Vestager in the Metaverse
Also — Ukraine, DSA, European Parliament, China, Inflation, Poland
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Vestager in the Metaverse as Antitrust Authorities Beef Up Toolbox on Both Sides of the Atlantic
The Metaverse — Facebook/Meta’s brand-new virtual world — is facing fresh scrutiny from the European Commission, as both sides of the Atlantic are fine-tuning their regulations to keep up with Big Tech.
META WHAT ? •The Metaverse is Facebook (now “Meta”)’s digital project to create shared virtual spaces, allowing users to interact, play games, consume, and work in an immersive digital environment that mirrors the real world. The initiative aims to smoothly integrate everyday existence into virtual reality.
BRAVE NEW WORLD • The Commission’s antitrust tsar stated that “the Metaverse will present new markets and a range of different businesses. There will be a marketplace where someone may have a dominant position”. Retailers such as Nike and Walmart are already settling into this parallel universe, and some public authorities are even considering offering their services on the Metaverse.
While the Metaverse could engender anti-competitive behaviours such as illegal pricing strategies, collusion through the exchange of sensitive data, and abuses of dominant positions, it remains to be seen how antitrust watch dogs will confront these new virtual models of commerce and economy.
IOT INQUIRY • Vestager’s statement came just two days before the Commission published its Final report on consumer Internet of Things (IoT) sector inquiry. The inquiry identifies potential competition concerns in the rapidly growing markets for internet-related products and services in the EU.
The main concerns identified in the report relate to voice assistants, and in particular the exclusivity and tying practices which are used to bind users to them, but also their potential ability to control users’ relationships. The report also criticises the lack of interoperability between devices of different companies, due to the prevalence of proprietary technology, and access to data issues.
The information collected through this inquiry will guide the Commission's future enforcement and regulatory activity. It will also inform the Commission's further work in implementing its digital strategy — in particular the ongoing debate on the Commission's proposal for the Digital Markets Act (DMA).
ACROSS THE POND • Big Tech platforms are not having an easy ride in the US either. Last Thursday, the Senate Judiciary Committee passed the Self-Preferencing Bill. The legislation will prevent the Big Tech from requiring a business to buy their goods in order to receive preferred placement on their platforms, from misusing a business’s data to compete against them, and from biasing search results in favour of themselves. The bill will now be eligible for a vote by the Senate, although it is unclear when that will happen.
Last week, the Federal Trade Commission (FTC) and the DoJ’s Antitrust Division launched a joint public inquiry aimed at strengthening enforcement against illegal mergers. While the inquiry does not target Big Tech specifically, it aims to ensure that USA’s merger enforcement tools are adapting to a changing economy. The comment period is now open, and the collected information will be used by the agencies to consider updates and revisions to the guidelines
Macron’s Call for Dialogue with Russia Exposes Divisions over Ukraine
While speaking to the European Parliament about his priorities for the French Presidency of the Council of the EU, Emmanuel Macron argued for a direct EU-Russia dialogue to resolve the tensions around Ukraine.
STRATEGIC AUTONOMY • Macron’s call contradicts Washington’s desire to lead negotiations and present a united Western front. It is also a change of tone compared to the Union’s previous threat to impose severe economic and diplomatic sanctions against Russia — should military operations escalate.
French and EU officials were quick to stress their commitment to joint, US-led negotiations with Russia. As the Financial Times reported, soon after the parliamentary address Josep Borrell was on the phone with US Secretary of State Antony Blinken and NATO Secretary-General Jens Stoltenberg. Borrell hastened to reassure Blinken and Stoltenberg that the Union’s position is “to further strengthen coordination with the United States and with NATO”.
STRATEGIC CACOPHONY • While Denmark has sent naval forces to the Baltic Sea and France offered to send troops to Romania, German chancellor Olaf Scholz stated that “prudence” should be the priority when considering any potential sanctions on Russia. Germany also refused to allow Estonia to export German-made arms to Ukraine, saying it risked aggravating tensions, despite the United States putting its stamp of approval on the same request regarding US-made arms.
