articulated around privacy or data, that are being violated by Big Tech. You can view this almost like a class-action lawsuit, where some compensation is sought for harm done to a large group of people.

But for a class-action lawsuit to be legitimate, it must reward the consumers! Consider the $1.3B Meta fine: the legal decision cites 309M daily active users in Europe. Assuming the EU asserts that all such persons were violated, this means the fine is equivalent to $4.21 per person. As an EU citizen, I have two problems with this:

1. I have not seen a single penny of my $4.21. The EU regulators alleged that my rights have been violated, pursued a legal case on my behalf, paid the legal fees with my tax dollars, recovered the damages, and then… pocketed them? Why should the tax rate on recovered damages for violations to my rights be 100%?

2. It is difficult to square the minute damages of $4.21 with the posturing of the EU. European regulators and media constantly express incredible scorn toward Meta; the narrative is so bombastic and severe as if Meta’s transgressions were wild violations of fundamental rights. But after all this drum-beating about privacy rights and the great value of my personal data, when the damages finally got priced, it turned out all this stuff is worthless? $4.21 can’t even buy me a sandwich.

Fundamentally Unserious Actions

As I wrote in a related prior blog post:

If they can’t ban products, then it’s not consumer protection: it’s just wealth extraction. European politicians always drum on about supposed violations from Google and Facebook, fine them for some totally unimpactful amount of money, and then pipe down for six months before starting over again. If those politicians had real grievances, they would try to ban those products, or build local alternatives. They do neither. They’re just selectively enforcing regulation to extract what I view as a bribe to operate.

The great discrepancy between the public posture and the minute per-capita fines suggests a triviality to the grievances pursued. Practically, it seems that regulators are pricing and pursuing very small negative externalities imposed by Big Tech firms — but under that regime, there should be higher priorities. European consumers suffer much more greatly from other firms and practices: e.g. air pollution is priced at roughly $110B per year in negative economic externalities (~55x of Big Tech fines), while the long-term loss of economic competitiveness, relatively weak tech industry, and failure to transition away from Russian oil are incalculably damaging to EU citizens. By contrast, the European Commission is dabbling in trifles.

The issue with dabbling in trifles is not just that it’s relatively unimportant and not a good use of lawmaker time, but also that trifles are plentiful: this makes it difficult to enforce the law in a consistent manner. Indeed, it encourages selective enforcement, which saps the appearance of legitimacy. When the EU threatened to fine Twitter over Blue Checks, that did not seem like an impartial application of the law, but as a personal grievance. Such capriciousness is no standard for any respectable authority.

The Realpolitik of Technology

Having gone over issues of legitimacy, let’s talk about power. Thierry Breton, the relevant leader in the European Commission, states:

And a market of 450 million customers is simply unthinkable for anyone not to be there.

Where the digital giants could pay fines of several billion dollars without batting an eye — by the way, when they had to pay them, after long years of procedures, which was not systematic, far from it... — today none of them can afford not to be in our market.

This is the reality of the balance of power of the world in which we operate.

Mister Breton, you may be mistaken! Specifically, in two ways:

1. Overstatement of EU Market Size

As a global market, Europe is not as big as it used to be. And the EU is smaller yet. If you take a look at Apple’s financial statements by geography, “Europe” accounts for 25% of global revenue. But in Apple’s consolidation, “Europe” includes the UK, Norway, Switzerland, Russia, Turkey, and the entire Middle East! None of these are EU members. The EU might account only for 7% of Apple’s global revenue.

7% is still a big market, but Apple is by no means dependent on it. Especially considering the exceptionally high level of operational headache in complying with European requirements, if it comes to be Apple’s view that the fines-as-percentage-of-global-revenue cannot be avoided, then it may be rational to pull out. John Gruber makes a similar argument for Meta.

2. Consumer Dependency

Where the rubber really hits the road is that consumers are dependent on Big Tech. They like using iPhones. They like using Instagram. They like using Amazon. And European businesses everywhere use Google services. The EU would struggle severely to go up against the most popular and widely used products on the planet.

This is the nature of true power: the firms have captured the hearts and minds of the public. Even if the EU were to ban these companies, consumers wouldn’t want to lose access to these services. Their digital lives are on them. Rather than moving from WhatsApp back to Skype and losing all their contacts, they would use VPNs to access software products, and purchase Apple devices on grey markets.

Moreover, the EU doesn’t have true local alternatives. If it pursues Nvidia on Antitrust grounds: does it really want Nvidia GPUs to be replaced by, say, Huawei GPUs? Does it want Facebook to be replaced by VK? If EU regulators are motivated by concerns over unaccountable, outside influences, I might suggest that American Big Tech is still their best option.

Power

To Europeans, Big Tech products are hard-to-replace public services. In past nation-tech disputes, like Facebook and Google in Australia (2021), Facebook in Canada (2023), or Google News in Spain (2014), tech firms pulling out of markets in just a small respect generated significant backlash, and allowed the tech firms to flex negotiating leverage.

