Why is Europe so much more vigorous than the US when it comes to antitrust enforcement? In an interview with ProMarket, Monti, who served as the EU’s Competition Commissioner between 1999 and 2004, offers a possible explanation: American antitrust’s sensitivity to election outcomes and industry lobbying.

Europe’s Competition Commissioner Margrethe Vestager announced today that the European Commission has launched an “in-depth investigation” into Apple’s acquisition of the song-recognition app Shazam, based on concerns that the deal would give Apple access to user data that may enable the company to drive customers away from competitors and onto Apple Music.

The Apple/Shazam probe is the latest in a series of aggressive measures undertaken by the EC as it seeks to root out anticompetitive behavior among tech giants. Nearly two years after it leveled a 2.4-billion-euro fine on Google for abusing its market dominance to favor its comparison shopping service in search results, the EC still has two pending antitrust cases against the company and is refusing to rule out the possibility of breaking Google up. In 2016, it ordered Apple to pay 13 billion euros in back taxes to Ireland, and is now suing Ireland for its failure to collect these funds.

The EC’s increased scrutiny of tech giants has led to the now-common perception among economists and scholars that European enforcers are far ahead of their much more permissive American counterparts when it comes to challenging the threats posed by digital platforms. In a recent ProMarket piece, former FTC chair William Kovacic wrote that Brussels is now “the capital of the world” when it comes to antitrust enforcement against dominant firms, leaving the Department of Justice and the FTC “in the shade.”

Why are European regulators so much more aggressive in their attempt to tame tech giants? One oft-repeated charge is that the European crackdown is driven by protectionism and “anti-American bias.” In 2015, then-president Barack Obama weighed in on the issue and accused European competition authorities of being driven by the “commercial interests” of local service providers who “can’t compete with ours.”

This is not a new dynamic. Similar charges have been made when the European Commission, then led by Mario Monti, decided to block GE’s $42 billion bid to acquire Honeywell and the WorldCom-Sprint merger in the early aughts, and again when it leveled a then-record fine of 497 million euros against Microsoft for abusing the dominant market position of Windows in 2004.

While persistent, the protectionism charge doesn’t necessarily hold up to scrutiny. A recent study by Anu Bradford, Robert Jackson, Jr. and Jonathan Zytnick looked into these accusations, and found no evidence that the EC is protectionist or biased against non-EU or America-based firms.

In a keynote speech during the Stigler Center’s annual antitrust conference last week, Monti also categorically denied charges that the EU is acting out of protectionism. “The European Commission, as a competition enforcer, does tend to be more vigorous on average than US antitrust agencies, [but] it is not protectionist,” said Monti, the former prime minister of Italy and a lifetime Italian Senator.

Monti, who served as the EU’s Competition Commissioner between 1999 and 2004, is most famous today for his tenure as head of Italy’s technocratic government between November 2011 to April 2013. Before then, however, he was known primarily as an antitrust enforcer “most famous for shooting mergers down in flames.” His decision to block the GE-Honeywell merger, in the face of intense lobbying and threats of a trade war, led American businessmen to describe him in the pages of The Economist as “the corporate equivalent of Saddam Hussein.”

In an interview with ProMarket, Monti explained why, in his view, the protectionism charge remains salient despite evidence to the contrary. “American companies and the American public opinion are obviously impressed by what the EU from time to time does to American companies. Understandably, they follow much less all the other decisions that the Commission takes to enforce competition within the EU,” he said. “For Competition Commissioners, the biggest fights are not with American CEOs, but with European governments. For Commissioners, most [of the] arm-twisting activity has to do with the control over state-aid—which is something that does not exist in other parts of the world, but does exist in a supranational structure like the EU—[whereby] the Commissioner has to impose the law not on an American or European company, but on one of its own shareholders.

“For me personally, for example, the toughest fights have not been with [Jack] Welch or [Bill] Gates, but with [then German Chancellor Gerhard] Schröder, because we ordered the elimination of all state guarantees to the public banks in Germany, which was something that would considerably undermine the nexus between politics and finance in Germany.”