Meanwhile, Spain announced it sent warships to the Black Sea to assist NATO in the conflict, a major step from a Western nation. This move was quickly followed by a manifesto from Unidas Podemos, part of the Spanish coalition government, stating their opposition to the mission and calling for Spain’s exit from NATO entirely.
While Russia has massed over 100,000 troops on Ukraine’s border and is conducting military drills in the very neighbourhood it threatens, Western nations have yet to agree what would qualify as Russian aggression, and therefore warrant sanctions.
Clouds Darken for Big Tech as European Parliament Votes on Digital Services Act
Inching closer to its adoption into law, the Digital Services Act (DSA) passed through the European Parliament last Thursday — but not without substantial amendments which could deeply affect the digital economy, if enacted.
IN CONTEXTO • The DSA adds to the rich tapestry of legislation regulating the EU’s e-commerce market. It aims to combat unlawfulness online — think copyright infringing content or illegal products and services — and to make the digital world more transparent.
2021 has already been a watershed year for data privacy enforcement in the EU. Fines issued by regulators in the EU under the General Data Protection Regulation have increased sevenfold in a year. The biggest fine — to the tune of €746m — was imposed on Amazon by the Luxembourgish data protection authority.
DIGITAL WILD WEST • Internal market Commissioner Thierry Breton sums up the spirit of the new law saying that “what is prohibited offline must be prohibited online”. The DSA will do so by imposing increasingly stringent content moderation and transparency obligations depending on the online platform’s size — a so-called “asymmetric” model.
TARGETED ADS • The most important of the European Parliament’s amendments concerned targeted advertising. Many online platforms provide free services for users while making money by selling space in which ads can be displayed to advertisers. Platforms often combine user input (what the user has searched) with contextual data (what the user has interacted with on the site) or personal information (age, gender) to serve their visitors highly targeted adverts.
Under the European Parliament’s amendments, online platforms would be totally prohibited from serving targeted ads if the user is a minor. They would also be prohibited from using sensitive personal data — like political and religious beliefs or sexual orientation. These amendments were successfully tabled by the Tracking-Free Ads Coalition, a cross-party group of 24 MEPs, after their bid to prohibit all targeted ads failed to garner enough support.
ACROSS THE POND • Two days before the European Parliament’s vote, a draft bill banning the use of personal data in targeted advertising was introduced in the US Senate by three Democratic senators. The broader policy shift in the US concerning technology firms follows a loss of standing which Big Tech has suffered in the eyes of the American public.
US Senators are also considering six antitrust bills introduced in 2021 aiming to reduce anti-competitive abuses, some proposals of which resemble the DSA’s sister legislation, the Digital Markets Act.
Macron Lays Down French Presidency of the Council Priorities at the European Parliament
Emmanuel Macron was in Strasbourg last Wednesday to lay down France’s priorities for the rotating presidency of the Council of the EU — dubbed PFUE in French. He addressed a European Parliament chaired by a new President, Roberta Metsola.
WHAT HAPPENED? • “European integration is based on three main promises: the promise of democracy…a promise of progress…and a promise of peace”, French President Emmanuel Macron told the European Parliament last Wednesday. Macron particularly emphasised the challenges that the Union is facing. The threats that currently confront the EU come from within and outside, Macron said, and he added that it must act urgently to guarantee its very existence.
CLIMATE • According to the French President, climate change remains Europe’s greatest challenge, as it must legislate to ensure that the carbon neutral targets it has set for itself in 2015 will be met by 2050.
POLITICKING • As one might have expected, it did not take long for the debate to shift its focus to the upcoming French presidential elections, with Macron being accused of delivering an opportunistic speech in his run for reelection.
RUSSIA • One other matter which ranks high on the President’s agenda is the creation of a “new security and stability order” between the EU and Russia.
