As Europe begins the year in a state of relative stability with the EU Commission firmly in place as well as new governments in the UK and Spain, all eyes are on how policymakers will now respond to popular demand for changes to our liberal order. The tech sector could be in for a rough ride.
If 2019 was a year of political manoeuvring, restlessness and transition, 2020 is poised to be one of more decisive action and interventions. In all likelihood, at least.
Bar any surprises, Angela Merkel will enjoy her last full year as German Chancellor before she makes way for someone else after 16 years at the helm. If she wants to build on her legacy, this is basically her last chance. French President Emmanuel Macron is more than halfway into his presidency but continues to apply his modernising zeal to all kinds of policy areas. Spain finally has a functioning and reform-minded government, while Italy’s experimental coalition is so far proving remarkably resilient in the face of Matteo Salvini’s fierce opposition. Of the major European economies, only Poland goes to the polls later this year to elect a new president.
Of course, nowhere is this blend of relative political stability and hunger for reform more prevalent than in the UK. After years of domestic turmoil and navel-gazing following the Brexit referendum, the General Election at the end of 2019 provided a much longed-for escape from the political impasse, even if the actual result was not to everyone’s liking. The Conservative majority is such that any daring idea might fly in the House of Commons. Add to this the new European Commission that has set itself the ambition to rediscover Europe’s purpose in a world in flux, and the outlook for 2020 looks very different to what happened last year.
Addressing perceived imbalances
From the perspective of the technology sector, this naturally begs the question of when, not if, industry-defining regulation will again be in the spotlight. Commission President Ursula von der Leyen has already instructed her Cabinet to revisit the rulebook for the digital economy, tasking individual Directorates-General (the EU’s policy departments) to come forward with thorough proposals for updating competition law, online platform responsibilities, digital taxation and accountability rules for artificial intelligence – to name just a few.
At the UN in September Prime Minister Boris Johnson, for his part, invited world leaders to a 2020 technology summit in London, arguing that Governments around the world need to “find the right balance” between private enterprise and government oversight. His Secretary of State for Digital, Culture, Media and Sports Baroness Morgan has talked about defining a “third path” between tech-bashing and tech-worshipping by developing new approaches to a whole range of controversial issues, including online harms and digital markets. Change is clearly in the air.
On the one hand, this should not come as a surprise. New technology and their applications keep affecting every facet of life – from how people work, organise their homes, relate to each other and form their worldviews. This poses a considerable, ongoing challenge to re-think the extent to which regulatory interventions can enable access to the many benefits of tech-driven innovations, while mitigating their risks and potential downsides.
Yet on the other hand, policymakers have consistently struggled to catch up with the sheer pace of tech innovation, leading to widespread accusations that technology regulation has often been ineffective or failed to set clearer rules for how the old, analogue and the new, digital world can co-exist. This, in turn, has created a kind of moral vacuum which is now being filled by those voices that want to see more drastic, radical action in order to rein in the power of tech companies and platforms that dominate the digital sphere, if not entire sectors. (European city mayors calling for an outright ban of Airbnb or Uber in some localities is rather symptomatic in this context).
Increased politicisation of technology regulation therefore seems inevitable and could well be one of the defining features of 2020. Four drivers of this development stand out in particular.
1. Digital gatekeeping
As a select few technology companies continue to integrate numerous different services into one platform, the level of control granted by these network effects has emerged as one of the central concerns. In the eyes of some policymakers, certain players are simply becoming too big and powerful as a result of product expansion and controlling vast amounts of consumer and personal data. Regulating these ‘super-apps’ or tech conglomerates effectively looks often near impossible, such is their reach and influence in the modern economy.
2. The quest for fairness
Concerns over unlevel playing fields, and sustained campaigns by digital entrants and non-digital businesses to highlight the issue of distorted competition, has led to a renewed focus on measures to revamp competition policy by combating perceived anti-competitive practices, lowering the barriers to entry in the digital realm and taking a tougher line on mergers and acquisitions. The backdrop of bleeding high streets where brick-and-mortar businesses struggle to maintain a presence is only adding further fuel to the debate.
3. The black box phobia
There is a distinct worry, both among the public and politicians, that the practices and processes driven by algorithmic decision making have simply become too obscure and unintelligible to consumers, patients or citizens, leading to falling trust in technology companies to do the ‘right thing’. As a consequence, policymakers will continue to push for greater transparency and a gradual shift of liability from user action to the companies who offer the service.
4. The rise of geopolitics
The intensifying conflict about the integration of digital assets between the US and China will continue to impact regulatory decisions in Europe, far beyond the current dispute about Huawei’s involvement in the rollout of 5G. The UK, for instance, is sure to find itself caught between a desire to attract foreign investment after Brexit, of which China is one of the most lucrative sources, and the demands of the US, its most important security ally, to take a more restrictive approach to Chinese technology. In a world where globalisation is seemingly in retreat, the appetite to promote home-grown companies at the expense of foreign competitors is going strong. The tech sector won’t be untroubled by this.
The rough ride to come
To be sure, there are other factors and influences but those four are particularly prone to diverging political interpretations, moral preferences or dogmatic reasoning. They will drive much of the policy action going forward.
Indeed, some observers like to draw parallels to the financial service sector, which for over a decade was subject to highly charged and polarising debates, until the global crash of 2007-08 changed it all. For the political Right, leaving the operations of banks largely untouched became somewhat an ideological reference point and a proof of economic competence. For the Left, hedge funds were the enemies number one, the finance system per se suspicious and a transaction tax the cure of all evil. There was little space for a more measured debate that could lead to meaningful reforms of the banking sector before it was too late.
Although we are nowhere near that level of politicisation (yet) when it comes to technology regulation, the direction of travel seems unambiguous. 2020 is promising to bring a rough ride for the tech sector.
Topics: Competition policy, EU Digital Services Act, EU, Regulation, Technology, Europe, Digitaleconomy, Politics
Written by Olaf Cramme
Olaf's public policy expertise draws on his experience in government, Parliament and leadership roles in consulting and at a leading European think tank.
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