From early on as the EU’s top antitrust enforcer, Monti had been aware of the threats to competition posed by the then-fledgling digital economy. His decision to aggressively pursue the Microsoft case, long after the company reached a settlement with the DOJ, led to what was at the time a record fine against a US tech firm.

While reluctant to comment about pending EC cases, in his interview with ProMarket Monti noted that he does see some resemblances between the European charges against Google and the Microsoft case. “I think the most important underlying commonality is the attempt to leverage the market power acquired in a given market onto proximate markets. That was true for Microsoft tying the Windows operating system and the media player and in different respects, the Google cases also fall within that line, I believe.”

When asked how he explains the divergence between antitrust in the EU and the US on digital platforms, Monti offered two explanations: one was that US antitrust is much more sensitive to election outcomes, which makes US antitrust policy less consistent than in Europe. The EU’s competition authority is less affected by national election cycles, and even elections to the European Parliament, which take place every five years, have an “absolutely minimal” influence, he explained. 

Being shielded from political shifts, he added, allows for a more consistent competition policy. The Microsoft case, he said, provides a useful example. Joel Klein, head of the DOJ’s antitrust division under Bill Clinton, wanted to break up Microsoft, but the decision was overturned by the courts. By that point, Klein had already left the DOJ, George W. Bush won the presidency, and the new administration reached a new settlement with Microsoft that, per Monti, was “extremely soft.”

The other explanation is that antitrust officials in the US are more vulnerable to lobbying by firms. “Certainly when it comes to lobbying exercised by an American company, I believe that the ability and the effectiveness with which American companies lobby Congress or the administration in the US is greater, in particular in Congress or the White House.” he said.

The unique structure of the European Commission, he said, keeps European authorities “a bit more at arms’ length” from industry pressures—particularly those of the tech industry.  “It’s not that the European industry does not lobby Brussels,” he said. “But the European industry has known for much longer than the American industry that it’s one thing to lobby the legislators in Europe—the European Parliament, which has to approve a proposal for a directive presented by the Commission—and the Commission [is another]. They are much more respectful when it comes to the competition enforcement side, whereas American companies were less familiar with this and maybe in good faith believed that they had to overcome some protectionist bias.”

Effectively, he said, European competition officials are able to take decisions “independent from the lobbying exercises— the more far away you are, the less you feel under pressure.” In the US, he said, “permissive changes” in campaign financing laws also lead to more risk of regulatory capture.

In his speech at the antitrust conference, Monti shared an anecdote that epitomized this difference. When the EC was reviewing the GE-Honeywell merger, Jack Welch, GE’s CEO at the time, came to Brussels “with the impression that it was a nice formality that would be greatly appreciated that he pay personal visits to the Commissioner.” This, said Monti, “was very much appreciated…However, after some meetings I had to say to Welch in my office ‘Look, you are putting desperate lobbying pressure on all my colleagues in the Commission and on all the national competition authorities. You must be aware that if you continue like this, you can only worsen your situation.’ And from my office he immediately called Andrew Card, who was the chief of staff for President Bush.” 

While critical of the Bush administration’s lax approach to antitrust enforcement, Monti said he was encouraged by Makan Delrahim’s speech at the Stigler Center conference, in which the Trump administration’s antitrust chief said antitrust enforcers “should be open and receptive to empirical evidence that companies in digital markets may be engaging in predatory pricing or other exclusionary conduct to drive out competition and cause long-run harm to consumers.” Delrahim, said Monti, represents “the most potentially vigorous assistant attorney general for antitrust under a Republican administration that I have seen so far.”

As for the potential for increased convergence on antitrust between the EU and the US, Monti sounded optimistic. “I was very impressed by the depth of [Delrahim’s] speech,” he said. “I saw various signs of opening up prudently more vigorous avenues than we observed during the previous Republican [administration].”

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