METSOLA • Emmanuel Macron’s speech came a day after the election of a new President for the European Parliament — Roberta Metsola. She is the third female Parliament president in the Union’s history. The Maltese centre-right MEP obtained an impressive 458 votes to become the first politician from her country to fill a top position at the EU institution.
Her rise, starting as a student campaigner advocating for Malta’s EU accession, to EP President has been hailed as inspirational by Ursula von der Leyen. In a country mired in corruption, a picture showing her steadfast refusal to shake ex-Prime Minister Joseph Muscat’s hand during an official visit to Malta quickly circulated on social media.
Her prior anti-abortionist stances have led Emmanuel Macron to say that abortion rights should be entrenched in the Union’s Charter of Fundamental Rights, thus preventing any form of regression on the topic of women’s reproductive rights.
China in ‘shock’ as Slovenia Joins Lithuania in Taiwan Rift and France Votes on Uyghur Repression
2022 is off to a bumpy start for EU-China relations. Slovenia is deepening diplomatic relations with Taiwan, the French National Assembly voted a motion recognising the genocidal nature of China’s treatment of Uyghurs, and the US are taking a stance in the Lithuania-China rift. All of this with just two weeks to go before the Beijing Winter Olympics, which some countries are boycotting.
SLOVENIA • The Slovenian Prime Minister, Janez Janša, in an interview with the Indian national television station Doordarshan on 17 January, strongly criticised the Chinese measures taken against Lithuania while calling for a firmer European policy on these issues. At the same time, he noted that Slovenia has economic relations with Taiwan and that the two countries are working on exchanging representatives. The Chinese Foreign Ministry expressed its “shock” after Slovenia’s plans were made public.
FRANCE • The French National Assembly adopted a resolution on 20 January which — although it has no legal value — recognises and condemns the “genocidal nature” of the “systematic political violence” and the “crimes against humanity” currently being perpetrated by the Chinese government against the Uyghurs.
Zhao Lijian, spokesman for the Ministry of Foreign Affairs, denounced the resolution on 21 January as blatant interference in China's internal affairs, while the Chinese Embassy in Paris warned France of serious damage to bilateral relations.
The Minister for Foreign Trade, Frank Riester, recalled that the formal qualification of genocide is a matter for international bodies and not for the government, while stating that the fate of this community is “discussed at the highest level”.
LITHUANIA • Lithuania is campaigning to rally EU Member States in the escalating tensions with China over Taiwan’s status. Washington threw its weight in the battle when the United States Trade Representative Katherine Tai expressed support for Lithuania and promised to stay in regular communication to strengthen economic and trade relations between the two partners.
However, Washington has advised Lithuania to consider changing the name of the representative office, although such a claim has been strongly denied by the White House, as reported by the Financial Times. China, for its part, has accused the US of exploiting the situation in order to pursue its policy of containment towards China.
ECB Won’t Budge as Record Inflation Data Deemed Transitory
European Central Bank (ECB) president, Christine Lagarde, discussed the current inflation situation in Europe on French radio.
RISING INFLATION • In her interview, Lagarde stated that about 50% of the record high inflation rate of 5% in December 2021 — vs. -0,3% in December 2020 — stems from soaring energy prices. European natural gas prices have increased more than 600% in 2021. The inflation rate, significantly above the ECB’s 2% target, prompted concerns in Europe.
BusinessEurope, which represents national industry and employers’ organisations across the EU, warned that temporary price rises may trigger a wage-price spiral. In Belgium, the issue of automatic wage hikes in response to higher price pressures has already become a politically contentious topic.
LAGARDE’S ANSWER • Both the Fed and the Bank of England are expected to raise their interest rates several times in 2022. Christine Lagarde has been pushing back on market bets that the ECB will follow suit and raise interest rates as well.
Despite the current inflation surge, she argued, the outlook for inflation over the medium term remains subdued and hiking rates too soon could put a break on growth. Lagarde forecasts that inflation in the eurozone will stabilise and “gradually fall” in 2022. As a consequence, she pledged that the ECB will continue its monetary policy support into 2022.
