European Commission vs. the United States

Today I read an interesting piece in the Wall Street Journal about American tech companies, such as Google and Amazon, setting up lobbying organizations in Brussells, Belgium where the European Commission is located.  I already have this sickening fascination with legislative bodies, but I found this particular story interesting because it’s difficult to tell how much of a difference it will make for American companies to lobby a European entity.

The purpose of the European Commission is to propose and implement EU legislation, as well as monitor EU member states’ compliance thereof.  In May 2009, this body imposed a record fine of $1.45 billion on Intel due to alleged anti-competitive behavior.  5 years later, Microsoft experienced a similar fate, but was only subject to a milder fine of $732 million.

When Intel fought its battle with the European Commission, it was penalized for offering rebates to PC manufacturers, such as Dell, Hewlett-Packard, and Lenovo, in exchange for an agreement that these companies would purchase all or almost all of their supplies exclusively from Intel.  Further, the EC accused Intel of moving forward with these practices in a deliberate effort to put its major European rival, AWD, at a competitive disadvantage.

I don’t have a huge background in business law, but for some reason I feel that if a smaller company were to engage in the same activities that Intel did, the EC would not even bother to take disciplinary action.  I hate to be cynical, but it almost feels like the EC is going after these large corporations – not only because they feel threatened by them, perhaps – but also because they know these large companies have the ability to pay such a large fine.  The activity in which Intel was engaging is not unusual, and I’ve seen many companies engage in the same type of behavior in order to compete and gain customers.

The European Commission was formed with the purpose of protecting the competitive spirit in the EU, and is comprised of representation from every member state.  I think political bodies like the European Commission play a critical role in decision-making, and I like that the opinions of every member state are considered in the formulation of any EU legislative proposals through this means.

It’s incredible how much power these seemingly outdated, cumbersome, institutions have – since the EC has a monopoly on proposing European Union legislation, companies like Microsoft and Intel that have been levied fines for anti-competitive behavior are faced with a decision: either face the risk of losing the ability to do business in Europe, or pay the giant fine.  At this point, many companies just consider this the cost of doing business abroad because they don’t want to lose the European Market, and certainly don’t want to have their foreign direct investment go to waste.

It will be interesting to see how effective the American companies that are lobbying the EC in Brussells are in shaping international policy.  Are the Europeans taking advantage of large American companies for penalizing them?  Or are practices perceived to be business as usual in the United States considered to be unfair and harmful to competition abroad?  International policy can be complex and difficult to understand because different cultures perceive things in varying ways.  I am hopeful that American corporations can be successful in any country around the world as long as we are mindful of the culture of the country in which we are doing business.  These lobbying efforts can be the beginnings of unprecedented relationship-building with Europe that will benefit business in both nations.

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