European officials must be frustrated. Since the founding of the internet, they have failed to launch a major tech company except perhaps Spotify.
Meanwhile, the United States has produced some of the world's best known tech companies including Airbnb, Amazon.com, Apple, eBay, Facebook, Google, Instagram, Microsoft, Netflix, Pandora, Periscope, Snapchat, Travelocity, Trip Advisor, Twitter, Uber, Wikipedia, Yelp, Zappos and Zynga.
It didn't have to be this way.
Several years ago, while waiting to speak at a European conference on innovation, I heard a top government official urge his colleagues to leapfrog the Americans by encouraging entrepreneurship, relaxing regulations and promoting science, technology, engineering and math (STEM) education at the high school level, as well as English proficiency. He was followed by a government minister who suggested a different approach: attacking big American tech companies using new legal arguments.
Clearly, European Union officials have chosen the latter path and accelerated their efforts to extort, restrict and damage successful American tech companies. Over the last two decades, European regulators have investigated and challenged Google, Amazon, Intel, Facebook, Microsoft and Qualcomm, among others.
The late August announcement by Margrethe Vestager, European commissioner for Violation of EU Treaties, that the EU will seek $14.5 billion from Apple in back taxes is an unprecedented act of economic aggression against not only Apple, but more broadly the United States. Apple says it followed the law and paid the taxes it owed to Ireland — to the tune of $400 million annually.
And the tech company isn't the only global target in the EU's sights. The EC is also going after Starbucks, Amazon and McDonald's for supposed tax avoidance.
The European Commission's (EC) move has rightly enraged top Democrats and Republicans in the States. Sen. Chuck Schumer, D-N.Y., called it a "cheap money grab" by the EC, "targeting U.S. businesses and the U.S. tax base." House Speaker Paul Ryan, R-Wis., said, "This is precisely the kind of unpredictable and heavy-handed taxation that kills jobs and opportunity." And Sen. Ron Wyden, D-Ore., worries the action may "set a dangerous precedent that … paints a target on American firms in the eyes of foreign governments."
Put another way, the EC's order is like California and New York seeking back taxes from citizens who moved to Nevada and Florida 10 years earlier — even though the latter two states say those citizens have paid their taxes in full.
The EU's war on innovative U.S. tech companies extends far beyond tax structures. France's data protection authority requires search engines such as Google to remove links to factual stories online if a person named in the stories asserts the "right to be forgotten." Google also faces restrictions on displaying printed media sources in search results. Netflix is being told it must finance European films. Facebook and others are being attacked over bogus privacy issues. Amazon is being investigated over e-book antitrust concerns. Uber faces legal roadblocks in several countries including France and Germany.
EU officials have decided to attack rather than compete. They are stuck defending European socialism, restricting the agility that tech companies require to thrive. Companies face excessive challenges in firing EU employees, even if the company wants to shift its lines of business or move its locations. Many worker benefits are mandatory. Vacations last weeks — many businesses shut down for the month of August. Unions seem to disrupt commerce and travel on a daily basis. Even sending emails after normal work hours can violate the law.
European citizens don't necessarily want this. British citizens voted to leave the EU in part because of the broad, onerous and often senseless rules the EU imposed on businesses.
Not every European official agrees with this approach. France's pro-business Economic Minister Emmanuel Macron, who resigned his post in August possibly to consider a presidential run, has challenged the short workweek and restrictions on Uber. This year, he led a delegation of over 100 French innovators to our recent Las Vegas CES — the Global Stage for Innovation.
To build businesses and foster innovation, the EU must rethink its approach to regulation. Its economy has grown by a meager 1.9%, compared to the relatively robust 2.4% GDP growth in the U.S.
The EU is losing a strong and steady force in Great Britain. Now it could lose Ireland. Even its one big success story, Spotify, is considering relocating from Sweden to the U.S. because the company feels it can no longer attract the best and brightest workers, given the political obstacles it faces in Sweden.
Growth doesn't come from outlandish legal attacks on competition — it comes from encouraging new businesses, deregulation and innovation. It's time for the EU to change its outlook on innovation, or else face the withering consequences of stagnation.
- Shapiro is president and CEO of the Consumer Technology Association (CTA), which represents more than 2,200 consumer technology companies, and author of the New York Times best-selling books, "Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses" and "The Comeback: How Innovation Will Restore the American Dream." His views are his own. Connect with him on Twitter: @GaryShapiro.