HOUSE DIVIDED • Lagarde’s confidence that inflationary pressure will fade soon is not unanimously shared within the ECB Governing Council, as shown by the minutes of the 15-16 December meeting. Some warned that a “higher for longer” inflation scenario “could not be ruled out”.
The dissenters’ group — the heads of the German, Belgian and Austrian central banks — criticised the decision to increase the pace of purchases under the Asset Purchasing Programme (APP) from 20 to 40 billion euros a month to partly offset the ending of new purchases under the Pandemic Emergency Purchase Programme (PEPP) in March. They also argued against extending the period for reinvesting proceeds from the PEPP until 2024.
‘I Want my Money Back’ — Commission to Poland as Brussels send Warsaw Formal Request to Pay Fines
After being fined by the Court of Justice of the EU in a rule-of-law spat over the country’s judicial system, Poland now owes 69 million euros to the EU — a sum which Warsaw refuses to honour. The Commission set a 45-day deadline for Poland to pay on 20 January, according to Commission officials.
CONSTITUTIONAL MINE • The CJEU ordered Warsaw to put an end to the activities of the Supreme Court’s Disciplinary Chamber in July 2021. In October, the Polish Constitutional Court ruled in its decision K 3/21 that several EU Treaty articles were incompatible with the National Constitution — calling into question the primacy of EU law. In the same month, the CJEU sentenced Poland to a fine of one million euros per day from 3 November onwards.
On 20 January, the European Commission demanded Poland in a letter to “pay […] the penalties for the period from 3 November 2021 to 10 January 2022 inclusive”. Brussels will send a new request for payment with interest if Poland does not comply within 45 days.
COAL FINE • Separately, the Polish government has to pay a 500,000 euro daily penalty. This fine was imposed by the CJUE on 21 September in the context of a dispute between Poland and the Czech Republic over the border mine of Turow, which Warsaw refuses to close.
Poland still wishes to settle the matter with the Czech Republic, notes Daniel Tilles from Notes from Poland. Nevertheless, even in the event of a withdrawal of the Czech complaint, Warsaw would probably still be forced to pay the fines racked up between 20 September and the date of the withdrawal of the complaint.
UNPRECEDENTED • The Commission, which had until now favored dialogue with Warsaw — despite strong pressure from the European Parliament to sanction Poland — decided to take a step forward. For Brussels, it would be a first to withdraw the amounts of uncollected fines from European transfers to Poland. The Polish government spokesman, Piotr Muller maintains that such a deduction is illegal under EU law. A study is underway to identify the payments to be levied.
CONDITIONALITY • EU funds could also be withheld via the conditionality mechanism, which can be triggered if a Member State does not respect the rule of law, as defined by the regulation. The legality of this regulation is currently subject to the decision of the CJEU, after Poland and Hungary took the regulation to EU courts. The judgment is expected in the coming weeks.
CHECK OUT • The Polish Prime Minister affirmed his intention in the long run to close the disciplinary Chamber as part of a more general reform of Polish justice. Morawiecki also showed his determination to reach an amicable agreement with the Czech Republic concerning the Turow mine dispute.
What we’ve been reading this week
“Guts, not guidelines, will stop Tech mergers”, a letter addressed to Lina Khan and Jonathan Kanter on Wired
The Draghi Dilemma, a must-read long-read from the FT.
David Runciman takes a deep dive into into the mind of Dominic Cummings, one of the chief architects of Brexit
Adam Tooze has a look at the inflation debate in Germany.
Thanks to those who helped put this edition together — Clémence Coppin, Théo Larue, Kéram Kehiaian, Mark Soler, Briac de Charry, Ambroise Simon, Nathan Munch, Pierre Pinhas, Aleksandra Wierzbicka, Andrei-Bogdan Sterescu, Filip Filipek, Maxence de La Rochère, Rogier Prins, Leon Holly, Agnès de Fortanier and Thomas Harbor. See you next week!