Never forget: these Big Tech products are, for the most part, cloud services. They can simply be turned off remotely, from one minute to the next. Hypothetically, if Big Tech were to coordinate, play true hardball, and shut off EU-facing products, the EU economy would grind to a halt overnight. Imagine the fallout from hundreds of millions of people suddenly not having email anymore. Without AWS, GCP, Azure, etc. things simply wouldn’t work. We live in a digital world; the dependencies are everywhere. It’d be like when OPEC constrained oil supply in the 70s, except percolating much more deeply and instantaneously throughout economies.

Falling Behind

Of course, it’s very unlikely for Big Tech to withdraw from the EU entirely. That would be drastic. The reality is subtler, and we’re seeing it play out right now: Meta is not making its multimodal Llama models available in the EU. Apple isn’t going to bring Apple Intelligence to the EU. These are important, state-of-the-art products. If you believe at all that AI is promising or important, then EU businesses and consumers will suffer from not having access to them.

We may see the EU and US technology markets bifurcate, similar to how automobile markets have separated. Cars are widespread in Latin America, but the models are overwhelmingly older, smaller, less safe, and less fuel efficient than ones in the EU or US. This is due to cost, but all things being equal, consumers would be better off with newer models. EU consumers might similarly end up with older, lower-quality technology everywhere — but not due to cost, just due to regulation!

Because technology builds on itself, omissions compound. Maybe multimodal Llama AI is not important for EU consumers today. But what if the best radiology AI assistant gets built on Llama AI — and EU patients can’t have access? Or an EU business needs the best-in-class AI to remain globally competitive? What if Apple Intelligence can automatically call an ambulance for you if you have a heart attack — but not in the EU? If only second-tier technology is available, then after several years of falling behind, the democratic masses will realize they have been deprived of real things of value, and they will undo these policies.

Suggestions

The EU must compete or cooperate. Either one is fine. But it would be ill-advised to continue the current regime of low-grade economic harassment of its nominal allies by syphoning off fines and imposing obnoxious requirements.

• It is inappropriate for EU regulators to assess fines based on global revenue. Such precedent cannot stand. The US must, and surely will, flex its overall trading relationship with the EU to put an end to this.

• The EU must recognize that the US will eventually push back, and find a way to ignore or sidestep⁵ these regulations. At that point, they will cease to impose anything useful on foreign businesses, while constraining EU businesses.

• The EU’s regulatory gamesmanship will also be under long-term pressure by its own citizens, who will not appreciate access to lower-quality goods and services. If the single reason why their businesses are less competitive and their quality of life is lower is not one of cost but of abstract regulation, they will push back.

• The EU would do well to recognize that it is broadly dependent on the products and services of Big Tech, while being only a minority revenue originator. In my view, the true push-come-to-shove balance of power rests with Big Tech more so than with EU regulators.

• The EU would be well-advised to grow its own tech industry, which it currently lacks. No Big Tech company has anything even close to an EU competitor. More free-market competition would be good, both generally and for EU consumers.

The last point bears repeating. I view all of this regulatory squabbling as a tragic and futile misdirection of effort. The EU recognizes that it is dependent on Big Tech, recognizes that it doesn’t have any ownership, and is using a combination of fines and regulation to claw back some power in this relationship. But that’s not sustainable; the relationship will be parasitic at best, never one of equals. The practical reality is that the EU must create and foster its own tech industry to be globally competitive. That is the only way for the EU to have a seat at this table.

FURTHER READING

Some work from other writers that acted as partial inspiration for this post, which I haven’t linked to already:

• Stratechery: The E.U. Goes Too Far

• Daring Fireball: European Commission Opens DMA Non-Compliance Investigations Against Google, Apple, and Meta

• Mostly Borrowed Ideas: Tweet

ACKNOWLEDGEMENT

Thanks to Evan Zimmerman for helping me refine my notes on Antitrust and US-EU trade relations.

1. Technically under the DSA, which is a close counterpart to DMA. For simplicity, I refer to both of them as DMA.

2. As an aside: perhaps you disagree with Kissinger’s actions in office, which remain controversial. However, his academic work on statecraft and state relations is highly insightful, independent of political ideology.

3. I’m avoiding a more precise figure here because it’s difficult to specifically break out EU numbers. (For example, Apple’s revenues reported as originating in “Europe” include all of the Middle East.)

4. For comparison: in the US, the Federal Court of the Southern District of New York (SDNY) is the key venue where global financial crime usually is prosecuted. SDNY famously asserts broader-than-usual jurisdiction and authority. Nonetheless, SDNY usually assesses damages not on a global scale, but as suffered by subjects within its jurisdiction: i.e. US individuals, corporations, or the national interest as a whole.

5. Future blog post coming on “sidestepping” antitrust by geography-constrained software.